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Title 42 – Public Health–Volume 4

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Title 42 – Public Health–Volume 4


Part


chapter iv – Centers for Medicare & Medicaid Services, Department of Health and Human Services (Continued)

430

CHAPTER IV – CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES (CONTINUED)

SUBCHAPTER C – MEDICAL ASSISTANCE PROGRAMS

PART 430 – GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS


Authority:Sec. 1102 of the Social Security Act (42 U.S.C. 1302).


Source:53 FR 36571, Sept. 21, 1988, unless otherwise noted.

Subpart A – Introduction; General Provisions

§ 430.0 Program description.

Title XIX of the Social Security Act, enacted in 1965, authorizes Federal grants to States for medical assistance to low-income persons who are age 65 or over, blind, disabled, or members of families with dependent children or qualified pregnant women or children. The program is jointly financed by the Federal and State governments and administered by States. Within broad Federal rules, each State decides eligible groups, types and range of services, payment levels for services, and administrative and operating procedures. Payments for services are made directly by the State to the individuals or entities that furnish the services.


§ 430.1 Scope of subchapter C.

The regulations in subchapter C set forth State plan requirements, standards, procedures, and conditions for obtaining Federal financial participation (FFP). Each part (or subpart of section) in the subchapter describes the specific statutory basis for the regulation. However, where the basis is the Secretary’s general authority to issue regulations for any program under the Act (section 1102 of the Act), or his general authority to prescribe State plan requirements needed for proper and efficient administration of the plan (section 1902(a)(4)), those statutory provisions are simply cited without further description.


§ 430.2 Other applicable Federal regulations.

Other regulations applicable to State Medicaid programs include the following:


(a) 5 CFR part 900, subpart F, Administration of the Standards for a Merit System of Personnel Administration.


(b) The following HHS Regulations in 45 CFR subtitle A:



Part 16 – Procedures of the Departmental Appeals Board.

Part 75 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards.

Part 80 – Nondiscrimination Under Programs Receiving Federal Assistance Through the Department of Health and Human Services: Effectuation of Title VI of the Civil Rights Act of 1964.

Part 81 – Practice and Procedure for Hearings Under 45 CFR part 80.

Part 84 – Nondiscrimination on the Basis of Handicap in Programs and Activities Receiving or Benefiting From Federal Financial Assistance.

Part 95 – General Administration – grant programs (public assistance and medical assistance).

[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991; 81 FR 3011, Jan. 20, 2016]


§ 430.3 Appeals under Medicaid.

Three distinct types of disputes may arise under Medicaid.


(a) Compliance with Federal requirements. Disputes that pertain to whether a State’s plan or proposed plan amendments, or its practice under the plan meet or continue to meet Federal requirements are subject to the hearing provisions of subpart D of this part.


(b) FFP in Medicaid expenditures. Disputes that pertain to disallowances of FFP in Medicaid expenditures (mandatory grants) are heard by the Departmental Appeals Board (the Board) in accordance with procedures set forth in 45 CFR part 16.


(c) Discretionary grants disputes. Disputes pertaining to discretionary grants, such as grants for special demonstration projects under sections 1110 and 1115 of the Act, which may be awarded to a Medicaid agency, are also heard by the Board. 45 CFR part 16, appendix A, lists all the types of disputes that the Board hears.


[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]


§ 430.5 Definitions.

As used in this subchapter, unless the context indicates otherwise –


Contractor means any entity that contracts with the State agency, under the State plan, in return for a payment, to process claims, to provide or pay for medical services, or to enhance the State agency’s capability for effective administration of the program.


Representative has the meaning given the term by each State consistent with its laws, regulations, and policies.


[67 FR 41094, June 14, 2002]


Subpart B – State Plans

§ 430.10 The State plan.

The State plan is a comprehensive written statement submitted by the agency describing the nature and scope of its Medicaid program and giving assurance that it will be administered in conformity with the specific requirements of title XIX, the regulations in this Chapter IV, and other applicable official issuances of the Department. The State plan contains all information necessary for CMS to determine whether the plan can be approved to serve as a basis for Federal financial participation (FFP) in the State program.


§ 430.12 Submittal of State plans and plan amendments.

(a) Format. A State plan for Medicaid consists of a standardized template, issued and updated by CMS, that includes both basic requirements and individualized content that reflects the characteristics of the State’s program. The Secretary will periodically update the template and format specifications for State plans and plan amendments through a process consistent with the requirements of the Paperwork Reduction Act.


(b) Governor’s review – (1) Basic rules. Except as provided in paragraph (b)(2) of this section –


(i) The Medicaid agency must submit the State plan and State plan amendments to the State Governor or his designee for review and comment before submitting them to the CMS regional office.


(ii) The plan must provide that the Governor will be given a specific period of time to review State plan amendments, long-range program planning projections, and other periodic reports on the Medicaid program, excluding periodic statistical, budget and fiscal reports.


(iii) Any comments from the Governor must be submitted to CMS with the plan or plan amendment.


(2) Exceptions. (i) Submission is not required if the Governor’s designee is the head of the Medicaid agency.


(ii) Governor’s review is not required for preprinted plan amendments that are developed by CMS if they provide absolutely no options for the State.


(c) Plan amendments. (1) The plan must provide that it will be amended whenever necessary to reflect –


(i) Changes in Federal law, regulations, policy interpretations, or court decisions; or


(ii) Material changes in State law, organization, or policy, or in the State’s operation of the Medicaid program. For changes related to advance directive requirements, amendments must be submitted as soon as possible, but no later than 60 days from the effective date of the change to State law concerning advance directives.


(2) Prompt submittal of amendments is necessary –


(i) So that CMS can determine whether the plan continues to meet the requirements for approval; and


(ii) To ensure the availability of FFP in accordance with § 430.20.


[53 FR 36571, Sept. 21, 1988, as amended at 60 FR 33293, June 27, 1995; 81 FR 86447, Nov. 30, 2016]


§ 430.14 Review of State plan material.

CMS regional staff reviews State plans and plan amendments, discusses any issues with the Medicaid agency, and consults with central office staff on questions regarding application of Federal policy.


§ 430.15 Basis and authority for action on State plan material.

(a) Basis for action. (1) Determinations as to whether State plans (including plan amendments and administrative practice under the plans) originally meet or continue to meet the requirements for approval are based on relevant Federal statutes and regulations.


(2) Guidelines are furnished to assist in the interpretation of the regulations.


(b) Approval authority. The Regional Administrator exercises delegated authority to approve the State plan and plan amendments on the basis of policy statements and precedents previously approved by the Administrator.


(c) Disapproval authority. (1) The Administrator retains authority for determining that proposed plan material is not approvable or that previously approved material no longer meets the requirements for approval.


(2) The Administrator does not make a final determination of disapproval without first consulting the Secretary.


§ 430.16 Timing and notice of action on State plan material.

(a) Timing. (1) A State plan or plan amendment will be considered approved unless CMS, within 90 days after receipt of the plan or plan amendment in the regional office, sends the State –


(i) Written notice of disapproval; or


(ii) Written notice of any additional information it needs in order to make a final determination.


(2) If CMS requests additional information, the 90-day period for CMS action on the plan or plan amendment begins on the day it receives that information.


(b) Notice of final determination. (1) The Regional Administrator or the Administrator notifies the Medicaid agency of the approval of a State plan or plan amendment.


(2) Only the Administrator gives notice of disapproval of a State plan or plan amendment.


§ 430.18 Administrative review of action on State plan material.

(a) Request for reconsideration. Any State dissatisfied with the Administrator’s action on plan material under § 430.15 may, within 60 days after receipt of the notice provided under § 430.16(b), request that the Administrator reconsider the issue of whether the plan or plan amendment conforms to the requirements for approval.


(b) Notice and timing of hearing. (1) Within 30 days after receipt of the request, the Administrator notifies the State of the time and place of the hearing.


(2) The hearing takes place not less than 30 days nor more than 60 days after the date of the notice, unless the State and the Administrator agree in writing on an earlier or later date.


(c) Hearing procedures. The hearing procedures are set forth in subpart D of this part.


(d) Decision. A decision affirming, modifying, or reversing the Administrator’s original determination is made in accordance with § 430.102.


(e) Effect of hearing decision. (1) Denial of Federal funds, if required by the Administrator’s original determination, will not be delayed pending a hearing decision.


(2) However, if the Administrator determines that his or her original decision was incorrect, CMS pays the State a lump sum equal to any funds incorrectly denied.


§ 430.20 Effective dates of State plans and plan amendments.

For purposes of FFP, the following rules apply:


(a) New plans. The effective date of a new plan –


(1) May not be earlier than the first day of the quarter in which an approvable plan is submitted to the regional office; and


(2) With respect to expenditures for medical assistance, may not be earlier than the first day on which the plan is in operation on a statewide basis.


(b) Plan amendment. (1) For a plan amendment that provides additional services to individuals eligible under the approved plan, increases the payment amounts for services already included in the plan, or makes additional groups eligible for services provided under the approved plan, the effective date is determined in accordance with paragraph (a) of this section.


(2) For a plan amendment that changes the State’s payment method and standards, the rules of § 447.256 of this chapter apply.


(3) For other plan amendments, the effective date may be a date requested by the State if CMS approves it.


[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]


§ 430.25 Waivers of State plan requirements.

(a) Scope of section. This section describes the purpose and effect of waivers, identifies the requirements that may be waived and the other regulations that apply to waivers, and sets forth the procedures that CMS follows in reviewing and taking action on waiver requests.


(b) Purpose of waivers. Waivers are intended to provide the flexibility needed to enable States to try new or different approaches to the efficient and cost-effective delivery of health care services, or to adapt their programs to the special needs of particular areas or groups of beneficiaries. Waivers allow exceptions to State plan requirements and permit a State to implement innovative programs or activities on a time-limited basis, and subject to specific safeguards for the protection of beneficiaries and the program. Detailed rules for waivers are set forth in subpart B of part 431, subpart A of part 440, and subpart G of part 441 of this chapter.


(c) Effect of waivers. (1) Waivers under section 1915(b) allow a State to take the following actions:


(i) Implement a primary care case-management system or a specialty physician system.


(ii) Designate a locality to act as central broker in assisting Medicaid beneficiaries to choose among competing health care plans.


(iii) Share with beneficiaries (through provision of additional services) cost-savings made possible through the beneficiaries’ use of more cost-effective medical care.


(iv) Limit beneficiaries’ choice of providers (except in emergency situations and with respect to family planning services) to providers that fully meet reimbursement, quality, and utilization standards, which are established under the State plan and are consistent with access, quality, and efficient and economical furnishing of care.


(2) A waiver under section 1915(c) of the Act allows a State to include as “medical assistance” under its plan home and community based services furnished to beneficiaries who would otherwise need inpatient care that is furnished in a hospital, SNF, ICF, or ICF/IID, and is reimbursable under the State plan.


(3) A waiver under section 1916 (a)(3) or (b)(3) of the Act allows a State to impose a deduction, cost-sharing or similar charge of up to twice the “nominal charge” established under the plan for outpatient services, if –


(i) The outpatient services are received in a hospital emergency room but are not emergency services; and


(ii) The State has shown that Medicaid beneficiaries have actually available and accessible to them alternative services of nonemergency outpatient services.


(d) Requirements that are waived. In order to permit the activities described in paragraph (c) of this section, one or more of the title XIX requirements must be waived, in whole or in part.


(1) Under section 1915(b) of the Act, and subject to certain limitations, any of the State plan requirements of section 1902 of the Act may be waived to achieve one of the purposes specified in that section.


(2) Under section 1915(c) of the Act, the following requirements may be waived:


(i) Statewideness – section 1902(a)(1).


(ii) Comparability of services – section 1902(a)(10)(B).


(iii) Income and resource rules – section 1902(a)(10)(C)(i)(III).


(3) Under section 1916 of the Act, paragraphs (a)(3) and (b)(3) require that any cost-sharing imposed on beneficiaries be nominal in amount, and provide an exception for nonemergency services furnished in a hospital emergency room if the conditions of paragraph (c)(3) of this section are met.


(e) Submittal of waiver request. The State Governor, the head of the Medicaid agency, or an authorized designee may submit the waiver request.


(f) Review of waiver requests. (1) This paragraph applies to initial waiver requests and to requests for renewal or amendment of a previously approved waiver.


(2) CMS regional and central office staff review waiver requests and submit a recommendation to the Administrator, who –


(i) Has the authority to approve or deny waiver requests; and


(ii) Does not deny a request without first consulting the Secretary.


(3) A waiver request is considered approved unless, within 90 days after the request is received by CMS, the Administrator denies the request, or the Administrator or the Regional Administrator sends the State a written request for additional information necessary to reach a final decision. If additional information is requested, a new 90-day period begins on the day the response to the additional information request is received by the addressee.


(g) Basis for approval – (1) Waivers under section 1915 (b) and (c). The Administrator approves waiver requests if the State’s proposed program or activity meets the requirements of the Act and the regulations at § 431.55 or subpart G of part 441 of this chapter.


(2) Waivers under section 1916. The Administrator approves a waiver under section 1916 of the Act if the State shows, to CMS’s satisfaction, that the Medicaid beneficiaries have available and accessible to them sources, other than a hospital emergency room, where they can obtain necessary nonemergency outpatient services.


(h) Effective date and duration of waivers – (1) Effective date. Waivers receive a prospective effective date determined, with State input, by the Administrator. The effective date is specified in the letter of approval to the State.


(2) Duration of waivers – (i) Home and community-based services under section 1915(c) of the Act. (A) The initial waiver is for a period of 3 years and may be renewed thereafter for periods of 5 years.


(B) For waivers that include individuals who are dually eligible for Medicare and Medicaid, 5-year initial approval periods may be granted at the discretion of the Secretary for waivers meeting all necessary programmatic, financial and quality requirements, and in a manner consistent with the interests of beneficiaries and the objectives of the Medicaid program.


(ii) Waivers under section 1915(b) of the Act. (A) The initial waiver is for a period of 2 years and may be renewed for additional periods of up to 2 years as determined by the Administrator.


(B) For waivers that include individuals who are dually eligible for Medicare and Medicaid, 5-year initial and renewal approval periods may be granted at the discretion of the Secretary for waivers meeting all necessary programmatic, financial and quality requirements, and in a manner consistent with the interests of beneficiaries and the objectives of the Medicaid program.


(iii) Waivers under section 1916 of the Act. The initial waiver is for a period of 2 years and may be renewed for additional periods of up to 2 years as determined by the Administrator.


(3) Renewal of waivers. (i) A renewal request must be submitted at least 90 days (but not more than 120 days) before a currently approved waiver expires, to provide adequate time for CMS review.


(ii) If a renewal request for a section 1915(c) waiver proposes a change in services provided, eligible population, service area, or statutory sections waived, the Administrator may consider it a new waiver, and approve it for a period of three years.


[56 FR 8846, Mar. 1, 1991, as amended at 79 FR 3028, Jan. 16, 2014]


Subpart C – Grants; Reviews and Audits; Withholding for Failure To Comply; Deferral and Disallowance of Claims; Reduction of Federal Medicaid Payments

§ 430.30 Grants procedures.

(a) General provisions. (1) Once CMS has approved a State plan, it makes quarterly grant awards to the State to cover the Federal share of expenditures for services, training, and administration.


(2) The amount of the quarterly grant is determined on the basis of information submitted by the State agency (in quarterly estimate and quarterly expenditure reports) and other pertinent documents.


(b) Quarterly estimates. The Medicaid agency must submit Form CMS-37 (Medicaid Program Budget Report; Quarterly Distribution of Funding Requirements) to the central office (with a copy to the regional office) 45 days before the beginning of each quarter.


(c) Expenditure reports. (1) The State must submit Form CMS-64 (Quarterly Medicaid Statement of Expenditures for the Medical Assistance Program) to the central office (with a copy to the regional office) not later than 30 days after the end of each quarter.


(2) This report is the State’s accounting of actual recorded expenditures. The disposition of Federal funds may not be reported on the basis of estimates.


(d) Grant award – (1) Computation by CMS. Regional office staff analyzes the State’s estimates and sends a recommendation to the central office. Central office staff considers the State’s estimates, the regional office recommendations and any other relevant information, including any adjustments to be made under paragraph (d)(2) of this section, and computes the grant.


(2) Content of award. The grant award computation form shows the estimate of expenditures for the ensuring quarter, and the amounts by which that estimate is increased or decreased because of an underestimate or overestimate for prior quarters, or for any of the following reasons:


(i) Penalty reductions imposed by law.


(ii) Accounting adjustments.


(iii) Deferrals or disallowances.


(iv) Interest assessments.


(v) Mandated adjustments such as those required by section 1914 of the Act.


(3) Effect of award. The grant award authorizes the State to draw Federal funds as needed to pay the Federal share of disbursements.


(4) Drawing procedure. The draw is through a commercial bank and the Federal Reserve system against a continuing letter of credit certified to the Secretary of the Treasury in favor of the State payee. (The letter of credit payment system was established in accordance with Treasury Department regulations – Circular No. 1075.)


(e) General administrative requirements. With the following exceptions, the provisions of 45 CFR 75, which establish uniform administrative requirements and cost principles, apply to all grants made to States under this subpart:


(1) Cost sharing or matching, 45 CFR 75.306; and


(2) Financial reporting, 45 CFR 75.341.


[53 FR 36571, Sept. 21, 1988, as amended at 77 FR 31507, May 29, 2012; 81 FR 3011, Jan. 20, 2016]


§ 430.32 Program reviews.

(a) Review of State and local administration. In order to determine whether the State is complying with the Federal requirements and the provisions of its plan, CMS reviews State and local administration through analysis of the State’s policies and procedures, on-site review of selected aspects of agency operation, and examination of samples of individual case records.


(b) Quality control program. The State itself is required to carry out a continuing quality control program as set forth in part 431, subpart P, of this chapter.


(c) Action on review findings. If Federal or State reviews reveal serious problems with respect to compliance with any Federal requirement, the State must correct its practice accordingly.


§ 430.33 Audits.

(a) Purpose. The Department’s Office of Inspector General (OIG) periodically audits State operations in order to determine whether –


(1) The program is being operated in a cost-efficient manner; and


(2) Funds are being properly expended for the purposes for which they were appropriated under Federal and State law and regulations.


(b) Reports. (1) The OIG releases audit reports simultaneously to State officials and the Department’s program officials.


(2) The reports set forth OIG opinion and recommendations regarding the practices it reviewed, and the allowability of the costs it audited.


(3) Cognizant officials of the Department make final determinations on all audit findings.


(c) Action on audit exceptions – (1) Concurrence or clearance. The State agency has the opportunity of concurring in the exceptions or submitting additional facts that support clearance of the exceptions.


(2) Appeal. Any exceptions that are not disposed of under paragraph (c)(1) of this section are included in a disallowance letter that constitutes the Department’s final decision unless the State requests reconsideration by the Administrator or the Departmental Appeals Board. (Specific rules are set forth in § 430.42.)


(3) Adjustment. If the decision by the Board requires an adjustment of FFP, either upward or downward, a subsequent grant award promptly reflects the amount of increase or decrease.


[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991; 77 FR 31507, May 29, 2012]


§ 430.35 Withholding of payment for failure to comply with Federal requirements.

(a) Basis for withholding. CMS withholds payments to the State, in whole or in part, only if, after giving the agency reasonable notice and opportunity for a hearing in accordance with subpart D of this part, the Administrator finds –


(1) That the plan no longer complies with the provisions of section 1902 of the Act; or


(2) That in the administration of the plan there is failure to comply substantially with any of those provisions.


(Hearings under subpart D are generally not called until a reasonable effort has been made to resolve the issues through conferences and discussions. These may be continued even if a date and place have been set for the hearing.)

(b) Noncompliance of the plan. A question of noncompliance of a State plan may arise from an unapprovable change in the approved State plan or the failure of the State to change its approved plan to conform to a new Federal requirement for approval of State plans.


(c) Noncompliance in practice. A question of noncompliance in practice may arise from the State’s failure to actually comply with a Federal requirement, regardless of whether the plan itself complies with that requirement.


(d) Notice and implementation of withholding. If the Administrator makes a finding of noncompliance under paragraph (a) of this section, the following rules apply:


(1) The Administrator notifies the State:


(i) That no further payments will be made to the State (or that payments will be made only for those portions or aspects of the program that are not affected by the noncompliance); and


(ii) That the total or partial withholding will continue until the Administrator is satisfied that the State’s plan and practice are, and will continue to be, in compliance with Federal requirements.


(2) CMS withholds payments, in whole or in part, until the Administrator is satisfied regarding the State’s compliance.


§ 430.38 Judicial review.

(a) Right to judicial review. Any State dissatisfied with the Administrator’s final determination on approvability of plan material (§ 430.18) or compliance with Federal requirements (§ 430.35) has a right to judicial review.


(b) Petition for review. (1) The State must file a petition for review with the U.S. Court of Appeals for the circuit in which the State is located, within 60 days after it is notified of the determination.


(2) The clerk of the court will file a copy of the petition with the Administrator and the Administrator will file in the court the record of the proceedings on which the determination was based.


(c) Court action. (1) The court is bound by the Administrator’s findings of fact if they are supported by substantial evidence.


(2) The court has jurisdiction to affirm the Administrator’s decision, to set it aside in whole or in part, or, for good cause, to remand the case for additional evidence.


(d) Response to remand. (1) If the court remands the case, the Administrator may make new or modified findings of fact and may modify his or her previous determination.


(2) The Administrator will certify to the court the transcript and record of the further proceedings.


(e) Review by the Supreme Court. The judgment of the appeals court is subject to review by the U.S. Supreme Court upon certiorari or certification, as provided in 28 U.S.C. 1254.


§ 430.40 Deferral of claims for FFP.

(a) Requirements for deferral. Payment of a claim or any portion of a claim for FFP is deferred only if –


(1) The Administrator or current Designee questions its allowability and needs additional information to resolve the question; and


(2) CMS takes action to defer the claim (by excluding the claimed amount from the grant award) within 60 days after the receipt of a Quarterly Statement of Expenditures (prepared in accordance with CMS instructions) that includes that claim.


(b) Notice of deferral and State’s responsibility. (1) Within 15 days of the action described in paragraph (a)(2) of this section, the current Designee sends the State a written notice of deferral that –


(i) Identifies the type and amount of the deferred claim and specifies the reason for deferral; and


(ii) Requests the State to make available all the documents and materials the regional office then believes are necessary to determine the allowability of the claim.


(2) It is the responsibility of the State to establish the allowability of a deferred claim.


(c) Handling of documents and materials. (1) Within 60 days (or within 120 days if the State requests an extension) after receipt of the notice of deferral, the State must make available to the regional office, in readily reviewable form, all requested documents and materials except any that it identifies as not being available.


(2) Regional office staff usually initiates review within 30 days after receipt of the documents and materials.


(3) If the current Designee finds that the materials are not in readily reviewable form or that additional information is needed, he or she promptly notifies the State that it has 15 days to submit the readily reviewable or additional materials.


(4) If the State does not provide the necessary materials within 15 days, the current Designee disallows the claim.


(5) The current Designee has 90 days, after all documentation is available in readily reviewable form, to determine the allowability of the claim.


(6) If the current Designee cannot complete review of the material within 90 days, CMS pays the claim, subject to a later determination of allowability.


(d) Effect of decision to pay a deferred claim. Payment of a deferred claim under paragraph (c)(6) of this section does not preclude a subsequent disallowance based on the results of an audit or financial review. (If there is a subsequent disallowance, the State may request reconsideration as provided in paragraph (e)(2) of this section.)


(e) Notice and effect of decision on allowability. (1) The Administrator or current Designee gives the State written notice of his or her decision to pay or disallow a deferred claim.


(2) If the decision is to disallow, the notice informs the State of its right to reconsideration in accordance with 45 CFR part 16.


[53 FR 36571, Sept. 21, 1988, as amended at 77 FR 31507, May 29, 2012]


§ 430.42 Disallowance of claims for FFP.

(a) Notice of disallowance and of right to reconsideration. When the Administrator or current Designee determines that a claim or portion of claim is not allowable, he or she promptly sends the State a disallowance letter that includes the following, as appropriate:


(1) The date or dates on which the State’s claim for FFP was made.


(2) The time period during which the expenditures in question were made or claimed to have been made.


(3) The date and amount of any payment or notice of deferral.


(4) A statement of the amount of FFP claimed, allowed, and disallowed and the manner in which these amounts were computed.


(5) Findings of fact on which the disallowance determination is based or a reference to other documents previously furnished to the State or included with the notice (such as a report of a financial review or audit) which contain the findings of fact on which the disallowance determination is based.


(6) Pertinent citations to the law, regulations, guides and instructions supporting the action taken.


(7) A request that the State make appropriate adjustment in a subsequent expenditure report.


(8) Notice of the State’s right to request reconsideration of the disallowance and the time allowed to make the request.


(9) A statement indicating that the disallowance letter is the Department’s final decision unless the State requests reconsideration under paragraph (b)(2) or (f)(2) of this section.


(b) Reconsideration of a disallowance. (1) The Administrator will reconsider Medicaid disallowance determinations.


(2) To request reconsideration of a disallowance, a State must complete the following:


(i) Submit the following within 60 days after receipt of the disallowance letter:


(A) A written request to the Administrator that includes the following:


(1) A copy of the disallowance letter.


(2) A statement of the amount in dispute.


(3) A brief statement of why the disallowance should be reversed or revised, including any information to support the State’s position with respect to each issue.


(4) Additional information regarding factual matters or policy considerations.


(B) A copy of the written request to the Regional Office.


(C) Send all requests for reconsideration via registered or certified mail to establish the date the reconsideration was received by CMS.


(ii) In all cases, the State has the burden of documenting the allowability of its claims for FFP.


(iii) Additional information regarding the legal authority for the disallowance will not be reviewed in the reconsideration but may be presented in any appeal to the Departmental Appeals Board under paragraph (f)(2) of this section.


(3) A State may request to retain the FFP during the reconsideration of the disallowance under section 1116(e) of the Act, in accordance with § 433.38 of this subchapter.


(4) The State is not required to request reconsideration before seeking review from the Departmental Appeals Board.


(5) The State may also seek reconsideration, and following the reconsideration decision, request a review from the Board.


(6) If the State elects reconsideration, the reconsideration process must be completed or withdrawn before requesting review by the Board.


(c) Procedures for reconsideration of a disallowance. (1) Within 60 days after receipt of the disallowance letter, the State shall, in accordance with (b)(2) of this section, submit in writing to the Administrator any relevant evidence, documentation, or explanation and shall simultaneously submit a copy thereof to the Regional Office.


(2) After consideration of the policies and factual matters pertinent to the issues in question, the Administrator shall, within 60 days from the date of receipt of the request for reconsideration, issue a written decision or a request for additional information as described in paragraph (c)(3) of this section.


(3) At the Administrator’s option, CMS may request from the State any additional information or documents necessary to make a decision. The request for additional information must be sent via registered or certified mail to establish the date the request was sent by CMS and received by the State.


(4) Within 30 days after receipt of the request for additional information, the State must submit to the Administrator, with a copy to the Regional Office in readily reviewable form, all requested documents and materials.


(i) If the Administrator finds that the materials are not in readily reviewable form or that additional information is needed, he or she shall notify the State via registered or certified mail that it has 15 business days from the date of receipt of the notice to submit the readily reviewable or additional materials.


(ii) If the State does not provide the necessary materials within 15 business days from the date of receipt of such notice, the Administrator shall affirm the disallowance in a final reconsideration decision issued within 15 days from the due date of additional information from the State.


(5) If additional documentation is provided in readily reviewable form under the paragraph (c)(4) of this section, the Administrator shall issue a written decision, within 60 days from the due date of such information.


(6) The final written decision shall constitute final CMS administrative action on the reconsideration and shall be (within 15 business days of the decision) mailed to the State agency via registered or certified mail to establish the date the reconsideration decision was received by the State.


(7) If the Administrator does not issue a decision within 60 days from the date of receipt of the request for reconsideration or the date of receipt of the requested additional information, the disallowance shall be deemed to be affirmed upon reconsideration.


(8) No section of this regulation shall be interpreted as waiving the Department’s right to assert any provision or exemption under the Freedom of Information Act.


(d) Withdrawal of a request for reconsideration of a disallowance. (1) A State may withdraw the request for reconsideration at any time before the notice of the reconsideration decision is received by the State without affecting its right to submit a notice of appeal to the Board. The request for withdrawal must be in writing and sent to the Administrator, with a copy to the Regional Office, via registered or certified mail.


(2) Within 60 days after CMS’ receipt of a State’s withdrawal request, a State may, in accordance with (f)(2) of this section, submit a notice of appeal to the Board.


(e) Implementation of decisions for reconsideration of a disallowance. (1) After undertaking a reconsideration, the Administrator may affirm, reverse, or revise the disallowance and shall issue a final written reconsideration decision to the State in accordance with paragraph (c)(4) of this section.


(2) If the reconsideration decision requires an adjustment of FFP, either upward or downward, a subsequent grant award will be issued in the amount of such increase or decrease.


(3) Within 60 days after the receipt of a reconsideration decision from CMS a State may, in accordance with paragraph (f)(2) of this section, submit a notice of appeal to the Board.


(f) Appeal of Disallowance. (1) The Departmental Appeals Board reviews disallowances of FFP under title XIX.


(2) A State that wishes to appeal a disallowance to the Board must:


(i) Submit a notice of appeal to the Board at the address given on the Departmental Appeals Board’s web site within 60 days after receipt of the disallowance letter.


(A) If a reconsideration of a disallowance was requested, within 60 days after receipt of the reconsideration decision; or


(B) If reconsideration of a disallowance was requested and no written decision was issued, within 60 days from the date the decision on reconsideration of the disallowance was due to be issued by CMS.


(ii) Include all of the following:


(A) A copy of the disallowance letter.


(B) A statement of the amount in dispute.


(C) A brief statement of why the disallowance is wrong.


(3) The Board’s decision of an appeal under paragraph (f)(2) of this section shall be the final decision of the Secretary and shall be subject to reconsideration by the Board only upon a motion by either party that alleges a clear error of fact or law and is filed during the 60-day period that begins on the date of the Board’s decision or to judicial review in accordance with paragraph (f)(2)(i) of this section.


(g) Appeals procedures. The appeals procedures are those set forth in 45 CFR part 16 for Medicaid and for many other programs administered by the Department.


(1) In all cases, the State has the burden of documenting the allowability of its claims for FFP.


(2) The Board shall conduct a thorough review of the issues, taking into account all relevant evidence, including such documentation as the State may submit and the Board may require.


(h) Implementation of decisions. (1) The Board may affirm the disallowance, reverse the disallowance, modify the disallowance, or remand the disallowance to CMS for further consideration.


(2) The Board will issue a final written decision to the State consistent with 45 CFR part 16.


(3) If the appeal decision requires an adjustment of FFP, either upward or downward, a subsequent grant award will be issued in the amount of increase or decrease.


[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991; 77 FR 31507, May 29, 2012]


§ 430.45 Reduction of Federal Medicaid payments.

(a) Methods of reduction. CMS may reduce Medicaid payments to a State as required under the Act by reducing –


(1) The Federal Medical Assistance Percentage;


(2) The amount of State expenditures subject to FFP;


(3) The rates of FFP; or


(4) The amount otherwise payable to the State.


(b) Right to reconsideration. A state that receives written final notice of a reduction under paragraph (a) of this section has a right to reconsideration. The provisions of § 430.42 (b) and (c) apply.


(c) Other applicable rules. Other rules regarding reduction of Medicaid payments are set forth in parts 433 and 447 of this chapter.


§ 430.48 Repayment of Federal funds by installments.

(a) Basic conditions. When Federal payments have been made for claims that are later found to be unallowable, the State may repay the Federal funds by installments if all of the following conditions are met:


(1) The amount to be repaid exceeds 0.25 percent of the estimated or actual annual State share for the Medicaid program.


(2) The State has given the Regional Office written notice, before total repayment was due, of its intent to repay by installments.


(b) Annual State share determination. CMS determines whether the amount to be repaid exceeds 0.25 percent of the annual State share as follows:


(1) If the Medicaid program is ongoing, CMS uses the annual estimated State share of Medicaid expenditures for the current year, as shown on the State’s latest Medicaid Program Budget Report (CMS-37). The current year is the year in which the State requests the repayment by installments.


(2) If the Medicaid program has been terminated by Federal law or by the State, CMS uses the actual State share that is shown on the State’s CMS-64 Quarterly Expense Report for the last four quarters filed.


(c) Standard Repayment amounts, schedules, and procedures – (1) Repayment amount. The repayment amount may not include any amount previously approved for installment repayment.


(2) Repayment schedule. The maximum number of quarters allowed for the standard repayment schedule is 12 quarters (3 years), except as provided in paragraphs (c)(4) and (e) of this section.


(3) Quarterly repayment amounts. (i) The quarterly repayment amounts for each of the quarters in the repayment schedule will be the larger of the repayment amount divided by 12 quarters or the minimum repayment amount;


(ii) The minimum quarterly repayment amounts for each of the quarters in the repayment schedule is 0.25 percent of the estimated State share of the current annual expenditures for Medicaid;


(iii) The repayment period may be less than 12 quarters when the minimum repayment amount is required.


(4) Extended schedule. (i) The repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount exceeds 100 percent of the estimated State share of the current annual expenditures;


(ii) The quarterly repayment amount will be 8
1/3 percent of the estimated State share of the current annual expenditures until fully repaid.


(5) Repayment process. (i) Repayment is accomplished through deposits into the State’s Payment Management System (PMS) account;


(ii) A State may choose to make payment by Automated Clearing House (ACH) direct deposit, by check, or by Fedwire transfer.


(6) Reductions. If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages is applied first to the last scheduled payment, then to the next to the last payment, and so forth as necessary.


(d) Alternate repayment amounts, schedules, and procedures for States experiencing economic distress immediately prior to the repayment period – (1) Repayment amount. The repayment amount may not include amounts previously approved for installment repayment if a State initially qualifies for the alternate repayment schedule at the onset of an installment repayment period.


(2) Qualifying period of economic distress. (i) A State will qualify to avail itself of the alternate repayment schedule if it demonstrates the State is experiencing a period of economic distress;


(ii) A period of economic distress is one in which the State demonstrates distress for at least each of the previous 6 months, ending the month prior to the date of the State’s written request for an alternate repayment schedule, as determined by a negative percent change in the monthly Philadelphia Federal Reserve Bank State coincident index.


(3) Repayment schedule. The maximum number of quarters allowed for the alternate repayment schedule is 12 quarters (3 years), except as provided in paragraph (d)(5) of this section.


(4) Quarterly repayment amounts. (i) The quarterly repayment amounts for each of the first 8 quarters in the repayment schedule will be the smaller of the repayment amount divided by 12 quarters or the maximum quarterly repayment amount;


(ii) The maximum quarterly repayment amounts for each of the first 8 quarters in the repayment schedule is 0.25 percent of the annual State share determination as defined in paragraph (b) of this section;


(iii) For the remaining 4 quarters, the quarterly repayment amount equals the remaining balance of the overpayment amount divided by the remaining 4 quarters.


(5) Extended schedule. (i) For a State that initiated its repayment under an alternate payment schedule for economic distress, the repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount exceeds 100 percent of the estimated State share of current annual expenditures;


(A) In these circumstances, paragraph (d)(3) of this section is followed for repayment of the amount equal to 100 percent of the estimated State share of current annual expenditures.


(B) The remaining amount of the repayment is in quarterly amounts equal to 8
1/3 percent of the estimated State share of current annual expenditures until fully repaid.


(ii) Upon request by the State, the repayment schedule may be extended beyond 12 quarterly installments if the State has qualifying periods of economic distress in accordance with paragraph (d)(2) of this section during the first 8 quarters of the alternate repayment schedule.


(A) To qualify for additional quarters, the States must demonstrate a period of economic distress in accordance with paragraph (d)(2) of this section for at least 1 month of a quarter during the first 8 quarters of the alternate repayment schedule.


(B) For each quarter (of the first 8 quarters of the alternate payment schedule) identified as qualified period of economic distress, one quarter will be added to the remaining 4 quarters of the original 12 quarter repayment period.


(C) The total number of quarters in the alternate repayment schedule shall not exceed 20 quarters.


(6) Repayment process. (i) Repayment is accomplished through deposits into the State’s Payment Management System (PMS) account;


(ii) A State may choose to make payment by Automated Clearing House (ACH) direct deposit, by check, or by Fedwire transfer.


(7) If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages is applied first to the last scheduled payment, then to the next to the last payment, and so forth as necessary.


(e) Alternate repayment amounts, schedules, and procedures for States entering into distress during a standard repayment schedule – (1) Repayment amount. The repayment amount may include amounts previously approved for installment repayment if a State enters into a qualifying period of economic distress during an installment repayment period.


(2) Qualifying period of economic distress. (i) A State will qualify to avail itself of the alternate repayment schedule if it demonstrates the State is experiencing economic distress;


(ii) A period of economic distress is one in which the State demonstrates distress for each of the previous 6 months, that begins on the date of the State’s request for an alternate repayment schedule, as determined by a negative percent change in the monthly Philadelphia Federal Reserve Bank State coincident index.


(3) Repayment schedule. The maximum number of quarters allowed for the alternate repayment schedule is 12 quarters (3 years), except as provided in paragraph (e)(5) of this section.


(4) Quarterly repayment amounts. (i) The quarterly repayment amounts for each of the first 8 quarters in the repayment schedule will be the smaller of the repayment amount divided by 12 quarters or the maximum repayment amount;


(ii) The maximum quarterly repayment amounts for each of the first 8 quarters in the repayment schedule is 0.25 percent of the annual State share determination as defined in paragraph (b) of this section;


(iii) For the remaining 4 quarters, the quarterly repayment amount equals the remaining balance of the overpayment amount divided by the remaining 4 quarters.


(5) Extended schedule. (i) For a State that initiated its repayment under the standard payment schedule and later experienced periods of economic distress and elected an alternate repayment schedule, the repayment schedule may be extended beyond 12 quarterly installments if the total repayment amount of the remaining balance of the standard schedule, exceeds 100 percent of the estimated State share of the current annual expenditures;


(ii) In these circumstances, paragraph (d)(3) of this section is followed for repayment of the amount equal to 100 percent of the estimated State share of current annual expenditures;


(iii) The remaining amount of the repayment is in quarterly amounts equal to 8
1/3 percent of the estimated State share of the current annual expenditures until fully repaid.


(6) Repayment process. (i) Repayment is accomplished through deposits into the State’s Payment Management System (PMS) account;


(ii) A State may choose to make payment by Automated Clearing House (ACH) direct deposit, by check, or by Fedwire transfer.


(7) If the State chooses to repay amounts representing higher percentages during the early quarters, any corresponding reduction in required minimum percentages is applied first to the last scheduled payment, then to the next to the last payment, and so forth as necessary.


[77 FR 31509, May 29, 2012]


Subpart D – Hearings on Conformity of State Medicaid Plans and Practice to Federal Requirements

§ 430.60 Scope.

(a) This subpart sets forth the rules for hearings to States that appeal a decision to disapprove State plan material (under § 430.18) or to withhold Federal funds (under § 430.35), because the State plan or State practice in the Medicaid program is not in compliance with Federal requirements.


(b) Nothing in this subpart is intended to preclude or limit negotiations between CMS and the State, whether before, during, or after the hearing to resolve the issues that are, or otherwise would be, considered at the hearing. Such negotiations and resolution of issues are not part of the hearing, and are not governed by the rules in this subpart except as expressly provided.


§ 430.62 Records to be public.

All pleadings, correspondence, exhibits, transcripts of testimony, exceptions, briefs, decisions, and other documents filed in the docket in any proceeding may be inspected and copied in the office of the CMS Docket Clerk. Inquiries may be made to the Docket Clerk, Hearing Staff, Bureau of Eligibility, Reimbursment and Coverage, 300 East High Rise, 6325 Security Boulevard, Baltimore, Maryland, 21207. Telephone: (301) 594-8261.


§ 430.63 Filing and service of papers.

(a) Filing. All papers in the proceedings are filed with the CMS Docket Clerk, in an original and two copies. Originals only of exhibits and transcripts of testimony need be filed.


(b) Service. All papers in the proceedings are served on all parties by personal delivery or by mail. Service on the party’s designated attorney is considered service upon the party.


§ 430.64 Suspension of rules.

Upon notice to all parties, the Administrator or the presiding officer may modify or waive any rule in this subpart upon determination that no party will be unduly prejudiced and the ends of justice will thereby be served.


§ 430.66 Designation of presiding officer for hearing.

(a) The presiding officer at a hearing is the Administrator or his designee.


(b) The designation of the presiding officer is in writing. A copy of the designation is served on all parties.


§ 430.70 Notice of hearing or opportunity for hearing.

The Administrator mails the State a notice of hearing or opportunity for hearing that –


(a) Specifies the time and place for the hearing;


(b) Specifies the issues that will be considered;


(c) Identifies the presiding officer; and


(d) Is published in the Federal Register.


§ 430.72 Time and place of hearing.

(a) Time. The hearing is scheduled not less than 30 nor more than 60 days after the date of notice to the State. The scheduled date may be changed by written agreement between CMS and the State.


(b) Place. The hearing is conducted in the city in which the CMS regional office is located or in another place fixed by the presiding officer in light of the circumstances of the case, with due regard for the convenience and necessity of the parties or their representatives.


§ 430.74 Issues at hearing.

The list of issues specified in the notice of hearing may be augmented or reduced as provided in this section.


(a) Additional issues. (1) Before a hearing under § 430.35, the Administrator may send written notice to the State listing additional issues to be considered at the hearing. That notice is published in the Federal Register.


(2) If the notice of additional issues is furnished to the State less than 20 days before the scheduled hearing date, postponement is granted if requested by the State or any other party. The new date may be 20 days after the date of the notice, or a later date agreed to by the presiding officer.


(b) New or modified issues. If, as a result of negotiations between CMS and the State, the submittal of plan amendment, a change in the State program, or other actions by the State, any issue is resolved in whole or in part, but new or modified issues are presented, as specified by the presiding officer, the hearing proceeds on the new or modified issues.


(c) Issues removed from consideration – (1) Basis for removal. If at any time before, during, or after the hearing, the presiding officer finds that the State has come into compliance with Federal requirements on any issue or part of an issue, he or she removes the appropriate issue or part of an issue from consideration. If all issues are removed, the hearing is terminated.


(2) Notice to parties. Before removing any issue or part of an issue from consideration, the presiding officer provides all parties other than CMS and the State with –


(i) A statement of the intent to remove and the reasons for removal; and


(ii) A copy of the proposed State plan provision on which CMS and the State have agreed.


(3) Opportunity for written comment. The notified parties have 15 days to submit, for consideration by the presiding officer, and for the record, their views as to, or any information bearing upon, the merits of the proposed plan provision and the merits of the reasons for removing the issue from consideration.


(d) Remaining issues. The issues considered at the hearing are limited to those issues of which the State is notified as provided in § 430.70 and paragraph (a) of this section, and new or modified issues described in paragraph (b) of this section. They do not include issues or parts of issues removed in accordance with paragraph (c) of this section.


§ 430.76 Parties to the hearing.

(a) CMS and the State. CMS and the State are parties to the hearing.


(b) Other individuals – (1) Basis for participation. Other individuals or groups may be recognized as parties if the issues to be considered at the hearing have caused them injury and their interest is within the zone of interests to be protected by the governing Federal statute.


(2) Petition for participation. Any individual or group wishing to participate as a party must, within 15 days after notice of hearing is published in the Federal Register, file with the CMS Docket Clerk, a petition that concisely states –


(i) Petitioner’s interest in the proceeding;


(ii) Who will appear for petitioner;


(iii) The issues on which petitioner wishes to participate; and


(iv) Whether petitioner intends to present witnesses.


The petitioner must also serve a copy of the petition on each party of record at that time.

(3) Comments on petition. Any party may, within 5 days of receipt of the copy of the petition, file comments on it.


(4) Action on petition. (i) The presiding officer promptly determines whether each petitioner has the requisite interest in the proceedings and approves or denies participation accordingly.


(ii) If petitions are made by more than one individual or group with common interests, the presiding officer may –


(A) Request all those petitioners to designate a single representative; or


(B) Recognize one or more of those petitioners to represent all of them.


(iii) The presiding officer gives each petitioner written notice of the decision and, if the decision is to deny, briefly states the grounds for denial.


(c) Amicus curiae (friend of the court) – (1) Petition for participation. Any person or organization that wishes to participate as amicus curiae must, before the hearing begins, file with the CMS Docket Clerk, a petition that concisely states –


(i) The petitioners’ interest in the hearing;


(ii) Who will represent the petitioner; and


(iii) The issues on which the petitioner intends to present argument.


(2) Action on amicus curiae petition. The presiding officer may grant the petition if he or she finds that the petitioner has a legitimate interest in the proceedings, that such participation will not unduly delay the outcome and may contribute materially to the proper disposition of the issues.


(3) Nature of amicus participation. An amicus curiae is not a party to the hearing but may participate by –


(i) Submitting a written statement of position to the presiding officer before the beginning of the hearing;


(ii) Presenting a brief oral statement at the hearing, at the point in the proceedings specified by the presiding officer; and


(iii) Submitting a brief or written statement when the parties submit briefs.


The amicus curiae must serve copies of any briefs or written statements on all parties.


§ 430.80 Authority of the presiding officer.

(a) The presiding officer has the duty to conduct a fair hearing, to avoid delay, maintain order, and make a record of the proceedings. He or she has the authority necessary to accomplish those ends, including but not limited to authority to take the following actions:


(1) Change the date, time, and place of the hearing after due notice to the parties. This includes authority to postpone or adjourn the hearing in whole or in part. In a hearing on disapproval of a State plan, or State plan amendments, changes in the date of the hearing are subject to the time limits imposed by section 1116(a)(2) of the Act.


(2) Hold conferences to settle or simplify the issues, or to consider other matters that may aid in the expeditious disposition of the issues.


(3) Regulate participation of parties and amici curiae and require parties and amici curiae to state their position with respect to the various issues in the proceeding.


(4) Administer oaths and affirmations.


(5) Rule on motions and other procedural items, including issuance of protective orders or other relief to a party against whom discovery is sought.


(6) Regulate the course of the hearing and conduct of counsel.


(7) Examine witnesses.


(8) Receive, rule on, exclude or limit evidence or discovery.


(9) Fix the time for filing motions, petitions, briefs, or other items.


(10) If the presiding officer is the Administrator, make a final decision.


(11) If the presiding officer is a designee of the Administrator, certify the entire record including recommended findings and proposed decision to the Administrator.


(12) Take any action authorized by the rules in this subpart or in conformance with the provisions of 5 U.S.C. 551 through 559.


(b) The presiding officer does not have authority to compel by subpoena the production of witnesses, papers, or other evidence.


(c) If the presiding officer is a designee of the Administrator, his or her authority pertains to the issues of compliance by a State with Federal requirements, and does not extend to the question of whether, in case of any noncompliance, Federal payments will be denied in respect to the entire State plan or only for certain categories under, or parts of, the State plan affected by the noncompliance.


§ 430.83 Rights of parties.

All parties may:


(a) Appear by counsel or other authorized representative, in all hearing proceedings.


(b) Participate in any prehearing conference held by the presiding officer.


(c) Agree to stipulations as to facts which will be made a part of the record.


(d) Make opening statements at the hearing.


(e) Present relevant evidence on the issues at the hearing.


(f) Present witnesses who then must be available for cross-examination by all other parties.


(g) Present oral arguments at the hearing.


(h) Submit written briefs, proposed findings of fact, and proposed conclusions of law, after the hearing.


§ 430.86 Discovery.

CMS and any party named in the notice issued under § 430.70 has the right to conduct discovery (including depositions) against opposing parties. Rules 26-37 of the Federal Rules of Civil Procedures apply to such proceedings; there will be no fixed rule on priority of discovery. Upon written motion, the presiding officer promptly rules upon any objection to discovery action initiated under this section. The presiding officer also has the power to grant a protective order or relief to any party against whom discovery is sought and to restrict or control discovery so as to prevent undue delay in the conduct of the hearing. Upon the failure of any party to make discovery, the presiding officer may issue any order and impose any sanction (other than contempt orders) authorized by Rule 37 of the Federal Rules of Civil Procedure.


§ 430.88 Evidence.

(a) Evidentiary purpose. The hearing is directed to receiving factual evidence and expert opinion testimony related to the issues involved in the proceeding. Argument is not received in evidence. It must be presented in statements, memoranda, or briefs, as determined by the presiding officer. Brief opening statements, concerning the party’s position and what he or she intends to prove, may be made at hearings.


(b) Testimony. Testimony is given orally under oath or affirmation by witnesses at the hearing. Witnesses are available at the hearing for cross-examination by all parties.


(c) Stipulations and exhibits. Two or more parties may agree to stipulations of fact. Those stipulations, and any exhibit proposed by any party, are exchanged before the hearing if the presiding officer so requires.


(d) Rules of evidence. (1) Technical rules of evidence do not apply to hearings conducted under this subpart. However, rules or principles designed to ensure production of the most credible evidence available and to subject testimony to test by cross-examination are applied by the presiding officer when reasonably necessary.


(2) A witness may be cross-examined on any matter material to the proceeding without regard to the scope of his or her direct examination.


(3) The presiding officer may exclude irrelevant, immaterial, or unduly repetitious evidence.


(4) All documents and other evidence offered or taken for the record are open to examination by the parties and an opportunity is given to refute facts and arguments advanced on either side of the issues.


§ 430.90 Exclusion from hearing for misconduct.

The presiding officer may immediately exclude from the hearing any person who –


(a) Uses disrespectful, disorderly, or contumacious language or engages in contemptuous behavior;


(b) Refuses to comply with directions; or


(c) Uses dilatory tactics.


§ 430.92 Unsponsored written material.

Letters expressing views or urging action and other unsponsored written material regarding matters in issue in a hearing are placed in the correspondence section of the docket of the proceeding. These data are not considered part of the evidence or record in the hearing.


§ 430.94 Official transcript.

(a) Filing. The official transcripts of testimony, together with any stipulations, briefs, or memoranda of law, are filed with CMS.


(b) Availability of transcripts. CMS designates an official reporter for each hearing. Transcripts of testimony in hearings may be obtained from the official reporter by the parties and the public at rates not in excess of the maximum rates fixed by the contract between CMS and the reporter.


(c) Correction of transcript. Upon notice to all parties, the presiding officer may authorize corrections that affect substantive matters in the transcript.


§ 430.96 Record for decision.

The transcript of testimony, exhibits, and all papers and requests filed in the proceedings, except the correspondence section of the docket, including rulings and any recommended or initial decision constitute the exclusive record for decision.


§ 430.100 Posthearing briefs.

The presiding officer fixes the time for filing posthearing briefs, which may contain proposed findings of fact and conclusions of law. The presiding officer may also permit reply briefs.


§ 430.102 Decisions following hearing.

(a) Administrator presides. If the presiding officer is the Administrator, he or she issues the hearing decision within 60 days after expiration of the period for submission of posthearing briefs.


(b) Administrator’s designee presides. If the presiding officer is other than the Administrator, the procedure is as follows:


(1) Upon expiration of the period allowed for submission of posthearing briefs, the presiding officer certifies the entire record, including his or her recommended findings and proposed decision, to the Administrator. The Administrator serves a copy of the recommended findings and proposed decision upon all parties and amici, if any.


(2) Any party may, within 20 days, file with the Administrator exceptions to the recommended findings and proposed decision and a supporting brief or statement.


(3) The Administrator reviews the recommended decision and, within 60 days of its issuance, issues his or her own decision.


(c) Effect of Administrator’s decision. The decision of the Administrator under this section is the final decision of the Secretary and constitutes “final agency action” within the meaning of 5 U.S.C. 704 and a “final determination” within the meaning of section 1116(a)(3) of the Act and § 430.38. The Administrator’s decision is promptly served on all parties and amici.


§ 430.104 Decisions that affect FFP.

(a) Scope of decisions. If the Administrator concludes that withholding of FFP is necessary because a State is out of compliance with Federal requirements, in accordance with § 430.35, the decision also specifies –


(1) Whether no further payments will be made to the State or whether payments will be limited to parts of the program not affected by the noncompliance; and


(2) The effective date of the decision to withhold.


(b) Consultation. The Administrator may ask the parties for recommendations or briefs or may hold conferences of the parties on the question of further payments to the State.


(c) Effective date of decision. The effective date of a decision to withhold Federal funds will not be earlier than the date of the Administrator’s decision and will not be later than the first day of the next calendar quarter. The provisions of this section may not be waived under § 430.64.


PART 431 – STATE ORGANIZATION AND GENERAL ADMINISTRATION


Authority:42 U.S.C. 1302.



Source:43 FR 45188, Sept. 29, 1978, unless otherwise noted.


Editorial Note:Nomenclature changes to part 431 appear at 75 FR 48852, Aug. 11, 2010.

§ 431.1 Purpose.

This part establishes State plan requirements for the designation, organization, and general administrative activities of a State agency responsible for operating the State Medicaid program, directly or through supervision of local administering agencies.


Subpart A – Single State Agency

§ 431.10 Single State agency.

(a) Basis, purpose, and definitions. (1) This section implements section 1902(a)(4) and (5) of the Act.


(2) For purposes of this part –


Appeals decision means a decision made by a hearing officer adjudicating a fair hearing under subpart E of this part.


Exchange has the meaning given to the term in 45 CFR 155.20.


Exchange appeals entity has the meaning given to the term “appeals entity,” as defined in 45 CFR 155.500.


Medicaid agency is the single State agency for the Medicaid program.


(b) Designation and certification. A State plan must –


(1) Specify a single State agency established or designated to administer or supervise the administration of the plan; and


(2) Include a certification by the State Attorney General, citing the legal authority for the single State agency to –


(i) Administer or supervise the administration of the plan; and


(ii) Make rules and regulations that it follows in administering the plan or that are binding upon local agencies that administer the plan.


(3) The single State agency is responsible for determining eligibility for all individuals applying for or receiving benefits in accordance with regulations in part 435 of this chapter and for fair hearings filed in accordance with subpart E of this part.


(c) Delegations. (1) Subject to the requirement in paragraph (c)(2) of this section, the Medicaid agency –


(i)(A) May, in the approved state plan, delegate authority to determine eligibility for all or a defined subset of individuals to –


(1) The single State agency for the financial assistance program under title IV-A (in the 50 States or the District of Columbia), or under title I or XVI (AABD), in Guam, Puerto Rico, or the Virgin Islands;


(2) The Federal agency administering the supplemental security income program under title XVI of the Act; or


(3) The Exchange.


(B) Must in the approved state plan specify to which agency, and the individuals for which, authority to determine eligibility is delegated.


(ii) Delegate authority to conduct fair hearings under subpart E of this part for denials of eligibility for individuals whose income eligibility is determined based on the applicable modified adjusted gross income standard described in § 435.911(c) of this chapter, to an Exchange or Exchange appeals entity, provided that individuals who have requested a fair hearing of such a denial are given a choice to have their fair hearing instead conducted by the Medicaid agency.


(2) The Medicaid agency may delegate authority to make eligibility determinations or to conduct fair hearings under this section only to a government agency which maintains personnel standards on a merit basis.


(3) The Medicaid agency –


(i) Must ensure that any agency to which eligibility determinations or appeals decisions are delegated –


(A) Complies with all relevant Federal and State law, regulations and policies, including, but not limited to, those related to the eligibility criteria applied by the agency under part 435 of this chapter; prohibitions against conflicts of interest and improper incentives; and safeguarding confidentiality, including regulations set forth at subpart F of this part.


(B) Informs applicants and beneficiaries how they can directly contact and obtain information from the agency; and


(ii) Must exercise appropriate oversight over the eligibility determinations and appeals decisions made by such agencies to ensure compliance with paragraphs (c)(2) and (c)(3)(i) of this section and institute corrective action as needed, including, but not limited to, rescission of the authority delegated under this section.


(iii) If authority to conduct fair hearings is delegated to the Exchange or Exchange appeals entity under paragraph (c)(1)(ii) of this section, the agency may establish a review process whereby the agency may review fair hearing decisions made under that delegation, but that review will be limited to the proper application of federal and state Medicaid law and regulations, including sub-regulatory guidance and written interpretive policies, and must be conducted by an impartial official not directly involved in the initial determination.


(d) Agreement with Federal, State or local entities making eligibility determinations or appeals decisions. The plan must provide for written agreements between the Medicaid agency and the Exchange or any other State or local agency that has been delegated authority under paragraph (c)(1)(i) of this section to determine Medicaid eligibility and for written agreements between the agency and the Exchange or Exchange appeals entity that has been delegated authority to conduct Medicaid fair hearings under paragraph (c)(1)(ii) of this section. Such agreements must be available to the Secretary upon request and must include provisions for:


(1) The relationships and respective responsibilities of the parties, including but not limited to the respective responsibilities to effectuate the fair hearing rules in subpart E of this part;


(2) Quality control and oversight by the Medicaid agency, including any reporting requirements needed to facilitate such control and oversight;


(3) Assurances that the entity to which authority to determine eligibility or conduct fair hearings will comply with the provisions set forth in paragraph (c)(3) of this section.


(4) For appeals, procedures to ensure that individuals have notice and a full opportunity to have their fair hearing conducted by either the Exchange or Exchange appeals entity or the Medicaid agency.


(e) Authority of the single State agency. The Medicaid agency may not delegate, to other than its own officials, the authority to supervise the plan or to develop or issue policies, rules, and regulations on program matters.


[44 FR 17930, Mar. 23, 1979, as amended at 77 FR 17202, Mar. 23, 2012; 78 FR 42300, July 15, 2013]


§ 431.11 Organization for administration.

(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes the general organization and staffing requirements for the Medicaid agency and the State plan.


(b) Description of organization. (1) The plan must include a description of the organization and functions of the Medicaid agency.


(2) When submitting a state plan amendment related to the designation, authority, organization or functions of the Medicaid agency, the Medicaid agency must provide an organizational chart reflecting the key components of the Medicaid agency and the functions each performs.


(c) Eligibility determined or fair hearings decided by other entities. If eligibility is determined or fair hearings decided by Federal or State entities other than the Medicaid agency or by local agencies under the supervision of other State agencies, the plan must include a description of the staff designated by those other entities and the functions they perform in carrying out their responsibilities.


[44 FR 17931, Mar. 23, 1979, as amended at 77 FR 17203, Mar. 23, 2012; 78 FR 42301, July 15, 2013]


§ 431.12 Medical care advisory committee.

(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes State plan requirements for establishment of a committee to advise the Medicaid agency about health and medical care services.


(b) State plan requirement. A State plan must provide for a medical care advisory committee meeting the requirements of this section to advise the Medicaid agency director about health and medical care services.


(c) Appointment of members. The agency director, or a higher State authority, must appoint members to the advisory committee on a rotating and continuous basis.


(d) Committee membership. The committee must include –


(1) Board-certified physicians and other representatives of the health professions who are familiar with the medical needs of low-income population groups and with the resources available and required for their care;


(2) Members of consumers’ groups, including Medicaid beneficiaries, and consumer organizations such as labor unions, cooperatives, consumer-sponsored prepaid group practice plans, and others; and


(3) The director of the public welfare department or the public health department, whichever does not head the Medicaid agency.


(e) Committee participation. The committee must have opportunity for participation in policy development and program administration, including furthering the participation of beneficiary members in the agency program.


(f) Committee staff assistance and financial help. The agency must provide the committee with –


(1) Staff assistance from the agency and independent technical assistance as needed to enable it to make effective recommendations; and


(2) Financial arrangements, if necessary, to make possible the participation of beneficiary members.


(g) Federal financial participation. FFP is available at 50 percent in expenditures for the committee’s activities.


§ 431.15 Methods of administration.

A State plan must provide for methods of administration that are found by the Secretary to be necessary for the proper and efficient operation of the plan.


(Sec. 1902(a)(4) of the Act)

[44 FR 17931, Mar. 23, 1979]


§ 431.16 Reports.

A State plan must provide that the Medicaid agency will –


(a) Submit all reports required by the Secretary;


(b) Follow the Secretary’s instructions with regard to the form and content of those reports; and


(c) Comply with any provisions that the Secretary finds necessary to verify and assure the correctness of the reports.


[44 FR 17931, Mar. 23, 1979]


§ 431.17 Maintenance of records.

(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes the kinds of records a Medicaid agency must maintain, the retention period, and the conditions under which microfilm copies may be substituted for original records.


(b) Content of records. A State plan must provide that the Medicaid agency will maintain or supervise the maintenance of the records necessary for the proper and efficient operation of the plan. The records must include –


(1) Individual records on each applicant and beneficiary that contain information on –


(i) Date of application;


(ii) Date of and basis for disposition;


(iii) Facts essential to determination of initial and continuing eligibility;


(iv) Provision of medical assistance;


(v) Basis for discontinuing assistance;


(vi) The disposition of income and eligibility verification information received under §§ 435.940 through 435.960 of this subchapter; and


(2) Statistical, fiscal, and other records necessary for reporting and accountability as required by the Secretary.


(c) Retention of records. The plan must provide that the records required under paragraph (b) of this section will be retained for the periods required by the Secretary.


(d) Conditions for optional use of microfilm copies. The agency may substitute certified microfilm copies for the originals of substantiating documents required for Federal audit and review, if the conditions in paragraphs (d)(1) through (4) of this section are met.


(1) The agency must make a study of its record storage and must show that the use of microfilm is efficient and economical.


(2) The microfilm system must not hinder the agency’s supervision and control of the Medicaid program.


(3) The microfilm system must –


(i) Enable the State to audit the propriety of expenditures for which FFP is claimed; and


(ii) Enable the HHS Audit Agency and CMS to properly discharge their respective responsibilities for reviewing the manner in which the Medicaid program is being administered.


(4) The agency must obtain approval from the CMS regional office indicating –


(i) The system meets the conditions of paragraphs (d)(2) and (3) of this section; and


(ii) The microfilming procedures are reliable and are supported by an adequate retrieval system.


[44 FR 17931, Mar. 23, 1979, as amended at 51 FR 7210, Feb. 28, 1986]


§ 431.18 Availability of agency program manuals.

(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes State plan requirements for facilitating access to Medicaid rules and policies by individuals outside the State Medicaid agency.


(b) State plan requirements. A State plan must provide that the Medicaid agency meets the requirements of paragraphs (c) through (g) of this section.


(c) Availability in agency offices. (1) The agency must maintain, in all its offices, copies of its current rules and policies that affect the public, including those that govern eligibility, provision of medical assistance, covered services, and beneficiary rights and responsibilities.


(2) These documents must be available upon request for review, study, and reproduction by individuals during regular working hours of the agency.


(d) Availability through other entities. The agency must provide copies of its current rules and policies to –


(1) Public and university libraries;


(2) The local or district offices of the Bureau of Indian Affairs;


(3) Welfare and legal services offices; and


(4) Other entities that –


(i) Request the material in order to make it accessible to the public;


(ii) Are centrally located and accessible to a substantial number of the beneficiary population they serve; and


(iii) Agree to accept responsibility for filing all amendments or changes forwarded by the agency.


(e) Availability in relation to fair hearings. The agency must make available to an applicant or beneficiary, or his representative, a copy of the specific policy materials necessary –


(1) To determine whether to request a fair hearing; or


(2) To prepare for a fair hearing.


(f) Availability for other purposes. The agency must establish rules for making program policy materials available to individuals who request them for other purposes.


(g) Charges for reproduction. The agency must make copies of its program policy materials available without charge or at a charge related to the cost of reproduction.


[44 FR 17931, Mar. 23, 1979]


§ 431.20 Advance directives.

(a) Basis and purpose. This section, based on section 1902(a) (57) and (58) of the Act, prescribes State plan requirements for the development and distribution of a written description of State law concerning advance directives.


(b) A State Plan must provide that the State, acting through a State agency, association, or other private nonprofit entity, develop a written description of the State law (whether statutory or as recognized by the courts of the State) concerning advance directives, as defined in § 489.100 of this chapter, to be distributed by Medicaid providers and health maintenance organizations (as specified in section 1903(m)(1)(A) of the Act) in accordance with the requirements under part 489, subpart I of this chapter. Revisions to the written descriptions as a result of changes in State law must be incorporated in such descriptions and distributed as soon as possible, but no later than 60 days from the effective date of the change in State law, to Medicaid providers and health maintenance organizations.


[57 FR 8202, Mar. 6, 1992, as amended at 60 FR 33293, June 27, 1995]


Subpart B – General Administrative Requirements


Source:56 FR 8847, Mar. 1, 1991, unless otherwise noted.

§ 431.40 Basis and scope.

(a) This subpart sets forth State plan requirements and exceptions that pertain to the following administrative requirements and provisions of the Act:


(1) Statewideness – section 1902(a)(1);


(2) Proper and efficient administration – section 1902(a)(4);


(3) Comparability of services – section 1902(a)(10) (B)-(E);


(4) Payment for services furnished outside the State – section 1902(a)(16);


(5) Free choice of providers – section 1902(a)(23);


(6) Special waiver provisions applicable to American Samoa and the Northern Mariana Islands – section 1902(j); and


(7) Exceptions to, and waiver of, State plan requirements – sections 1915 (a)-(c) and 1916 (a)(3) and (b)(3).


(b) Other applicable regulations include the following:


(1) Section 430.25 Waivers of State plan requirements.


(2) Section 440.250 Limits on comparability of services.


§ 431.50 Statewide operation.

(a) Statutory basis. Section 1902(a)(1) of the Act requires a State plan to be in effect throughout the State, and section 1915 permits certain exceptions.


(b) State plan requirements. A State plan must provide that the following requirements are met:


(1) The plan will be in operation statewide through a system of local offices, under equitable standards for assistance and administration that are mandatory throughout the State.


(2) If administered by political subdivisions of the State, the plan will be mandatory on those subdivisions.


(3) The agency will ensure that the plan is continuously in operation in all local offices or agencies through –


(i) Methods for informing staff of State policies, standards, procedures, and instructions;


(ii) Systematic planned examination and evaluation of operations in local offices by regularly assigned State staff who make regular visits; and


(iii) Reports, controls, or other methods.


(c) Exceptions. (1) “Statewide operation” does not mean, for example, that every source of service must furnish the service State-wide. The requirement does not preclude the agency from contracting with a comprehensive health care organization (such as an HMO or a rural health clinic) that serves a specific area of the State, to furnish services to Medicaid beneficiaries who live in that area and chose to receive services from that HMO or rural health clinic. beneficiaries who live in other parts of the State may receive their services from other sources.


(2) Other allowable exceptions and waivers are set forth in §§ 431.54 and 431.55.


[56 FR 8847, Mar. 1, 1991; 56 FR 23022, May 20, 1991]


§ 431.51 Free choice of providers.

(a) Statutory basis. This section is based on sections 1902(a)(23), 1902(e)(2), and 1915(a) and (b) and 1932(a)(3) of the Act.


(1) Section 1902(a)(23) of the Act provides that beneficiaries may obtain services from any qualified Medicaid provider that undertakes to provide the services to them.


(2) Section 1915(a) of the Act provides that a State shall not be found out of compliance with section 1902(a)(23) solely because it imposes certain specified allowable restrictions on freedom of choice.


(3) Section 1915(b) of the Act authorizes waiver of the section 1902(a)(23) freedom of choice of providers requirement in certain specified circumstances, but not with respect to providers of family planning services.


(4) Section 1902(a)(23) of the Act provides that a beneficiary enrolled in a primary care case management system or Medicaid managed care organization (MCO) may not be denied freedom of choice of qualified providers of family planning services.


(5) Section 1902(e)(2) of the Act provides that an enrollee who, while completing a minimum enrollment period, is deemed eligible only for services furnished by or through the MCO or PCCM, may, as an exception to the deemed limitation, seek family planning services from any qualified provider.


(6) Section 1932(a) of the Act permits a State to restrict the freedom of choice required by section 1902(a)(23), under specified circumstances, for all services except family planning services.


(b) State plan requirements. A State plan, except the plan for Puerto Rico, the Virgin Islands, or Guam, must provide as follows:


(1) Except as provided under paragraph (c) of this section and part 438 of this chapter, a beneficiary may obtain Medicaid services from any institution, agency, pharmacy, person, or organization that is –


(i) Qualified to furnish the services; and


(ii) Willing to furnish them to that particular beneficiary.


This includes an organization that furnishes, or arranges for the furnishing of, Medicaid services on a prepayment basis.

(2) A beneficiary enrolled in a primary care case-management system, a Medicaid MCO, or other similar entity will not be restricted in freedom of choice of providers of family planning services.


(c) Exceptions. Paragraph (b) of this section does not prohibit the agency from –


(1) Establishing the fees it will pay providers for Medicaid services;


(2) Setting reasonable standards relating to the qualifications of providers; or


(3) Subject to paragraph (b)(2) of this section, restricting beneficiaries’ free choice of providers in accordance with one or more of the exceptions set forth in § 431.54, or under a waiver as provided in § 431.55; or


(4) Limiting the providers who are available to furnish targeted case management services defined in § 440.169 of this chapter to target groups that consist solely of individuals with developmental disabilities or with chronic mental illness. This limitation may only be permitted so that the providers of case management services for eligible individuals with developmental disabilities or with chronic mental illness are capable of ensuring that those individuals receive needed services.


(d) Certification requirement – (1) Content of certification. If a State implements a project under one of the exceptions allowed under § 431.54 (d), (e) or (f), it must certify to CMS that the statutory safeguards and requirements for an exception under section 1915(a) of the Act are met.


(2) Timing of certification. (i) For an exception under § 431.54(d), the State may not institute the project until after it has submitted the certification and CMS has made the findings required under the Act, and so notified the State.


(ii) For exceptions under § 431.54 (e) or (f), the State must submit the certificate by the end of the quarter in which it implements the project.


[56 FR 8847, Mar. 1, 1991, as amended at 67 FR 41094, June 14, 2002; 72 FR 68091, Dec. 4, 2007]


§ 431.52 Payments for services furnished out of State.

(a) Statutory basis. Section 1902(a)(16) of the Act authorizes the Secretary to prescribe State plan requirements for furnishing Medicaid to State residents who are absent from the State.


(b) Payment for services. A State plan must provide that the State will pay for services furnished in another State to the same extent that it would pay for services furnished within its boundaries if the services are furnished to a beneficiary who is a resident of the State, and any of the following conditions is met:


(1) Medical services are needed because of a medical emergency;


(2) Medical services are needed and the beneficiary’s health would be endangered if he were required to travel to his State of residence;


(3) The State determines, on the basis of medical advice, that the needed medical services, or necessary supplementary resources, are more readily available in the other State;


(4) It is general practice for beneficiaries in a particular locality to use medical resources in another State.


(c) Cooperation among States. The plan must provide that the State will establish procedures to facilitate the furnishing of medical services to individuals who are present in the State and are eligible for Medicaid under another State’s plan.


§ 431.53 Assurance of transportation.

A State plan must –


(a) Specify that the Medicaid agency will ensure necessary transportation for beneficiaries to and from providers; and


(b) Describe the methods that the agency will use to meet this requirement.


[74 FR 31195, June 30, 2009]


§ 431.54 Exceptions to certain State plan requirements.

(a) Statutory basis – (1) Section 1915(a) of the Act provides that a State shall not be deemed to be out of compliance with the requirements of sections 1902(a)(1), (10), or (23) of the Act solely because it has elected any of the exceptions set forth in paragraphs (b) and (d) through (f) of this section.


(2) Section 1915(g) of the Act provides that a State may provide, as medical assistance, targeted case management services under the plan without regard to the requirements of sections 1902(a)(1) and 1902(a)(10)(B) of the Act.


(3) Section 1915(i) of the Act provides that a State may provide, as medical assistance, home and community-based services under an approved State plan amendment that meets certain requirements, without regard to the requirements of sections 1902(a)(10)(B) and 1902(a)(10)(C)(i)(III) of the Act, with respect to such services.


(b) Additional services under a prepayment system. If the Medicaid agency contracts on a prepayment basis with an organization that provides services additional to those offered under the State plan, the agency may restrict the provision of the additional services to beneficiaries who live in the area served by the organization and wish to obtain services from it.


(c) [Reserved]


(d) Special procedures for purchase of medical devices and laboratory and X-ray tests. The Medicaid agency may establish special procedures for the purchase of medical devices or laboratory and X-ray tests (as defined in § 440.30 of this chapter) through a competitive bidding process or otherwise, if the State assures, in the certification required under § 431.51(d), and CMS finds, as follows:


(1) Adequate services or devices are available to beneficiaries under the special procedures.


(2) Laboratory services are furnished through laboratories that meet the following requirements:


(i) They are independent laboratories, or inpatient or outpatient hospital laboratories that provide services for individuals who are not hospital patients, or physician laboratories that process at least 100 specimens for other physicians during any calendar year.


(ii) They meet the requirements of subpart M of part 405 or part 482 of this chapter.


(iii) Laboratories that require an interstate license under 42 CFR part 74 are licensed by CMS or receive an exemption from the licensing requirement by the College of American Pathologists. (Hospital and physician laboratories may participate in competitive bidding only with regard to services to non-hospital patients and other physicians’ patients, respectively.)


(3) Any laboratory from which a State purchases services under this section has no more than 75 percent of its charges based on services to Medicare beneficiaries and Medicaid beneficiaries.


(e) Lock-in of beneficiaries who over-utilize Medicaid services. If a Medicaid agency finds that a beneficiary has utilized Medicaid services at a frequency or amount that is not medically necessary, as determined in accordance with utilization guidelines established by the State, the agency may restrict that beneficiary for a reasonable period of time to obtain Medicaid services from designated providers only. The agency may impose these restrictions only if the following conditions are met:


(1) The agency gives the beneficiary notice and opportunity for a hearing (in accordance with procedures established by the agency) before imposing the restrictions.


(2) The agency ensures that the beneficiary has reasonable access (taking into account geographic location and reasonable travel time) to Medicaid services of adequate quality.


(3) The restrictions do not apply to emergency services furnished to the beneficiary.


(f) Lock-out of providers. If a Medicaid agency finds that a Medicaid provider has abused the Medicaid program, the agency may restrict the provider, through suspension or otherwise, from participating in the program for a reasonable period of time.


Before imposing any restriction, the agency must meet the following conditions:


(1) Give the provider notice and opportunity for a hearing, in accordance with procedures established by the agency.


(2) Find that in a significant number or proportion of cases, the provider has:


(i) Furnished Medicaid services at a frequency or amount not medically necessary, as determined in accordance with utilization guidelines established by the agency; or


(ii) Furnished Medicaid services of a quality that does not meet professionally recognized standards of health care.


(3) Notify CMS and the general public of the restriction and its duration.


(4) Ensure that the restrictions do not result in denying beneficiaries reasonable access (taking into account geographic location: and reasonable travel time) to Medicaid services of adequate quality, including emergency services.


(g) Targeted case management services. The requirements of § 431.50(b) relating to the statewide operation of a State plan and § 440.240 of this chapter related to comparability of services do not apply with respect to targeted case management services defined in § 440.169 of this chapter.


(h) State plan home and community-based services. The requirements of § 440.240 of this chapter related to comparability of services do not apply with respect to State plan home and community-based services defined in § 440.182 of this chapter.


[56 FR 8847, Mar. 1, 1991, as amended at 72 FR 68091, Dec. 4, 2007; 79 FR 3028, Jan. 16, 2014]


§ 431.55 Waiver of other Medicaid requirements.

(a) Statutory basis. Section 1915(b) of the Act authorizes the Secretary to waive most requirements of section 1902 of the Act to the extent he or she finds proposed improvements or specified practices in the provision of services under Medicaid to be cost effective, efficient, and consistent with the objectives of the Medicaid program. Sections 1915 (f) and (h) prescribe how such waivers are to be approved, continued, monitored, and terminated. Section 1902(p)(2) of the Act conditions FFP in payments to an entity under a section 1915(b)(1) waiver on the State’s provision for exclusion of certain entities from participation.


(b) General requirements. (1) General requirements for submittal of waiver requests, and the procedures that CMS follows for review and action on those requests are set forth in § 430.25 of this chapter.


(2) In applying for a waiver to implement an approvable project under paragraph (c), (d), (e), or (f) of this section, a Medicaid agency must document in the waiver request and maintain data regarding:


(i) The cost-effectiveness of the project;


(ii) The effect of the project on the accessibility and quality of services;


(iii) The anticipated impact of the project on the State’s Medicaid program and;


(iv) Assurances that the restrictions on free choice of providers do not apply to family planning services.


(3) No waiver under this section may be granted for a period longer than 2 years, unless the agency requests a continuation of the waiver.


(4) CMS monitors the implementation of waivers granted under this section to ensure that requirements for such waivers are being met.


(i) If monitoring demonstrates that the agency is not in compliance with the requirements for a waiver under this section, CMS gives the agency notice and opportunity for a hearing.


(ii) If, after a hearing, CMS finds an agency to be out of compliance with the requirements of a waiver, CMS terminates the waiver and gives the agency a specified date by which it must demonstrate that it meets the applicable requirements of section 1902 of the Act.


(5) The requirements of section 1902(s) of the Act, with regard to adjustments in payments for inpatient hospital services furnished to infants who have not attained age 1 and to children who have not attained age 6 and who receive these services in disproportionate share hospitals, may not be waived under a section 1915(b) waiver.


(c) Case-management system. (1) Waivers of appropriate requirements of section 1902 of the Act may be authorized for a State to implement a primary care case-management system or specialty physician services system.


(i) Under a primary care case-management system the agency assures that a specific person or persons or agency will be responsible for locating, coordinating, and monitoring all primary care or primary care and other medical care and rehabilitative services on behalf of a beneficiary. The person or agency must comply with the requirements set forth in part 438 of this chapter for primary care case management contracts and systems.


(ii) A specialty physician services system allows States to restrict beneficiaries of specialty services to designated providers of such services, even in the absence of a primary care case-management system.


(2) A waiver under this paragraph (c) may not be approved unless the State’s request assures that the restrictions –


(i) Do not apply in emergency situations; and


(ii) Do not substantially impair access to medically necessary services of adequate quality.


(d) Locality as central broker. Waivers of appropriate requirements of section 1902 of the Act may be authorized for a State to allow a locality to act as a central broker to assist beneficiaries in selecting among competing health care plans. States must ensure that access to medically necessary services of adequate quality is not substantially impaired.


(1) A locality is any defined jurisdiction, e.g., district, town, city, borough, county, parish, or State.


(2) A locality may use any agency or agent, public or private, profit or nonprofit, to act on its behalf in carrying out its central broker function.


(e) Sharing of cost savings. (1) Waivers of appropriate requirements of section 1902 of the Act may be authorized for a State to share with beneficiaries the cost savings resulting from the beneficiaries’ use of more cost-effective medical care.


(2) Sharing is through the provision of additional services, including –


(i) Services furnished by a plan selected by the beneficiary; and


(ii) Services expressly offered by the State as an inducement for beneficiaries to participate in a primary care case-management system, a competing health care plan or other system that furnishes health care services in a more cost-effective manner.


(f) Restriction of freedom of choice – (1) Waiver of appropriate requirements of section 1902 of the Act may be authorized for States to restrict beneficiaries to obtaining services from (or through) qualified providers or practitioners that meet, accept, and comply with the State reimbursement, quality and utilization standards specified in the State’s waiver request.


(2) An agency may qualify for a waiver under this paragraph (f) only if its applicable State standards are consistent with access, quality and efficient and economic provision of covered care and services and the restrictions it imposes –


(i) Do not apply to beneficiaries residing at a long-term care facility when a restriction is imposed unless the State arranges for reasonable and adequate beneficiary transfer.


(ii) Do not discriminate among classes of providers on grounds unrelated to their demonstrated effectiveness and efficiency in providing those services; and


(iii) Do not apply in emergency circumstances.


(3) Demonstrated effectiveness and efficiency refers to reducing costs or slowing the rate of cost increase and maximizing outputs or outcomes per unit of cost.


(4) The agency must make payments to providers furnishing services under a freedom of choice waiver under this paragraph (f) in accordance with the timely claims payment standards specified in § 447.45 of this chapter for health care practitioners participating in the Medicaid program.


(g) [Reserved]


(h) Waivers approved under section 1915(b)(1) of the Act – (1) Basic rules. (i) An agency must submit, as part of it’s waiver request, assurance that the entities described in paragraph (h)(2) of this section will be excluded from participation under an approved waiver.


(ii) FFP is available in payments to an entity that furnishes services under a section 1915(b)(1) waiver only if the agency excludes from participation any entity described in paragraph (h)(2) of this section.


(2) Entities that must be excluded. The agency must exclude an entity that meets any of the following conditions:


(i) Could be excluded under section 1128(b)(8) of the Act as being controlled by a sanctioned individual.


(ii) Has a substantial contractual relationship (direct or indirect) with an individual convicted of certain crimes, as described in section 1128(b)(8)(B) of the Act.


(iii) Employs or contracts directly or indirectly with one of the following:


(A) Any individual or entity that, under section 1128 or section 1128A of the Act, is precluded from furnishing health care, utilization review, medical social services, or administrative services.


(B) Any entity described in paragraph (h)(2)(i) of this section.


(3) Definitions. As used in this section, substantial contractual relationship means any contractual relationship that provides for one or more of the following services:


(i) The administration, management, or provision of medical services.


(ii) The establishment of policies, or the provision of operational support, for the administration, management, or provision of medical services.


[56 FR 8847, Mar. 1, 1991, as amended at 59 FR 4599, Feb. 1, 1994; 59 FR 36084, July 15, 1994; 67 FR 41094, June 14, 2002]


§ 431.56 Special waiver provisions applicable to American Samoa and the Northern Mariana Islands.

(a) Statutory basis. Section 1902(j) of the Act provides for waiver of all but three of the title XIX requirements, in the case of American Samoa and the Northern Mariana Islands.


(b) Waiver provisions. American Samoa or the Northern Mariana Islands may request, and CMS may approve, a waiver of any of the title XIX requirements except the following:


(1) The Federal medical assistance percentage specified in section 1903 of the Act and § 433.10(b) of this chapter.


(2) The limit imposed by section 1108(c) of the Act on the amount of Federal funds payable to American Samoa or the Northern Mariana Islands for care and services that meet the section 1905(a) definition for Medicaid assistance.


(3) The requirement that payment be made only with respect to expenditure made by American Samoa or the Northern Mariana Islands for care and services that meet the section 1905(a) definition of medical assistance.


§ 431.60 Beneficiary access to and exchange of data.

(a) Application Programming Interface to support Medicaid beneficiaries. A State must implement and maintain a standards-based Application Programming Interface (API) that permits third-party applications to retrieve, with the approval and at the direction of a current beneficiary or the beneficiary’s personal representative, data specified in paragraph (b) of this section through the use of common technologies and without special effort from the beneficiary.


(b) Accessible content. A State must make the following information accessible to its current beneficiaries or the beneficiary’s personal representative through the API described in paragraph (a) of this section:


(1) Data concerning adjudicated claims, including claims data for payment decisions that may be appealed, were appealed, or are in the process of appeal, and provider remittances and beneficiary cost-sharing pertaining to such claims, no later than one (1) business day after a claim is processed;


(2) Encounter data no later than one (1) business day after receiving the data from providers, other than MCOs, PIHPs, and PAHPs, compensated on the basis of capitation payments;


(3) Clinical data, including laboratory results, if the State maintains any such data, no later than one (1) business day after the data is received by the State; and


(4) Information about covered outpatient drugs and updates to such information, including, where applicable, preferred drug list information, no later than one (1) business day after the effective date of any such information or updates to such information.


(c) Technical requirements. A State implementing an API under paragraph (a) of this section:


(1) Must implement, maintain, and use API technology conformant with 45 CFR 170.215;


(2) Must conduct routine testing and monitoring, and update as appropriate, to ensure the API functions properly, including assessments to verify that the API is fully and successfully implementing privacy and security features such as, but not limited to, those required to comply with HIPAA privacy and security requirements in 45 CFR parts 160 and 164, 42 CFR parts 2 and 3, and other applicable law protecting the privacy and security of individually identifiable data;


(3) Must comply with the content and vocabulary standards requirements in paragraphs (c)(3)(i) and (ii) of this section, as applicable to the data type or data element, unless alternate standards are required by other applicable law:


(i) Content and vocabulary standards at 45 CFR 170.213 where such standards are applicable to the data type or element, as appropriate; and


(ii) Content and vocabulary standards at 45 CFR part 162 and § 423.160 of this chapter where required by law, or where such standards are applicable to the data type or element, as appropriate.


(4) May use an updated version of any standard or all standards required under paragraph (c)(1) or (3) of this section, where:


(i) Use of the updated version of the standard is required by other applicable law, or


(ii) Use of the updated version of the standard is not prohibited under other applicable law, provided that:


(A) For content and vocabulary standards other than those at 45 CFR 170.213, the Secretary has not prohibited use of the updated version of a standard for purposes of this section or 45 CFR part 170;


(B) For standards at 45 CFR 170.213 and 45 CFR 170.215, the National Coordinator has approved the updated version for use in the ONC Health IT Certification Program; and


(C) Use of the updated version of a standard does not disrupt an end user’s ability to access the data described in paragraph (b) of this section through the API described in paragraph (a) of this section.


(d) Documentation requirements for APIs. For each API implemented in accordance with paragraph (a) of this section, a State must make publicly accessible, by posting directly on its website or via publicly accessible hyperlink(s), complete accompanying documentation that contains, at a minimum the information listed in this paragraph. For the purposes of this section, “publicly accessible” means that any person using commonly available technology to browse the internet could access the information without any preconditions or additional steps, such as a fee for access to the documentation; a requirement to receive a copy of the material via email; a requirement to register or create an account to receive the documentation; or a requirement to read promotional material or agree to receive future communications from the organization making the documentation available;


(1) API syntax, function names, required and optional parameters supported and their data types, return variables and their types/structures, exceptions and exception handling methods and their returns;


(2) The software components and configurations an application must use in order to successfully interact with the API and process its response(s); and


(3) All applicable technical requirements and attributes necessary for an application to be registered with any authorization server(s) deployed in conjunction with the API.


(e) Denial or discontinuation of access to the API. A State may deny or discontinue any third-party application’s connection to the API required under paragraph (a) of this section if the State:


(1) Reasonably determines, consistent with its security risk analysis under 45 CFR part 164 subpart C, that allowing an application to connect or remain connected to the API would present an unacceptable level of risk to the security of protected health information on the State’s systems; and


(2) Makes this determination using objective, verifiable criteria that are applied fairly and consistently across all applications and developers through which beneficiaries seek to access their electronic health information as defined at 45 CFR 171.102, including but not limited to criteria that may rely on automated monitoring and risk mitigation tools.


(f) Beneficiary resources regarding privacy and security. The State must provide in an easily accessible location on its public website and through other appropriate mechanisms through which it ordinarily communicates with current and former beneficiaries seeking to access their health information held by the State Medicaid agency, educational resources in non-technical, simple and easy-to-understand language explaining at a minimum:


(1) General information on steps the individual may consider taking to help protect the privacy and security of their health information, including factors to consider in selecting an application including secondary uses of data, and the importance of understanding the security and privacy practices of any application to which they will entrust their health information; and


(2) An overview of which types of organizations or individuals are and are not likely to be HIPAA covered entities, the oversight responsibilities of the Office for Civil Rights (OCR) and the Federal Trade Commission (FTC), and how to submit a complaint to:


(i) The HHS Office for Civil Rights (OCR); and


(ii) The Federal Trade Commission (FTC).


(g) Data availability. (1) The State must comply with the requirements in paragraph (a) through (f) of this section beginning January 1, 2021 with regard to data:


(i) With a date of service on or after January 1, 2016; and


(ii) That are maintained by the State.


(2) [Reserved]


[85 FR 25634, May 1, 2020]


§ 431.70 Access to published provider directory information.

(a) The State must implement and maintain a publicly accessible, standards-based Application Programming Interface (API) that is conformant with the technical requirements at § 431.60(c), excluding the security protocols related to user authentication and authorization and any other protocols that restrict the availability of this information to particular persons or organizations, the documentation requirements at § 431.60(d), and is accessible via a public-facing digital endpoint on the State’s website.


(b) The API must provide a complete and accurate directory of –


(1) The State’s provider directory information specified in section 1902(a)(83) of the Act, updated no later than 30 calendar days after the State receives provider directory information or updates to provider directory information.


(2) [Reserved]


(c) This section is applicable beginning January 1, 2021.


[85 FR 25635, May 1, 2020]


Subpart C – Administrative Requirements: Provider Relations

§ 431.105 Consultation to medical facilities.

(a) Basis and purpose. This section implements section 1902(a)(24) of the Act, which requires that the State plan provide for consultative services by State agencies to certain institutions furnishing Medicaid services.


(b) State plan requirements. A State plan must provide that health agencies and other appropriate State agencies furnish consultative services to hospitals, nursing homes, home health agencies, clinics, and laboratories in order to assist these facilities to –


(1) Qualify for payments under the maternal and child health and crippled children’s program (title V of the Act), Medicaid or Medicare;


(2) Establish and maintain fiscal records necessary for the proper and efficient administration of the Act; and


(3) Provide information needed to determine payments due under the Act for services furnished to beneficiaries.


(c) State plan option: Consultation to other facilities. The plan may provide that health agencies and other appropriate State agencies furnish consultation to other types of facilities if those facilities are specified in the plan and provide medical care to individuals receiving services under the programs specified in paragraph (b) of this section.


§ 431.107 Required provider agreement.

(a) Basis and purpose. This section sets forth State plan requirements, based on sections 1902(a)(4), 1902(a)(27), 1902(a)(57), and 1902(a)(58) of the Act, that relate to the keeping of records and the furnishing of information by all providers of services (including individual practitioners and groups of practitioners).


(b) Agreements. A State plan must provide for an agreement between the Medicaid agency and each provider or organization furnishing services under the plan in which the provider or organization agrees to:


(1) Keep any records necessary to disclose the extent of services the provider furnishes to beneficiaries;


(2) On request, furnish to the Medicaid agency, the Secretary, or the State Medicaid fraud control unit (if such a unit has been approved by the Secretary under § 455.300 of this chapter), any information maintained under paragraph (b)(1) of this section and any information regarding payments claimed by the provider for furnishing services under the plan;


(3) Comply with the disclosure requirements specified in part 455, subpart B of this chapter; and


(4) Comply with the advance directives requirements for hospitals, nursing facilities, providers of home health care and personal care services, hospices, and HMOs specified in part 489, subpart I, and § 417.436(d) of this chapter.


(5)(i) Furnish to the State agency its National Provider Identifier (NPI) (if eligible for an NPI); and


(ii) Include its NPI on all claims submitted under the Medicaid program.


[44 FR 41644, July 17, 1979, as amended at 57 FR 8202, Mar. 6, 1992; 75 FR 24449, May 5, 2010]


§ 431.108 Effective date of provider agreements.

(a) Applicability – (1) General rule. Except as provided in paragraph (a)(2) of this section, this section applies to Medicaid provider agreements with entities that, as a basis for participation in Medicaid –


(i) Are subject to survey and certification by CMS or the State survey agency; or


(ii) Are deemed to meet Federal requirements on the basis of accreditation by an accrediting organization whose program has CMS approval at the time of accreditation survey and accreditation decision.


(2) Exception. A Medicaid provider agreement with a laboratory is effective only while the laboratory has in effect a valid CLIA certificate issued under part 493 of this chapter, and only for the specialty and subspecialty tests it is authorized to perform.


(b) All requirements are met on the date of survey. The agreement is effective on the date the onsite survey (including the Life Safety Code survey if applicable) is completed, if on that date the provider meets –


(1) All applicable Federal requirements as set forth in this chapter; and


(2) Any other requirements imposed by the State for participation in the Medicaid program. (If the provider has a time-limited agreement, the new agreement is effective on the day following expiration of the current agreement.)


(c) All requirements are not met on the date of survey. If on the date the survey is completed the provider fails to meet any of the requirements specified in paragraph (b) of this section, the following rules apply:


(1) An NF provider agreement is effective on the date on which –


(i) The NF is found to be in substantial compliance as defined in § 488.301 of this chapter; and


(ii) CMS or the State survey agency receives from the NF, if applicable, an approvable waiver request.


(2) For an agreement with any other provider, the effective date is the earlier of the following:


(i) The date on which the provider meets all requirements.


(ii) The date on which a provider is found to meet all conditions of participation but has lower level deficiencies, and CMS or the State survey agency receives from the provider an acceptable plan of correction for the lower level deficiencies, or an approvable waiver request, or both. (The date of receipt is the effective date of the agreement, regardless of when CMS approves the plan of correction or waiver request, or both.)


(d) Accredited provider requests participation in the Medicaid program – (1) General rule. If a provider is currently accredited by a national accrediting organization whose program had CMS approval at the time of accreditation survey and accreditation decision, and on the basis of accreditation, CMS has deemed the provider to meet Federal requirements, the effective date depends on whether the provider is subject to requirements in addition to those included in the accrediting organization’s approved program.


(i) Provider subject to additional requirements. For a provider that is subject to additional requirements, Federal or State, or both, the effective date is the date on which the provider meets all requirements, including the additional requirements.


(ii) Provider not subject to additional requirements. For a provider that is not subject to additional requirements, the effective date is the date of the provider’s initial request for participation if on that date the provider met all Federal requirements.


(2) Special rule: Retroactive effective date. If the provider meets the requirements of paragraphs (d)(1) and (d)(1)(i) or (d)(1)(ii) of this section, the effective date may be retroactive for up to one year, to encompass dates on which the provider furnished, to a Medicaid beneficiary, covered services for which it has not been paid.


[62 FR 43935, Aug. 18, 1997]


§ 431.110 Participation by Indian Health Service facilities.

(a) Basis. This section is based on section 1902(a)(4) of the Act, proper and efficient administration; 1902(a)(23), free choice of provider; and 1911, reimbursement of Indian Health Service facilities.


(b) State plan requirements. A State plan must provide that an Indian Health Service facility meeting State requirements for Medicaid participation must be accepted as a Medicaid provider on the same basis as any other qualified provider. However, when State licensure is normally required, the facility need not obtain a license but must meet all applicable standards for licensure. In determining whether a facility meets these standards, a Medicaid agency or State licensing authority may not take into account an absence of licensure of any staff member of the facility.


§ 431.115 Disclosure of survey information and provider or contractor evaluation.

(a) Basis and purpose. This section implements –


(1) Section 1902(a)(36) of the Act, which requires a State plan to provide that the State survey agency will make publicly available the findings from surveys of health care facilities, laboratories, agencies, clinics, or organizations; and


(2) Section 1106(d) of the Act, which places certain restrictions on the Medicaid agency’s disclosure of contractor and provider evaluations.


(b) Definition of State survey agency. The State survey agency referred to in this section means the agency specified under section 1902(a)(9) of the Act as responsible for establishing and maintaining health standards for private or public institutions in which Medicaid beneficiaries may receive services.


(c) State plan requirements. A State plan must provide that the requirements of this section and § 488.325 of this chapter are met.


(d) Disclosure procedure. The Medicaid agency must have a procedure for disclosing pertinent findings obtained from surveys made by the State survey agency to determine if a health care facility, laboratory, agency, clinic or health care organization meets the requirements for participation in the Medicaid program.


(e) Documents subject to disclosure. Documents subject to disclosure include –


(1) Survey reports, except for Joint Commission on the Accreditation of Hospitals reports prohibited from disclosure under § 422.426(b)(2) of this chapter;


(2) Official notifications of findings based on survey reports:


(3) Pertinent parts of written documents furnished by the health care provider to the survey agency that relate to the reports and findings; and


(4) Ownership and contract information as specified in § 455.104 of this subchapter.


(f) Availability for inspection and copy of statements listing deficiencies. The disclosure procedure must provide that the State survey agency will –


(1) Make statements of deficiencies based on the survey reports available for inspection and copying in both the public assistance office and the Social Security Administration district office serving the area where the provider is located; and


(2) Submit to the Regional Medicaid Director, through the Medicaid agency, a plan for making those findings available in other public assistance offices in standard metropolitian statistical areas where this information would be helpful to persons likely to use the health care provider’s services.


(g) When documents must be made available. The disclosure procedure must provide that the State survey agency will –


(1) Retain in the survey agency office and make available upon request survey reports and current and accurate ownership information; and


(2) Make available survey reports, findings, and deficiency statements immediately upon determining that a health care provider is eligible to begin or continue participation in the Medicaid program, or within 90 days after completion of the survey, whichever occurs first.


(h) Evaluation reports on providers and contractors. (1) If the Secretary sends the following reports to the Medicaid agency, the agency must meet the requirements of paragraphs (h) (2) and (3) of this section in releasing them:


(i) Individual contractor performance reviews and other formal performance evaluations of carriers, intermediaries, and State agencies, including the reports of followup reviews;


(ii) Comparative performance evaluations of those contractors, including comparisons of either overall performance or of any particular aspect of contractor operations; and


(iii) Program validation survey reports and other formal performance evaluations of providers, including the reports of followup reviews.


(2) The agency must not make the reports public until –


(i) The contractor or provider has had a reasonable opportunity, not to exceed 30 days, to comment on them; and


(ii) Those comments have been incorporated in the report.


(3) The agency must ensure that the reports contain no identification of individual patients, individual health care practitioners or other individuals.


[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 41644, July 17, 1979; 59 FR 56232, Nov. 10, 1994]


§ 431.120 State requirements with respect to nursing facilities.

(a) State plan requirements. A State plan must –


(1) Provide that the requirements of subpart D of part 483 of this chapter are met; and


(2) Specify the procedures and rules that the State follows in carrying out the specified requirements, including review and approval of State-operated programs.


(3) To an NF or ICF/IID that is dissatisfied with a determination as to the effective date of its provider agreement.


(b) Basis and scope of requirements. The requirements set forth in part 483 of this chapter pertain to the following aspects of nursing facility services and are required by the indicated sections of the Act.


(1) Nurse aide training and competency programs, and evaluation of nurse aide competency (1919(e)(1) of the Act).


(2) Nurse aide registry (1919(e)(2) of the Act).


[56 FR 48918, Sept. 26, 1991, as amended at 62 FR 43935, Aug. 18, 1997]


Subpart D – Appeals Process for NFs and ICFs/IID


Source:44 FR 9753, Feb. 15, 1979, unless otherwise noted.

§ 431.151 Scope and applicability.

(a) General rules. This subpart sets forth the appeals procedures that a State must make available as follows:


(1) To a nursing facility (NF) that is dissatisfied with a State’s finding of noncompliance that has resulted in one of the following adverse actions:


(i) Denial or termination of its provider agreement.


(ii) Imposition of a civil money penalty or other alternative remedy.


(2) To an intermediate care facility for Individuals with Intellectual Disabilities (ICF/IID) that is dissatisfied with a State’s finding of noncompliance that has resulted in the denial, termination, or nonrenewal of its provider agreement.


(3) To an NF or ICF/IID that is dissatisfied with a determination as to the effective date of its provider agreement.


(b) Special rules. This subpart also sets forth the special rules that apply in particular circumstances, the limitations on the grounds for appeal, and the scope of review during a hearing.


[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997]


§ 431.152 State plan requirements.

The State plan must provide for appeals procedures that, as a minimum, satisfy the requirements of §§ 431.153 and 431.154.


[59 FR 56232, Nov. 10, 1994, as amended at 61 FR 32348, June 24, 1996]


§ 431.153 Evidentiary hearing.

(a) Right to hearing. Except as provided in paragraph (b) of this section, and subject to the provisions of paragraphs (c) through (j) of this section, the State must give the facility a full evidentiary hearing for any of the actions specified in § 431.151.


(b) Limit on grounds for appeal. The following are not subject to appeal:


(1) The choice of sanction or remedy.


(2) The State monitoring remedy.


(3) [Reserved]


(4) The level of noncompliance found by a State except when a favorable final administrative review decision would affect the range of civil money penalty amounts the State could collect.


(5) A State survey agency’s decision as to when to conduct an initial survey of a prospective provider.


(c) Notice of deficiencies and impending remedies. The State must give the facility a written notice that includes:


(1) The basis for the decision; and


(2) A statement of the deficiencies on which the decision was based.


(d) Request for hearing. The facility or its legal representative or other authorized official must file written request for hearing within 60 days of receipt of the notice of adverse action.


(e) Special rules: Denial, termination or nonrenewal of provider agreement – (1) Appeal by an ICF/IID. If an ICF/IID requests a hearing on denial, termination, or nonrenewal of its provider agreement –


(i) The evidentiary hearing must be completed either before, or within 120 days after, the effective date of the adverse action; and


(ii) If the hearing is made available only after the effective date of the action, the State must, before that date, offer the ICF/IID an informal reconsideration that meets the requirements of § 431.154.


(2) Appeal by an NF. If an NF requests a hearing on the denial or termination of its provider agreement, the request does not delay the adverse action and the hearing need not be completed before the effective date of the action.


(f) Special rules: Imposition of remedies. If a State imposes a civil money penalty or other remedies on an NF, the following rules apply:


(1) Basic rule. Except as provided in paragraph (f)(2) of this section (and notwithstanding any provision of State law), the State must impose all remedies timely on the NF, even if the NF requests a hearing.


(2) Exception. The State may not collect a civil money penalty until after the 60-day period for request of hearing has elapsed or, if the NF requests a hearing, until issuance of a final administrative decision that supports imposition of the penalty.


(g) Special rules: Dually participating facilities. If an NF is also participating or seeking to participate in Medicare as an SNF, and the basis for the State’s denial or termination of participation in Medicaid is also a basis for denial or termination of participation in Medicare, the State must advise the facility that –


(1) The appeals procedures specified for Medicare facilities in part 498 of this chapter apply; and


(2) A final decision entered under the Medicare appeals procedures is binding for both programs.


(h) Special rules: Adverse action by CMS. If CMS finds that an NF is not in substantial compliance and either terminates the NF’s Medicaid provider agreement or imposes alternative remedies on the NF (because CMS’s findings and proposed remedies prevail over those of the State in accordance with § 488.452 of this chapter), the NF is entitled only to the appeals procedures set forth in part 498 of this chapter, instead of the procedures specified in this subpart.


(i) Required elements of hearing. The hearing must include at least the following:


(1) Opportunity for the facility –


(i) To appear before an impartial decision-maker to refute the finding of noncompliance on which the adverse action was based;


(ii) To be represented by counsel or other representative; and


(iii) To be heard directly or through its representative, to call witnesses, and to present documentary evidence.


(2) A written decision by the impartial decision-maker, setting forth the reasons for the decision and the evidence on which the decision is based.


(j) Limits on scope of review: Civil money penalty cases. In civil money penalty cases –


(1) The State’s finding as to a NF’s level of noncompliance must be upheld unless it is clearly erroneous; and


(2) The scope of review is as set forth in § 488.438(e) of this chapter.


[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997; 64 FR 39937, July 23, 1999]


§ 431.154 Informal reconsideration for ICFs/IID.

The informal reconsideration must, at a minimum, include –


(a) Written notice to the facility of the denial, termination or nonrenewal and the findings upon which it was based;


(b) A reasonable opportunity for the facility to refute those findings in writing, and


(c) A written affirmation or reversal of the denial, termination, or nonrenewal.


[44 FR 9753, Feb. 15, 1979, as amended at 59 FR 56233, Nov. 10, 1994; 61 FR 32349, June 24, 1996]


Subpart E – Fair Hearings for Applicants and Beneficiaries


Source:44 FR 17932, Mar. 29, 1979, unless otherwise noted.

General Provisions

§ 431.200 Basis and scope.

This subpart –


(a) Implements section 1902(a)(3) of the Act, which requires that a State plan provide an opportunity for a fair hearing to any person whose claim for assistance is denied or not acted upon promptly;


(b) Prescribes procedures for an opportunity for a hearing if the State agency or non-emergency transportation PAHP (as defined in § 438.9(a) of this chapter) takes action, as stated in this subpart, to suspend, terminate, or reduce services, or of an adverse benefit determination by an MCO, PIHP or PAHP under subpart F of part 438 of this chapter; and


(c) Implements sections 1919(f)(3) and 1919(e)(7)(F) of the Act by providing an appeals process for any person who –


(1) Is subject to a proposed transfer or discharge from a nursing facility; or


(2) Is adversely affected by the pre-admission screening or the annual resident review that are required by section 1919(e)(7) of the Act.


(d) Implements section 1943(b)(3) of the Act and section 1413 of the Affordable Care Act to permit coordinated hearings and appeals among insurance affordability programs.


[67 FR 41094, June 14, 2002, as amended at 81 FR 27852, May 6, 2016; 81 FR 86448, Nov. 30, 2016]


§ 431.201 Definitions.

For purposes of this subpart:


Action means a termination, suspension of, or reduction in covered benefits or services, or a termination, suspension of, or reduction in Medicaid eligibility or an increase in beneficiary liability, including a determination that a beneficiary must incur a greater amount of medical expenses in order to establish income eligibility in accordance with § 435.121(e)(4) or § 435.831 of this chapter or is subject to an increase in premiums or cost-sharing charges under subpart A of part 447 of this chapter. It also means a determination by a skilled nursing facility or nursing facility to transfer or discharge a resident and an adverse determination by a State with regard to the preadmission screening and resident review requirements of section 1919(e)(7) of the Act.


Adverse determination means a determination made in accordance with sections 1919(b)(3)(F) or 1919(e)(7)(B) of the Act that the individual does not require the level of services provided by a nursing facility or that the individual does or does not require specialized services.


Date of action means the intended date on which a termination, suspension, reduction, transfer or discharge becomes effective. It also means the date of the determination made by a State with regard to the preadmission screening and annual resident review requirements of section 1919(e)(7) of the Act.


De novo hearing means a hearing that starts over from the beginning.


Evidentiary hearing means a hearing conducted so that evidence may be presented.


Joint fair hearing request means a request for a Medicaid fair hearing which is included in an appeal request submitted to an Exchange or Exchange appeals entity under 45 CFR 155.520 or other insurance affordability program or appeals entity, in accordance with the signed agreement between the agency and an Exchange or Exchange appeals entity or other program or appeals entity described in § 435.1200(b)(3) of this chapter .


Local evidentiary hearing means a hearing held on the local or county level serving a specified portion of the State.


Notice means a written statement that meets the requirements of § 431.210.


Request for a hearing means a clear expression by the applicant or beneficiary, or his authorized representative, that he wants the opportunity to present his case to a reviewing authority.


Send means deliver by mail or in electronic format consistent with § 435.918 of this chapter.


Service authorization request means a managed care enrollee’s request for the provision of a service.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 67 FR 41095, June 14, 2002; 78 FR 42301, July 15, 2013; 81 FR 86448, Nov. 30, 2016]


§ 431.202 State plan requirements.

A State plan must provide that the requirements of §§ 431.205 through 431.246 of this subpart are met.


§ 431.205 Provision of hearing system.

(a) The Medicaid agency must be responsible for maintaining a hearing system that meets the requirements of this subpart.


(b) The State’s hearing system must provide for –


(1) A hearing before –


(i) The Medicaid agency; or


(ii) For the denial of eligibility for individuals whose income eligibility is determined based on the applicable modified adjusted gross income standard described in§ 435.911(c) of this chapter, the Exchange or Exchange appeals entity to which authority to conduct fair hearings has been delegated under § 431.10(c)(1)(ii), provided that individuals who have requested a fair hearing are given the choice to have their fair hearing conducted instead by the Medicaid agency; at state option the Exchange or Exchange appeals entity decision may be subject to review by the Medicaid agency in accordance with § 431.10(c)(3)(iii); or


(2) An evidentiary hearing at the local level, with a right of appeal to the Medicaid agency.


(c) The agency may offer local hearings in some political subdivisions and not in others.


(d) The hearing system must meet the due process standards set forth in Goldberg v. Kelly, 397 U.S. 254 (1970), and any additional standards specified in this subpart.


(e) The hearing system must be accessible to persons who are limited English proficient and persons who have disabilities, consistent with § 435.905(b) of this chapter.


(f) The hearing system must comply with the United States Constitution, the Social Security Act, title VI of the Civil Rights Act of 1964, section 504 of the Rehabilitation Act of 1973, the Americans with Disabilities Act of 1990, the Age Discrimination Act of 1975, and section 1557 of the Affordable Care Act and implementing regulations.


[44 FR 17932, Mar. 29, 1979, as amended at 78 FR 42301, July 15, 2013; 81 FR 86448, Nov. 30, 2016]


§ 431.206 Informing applicants and beneficiaries.

(a) The agency must issue and publicize its hearing procedures.


(b) The agency must, at the time specified in paragraph (c) of this section, inform every applicant or beneficiary in writing –


(1) Of his or her right to a fair hearing and right to request an expedited fair hearing;


(2) Of the method by which he may obtain a hearing;


(3) That he may represent himself or use legal counsel, a relative, a friend, or other spokesman; and


(4) Of the time frames in which the agency must take final administrative action, in accordance with § 431.244(f).


(c) The agency must provide the information required in paragraph (b) of this section – (1) At the time that the individual applies for Medicaid;


(2) At the time the agency denies an individual’s claim for eligibility, benefits or services; or denies a request for exemption from mandatory enrollment in an Alternative Benefit Plan; or takes other action, as defined at § 431.201; or whenever a hearing is otherwise required in accordance with § 431.220(a);


(3) At the time a skilled nursing facility or a nursing facility notifies a resident in accordance with § 483.15 of this chapter that he or she is to be transferred or discharged; and


(4) At the time an individual receives an adverse determination by the State with regard to the preadmission screening and annual resident review requirements of section 1919(e)(7) of the Act.


(d) If, in accordance with § 431.10(c)(1)(ii), the agency has delegated authority to the Exchange or Exchange appeals entity to conduct the fair hearing, the agency must inform the individual in writing that –


(1) He or she has the right to have his or her hearing before the agency, instead of the Exchange or the Exchange appeals entity; and


(2) The method by which the individual may make such election;


(e) The information required under this subpart must be accessible to individuals who are limited English proficient and to individuals with disabilities, consistent with § 435.905(b) of this chapter, and may be provided in electronic format in accordance with § 435.918 of this chapter.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993; 78 FR 42301, July 15, 2013; 81 FR 68847, Oct. 4, 2016; 81 FR 86448, Nov. 30, 2016]


Notice

§ 431.210 Content of notice.

A notice required under § 431.206 (c)(2), (c)(3), or (c)(4) of this subpart must contain –


(a) A statement of what action the agency, skilled nursing facility, or nursing facility intends to take and the effective date of such action;


(b) A clear statement of the specific reasons supporting the intended action;


(c) The specific regulations that support, or the change in Federal or State law that requires, the action;


(d) An explanation of –


(1) The individual’s right to request a local evidentiary hearing if one is available, or a State agency hearing; or


(2) In cases of an action based on a change in law, the circumstances under which a hearing will be granted; and


(e) An explanation of the circumstances under which Medicaid is continued if a hearing is requested.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 81 FR 86448, Nov. 30, 2016]


§ 431.211 Advance notice.

The State or local agency must send a notice at least 10 days before the date of action, except as permitted under §§ 431.213 and 431.214.


[78 FR 42301, July 15, 2013]


§ 431.213 Exceptions from advance notice.

The agency may send a notice not later than the date of action if –


(a) The agency has factual information confirming the death of a beneficiary;


(b) The agency receives a clear written statement signed by a beneficiary that –


(1) He no longer wishes services; or


(2) Gives information that requires termination or reduction of services and indicates that he understands that this must be the result of supplying that information;


(c) The beneficiary has been admitted to an institution where he is ineligible under the plan for further services;


(d) The beneficiary’s whereabouts are unknown and the post office returns agency mail directed to him indicating no forwarding address (See § 431.231 (d) of this subpart for procedure if the beneficiary’s whereabouts become known);


(e) The agency establishes the fact that the beneficiary has been accepted for Medicaid services by another local jurisdiction, State, territory, or commonwealth;


(f) A change in the level of medical care is prescribed by the beneficiary’s physician;


(g) The notice involves an adverse determination made with regard to the preadmission screening requirements of section 1919(e)(7) of the Act; or


(h) The date of action will occur in less than 10 days, in accordance with § 483.15(b)(4)(ii) and (b)(8), which provides exceptions to the 30 days notice requirements of § 483.15(b)(4)(i) of this chapter.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993; 78 FR 42301, July 15, 2013; 81 FR 68847, Oct. 4, 2016]


§ 431.214 Notice in cases of probable fraud.

The agency may shorten the period of advance notice to 5 days before the date of action if –


(a) The agency has facts indicating that action should be taken because of probable fraud by the beneficiary; and


(b) The facts have been verified, if possible, through secondary sources.


Right to Hearing

§ 431.220 When a hearing is required.

(a) The State agency must grant an opportunity for a hearing to the following:


(1) Any individual who requests it because he or she believes the agency has taken an action erroneously, denied his or her claim for eligibility or for covered benefits or services, or issued a determination of an individual’s liability, or has not acted upon the claim with reasonable promptness including, if applicable –


(i) An initial or subsequent decision regarding eligibility;


(ii) A determination of the amount of medical expenses that an individual must incur in order to establish eligibility in accordance with § 435.121(e)(4) or § 435.831 of this chapter; or


(iii) A determination of the amount of premiums and cost sharing charges under subpart A of part 447 of this chapter;


(iv) A change in the amount or type of benefits or services; or


(v) A request for exemption from mandatory enrollment in an Alternative Benefit Plan.


(2) Any resident who requests it because he or she believes a skilled nursing facility or nursing facility has erroneously determined that he or she must be transferred or discharged.


(3) Any individual who requests it because he or she believes the State has made an erroneous determination with regard to the preadmission and annual resident review requirements of section 1919(e)(7) of the Act.


(4) Any MCO, PIHP, or PAHP enrollee who is entitled to a hearing under subpart F of part 438 of this chapter.


(5) Any enrollee in a non-emergency medical transportation PAHP (as that term is defined in § 438.9 of this chapter) who has an action as stated in this subpart.


(6) Any enrollee who is entitled to a hearing under subpart B of part 438 of this chapter.


(b) The agency need not grant a hearing if the sole issue is a Federal or State law requiring an automatic change adversely affecting some or all beneficiaries.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002; 81 FR 27853, May 6, 2016; 81 FR 86448, Nov. 30, 2016]


§ 431.221 Request for hearing.

(a)(1) The agency must establish procedures that permit an individual, or an authorized representative as defined at § 435.923 of this chapter, to –


(i) Submit a hearing request via any of the modalities described in § 435.907(a) of this chapter, except that the requirement to establish procedures for submission of a fair hearing request described in § 435.907(a)(1), (2) and (5) of this chapter (relating to submissions via Internet Web site, telephone and other electronic means) is effective no later than the date described in § 435.1200(i) of this chapter; and


(ii) Include in a hearing request submitted under paragraph (a)(1)(i) of this section, a request for an expedited fair hearing.


(2) [Reserved]


(b) The agency may not limit or interfere with the applicant’s or beneficiary’s freedom to make a request for a hearing.


(c) The agency may assist the applicant or beneficiary in submitting and processing his request.


(d) The agency must allow the applicant or beneficiary a reasonable time, not to exceed 90 days from the date that notice of action is mailed, to request a hearings.


[44 FR 17932, Mar. 29, 1979, as amended at 81 FR 86448, Nov. 30, 2016]


§ 431.222 Group hearings.

The agency –


(a) May respond to a series of individual requests for hearing by conducting a single group hearing;


(b) May consolidate hearings only in cases in which the sole issue involved is one of Federal or State law or policy;


(c) Must follow the policies of this subpart and its own policies governing hearings in all group hearings; and


(d) Must permit each person to present his own case or be represented by his authorized representative.


§ 431.223 Denial or dismissal of request for a hearing.

The agency may deny or dismiss a request for a hearing if –


(a) The applicant or beneficiary withdraws the request. The agency must accept withdrawal of a fair hearing request via any of the modalities available per § 431.221(a)(1)(i). For telephonic hearing withdrawals, the agency must record the individual’s statement and telephonic signature. For telephonic, online and other electronic withdrawals, the agency must send the affected individual written confirmation, via regular mail or electronic notification in accordance with the individual’s election under § 435.918(a) of this chapter.


(b) The applicant or beneficiary fails to appear at a scheduled hearing without good cause.


[44 FR 17932, Mar. 29, 1979, as amended at 81 FR 86449, Nov. 30, 2016]


§ 431.224 Expedited appeals.

(a) General rule. (1) The agency must establish and maintain an expedited fair hearing process for individuals to request an expedited fair hearing, if the agency determines that the time otherwise permitted for a hearing under § 431.244(f)(1) could jeopardize the individual’s life, health or ability to attain, maintain, or regain maximum function.


(2) The agency must take final administrative action within the period of time permitted under § 431.244(f)(3) if the agency determines that the individual meets the criteria for an expedited fair hearing in paragraph (a)(1) of this section.


(b) Notice. The agency must notify the individual whether the request is granted or denied as expeditiously as possible. Such notice must be provided orally or through electronic means in accordance with § 435.918 of this chapter, if consistent with the individual’s election under such section; if oral notice is provided, the agency must follow up with written notice, which may be through electronic means if consistent with the individual’s election under § 435.918.


[81 FR 86449, Nov. 30, 2016]


Procedures

§ 431.230 Maintaining services.

(a) If the agency sends the 10-day or 5-day notice as required under § 431.211 or § 431.214 of this subpart, and the beneficiary requests a hearing before the date of action, the agency may not terminate or reduce services until a decision is rendered after the hearing unless –


(1) It is determined at the hearing that the sole issue is one of Federal or State law or policy; and


(2) The agency promptly informs the beneficiary in writing that services are to be terminated or reduced pending the hearing decision.


(b) If the agency’s action is sustained by the hearing decision, the agency may institute recovery procedures against the applicant or beneficiary to recoup the cost of any services furnished the beneficiary, to the extent they were furnished solely by reason of this section.


[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980; 78 FR 42302, July 15, 2013]


§ 431.231 Reinstating services.

(a) The agency may reinstate services if a beneficiary requests a hearing not more than 10 days after the date of action.


(b) The reinstated services must continue until a hearing decision unless, at the hearing, it is determined that the sole issue is one of Federal or State law or policy.


(c) The agency must reinstate and continue services until a decision is rendered after a hearing if –


(1) Action is taken without the advance notice required under § 431.211 or § 431.214 of this subpart;


(2) The beneficiary requests a hearing within 10 days from the date that the individual receives the notice of action. The date on which the notice is received is considered to be 5 days after the date on the notice, unless the beneficiary shows that he or she did not receive the notice within the 5-day period; and


(3) The agency determines that the action resulted from other than the application of Federal or State law or policy.


(d) If a beneficiary’s whereabouts are unknown, as indicated by the return of unforwardable agency mail directed to him, any discontinued services must be reinstated if his whereabouts become known during the time he is eligible for services.


[44 FR 17932, Mar. 29, 1979, as amended at 78 FR 42302, July 15, 2013]


§ 431.232 Adverse decision of local evidentiary hearing.

If the decision of a local evidentiary hearing is adverse to the applicant or beneficiary, the agency must –


(a) Inform the applicant or beneficiary of the decision;


(b) Inform the applicant or beneficiary in writing that he or she has a right to appeal the decision to the State agency within 10 days after the individual receives the notice of the adverse decision. The date on which the notice is received is considered to be 5 days after the date on the notice, unless the individual shows that he or she did not receive the notice within the 5-day period; and


(c) Inform the applicant or beneficiary of his right to request that his appeal be a de novo hearing; and


(d) Discontinue services after the adverse decision.


[44 FR 17932, Mar. 29, 1979, as amended at 81 FR 86449, Nov. 30, 2016]


§ 431.233 State agency hearing after adverse decision of local evidentiary hearing.

(a) Unless the applicant or beneficiary specifically requests a de novo hearing, the State agency hearing may consist of a review by the agency hearing officer of the record of the local evidentiary hearing to determine whether the decision of the local hearing officer was supported by substantial evidence in the record.


(b) A person who participates in the local decision being appealed may not participate in the State agency hearing decision.


§ 431.240 Conducting the hearing.

(a) All hearings must be conducted –


(1) At a reasonable time, date, and place;


(2) Only after adequate written notice of the hearing; and


(3) By one or more impartial officials or other individuals who have not been directly involved in the initial determination of the action in question.


(b) If the hearing involves medical issues such as those concerning a diagnosis, an examining physician’s report, or a medical review team’s decision, and if the hearing officer considers it necessary to have a medical assessment other than that of the individual involved in making the original decision, such a medical assessment must be obtained at agency expense and made part of the record.


(c) A hearing officer must have access to agency information necessary to issue a proper hearing decision, including information concerning State policies and regulations.


[44 FR 17932, Mar. 29, 1979, as amended at 78 FR 42302, July 15, 2013]


§ 431.241 Matters to be considered at the hearing.

The hearing must cover –


(a) Any matter described in § 431.220(a)(1) for which an individual requests a fair hearing.


(b) A decision by a skilled nursing facility or nursing facility to transfer or discharge a resident; and


(c) A State determination with regard to the preadmission screening and annual resident review requirements of section 1919(e)(7) of the Act.


[57 FR 56505, Nov. 30, 1992, as amended at 81 FR 86449, Nov. 30, 2016]

]


§ 431.242 Procedural rights of the applicant or beneficiary.

The applicant or beneficiary, or his representative, must be given an opportunity to –


(a) Examine at a reasonable time before the date of the hearing and during the hearing:


(1) The content of the applicant’s or beneficiary’s case file and electronic account, as defined in § 435.4 of this chapter; and


(2) All documents and records to be used by the State or local agency or the skilled nursing facility or nursing facility at the hearing;


(b) Bring witnesses;


(c) Establish all pertinent facts and circumstances;


(d) Present an argument without undue interference; and


(e) Question or refute any testimony or evidence, including opportunity to confront and cross-examine adverse witnesses.


(f) Request an expedited fair hearing.


[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56506, Nov. 30, 1992; 81 FR 86449, Nov. 30, 2016]


§ 431.243 Parties in cases involving an eligibility determination.

If the hearing involves an issue of eligibility and the Medicaid agency is not responsible for eligibility determinations, the agency that is responsible for determining eligibility must participate in the hearing.


§ 431.244 Hearing decisions.

(a) Hearing recommendations or decisions must be based exclusively on evidence introduced at the hearing.


(b) The record must consist only of –


(1) The transcript or recording of testimony and exhibits, or an official report containing the substance of what happened at the hearing;


(2) All papers and requests filed in the proceeding; and


(3) The recommendation or decision of the hearing officer.


(c) The applicant or beneficiary must have access to the record at a convenient place and time.


(d) In any evidentiary hearing, the decision must be a written one that –


(1) Summarizes the facts; and


(2) Identifies the regulations supporting the decision.


(e) In a de novo hearing, the decision must –


(1) Specify the reasons for the decision; and


(2) Identify the supporting evidence and regulations.


(f) The agency must take final administrative action as follows:


(1) Ordinarily, within 90 days from:


(i) The date the enrollee filed an MCO, PIHP, or PAHP appeal, not including the number of days the enrollee took to subsequently file for a State fair hearing; or


(ii) For all other fair hearings, the date the agency receives a request for a fair hearing in accordance with § 431.221(a)(1).


(2) As expeditiously as the enrollee’s health condition requires, but no later than 3 working days after the agency receives, from the MCO, PIHP, or PAHP, the case file and information for any appeal of a denial of a service that, as indicated by the MCO, PIHP, or PAHP –


(i) Meets the criteria for expedited resolution as set forth in § 438.410(a) of this chapter, but was not resolved within the timeframe for expedited resolution; or


(ii) Was resolved within the timeframe for expedited resolution, but reached a decision wholly or partially adverse to the enrollee.


(3) In the case of individuals granted an expedited fair hearing in accordance with § 431.224(a) –


(i) For a claim related to eligibility described in § 431.220(a)(1), or any claim described in § 431.220(a)(2) (relating to a nursing facility) or § 431.220(a)(3) (related to preadmission and annual resident review), as expeditiously as possible and, effective no later than the date described in § 435.1200(i) of this chapter, no later than 7 working days after the agency receives a request for expedited fair hearing; or


(ii) For a claim related to services or benefits described in § 431.220(a)(1) as expeditiously as possible and, effective no later than the date described in § 435.1200(i) of this chapter, within the time frame in paragraph (f)(2) of this section.


(iii) For a claim related to services or benefits described in § 431.220(a)(4), (5) or (6), in accordance with the time frame in paragraph (f)(2) of this section.


(4)(i) The agency must take final administrative action on a fair hearing request within the time limits set forth in this paragraph except in unusual circumstances when –


(A) The agency cannot reach a decision because the appellant requests a delay or fails to take a required action; or


(B) There is an administrative or other emergency beyond the agency’s control.


(ii) The agency must document the reasons for any delay in the appellant’s record.


(g) The public must have access to all agency hearing decisions, subject to the requirements of subpart F of this part for safeguarding of information.


[44 FR 17932, Mar. 29, 1979, as amended at 67 FR 41095, June 14, 2002; 81 FR 27853, May 6, 2016; 81 FR 86449, Nov. 30, 2016]


§ 431.245 Notifying the applicant or beneficiary of a State agency decision.

The agency must notify the applicant or beneficiary in writing of –


(a) The decision; and


(b) His right to request a State agency hearing or seek judicial review, to the extent that either is available to him.


§ 431.246 Corrective action.

The agency must promptly make corrective payments, retroactive to the date an incorrect action was taken, and, if appropriate, provide for admission or readmission of an individual to a facility if –


(a) The hearing decision is favorable to the applicant or beneficiary; or


(b) The agency decides in the applicant’s or beneficiary’s favor before the hearing.


[57 FR 56506, Nov. 30, 1992]


Federal Financial Participation

§ 431.250 Federal financial participation.

FFP is available in expenditures for –


(a) Payments for services continued pending a hearing decision;


(b) Payments made –


(1) To carry out hearing decisions; and


(2) For services provided within the scope of the Federal Medicaid program and made under a court order.


(c) Payments made to take corrective action prior to a hearing;


(d) Payments made to extend the benefit of a hearing decision or court order to individuals in the same situation as those directly affected by the decision or order;


(e) Retroactive payments under paragraphs (b), (c), and (d) of this section in accordance with applicable Federal policies on corrective payments; and


(f) Administrative costs incurred by the agency for –


(1) Transportation for the applicant or beneficiary, his representative, and witnesses to and from the hearing;


(2) Meeting other expenses of the applicant or beneficiary in connection with the hearing;


(3) Carrying out the hearing procedures, including expenses of obtaining the additional medical assessment specified in § 431.240 of this subpart; and


(4) Hearing procedures for Medicaid and non-Medicaid individuals appealing transfers, discharges and determinations of preadmission screening and annual resident reviews under part 483, subparts C and E of this chapter.


[44 FR 17932, Mar. 29, 1979, as amended at 45 FR 24882, Apr. 11, 1980; 57 FR 56506, Nov. 30, 1992]


Subpart F – Safeguarding Information on Applicants and Beneficiaries


Source:44 FR 17934, Mar. 29, 1979, unless otherwise noted.

§ 431.300 Basis and purpose.

(a) Section 1902(a)(7) of the Act requires that a State plan must provide safeguards that restrict the use or disclosure of information concerning applicants and beneficiaries to purposes directly connected with the administration of the plan. This subpart specifies State plan requirements, the types of information to be safeguarded, the conditions for release of safeguarded information, and restrictions on the distribution of other information.


(b) For purposes of this subpart, information concerning an applicant or beneficiary includes information on a non-applicant, as defined in § 435.4 of this subchapter.


(c) Section 1137 of the Act, which requires agencies to exchange information to verify the income and eligibility of applicants and beneficiaries (see § 435.940 through § 435.965 of this subchapter), requires State agencies to have adequate safeguards to assure that –


(1) Information exchanged by the State agencies is made available only to the extent necessary to assist in the valid administrative needs of the program receiving the information, and information received under section 6103(l)(7) of the Internal Revenue Code is exchanged only with agencies authorized to receive that information under that section of the Code; and


(2) The information is adequately stored and processed so that it is protected against unauthorized disclosure for other purposes.


(d) Section 1943 of the Act and section 1413 of the Affordable Care Act.


[51 FR 7210, Feb. 28, 1986, as amended at 77 FR 17203, Mar. 23, 2012]


§ 431.301 State plan requirements.

A State plan must provide, under a State statute that imposes legal sanctions, safeguards meeting the requirements of this subpart that restrict the use or disclosure of information concerning applicants and beneficiaries to purposes directly connected with the administration of the plan.


§ 431.302 Purposes directly related to State plan administration.

Purposes directly related to plan administration include –


(a) Establishing eligibility;


(b) Determining the amount of medical assistance;


(c) Providing services for beneficiaries; and


(d) Conducting or assisting an investigation, prosecution, or civil or criminal proceeding related to the administration of the plan.


§ 431.303 State authority for safeguarding information.

The Medicaid agency must have authority to implement and enforce the provisions specified in this subpart for safeguarding information about applicants and beneficiaries.


§ 431.304 Publicizing safeguarding requirements.

(a) The agency must publicize provisions governing the confidential nature of information about applicants and beneficiaries, including the legal sanctions imposed for improper disclosure and use.


(b) The agency must provide copies of these provisions to applicants and beneficiaries and to other persons and agencies to whom information is disclosed.


§ 431.305 Types of information to be safeguarded.

(a) The agency must have criteria that govern the types of information about applicants and beneficiaries that are safeguarded.


(b) This information must include at least –


(1) Names and addresses;


(2) Medical services provided;


(3) Social and economic conditions or circumstances;


(4) Agency evaluation of personal information;


(5) Medical data, including diagnosis and past history of disease or disability; and


(6) Any information received for verifying income eligibility and amount of medical assistance payments (see § 435.940 through § 435.965 of this subchapter). Income information received from SSA or the Internal Revenue Service must be safeguarded according to the requirements of the agency that furnished the data, including section 6103 of the Internal Revenue Code, as applicable.


(7) Any information received in connection with the identification of legally liable third party resources under § 433.138 of this chapter.


(8) Social Security Numbers.


[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 FR 5975, Feb. 27, 1987; 77 FR 17203, Mar. 23, 2012]


§ 431.306 Release of information.

(a) The agency must have criteria specifying the conditions for release and use of information about applicants and beneficiaries.


(b) Access to information concerning applicants or beneficiaries must be restricted to persons or agency representatives who are subject to standards of confidentiality that are comparable to those of the agency.


(c) The agency must not publish names of applicants or beneficiaries.


(d) The agency must obtain permission from a family or individual, whenever possible, before responding to a request for information from an outside source, unless the information is to be used to verify income, eligibility and the amount of medical assistance payment under section 1137 of this Act and §§ 435.940 through 435.965 of this chapter.


If, because of an emergency situation, time does not permit obtaining consent before release, the agency must notify the family or individual immediately after supplying the information.

(e) The agency’s policies must apply to all requests for information from outside sources, including governmental bodies, the courts, or law enforcement officials.


(f) If a court issues a subpoena for a case record or for any agency representative to testify concerning an applicant or beneficiary, the agency must inform the court of the applicable statutory provisions, policies, and regulations restricting disclosure of information.


(g) Before requesting information from, or releasing information to, other agencies to verify income, eligibility and the amount of assistance under § 435.940 through § 435.965 of this subchapter, the agency must execute data exchange agreements with those agencies, as specified in § 435.945(i) of this subchapter.


(h) Before requesting information from, or releasing information to, other agencies to identify legally liable third party resources under § 433.138(d) of this chapter, the agency must execute data exchanges agreements, as specified in § 433.138(h)(2) of this chapter.


[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 FR 5975, Feb. 27, 1987; 77 FR 17203, Mar. 23, 2012]


§ 431.307 Distribution of information materials.

(a) All materials distributed to applicants, beneficiaries, or medical providers must –


(1) Directly relate to the administration of the Medicaid program;


(2) Have no political implications except to the extent required to implement the National Voter Registration Act of 1993 (NVRA) Pub. L. 103-931; for States that are exempt from the requirements of NVRA, voter registration may be a voluntary activity so long as the provisions of section 7(a)(5) of NVRA are observed;


(3) Contain the names only of individuals directly connected with the administration of the plan; and


(4) Identify those individuals only in their official capacity with the State or local agency.


(b) The agency must not distribute materials such as “holiday” greetings, general public announcements, partisan voting information and alien registration notices.


(c) The agency may distribute materials directly related to the health and welfare of applicants and beneficiaries, such as announcements of free medical examinations, availability of surplus food, and consumer protection information.


(d) Under NVRA, the agency must distribute voter information and registration materials as specified in NVRA.


[44 FR 17934, Mar. 29, 1979, as amended at 61 FR 58143, Nov. 13, 1996]


Subpart G – Section 1115 Demonstrations


Source:77 FR 11696, Feb. 27, 2012, unless otherwise noted.

§ 431.400 Basis and purpose.

(a) Basis. This subpart implements provisions in section 1115(d) of the Act, which requires all of the following:


(1) The establishment of application requirements for Medicaid and CHIP demonstration projects that provide for:


(i) A process for public notice and comment at the State level, including public hearings, sufficient to ensure a meaningful level of public input and that does not impose requirements that are in addition to, or duplicative of, requirements imposed under the Administrative Procedure Act, or requirements that are unreasonable or unnecessarily burdensome with respect to State compliance.


(ii) Requirements relating to all of the following:


(A) The goals of the program to be implemented or renewed under the demonstration project.


(B) Expected State and Federal costs and coverage projections of the State demonstration project.


(C) Specific plans of the State to ensure the demonstration project will be in compliance with titles XIX or XXI of the Act.


(2) A process for public notice and comment after a demonstration application is received by the Secretary that is sufficient to ensure a meaningful level of public input.


(3) A process for the submission of reports to the Secretary by a State relating to the implementation of a demonstration project.


(4) Periodic evaluation of demonstration projects by the Secretary.


(b) Purpose. This subpart sets forth a process for application and review of Medicaid and CHIP demonstration projects that provides for transparency and public participation.


§ 431.404 Definitions.

For the purposes of this subpart:


Demonstration means any experimental, pilot, or demonstration project which the Secretary approves under the authority of section 1115 of the Act because, in the judgment of the Secretary, it is likely to assist in promoting the statutory objectives of the Medicaid or CHIP program.


Indian Health Program means a program as defined at section 4(12) of the Indian Health Care Improvement Act, (Pub. L. 94-437).


Public notice means a notice issued by a government agency or legislative body that contains sufficient detail to notify the public at large of a proposed action, consistent with the provisions of § 431.408 of this subpart.


§ 431.408 State public notice process.

(a) General. A State must provide at least a 30-day public notice and comment period regarding applications for a demonstration project, or an extension of an existing demonstration project that the State intends to submit to CMS for review and consideration.


(1) Public notice and comment period. Prior to submitting an application to CMS for a new demonstration project or an extension of a previously approved demonstration project, the State must provide at least a 30-day public notice and comment period, and the public notice shall include all of the following information:


(i) A comprehensive description of the demonstration application or extension to be submitted to CMS that contains a sufficient level of detail to ensure meaningful input from the public, including:


(A) The program description, goals, and objectives to be implemented or extended under the demonstration project, including a description of the current or new beneficiaries who will be impacted by the demonstration.


(B) To the extent applicable, the proposed health care delivery system and the eligibility requirements, benefit coverage and cost sharing (premiums, co-payments, and deductibles) required of individuals that will be impacted by the demonstration, and how such provisions vary from the State’s current program features.


(C) An estimate of the expected increase or decrease in annual enrollment, and in annual aggregate expenditures, including historic enrollment or budgetary data, if applicable. This includes a financial analysis of any changes to the demonstration requested by the State in its extension request.


(D) The hypothesis and evaluation parameters of the demonstration.


(E) The specific waiver and expenditure authorities that the State believes to be necessary to authorize the demonstration.


(ii) The locations and Internet address where copies of the demonstration application are available for public review and comment.


(iii) Postal and Internet email addresses where written comments may be sent and reviewed by the public, and the minimum 30-day time period in which comments will be accepted.


(iv) The location, date, and time of at least two public hearings convened by the State to seek public input on the demonstration application.


(2) Statement of public notice and public input procedures. (i) The State shall publish its public notice process, public input process, planned hearings, the demonstration application(s), and a link to the relevant Medicaid demonstration page(s) on the CMS Web site in a prominent location on either the main page of the public Web site of the State agency responsible for making applications for demonstrations or on a demonstration-specific Web page that is linked in a readily identifiable way to the main page of the State agency’s Web site. The State must maintain and keep current the public Web site throughout the entire public comment and review process.


(ii) The State shall also publish an abbreviated public notice which must include a summary description of the demonstration, the location and times of the two or more public hearings, and an active link to the full public notice document on the State’s Web site in the State’s administrative record in accordance with the State’s Administrative Procedure Act, provided that such notice is provided at least 30 days prior to the submission of the demonstration application to CMS or in the newspapers of widest circulation in each city with a population of 100,000, or more, provided that such notice is provided at least 30 days prior to the submission of the demonstration application to CMS, or both.


(iii) The State must also utilize additional mechanisms, such as an electronic mailing list, to notify interested parties of the demonstration application(s).


(3) Public hearings. At least 20 days prior to submitting an application for a new demonstration project or extension of an existing demonstration project to CMS for review, the State must have conducted at least two public hearings, on separate dates and at separate locations, regarding the State’s demonstration application at which members of the public throughout the State have an opportunity to provide comments. The State must use telephonic and/or Web conference capabilities for at least one of the two required public hearings to ensure statewide accessibility to the public hearing unless it can document it has afforded the public throughout the State the opportunity to provide comment, such as holding the two public hearings in geographically distinct areas of the State. The State must use at least two of the following public forums:


(i) The Medical Care Advisory Committee that operates in accordance with § 431.12 of this subpart; or


(ii) A commission or other similar process, where meetings are open to members of the public; or


(iii) A State legislative process, which would afford an interested party the opportunity to learn about the contents of the demonstration application, and to comment on its contents; or


(iv) Any other similar process for public input that would afford an interested party the opportunity to learn about the contents of the demonstration application, and to comment on its contents.


(b) Tribal consultation and seeking advice from Indian health providers and urban Indian organizations. A State with Federally-recognized Indian tribes, Indian health programs, and/or urban Indian health organizations shall include a process to consult with the Indian tribes, and seek advice from Indian Health programs and urban Indian health organizations in the State, prior to submission of an application to CMS for a new demonstration project, or an extension of a previously approved demonstration project, that has or would have a direct effect on Indians, tribes, on Indian health programs, or on urban Indian health organizations.


(1) For initial applications and applications extending existing demonstration projects that have a direct effect on Indians, tribes, Indian health programs, and urban Indian health organizations in the State, the State must demonstrate that it has conducted consultation activities with tribes and sought advice from Indian health programs and urban Indian health organizations prior to submission of such application.


(2) Consultation with Federally-recognized Indian tribes and solicitation of advice from affected Indian health providers and urban Indian organizations must be conducted in accordance with the consultation process outlined in the July 17, 2001 letter or the State’s formal tribal consultation agreement or process and the process for seeking advice from Indian Health providers must be conducted as outlined in the State’s approved Medicaid State Plan.


(3) Documentation of the State’s consultation activities must be included in the demonstration application, which must describe the notification process, the entities involved in the consultation(s), the date(s) and location(s) of the consultation(s), issues raised, and the potential resolution for such issues.


§ 431.412 Application procedures.

(a) Initial demonstration application content. (1) Applications for initial approval of a demonstration will not be considered complete unless they comply with the public notice process set forth in § 431.408(a) of this subpart, and include the following:


(i) A comprehensive program description of the demonstration, including the goals and objectives to be implemented under the demonstration project.


(ii) A description of the proposed health care delivery system, eligibility requirements, benefit coverage and cost sharing (premiums, copayments, and deductibles) required of individuals who will be impacted by the demonstration to the extent such provisions would vary from the State’s current program features and the requirements of the Act.


(iii) An estimate of the expected increase or decrease in annual enrollment, and in annual aggregate expenditures, including historic enrollment or budgetary data, if applicable.


(iv) Current enrollment data, if applicable, and enrollment projections expected over the term of the demonstration for each category of beneficiary whose health care coverage is impacted by the demonstration.


(v) Other program features that the demonstration would modify in the State’s Medicaid and CHIP programs.


(vi) The specific waiver and expenditure authorities that the State believes to be necessary to authorize the demonstration.


(vii) The research hypotheses that are related to the demonstration’s proposed changes, goals, and objectives, a plan for testing the hypotheses in the context of an evaluation, and, if a quantitative evaluation design is feasible, the identification of appropriate evaluation indicators.


(viii) Written documentation of the State’s compliance with the public notice requirements set forth in § 431.408 of this subpart, with a report of the issues raised by the public during the comment period, which shall be no less than 30 days, and how the State considered those comments when developing the demonstration application.


(2) CMS may request, or the State may propose application modifications, as well as additional information to aid in the review of the application. If an application modification substantially changes the original demonstration design, CMS may, at its discretion, direct an additional 30-day public comment period.


(3) This section does not preclude a State from submitting to CMS a pre-application concept paper or from conferring with CMS about its intent to seek a demonstration prior to submitting a completed application.


(b) Demonstration application procedures. A State application for approval of a new demonstration project or an extension of an existing demonstration project must be submitted to CMS as both printed and electronic documents. Electronic documents must be submitted in a format that will be accessible to individuals with disabilities.


(1) Consistent with § 431.416(a) of this subpart, within 15 days of receipt of a complete application, CMS will send the State a written notice informing the State of receipt of the submitted application, the date in which the Secretary received the State’s demonstration application and the start date of the 30-day Federal public notice process set forth in § 431.416 of this subpart. The written notice –


(i) Is provided for purposes of initiating the Federal-level public comment period and does not preclude a determination that, based on further review, further information is required to supplement or support the application, or that the application cannot be approved because a required element is missing or insufficient.


(ii) Does not prevent a State from modifying its application or submitting any supplementary information it determines necessary to support CMS’ review of its application.


(2) Within 15 days of receipt of a demonstration application that CMS determines is incomplete, CMS will send the State a written notice of the elements missing from the application.


(3) CMS will publish on its Web site at regular intervals the status of all State submissions, including information received from the State while the State works with CMS to meet the demonstration application process set forth in this section.


(c) Demonstration extension request. A request to extend an existing demonstration under sections 1115(a), (e), and (f) of the Act will be considered only if it is submitted at least 12 months prior to the expiration date of the demonstration when requesting an extension under section 1115(e) of the Act or 6 months prior to the expiration date of the demonstration when requesting an extension under section 1115(a) or (f) of the Act, unless a longer time frame is specified in the Special Terms and Conditions for the original demonstration. An extension application, including an extension for the purpose of phasing out a demonstration, must be sent from the Governor of the State to the Secretary.


(1) Changes to existing demonstration. If an extension application includes substantial changes to the existing demonstration, CMS may, at its discretion, treat the application as an application for a new demonstration.


(2) Demonstration extension application. An application to extend an existing demonstration will be considered complete, for purposes of initiating the Federal-level public notice period, when the State provides the following:


(i) A historical narrative summary of the demonstration project, which includes the objectives set forth at the time the demonstration was approved, evidence of how these objectives have or have not been met, and the future goals of the program.


(ii) If changes are requested, a narrative of the changes being requested along with the objective of the change and the desired outcomes.


(iii) A list and programmatic description of the waivers and expenditure authorities that are being requested for the extension period, or a statement that the State is requesting the same waiver and expenditure authorities as those approved in the current demonstration.


(iv) Summaries of External Quality Review Organization (EQRO) reports, managed care organization (MCO) and State quality assurance monitoring, and any other documentation of the quality of and access to care provided under the demonstration, such as the CMS Form 416 EPSDT/CHIP report.


(v) Financial data demonstrating the State’s historical and projected expenditures for the requested period of the extension, as well as cumulatively over the lifetime of the demonstration. This includes a financial analysis of changes to the demonstration requested by the State.


(vi) An evaluation report of the demonstration, inclusive of evaluation activities and findings to date, plans for evaluation activities during the extension period, and if changes are requested, identification of research hypotheses related to the changes and an evaluation design for addressing the proposed revisions.


(vii) Documentation of the State’s compliance with the public notice process set forth in § 431.408 of this subpart, including the post-award public input process described in § 431.420(c) of this subpart, with a report of the issues raised by the public during the comment period and how the State considered the comments when developing the demonstration extension application.


(3) CMS may request, or the State may propose application modifications, as well as additional information to aid in the review of an application to extend a demonstration. If an application modification substantially changes the original demonstration design, CMS may, at its discretion, direct an additional 30-day public comment period.


(4) Upon application from the State, the Secretary may extend existing demonstration projects on a temporary basis for the period during which a successor demonstration is under review, without regard to the date when the application was submitted.


(d) Approvals. Approval of a new demonstration or a demonstration extension will generally be prospective only and Federal Financial Participation (FFP) will not be available for changes to the demonstration that have not been approved by CMS.


§ 431.416 Federal public notice and approval process.

(a) General. Within 15 days of receipt of a complete application from the State for a new demonstration project or an extension of a previously approved demonstration project, CMS will:


(1) Send the State a written notice informing the State of receipt of the demonstration application, the date in which the Secretary received the State’s demonstration application, the start dates of the 30-day Federal public notice process, and the end date of the 45-day minimum Federal decision-making period.


(2) Publish the written notice acknowledging receipt of the State’s completed application on its Web site within the same 15-day timeframe.


(b) Public comment period. Upon notifying a State of a completed application, CMS will solicit public comment regarding such demonstration application for 30 days by doing the following:


(1) Publishing the following on the CMS Web site:


(i) The written notice of CMS receipt of the State’s complete demonstration application.


(ii) Demonstration applications, including supporting information submitted by the State as part of the complete application, and associated concept papers, as applicable.


(iii) The proposed effective date of the demonstration.


(iv) Addresses to which inquiries and comments from the public may be directed to CMS by mail or email.


(2) Notifying interested parties through a mechanism, such an electronic mailing list, that CMS will create for this purpose.


(c) Public disclosure. CMS will publish on its Web site, at regular intervals, appropriate information, which may include, but is not limited to the following:


(1) Relevant status update(s);


(2) A listing of the issues raised through the public notice process.


(d) Publishing of comments. (1) CMS will publish written comments electronically through its Web site or an alternative Web site.


(2) CMS will review and consider all comments received by the deadline, but will not provide written responses to public comments. While comments may be submitted after the deadline, CMS cannot assure that these comments will be considered.


(e) Approval of a demonstration application. (1) CMS will not render a final decision on a demonstration application until at least 45 days after notice of receipt of a completed application, to receive and consider public comments.


(2) CMS may expedite this process under the exception to the normal public notice process provisions in § 431.416(g) of this subpart.


(f) Administrative record. (1) CMS will maintain, and publish on its public Web site, an administrative record that may include, but is not limited to the following:


(i) The demonstration application from the State.


(ii) The State’s disaster exemption request and CMS’ response, if applicable.


(iii) Written public comments sent to the CMS and any CMS responses.


(iv) If an application is approved, the final special terms and conditions, waivers, expenditure authorities, and award letter sent to the State.


(v) If an application is denied, the disapproval letter sent to the State.


(vi) The State acceptance letter, as applicable.


(vii) Specific requirements related to the approved and agreed upon terms and conditions, such as implementation reviews, evaluation design, quarterly progress reports, annual reports, and interim and/or final evaluation reports.


(viii) Notice of the demonstration’s suspension or termination, if applicable.


(2) To ensure that the public has access to all documentation related to the demonstration project, including the aforementioned items, we will also provide a link to the State’s public Web site.


(g) Exemption from the normal public notice process. (1) CMS may waive, in whole or in part, the Federal and State public notice procedures to expedite a decision on a proposed demonstration or demonstration extension request that addresses a natural disaster, public health emergency, or other sudden emergency threats to human lives.


(2) The Secretary may exempt a State from the normal public notice process or the required time constraints imposed in this section or § 431.408(a) of this subpart when the State demonstrates to CMS the existence of unforeseen circumstances resulting from a natural disaster, public health emergency, or other sudden emergency that directly threatens human lives that warrant an exception to the normal public notice process.


(i) The State is expected to discharge its basic responsibilities in submitting demonstration applications to the Secretary as required in § 431.412 of this subpart.


(ii) Such applications will be posted on the CMS Web site.


(3) A State must establish (or meet) all of the following criteria to obtain such an exemption from the normal public notice process requirements:


(i) The State acted in good faith, and in a diligent, timely, and prudent manner.


(ii) The circumstances constitute an emergency and could not have been reasonably foreseen.


(iii) Delay would undermine or compromise the purpose of the demonstration and be contrary to the interests of beneficiaries.


(4) CMS will publish on its Web site any disaster exemption determinations within 15 days of approval, as well as the revised timeline for public comment or post-award processes, if applicable.


§ 431.420 Monitoring and compliance.

(a) General. (1) Any provision of the Social Security Act that is not expressly waived by CMS in its approval of the demonstration project are not waived, and States may not stop compliance with any of these provisions not expressly waived. Waivers may be limited in scope to the extent necessary to achieve a particular purpose or to the extent of a particular regulatory requirement implementing the statutory provision.


(2) States must comply with the terms and conditions of the agreement between the Secretary and the State to implement a State demonstration project.


(b) Implementation reviews. (1) The terms and conditions will provide that the State will perform periodic reviews of the implementation of the demonstration.


(2) CMS will review documented complaints that a State is failing to comply with requirements specified in the special terms and conditions and implementing waivers of any approved demonstration.


(3) CMS will promptly share with the State complaints that CMS has received and will also provide notification of any applicable monitoring and compliance issues.


(c) Post award. Within 6 months after the implementation date of the demonstration and annually thereafter, the State must hold a public forum –


(1) To solicit comments on the progress of a demonstration project.


(2) At which members of the public have an opportunity to provide comments and in such time as to include a summary of the forum in the quarterly report associated with the quarter in which the forum was held, as well as in its annual report to CMS.


(3) The public forum to solicit feedback on the progress of a demonstration project must occur using one of the following:


(i) A Medical Care Advisory Committee that operates in accordance with § 431.412 of this subpart.


(ii) A commission or other similar process, where meetings are open to members of the public, and would afford an interested party the opportunity to learn about the demonstration’s progress.


(iii) The State must publish the date, time, and location of the public forum in a prominent location on the State’s public Web site, at least 30 days prior to the date of the planned public forum.


(4) [Reserved]


(d) Terminations and suspensions. (1) The Secretary may suspend or terminate a demonstration in whole or in part, any time before the date of expiration, whenever it determines that the State has materially failed to comply with the terms of the demonstration project.


(2) The Secretary may also withdraw waivers or expenditure authorities based on a finding that the demonstration project is not likely to achieve the statutory purposes.


(3) The terms and conditions for the demonstration will detail any notice and appeal rights for the State for a termination, suspension or withdrawal of waivers or expenditure authorities.


(e) Closeout costs. When a demonstration is terminated, suspended, or if waivers or expenditure authority are withdrawn, Federal funding is limited to normal closeout costs associated with an orderly termination of the demonstration or expenditure authority, including service costs during any approved transition period, and administrative costs of disenrolling participants.


(f) Federal evaluators. (1) The State must fully cooperate with CMS or an independent evaluator selected by CMS to undertake an independent evaluation of any component of the demonstration.


(2) The State must submit all requested data and information to CMS or the independent evaluator.


§ 431.424 Evaluation requirements.

(a) General. States are permitted and encouraged to use a range of appropriate evaluation strategies (including experimental and other quantitative and qualitative designs) in the application of evaluation techniques with the approval of CMS.


(b) Demonstration evaluations. Demonstration evaluations will include the following:


(1) Quantitative research methods. (i) These methods involve the empirical investigation of the impact of key programmatic features of the demonstration.


(ii) CMS will consider alternative evaluation designs when quantitative designs are technically infeasible or not well suited to the change made by the demonstration.


(2) Approaches that minimize beneficiary impact. The evaluation process must minimize burden on beneficiaries and protect their privacy in terms of implementing and operating the policy approach to be demonstrated while ensuring the impact of the demonstration is measured.


(c) Evaluation design plan. (1) The State will submit and receive CMS approval of a design for an evaluation of the demonstration project and publish this document to the State’s public Web site within 30 days of CMS approval.


(2) The draft demonstration evaluation design must include all of the following:


(i) A discussion of the demonstration hypotheses that are being tested including monitoring and reporting on the progress towards the expected outcomes.


(ii) The data that will be utilized and the baseline value for each measure.


(iii) The methods of data collection.


(iv) A description of how the effects of the demonstration will be isolated from those other changes occurring in the State at the same time through the use of comparison or control groups to identify the impact of significant aspects of the demonstration.


(v) A proposed date by which a final report on findings from evaluation activities conducted under the evaluation plan must be submitted to CMS.


(vi) Any other information pertinent to the State’s research on the policy operations of the demonstration operations.


(d) Evaluations for demonstration extensions. (1) In the event that the State requests to extend the demonstration beyond the current approval period under the authority of section 1115(a), (e), or (f) of the Act, the State must submit an interim evaluation report as part of the State’s request for a subsequent renewal of the demonstration.


(2) State evaluations must be published on the State’s public Web site within 30 days of submission to CMS.


(e) Approved evaluation designs. The State must publish the CMS-approved demonstration evaluation design on the State’s public Web site within 30 days of CMS approval.


(f) Federal evaluations. The State must comply with all requirements set forth in this subpart.


(g) Federal public notice. CMS will post, or provide a link to the State’s public Web site, all evaluation materials, including research and data collection, on its Web site for purposes of sharing findings with the public within 30 days of receipt of materials.


§ 431.428 Reporting requirements.

(a) Annual reports. The State must submit an annual report to CMS documenting all of the following:


(1) Any policy or administrative difficulties in the operation of the demonstration.


(2) The status of the health care delivery system under the demonstration with respect to issues and/or complaints identified by beneficiaries.


(3) The impact of the demonstration in providing insurance coverage to beneficiaries and uninsured populations.


(4) Outcomes of care, quality of care, cost of care and access to care for demonstration populations.


(5) The results of beneficiary satisfaction surveys, if conducted during the reporting year, grievances and appeals.


(6) The existence or results of any audits, investigations or lawsuits that impact the demonstration.


(7) The financial performance of the demonstration.


(8) The status of the evaluation and information regarding progress in achieving demonstration evaluation criteria.


(9) Any State legislative developments that may impact the demonstration.


(10) The results/impact of any demonstration programmatic area defined by CMS that is unique to the demonstration design or evaluation hypothesis.


(11) A summary of the annual post-award public forum, including all public comments received regarding the progress of the demonstration project.


(b) Submitting and publishing annual reports. States must submit a draft annual report to CMS no later than 90 days after the end of each demonstration year, or as specified in the demonstration’s STCs. The State must publish its draft annual report on its public Web site within 30 days of submission to CMS.


(1) Within 60 days of receipt of comments from CMS, the State must submit to CMS the final annual report for the demonstration year.


(2) The final annual report is to be published on the State’s public Web site within 30 days of approval by CMS.


Subparts H-L [Reserved]

Subpart M – Relations With Other Agencies

§ 431.610 Relations with standard-setting and survey agencies.

(a) Basis and purpose. This section implements –


(1) Section 1902(a)(9) of the Act, concerning the designation of State authorities to be responsible for establishing and maintaining health and other standards for institutions participating in Medicaid; and


(2) Section 1902(a)(33) of the Act, concerning the designation of the State licensing agency to be responsible for determining whether institutions and agencies meet requirements for participation in the State’s Medicaid program.


(3) Section 1919(g)(1)(A) of the Act, concerning responsibilities of the State for certifying the compliance of non-State operated NFs with requirements of participation in the State’s Medicaid program.


(b) Designated agency responsible for health standards. A State plan must designate, as the State authority responsible for establishing and maintaining health standards for private or public institutions that provide services to Medicaid beneficiaries, the same State agency that is used by the Secretary to determine qualifications of institutions and suppliers of services to participate in Medicare (see 42 CFR 405.1902). The requirement for establishing and maintaining standards does not apply with respect to religious nonmedical institutions as defined in § 440.170(b) of this chapter.


(c) Designated agency responsible for standards other than health standards. The plan must designate the Medicaid agency or other appropriate State authority or authorities to be responsible for establishing and maintaining standards, other than those relating to health, for private or public institutions that provide services to Medicaid beneficiaries.


(d) Description and retention of standards. (1) The plan must describe the standards established under paragraphs (b) and (c) of this section.


(2) The plan must provide that the Medicaid agency keeps these standards on file and makes them available to the Administrator upon request.


(e) Designation of survey agency. The plan must provide that –


(1) The agency designated in paragraph (b) of this section, or another State agency responsible for licensing health institutions in the State, determines for the Medicaid agency whether institutions and agencies meet the requirements for participation in the Medicaid program; and


(2) The agency staff making the determination under paragraph (e)(1) of this section is the same staff responsible for making similar determinations for institutions or agencies participating under Medicare; and


(3) The agency designated in paragraph (e)(1) of this section makes recommendations regarding the effective dates of provider agreements, as determined under § 431.108.


(f) Written agreement required. The plan must provide for a written agreement (or formal written intra-agency arrangement) between the Medicaid agency and the survey agency designated under paragraph (e) of this section, covering the activities of the survey agency in carrying out its responsibilities. The agreement must specify that –


(1) Federal requirements and the forms, methods and procedures that the Administrator designates will be used to determine provider eligibility and certification under Medicaid;


(2) Inspectors surveying the premises of a provider will –


(i) Complete inspection reports;


(ii) Note on completed reports whether or not each requirement for which an inspection is made is satisfied; and


(iii) Document deficiencies in reports;


(3) The survey agency will keep on file all information and reports used in determining whether participating facilities meet Federal requirements; and


(4) The survey agency will make the information and reports required under paragraph (f)(3) of this section readily accessible to HHS and the Medicaid agency as necessary –


(i) For meeting other requirements under the plan; and


(ii) For purposes consistent with the Medicaid agency’s effective administration of the program.


(g) Responsibilities of survey agency. The plan must provide that, in certifying NFs, HHAs, and ICF-IIDs, the survey agency designated under paragraph (e) of this section will –


(1) Review and evaluate medical and independent professional review team reports obtained under part 456 of this subchapter as they relate to health and safety requirements;


(2) Have qualified personnel perform on-site inspections periodically as appropriate based on the timeframes in the correction plan and –


(i) At least once during each certification period or more frequently if there is a compliance question; and


(ii) For non-State operated NFs, within the timeframes specified in § 488.308 of this chapter.


(3) Have qualified personnel perform on-site inspections –


(i) At least once during each certification period or more frequently if there is a compliance question; and


(ii) For intermediate care facilities with deficiencies as described in §§ 442.112 and 442.113 of this subchapter, within 6 months after initial correction plan approval and every 6 months thereafter as required under those sections.


(h) FFP for survey responsibilities. (1) FFP is available in expenditures that the survey agency makes to carry out its survey and certification responsibilities under the agreement specified in paragraph (f) of this section.


(2) FFP is not available in any expenditures that the survey agency makes that are attributable to the State’s overall responsibilities under State law and regulations for establishing and maintaining standards.


[43 FR 45188, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 53 FR 20494, June 3, 1988; 57 FR 43923, Sept. 23, 1992; 59 FR 56233, Nov. 10, 1994; 62 FR 43936, Aug. 18, 1997; 64 FR 67052, Nov. 30, 1999; 78 FR 72320, Dec. 2, 2013]


§ 431.615 Relations with State health and vocational rehabilitation agencies and title V grantees.

(a) Basis and purpose. This section implements section 1902(a)(11) and (22)(C) of the Act, by setting forth State plan requirements for arrangements and agreements between the Medicaid agency and –


(1) State health agencies;


(2) State vocational rehabilitation agencies; and


(3) Grantees under title V of the Act, Maternal and Child Health and Crippled Children’s Services.


(b) Definitions. For purposes of this section –


“Title V grantee” means the agency, institution, or organization receiving Federal payments for part or all of the cost of any service program or project authorized by title V of the Act, including –


(1) Maternal and child health services;


(2) Crippled children’s services;


(3) Maternal and infant care projects;


(4) Children and youth projects; and


(5) Projects for the dental health of children.


(c) State plan requirements. A state plan must –


(1) Describe cooperative arrangements with the State agencies that administer, or supervise the administration of, health services and vocational rehabilitation services designed to make maximum use of these services;


(2) Provide for arrangements with title V grantees, under which the Medicaid agency will utilize the grantee to furnish services that are included in the State plan;


(3) Provide that all arrangements under this section meet the requirements of paragraph (d) of this section; and


(4) Provide, if requested by the title V grantee in accordance with the arrangements made under this section, that the Medicaid agency reimburse the grantee or the provider for the cost of services furnished beneficiaries by or through the grantee.


(d) Content of arrangements. The arrangements referred to in paragraph (c) must specify, as appropriate –


(1) The mutual objectives and responsibilities or each party to the arrangement;


(2) The services each party offers and in what circumstances;


(3) The cooperative and collaborative relationships at the State level;


(4) The kinds of services to be provided by local agencies; and


(5) Methods for –


(i) Early identification of individuals under 21 in need of medical or remedial services;


(ii) Reciprocal referrals;


(iii) Coordinating plans for health services provided or arranged for beneficiaries;


(iv) Payment or reimbursement;


(v) Exchange of reports of services furnished to beneficiaries;


(vi) Periodic review and joint planning for changes in the agreements;


(vii) Continuous liaison between the parties, including designation of State and local liaison staff; and


(viii) Joint evaluation of policies that affect the cooperative work of the parties.


(e) Federal financial participation. FFP is available in expenditures for Medicaid services provided to beneficiaries through an arrangement under this section.


§ 431.620 Agreement with State mental health authority or mental institutions.

(a) Basis and purpose. This section implements section 1902(a)(20)(A) of the Act, for States offering Medicaid services in institutions for mental diseases for beneficiaries aged 65 or older, by specifying the terms of the agreement those States must have with other State authorities and institutions. (See part 441, subpart C of this chapter for regulations implementing section 1902(a)(20) (B) and (C).)


(b) Definition. For purposes of this section, an “institution for mental diseases” means an institution primarily engaged in providing diagnosis, treatment, or care of persons with mental diseases. This includes medical attention, nursing care, and related services.


(c) State plan requirement. A State plan that includes Medicaid for persons aged 65 or older in institutions for mental diseases must provide that the Medicaid agency has in effect a written agreement with –


(1) The State authority or authorities concerned with mental diseases; and


(2) Any institution for mental diseases that is not under the jurisdiction of those State authorities, and that provides services under Medicaid to beneficiaries aged 65 or older.


(d) Provisions required in an agreement. The agreement must specify the respective responsibilities of the agency and the authority or institution, including arrangements for –


(1) Joint planning between the parties to the agreement;


(2) Development of alternative methods of care;


(3) Immediate readmission to an institution when needed by a beneficiary who is in alternative care;


(4) Access by the agency to the institution, the beneficiary, and the beneficiary’s records when necessary to carry out the agency’s responsibilities;


(5) Recording, reporting, and exchanging medical and social information about beneficiaries; and


(6) Other procedures needed to carry out the agreement.


[44 FR 17935, Mar. 23, 1979]


§ 431.621 State requirements with respect to nursing facilities.

(a) Basis and purpose. This section implements sections 1919(b)(3)(F) and 1919(e)(7) of the Act by specifying the terms of the agreement the State must have with the State mental health and Intellectual Disability authorities concerning the operation of the State’s preadmission screening and annual resident review (PASARR) program.


(b) State plan requirement. The State plan must provide that the Medicaid agency has in effect a written agreement with the State mental health and Intellectual Disability authorities that meets the requirements specified in paragraph (c) of this section.


(c) Provisions required in an agreement. The agreement must specify the respective responsibilities of the agency and the State mental health and Intellectual Disability authorities, including arrangements for – (1) Joint planning between the parties to the agreement;


(2) Access by the agency to the State mental health and Intellectual Disability authorities’ records when necessary to carry out the agency’s responsibilities;


(3) Recording, reporting, and exchanging medical and social information about individuals subject to PASARR;


(4) Ensuring that preadmission screenings and annual resident reviews are performed timely in accordance with §§ 483.112(c) and 483.114(c) of this part;


(5) Ensuring that, if the State mental health and Intellectual Disability authorities delegate their respective responsibilities, these delegations comply with § 483.106(e) of this part;


(6) Ensuring that PASARR determinations made by the State mental health and Intellectual Disability authorities are not countermanded by the State Medicaid agency, except through the appeals process, but that the State mental health and Intellectual Disability authorities do not use criteria which are inconsistent with those adopted by the State Medicaid agency under its approved State plan;


(7) Designating the independent person or entity who performs the PASARR evaluations for individuals with MI; and


(8) Ensuring that all requirements of §§ 483.100 through 483.136 are met.


[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]


§ 431.625 Coordination of Medicaid with Medicare part B.

(a) Basis and purpose. (1) Section 1843(a) of the Act requires the Secretary to have entered into an agreement with any State that requested that agreement before January 1, 1970, or during calendar year 1981, under which the State could enroll certain Medicare-eligible beneficiaries under Medicare Part B and agree to pay their premiums.


(2) Section 1902(a)(10) of the Act (in clause (II) following subparagraph (D)), allows the State to pay the premium, deductibles, cost sharing, and other charges for beneficiaries enrolled under Medicare Part B without obligating itself to provide the range of Part B benefits to other beneficiaries; and


(3) Section 1903 (a)(1) and (b) of the Act authorizes FFP for State payment of Medicare Part B premiums for certain beneficiaries.


(4) This section –


(i) Specifies the exception, relating to Part B coverage, from the requirement to provide comparable services to all beneficiaries; and


(ii) Prescribes FFP rules concerning State payment for Medicare premiums and for services that could have been covered under Medicare.


(5) Section 1902(a)(15) of the Act requires that if a State chooses to pay only a portion of deductibles, cost sharing or other charges for beneficiaries enrolled under Medicare Part B, the portion that is to be paid by a Medicaid beneficiary must be reasonably related to the beneficiary’s income and resources.


(b) Exception from obligation to provide comparable services; State plan requirement. (1) The State’s payment of premiums, deductibles, cost sharing, or similar charges under Part B does not obligate it to provide the full range of Part B services to beneficiaries not covered by Medicare.


(2) The State plan must specify this exception if it applies.


(c) Effect of payment of premiums on State liability for cost sharing. (1) State payment of Part B premiums on behalf of a Medicaid beneficiary does not obligate it to pay on the beneficiary’s behalf the Part B deductible and coinsurance amounts for those Medicare Part B services not covered in the Medicaid State plan.


(2) If a State pays on a beneficiary’s behalf any portion of the deductible or cost sharing amounts under Medicare Part B, the portion paid by a State must be reasonably related to the beneficiary’s income and resources.


(d) Federal financial participation: Medicare Part B premiums – (1) Basic rule. Except as provided in paragraph (d)(2) of this section, FFP is not available in State expenditures for Medicare Part B premiums for Medicaid beneficiaries unless the beneficiaries receive money payments under title I, IV-A, X, XIV, XVI (AABD or SSI) of the Act, or State supplements as permitted under section 1616(a) of the Act, or as required by section 212 of Pub. L. 93-66.


(2) Exception. FFP is available in expenditures for Medicare Part B premiums for the following groups:


(i) AFDC families required to be covered under §§ 435.112 and 436.116 of this subchapter, those eligible for continued Medicaid coverage despite increased income from employment;


(ii) Beneficiaries required to be covered under §§ 435.114, 435.134, and 436.112 of this subchapter, those eligible for continued Medicaid coverage despite increased income from monthly insurance benefits under title II of the Act;


(iii) Beneficiaries required to be covered under § 435.135 of this subchapter, those eligible for continued Medicaid coverage despite increased income from cost-of-living increases under title II of the Act;


(iv) Beneficiaries of foster care maintenance payments or adoption assistance payments who, under Part E of title IV of the Act are considered as receiving AFDC;


(v) Individuals required to be covered under § 435.120 of this chapter, that is, blind or disabled individuals who, under section 1619(b) of the Act, are considered to be receiving SSI;


(vi) Individuals who, in accordance with §§ 435.115 and 436.114 of this chapter are, for purposes of Medicaid eligibility, considered to be receiving AFDC. These are participants in a work supplementation program, or individuals denied AFDC because the payment would be less than $10;


(vii) Certain beneficiaries of Veterans Administration pensions during the limited time they are, under section 310(b) of Pub. L. 96-272, considered as receiving SSI, mandatory State supplements, or AFDC;


(viii) Disabled children living at home to whom the State provides Medicaid under section 1902(e)(3) of the Act;


(ix) Individuals who become ineligible for AFDC because of the collection or increased collection of child or spousal support, but, in accordance with section 406(h) of the Act, remain eligible for Medicaid for four more months; and


(x) Individuals who become ineligible for AFDC because they are no longer eligible for the disregard of earnings of $30 or of $30 plus one-third of the remainder, but, in accordance with section 402(a)(37) of the Act, are considered as receiving AFDC for a period of 9 to 15 months.


(3) No FFP is available in State Medicaid expenditures that could have been paid for under Medicare Part B but were not because the person was not enrolled in Part B. This limit applies to all beneficiaries eligible for enrollment under Part B, whether individually or through an agreement under section 1843(a) of the Act. However, FFP is available in expenditures required by §§ 435.914 and 436.901 of this subchapter for retroactive coverage of beneficiaries.


[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979; 52 FR 47933, Dec. 17, 1987; 53 FR 657, Jan. 11, 1988]


§ 431.630 Coordination of Medicaid with QIOs.

(a) The State plan may provide for the review of Medicaid services through a contract with a QIO designated under part 462 of this chapter. Medicaid requirements for medical and utilization review are deemed to be met for those services or providers subject to review under the contract.


(b) The State plan must provide that the contract with the QIO –


(1) Meets the requirements of § 434.6(a) of this part;


(2) Includes a monitoring and evaluation plan by which the State ensures satisfactory performance by the QIO;


(3) Identifies the services and providers subject to QIO review;


(4) Ensures that the review activities performed by the QIO are not inconsistent with QIO review activities of Medicare services and includes a description of whether and to what extent QIO determinations will be considered conclusive for Medicaid payment purposes.


[50 FR 15327, Apr. 17, 1985]


§ 431.635 Coordination of Medicaid with Special Supplemental Food Program for Women, Infants, and Children (WIC).

(a) Basis. This section implements sections 1902(a)(11)(C) and 1902(a) (53) of the Act, which provide for coordination of Medicaid with the Special Supplemental Food Program for Women, Infants, and Children (WIC) under section 17 of the Child Nutrition Act of 1966.


(b) Definitions. As used in this section, the terms breastfeeding women, postpartum women, and pregnant women mean women as defined in section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786(b)).


(c) State plan requirements. A State Plan must provide for –


(1) Coordinating operation of the Medicaid program with the State’s operation of the Special Supplemental Food Program for Women, Infants, and Children;


(2) Providing timely written notice of the availability of WIC benefits to all individuals in the State who are determined to be eligible (including presumptively eligible) for Medicaid and who are:


(i) Pregnant women;


(ii) Postpartum women;


(iii) Breastfeeding women; and


(iv) Children under the age of 5.


(3) Referring individuals described under paragraphs (c)(2) (i) through (iv) of this section to the local agency responsible for administering the WIC program.


(d) Notification requirements. (1) The agency must give the written notice required under paragraph (c) of this section as soon as the agency identifies the individual (e.g., at the time of an eligibility determination for Medicaid) or immediately thereafter (e.g., at the time of notice of eligibility).


(2) The agency, no less frequently than annually, must also provide written notice of the availability of WIC benefits, including the location and telephone number of the local WIC agency or instructions for obtaining further information about the WIC program, to all Medicaid beneficiaries (including those found to be presumptively eligible) who are under age 5 or who are women who might be pregnant, postpartum, or breastfeeding as described in paragraphs (c)(2) (i) through (iv) of this section.


(3) The agency must effectively inform those individuals who are blind or deaf or who cannot read or understand the English language.


[57 FR 28103, June 24, 1992]


Subpart N – State Programs for Licensing Nursing Home Administrators

§ 431.700 Basis and purpose.

This subpart implements sections 1903(a)(29) and 1908 of the Act which require that the State plan include a State program for licensing nursing home administrators.


§ 431.701 Definitions.

Unless otherwise indicated, the following definitions apply for purposes of this subpart:


Agency means the State agency responsible for licensing individual practitioners under the State’s healing arts licensing act.


Board means an appointed State board established to carry out a State program for licensing administrators of nursing homes, in a State that does not have a healing arts licensing act or an agency as defined in this section.


Licensed means certified by a State agency or board as meeting all of the requirements for a licensed nursing home administrator specified in this subpart.


Nursing home means any institution, facility, or distinct part of a hospital that is licensed or formally recognized as meeting nursing home standards established under State law, or that is determined under § 431.704 to be included under the requirements of this subpart. The term does not include –


(a) A religious nonmedical institution as defined in § 440.170(b) of this chapter; or


(b) A distinct part of a hospital, if the hospital meets the definition in § 440.10 or § 440.140 of this subchapter, and the distinct part is not licensed separately or formally approved as a nursing home by the State even though it is designated or certified as a skilled nursing facility.


Nursing home administrator means any person who is in charge of the general administration of a nursing home whether or not the person –


(a) Has an ownership interest in the home; or


(b) Shares his functions and duties with one or more other persons.


[43 FR 45188, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]


§ 431.702 State plan requirement.

A State plan must provide that the State has a program for licensing administrators of nursing homes that meets the requirements of §§ 431.703 through 431.713 of this subpart.


§ 431.703 Licensing requirement.

The State licensing program must provide that only nursing homes supervised by an administrator licensed in accordance with the requirements of this subpart may operate in the State.


§ 431.704 Nursing homes designated by other terms.

If a State licensing law does not use the term “nursing home,” the CMS Administrator will determine the term or terms equivalent to “nursing home” for purposes of applying the requirements of this subpart. To obtain this determination, the Medicaid agency must submit to the Regional Medicaid Director copies of current State laws that define institutional health care facilities for licensing purposes.


§ 431.705 Licensing authority.

(a) The State licensing program must provide for licensing of nursing home administrators by –


(1) The agency designated under the healing arts act of the State; or


(2) A State licensing board.


(b) The State agency or board must perform the functions and duties specified in §§ 431.707 through 431.713 and the board must meet the membership requirements specified in § 431.706 of this subpart.


§ 431.706 Composition of licensing board.

(a) The board must be composed of persons representing professions and institutions concerned with the care and treatment of chronically ill or infirm elderly patients. However –


(1) A majority of the board members may not be representative of a single profession or category of institution; and


(2) Members not representative of institutions may not have a direct financial interest in any nursing home.


(b) For purposes of this section, nursing home administrators are considered representatives of institutions.


§ 431.707 Standards.

(a) The agency or board must develop, impose, and enforce standards that must be met by individuals in order to be licensed as a nursing home administrator.


(b) The standards must be designed to insure that nursing home administrators are –


(1) Of good character;


(2) Otherwise suitable; and


(3) Qualified to serve because of training or experience in institutional administration.


§ 431.708 Procedures for applying standards.

The agency or board must develop and apply appropriate procedures and techniques, including examinations and investigations, for determining if a person meets the licensing standards.


§ 431.709 Issuance and revocation of license.

Except as provided in § 431.714 of this subpart, the agency or board must –


(a) Issue licenses to persons who meet the agency’s or board’s standards; and


(b) Revoke or suspend a license if the agency or board determines that the person holding the license substantially fails to meet the standards.


§ 431.710 Provisional licenses.

To fill a position of nursing home administrator that unexpectedly becomes vacant, the agency or board may issue one provisional license, for a single period not to exceed 6 months. The license may be issued to a person who does not meet all of the licensing requirements established under § 431.707 but who –


(a) Is of good character and otherwise suitable; and


(b) Meets any other standards established for provisional licensure by the agency or board.


§ 431.711 Compliance with standards.

The agency or board must establish and carry out procedures to insure that licensed administrators comply with the standards in this subpart when they serve as nursing home administrators.


§ 431.712 Failure to comply with standards.

The agency or board must investigate and act on all complaints it receives of violations of standards.


§ 431.713 Continuing study and investigation.

The agency or board must conduct a continuing study of nursing homes and administrators within the State to improve –


(a) Licensing standards; and


(b) The procedures and methods for enforcing the standards.


§ 431.714 Waivers.

The agency or board may waive any standards developed under § 431.707 of this subpart for any person who has served in the capacity of a nursing home administrator during all of the 3 calendar years immediately preceding the calendar year in which the State first meets the requirements in this subpart.


§ 431.715 Federal financial participation.

No FFP is available in expenditures by the licensing board for establishing and maintaining standards for the licensing of nursing home administrators.


Subpart O [Reserved]

Subpart P – Quality Control

Medicaid Eligibility Quality Control (MEQC) Program


Source:Sections 431.800 through 431.808 appear at 55 FR 22166, May 31, 1990, unless otherwise noted.

§ 431.800 Basis and scope.

This subpart establishes State requirements for the Medicaid Eligibility Quality Control (MEQC) Program designed to reduce erroneous expenditures by monitoring eligibility determinations and a claims processing assessment that monitors claims processing operations. MEQC will work in conjunction with the Payment Error Rate Measurement (PERM) Program established in subpart Q of this part. In years in which the State is required to participate in PERM, as stated in subpart Q of this part, it will only participate in the PERM program and will not be required to conduct a MEQC pilot. In the 2 years between PERM cycles, the State is required to conduct a MEQC pilot, as set forth in this subpart.


[82 FR 31182, July 5, 2017]


§ 431.804 Definitions.

As used in this subpart –


Active case means an individual determined to be currently authorized as eligible for Medicaid or CHIP by the State.


Corrective action means action(s) to be taken by the State to reduce major error causes, trends in errors or other vulnerabilities for the purpose of reducing improper payments in Medicaid and CHIP.


Deficiency means a finding in processing identified through active case review or negative case review that does not meet the definition of an eligibility error.


Eligibility means meeting the State’s categorical and financial criteria for receipt of benefits under the Medicaid or CHIP programs.


Eligibility error is an error resulting from the States’ improper application of Federal rules and the State’s documented policies and procedures that causes a beneficiary to be determined eligible when he or she is ineligible for Medicaid or CHIP, causes a beneficiary to be determined eligible for the incorrect type of assistance, causes applications for Medicaid or CHIP to be improperly denied by the State, or causes existing cases to be improperly terminated from Medicaid or CHIP by the State. An eligibility error may also be caused when a redetermination did not occur timely or a required element of the eligibility determination process (for example income) cannot be verified as being performed/completed by the state.


Medicaid Eligibility Quality Control (MEQC) means a program designed to reduce erroneous expenditures by monitoring eligibility determinations and work in conjunction with the PERM program established in subpart Q of this part.


MEQC pilot refers to the process used to implement the MEQC Program.


MEQC review period is the 12-month timespan from which the State will sample and review cases.


Negative case means an individual denied or terminated eligibility for Medicaid or CHIP by the State.


Off-years are the scheduled 2-year period of time between a States’ designated PERM years.


Payment Error Rate Measurement (PERM) Program means the program set forth at subpart Q of this part utilized to calculate a national improper payment rate for Medicaid and CHIP.


PERM year is the scheduled and designated year for a State to participate in, and be measured by, the PERM Program set forth at subpart Q of this part.


[82 FR 31182, July 5, 2017]


§ 431.806 State requirements.

(a) General requirements. (1) In a State’s PERM year, the PERM measurement will meet the requirements of section 1903(u) of the Act.


(2) In the 2 years between each State’s PERM year, the State is required to conduct one MEQC pilot, which will span parts of both off years.


(i) The MEQC pilot review period will span 12 months of a calendar year, beginning the January 1 following the end of the State’s PERM year through December 31.


(ii) The MEQC pilot planning document described in § 431.814 is due no later than the first November 1 following the end of the State’s PERM year.


(iii) A State must submit its MEQC pilot findings and its plan for corrective action(s) by the August 1 following the end of its MEQC pilot review period.


(b) PERM measurement. Requirements for the State PERM review process are set forth in subpart Q of this part.


(c) MEQC pilots. MEQC pilot requirements are specified in §§ 431.812 through 431.820.


(d) Claims processing assessment system. Except in a State that has an approved Medicaid Management Information System (MMIS) under subpart C of part 433 of this subchapter, a State plan must provide for operating a Medicaid quality control claims processing assessment system that meets the requirements of §§ 431.830 through 431.836.


[82 FR 31182, July 5, 2017]


§ 431.808 Protection of beneficiary rights.

Any individual performing activities under the MEQC program or the claims processing assessment system specified in this subpart must do so in a manner that is consistent with the provisions of §§ 435.902 and 436.901 of this subchapter concerning the rights of beneficiaries.


§ 431.810 Basic elements of the Medicaid Eligibility Quality Control (MEQC) Program.

(a) General requirements. The State must operate the MEQC pilot in accordance with this section and §§ 431.812 through 431.820, as well as other instructions established by CMS.


(b) Review requirements. The State must conduct reviews for the MEQC pilot in accordance with the requirements specified in § 431.812 and other instructions established by CMS.


(c) Pilot planning requirements. The State must develop a MEQC pilot planning proposal in accordance with requirements specified in § 431.814 and other instructions established by CMS.


(d) Reporting requirements. The State must report the finding of the MEQC pilots in accordance with the requirements specified in § 431.816 and other instructions established by CMS.


(e) Corrective action requirements. The State must conduct corrective actions based on the findings of the MEQC pilots in accordance with the requirements specified in § 431.820 and other instructions established by CMS.


[82 FR 31183, July 5, 2017]


§ 431.812 Review procedures.

(a) General requirements. Each State is required to conduct a MEQC pilot during the 2 years between required PERM cycles in accordance with the approved pilot planning document specified in § 431.814, as well as other instructions established by CMS. The agency and personnel responsible for the development, direction, implementation, and evaluation of the MEQC reviews and associated activities, must be functionally and physically separate from the State agencies and personnel that are responsible for Medicaid and CHIP policy and operations, including eligibility determinations.


(b) Active case reviews. (1) The State must review all active cases selected from the universe of cases, as established in the State’s approved MEQC pilot planning document, under § 431.814 to determine if the cases were eligible for services, as well as to identify deficiencies in processing subject to corrective actions.


(2) The State must select and review, at a minimum, 400 active cases in total from the Medicaid and CHIP universe.


(i) The State must review at least 200 Medicaid cases.


(ii) The State will identify in the pilot planning document at § 431.814 the sample size per program.


(iii) The State may sample more than 400 cases.


(3) The State may propose to focus the active case reviews on recent changes to eligibility policies and processes, areas where the state suspects vulnerabilities, or proven error prone areas.


(i) Unless otherwise directed by CMS, the State must propose its active case review approach in the pilot planning document described at § 431.814 or perform a comprehensive review.


(ii) When the State has a PERM eligibility improper payment rate that exceeds the 3 percent national standard for two consecutive PERM cycles, the State must follow CMS direction for its active case reviews. CMS guidance will be provided to any state meeting this criteria.


(c) Negative case reviews. (1) As established in the State’s approved MEQC pilot planning document under § 431.814, the State must review negative cases selected from the State’s universe of cases that are denied or terminated in the review month to determine if the denial, or termination, was correct, as well as to identify deficiencies in processing subject to corrective actions.


(2) The State must review, at a minimum, 200 negative cases from Medicaid and 200 negative cases from CHIP.


(i) The State may sample more than 200 cases from Medicaid and/or more than 200 cases from CHIP.


(ii) [Reserved]


(d) Error definition. (1) An active case error is an error resulting from the State’s improper application of Federal rules and the State’s documented policies and procedures that causes a beneficiary to be determined eligible when he or she is ineligible for Medicaid or CHIP, causes a beneficiary to be determined eligible for the incorrect type of assistance, or when a determination did not occur timely or cannot be verified.


(2) Negative case errors are errors, based on the State’s documented policies and procedures, resulting from either of the following:


(i) Applications for Medicaid or CHIP that are improperly denied by the State.


(ii) Existing cases that are improperly terminated from Medicaid or CHIP by the State.


(e) Active case payment reviews. In accordance with instructions established by CMS, the State must also conduct payment reviews to identify payments for active case errors, as well as identify the individual’s understated or overstated liability, and report payment findings as specified in § 431.816.


[82 FR 31183, July 5, 2017]


§ 431.814 Pilot planning document.

(a) Plan approval. For each MEQC pilot, the State must submit a MEQC pilot planning document that meets the requirements of this section to CMS for approval by the first November 1 following the end of the State’s PERM year. The State must receive approval for a plan before the plan can be implemented.


(b) Plan requirements. The State must have an approved pilot planning document in effect for each MEQC pilot that must be in accordance with instructions established by CMS and that includes, at a minimum, the following for –


(1) Active case reviews. (i) Focus of the active case reviews in accordance with § 431.812(b)(3) and justification for focus.


(ii) Universe development process.


(iii) Sample size per program.


(iv) Sample selection procedure.


(v) Case review process.


(2) Negative case reviews. (i) Universe development process.


(ii) Sample size per program.


(iii) Sample selection procedure.


(iv) Case review process.


[82 FR 31183, July 5, 2017]


§ 431.816 Case review completion deadlines and submittal of reports.

(a) The State must complete case reviews and submit reports of findings to CMS as specified in paragraph (b) of this section in the form and at the time specified by CMS.


(b) In addition to the reporting requirements specified in § 431.814 relating to the MEQC pilot planning document, the State must complete case reviews and submit reports of findings to CMS in accordance with paragraphs (b)(1) and (2) of this section.


(1) For all active and negative cases reviewed, the State must submit a detailed case-level report in a format provided by CMS.


(2) All case-level findings will be due by August 1 following the end of the MEQC review period.


[82 FR 31183, July 5, 2017]


§ 431.818 Access to records.

The State, upon written request, must submit to the HHS staff, or other designated entity, all records, including complete local agency eligibility case files or legible copies and all other documents pertaining to its MEQC reviews to which the State has access, including information available under part 435, subpart I of this chapter.


[82 FR 31184, July 5, 2017]


§ 431.820 Corrective action under the MEQC program.

The State must –


(a) Take action to correct any active or negative case errors, including deficiencies, found in the MEQC pilot sampled cases in accordance with instructions established by CMS;


(b) By the August 1 following the MEQC review period, submit to CMS a report that –


(1) Identifies the root cause and any trends found in the case review findings.


(2) Offers corrective actions for each unique error and deficiency finding based on the analysis provided in paragraph (b)(1) of this section.


(c) In the corrective action report, the State must provide updates on corrective actions reported for the previous MEQC pilot.


[82 FR 31184, July 5, 2017]


Medicaid Quality Control (MQC) Claims Processing Assessment System


Source:Sections 431.830 through 431.836 appear at 55 FR 22170, May 31, 1990, unless otherwise noted.

§ 431.830 Basic elements of the Medicaid quality control (MQC) claims processing assessment system.

An agency must –


(a) Operate the MQC claims processing assessment system in accordance with the policies, sampling methodology, review procedures, reporting forms, requirements, and other instructions established by CMS.


(b) Identify deficiencies in the claims processing operations.


(c) Measure cost of deficiencies;


(d) Provide data to determine appropriate corrective action;


(e) Provide an assessment of the State’s claims processing or that of its fiscal agent;


(f) Provide for a claim-by-claim review where justifiable by data; and


(g) Produce an audit trail that can be reviewed by CMS or an outside auditor.


§ 431.832 Reporting requirements for claims processing assessment systems.

(a) The agency must submit reports and data specified in paragraph (b) of this section to CMS, in the form and at the time specified by CMS.


(b) Except when CMS authorizes less stringent reporting, States must submit:


(1) A monthly report on claims processing reviews sampled and or claims processing reviews completed during the month;


(2) A summary report on findings for all reviews in the 6-month sample to be submitted by the end of the 3rd month following the scheduled completion of reviews for that 6 month period; and


(3) Other data and reports as required by CMS.


§ 431.834 Access to records: Claims processing assessment systems.

The agency, upon written request, must provide HHS staff with access to all records pertaining to its MQC claims processing assessment system reviews to which the State has access, including information available under part 435, subpart J, of this chapter.


§ 431.836 Corrective action under the MQC claims processing assessment system.

The agency must –


(a) Take action to correct those errors identified through the claims processing assessment system review and, if cost effective, to recover those funds erroneously spent;


(b) Take administrative action to prevent and reduce the incidence of those errors; and


(c) By August 31 of each year, submit to CMS a report of its error analysis and a corrective action plan on the reviews conducted since the cut-off-date of the previous corrective action plan.


Subpart Q – Requirements for Estimating Improper Payments in Medicaid and CHIP


Source:71 FR 51081, Aug. 28, 2006, unless otherwise noted.

§ 431.950 Purpose.

This subpart requires States and providers to submit information and provide support to Federal contractors as necessary to enable the Secretary to produce national improper payment estimates for Medicaid and the Children’s Health Insurance Program (CHIP).


[82 FR 31184, July 5, 2017]


§ 431.954 Basis and scope.

(a) Basis. The statutory bases for this subpart are as follows:


(1) Sections 1102, 1902(a)(6), and 2107(b)(1) of the Act, which contain the Secretary’s general rulemaking authority and obligate States to provide information, as the Secretary may require, to monitor program performance.


(2) The Improper Payments Information Act of 2002 (Pub. L. 107-300), which requires Federal agencies to review and identify annually those programs and activities that may be susceptible to significant erroneous payments, estimate the amount of improper payments, report such estimates to the Congress, and submit a report on actions the agency is taking to reduce erroneous payments.


(3) Section 1902(a)(27)(B) of the Act requires States to require providers to agree to furnish the State Medicaid agencies and the Secretary with information regarding payments claimed by Medicaid providers for furnishing Medicaid services.


(4) Section 601 of the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3) which requires that the new PERM regulations include the following: Clearly defined criteria for errors for both States and providers; Clearly defined processes for appealing error determinations; clearly defined responsibilities and deadlines for States in implementing any corrective action plans; requirements for State verification of an applicant’s self-declaration or self-certification of eligibility for, and correct amount of, medical assistance under Medicaid or child health assistance under CHIP; and State-specific sample sizes for application of the PERM requirements.


(b) Scope. (1) This subpart requires States under the statutory provisions cited in paragraph (a) of this section to submit information as set forth in § 431.970 for, among other purposes, estimating improper payments in the fee-for-service (FFS) and managed care components of the Medicaid and CHIP programs and to determine whether eligibility was correctly determined. This subpart also requires providers to submit to the Secretary any medical records and other information necessary to disclose the extent of services provided to individuals receiving assistance, and to furnish information regarding any payments claimed by the provider for furnishing such services, as requested by the Secretary.


(2) All information must be furnished in accordance with section 1902(a)(7)(A) of the Act, regarding confidentiality.


(3) This subpart does not apply with respect to Puerto Rico, Guam, the Virgin Islands, the Northern Mariana Islands or American Samoa.


[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]


§ 431.958 Definitions and use of terms.

Adjudication date means either the date on which money was obligated to pay a claim or the date the decision was made to deny a claim.


Annual sample size means the number of fee-for-service claims, managed care payments, or eligibility cases that will be sampled for review in a given PERM cycle.


Appeals means a process that allows the State to dispute the PERM Review Contractor and Eligibility Review Contractor findings with CMS after the difference resolution process has been exhausted.


Beneficiary means an applicant for, or beneficiary of, Medicaid or CHIP program benefits.


Children’s Health Insurance Program (CHIP) means the program authorized and funded under Title XXI of the Act.


Corrective action means actions to be taken by the State to reduce errors or other vulnerabilities for the purpose of reducing improper payments in Medicaid and CHIP.


Deficiency means a finding in which a claim or payment had a medical, data processing, and/or eligibility error that did not result in federal and/or state improper payment.


Difference resolution means a process that allows the State to dispute the PERM Review Contractor and Eligibility Review Contractor findings directly with the contractor.


Disallowance means the percentage of Federal medical assistance funds the State is required to return to CMS in accordance with section 1903(u) of the Act.


Eligibility means meeting the State’s categorical and financial criteria for receipt of benefits under the Medicaid or CHIP programs.


Eligibility Review Contractor (ERC) means the CMS contractor responsible for conducting state eligibility reviews for the PERM Program.


Federal contractor means the ERC, RC, or SC which support CMS in executing the requirements of the PERM program.


Federally Facilitated Exchange (FFE) means the health insurance exchange established by the Federal government with responsibilities that include making Medicaid and CHIP determinations for states that delegate authority to the FFE.


Federally Facilitated Exchange – Determination (FFE-D) means cases determined by the FFE in states that have delegated the authority to make Medicaid/CHIP eligibility determinations to the FFE.


Federal financial participation means the Federal Government’s share of the State’s expenditures under the Medicaid program and CHIP.


Finding means errors and/or deficiencies identified through the medical, data processing, and eligibility reviews.


Improper payment means any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) under statutory, contractual, administrative, or other legally applicable requirements; and includes any payment to an ineligible beneficiary, any duplicate payment, any payment for services not received, any payment incorrectly denied, and any payment that does not account for credits or applicable discounts.


Improper payment rate means an annual estimate of improper payments made under Medicaid and CHIP equal to the sum of the overpayments and underpayments in the sample, that is, the absolute value of such payments, expressed as a percentage of total payments made in the sample.


Lower limit means the lower bound of the 95-percent confidence interval for the State’s eligibility improper payment rate.


Medicaid means the joint Federal and State program, authorized and funded under Title XIX of the Act, that provides medical care to people with low incomes and limited resources.


Payment means any payment to a provider, insurer, or managed care organization for a Medicaid or CHIP beneficiary for which there is Medicaid or CHIP Federal financial participation. It may also mean a direct payment to a Medicaid or CHIP beneficiary in limited circumstances permitted by CMS regulation or policy.


Payment error means any claim or payment where federal and/or state dollars were paid improperly based on medical, data processing, and/or eligibility reviews.


PERM means the Payment Error Rate Measurement process to measure improper payment in Medicaid and CHIP.


PERM review period means the timeframe in which claims and eligibility are reviewed for national annual improper payment rate calculation purposes, July through June.


Provider means any qualified provider recognized under Medicaid and CHIP statute and regulations.


Provider error includes, but is not limited to, medical review errors as described in § 431.960(c) of this subpart, as determined in accordance with documented State or Federal policies or both.


Recoveries mean those monies for which the State is responsible to pay back to CMS based on the identification of Federal improper payments.


Review Contractor (RC) means the CMS contractor responsible for conducting state data processing and medical record reviews for the PERM Program.


Review year means the year being analyzed for improper payments under the PERM Program.


State eligibility system means any system, within the State or with a state-delegated contractor, that is used by the state to determine Medicaid and/or CHIP eligibility and/or that maintains documentation related to Medicaid and/or CHIP eligibility determinations.


State error includes, but is not limited to, data

processing errors and eligibility errors as described in § 431.960(b) and (d), as determined in accordance with documented State and Federal policies. State errors do not include the errors described in paragraph § 431.960(e)(2).


State payment system means any system within the State or with a state-delegated contractor that is used to adjudicate and pay Medicaid and/or CHIP FFS claims and/or managed care payments.


State-specific sample size means the sample size determined by CMS that is required from each individual State to support national improper payment rate precision requirements.


Statistical Contractor (SC) means the contractor responsible for collecting and sampling fee-for-service claims and managed care capitation payment data, as well as calculating Medicaid and CHIP state and national improper payment rates.


States means the 50 States and the District of Columbia.


[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010; 82 FR 31184, July 5, 2017]


§ 431.960 Types of payment errors.

(a) General rule. Errors identified for the Medicaid and CHIP improper payments measurement under the Improper Payments Information Act of 2002 must affect payment under applicable Federal or State policy, or both.


(b) Data processing errors. (1) A data processing error is an error resulting in an overpayment or underpayment that is determined from a review of the claim and other information available in the State’s Medicaid Management Information System, related systems, or outside sources of provider verification resulting in Federal and/or State improper payments.


(2) The difference in payment between what the State paid (as adjusted within improper payment measurement guidelines) and what the State should have paid, in accordance with federal and state documented policies, is the dollar measure of the payment error.


(3) Data processing errors include, but are not limited to, the following:


(i) Payment for duplicate items.


(ii) Payment for non-covered services.


(iii) Payment for fee-for-service claims for managed care services.


(iv) Payment for services that should have been paid by a third party but were inappropriately paid by Medicaid or CHIP.


(v) Pricing errors.


(vi) Logic edit errors.


(vii) Data entry errors.


(viii) Managed care rate cell errors.


(ix) Managed care payment errors.


(c) Medical review errors. (1) A medical review error is an error resulting in an overpayment or underpayment that is determined from a review of the provider’s medical record or other documentation supporting the service(s) claimed, Code of Federal Regulations that are applicable to conditions of payment, the State’s written policies, and a comparison between the documentation and written policies and the information presented on the claim resulting in Federal and/or State improper payments.


(2) The difference in payment between what the State paid (as adjusted within improper payment measurement guidelines) and what the State should have paid, in accordance with the applicable conditions of payment per 42 CFR parts 440 through 484, this part (431), and in accordance with the State’s documented policies, is the dollar measure of the payment error.


(3) Medical review errors include, but are not limited to, the following:


(i) Lack of documentation.


(ii) Insufficient documentation.


(iii) Procedure coding errors.


(iv) Diagnosis coding errors.


(v) Unbundling.


(vi) Number of unit errors.


(vii) Medically unnecessary services.


(viii) Policy violations.


(ix) Administrative errors.


(d) Eligibility errors. (1) An eligibility error is an error resulting in an overpayment or underpayment that is determined from a review of a beneficiary’s eligibility determination, in comparison to the documentation used to establish a beneficiary’s eligibility and applicable federal and state regulations and policies, resulting in Federal and/or State improper payments.


(2) Eligibility errors include, but are not limited to, the following:


(i) Ineligible individual, but authorized as eligible when he or she received services.


(ii) Eligible individual for the program, but was ineligible for certain services he or she received.


(iii) Lacked or had insufficient documentation in his or her case record, in accordance with the State’s documented policies and procedures, to make a definitive review decision of eligibility or ineligibility.


(iv) Was ineligible for managed care but enrolled in managed care.


(3) The dollars paid in error due to an eligibility error is the measure of the payment error.


(4) A State eligibility error does not result from the State’s verification of an applicant’s self-declaration or self-certification of eligibility for, and the correct amount of, medical assistance or child health assistance, if the State process for verifying an applicant’s self-declaration or self-certification satisfies the requirements in Federal law or guidance, or, if applicable, has the Secretary’s approval.


(e) Errors for purposes of determining the national improper payment rates. (1) The Medicaid and CHIP national improper payment rates include, but are not limited to, the errors described in paragraphs (b) through (d) of this section.


(2) Eligibility errors resulting solely from determinations of Medicaid or CHIP eligibility delegated to, and made by, the Federally Facilitated Exchange will be included in the national improper payment rate.


(f) Errors for purposes of determining the State improper payment rates. The Medicaid and CHIP State improper payment rates include, but are not limited to, the errors described in paragraphs (b) through (d) of this section, and do not include the errors described in paragraph (e)(2) of this section.


(g) Error codes. CMS will define different types of errors within the above categories for analysis and reporting purposes. Only Federal and/or State dollars in error will factor into the State’s PERM improper payment rate.


[82 FR 31185, July 5, 2017]


§ 431.970 Information submission and systems access requirements.

(a) The State must submit information to the Secretary for, among other purposes, estimating improper payments in Medicaid and CHIP, that include, but are not limited to –


(1) Adjudicated fee-for-service or managed care claims information, or both, on a quarterly basis, from the review year;


(2) Upon request from CMS, provider contact information that has been verified by the State as current;


(3) All medical, eligibility, and other related policies in effect, and any quarterly policy updates;


(4) Current managed care contracts, rate information, and any quarterly updates applicable to the review year;


(5) Data processing systems manuals;


(6) Repricing information for claims that are determined during the review to have been improperly paid;


(7) Information on claims that were selected as part of the sample, but changed in substance after selection, for example, successful provider appeals;


(8) Adjustments made within 60 days of the adjudication dates for the original claims or line items, with sufficient information to indicate the nature of the adjustments and to match the adjustments to the original claims or line items;


(9) Case documentation to support the eligibility review, as requested by CMS;


(10) A corrective action plan for purposes of reducing erroneous payments in FFS, managed care, and eligibility; and


(11) Other information that the Secretary determines is necessary for, among other purposes, estimating improper payments and determining improper payment rates in Medicaid and CHIP.


(b) Providers must submit information to the Secretary for, among other purposes, estimating improper payments in Medicaid and CHIP, which include but are not limited to Medicaid and CHIP beneficiary medical records, within 75 calendar days of the date the request is made by CMS. If CMS determines that the documentation is insufficient, providers must respond to the request for additional documentation within 14 calendar days of the date the request is made by CMS.


(c) The State must provide the Federal contractor(s) with access to all payment system(s) necessary to conduct the medical and data processing review, including the Medicaid Management Information System (MMIS), any systems that include beneficiary demographic and/or provider enrollment information, and any document imaging systems that store paper claims.


(d) The State must provide the Federal contractor(s) with access to all eligibility system(s) necessary to conduct the eligibility review, including any eligibility systems of record, any electronic document management system(s) that house case file information, and systems that house the results of third party data matches.


[82 FR 31185, July 5, 2017]


§ 431.972 Claims sampling procedures.

(a) General requirements. The State will submit quarterly FFS claims and managed care payments, as identified in § 431.970(a), to allow federal contractors to conduct data processing, medical record, and eligibility reviews to meet the requirements of the PERM measurement.


(b) Claims universe. (1) The PERM claims universe includes payments that were originally paid (paid claims) and for which payment was requested but denied (denied claims) during the PERM review period, and for which there is FFP (or would have been if the claim had not been denied) through Title XIX (Medicaid) or Title XXI (CHIP).


(2) The State must establish controls to ensure FFS and managed care universes are accurate and complete, including comparing the FFS and managed care universes to the Form CMS-64 and Form CMS-21 as appropriate.


(c) Sample size. CMS estimates each State’s annual sample size for the PERM review at the beginning of the PERM cycle.


(1) Precision and confidence levels. The national annual sample size will be estimated to achieve at least a minimum National-level improper payment rate with a 90 percent confidence interval of plus or minus 2.5 percent of the total amount of all payments for Medicaid and CHIP.


(2) State-specific sample sizes. CMS will develop State-specific sample sizes for each State. CMS may take into consideration the following factors in determining each State’s annual state-specific sample size for the current PERM cycle:


(i) State-level precision goals for the current PERM cycle;


(ii) The improper payment rate and precision of that improper payment rate from the State’s previous PERM cycle;


(iii) The State’s overall Medicaid and CHIP expenditures; and


(iv) Other relevant factors as determined by CMS.


[82 FR 31186, July 5, 2017]


§ 431.992 Corrective action plan.

(a) The State must develop a separate corrective action plan for Medicaid and CHIP for each improper payment rate measurement, designed to reduce improper payments in each program based on its analysis of the improper payment causes in the FFS, managed care, and eligibility components.


(1) The corrective action plan must address all errors that are included in the State improper payment rate defined at § 431.960(f)(1) and all deficiencies.


(2) For eligibility, the corrective action plan must include an evaluation of whether actions the State takes to reduce eligibility errors will also avoid increases in improper denials.


(b) In developing a corrective action plan, the State must take the following actions:


(1) Error analysis. The State must conduct analysis such as reviewing causes, characteristics, and frequency of errors that are associated with improper payments. The State must review the findings of the analysis to determine specific programmatic causes to which errors are attributed (for example, provider lack of understanding of the requirement to provide documentation), if any, and to identify root improper payment causes.


(2) Corrective action planning. The State must determine the corrective actions to be implemented that address the root improper payment causes and prevent that same improper payment from occurring again.


(3) Implementation and monitoring. (i) The State must develop an implementation schedule for each corrective action and implement those actions in accordance with the schedule.


(ii) The implementation schedule must identify all of the following for each action:


(A) The specific corrective action.


(B) Status.


(C) Scheduled or actual implementation date.


(D) Key personnel responsible for each activity.


(E) A monitoring plan for monitoring the effectiveness of the action.


(4) Evaluation. The State must submit an evaluation of the corrective action plan from the previous measurement. The State must evaluate the effectiveness of the corrective action(s) by assessing all of the following:


(i) Improvements in operations.


(ii) Efficiencies.


(iii) Number of errors.


(iv) Improper payments.


(v) Ability to meet the PERM improper payment rate targets assigned by CMS.


(c) The State must submit to CMS and implement the corrective action plan for the fiscal year it was reviewed no later than 90 calendar days after the date on which the State’s Medicaid or CHIP improper payment rates are posted on the CMS contractor’s Web site.


(d) The State must provide updates on corrective action plan implementation progress annually and upon request by CMS.


(e) In addition to paragraphs (a) through (d) of this section, each State that has an eligibility improper payment rates over the allowable threshold of 3 percent for consecutive PERM years, must submit updates on the status of corrective action implementation to CMS every other month. Status updates must include, but are not limited to the following:


(1) Details on any setbacks along with an alternate corrective action or workaround.


(2) Actual examples of how the corrective actions have led to improvements in operations, and explanations for how the improvements will lead to a reduction in the number of errors, as well as the State’s next PERM eligibility improper payment rate.


(3) An overall summary on the status of corrective actions, planning, and implementation, which demonstrates how the corrective actions will provide the State with the ability to meet the 3 percent threshold.


[82 FR 31186, July 5, 2017]


§ 431.998 Difference resolution and appeal process.

§ 431.998 Difference resolution and appeal process.

(a) The State may file, in writing, a request with the relevant Federal contractor to resolve differences in the Federal contractor’s findings based on medical, data processing, or eligibility reviews in Medicaid or CHIP.


(b) The State must file requests to resolve differences based on the medical, data processing, or eligibility reviews within 25 business days after the report of review findings is shared with the State.


(c) To file a difference resolution request, the State must be able to demonstrate all of the following:


(1) Have a factual basis for filing the request.


(2) Provide the appropriate Federal contractor with valid evidence directly related to the finding(s) to support the State’s position.


(d) For a finding in which the State and the Federal contractor cannot resolve the difference in findings, the State may appeal to CMS for final resolution by filing an appeal within 15 business days from the date the relevant Federal contractor’s finding as a result of the difference resolution is shared with the State. There is no minimum dollar threshold required to appeal a difference in findings.


(e) To file an appeal request, the State must be able to demonstrate all of the following:


(1) Have a factual basis for filing the request.


(2) Provide CMS with valid evidence directly related to the finding(s) to support the State’s position.


(f) All differences, including those pending in CMS for final decision that are not overturned in time for improper payment rate calculation, will be considered as errors in the improper payment rate calculation in order to meet the reporting requirements of the IPIA.


[82 FR 31187, July 5, 2017]


§ 431.1002 Recoveries.

(a) Medicaid. States must return to CMS the Federal share of overpayments based on medical and processing errors in accordance with section 1903(d)(2) of the Act and related regulations at part 433, subpart F of this chapter. Payments based on erroneous Medicaid eligibility determinations are addressed under section 1903(u) of the Act and related regulations at part 431, subpart P of this chapter.


(b) CHIP. Quarterly Federal payments to the States under Title XXI of the Act must be reduced in accordance with section 2105(e) of the Act and related regulations at part 457, subpart B of this chapter.


§ 431.1010 Disallowance of Federal financial participation for erroneous State payments (for PERM review years ending after July 1, 2020).

(a) Purpose. (1) This section establishes rules and procedures for disallowing Federal financial participation (FFP) in erroneous medical assistance payments due to eligibility improper payment errors, as detected through the PERM program required under this subpart, in effect on and after July 1, 2020.


(2) After the State’s eligibility improper rate has been established for each PERM review period, CMS will compute the amount of the disallowance, removing any underpayments due to eligibility errors, and adjust the FFP payable to each State. The disallowance or withholding is only applicable to the State’s PERM year.


(3) CMS will compute the amount to be withheld or disallowed as follows:


(i) Subtract the 3 percent allowable threshold from the lower limit of the State’s eligibility improper payment rate percentage excluding underpayments.


(ii) If the difference is greater than zero, the Federal medical assistance funds for the period, are multiplied by that percentage. This product is the amount of the disallowance or withholding.


(b) Notice to States and showing of good faith. (1) If CMS is satisfied that the State did not meet the 3 percent allowable threshold despite a good faith effort, CMS will reduce the funds being disallowed in whole.


(2) CMS may find that a State did not meet the 3 percent allowable threshold despite a good faith effort if the State has taken the action it believed was needed to meet the threshold, but the threshold was not met. CMS will grant a good faith waiver only if the State both:


(i) Participates in the MEQC pilot program in accordance with §§ 431.800 through 431.820, and


(ii) Implements PERM CAPs in accordance with § 431.992.


(3) Each State that has an eligibility improper payment rate above the allowable threshold will be notified by CMS of the amount of the disallowance.


(c) Disallowance subject to appeal. If the State does not agree with a disallowance imposed under paragraph (e) of this section, it may appeal to the Departmental Appeals Board within 30 days from the date of the final disallowance notice from CMS. The regular procedures for an appeal of a disallowance will apply, including review by the Appeals Board under 45 CFR part 16.


[82 FR 31187, July 5, 2017]


PART 432 – STATE PERSONNEL ADMINISTRATION


Authority:Sec. 1102 of the Social Security Act (42 U.S.C. 1302).


Source:43 FR 45199, Sept. 29, 1978, unless otherwise noted.

Subpart A – General Provisions

§ 432.1 Basis and purpose.

This part prescribes regulations to implement section 1902(a)(4) of the Act, which relates to a merit system of State personnel administration and training and use of subprofessional staff and volunteers in State Medicaid programs, and section 1903(a), rates of FFP for Medicaid staffing and training costs. It also prescribes regulations, based on the general administrative authority in section 1902(a)(4), for State training programs for all staff.


§ 432.2 Definitions.

As used in this part –


Community service aides means subprofessional staff, employed in a variety of positions, whose duties are an integral part of the agency’s responsibility for planning, administration, and for delivery of health services.


Directly supporting staff means secretarial, stenographic, and copying personnel and file and records clerks who provide clerical services that directly support the responsibilities of skilled professional medical personnel, who are directly supervised by the skilled professional medical personnel, and who are in an employer-employee relationship with the Medicaid agency.


Fringe benefits means the employer’s share of premiums for workmen’s compensation, employees’ retirement, unemployment compensation, health insurance, and similar expenses.


Full-time training means training that requires employees to be relieved of all responsibility for performance of current agency work to participate in a training program.


Part-time training means training that allows employees to continue full-time in their agency jobs or requires only partial reduction of work activities to participate in the training activity.


Skilled professional medical personnel means physicians, dentists, nurses, and other specialized personnel who have professional education and training in the field of medical care or appropriate medical practice and who are in an employer-employee relationship with the Medicaid agency. It does not include other nonmedical health professionals such as public administrators, medical analysts, lobbyists, senior managers or administrators of public assistance programs or the Medicaid program.


Staff of other public agencies means skilled professional medical personnel and directly supporting staff who are employed in State or local agencies other than the Medicaid agency who perform duties that directly relate to the administration of the Medicaid program.


Subprofessional staff means persons performing tasks that demand little or no formal education; a high school diploma; or less than 4 years of college.


Supporting staff means secretarial, stenographic, clerical, and other subprofessional staff whose activities are directly necessary to the carrying out of the functions which are the responsibility of skilled professional medical personnel, as defined in this section.


Training program means a program of educational activities based on the agency’s training needs and aimed at insuring that agency staff acquire the knowledge and skills necessary to perform their jobs.


Volunteer means a person who contributes personal service to the community through the agency’s program but is not a replacement or substitute for paid staff.


[43 FR 45199, Sept. 29, 1978, as amended at 50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]


§ 432.10 Standards of personnel administration.

(a) State plan requirement. A State plan must provide that the requirements of paragraphs (c) through (h) of this section are met.


(b) Terms. In this section, “standards” refer to those specified in paragraph (c) of this section.


(c) Methods of personnel administration. Methods of personnel administration must be established and maintained, in the Medicaid agency and in local agencies administering the propgram, in conformity with:


(1) [Reserved]


(2) 5 CFR part 900, subpart F, Administration of the Standards for Merit System of Personnel Administration.


(d) Compliance of local jurisdictions. The Medicaid agency must have in effect methods to assure compliance with the standards by local jurisdictions included in the plan.


(e) Review and adequacy of State laws, regulations, and policies. The agency must –


(1) Assure that the U.S. Civil Service Commission has determined the adequacy of current State laws, regulations, and policy statements that effect methods of personnel administration in conformity with the standards, and


(2) Submit any changes in them to the Commission for review.


(f) Statements of acceptance by local agencies. If the Medicaid agency changes from a State-administered to a State-supervised, locally administered program, it must obtain statements of acceptance of the standards from the local agencies.


(g) Affirmative action plan. The Medicaid agency must have in effect an affirmative action plan for equal employment opportunity, that includes specific action steps and timetables to assure that opportunity, and meets all other requirements of 45 CFR 70.4.
1




1 Editorial Note: The regulations formerly contained in 45 CFR 70.4 were revised and reissued by the Office of Personnel Management at 5 CFR part 900, (subpart F).


(h) Submittal of requested materials. The Medicaid agency must submit to HHS, upon request, copies of the affirmative action plan and of the State and local materials that assure compliance with the standards.


[43 FR 45199, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]


Subpart B – Training Programs; Subprofessional and Volunteer Programs

§ 432.30 Training programs: General requirements.

(a) A State plan must provide for a program of training for Medicaid agency personnel. (See also §§ 432.31 and 432.32 for training programs for subprofessional staff and for volunteers.)


(b) The program must –


(1) Include initial inservice training for newly appointed staff, and continuing training opportunities to improve the operation of the program;


(2) Be related to job duties performed or to be performed by the persons trained; and


(3) Be consistent with the program objectives of the agency.


§ 432.31 Training and use of subprofessional staff.

(a) State plan requirement. A State plan must provide for the training and effective use of subprofessional staff as community service aides, in accordance with the requirements of this section.


(b) Recruitment and selection. The Medicaid agency must have methods of recruitment and selection that afford opportunity for full-time or part-time employment of persons of low income, including:


(1) Young, middle-aged, and older persons;


(2) Physically and mentally disabled; and


(3) Beneficiaries.


(c) Merit system. Subprofessional positions must be subject to merit system requirements except where special exemption is approved on the basis of a State alternative plan for employment of disadvantaged persons.


(d) Staffing plan. The agency staffing plan must include the kinds of jobs that subprofessional staff can perform.


(e) Career service. The agency must have a career service program that allows persons:


(1) To enter employment at the subprofessional level; and


(2) To progress to positions of increasing responsibility and reward:


(i) In accordance with their abilities; and


(ii) Through work experience and pre-service and in-service training.


(f) Training, supervision and supportive services. The agency must have an organized training program, supervision, and supportive services for subprofessional staff.


(g) Progressive expansion. The agency must provide for annual increase in the number of subprofessional staff until:


(1) An appropriate ratio of subprofessional and professional staff has been achieved; and


(2) There is maximum use of subprofessional staff as community aides in the operation of the program.


§ 432.32 Training and use of volunteers.

(a) State plan requirement. A State plan must provide for the training and use of non-paid or partially paid volunteers in accordance with the requirements of this section.


(b) Functions of volunteers. The Medicaid agency must make use of volunteers in:


(1) Providing services to applicants and beneficiaries; and


(2) Assisting any advisory committees established by the agency.


As used in this paragraph, “partially paid volunteers” means volunteers who are reimbursed only for actual expenses incurred in giving service, without regard to the value of the service or the time required to provide it.

(c) Staffing. The agency must designate a position whose incumbent is responsible for:


(1) The development, organization, and administration of the volunteer program; and


(2) Coordination of the program with related functions.


(d) Recruitment, selection, training, and supervision. The agency must have:


(1) Methods of recruitment and selection that assure participation of volunteers of all income levels, in planning capacities and service provision; and


(2) A program of organized training and supervision of volunteers.


(e) Reimbursement of expenses. The agency must –


(1) Reimburse volunteers for actual expenses incurred in providing services; and


(2) Assure that no volunteer is deprived of the opportunity to serve because of the expenses involved.


(f) Progressive expansion. The agency must provide for annual increase in the number of volunteers used until the volunteer program is adequate for the achievement of the agency’s service goals.


Subpart C – Staffing and Training Expenditures

§ 432.45 Applicability of provisions in subpart.

The rates of FFP specified in this subpart C do not apply to State personnel who conduct survey activities and certify facilities for participation in Medicaid, as provided for under section 1902(a)(33)(B) of the Act.


[50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]


§ 432.50 FFP: Staffing and training costs.

(a) Availability of FFP. FFP is available in expenditures for salary or other compensation, fringe benefits, travel, per diem, and training, at rates determined on the basis of the individual’s position, as specified in paragraph (b) of this section.


(b) Rates of FFP. (1) For skilled professional medical personnel and directly supporting staff of the Medicaid agency or of other public agencies (as defined in § 432.2), the rate is 75 percent.


(2) For personnel engaged directly in the operation of mechanized claims processing and information retrieval systems, the rate is 75 percent.


(3) For personnel engaged in the design, development, or installation of mechanized claims processing and information retrieval systems, the rate is 50 percent for training and 90 percent for all other costs specified in paragraph (a) of this section.


(4) [Reserved]


(5) For personnel administering family planning services and supplies, the rate is 90 percent.


(6) For all other staff of the Medicaid agency or other public agencies providing services to the Medicaid agency, and for training and other expenses of volunteers, the rate is 50 percent.


(c) Application of rates. (1) FFP is prorated for staff time that is split among functions reimbursed at different rates.


(2) Rates of FFP in excess of 50 percent apply only to those portions of the individual’s working time that are spent carrying out duties in the specified areas for which the higher rate is authorized.


(3) The allocation of personnel and staff costs must be based on either the actual percentages of time spent carrying out duties in the specified areas, or another methodology approved by CMS.


(d) Other limitations for FFP rate for skilled professional medical personnel and directly supporting staff – (1) Medicaid agency personnel and staff. The rate of 75 percent FFP is available for skilled professional medical personnel and directly supporting staff of the Medicaid agency if the following criteria, as applicable, are met:


(i) The expenditures are for activities that are directly related to the administration of the Medicaid program, and as such do not include expenditures for medical assistance;


(ii) The skilled professional medical personnel have professional education and training in the field of medical care or appropriate medical practice. “Professional education and training” means the completion of a 2-year or longer program leading to an academic degree or certificate in a medically related profession. This is demonstrated by possession of a medical license, certificate, or other document issued by a recognized National or State medical licensure or certifying organization or a degree in a medical field issued by a college or university certified by a professional medical organization. Experience in the administration, direction, or implementation of the Medicaid program is not considered the equivalent of professional training in a field of medical care.


(iii) The skilled professional medical personnel are in positions that have duties and responsibilities that require those professional medical knowledge and skills.


(iv) A State-documented employer-employee relationship exists between the Medicaid agency and the skilled professional medical personnel and directly supporting staff; and


(v) The directly supporting staff are secretarial, stenographic, and copying personnel and file and records clerks who provide clerical services that are directly necessary for the completion of the professional medical responsibilities and functions of the skilled professional medical staff. The skilled professional medical staff must directly supervise the supporting staff and the performance of the supporting staff’s work.


(2) Staff of other public agencies. The rate of 75 percent FFP is available for staff of other public agencies if the requirements specified in paragraph (d)(1) of this section are met and the public agency has a written agreement with the Medicaid agency to verify that these requirements are met.


(e) Limitations on FFP rates for staff in mechanized claims processing and information retrieval systems. The special matching rates for persons working on mechanized claims processing and information retrieval systems (paragraphs (b)(2) and (3) of this section) are applicable only if the design, development and installation, or the operation, have been approved by the Administrator in accordance with part 433, subchapter C, of this chapter.


[43 FR 45199, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 50 FR 46663, Nov. 12, 1985]


§ 432.55 Reporting training and administrative costs.

(a) Scope. This section identifies activities and costs to be reported as training or administrative costs on quarterly estimate and expenditure reports to CMS.


(b) Activities and costs to be reported on training expenditures. (1) For fulltime training (with no assigned agency duties): Salaries, fringe benefits, dependency allowances, travel, tuition, books, and educational supplies.


(2) For part-time training: Travel, per diem, tuition, books and educational supplies.


(3) For State and local Medicaid agency staff development personnel (including supporting staff) assigned fulltime training functions: Salaries, fringe benefits, travel, and per diem. Costs for staff spending less than full time on training for the Medicaid program must be allocated between training and administration in accordance with § 433.34 of this subchapter.


(4) For experts engaged to develop or conduct special programs: Salary, fringe benefits, travel, and per diem.


(5) For agency training activities directly related to the program: Use of space, postage, teaching supplies, and purchase or development of teaching materials and equipment, for example, books and audiovisual aids.


(6) For field instruction in Medicaid: Instructors’ salaries and fringe benefits, rental of space, travel, clerical assistance, teaching materials and equipment such as books and audiovisual aids.


(c) Activities and costs not to be reported as training expenditures. The following activities are to be reported as administrative costs:


(1) Salaries of supervisors (day-to-day supervision of staff is not a training activity); and


(2) Cost of employing students on a temporary basis, for instance, during summer vacation.


[43 FR 45199, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979]


PART 433 – STATE FISCAL ADMINISTRATION


Authority:42 U.S.C. 1302.



Source:43 FR 45201, Sept. 29, 1978, unless otherwise noted.

§ 433.1 Purpose.

This part specifies the rates of FFP for services and administration, and prescribes requirements, prohibitions, and FFP conditions relating to State fiscal activities.


Subpart A – Federal Matching and General Administration Provisions

§ 433.8 [Reserved]

§ 433.10 Rates of FFP for program services.

(a) Basis. Sections 1903(a)(1), 1903(g), 1905(b), 1905(y), and 1905(z) provide for payments to States, on the basis of a Federal medical assistance percentage, for part of their expenditures for services under an approved State plan.


(b) Federal medical assistance percentage (FMAP)Computations. The FMAP is determined by the formula described in section 1905(b) of the Act. Under the formula, if a State’s per capita income is equal to the national average per capita income, the Federal share is 55 percent. If a State’s per capita income exceeds the national average, the Federal share is lower, with a statutory minimum of 50 percent. If a State’s per capita income is lower than the national average, the Federal share is increased, with a statutory maximum of 83 percent. The formula used in determining the State and Federal share is as follows:



State Share = [(State per capita income)
2/(National per capita income)
2] × 45 percent

Federal share = 100 percent minus the State share (with a minimum of 50 percent and a maximum of 83 percent)

The formula provides for squaring both the State and national average per capita incomes; this procedure magnifies any difference between the State’s income and the national average. Consequently, Federal matching to lower income States is increased, and Federal matching to higher income States is decreased, within the statutory 50-83 percent limits. The FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is set by statute at 50 percent and is subject to dollar limitations specified in section 1108 of the Act.

(c) Special provisions. (1) Under section 1903(a)(5) of the Act, the Federal share of State expenditures for family planning services is 90 percent.


(2) Under section 1905(b), the Federal share of State expenditures for services provided through Indian Health Service facilities is 100 percent.


(3) Under section 1903(g), the FMAP is reduced if the State does not have an effective program to control use of institutional services.


(4) Under section 1905(b) of the Social Security Act, the Federal share of State expenditures described in § 433.11(a) for services provided to children, is the enhanced FMAP rate determined in accordance with § 457.622(b) of this chapter, subject to the conditions explained in § 433.11(b).


(5)(i) Under section 1933(d) of the Act, the Federal share of State expenditures for Medicare Part B premiums described in section 1905(p)(3)(A)(ii) of the Act on behalf of Qualifying Individuals described in section 1902(a)(10)(E)(iv) of the Act, is 100 percent, to the extent that the assistance does not exceed the State’s allocation under paragraph (c)(5)(ii) of this section. To the extent that the assistance exceeds that allocation, the Federal share is 0 percent.


(ii) Under section 1933(c)(2) of the Act and subject to paragraph (c)(5)(iii) of this section, the allocation to each State is equal to the total allocation specified in section 1933(g) of the Act multiplied by the Secretary’s estimate of the ratio of the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act in the State to the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating that ratio, the Secretary will use data from the U.S. Census Bureau.


(iii) If, based on projected expenditures for a fiscal year, or for a shorter period for which funding is available under section 1933 of the Act, the Secretary determines that the expenditures described in paragraph (c)(5)(i) of this section for one or more States are projected to exceed the allocation made to the State, the Secretary may adjust each State’s fiscal year allocation, as follows:


(A) The Secretary will compare each State’s projected total expenditures for the expenses described in paragraph (c)(5)(i) of this section to the State’s initial allocation determined under paragraph (c)(5)(ii) of this section, to determine the extent of each State’s projected surplus or deficit.


(B) The surplus of each State with a projected surplus, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Surplus.


(C) The deficit of each State with a projected deficit, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Deficit.


(D) Each State with a projected deficit will receive an additional allocation equal to the amount of its projected deficit, or a prorated amount of such deficit, if the Total Projected Deficit is greater than the Total Projected Surplus. Except as described in paragraph (c)(5)(iii)(E) of this section, the amount to be reallocated from each State with a projected surplus will be equal to A × B, where A equals the Total Projected Deficit and B equals the amount of the State’s projected surplus as a percentage of the Total Projected Surplus.


(E) If the Total Projected Deficit determined under paragraph (c)(5)(iii)(C) of this section is greater than the Total Projected Surplus determined under paragraph (c)(5)(iii)(B) of this section, each State with a projected deficit will receive an additional allocation amount equal to the amount of the Total Projected Surplus multiplied by the amount of the projected deficit for such State as a percentage of the Total Projected Deficit. The amount to be reallocated from each State with a projected surplus will be equal to the amount of the projected surplus.


(iv) CMS will notify States of any changes in allotments resulting from any reallocations.


(v) The provisions in paragraph (c)(5) of this section will be in effect through the end of the period for which funding authority is available under section 1933 of the Act.


(6)(i) Newly eligible FMAP. Beginning January 1, 2014, under section 1905(y) of the Act, the FMAP for a State that is one of the 50 States or the District of Columbia, including a State that meets the definition of expansion State in § 433.204(b), for amounts expended by such State for medical assistance for newly eligible individuals, as defined in § 433.204(a)(1), will be an increased FMAP equal to:


(A) 100 percent, for calendar quarters in calendar years (CYs) 2014 through 2016;


(B) 95 percent, for calendar quarters in CY 2017;


(C) 94 percent, for calendar quarters in CY 2018;


(D) 93 percent, for calendar quarters in CY 2019;


(E) 90 percent, for calendar quarters in CY 2020 and all subsequent calendar years.


(ii) The FMAP specified in paragraph (c)(6)(i) of this section will apply to amounts expended by a State for medical assistance for newly eligible individuals in accordance with the requirements of the methodology applied by the State under § 433.206.


(7)(i) Temporary FMAP increase. During the period January 1, 2014, through December 31, 2015, under section 1905(z)(1) of the Act for a State described in paragraph (c)(7)(ii) of this section, the FMAP determined under paragraph (b) of this section will be increased by 2.2 percentage points.


(ii) A State qualifies for the targeted increase in the FMAP under paragraph (c)(7)(i) of this section, if the State:


(A) Is an expansion State, as described in § 433.204(b) of this section;


(B) Does not qualify for any payments on the basis of the increased FMAP under paragraph (c)(6) of this section, as determined by the Secretary; and


(C) Has not been approved by the Secretary to divert a portion of the disproportionate share hospital allotment for the State under section 1923(f) of the Act to the costs of providing medical assistance or other health benefits coverage under a demonstration that is in effect on July 1, 2009.


(iii) The increased FMAP under paragraph (c)(7)(i) of this section is available for amounts expended by the State for medical assistance for individuals that are not newly eligible as defined in § 433.204(a)(1).


(8) Expansion State FMAP. Beginning January 1, 2014, under section 1905(z)(2) of the Act, the FMAP for an expansion State defined in § 433.204(b), for amounts expended by such State for medical assistance for individuals described in § 435.119 of this chapter who are not newly eligible as defined in § 433.204(a)(1), and who are nonpregnant childless adults with respect to whom the State may require enrollment in benchmark coverage under section 1937 of the Act, will be determined in accordance with the expansion State FMAP formula in paragraph (c)(8)(i).



(i) Expansion State FMAP.


(ii) Transition percentage. For purposes of paragraph (c)(8)(i) of this section, the transition percentage is equal to:


(A) 50 percent, for calendar quarters in CY 2014;


(B) 60 percent, for calendar quarters in CY 2015;


(C) 70 percent, for calendar quarters in CY 2016;


(D) 80 percent, for calendar quarters in CY 2017;


(E) 90 percent, for calendar quarters in CY 2018; and


(F) 100 percent, for calendar quarters in CY 2019 and all subsequent calendar years.


(Sections 1902(a)(10), 1933 of the Social Security Act (42 U.S.C. 1396a), and Pub. L. 105-33)

[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48559, Oct. 1, 1981; 51 FR 41350, Nov. 14, 1986; 54 FR 21066, May 16, 1989; 66 FR 2666, Jan. 11, 2001; 70 FR 50220, Aug. 26, 2005; 71 FR 25092, Apr. 28, 2006; 73 FR 70893, Nov. 24, 2008; 78 FR 19942, Apr. 2, 2013]


§ 433.11 Enhanced FMAP rate for children.

(a) Subject to the conditions in paragraph (b) of this section, the enhanced FMAP determined in accordance with § 457.622 of this chapter will be used to determine the Federal share of State expenditures, except any expenditures pursuant to section 1923 of the Act for payments to disproportionate share hospitals for –


(1) Services provided to optional targeted low-income children described in § 435.4 or § 436.3 of this chapter; and


(2) Services provided to children born before October 1, 1983, with or without group health coverage or other health insurance coverage, who would be described in section 1902(l)(1)(D) of the Act (poverty-level-related children’s groups) if –


(i) They had been born on or after that date; and


(ii) They would not qualify for medical assistance under the State plan in effect on March 31, 1997.


(b) Enhanced FMAP is not available if –


(1) A State adopts income and resource standards and methodologies for purposes of determining a child’s eligibility under the Medicaid State plan that are more restrictive than those applied under policies of the State plan (as described in the definition of optional targeted low-income children at § 435.4 of this chapter) in effect on June 1, 1997; or


(2) No funds are available in the State’s title XXI allotment, as determined under part 457, subpart F of this chapter for the quarter enhanced FMAP is claimed; or


(3) The State fails to maintain a valid method of identifying services provided on behalf of children listed in paragraph (a) of this section.


[66 FR 2666, Jan. 11, 2001]


§ 433.15 Rates of FFP for administration.

(a) Basis. Section 1903(a) (2) through (5) and (7) of the Act provide for payments to States, on the basis of specified percentages, for part of their expenditures for administration of an approved State plan.


(b) Activities and rates. (1) [Reserved]


(2) Administration of family planning services: 90 percent. (Section 1903 (a)(5); 42 CFR 432.50(b)(5).)


(3) Design, development, or installation of mechanized claims processing and information retrieval systems: 90 percent. (Section 1903(a)(3)(A)(i); 42 CFR part 433, subpart C, and § 432.50 (b)(3).)


(4) Operation of mechanized claims processing and information retrieval systems: 75 percent. (Section 1903(a) (3)(B); 42 CFR part 433, subpart C and § 432.50(b)(2).)


(5) Compensation and training of skilled professional medical personnel and staff directly supporting those personnel if the criteria specified in § 432.50 (c) and (d) are met: 75 percent. (Section 1903(a)(2); 42 CFR 432.50(b)(1).)


(6)(i) Funds expended for the performance of medical and utilization review by a QIO under a contract entered into under section 1902(d) of the Act: 75 percent (section 1903(a)(3)(C) of the Act).


(ii) If a State contracts for medical and utilization review with any individual or organization not designated under Part B of Title XI of the Act, funds expended for such review will be reimbursed as provided in paragraph (b)(7) of this section.


(7) All other activities the Secretary finds necessary for proper and efficient administration of the State plan: 50 percent. (Section 1903(a)(7).) (See also § 455.300 of this subchapter for FFP at 90 percent for State Medicaid fraud control units under section 1903(a)(6).)


(8) Nurse aide training and competency evaluation programs and competency evaluation programs described in 1919(e)(1) of the Act: for calendar quarters beginning on or after July 1, 1988 and before July 1, 1990: The lesser of 90% or the Federal medical assistance percentage plus 25 percentage points; for calendar quarters beginning on or after October 1, 1990: 50%. (Section 1903(a)(2)(B) of the Act.)


(9) Preadmission screening and annual resident review (PASARR) activities conducted by the State: 75 percent. (Sections 1903(a)(2)(C) and 1919(e)(7); 42 CFR part 483, subparts C and E.)


(10) Funds expended for the performance of external quality review or the related activities described in § 438.358 of this chapter consistent with § 438.370(a) of this chapter: 75 percent; consistent with § 438.370(b): 50 percent.


[43 FR 45201, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 46 FR 54744, Nov. 4, 1981; 50 FR 15327, Apr. 17, 1985; 50 FR 46664, Nov. 12, 1985; 56 FR 48918, Sept. 26, 1991; 57 FR 56506, Nov. 30, 1992; 68 FR 3635, Jan. 24, 2003; 81 FR 27853, May 6, 2016]


§ 433.32 Fiscal policies and accountability.

A State plan must provide that the Medicaid agency and, where applicable, local agencies administering the plan will –


(a) Maintain an accounting system and supporting fiscal records to assure that claims for Federal funds are in accord with applicable Federal requirements;


(b) Retain records for 3 years from date of submission of a final expenditure report;


(c) Retain records beyond the 3-year period if audit findings have not been resolved; and


(d) Retain records for nonexpendable property acquired under a Federal grant for 3 years from the date of final disposition of that property.


[44 FR 17935, Mar. 23, 1979]


§ 433.34 Cost allocation.

A State plan under Title XIX of the Social Security Act must provide that the single or appropriate Agency will have an approved cost allocation plan on file with the Department in accordance with the requirements contained in subpart E of 45 CFR part 95. Subpart E also sets forth the effect on FFP if the requirements contained in that subpart are not met.


[47 FR 17490, Apr. 23, 1982]


§ 433.35 Equipment – Federal financial participation.

Claims for Federal financial participation in the cost of equipment under the Medicaid Program are determined in accordance with subpart G of 45 CFR part 95. Requirements concerning the management and disposition of equipment under the Medicaid Program are also prescribed in subpart G of 45 CFR part 95.


[47 FR 41564, Sept. 21, 1982]


§ 433.36 Liens and recoveries.

(a) Basis and purpose. This section implements sections 1902(a)(18) and 1917(a) and (b) of the Act, which describe the conditions under which an agency may impose a lien against a beneficiary’s property, and when an agency may make an adjustment or recover funds in satisfaction of the claim against the individual’s estate or real property.


(b) Definition of property. For purposes of this section, “property” includes the homestead and all other personal and real property in which the beneficiary has a legal interest.


(c) State plan requirement. If a State chooses to impose a lien against an individual’s real property (or as provided in paragraph (g)(1) of this section, personal property), the State plan must provide that the provisions of paragraphs (d) through (i) of this section are met.


(d) Procedures. The State plan must specify the process by which the State will determine that an institutionalized individual cannot reasonably be expected to be discharged from the medical institution and return home as provided in paragraph (g)(2)(ii) of this section. The description of the process must include the type of notice to be given the individual, the process by which the individual will be given the opportunity for a hearing, the hearing procedures, and by whom and on what basis the determination that the individual cannot reasonably be expected to be discharged from the institution will be made. The notice to the individual must explain what is meant by the term lien, and that imposing a lien does not mean that the individual will lose ownership of the home.


(e) Definitions. The State plan must define the following terms used in this section:


(1) Individual’s home.


(2) Equity interest in home.


(3) Residing in the home for at least 1 (or 2) year(s).


(4) On a continuing basis.


(5) Discharge from the medical institution and return home.


(6) Lawfully residing.


(f) Exception. The State plan must specify the criteria by which a son or daughter can establish to the agency’s satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution, as provided in paragraph (h)(2)(iii)(B) of this section.


(g) Lien provisions – (1) Incorrect payments. The agency may place a lien against an individual’s property, both personal and real, before his or her death because of Medicaid claims paid or to be paid on behalf of that individual following a court judgement which determined that benefits were incorrectly paid for that individual.


(2) Correct payments. Except as provided in paragraph (g)(3) of this section, the agency may place a lien against the real property of an individual at any age before his or her death because of Medicaid claims paid or to be paid for that individual when –


(i) An individual is an inpatient of a medical institution and must, as a condition of receiving services in the institution under the State plan, apply his or her income to the cost of care as provided in §§ 435.725, 435.832 and 436.832; and


(ii) The agency determines that he or she cannot reasonably be expected to be discharged and return home. The agency must notify the individual of its intention to make that determination and provide an opportunity for a hearing in accordance with State established procedures before the determination is made. The notice to an individual must include an explanation of liens and the effect on an individual’s ownership of property.


(3) Restrictions on placing liens. The agency may not place a lien on an individual’s home under paragraph (g)(2) of this section if any of the following individuals is lawfully residing in the home:


(i) The spouse;


(ii) The individual’s child who is under age 21 or blind or disabled as defined in the State plan; or


(iii) The individual’s sibling (who has an equity interest in the home, and who was residing in the individual’s home for at least one year immediately before the date the individual was admitted to the medical institution).


(4) Termination of lien. Any lien imposed on an individual’s real property under paragraph (g)(2) of this section will dissolve when that individual is discharged from the medical institution and returns home.


(h) Adjustments and recoveries. (1) The agency may make an adjustment or recover funds for Medicaid claims correctly paid for an individual as follows:


(i) From the estate of any individual who was 65 years of age or older when he or she received Medicaid; and


(ii) From the estate or upon sale of the property subject to a lien when the individual is institutionalized as described in paragraph (g)(2) of this section.


(2) The agency may make an adjustment or recovery under paragraph (h)(1) of this section only:


(i) After the death of the individual’s surviving spouse; and


(ii) When the individual has no surviving child under age 21 or blind or disabled as defined in the State plan; and


(iii) In the case of liens placed on an individual’s home under paragraph (g)(2) of this section, when there is no –


(A) Sibling of the individual residing in the home, who has resided there for at least one year immediately before the date of the individual’s admission to the institution, and has resided there on a continuous basis since that time; or


(B) Son or daughter of the individual residing in the home, who has resided there for at least two years immediately before the date of the individual’s admission to the institution, has resided there on a continuous basis since that time, and can establish to the agency’s satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution.


(i) Prohibition of reduction of money payments. No money payment under another program may be reduced as a means of recovering Medicaid claims incorrectly paid.


[43 FR 45201, Sept. 29, 1978, as amended at 47 FR 43647, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]


§ 433.37 Reporting provider payments to Internal Revenue Service.

(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes requirements concerning –


(1) Identification of providers; and


(2) Compliance with the information reporting requirements of the Internal Revenue Code.


(b) Identification of providers. A State plan must provide for the identification of providers by –


(1) Social security number if –


(i) The provider is in solo practice; or


(ii) The provider is not in solo practice but billing is by the individual practitioner; or


(2) Employer identification number for all other providers.


(c) Compliance with section 6041 of the Internal Revenue Code. The plan must provide that the Medicaid agency complies with the information reporting requirements of section 6041 of the Internal Revenue Code (26 U.S.C. 6041). Section 6041 requires the filing of annual information returns showing amounts paid to providers, who are identified by name, address, and social security number or employer identification number.


§ 433.38 Interest charge on disallowed claims for FFP.

(a) Basis and scope. This section is based on section 1903(d)(5) of the Act, which requires that the Secretary charge a State interest on the Federal share of claims that have been disallowed but have been retained by the State during the administrative appeals process under section 1116(e) of the Act and the Secretary later recovers after the administrative appeals process has been completed. This section does not apply to –


(1) Claims that have been deferred by the Secretary and disallowed within the time limits of § 430.40 of this chapter. Deferral of claims for FFP; or


(2) Claims for expenditures that have never been paid on a grant award; or


(3) Disallowances of any claims for services furnished before October 1, 1980, regardless of the date of the claim submitted to CMS.


(b) General principles. (1) CMS will charge the State interest on FFP when –


(i) CMS has notified the Medicaid agency under § 430.42 of this subpart that a State’s claim for FFP is not allowable;


(ii) The agency has requested a reconsideration of the disallowance to the Administrator under § 430.42 of this chapter and has chosen to retain the FFP during the administrative reconsideration process in accordance with paragraph (c)(2) of this section;


(iii)(A) CMS has made a final determination upholding part or all of the disallowance;


(B) The agency has withdrawn its request for administrative reconsideration on all or part of the disallowance; or


(C) The agency has reversed its decision to retain the funds without withdrawing its request for administrative reconsideration and CMS upholds all or part of the disallowance.


(iv) The agency has appealed the disallowance to the Departmental Appeals Board under 45 CFR part 16 and has chosen to retain the FFP during the administrative appeals process in accordance with paragraph (c)(2) of this section.


(v)(A)The Board has made a final determination upholding part or all of the disallowance;


(B) The agency has withdrawn its appeal on all or part of the disallowance; or


(C) The agency has reversed its decision to retain the funds without withdrawing its appeal and the Board upholds all or part of the disallowance.


(2) If the courts overturn, in whole or in part, a Board decision that has sustained a disallowance, CMS will return the principal and the interest collected on the funds that were disallowed, upon the completion of all judicial appeals.


(3) Unless an agency decides to withdraw its request for administrative reconsideration or appeal on part of the disallowance and therefore returns only that part of the funds on which it has withdrawn its request for administrative reconsideration or appeal, any decision to retain or return disallowed funds must apply to the entire amount in dispute.


(4) If the agency elects to have CMS recover the disputed amount, it may not reverse that election.


(c) State procedures. (1) If the Medicaid agency has requested administrative reconsideration to CMS or appeal of a disallowance to the Board and wishes to retain the disallowed funds until CMS or the Board issues a final determination, the agency must notify the CMS Regional Office in writing of its decision to do so.


(2) The agency must mail its notice to the CMS Regional Office within 60 days of the date of receipt of the notice of the disallowance, as established by the certified mail receipt accompanying the notice.


(3) If the agency withdraws its decision to retain the FFP or its request for administrative reconsideration or appeal on all or part of the FFP, the agency must notify CMS in writing.


(d) Amount of interest charged. (1) If the agency retains funds that later become subject to an interest charge under paragraph (b) of this section, CMS will offset from the next Medicaid grant award to the State the amount of the funds subject to the interest charge, plus interest on that amount.


(2) The interest charge is at the rate CMS determines to be the average of the bond equivalent of the weekly 90-day Treasury bill auction rates during the period for which interest will be charged.


(e) Duration of interest. (1) The interest charge on the amount of disallowed FFP retained by the agency will begin on the date of the disallowance notice and end –


(i) On the date of the final determination by CMS of the administrative reconsideration if the State elects not to appeal to the Board, or final determination by the Board;


(ii) On the date CMS receives written notice from the State that it is withdrawing its request for administrative reconsideration and elects not to appeal to the Board, or withdraws its appeal to the Board on all of the disallowed funds; or


(iii) If the agency withdraws its request for administrative reconsideration on part of the funds on –


(A) The date CMS receives written notice from the agency that it is withdrawing its request for administrative reconsideration on a specified part of the disallowed funds for the part on which the agency withdraws its request for administrative reconsideration; and


(B) The date of the final determination by CMS on the part for which the agency pursues its administrative reconsideration; or


(iv) If the agency withdraws its appeal on part of the funds, on –


(A) The date CMS receives written notice from the agency that it is withdrawing its appeal on a specified part of the disallowed funds for the part on which the agency withdraws its appeal; and


(B) The date of the final determination by the Board on the part for which the agency pursues its appeal; or


(v) If the agency has given CMS written notice of its intent to repay by installment, in the quarter in which the final installment is paid. Interest during the repayment of Federal funds by installments will be at the Current Value of Funds Rate (CVFR); or


(vi) The date CMS receives written notice from the agency that it no longer chooses to retain the funds.


(2) CMS will not charge interest on FFP retained by an agency for more than 12 months for disallowances of FFP made between October 1, 1980 and August 13, 1981.


[48 FR 29485, June 27, 1983, as amended at 77 FR 31510, May 29, 2012]


§ 433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.

(a) Purpose. This section provides the rules to ensure that States refund the Federal portion of uncashed or cancelled (voided) checks under title XIX.


(b) Definitions. As used in this section –


Cancelled (voided) check means a Medicaid check issued by a State or fiscal agent which prior to its being cashed is cancelled (voided) by the State or fiscal agent, thus preventing disbursement of funds.


Check means a check or warrant that a State or local agency uses to make a payment.


Fiscal agent means an entity that processes or pays vendor claims for the Medicaid State agency.


Uncashed check means a Medicaid check issued by a State or fiscal agent which has not been cashed by the payee.


Warrant means an order by which the State agency or local agency without the authority to issue checks recognizes a claim. Presentation of a warrant by the payee to a State officer with authority to issue checks will result in release of funds due.


(c) Refund of Federal financial participation (FFP) for uncashed checks – (1) General provisions. If a check remains uncashed beyond a period of 180 days from the date it was issued; i.e., the date of the check, it will no longer be regarded as an allowable program expenditure. If the State has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received.


(2) Report of refund. At the end of each calendar quarter, the State must identify those checks which remain uncashed beyond a period of 180 days after issuance. The State agency must refund all FFP that it received for uncashed checks by adjusting the Quarterly Statement of Expenditures for that quarter. If an uncashed check is cashed after the refund is made, the State may file a claim. The claim will be considered to be an adjustment to the costs for the quarter in which the check was originally claimed. This claim will be paid if otherwise allowed by the Act and the regulations issued pursuant to the Act.


(3) If the State does not refund the appropriate amount as specified in paragraph (c)(2) of this section, the amount will be disallowed.


(d) Refund of FFP for cancelled (voided) checks – (1) General provision. If the State has claimed and received FFP for the amount of a cancelled (voided) check, it must refund the amount of FFP received.


(2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks which were cancelled (voided). The State must refund all FFP that it received for cancelled (voided) checks by adjusting the Quarterly Statement of Expenditures for that quarter.


(3) If the State does not refund the appropriate amount as specified in paragraph (d)(2) of this section, the amount will be disallowed.


[51 FR 36227, Oct. 9, 1986]


Subpart B – General Administrative Requirements State Financial Participation


Source:57 FR 55138, Nov. 24, 1992, unless otherwise noted.

§ 433.50 Basis, scope, and applicability.

(a) Basis. This subpart interprets and implements – (1) Section 1902(a)(2) of the Act which requires States to share in the cost of medical assistance expenditures and permit both State and local governments to participate in the financing of the non-Federal portion of medical assistance expenditures.


(2) Section 1903(a) of the Act, which requires the Secretary to pay each State an amount equal to the Federal medical assistance percentage of the total amount expended as medical assistance under the State’s plan.


(3) Section 1903(w) of the Act, which specifies the treatment of revenues from provider-related donations and health care-related taxes in determining a State’s medical assistance expenditures for which Federal financial participation (FFP) is available under the Medicaid program.


(b) Scope. This subpart –


(1) Specifies State plan requirements for State financial participation in expenditures for medical assistance.


(2) Defines provider-related donations and health care-related taxes that may be received without a reduction in FFP.


(3) Specifies rules for revenues received from provider-related donations and health care-related taxes during a transition period.


(4) Establishes limitations on FFP when States receive funds from provider-related donations and revenues generated by health care-related taxes.


(c) Applicability. The provisions of this subpart apply to the 50 States and the District of Columbia, but not to any State whose entire Medicaid program is operated under a waiver granted under section 1115 of the Act.


[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993; 72 FR 29832, May 29, 2007; 72 FR 29832, May 29, 2007; 75 FR 73975, Nov. 30, 2010]


§ 433.51 Public Funds as the State share of financial participation.

(a) Public Funds may be considered as the State’s share in claiming FFP if they meet the conditions specified in paragraphs (b) and (c) of this section.


(b) The public funds are appropriated directly to the State or local Medicaid agency, or are transferred from other public agencies (including Indian tribes) to the State or local agency and under its administrative control, or certified by the contributing public agency as representing expenditures eligible for FFP under this section.


(c) The public funds are not Federal funds, or are Federal funds authorized by Federal law to be used to match other Federal funds.


[75 FR 73975, Nov. 30, 2010]


§ 433.52 General definitions.

As used in this subpart –


Entity related to a health care provider means –


(1) An organization, association, corporation, or partnership formed by or on behalf of a health care provider;


(2) An individual with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act;


(3) An employee, spouse, parent, child, or sibling of the provider, or of a person with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act; or


(4) A supplier of health care items or services or a supplier to providers of health care items or services.


Health care provider means the individual or entity that receives any payment or payments for health care items or services provided.


Provider-related donation means a donation or other voluntary payment (in cash or in kind) made directly or indirectly to a State or unit of local government by or on behalf of a health care provider, an entity related to such a health care provider, or an entity providing goods or services to the State for administration of the State’s Medicaid plan.


(1) Donations made by a health care provider to an organization, which in turn donates money to the State, may be considered to be a donation made indirectly to the State by a health care provider.


(2) When an organization receives less than 25 percent of its revenues from providers and/or provider-related entities, its donations will not generally be presumed to be provider-related donations. Under these circumstances, a provider-related donation to an organization will not be considered a donation made indirectly to the State. However, if the donations from providers to an organization are subsequently determined to be indirect donations to the State or unit of local government for administration of the State’s Medicaid program, then such donations will be considered to be health care related.


(3) When the organization receives more than 25 percent of its revenue from donations from providers or provider-related entities, the organization always will be considered as acting on behalf of health care providers if it makes a donation to the State. The amount of the organization’s donation to the State, in a State fiscal year, that will be considered health care related, will be based on the percentage of donations the organization received from the providers during that period.


§ 433.53 State plan requirements.

A State plan must provide that –


(a) State (as distinguished from local) funds will be used both for medical assistance and administration;


(b) State funds will be used to pay at least 40 percent of the non-Federal share of total expenditures under the plan; and


(c) State and Federal funds will be apportioned among the political subdivisions of the State on a basis that assures that –


(1) Individuals in similar circumstances will be treated similarly throughout the State; and


(2) If there is local financial participation, lack of funds from local sources will not result in lowering the amount, duration, scope, or quality of services or level of administration under the plan in any part of the State.


[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]


§ 433.54 Bona fide donations.

(a) A bona fide donation means a provider-related donation, as defined in § 433.52, made to the State or unit of local government, that has no direct or indirect relationship, as described in paragraph (b) of this section, to Medicaid payments made to –


(1) The health care provider;


(2) Any related entity providing health care items and services; or


(3) Other providers furnishing the same class of items or services as the provider or entity.


(b) Provider-related donations will be determined to have no direct or indirect relationship to Medicaid payments if those donations are not returned to the individual provider, the provider class, or related entity under a hold harmless provision or practice, as described in paragraph (c) of this section.


(c) A hold harmless practice exists if any of the following applies:


(1) The State (or other unit of government) provides for a direct or indirect non-Medicaid payment to those providers or others making, or responsible for, the donation, and the payment amount is positively correlated to the donation. A positive correlation includes any positive relationship between these variables, even if not consistent over time.


(2) All or any portion of the Medicaid payment to the donor, provider class, or related entity, varies based only on the amount of the donation, including where Medicaid payment is conditional on receipt of the donation.


(3) The State (or other unit of government) receiving the donation provides for any direct or indirect payment, offset, or waiver such that the provision of that payment, offset, or waiver directly or indirectly guarantees to return any portion of the donation to the provider (or other parties responsible for the donation).


(d) CMS will presume provider-related donations to be bona fide if the voluntary payments, including, but not limited to, gifts, contributions, presentations or awards, made by or on behalf of individual health care providers to the State, county, or any other unit of local government does not exceed –


(1) $5,000 per year in the case of an individual provider donation; or


(2) $50,000 per year in the case of a donation from any health care organizational entity.


(e) To the extent that a donation presumed to be bona fide contains a hold harmless provision, as described in paragraph (c) of this section, it will not be considered a bona fide donation. When provider-related donations are not bona fide, CMS will deduct this amount from the State’s medical assistance expenditures before calculating FFP. This offset will apply to all years the State received such donations and any subsequent fiscal year in which a similar donation is received.


[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]


§ 433.55 Health care-related taxes defined.

(a) A health care-related tax is a licensing fee, assessment, or other mandatory payment that is related to –


(1) Health care items or services;


(2) The provision of, or the authority to provide, the health care items or services; or


(3) The payment for the health care items or services.


(b) A tax will be considered to be related to health care items or services under paragraph (a)(1) of this section if at least 85 percent of the burden of the tax revenue falls on health care providers.


(c) A tax is considered to be health care related if the tax is not limited to health care items or services, but the treatment of individuals or entities providing or paying for those health care items or services is different than the tax treatment provided to other individuals or entities.


(d) A health care-related tax does not include payment of a criminal or civil fine or penalty, unless the fine or penalty was imposed instead of a tax.


(e) Health care insurance premiums and health maintenance organization premiums paid by an individual or group to ensure coverage or enrollment are not considered to be payments for health care items and services for purposes of determining whether a health care-related tax exists.


§ 433.56 Classes of health care services and providers defined.

(a) For purposes of this subpart, each of the following will be considered as a separate class of health care items or services:


(1) Inpatient hospital services;


(2) Outpatient hospital services;


(3) Nursing facility services (other than services of intermediate care facilities for individuals with intellectual disabilities);


(4) Intermediate care facility services for individuals with intellectual disabilities, and similar services furnished by community-based residences for individuals with intellectual disabilities, under a waiver under section 1915(c) of the Act, in a State in which, as of December 24, 1992, at least 85 percent of such facilities were classified as ICF/IIDs prior to the grant of the waiver;


(5) Physician services;


(6) Home health care services;


(7) Outpatient prescription drugs;


(8) Services of managed care organizations (including health maintenance organizations, preferred provider organizations);


(9) Ambulatory surgical center services, as described for purposes of the Medicare program in section 1832(a)(2)(F)(i) of the Social Security Act. These services are defined to include facility services only and do not include surgical procedures;


(10) Dental services;


(11) Podiatric services;


(12) Chiropractic services;


(13) Optometric/optician services;


(14) Psychological services;


(15) Therapist services, defined to include physical therapy, speech therapy, occupational therapy, respiratory therapy, audiological services, and rehabilitative specialist services;


(16) Nursing services, defined to include all nursing services, including services of nurse midwives, nurse practitioners, and private duty nurses;


(17) Laboratory and x-ray services, defined as services provided in a licensed, free-standing laboratory or x-ray facility. This definition does not include laboratory or x-ray services provided in a physician’s office, hospital inpatient department, or hospital outpatient department;


(18) Emergency ambulance services; and


(19) Other health care items or services not listed above on which the State has enacted a licensing or certification fee, subject to the following:


(i) The fee must be broad based and uniform or the State must receive a waiver of these requirements;


(ii) The payer of the fee cannot be held harmless; and


(iii) The aggregate amount of the fee cannot exceed the State’s estimated cost of operating the licensing or certification program.


(b) Taxes that pertain to each class must apply to all items and services within the class, regardless of whether the items and services are furnished by or through a Medicaid-certified or licensed provider.


[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, 2008]


§ 433.57 General rules regarding revenues from provider-related donations and health care-related taxes.

Effective January 1, 1992, CMS will deduct from a State’s expenditures for medical assistance, before calculating FFP, funds from provider-related donations and revenues generated by health care-related taxes received by a State or unit of local government, in accordance with the requirements, conditions, and limitations of this subpart, if the donations and taxes are not –


(a) Permissible provider-related donations, as specified in § 433.66(b); or


(b) Health care-related taxes, as specified in § 433.68(b).


[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]


§§ 433.58-433.60 [Reserved]

§ 433.66 Permissible provider-related donations.

(a) General rule. (1) Except as specified in paragraph (a)(2) of this section, a State may receive revenues from provider-related donations without a reduction in FFP, only in accordance with the requirements of this section.


(2) The provisions of this section relating to provider-related donations for outstationed eligibility workers are effective on October 1, 1992.


(b) Permissible donations. Subject to the limitations specified in § 433.67, a State may receive, without a reduction in FFP, provider-related donations that meet at least one of the following requirements:


(1) The donations must be bona fide donations, as defined in § 433.54; or


(2) The donations are made by a hospital, clinic, or similar entity (such as a Federally-qualified health center) for the direct costs of State or local agency personnel who are stationed at the facility to determine the eligibility (including eligibility redeterminations) of individuals for Medicaid or to provide outreach services to eligible (or potentially eligible) Medicaid individuals. Direct costs of outstationed eligibility workers refers to the costs of training, salaries and fringe benefits associated with each outstationed worker and similar allocated costs of State or local agency support staff, and a prorated cost of outreach activities applicable to the outstationed workers at these sites. The prorated costs of outreach activities will be calculated taking the percent of State outstationed eligibility workers at a facility to total outstationed eligibility workers in the State, and multiplying the percent by the total cost of outreach activities in the State. Costs for such items as State agency overhead and provider office space are not allowable for this purpose.


[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, 2008]


§ 433.67 Limitations on level of FFP for permissible provider-related donations.

(a)(1) Limitations on bona fide donations. There are no limitations on the amount of bona fide provider-related donations that a State may receive without a reduction in FFP, as long as the bona fide donations meet the requirements of § 433.66(b)(1).


(2) Limitations on donations for outstationed eligibility workers. Effective October 1, 1992, the maximum amount of provider-related donations for outstationed eligibility workers, as described in § 433.66(b)(2), that a State may receive without a reduction in FFP may not exceed 10 percent of a State’s medical assistance administrative costs (both the Federal and State share), excluding the costs of family planning activities. The 10 percent limit for provider-related donations for outstationed eligibility workers is not included in the limit in effect through September 30, 1995, for health care-related taxes as described in § 433.70.


(b) Calculation of FFP. CMS will deduct from a State’s quarterly medical assistance expenditures, before calculating FFP, any provider-related donations received in that quarter that do not meet the requirements of § 433.66(b)(1) and provider donations for outstationed eligibility workers in excess of the limits specified under paragraph (a)(2) of this section.


[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, 2008]


§ 433.68 Permissible health care-related taxes.

(a) General rule. A State may receive health care-related taxes, without a reduction in FFP, only in accordance with the requirements of this section.


(b) Permissible health care-related taxes. Subject to the limitations specified in § 433.70, a State may receive, without a reduction in FFP, health care-related taxes if all of the following are met:


(1) The taxes are broad based, as specified in paragraph (c) of this section;


(2) The taxes are uniformly imposed throughout a jurisdiction, as specified in paragraph (d) of this section; and


(3) The tax program does not violate the hold harmless provisions specified in paragraph (f) of this section.


(c) Broad based health care-related taxes. (1) A health care-related tax will be considered to be broad based if the tax is imposed on at least all health care items or services in the class or providers of such items or services furnished by all non-Federal, non-public providers in the State, and is imposed uniformly, as specified in paragraph (d) of this section.


(2) If a health care-related tax is imposed by a unit of local government, the tax must extend to all items or services or providers (or to all providers in a class) in the area over which the unit of government has jurisdiction.


(3) A State may request a waiver from CMS of the requirement that a tax program be broad based, in accordance with the procedures specified in § 433.72. Waivers from the uniform and broad-based requirements will automatically be granted in cases of variations in licensing and certification fees for providers if the amount of such fees is not more than $1,000 annually per provider and the total amount raised by the State from the fees is used in the administration of the licensing or certification program.


(d) Uniformly imposed health care-related taxes. A health care-related tax will be considered to be imposed uniformly even if it excludes Medicaid or Medicare payments (in whole or in part), or both; or, in the case of a health care-related tax based on revenues or receipts with respect to a class of items or services (or providers of items or services), if it excludes either Medicaid or Medicare revenues with respect to a class of items or services, or both. The exclusion of Medicaid revenues must be applied uniformly to all providers being taxed.


(1) A health care-related tax will be considered to be imposed uniformly if it meets any one of the following criteria:


(i) If the tax is a licensing fee or similar tax imposed on a class of health care services (or providers of those health care items or services), the tax is the same amount for every provider furnishing those items or services within the class.


(ii) If the tax is a licensing fee or similar tax imposed on a class of health care items or services (or providers of those items or services) on the basis of the number of beds (licensed or otherwise) of the provider, the amount of the tax is the same for each bed of each provider of those items or services in the class.


(iii) If the tax is imposed on provider revenue or receipts with respect to a class of items or services (or providers of those health care items or services), the tax is imposed at a uniform rate for all services (or providers of those items or services) in the class on all the gross revenues or receipts, or on net operating revenues relating to the provision of all items or services in the State, unit, or jurisdiction. Net operating revenue means gross charges of facilities less any deducted amounts for bad debts, charity care, and payer discounts.


(iv) The tax is imposed on items or services on a basis other than those specified in paragraphs (d)(1) (i) through (iii) of this section, e.g., an admission tax, and the State establishes to the satisfaction of the Secretary that the amount of the tax is the same for each provider of such items or services in the class.


(2) A tax imposed with respect to a class of health care items or services will not be considered to be imposed uniformly if it meets either one of the following two criteria:


(i) The tax provides for credits, exclusions, or deductions which have as its purpose, or results in, the return to providers of all, or a portion, of the tax paid, and it results, directly or indirectly, in a tax program in which –


(A) The net impact of the tax and payments is not generally redistributive, as specified in paragraph (e) of this section; and


(B) The amount of the tax is directly correlated to payments under the Medicaid program.


(ii) The tax holds taxpayers harmless for the cost of the tax, as described in paragraph (f) of this section.


(3) If a tax does not meet the criteria specified in paragraphs (d)(1)(i) through (iv) of this section, but the State establishes that the tax is imposed uniformly in accordance with the procedures for a waiver specified in § 433.72, the tax will be treated as a uniform tax.


(e) Generally redistributive. A tax will be considered to be generally redistributive if it meets the requirements of this paragraph. If the State desires waiver of only the broad-based tax requirement, it must demonstrate compliance with paragraph (e)(1) of this section. If the State desires waiver of the uniform tax requirement, whether or not the tax is broad-based, it must demonstrate compliance with paragraph (e)(2) of this section.


(1) Waiver of broad-based requirement only. This test is applied on a per class basis to a tax that is imposed on all revenues but excludes certain providers. For example, a tax that is imposed on all revenues (including Medicare and Medicaid) but excludes teaching hospitals would have to meet this test. This test cannot be used when a State excludes any or all Medicaid revenue from its tax in addition to the exclusion of providers, since the test compares the proportion of Medicaid revenue being taxed under the proposed tax with the proportion of Medicaid revenue being taxed under a broad-based tax.


(i) A State seeking waiver of the broad-based tax requirement only must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by:


(A) Calculating the proportion of the tax revenue applicable to Medicaid if the tax were broad based and applied to all providers or activities within the class (called P1);


(B) Calculating the proportion of the tax revenue applicable to Medicaid under the tax program for which the State seeks a waiver (called P2); and


(C) Calculating the value of P1/P2.


(ii) If the State demonstrates to the Secretary’s satisfaction that the value of P1/P2 is at least 1, CMS will automatically approve the waiver request.


(iii) If a tax is enacted and in effect prior to August 13, 1993, and the State demonstrates to the Secretary’s satisfaction that the value of P1/P2 is at least 0.90, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met:


(A) The value of P1/P2 is at least 0.90; and


(B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxed:


(1) Providers that furnish no services within the class in the State;


(2) Providers that do not charge for services within the class;


(3) Rural hospitals (defined as any hospital located outside of an urban area as defined in § 412.62(f)(1)(ii) of this chapter);


(4) Sole community hospitals as defined in § 412.92(a) of this chapter;


(5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act;


(6) Financially distressed hospitals if:


(i) A financially distressed hospital is defined by the State law;


(ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and


(iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax;


(7) Psychiatric hospitals; or


(8) Hospitals owned and operated by HMOs.


(iv) If a tax is enacted and in effect after August 13, 1993, and the State demonstrates to the Secretary’s satisfaction that the value of P1/P2 is at least 0.95, CMS will review the waiver request. Such a waiver request will be approved only if the following two criteria are met:


(A) The value of P1/P2 is at least 0.95; and


(B) The tax complies with the provisions of § 433.68(e)(1)(iii)(B).


(2) Waiver of uniform tax requirement. This test is applied on a per class basis to all taxes that are not uniform. This includes those taxes that are neither broad based (as specified in § 433.68(c)) nor uniform (as specified in § 433.68(d)).


(i) A State seeking waiver of the uniform tax requirement (whether or not the tax is broad based) must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by:


(A) Calculating, using ordinary least squares, the slope (designated as (B) (that is. the value of the x coefficient) of two linear regressions, in which the dependent variable is each provider’s percentage share of the total tax paid by all taxpayers during a 12-month period, and the independent variable is the taxpayer’s “Medicaid Statistic”. The term “Medicaid Statistic” means the number of the provider’s taxable units applicable to the Medicaid program during a 12-month period. If, for example, the State imposed a tax based on provider charges, the amount of a provider’s Medicaid charges paid during a 12-month period would be its “Medicaid Statistic”. If the tax were based on provider inpatient days, the number of the provider’s Medicaid days during a 12-month period would be its “Medicaid Statistic”. For the purpose of this test, it is not relevant that a tax program exempts Medicaid from the tax.


(B) Calculating the slope (designated as B1) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State’s tax program, if it were broad based and uniform.


(C) Calculating the slope (designated as B2) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State’s tax program, as proposed.


(ii) If the State demonstrates to the Secretary’s satisfaction that the value of B1/B2 is at least 1, CMS will automatically approve the waiver request.


(iii) If the State demonstrates to the Secretary’s satisfaction that the value of B1/B2 is at least 0.95, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met:


(A) The value of B1/B2 is at least 0.95; and


(B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxes:


(1) Providers that furnish no services within the class in the State;


(2) Providers that do not charge for services within the class;


(3) Rural hospitals (defined as any hospital located outside of an urban area as defined in § 412.62(f)(1)(ii) of this chapter;


(4) Sole community hospitals as defined in § 412.92(a) of this chapter;


(5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act;


(6) Financially distressed hospitals if:


(i) A financially distressed hospital is defined by the State law;


(ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and


(iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax;


(7) Psychiatric hospitals; or


(8) Providers or payers with tax rates that vary based exclusively on regions, but only if the regional variations are coterminous with preexisting political (and not special purpose) boundaries. Taxes within each regional boundary must meet the broad-based and uniformity requirements as specified in paragraphs (c) and (d) of this section.


(iv) A B1/B2 value of 0.70 will be applied to taxes that vary based exclusively on regional variations, and enacted and in effect prior to November 24, 1992, to permit such variations.


(f) Hold harmless. A taxpayer will be considered to be held harmless under a tax program if any of the following conditions applies:


(1) The State (or other unit of government) imposing the tax provides for a direct or indirect non-Medicaid payment to those providers or others paying the tax and the payment amount is positively correlated to either the tax amount or to the difference between the Medicaid payment and the tax amount. A positive correlation includes any positive relationship between these variables, even if not consistent over time.


(2) All or any portion of the Medicaid payment to the taxpayer varies based only on the tax amount, including where Medicaid payment is conditional on receipt of the tax amount.


(3) The State (or other unit of government) imposing the tax provides for any direct or indirect payment, offset, or waiver such that the provision of that payment, offset, or waiver directly or indirectly guarantees to hold taxpayers harmless for all or any portion of the tax amount.


(i)(A) An indirect guarantee will be determined to exist under a two prong “guarantee” test. If the health care-related tax or taxes on each health care class are applied at a rate that produces revenues less than or equal to 6 percent of the revenues received by the taxpayer, the tax or taxes are permissible under this test. The phrase “revenues received by the taxpayer” refers to the net patient revenue attributable to the assessed permissible class of health care items or services. However, for the period of January 1, 2008 through September 30, 2011, the applicable percentage of net patient service revenue is 5.5 percent. Compliance in State fiscal year 2008 will be evaluated from January 1, 2008 through the last day of State fiscal year 2008. Beginning with State fiscal year 2009 the 5.5 percent tax collection will be measured on an annual State fiscal year basis.


(B) When the tax or taxes produce revenues in excess of the applicable percentage of the revenue received by the taxpayer, CMS will consider an indirect hold harmless provision to exist if 75 percent or more of the taxpayers in the class receive 75 percent or more of their total tax costs back in enhanced Medicaid payments or other State payments. The second prong of the indirect hold harmless test is applied in the aggregate to all health care taxes applied to each class. If this standard is violated, the amount of tax revenue to be offset from medical assistance expenditures is the total amount of the taxpayers’ revenues received by the State.


(ii) [Reserved]


[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43181, Aug. 13, 1993; 62 FR 53572, Oct. 15, 1997; 73 FR 9698, Feb. 22, 2008]


§ 433.70 Limitation on level of FFP for revenues from health care-related taxes.

(a) Limitations. Beginning October 1, 1995, there is no limitation on the amount of health care-related taxes that a State may receive without a reduction in FFP, as long as the health care-related taxes meet the requirements specified in § 433.68.


(b) Calculation of FFP. CMS will deduct from a State’s medical assistance expenditures, before calculating FFP, revenues from health care-related taxes that do not meet the requirements of § 433.68 and any health care-related taxes in excess of the limits specified in paragraph (a)(1) of this section.


[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9699, Feb. 22, 2008]


§ 433.72 Waiver provisions applicable to health care-related taxes.

(a) Bases for requesting waiver. (1) A State may submit to CMS a request for a waiver if a health care-related tax does not meet any or all of the following:


(i) The tax does not meet the broad based criteria specified in § 433.68c); and/or


(ii) The tax is not imposed uniformly but meets the criteria specified in § 433.68(d)(2) or (d)(3).


(2) When a tax that meets the criteria specified in paragraph (a)(1) of this section is imposed on more than one class of health care items or services, a separate waiver must be obtained for each class of health care items and services subject to the tax.


(b) Waiver conditions. In order for CMS to approve a waiver request that would permit a State to receive tax revenue (within specified limitations) without a reduction in FFP, the State must demonstrate, to CMS’s satisfaction, that its tax program meets all of the following requirements:


(1) The net impact of the tax and any payments made to the provider by the State under the Medicaid program is generally redistributive, as described in § 433.68(e);


(2) The amount of the tax is not directly correlated to Medicaid payments; and


(3) The tax program does not fall within the hold harmless provisions specified in § 433.68(f).


(c) Effective date. A waiver will be effective:


(1) The date of enactment of the tax for programs in existence prior to August 13, 1993 or;


(2) For tax programs commencing on or after August 13, 1993, on the first day in the quarter in which the waiver is received by CMS.


[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]


§ 433.74 Reporting requirements.

(a) Beginning with the first quarter of Federal fiscal year 1993, each State must submit to CMS quarterly summary information on the source and use of all provider-related donations (including all bona fide and presumed-to-be bona fide donations) received by the State or unit of local government, and health care-related taxes collected. Each State must also provide any additional information requested by the Secretary related to any other donations made by, or any taxes imposed on, health care providers. States’ reports must present a complete, accurate, and full disclosure of all of their donation and tax programs and expenditures.


(b) Each State must provide the summary information specified in paragraph (a) of this section on a quarterly basis in accordance with procedures established by CMS.


(c) Each State must maintain, in readily reviewable form, supporting documentation that provides a detailed description and legal basis for each donation and tax program being reported, as well as the source and use of all donations received and taxes collected. This information must be made available to Federal reviewers upon request.


(d) If a State fails to comply with the reporting requirements contained in this section, future grant awards will be reduced by the amount of FFP CMS estimates is attributable to the sums raised by tax and donation programs as to which the State has not reported properly, until such time as the State complies with the reporting requirements. Deferrals and/or disallowances of equivalent amounts may also be imposed with respect to quarters for which the State has failed to report properly. Unless otherwise prohibited by law, FFP for those expenditures will be released when the State complies with all reporting requirements.


Subpart C – Mechanized Claims Processing and Information Retrieval Systems

§ 433.110 Basis, purpose, and applicability.

(a) This subpart implements the following sections of the Act:


(1) Section 1903(a)(3) of the Act, which provides for FFP in State expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures for implementing these regulations are in 45 CFR part 75, 45 CFR part 95, subpart F, and part 11, State Medicaid Manual; and


(2) Section 1903(r) of the Act, which imposes certain standards and conditions on mechanized claims processing and information retrieval systems (including eligibility determination systems) in order for these systems to be eligible for Federal funding under section 1903(a) of the Act.


(b) [Reserved]


[50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989; 76 FR 21973, Apr. 19, 2011; 80 FR 75841, Dec. 4, 2015]


§ 433.111 Definitions.

For purposes of this section:


(a) The following terms are defined at 45 CFR part 95, subpart F § 95.605:



“Advance Planning Document”; “Design” or “System Design”; “Development”; “Enhancement”; “Hardware”; “Installation”; “Operation”; and, “Software”.

(b) “Mechanized claims processing and information retrieval system” means:


(1) “Mechanized claims processing and information retrieval system” means the system of software and/or hardware used to process claims for medical assistance and to retrieve and produce service utilization and management information required by the Medicaid single state agency and Federal government for program administration and audit purposes. It may include modules of hardware, software, and other technical capabilities that are used by the Medicaid Single State Agency to manage, monitor, and administer the Medicaid enterprise, including transaction processing, information management, and reporting and data analytics.


(2) “Mechanized claims processing and information retrieval system” includes a “System of Systems.” Under this definition all modules or systems developed to support a Medicaid Management Information System (MMIS) and Eligibility and Enrollment (E&E) may be implemented as discrete, independent, interoperable elements. Use of a System of Systems requires interoperability between the systems.


(i) The system consists of –


(A) Required modules specified by the Secretary.


(B) Required changes to the system or required module that are specified by the Secretary.


(C) Approved enhancements to the system or module.


(ii) A “Mechanized claims processing and information retrieval system” include – s –


(A) An Eligibility and Enrollment (E&E) System which is used to process applications from Medicaid or CHIP applicants and beneficiaries to determine eligibility for enrollment in the Medicaid or CHIP programs, as well as change in circumstance updates and renewals; and


(B) A Medicaid Management Information System (MMIS) which is used to process claims for Medicaid payment from providers of medical care and services furnished to beneficiaries under the medical assistance program and to perform other functions necessary for economic and efficient operations, management, monitoring, and administration of the Medicaid program. The pertinent business areas are those included in the MMIS Certification Toolkit, and they may be applicable to Fee-For-Service, Managed Care, or an Administrative Services Organization (ASO) model.


(c) “Medicaid Information Technology Architecture (MITA)” is defined at § 495.302 of this chapter.


(d) “Open source” means software that can be used freely, changed, and shared (in modified or unmodified form) by anyone. Open source software is distributed under Open Source Initiative-approved licenses that comply with an open source framework that allows for free redistribution, provision of the source code, allowance for modifications and derived works, free and open distribution of licenses without restrictions and licenses that are technology-neutral.


(e) “Proprietary” means a closed source product licensed under exclusive legal right of the copyright holder with the intent that the licensee is given the right to use the software only under certain conditions, and restricted from other uses, such as modification, sharing, studying, redistribution, or reverse engineering.


(f) “Service” means a self-contained unit of functionality that is a discretely invokable operation. Services can be combined to provide the functionality of a large software application.


(g) “Shared Service” means the use of a service, including SaaS, by one part of an organization or group, including states, where that service is also made available to other entities of the organization, group or states. Thus the funding and resourcing of the service is shared and the providing department effectively becomes an internal service provider.


(h) “Module” means a packaged, functional business process or set of processes implemented through software, data, and interoperable interfaces that are enabled through design principles in which functions of a complex system are partitioned into discrete, scalable, reusable components.


(i) “Commercial Off the Shelf” (COTS) software means specialized software (which could be a system, subsystem or module) designed for specific applications that is available for sale or lease to other users in the commercial marketplace, and that can be used with little or no modification.


(j) “Software-as-a-Service” (SaaS) means a software delivery model in which software is managed and licensed by its vendor-owner on a pay-for-use or subscription basis, centrally hosted, on-demand, and common to all users.


[51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989; 76 FR 21973, Apr. 19, 2011; 80 FR 75841, Dec. 4, 2015]


§ 433.112 FFP for design, development, installation or enhancement of mechanized processing and information retrieval systems.

(a) Subject to paragraph (c) of this section, FFP is available at the 90 percent rate in State expenditures for the design, development, installation, or enhancement of a mechanized claims processing and information retrieval system only if the APD is approved by CMS prior to the State’s expenditure of funds for these purposes.


(b) CMS will approve the E&E or claims system described in an APD if certain conditions are met. The conditions that a system must meet are:


(1) CMS determines the system is likely to provide more efficient, economical, and effective administration of the State plan.


(2) The system meets the system requirements, standards and conditions, and performance standards in Part 11 of the State Medicaid Manual, as periodically amended.


(3) The system is compatible with the claims processing and information retrieval systems used in the administration of Medicare for prompt eligibility verification and for processing claims for persons eligible for both programs.


(4) The system supports the data requirements of quality improvement organizations established under Part B of title XI of the Act.


(5) The State owns any software that is designed, developed, installed or improved with 90 percent FFP.


(6) The Department has a royalty free, non-exclusive, and irrevocable license to reproduce, publish, or otherwise use and authorize others to use, for Federal Government purposes, software, modifications to software, and documentation that is designed, developed, installed or enhanced with 90 percent FFP.


(7) The costs of the system are determined in accordance with 45 CFR 75, subpart E.


(8) The Medicaid agency agrees in writing to use the system for the period of time specified in the advance planning document approved by CMS or for any shorter period of time that CMS determines justifies the Federal funds invested.


(9) The agency agrees in writing that the information in the system will be safeguarded in accordance with subpart F, part 431 of this subchapter.


(10) Use a modular, flexible approach to systems development, including the use of open interfaces and exposed application programming interfaces; the separation of business rules from core programming, available in both human and machine readable formats.


(11) Align to, and advance increasingly, in MITA maturity for business, architecture, and data.


(12) The agency ensures alignment with, and incorporation of, industry standards adopted by the Office of the National Coordinator for Health IT in accordance with 45 CFR part 170, subpart B: The HIPAA privacy, security and transaction standards; accessibility standards established under section 508 of the Rehabilitation Act, or standards that provide greater accessibility for individuals with disabilities, and compliance with Federal civil rights laws; standards adopted by the Secretary under section 1104 of the Affordable Care Act; and standards and protocols adopted by the Secretary under section 1561 of the Affordable Care Act.


(13) Promote sharing, leverage, and reuse of Medicaid technologies and systems within and among States.


(14) Support accurate and timely processing and adjudications/eligibility determinations and effective communications with providers, beneficiaries, and the public.


(15) Produce transaction data, reports, and performance information that would contribute to program evaluation, continuous improvement in business operations, and transparency and accountability.


(16) The system supports seamless coordination and integration with the Marketplace, the Federal Data Services Hub, and allows interoperability with health information exchanges, public health agencies, human services programs, and community organizations providing outreach and enrollment assistance services as applicable.


(17) For E&E systems, the State must have delivered acceptable MAGI-based system functionality, demonstrated by performance testing and results based on critical success factors, with limited mitigations and workarounds.


(18) The State must submit plans that contain strategies for reducing the operational consequences of failure to meet applicable requirements for all major milestones and functionality.


(19) The agency, in writing through the APD, must identify key state personnel by name, type and time commitment assigned to each project.


(20) Systems and modules developed, installed or improved with 90 percent match must include documentation of components and procedures such that the systems could be operated by a variety of contractors or other users.


(21) For software systems and modules developed, installed or improved with 90 percent match, the State must consider strategies to minimize the costs and difficulty of operating the software on alternate hardware or operating systems.


(22) Other conditions for compliance with existing statutory and regulatory requirements, issued through formal guidance procedures, determined by the Secretary to be necessary to update and ensure proper implementation of those existing requirements.


(c)(1) FFP is available at 90 percent of a State’s expenditures for the design, development, installation or enhancement of an E&E system that meets the requirements of this subpart and only for costs incurred for goods and services provided on or after April 19, 2011.


(2) Design, development, installation, or enhancement costs include costs for initial licensing of commercial off the shelf (COTS) software, and the minimum necessary costs to analyze the suitability of COTS software, install, configure and integrate the COTS software, and modify non-COTS software to ensure coordination of operations. The nature and extent of such costs must be expressly described in the approved APD.


[43 FR 45201, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 45 FR 14213, Mar. 5, 1980; 50 FR 30846, July 30, 1985; 51 FR 45330, Dec. 18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 55 FR 4375, Feb. 7, 1990; 76 FR 21973, Apr. 19, 2011; 80 FR 75842, Dec. 4, 2015; 81 FR 3011, Jan. 20, 2016]


§ 433.114 Procedures for obtaining initial approval; notice of decision.

(a) To obtain initial approval, the Medicaid agency must inform CMS in writing that the system meets the conditions specified in § 433.116(c) through (i).


(b) If CMS disapproves the system, the notice will include all of the following information:


(1) The findings of fact upon which the determination was made.


(2) The procedures for appeal of the determination in the context of a reconsideration of the resulting disallowance to the Departmental Appeals Board.


[50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989; 76 FR 21974, Apr. 19, 2011]


§ 433.116 FFP for operation of mechanized claims processing and information retrieval systems.

(a) Subject to paragraph (j) of this section, FFP is available at 75 percent of expenditures for operation of a mechanized claims processing and information retrieval system approved by CMS, from the first day of the calendar quarter after the date the system met the conditions of initial approval, as established by CMS (including a retroactive adjustment of FFP if necessary to provide the 75 percent rate beginning on the first day of that calendar quarter). Subject to 45 CFR 95.611(a), the State shall obtain prior written approval from CMS when it plans to acquire ADP equipment or services, when it anticipates the total acquisition costs will exceed thresholds, and meets other conditions of the subpart.


(b) CMS will approve enhanced FFP for system operations if the conditions specified in paragraphs (c) through (i) of this section are met.


(c) The conditions of § 433.112(b)(1) through (22) must be met at the time of approval.


(d) The system must have been operating continuously during the period for which FFP is claimed.


(e) The system must provide individual notices, within 45 days of the payment of claims, to all or a sample group of the persons who received services under the plan.


(f) The notice required by paragraph (e) of this section –


(1) Must specify –


(i) The service furnished;


(ii) The name of the provider furnishing the service;


(iii) The date on which the service was furnished; and


(iv) The amount of the payment made under the plan for the service; and


(2) Must not specify confidential services (as defined by the State) and must not be sent if the only service furnished was confidential.


(g) The system must provide both patient and provider profiles for program management and utilization review purposes.


(h) If the State has a Medicaid fraud control unit certified under section 1903(q) of the Act and § 455.300 of this chapter, the Medicaid agency must have procedures to assure that information on probable fraud or abuse that is obtained from, or developed by, the system is made available to that unit. (See § 455.21 of this chapter for State plan requirements.)


(i) The standards and conditions of § 433.112(b)(10) through (b)(16) of this subpart must be met.


(j) Beginning, and no earlier than, April 19, 2011, FFP is available at 75 percent of a State’s expenditures for the operation of an E&E system that meets the requirements of this subpart. FFP is not available for E&E systems that do not meet the standards and conditions.


[45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, July 30, 1985; 55 FR 4375, Feb. 7, 1990; 76 FR 21974, Apr. 19, 2011; 80 FR 75842, Dec. 4, 2015]


§ 433.117 Initial approval of replacement systems.

(a) A replacement system must meet all standards and conditions of initial approval of a mechanized claims processing and information retrieval system.


(b) The agency must submit a APD that includes –


(1) The date the replacement system will be in operation; and


(2) A plan for orderly transition from the system being replaced to the replacement system.


(c) FFP is available at –


(1) 90 percent in expenditures for design, development, and installation in accordance with the provisions of § 433.112; and


(2) 75 percent in expenditures for operation of an approved replacement system in accordance with the provisions of § 433.116(b) through (j), from the date that the system met the conditions of initial approval, as established by CMS.


(d) FFP is available at 75 percent in expenditures for the operation of an approved system that is being replaced (or at a reduced rate determined under § 433.120 of this subpart for a system that has been disapproved) until the replacement system is in operation and approved.


[50 FR 30847, July 30, 1985, as amended at 76 FR 21974, Apr. 19, 2011]


§ 433.119 Conditions for reapproval; notice of decision.

(a) CMS periodically reviews each system operation initially approved under § 433.114 of this subpart and reapproves it for FFP at 75 percent of expenditures if the following standards and conditions are met:


(1) The system meets the requirements of § 433.112(b)(1), (3), (4), and (7) through (22).


(2) The system meets the conditions of § 433.116 (d) through (j).


(3) The system meets the standards, conditions, and performance standards for reapproval and the system requirements in part 11 of the State Medicaid Manual as periodically amended.


(4) A State system must meet all of the requirements of this subpart within the appropriate period CMS determines should apply as required by § 433.123(b) of this subpart.


(b) CMS may review an entire system operation or focus its review on parts of the operation. However, at a minimum, CMS will review standards, system requirements and other conditions of reapproval that have demonstrated weakness in a previous review or reviews.


(c) After performing the review under paragraph (a) of this section, CMS will issue to the Medicaid agency a written notice informing the agency whether the system is reapproved or disapproved. If the system is disapproved, the notice will include the following information:


(1) CMS’s decision to reduce FFP for system operations from 75 percent to 50 percent of expenditures, beginning with the first day of the first calendar quarter after CMS issues the written notice to the State.


(2) The findings of fact upon which the determination was made.


(3) A statement that State claims in excess of the reduced FFP rate will be disallowed and that any such disallowance will be appealable to the Departmental Appeals Board.


[54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 76 FR 21974, Apr. 19, 2011; 80 FR 75843, Dec. 4, 2015]


§ 433.120 Procedures for reduction of FFP after reapproval review.

(a) If CMS determines after the reapproval review that the system no longer meets the conditions for reapproval in § 433.119, CMS may reduce FFP for certain expenditures for system operations.


(b) CMS may reduce FFP from 75 percent to 50 percent for expenditures related to the operations of non-compliant functionality or system components.


[80 FR 75843, Dec. 4, 2015]


§ 433.121 Reconsideration of the decision to reduce FFP after reapproval review.

(a) The State Medicaid agency may appeal (to the Departmental Appeals Board under 45 CFR part 16) a disallowance concerning a reduction in FFP claimed for system operations caused by a disapproval of the State’s system.


(b) The decisions concerning whether to restore any FFP retroactively and the actual number of quarters for which FFP will be restored under § 433.122 of this subpart are not subject to administrative appeal to the Departmental Appeals Board under 45 CFR part 16.


(c) An agency’s request for a reconsideration before the Board under paragraph (a) of this section does not delay implementation of the reduction in FFP. However, any reduction is subject to retroactive adjustment if required by the Board’s determination on reconsideration.


[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 55 FR 1820, Jan. 19, 1990; 76 FR 21974, Apr. 19, 2011]


§ 433.122 Reapproval of a disapproved system.

When FFP has been reduced under § 433.120(a), and CMS determines upon subsequent review that the system meets all current performance standards, system requirements and other conditions of reapproval, the following provisions apply:


(a) CMS will resume FFP in expenditures for system operations at the 75 percent level beginning with the quarter following the review determination that the system again meets conditions of reapproval.


(b) CMS may retroactively waive a reduction of FFP in expenditures for system operations if CMS determines that the waiver could improve the administration of the State Medicaid plan. However, CMS cannot waive this reduction for any quarter before the fourth quarter immediately preceding the quarter in which CMS issues the determination (as part of the review process) stating that the system is reapproved.


[54 FR 41974, Oct. 13, 1989]


§ 433.123 Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.

(a) Whenever CMS modifies system requirements or other conditions for approval under § 433.112 or § 433.116, CMS will –


(1) Publish a notice in the Federal Register making available the proposed changes for public comment;


(2) Respond in a subsequent Federal Register notice to comments received; and


(3) Issue the new or modified requirements or conditions in the State Medicaid Manual.


(b) For changes in system requirements or other conditions for approval, CMS will allow an appropriate period for Medicaid agencies to meet the requirement determining this period on the basis of the requirement’s complexity and other relevant factors.


(c) Whenever CMS modifies performance standards and other conditions for reapproval under § 433.119, CMS will notify Medicaid agencies at least one calendar quarter before the review period to which the new or modified standards or conditions apply.


[57 FR 38782, Aug. 27, 1992]


§ 433.127 Termination of FFP for failure to provide access to claims processing and information retrieval systems.

CMS will terminate FFP at any time if the Medicaid agency fails to provide State and Federal representatives with full access to the system, including on-site inspection. CMS may request such access at any time to determine whether the conditions in this subpart are being met.


[43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 and 30848, July 30, 1985]


§ 433.131 Waiver for noncompliance with conditions of approval and reapproval.

If a State is unable to comply with the conditions of approval or of reapproval and the noncompliance will cause a percentum reduction in FFP, CMS will waive the FFP reduction in the following circumstances:


(a) Good cause. If CMS determines that good cause existed, CMS will waive the FFP reduction attributable to those items for which the good cause existed. A waiver of FFP consequences of the failure to meet the conditions of approval or reapproval based upon good cause will not extend beyond two consecutive quarters.


(b) Circumstances beyond the control of a State. The State must satisfactorily explain the circumstances that are beyond its control. When CMS grants the waiver, CMS will also defer all other system deadlines for the same length of time that the waiver applies.


(c) Waiver of deadline. In no case will CMS waive the December 31, 2015 deadlines referenced in § 433.112(c) and § 433.116(j).


[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989; 76 FR 21975, Apr. 19, 2011]


Subpart D – Third Party Liability


Source:45 FR 8984, Feb. 11, 1980, unless otherwise noted.

§ 433.135 Basis and purpose.

This subpart implements sections 1902(a)(25), 1902(a)(45), 1903(d)(2), 1903(o), 1903(p), and 1912 of the Act by setting forth State plan requirements concerning –


(a) The legal liability of third parties to pay for services provided under the plan;


(b) Assignment to the State of an individual’s rights to third party payments; and


(c) Cooperative agreements between the Medicaid agency and other entities for obtaining third party payments.


[50 FR 46664, Nov. 12, 1985]


§ 433.136 Definitions.

For purposes of this subpart –


Private insurer means:


(1) Any commercial insurance company offering health or casualty insurance to individuals or groups (including both experience-rated insurance contracts and indemnity contracts);


(2) Any profit or nonprofit prepaid plan offering either medical services or full or partial payment for services included in the State plan; and


(3) Any organization administering health or casualty insurance plans for professional associations, unions, fraternal groups, employer-employee benefit plans, and any similar organization offering these payments or services, including self-insured and self-funded plans.


Third party means any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan.


Title IV-D agency means the organizational unit in the State that has the responsibility for administering or supervising the administration of a State plan for child support enforcement under title IV-D of the Act.


[49 FR 8984, Feb. 11, 1980, as amended at 50 FR 46664, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]


§ 433.137 State plan requirements.

(a) A State plan must provide that the requirements of §§ 433.138 and 433.139 are met for identifying third parties liable for payment of services under the plan and for payment of claims involving third parties.


(b) A State plan must provide that –


(1) The requirements of §§ 433.145 through 433.148 are met for assignment of rights to benefits, cooperation with the agency in obtaining medical support or payments, and cooperation in identifying and providing information to assist the State in pursuing any liable third parties; and


(2) The requirements of §§ 433.151 through 433.154 are met for cooperative agreements and incentive payments for third party collections.


(c) The requirements of paragraph (b)(1) of this section relating to assignment of rights to benefits and cooperation in obtaining medical support or payments and paragraph (b)(2) of this section are effective for medical assistance furnished on or after October 1, 1984. The requirements of paragraph (b)(1) of this section relating to cooperation in identifying and providing information to assist the State in pursuing liable third parties are effective for medical assistance furnished on or after July 1, 1986.


[50 FR 46665, Nov. 12, 1985, as amended at 55 FR 48606, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990; 60 FR 35502, July 10, 1995]


§ 433.138 Identifying liable third parties.

(a) Basic provisions. The agency must take reasonable measures to determine the legal liability of the third parties who are liable to pay for services furnished under the plan. At a minimum, such measures must include the requirements specified in paragraphs (b) through (k) of this section, unless waived under paragraph (l) of this section.


(b) Obtaining health insurance information: Initial application and redetermination processes for Medicaid eligibility. (1) If the Medicaid agency determines eligibility for Medicaid, it must, during the initial application and each redetermination process, obtain from the applicant or beneficiary such health insurance information as would be useful in identifying legally liable third party resources so that the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f). Health insurance information may include, but is not limited to, the name of the policy holder, his or her relationship to the applicant or beneficiary, the social security number (SSN) of the policy holder, and the name and address of insurance company and policy number.


(2) If Medicaid eligibility is determined by the Federal agency administering the supplemental security income program under title XVI in accordance with a written agreement under section 1634 of the Act, the Medicaid agency must take the following action. It must enter into an agreement with CMS or must have, prior to February 1, 1985, executed a modified section 1634 agreement that is still in effect to provide for –


(i) Collection, from the applicant or beneficiary during the initial application and each redetermination process, of health insurance information in the form and manner specified by the Secretary; and


(ii) Transmittal of the information to the Medicaid agency.


(3) If Medicaid eligibility is determined by any other agency in accordance with a written agreement, the Medicaid agency must modify the agreement to provide for –


(i) Collection, from the applicant or beneficiary during the initial application and each redetermination process, of such health insurance information as would be useful in identifying legally liable third party resources so that the Medicaid agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f). Health insurance information may include, but is not limited to, those elements described in paragraph (b)(1) of this section; and


(ii) Transmittal of the information to the Medicaid agency.


(c) Obtaining other information. Except as provided in paragraph (l) of this section, the agency must, for the purpose of implementing the requirements in paragraphs (d)(1)(ii) and (d)(4)(i) of this section, incorporate into the eligibility case file the names and SSNs of absent or custodial parents of Medicaid beneficiaries to the extent such information is available.


(d) Exchange of data. Except as provided in paragraph (l) of this section, to obtain and use information for the purpose of determining the legal liability of the third parties so that the agency may process claims under the third party liability payment procedures specified in § 433.139(b) through (f), the agency must take the following actions:


(1) Except as specified in paragraph (d)(2) of this section, as part of the data exchange requirements under § 435.945 of this chapter, from the State wage information collection agency (SWICA) defined in § 435.4 of this chapter and from the SSA wage and earnings files data as specified in § 435.948(a)(1) of this chapter, the agency must –


(i) Use the information that identifies Medicaid beneficiaries that are employed and their employer(s); and


(ii) Obtain and use, if their names and SSNs are available to the agency under paragraph (c) of this section, information that identifies employed absent or custodial parents of beneficiaries and their employer(s).


(2) If the agency can demonstrate to CMS that it has an alternate source of information that furnishes information as timely, complete and useful as the SWICA and SSA wage and earnings files in determining the legal liability of third parties, the requirements of paragraph (d)(1) of this section are deemed to be met.


(3) The agency must request, as required under § 435.948(a)(2) of this chapter, from the State title IV-A agency, information not previously reported that identifies those Medicaid beneficiaries who are employed and their employer(s).


(4) Except as specified in paragraph (d)(5) of this section, the agency must attempt to secure agreements (to the extent permitted by State law) to provide for obtaining –


(i) From State Workers’ Compensation or Industrial Accident Commission files, information that identifies Medicaid beneficiaries and, (if their names and SSNs were available to the agency under paragraph (c) of this section) absent or custodial parents of Medicaid beneficiaries with employment-related injuries or illnesses; and


(ii) From State Motor Vehicle accident report files, information that identifies those Medicaid beneficiaries injured in motor vehicle accidents, whether injured as pedestrians, drivers, passengers, or bicyclists.


(5) If unable to secure agreements as specified in paragraph (d)(4) of this section, the agency must submit documentation to the regional office that demonstrates the agency made a reasonable attempt to secure these agreements. If CMS determines that a reasonable attempt was made, the requirements of paragraph (d)(4) of this section are deemed to be met.


(e) Diagnosis and trauma code edits. Except as specified under paragraph (l) of this section, the agency must take action to identify those paid claims for Medicaid beneficiaries that contain diagnosis codes that are indicative of trauma, or injury, poisoning, and other consequences of external causes, for the purpose of determining the legal liability of third parties so that the agency may process claims under the third party liability payment procedures specified in § 433.139(b) through (f).


(f) Data exchanges and trauma code edits: Frequency. Except as provided in paragraph (l) of this section, the agency must conduct the data exchanges required in paragraphs (d)(1) and (3) of this section, and diagnosis and trauma edits required in paragraphs (d)(4) and (e) of this section on a routine and timely basis. The State plan must specify the frequency of these activities.


(g) Followup procedures for identifying legally liable third party resources. Except as provided in paragraph (l) of this section, the State must meet the requirements of this paragraph.


(1) SWICA, SSA wage and earnings files, and title IV-A data exchanges. With respect to information obtained under paragraphs (d)(1) through (d)(3) of this section –


(i) Within 45 days, the agency must follow up (if appropriate) on such information to identify legally liable third party resources and incorporate such information into the eligibility case file and into its third party data base and third party recovery unit so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f); and


(ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(1)(i) of this section.


(2) Health insurance information and workers’ compensation data exchanges. With respect to information obtained under paragraphs (b) and (d)(4)(i) of this section –


(i) Within 60 days, the agency must followup on such information (if appropriate) in order to identify legally liable third party resources and incorporate such information into the eligibility case file and into its third party data base and third party recovery unit so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f); and


(ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(2)(i) of this section.


(3) State motor vehicle accident report file data exchanges. With respect to information obtained under paragraph (d)(4)(ii) of this section –


(i) The State plan must describe the methods the agency uses for following up on such information in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f);


(ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and


(iii) The State plan must specify timeframes for incorporation of the information.


(4) Diagnosis and trauma code edits. With respect to the paid claims identified under paragraph (e) of this section –


(i) The State plan must describe the methods the agency uses to follow up on such claims in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f) (Methods must include a procedure for periodically identifying those trauma codes that yield the highest third party collections and giving priority to following up on those codes.);


(ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and


(iii) The State plan must specify the timeframes for incorporation of the information.


(h) Obtaining other information and data exchanges: Safeguarding information. (1) The agency must safeguard information obtained from and exchanged under this section with other agencies in accordance with the requirements set forth in part 431, subpart F of this chapter.


(2) Before requesting information from, or releasing information to other agencies to identify legally liable third party resources under paragraph (d) of this section the agency must execute data exchange agreements with those agencies. The agreements, at a minimum, must specify –


(i) The information to be exchanged;


(ii) The titles of all agency officials with the authority to request third party information;


(iii) The methods, including the formats to be used, and the timing for requesting and providing the information;


(iv) The safeguards limiting the use and disclosure of the information as required by Federal or State law or regulations; and


(v) The method the agency will use to reimburse reasonable costs of furnishing the information if payment is requested.


(i) Reimbursement. The agency must, upon request, reimburse an agency for the reasonable costs incurred in furnishing information under this section to the Medicaid agency.


(j) Reports. The agency must provide such reports with respect to the data exchanges and trauma code edits set forth in paragraphs (d)(1) through (d)(4) and paragraph (e) of this section, respectively, as the Secretary prescribes for the purpose of determining compliance under § 433.138 and evaluating the effectiveness of the third party liability identification system. However, if the State is not meeting the provisions of paragraph (e) of this section because it has been granted a waiver of those provisions under paragraph (l) of this section, it is not required to provide the reports required in this paragraph.


(k) Integration with the State mechanized claims processing and information retrieval system. Basic requirement – Development of an action plan. (1) If a State has a mechanized claims processing and information retrieval system approved by CMS under subpart C of this part, the agency must have an action plan for pursuing third party liability claims and the action plan must be integrated with the mechanized claims processing and information retrieval system.


(2) The action plan must describe the actions and methodologies the State will follow to –


(i) Identify third parties;


(ii) Determine the liability of third parties;


(iii) Avoid payment of third party claims as required in § 433.139;


(iv) Recover reimbursement from third parties after Medicaid claims payment as required in § 433.139; and,


(v) Record information and actions relating to the action plan.


(3) The action plan must be consistent with the conditions for reapproval set forth in § 433.119. The portion of the plan which is integrated with MMIS is monitored in accordance with those conditions and if the conditions are not met; it is subject to FFP reduction in accordance with procedures set forth in § 433.120. The State is not subject to any other penalty as a result of other monitoring, quality control, or auditing requirements for those items in the action plan.


(4) The agency must submit its action plan to the CMS Regional Office within 120 days from the date CMS issues implementing instructions for the State Medicaid Manual. If a State does not have an approved MMIS on the date of issuance of the State Medicaid Manual but subsequently implements an MMIS, the State must submit its action plan within 90 days from the date the system is operational. The CMS Regional Office approves or disapproves the action plan.


(l) Waiver of requirements. (1) The agency may request initial and continuing waiver of the requirements to determine third party liability found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), (g)(3), and (g)(4) of this section if the State determines the activity to be not cost-effective. An activity would not be cost-effective if the cost of the required activity exceeds the third party liability recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the State.


(i) The agency must submit a request for waiver of the requirement in writing to the CMS regional office.


(ii) The request must contain adequate documentation to establish that to meet a requirement specified by the agency is not cost-effective. Examples of documentation are claims recovery data and a State analysis documenting a cost-effective alternative that accomplished the same task.


(iii) The agency must agree, if a waiver is granted, to notify CMS of any event that occurs that changes the conditions upon which the waiver was approved.


(2) CMS will review a State’s request to have a requirement specified under paragraph (l)(1) of this section waived and will request additional information from the State, if necessary. CMS will notify the State of its approval or disapproval determination within 30 days of receipt of a properly documented request.


(3) CMS may rescind a waiver at any time that it determines that the agency no longer meets the criteria for approving the waiver. If the waiver is rescinded, the agency has 6 months from the date of the rescission notice to meet the requirement that had been waived.


[52 FR 5975, Feb. 27, 1987, as amended at 54 FR 8741, Mar. 2, 1989; 55 FR 1432, Jan. 16, 1990; 55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, 1995; 81 FR 27853, May 6, 2016; 81 FR 86449, Nov. 30, 2016]


§ 433.139 Payment of claims.

(a) Basic provisions. (1) For claims involving third party liability that are processed on or after May 12, 1986, the agency must use the procedures specified in paragraphs (b) through (f) of this section.


(2) The agency must submit documentation of the methods (e.g., cost avoidance, pay and recover later) it uses for payment of claims involving third party liability to the CMS Regional Office.


(b) Probable liability is established at the time claim is filed. Except as provided in paragraph (e) of this section –


(1) If the agency has established the probable existence of third party liability at the time the claim is filed, the agency must reject the claim and return it to the provider for a determination of the amount of liability. The establishment of third party liability takes place when the agency receives confirmation from the provider or a third party resource indicating the extent of third party liability. When the amount of liability is determined, the agency must then pay the claim to the extent that payment allowed under the agency’s payment schedule exceeds the amount of the third party’s payment.


(2) [Reserved]


(3) The agency must pay the full amount allowed under the agency’s payment schedule for the claim and seek reimbursement from any liable third party to the limit of legal liability (and for purposes of paragraph (b)(3)(ii) of this section, from a third party, if the third party liability is derived from an absent parent whose obligation to pay support is being enforced by the State title IV-D agency), consistent with paragraph (f) of this section if –


(i) The claim is for preventive pediatric services, including early and periodic screening, diagnosis and treatment services provided for under part 441, subpart B, of this chapter, that are covered under the State plan; or


(ii) The claim is for a service covered under the State plan that is provided to an individual on whose behalf child support enforcement is being carried out by the State title IV-D agency. The agency prior to making any payment under this section must assure that the following requirements are met:


(A) The State plan specifies whether or not providers are required to bill the third party.


(B) For child support enforcement services beginning February 9, 2018, the provider certifies that before billing Medicaid, if the provider has billed a third party, the provider has waited 100 days from the date of the service and has not received payment from the third party.


(C) The State plan specifies the method used in determining the provider’s compliance with the billing requirements.


(c) Probable liability is not established or benefits are not available at the time claim is filed. If the probable existence of third party liability cannot be established or third party benefits are not available to pay the beneficiary’s medical expenses at the time the claim is filed, the agency must pay the full amount allowed under the agency’s payment schedule.


(d) Recovery of reimbursement. (1) If the agency has an approved waiver under paragraph (e) of this section to pay a claim in which the probable existence of third party liability has been established and then seek reimbursement, the agency must seek recovery of reimbursement from the third party to the limit of legal liability within 60 days after the end of the month in which payment is made unless the agency has a waiver of the 60-day requirement under paragraph (e) of this section.


(2) Except as provided in paragraph (e) of this section, if the agency learns of the existence of a liable third party after a claim is paid, or benefits become available from a third party after a claim is paid, the agency must seek recovery of reimbursement within 60 days after the end of the month it learns of the existence of the liable third party or benefits become available.


(3) Reimbursement must be sought unless the agency determines that recovery would not be cost effective in accordance with paragraph (f) of this section.


(e) Waiver of requirements. (1) The agency may request initial and continuing waiver of the requirements in paragraphs (b)(1), (d)(1), and (d)(2) of this section, if it determines that the requirement is not cost-effective. An activity would not be cost-effective if the cost of the required activity exceeds the third party liability recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the State.


(i) The agency must submit a request for waiver of the requirement in writing to the CMS regional office.


(ii) The request must contain adequate documentation to establish that to meet a requirement specified by the agency is not cost-effective. Examples of documentation are costs associated with billing, claims recovery data, and a State analysis documenting a cost-effective alternative that accomplishes the same task.


(iii) The agency must agree, if a waiver is granted, to notify CMS of any event that occurs that changes the conditions upon which the waiver was approved.


(2) CMS will review a State’s request to have a requirement specified under paragraph (e)(1) of this section waived and will request additional information from the State, if necessary. CMS will notify the State of its approval or disapproval determination within 30 days of receipt of a properly documented request.


(3) CMS may rescind the waiver at any time that it determines that the State no longer meets the criteria for approving the waiver. If the waiver is rescinded, the agency has 6 months from the date of the rescission notice to meet the requirement that had been waived.


(4) An agency requesting a waiver of the requirements specifically concerning either the 60-day limit in paragraph (d)(1) or (d)(2) of this section must submit documentation of written agreement between the agency and the third party, including Medicare fiscal intermediaries and carriers, that extension of the billing requirement is agreeable to all parties.


(f) Suspension or termination of recovery of reimbursement. (1) An agency must seek reimbursement from a liable third party on all claims for which it determines that the amount it reasonably expects to recover will be greater than the cost of recovery. Recovery efforts may be suspended or terminated only if they are not cost effective.


(2) The State plan must specify the threshold amount or other guideline that the agency uses in determining whether to seek recovery of reimbursement from a liable third party, or describe the process by which the agency determines that seeking recovery of reimbursement would not be cost effective.


(3) The State plan must also specify the dollar amount or period of time for which it will accumulate billings with respect to a particular liable third party in making the decision whether to seek recovery of reimbursement.


[50 FR 46665, Nov. 12, 1985, as amended at 51 FR 16319, May 2, 1986; 60 FR 35503, July 10, 1995; 62 FR 23140, Apr. 29, 1997; 85 FR 87100, Dec. 31, 2020]


§ 433.140 FFP and repayment of Federal share.

(a) FFP is not available in Medicaid payments if –


(1) The agency failed to fulfill the requirements of §§ 433.138 and 433.139 with regard to establishing liability and seeking reimbursement from a third party;


(2) The agency received reimbursement from a liable third party; or


(3) A private insurer would have been obligated to pay for the service except that its insurance contract limits or excludes payments if the individual is eligible for Medicaid.


(b) FFP is available at the 50 percent rate for the agency’s expenditures in carrying out the requirements of this subpart.


(c) If the State receives FFP in Medicaid payments for which it receives third party reimbursement, the State must pay the Federal government a portion of the reimbursement determined in accordance with the FMAP for the State. This payment may be reduced by the total amount needed to meet the incentive payment in § 433.153.


Assignment of Rights to Benefits

§ 433.145 Assignment of rights to benefits – State plan requirements.

(a) A State plan must provide that, as a condition of eligibility, each legally able applicant or beneficiary is required to:


(1) Assign to the Medicaid agency his or her rights, or the rights of any other individual eligible under the plan for whom he or she can legally make an assignment, to medical support and to payment for medical care from any third party;


(2) Cooperate with the agency in establishing the identity of a child’s parents and in obtaining medical support and payments, unless the individual establishes good cause for not cooperating, and except for individuals described in § 435.116 of this chapter (pregnant women), who are exempt from cooperating in establishing the identity of a child’s parents and obtaining medical support and payments from, or derived from, the non-custodial parent of a child; and


(3) Cooperate in identifying and providing information to assist the Medicaid agency in pursuing third parties who may be liable to pay for care and services under the plan, unless the individual establishes good cause for not cooperating.


(b) A State plan must provide that the requirements for assignments, cooperation in establishing paternity and obtaining support, and cooperation in identifying and providing information to assist the State in pursuing any liable third party under §§ 433.146 through 433.148 are met.


(c) A State plan must provide that the assignment of rights to benefits obtained from an applicant or beneficiary is effective only for services that are reimbursed by Medicaid.


[55 FR 48606, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993; 81 FR 86450, Nov. 30, 2016]


§ 433.146 Rights assigned; assignment method.

(a) Except as specified in paragraph (b) of this section, the agency must require the individual to assign to the State –


(1) His own rights to any medical care support available under an order of a court or an administrative agency, and any third party payments for medical care; and


(2) The rights of any other individual eligible under the plan, for whom he can legally make an assignment.


(b) Assignment of rights to benefits may not include assignment of rights to Medicare benefits.


(c) If assignment of rights to benefits is automatic because of State law, the agency may substitute such an assignment for an individual executed assignment, as long as the agency informs the individual of the terms and consequences of the State law.


§ 433.147 Cooperation in establishing the identity of a child’s parents and in obtaining medical support and payments and in identifying and providing information to assist in pursuing third parties who may be liable to pay.

(a) Scope of requirement. The agency must require the individual who assigns his or her rights to cooperate in –


(1) Except as exempt under § 433.145(a)(2), establishing the identity of a child’s parents and obtaining medical support and payments for himself or herself and any other person for whom the individual can legally assign rights; and


(2) Identifying and providing information to assist the Medicaid agency in pursuing third parties who may be liable to pay for care and services under the plan.


(b) Essentials of cooperation. As part of a cooperation, the agency may require an individual to –


(1) Appear at a State or local office designated by the agency to provide information or evidence relevant to the case;


(2) Appear as a witness at a court or other proceeding;


(3) Provide information, or attest to lack of information, under penalty of perjury;


(4) Pay to the agency any support or medical care funds received that are covered by the assignment of rights; and


(5) Take any other reasonable steps to assist in establishing paternity and securing medical support and payments, and in identifying and providing information to assist the State in pursuing any liable third party.


(c) Waiver of cooperation for good cause. The agency must waive the requirements in paragraphs (a) and (b) of this section if it determines that the individual has good cause for refusing to cooperate.


(1) For establishing the identity of a child’s parents or obtaining medical care support and payments, or identifying or providing information to assist the State in pursuing any liable third party for a child for whom the individual can legally assign rights, the agency must find that cooperation is against the best interests of the child.


(2) With respect to obtaining medical care support and payments for an individual and identifying and providing information to assist in pursuing liable third parties in any case not covered by paragraph (c)(1) of this section, the agency must find that cooperation is against the best interests of the individual or the person to whom Medicaid is being furnished because it is anticipated that cooperation will result in reprisal against, and cause physical or emotional harm to, the individual or other person.


[45 FR 8984, Feb. 11, 1980, as amended at 55 FR 48606, Nov. 21, 1990; 58 FR 4907, Jan. 19, 1993; 81 FR 86450, Nov. 30, 2016]


§ 433.148 Denial or termination of eligibility.

In administering the assignment of rights provision, the agency must:


(a) Deny or terminate eligibility for any applicant or beneficiary who –


(1) Refuses to assign his own rights or those of any other individual for whom he can legally make an assignment; or


(2) In the case of an applicant, does not attest to willingness to cooperate, and in the case of a beneficiary, refuses to cooperate in establishing the identity of a child’s parents, obtaining medical child support and pursuing liable third parties, as required under § 433.147(a) unless cooperation has been waived;


(b) Provide Medicaid to any individual who –


(1) Cannot legally assign his own rights; and


(2) Would otherwise be eligible for Medicaid but for the refusal, by a person legally able to assign his rights, to assign his rights or to cooperate as required by this subpart; and


(c) In denying or terminating eligibility, comply with the notice and hearing requirements of part 431, subpart E of this subchapter.


[45 FR 8984, Feb. 11, 1980, as amended at 81 FR 86450, Nov. 30, 2016]


Cooperative Agreements and Incentive Payments

§ 433.151 Cooperative agreements and incentive payments – State plan requirements.

For medical assistance furnished on or after October 1, 1984 –


(a) A State plan must provide for entering into written cooperative agreements for enforcement of rights to and collection of third party benefits with at least one of the following entities: The State title IV-D agency, any appropriate agency of any State, and appropriate courts and law enforcement officials. The agreements must be in accordance with the provisions of § 433.152.


(b) A State plan must provide that the requirements for making incentive payments and for distributing third party collections specified in §§ 433.153 and 433.154 are met.


[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]


§ 433.152 Requirements for cooperative agreements for third party collections.

(a) Except as specified in paragraph (b) of this section, the State agency may develop the specific terms of cooperative agreements with other agencies as it determines appropriate for individual circumstances.


(b) Agreements with title IV-D agencies must specify that:


(1) The Medicaid agency may not refer a case for medical support enforcement when the following criteria have been met:


(i) The Medicaid referral is based solely upon health care services provided through an Indian Health Program (as defined at 25 U.S.C. 1603(12)), including through the Purchased/Referred Care program, to a child who is eligible for health care services from the Indian Health Service (IHS).


(ii) [Reserved]


(2) The Medicaid agency will provide reimbursement to the IV-D agency only for those child support services performed that are not reimbursable by the Office of Child Support Enforcement under title IV-D of the Act and that are necessary for the collection of amounts for the Medicaid program.


[50 FR 46666, Nov. 12, 1985, as amended at 81 FR 93560, Dec. 20, 2016]


§ 433.153 Incentive payments to States and political subdivisions.

(a) When payments are required. The agency must make an incentive payment to a political subdivision, a legal entity of the subdivision such as a prosecuting or district attorney or a friend of the court, or another State that enforces and collects medical support and payments for the agency.


(b) Amount and source of payment. The incentive payment must equal 15 percent of the amount collected, and must be made from the Federal share of that amount.


(c) Payment to two or more jurisdictions. If more than one State or political subdivision is involved in enforcing and collecting support and payments:


(1) The agency must pay all of the incentive payment to the political subdivision, legal entity of the subdivision, or another State that collected medical support and payments at the request of the agency.


(2) The political subdivision, legal entity or other State that receives the incentive payment must then divide the incentive payment equally with any other political subdivisions, legal entities, or other States that assisted in the collection, unless an alternative allocation is agreed upon by all jurisdictions involved.


§ 433.154 Distribution of collections.

The agency must distribute collections as follows –


(a) To itself, an amount equal to State Medicaid expenditures for the individual on whose right the collection was based.


(b) To the Federal Government, the Federal share of the State Medicaid expenditures, minus any incentive payment made in accordance with § 433.153.


(c) To the beneficiary, any remaining amount. This amount must be treated as income or resources under part 435 or part 436 of this subchapter, as appropriate.


Subpart E – Methodologies for Determining Federal Share of Medicaid Expenditures for Adult Eligibility Group


Source:78 FR 19942, Apr. 2, 2013, unless otherwise noted.

§ 433.202 Scope.

This subpart sets forth the requirements and procedures that are applicable to support State claims for the increased FMAP specified at § 433.10(c)(6) for the medical assistance expenditures for individuals determined eligible as specified in § 435.119 of this chapter who meet the definition of newly eligible individual specified in § 433.204(a)(1). These procedures will also identify individuals determined eligible as specified in § 435.119 of this chapter for whom the State may claim the regular FMAP rate specified at § 433.10(b) or the increased FMAP rate specified at § 433.10(c)(7) or (8), as applicable.


§ 433.204 Definitions.

(a)(1) Newly eligible individual means an individual determined eligible for Medicaid in accordance with the requirements of the adult group described in § 435.119 of this chapter, and who, as determined by the State in accordance with the requirements of § 433.206, would not have been eligible for Medicaid under the State’s eligibility standards and methodologies for the Medicaid State plan, waiver or demonstration programs in effect in the State as of December 1, 2009, for full benefits or for benchmark coverage described in § 440.330(a), (b), or (c) of this chapter or benchmark equivalent coverage described in § 440.335 of this chapter that has an aggregate actuarial value that is at least actuarially equivalent to benchmark coverage described in § 440.330(a), (b), or (c) of this chapter, or would have been eligible but not enrolled (or placed on a waiting list) for such benefits or coverage through a waiver under the plan that had a capped or limited enrollment that was full.


(2) Full benefits means, for purposes of paragraph (a)(1) of this section, with respect to an adult individual, medical assistance for all services covered under the State plan under Title XIX of the Act that is not less in amount, duration, or scope, or is determined by the Secretary to be substantially equivalent, to the medical assistance available for an individual described in section 1902(a)(10)(A)(i) of the Act.


(3) For purposes of establishing under paragraphs (a)(1) and (2) of this section whether an individual would not have been eligible for full benefits, benchmark coverage, or benchmark equivalent coverage under a waiver or demonstration program in effect on December 1, 2009, the State must provide CMS with its analysis, in accordance with guidance issued by CMS, about whether the benefits available under such waiver or demonstration constituted full benefits, benchmark coverage, or benchmark equivalent coverage. CMS will review such analysis and confirm the applicable FMAP. Individuals for whom such benefits or coverage would have been available under such waiver or demonstration are not newly eligible individuals.


(b)(1) Expansion State means a State that, as of March 23, 2010, offered health benefits coverage statewide to parents and nonpregnant, childless adults whose income is at least 100 percent of the Federal Poverty Level. A State that offers health benefits coverage to only parents or only nonpregnant childless adults described in the preceding sentence will not be considered to be an expansion State. Such health benefits coverage must:


(i) Have included inpatient hospital services;


(ii) Not have been dependent on access to employer coverage, employer contribution, or employment; and


(iii) Not have been limited to premium assistance, hospital-only benefits, a high deductible health plan, or benefits under a demonstration program authorized under section 1938 of the Act.


(2) For purposes of paragraph (b)(1) of this section and for § 433.10(c)(8), a nonpregnant childless adult means an individual who is not eligible based on pregnancy and does not meet the definition of a caretaker relative in § 435.4 of this chapter.


§ 433.206 Threshold methodology.

(a) Overview. Effective January 1, 2014, States must apply the threshold methodology described in this paragraph for purposes of determining the appropriate claiming for the Federal share of expenditures at the applicable FMAP rates described in § 433.10(b) and (c) for medical assistance provided with respect to individuals who have been determined eligible for the Medicaid program under § 435.119 of this chapter. Subject to the provisions of this paragraph, States must apply the CMS-approved State specific threshold methodology to determine and distinguish such individuals as newly or not newly eligible individuals in accordance with the definition in § 433.204(a)(1), and in accordance with States’ Medicaid eligibility criteria as in effect on December 1, 2009 and to attribute their associated medical expenditures with the appropriate FMAP. The threshold methodology must not be applied by States for the purpose of determining the applicable FMAP for individuals under any other eligibility category other than § 435.119 of this chapter.


(b) General principles. The threshold methodology should:


(1) Not impact the timing or approval of an individual’s eligibility for Medicaid.


(2) Not be biased in such a manner as to inappropriately establish the numbers of, or medical assistance expenditures for, individuals determined to be newly or not newly eligible.


(3) Provide a valid and accurate accounting of individuals who would have been eligible in accordance with the December 1, 2009 eligibility standards and applicable eligibility categories for the benefits described in § 433.204(a)(1), and subject to paragraphs (d), (e), and (g) of this section, by incorporating simplified assessments of resources, enrollment cap requirements in place at that time, and other special circumstances as approved by CMS, respectively.


(4) Operate efficiently, without further review once an individual has been determined not to be newly eligible based on the December 1, 2009 standards for any eligibility category.


(c) Components of the threshold methodology. Subject to the submission of a threshold methodology State plan amendment as specified in paragraph (h) of this section, the provisions of the threshold methodology consist of two components, the individual income-based determination and population-based non-income adjustments to reflect resource criteria, enrollment caps in effect on December 1, 2009, and other factors in accordance with paragraph (g) of this section.


(1) Scope. The threshold methodology shall apply with respect to the population, and the associated expenditures for such population, which has been determined eligible for Medicaid under section 1902(a)(10)(A)(i)(VIII) of the Act and in accordance with § 435.119 of this chapter. This population and associated expenditures must not include individuals who have been determined eligible for Medicaid under any other mandatory or optional eligibility category.


(2) Benefit criteria for newly eligible. An individual eligible for and enrolled under § 435.119 of this chapter is considered newly eligible if, with respect to the applicable eligibility category in effect on December 1, 2009, the benefits did not meet the criteria described in the newly eligible definition at § 433.204(a)(1).


(3) Individual income-based determination. The individual income-based determination shall be a comparison of the individual’s MAGI-based income to the income standard in effect on December 1, 2009, as converted to an equivalent MAGI-based income standard for each applicable eligibility category as in effect on that date, as follows.


(i) The amount of an individual’s income under the threshold methodology is the MAGI-based income determined in accordance with § 435.603 of this chapter.


(ii) For each individual, the equivalent MAGI-based income eligibility standard is the applicable income eligibility standard for the applicable category of eligibility as in effect on December 1, 2009 that is converted to an equivalent MAGI-based income standard. For example, as applicable, a separate MAGI-based income standard will be applied for individuals determined to be disabled who would have been eligible under an optional eligibility category in effect on December 1, 2009 that was based on disability. For these purposes, the applicable equivalent MAGI-based standard is the standard as submitted by the State and approved by CMS in accordance with CMS guidance.


(iii) With respect to income eligibility criteria, if the individual’s MAGI-based income is at or below the applicable converted MAGI-based income standard for the relevant eligibility category or group, then the individual is included in the population that is not newly eligible;


(iv) With respect to income eligibility criteria, if the individual’s MAGI-based income is greater than the applicable converted MAGI-based income standard for the relevant eligibility category or group, then the individual is included in the population that is newly eligible;


(v) Treatment of spend-down programs. Treatment of medically needy or spend-down programs under the threshold methodology is described in paragraph (f) of this section.


(vi) For purposes of comparing the individual’s MAGI-based income to the applicable converted MAGI-based income standard in effect on December 1, 2009, an individual will not be considered disabled absent an actual disability determination for the individual that is in accordance with the disability definition applicable for the State under Title XIX of the Act.


(4) Treatment of disability. For purposes of applying the appropriate FMAP under § 433.10(b) or (c) for the medical assistance expenditures of an individual in applying the definition of newly eligible under § 433.204(a)(1), for eligibility categories or groups as in effect on December 1, 2009 for which disability was an eligibility criteria:


(i) During the period of a disability determination. During the period for which a disability determination is pending, including during the period of any appeal process, and absent an actual disability determination for the individual that is in accordance with the disability definition applicable for the State under Title XIX of the Act, the individual is not considered to be disabled.


(ii) Following a disability determination. With respect to an individual for which a disability determination was pending, following the actual determination of disability, the individual will be considered disabled effective with the date of the disability determination, or, if later, the disability onset date, as determined.


(5) Population-based adjustments to the populations of newly eligible and not newly eligible. (i) The State may elect a resource criteria proxy adjustment described in paragraph (d) of this section.


(ii) States that had a waiver or demonstration program with an enrollment cap in effect as of December 1, 2009 must apply an adjustment based on enrollment caps, subject to the definition of newly eligible individual in § 433.204(a)(1) and paragraph (e) of this section.


(iii) States that have special circumstances may need to submit associated proxy methodologies to CMS for approval by CMS as described in paragraph (g) of this section.


(6) Application of FMAP rates to adult group expenditures. Subject to population adjustments under paragraphs (d), (e), or (g) of this section, federal funding for a State’s expenditures for medical assistance provided to individuals determined eligible under § 435.119 of this chapter, including individuals determined eligible under that eligibility group during the evaluation for another eligibility category, must be claimed using the applicable FMAP as follows:


(i) The newly eligible FMAP under § 433.10(c)(6) is applicable for the medical assistance expenditures for individuals determined to be newly eligible, as defined in § 433.204(a)(1).


(ii) The applicable FMAP under § 433.10(b) or § 433.10(c)(7) or (8) is applicable for the medical assistance expenditures for individuals determined not to be newly eligible.


(7) Status as newly or not newly eligible. Under the threshold methodology States must provide that once individuals are determined under the threshold methodology to be either newly or not newly eligible individuals in accordance with the applicable December 1, 2009 eligibility criteria, the State would apply that determination until a new determination of MAGI-based income has been made in accordance with § 435.916 of this chapter, or the individual has been otherwise determined not to be covered under the adult group set forth at § 435.119 of this chapter.


(d) Optional resource criteria proxy adjustment – (1) General. Under an election under this paragraph (d), the State may use a resource proxy methodology for purposes of adjusting the claims for the expenditures of the population enrolled under § 435.119 of this chapter to account for individuals who would not have been eligible for Medicaid because of the application of resource criteria as in effect for such population as of December 1, 2009, and therefore would meet the newly eligible individual definition at § 433.204(a)(1). Under this paragraph (d), a State may elect to apply a resource proxy methodology with respect to the resource criteria as in effect on December 1, 2009 and applied to the expenditures for a specific eligibility category or categories of individuals as in effect on December 1, 2009, or applied to the expenditures of the entire population enrolled under § 435.119 of this chapter. As provided in paragraph (d)(4) of this section, the State must indicate any resource proxy election in the threshold methodology State plan amendment submitted under paragraph (h) of this section. The use of a resource proxy methodology must not delay or interfere with the eligibility determination for an individual.


(2) A State’s resource proxy methodology must:


(i) Describe each eligibility group or groups for which an individual eligible under § 435.119 would have been eligible on December 1, 2009, subject to resource criteria, and a methodology to apply those resource criteria as an adjustment to the total expenditures to adjust determinations of the newly eligible population under paragraph (c) of this section.


(ii) Be auditable.


(iii) Be based on statistically valid data, which is either:


(A) Existing State data from and for periods before January 1, 2014 on the resources of individuals who had applied and received a determination with respect to Medicaid eligibility, including resource eligibility under the State’s applicable December 1, 2009 eligibility criteria. The existing State data must be specifically related to resource eligibility determinations, indicate the number and types of individuals for whom resource determinations were made, and establish the denial rates specifically identified as due to excess resources; or


(B) Post-eligibility State data on the resources of individuals described in paragraph (d)(2)(iii)(B)(1) and (2) of this section, based on and obtained through a post-eligibility statistically valid sample of such individuals with respect to the applicable Medicaid eligibility categories and resource eligibility criteria under the State’s applicable December 1, 2009 eligibility criteria:


(1) State data from and for periods before January 1, 2014 must be for individuals in eligibility categories relevant to § 435.119 of this chapter who apply and receive a determination with respect to Medicaid eligibility, including both approvals and denials, to establish denial rates specifically due to excess resources and identify numbers and types of individuals.


(2) State data from and for periods on or after January 1, 2014 must only be for individuals determined eligible and enrolled under § 435.119 of this chapter, must compare individuals’ resources to the applicable December 1, 2009 resource criteria to establish denial rates specifically due to excess resources, and identify numbers and types of individuals.


(iv) Describe the State data on individuals’ resources used and the application of such data. Whether such State data is based on data described in paragraph (d)(2)(iii)(A) or (B) of this section, such State data must represent sampling results for a period of sufficient length to be statistically valid.


(v) Provide that the resource proxy methodology will account for the treatment of resources in a statistically valid manner when there is a lack of sufficient information to make a resource determination for a particular individual in a sampled population.


(vi) Describe the application of the resource proxy methodology in establishing the amount and submission of claims for Federal funding by the State for the medical assistance expenditures of the applicable eligibility group(s). Such claims submitted under the resource proxy methodology must reflect the appropriate FMAP for the medical assistance expenditures of the affected eligibility group(s).


(vii) As appropriate, describe and demonstrate the statistical validity of the resource proxy methodology and the use of data under such methodology.


(3) Effective date for application of resource proxy. The resource proxy shall not be effective prior to the beginning of the quarter in which such resource proxy is submitted to CMS under the threshold methodology State plan in paragraph (h) of this section.


(4) One time election for resource proxy. The election, application, and description of a resource proxy methodology under this paragraph for individuals determined eligible under § 435.119 must be included in a one-time submission of a State plan amendment submitted under paragraph (h) of this section no later than one year from the first day of the quarter in which eligibility for individuals under § 435.119 of this chapter is initially effective for the State.


(e) Enrollment caps adjustment – (1) Scope. Certain States may have applied enrollment caps, limits, or waiting lists in their Medicaid programs as in effect on December 1, 2009. Under the definition of newly eligible individual in § 433.204(a)(1), such States must consider as newly eligible those individuals eligible under § 435.119 of this chapter who would otherwise be eligible for full benefits, benchmark coverage, or benchmark equivalent coverage provided through a demonstration under the State plan effective December 1, 2009, but would not have been enrolled (or would have been on a waiting list) based on the application of an enrollment cap or limit determined in accordance with the approved demonstration as in effect on that date. Such States must only apply such enrollment cap, limit or waiting list provisions with respect to eligibility category or categories for which such provisions were applicable (for example, nonpregnant childless adults or parents/caretaker relatives) and in effect under the State’s Medicaid program on December 1, 2009. For this purpose, individuals who would have been on a waiting list are considered as not enrolled under the demonstration.


(2) A State for which multiple enrollment caps or limits were in effect under its December 1, 2009 Medicaid program may elect to combine such enrollment caps or limits, unless such treatment would preclude claiming of Federal funding at the applicable FMAP rate required under § 433.10(b) or (c) (for example, to distinguish claims for childless adults and parents in an expansion State) for the medical assistance expenditures of individuals determined eligible and enrolled under § 435.119 of this chapter; a State with enrollment cap or limit provisions that would preclude combining enrollment caps or limit provisions must use separate caps; or, the State, at its option, may elect to use separate caps.


(3) For purposes of claiming Federal funding, with respect to each claiming period for which the State claims Federal funding for an eligibility category for which an enrollment cap or limit is applicable and in effect on December 1, 2009, the State must account for:


(i) The total unduplicated number of individuals eligible and enrolled under § 435.119 of this chapter for the applicable claiming period.


(ii) The total State medical assistance expenditures for individuals eligible and enrolled under § 435.119 of this chapter for the applicable claiming period.


(iii) The enrollment cap or limit in effect on December 1, 2009 for the eligibility category, determined in accordance with the approved demonstration as in effect on December 1, 2009.


(A) For States that elect under paragraph (e)(2) of this section to combine the enrollment caps, the enrollment cap is the sum of the enrollment caps for each eligibility group which is being combined.


(B) For States that elect to treat the enrollment caps separately under paragraph (e)(2) of this section, each enrollment cap will be accounted for separately.


(C) The level of the enrollment cap will be as authorized under the demonstration in effect on December 1, 2009; or, if the State had affirmatively set the cap at a lower level consistent with flexibility provided by the demonstration terms and conditions, the State may elect to apply the lower cap as in effect in the State on December 1, 2009. If a State elects to use such an alternate State-specified enrollment cap, the State will provide CMS with evidence, in its State plan amendment submitted to CMS under paragraph (h) of this section, that it had affirmatively implemented such a cap. Whether the State uses the authorized cap or a lower, verifiable cap as in effect in the State consistent with the demonstration special terms and conditions, the amount of expenditures up to the proportion of the 2009 enrollment cap to the total number of currently enrolled people in the group would not be claimed at the newly eligible FMAP.


(4) States for which an enrollment cap, limit, or waiting list was applicable under their Medicaid programs as in effect on December 1, 2009, must describe the treatment of such provision or provisions in the submission to CMS for approval by CMS in accordance with the State plan requirements outlined in § 433.206(h).


(f) Application of spend-down income eligibility criteria – (1) General. Certain States’ Medicaid programs as in effect on December 1, 2009 may have included eligibility categories for which deduction of incurred medical expenses from income (referred to as spend-down) under the provisions of sections 1902(a)(10)(C) or 1902(f) of the Act was applied in determining individuals’ Medicaid eligibility. Paragraphs (f)(2) and (3) of this section apply, for purposes of determining whether an individual enrolled under § 435.119 of this chapter meets the definition of newly eligible under § 433.204(a)(1), and for purposes of applying the appropriate FMAP under § 433.10(b) or (c) for the medical assistance expenditures of the individual for which a spend-down eligibility category of a State effective on December 1, 2009 is applicable.


(2) Not newly eligible individual. For purposes of a State’s spend-down provision, an individual enrolled under § 435.119 of this chapter whose income before the deduction of incurred medical expenses is less than or equal to the applicable December 1, 2009 State spend-down eligibility income level that would have resulted in full benefits is considered not newly eligible. The FMAP applicable for the medical assistance expenditures of such an individual is the appropriate FMAP under § 433.10(b) and (c) as applicable for an individual who is not newly eligible.


(3) Newly eligible individual. For purposes of a State’s spend-down provision, an individual enrolled under § 435.119 of this chapter whose income before the deduction of incurred medical expenses is greater than the applicable State spend-down eligibility income level is considered newly eligible. The FMAP applicable for the medical assistance expenditures of such an individual is the appropriate FMAP under § 433.10(b) and (c) as applicable for an individual who is newly eligible.


(g) Special circumstances. States may submit additional proxy methodologies to CMS for approval by CMS in accordance with the State plan requirements outlined in § 433.206(h).


(h) Threshold methodology State plan requirements. To claim expenditures at the increased FMAPs described in § 433.210(c)(6) or (c)(8), the State must amend its State plan under the provisions of subpart B of part 430 to reflect the threshold methodology the State implements in accordance with the provisions of this section. The threshold methodology will be included as an attachment to the State plan and, explicitly and by reference, must:


(1) Specify that the threshold methodology the State implements is in accordance with this section;


(2) Specify that the threshold methodology the State implements accounts for the individuals determined eligible under the adult group in § 435.119 of this chapter as a newly eligible individual or not newly eligible individual; and, on that basis, the State implements appropriate tracking for purpose of claiming Federal Medicaid funding for the associated medical assistance expenditures.


(3) Reference the converted MAGI-based December 1, 2009 income eligibility standards and the associated eligibility groups, describe how the State will apply such standards and methodologies, and include other relevant criteria in the assignment of FMAP.


(4) Indicate any required provisions, or options and alternatives the State elects, with respect to:


(i) Treatment of resources, in accordance with paragraph (d) of this section;


(ii) Treatment of enrollment caps or waiting lists, in accordance with paragraph (e) of this section; and


(iii) Special circumstances as approved by CMS in accordance with paragraph (g) of this section.


[78 FR 19942, Apr. 2, 2013, as amended at 78 FR 32991, June 3, 2013]


Subpart F – Refunding of Federal Share of Medicaid Overpayments to Providers


Source:54 FR 5460, Feb. 3, 1989, unless otherwise noted.

§ 433.300 Basis.

This subpart implements –


(a) Section 1903(d)(2)(A) of the Act, which directs that quarterly Federal payments to the States under title XIX (Medicaid) of the Act are to be reduced or increased to make adjustment for prior overpayments or underpayments that the Secretary determines have been made.


(b) Section 1903(d)(2)(C) and (D) of the Act, which provides that a State has 1 year from discovery of an overpayment for Medicaid services to recover or attempt to recover the overpayment from the provider before adjustment in the Federal Medicaid payment to the State is made; and that adjustment will be made at the end of the 1-year period, whether or not recovery is made, unless the State is unable to recover from a provider because the overpayment is a debt that has been discharged in bankruptcy or is otherwise uncollectable.


(c) Section 1903(d)(3) of the Act, which provides that the Secretary will consider the pro rata Federal share of the net amount recovered by a State during any quarter to be an overpayment.


[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31511, May 29, 2012]


§ 433.302 Scope of subpart.

This subpart sets forth the requirements and procedures under which States have 1 year following discovery of overpayments made to providers for Medicaid services to recover or attempt to recover that amount before the States must refund the Federal share of these overpayments to CMS, with certain exceptions.


[77 FR 31511, May 29, 2012]


§ 433.304 Definitions.

As used in this subpart –


Discovery (or discovered) means identification by any State Medicaid agency official or other State official, the Federal Government, or the provider of an overpayment, and the communication of that overpayment finding or the initiation of a formal recoupment action without notice as described in § 433.316.


Final written notice means that written communication, immediately preceding the first level of formal administrative or judicial proceedings, from a Medicaid agency official or other State official that notifies the provider of the State’s overpayment determination and allows the provider to contest that determination, or that notifies the State Medicaid agency of the filing of a civil or criminal action.


Fraud (in accordance with § 455.2) means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to himself or some other person. It includes any act that constitutes fraud under applicable Federal or State law.


Overpayment means the amount paid by a Medicaid agency to a provider which is in excess of the amount that is allowable for services furnished under section 1902 of the Act and which is required to be refunded under section 1903 of the Act.


Provider (in accordance with § 400.203) means any individual or entity furnishing Medicaid services under a provider agreement with the Medicaid agency.


Recoupment means any formal action by the State or its fiscal agent to initiate recovery of an overpayment without advance official notice by reducing future payments to a provider.


Third party (in accordance with § 433.136) means an individual, entity, or program that is or may be liable to pay for all or part of the expenditures for medical assistance furnished under a State plan.


[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 FR 31511, May 29, 2012]


§ 433.310 Applicability of requirements.

(a) General rule. Except as provided in paragraphs (b) and (c) of this section, the provisions of this subpart apply to –


(1) Overpayments made to providers that are discovered by the State;


(2) Overpayments made to providers that are initially discovered by the provider and made known to the State agency; and


(3) Overpayments that are discovered through Federal reviews.


(b) Third party payments and probate collections. The requirements of this subpart do not apply to –


(1) Cases involving third party liability because, in these situations, recovery is sought for a Medicaid payment that would have been made had another party not been legally responsible for payment; and


(2) Probate collections from the estates of deceased Medicaid beneficiaries, as they represent the recovery of payments properly made from resources later determined to be available to the State.


(c) Unallowable costs paid under rate-setting systems. (1) Unallowable costs for a prior year paid to an institutional provider under a rate-setting system that a State recovers through an adjustment to the per diem rate for a subsequent period do not constitute overpayments that are subject to the requirements of this subpart.


In such cases, the State is not required to refund the Federal share explicitly related to the original overpayment in accordance with the regulations in this subpart. Refund of the Federal share occurs when the State claims future expenditures made to the provider at a reduced rate.


(2) Unallowable costs for a prior year paid to an institutional provider under a rate-setting system that a State seeks to recover in a lump sum, by an installment repayment plan, or through reduction of future payments to which the provider would otherwise be entitled constitute overpayments that are subject to the requirements of this subpart.


(d) Recapture of depreciation upon gain on the sale of assets. Depreciation payments are considered overpayments for purposes of this subpart if a State requires their recapture in a discrete amount(s) upon gain on the sale of assets.


§ 433.312 Basic requirements for refunds.

(a) Basic rules. (1) Except as provided in paragraph (b) of this section, the State Medicaid agency has 1 year from the date of discovery of an overpayment to a provider to recover or seek to recover the overpayment before the Federal share must be refunded to CMS.


(2) The State Medicaid agency must refund the Federal share of overpayments at the end of the 1-year period following discovery in accordance with the requirements of this subpart, whether or not the State has recovered the overpayment from the provider.


(b) Exception. The agency is not required to refund the Federal share of an overpayment made to a provider when the State is unable to recover the overpayment amount because the provider has been determined bankrupt or out of business in accordance with § 433.318.


(c) Applicability. (1) The requirements of this subpart apply to overpayments made to Medicaid providers that occur and are discovered in any quarter that begins on or after October 1, 1985.


(2) The date upon which an overpayment occurs is the date upon which a State, using its normal method of reimbursement for a particular class of provider (e.g., check, interfund transfer), makes the payment involving unallowable costs to a provider.


[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31511, May 29, 2012]


§ 433.316 When discovery of overpayment occurs and its significance.

(a) General rule. The date on which an overpayment is discovered is the beginning date of the 1-year period allowed for a State to recover or seek to recover an overpayment before a refund of the Federal share of an overpayment must be made to CMS.


(b) Requirements for notification. Unless a State official or fiscal agent of the State chooses to initiate a formal recoupment action against a provider without first giving written notification of its intent, a State Medicaid agency official or other State official must notify the provider in writing of any overpayment it discovers in accordance with State agency policies and procedures and must take reasonable actions to attempt to recover the overpayment in accordance with State law and procedures.


(c) Overpayments resulting from situations other than fraud. An overpayment resulting from a situation other than fraud is discovered on the earliest of – –


(1) The date on which any Medicaid agency official or other State official first notifies a provider in writing of an overpayment and specifies a dollar amount that is subject to recovery;


(2) The date on which a provider initially acknowledges a specific overpaid amount in writing to the medicaid agency; or


(3) The date on which any State official or fiscal agent of the State initiates a formal action to recoup a specific overpaid amount from a provider without having first notified the provider in writing.


(d) Overpayments resulting from fraud. (1) An overpayment that results from fraud is discovered on the date of the final written notice (as defined in § 433.304 of this subchapter) of the State’s overpayment determination.


(2) When the State is unable to recover a debt which represents an overpayment (or any portion thereof) resulting from fraud within 1 year of discovery because no final determination of the amount of the overpayment has been made under an administrative or judicial process (as applicable), including as a result of a judgment being under appeal, no adjustment shall be made in the Federal payment to such State on account of such overpayment (or any portion thereof) until 30 days after the date on which a final judgment (including, if applicable, a final determination on an appeal) is made.


(3) The Medicaid agency may treat an overpayment made to a Medicaid provider as resulting from fraud under subsection (d) of this section only if it has referred a provider’s case to the Medicaid fraud control unit, or appropriate law enforcement agency in States with no certified Medicaid fraud control unit, as required by § 455.15, § 455.21, or § 455.23 of this chapter, and the Medicaid fraud control unit or appropriate law enforcement agency has provided the Medicaid agency with written notification of acceptance of the case; or if the Medicaid fraud control unit or appropriate law enforcement agency has filed a civil or criminal action against a provider and has notified the State Medicaid agency.


(e) Overpayments identified through Federal reviews. If a Federal review at any time indicates that a State has failed to identify an overpayment or a State has identified an overpayment but has failed to either send written notice of the overpayment to the provider that specified a dollar amount subject to recovery or initiate a formal recoupment from the provider without having first notified the provider in writing, CMS will consider the overpayment as discovered on the date that the Federal official first notifies the State in writing of the overpayment and specifies a dollar amount subject to recovery.


(f) Effect of changes in overpayment amount. Any adjustment in the amount of an overpayment during the 1-year period following discovery (made in accordance with the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution process specified in State administrative policies and procedures) has the following effect on the 1-year recovery period:


(1) A downward adjustment in the amount of an overpayment subject to recovery that occurs after discovery does not change the original 1-year recovery period for the outstanding balance.


(2) An upward adjustment in the amount of an overpayment subject to recovery that occurs during the 1-year period following discovery does not change the 1-year recovery period for the original overpayment amount. A new 1-year period begins for the incremental amount only, beginning with the date of the State’s written notification to the provider regarding the upward adjustment.


(g) Effect of partial collection by State. A partial collection of an overpayment amount by the State from a provider during the 1-year period following discovery does not change the 1-year recovery period for the balance of the original overpayment amount due to CMS.


(h) Effect of administrative or judicial appeals. Any appeal rights extended to a provider do not extend the date of discovery.


[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 FR 31511, May 29, 2012]


§ 433.318 Overpayments involving providers who are bankrupt or out of business.

(a) Basic rules. (1) The agency is not required to refund the Federal share of an overpayment made to a provider as required by § 433.312(a) to the extent that the State is unable to recover the overpayment because the provider has been determined bankrupt or out of business in accordance with the provisions of this section.


(2) The agency must notify the provider that an overpayment exists in any case involving a bankrupt or out-of-business provider and, if the debt has not been determined uncollectable, take reasonable actions to recover the overpayment during the 1-year recovery period in accordance with policies prescribed by applicable State law and administrative procedures.


(b) Overpayment debts that the State need not refund. Overpayments are considered debts that the State is unable to recover within the 1-year period following discovery if the following criteria are met:


(1) The provider has filed for bankruptcy, as specified in paragraph (c) of this section; or


(2) The provider has gone out of business and the State is unable to locate the provider and its assets, as specified in paragraph (d) of this section.


(c) Bankruptcy. The agency is not required to refund to CMS the Federal share of an overpayment at the end of the 1-year period following discovery, if –


(1) The provider has filed for bankruptcy in Federal court at the time of discovery of the overpayment or the provider files a bankruptcy petition in Federal court before the end of the 1-year period following discovery; and


(2) The State is on record with the court as a creditor of the petitioner in the amount of the Medicaid overpayment.


(d) Out of business. (1) The agency is not required to refund to CMS the Federal share of an overpayment at the end of the 1-year period following discovery if the provider is out of business on the date of discovery of the overpayment or if the provider goes out of business before the end of the 1-year period following discovery.


(2) A provider is considered to be out of business on the effective date of a determination to that effect under State law. The agency must –


(i) Document its efforts to locate the party and its assets. These efforts must be consistent with applicable State policies and procedures; and


(ii) Make available an affidavit or certification from the appropriate State legal authority establishing that the provider is out of business and that the overpayment cannot be collected under State law and procedures and citing the effective date of that determination under State law.


(3) A provider is not out of business when ownershp is transferred within the State unless State law and procedures deem a provider that has transferred ownership to be out of business and preclude collection of the overpayment from the provider.


(e) Circumstances requiring refunds. If the 1-year recovery period has expired before an overpayment is found to be uncollectable under the provisions of this section, if the State recovers an overpayment amount under a court-approved discharge of bankruptcy, or if a bankruptcy petition is denied, the agency must refund the Federal share of the overpayment in accordance with the procedures specified in § 433.320 of this subpart.


[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989, as amended at 77 FR 31512, May 29, 2012]


§ 433.320 Procedures for refunds to CMS.

(a) Basic requirements. (1) The agency must refund the Federal share of overpayments that are subject to recovery to CMS through a credit on its Quarterly Statement of Expenditures (Form CMS-64).


(2) The agency must credit CMS with the Federal share of overpayments subject to recovery on the earlier of –


(i) The Form CMS-64 submission due to CMS for the quarter in which the State recovers the overpayment from the provider; or


(ii) The Form CMS-64 due to CMS for the quarter in which the 1-year period following discovery, established in accordance with § 433.316, ends.


(3) A credit on the Form CMS-64 must be made whether or not the overpayment has been recovered by the State from the provider.


(4) If the State does not refund the Federal share of such overpayment as indicated in paragraph (a)(2) of this section, the State will be liable for interest on the amount equal to the Federal share of the non-recovered, non-refunded overpayment amount. Interest during this period will be at the Current Value of Funds Rate (CVFR), and will accrue beginning on the day after the end of the 1-year period following discovery until the last day of the quarter for which the State submits a CMS-64 report refunding the Federal share of the overpayment.


(b) Effect of reporting collections and submitting reduced expenditure claims. (1) The State is not required to refund the Federal share of an overpayment at the end of the 1-year period if the State has already reported a collection or submitted an expenditure claim reduced by a discrete amount to recover the overpayment prior to the end of the 1-year period following discovery.


(2) The State is not required to report on the Form CMS-64 any collections made on overpayment amounts for which the Federal share has been refunded previously.


(3) If a State has refunded the Federal share of an overpayment as required under this subpart and the State subsequently makes recovery by reducing future provider payments by a discrete amount, the State need not reflect that reduction in its claim for Federal financial participation.


(c) Reclaiming overpayment amounts previously refunded to CMS. If the amount of an overpayment is adjusted downward after the agency has credited CMS with the Federal share, the agency may reclaim the amount of the downward adjustment on the Form CMS-64. Under this provision –


(1) Downward adjustment to an overpayment amount previously credited to CMS is allowed only if it is properly based on the approved State plan, Federal law and regulations governing Medicaid, and the appeals resolution processes specified in State administrative policies and procedures.


(2) The 2-year filing limit for retroactive claims for Medicaid expenditures does not apply. A downward adjustment is not considered a retroactive claim but rather a reclaiming of costs previously claimed.


(d) Expiration of 1-year recovery period. If an overpayment has not been determined uncollectable in accordance with the requirements of § 433.318 of this subpart at the end of the 1-year period following discovery of the overpayment, the agency must refund the Federal share of the overpayment to CMS in accordance with the procedures specified in paragraph (a) of this section.


(e) Court-approved discharge of bankruptcy. If the State recovers any portion of an overpayment under a court-approved discharge of bankruptcy, the agency must refund to CMS the Federal share of the overpayment amount collected on the next quarterly expenditure report that is due to CMS for the period that includes the date on which the collection occurs.


(f) Bankruptcy petition denied. If a provider’s petition for bankruptcy is denied in Federal court, the agency must credit CMS with the Federal share of the overpayment on the later of –


(1) The Form CMS-64 submission due to CMS immediately following the date of the decision of the court; or


(2) The Form CMS-64 submission for the quarter in which the 1-year period following discovery of the overpayment ends.


(g) Reclaim of refunds. (1) If a provider is determined bankrupt or out of business under this section after the 1-year period following discovery of the overpayment ends and the State has not been able to make complete recovery, the agency may reclaim the amount of the Federal share of any unrecovered overpayment amount previously refunded to CMS. CMS allows the reclaim of a refund by the agency if the agency submits to CMS documentation that it has made reasonable efforts to obtain recovery.


(2) If the agency reclaims a refund of the Federal share of an overpayment –


(i) In bankruptcy cases, the agency must submit to CMS a statement of its efforts to recover the overpayment during the period before the petition for bankruptcy was filed; and


(ii) In out-of-business cases, the agency must submit to CMS a statement of its efforts to locate the provider and its assets and to recover the overpayment during any period before the provider is found to be out of business in accordance with § 433.318.


(h) Supporting reports. The agency must report the following information to support each Quarterly Statement of Expenditures Form CMS-64:


(1) Amounts of overpayments not collected during the quarter but refunded because of the expiration of the 1-year period following discovery;


(2) Upward and downward adjustments to amounts credited in previous quarters;


(3) Amounts of overpayments collected under court-approved discharges of bankruptcy;


(4) Amounts of previously reported overpayments to providers certified as bankrupt or out of business during the quarter; and


(5) Amounts of overpayments previously credited and reclaimed by the State.


[54 FR 5460, Feb. 3, 1989, as amended at 77 FR 31512, May 29, 2012]


§ 433.322 Maintenance of Records.

The Medicaid agency must maintain a separate record of all overpayment activities for each provider in a manner that satisfies the retention and access requirements of 45 CFR 75.361 through 75.370.


[77 FR 31512, May 29, 2012, as amended at 81 FR 3011, Jan. 20, 2016]


Subpart G – Temporary FMAP Increase During the Public Health Emergency for COVID-19


Source:85 FR 71197, Nov. 6, 2020, unless otherwise noted.

§ 433.400 Continued enrollment for temporary FMAP increase.

(a) Statutory basis. This subpart interprets and implements section 6008(b)(3) of the Families First Coronavirus Response Act (FFCRA) and section 1902(a)(4) and (a)(19) of the Social Security Act.


(b) Definitions. For purposes of this subpart –


COVID-19 means Coronavirus Disease 2019.


Medicare Savings Program means the coverage of Medicare premiums and cost sharing furnished to individuals described in, and determined by the state to be eligible under, section 1902(a)(10)(E)(i), 1902(a)(10)(E)(iii), or 1902(a)(10)(E)(iv) of the Act.


Minimum essential coverage (MEC) has the meaning provided under section 5000A(f)(1) of the Internal Revenue Code and implementing regulations at 26 CFR 1.5000A-2 and includes minimum essential coverage determined by the Secretary under 26 CFR 1.5000A-2(f).


Public Health Emergency for COVID-19 has the same definition provided in § 400.200 of this chapter.


Temporary FMAP increase means the 6.2 percentage point increase in the State’s Federal medical assistance percentage (FMAP) that is authorized under section 6008(a) of the FFCRA through the end of the fiscal quarter in which the Public Health Emergency for COVID-19 ends.


Validly enrolled means that the beneficiary was enrolled in Medicaid based on a determination of eligibility. A beneficiary is not validly enrolled if the agency determines the eligibility was erroneously granted at the most recent determination, redetermination, or renewal of eligibility (if such last redetermination or renewal was completed prior to March 18, 2020) because of agency error or fraud (as evidenced by a fraud conviction) or abuse (as determined following the completion of an investigation pursuant to §§ 455.15 and 455.16 of this chapter) attributed to the beneficiary or the beneficiary’s representative, which was material to the determination of eligibility. Individuals receiving medical assistance during a presumptive eligibility period in accordance with part 435, subpart L, of this chapter have not received a determination of eligibility by the state under the state plan and are not considered validly enrolled beneficiaries for purposes of this section.


(c) General requirements. (1) In order to claim the temporary FMAP increase for:


(i) The quarter in which November 2, 2020, falls, a state must meet the requirements described in paragraph (c)(2) of this section from November 2, 2020, through the end of the quarter.


(ii) Any quarter beginning after November 2, 2020, through the quarter in which the public health emergency for COVID-19, including any extensions, ends, a state must meet the requirements described in paragraphs (c)(2) of this section.


(2) Except as provided in paragraph (d) of this section, for all beneficiaries validly enrolled for benefits under the state plan, a waiver of such plan, or a demonstration project under section 1115(a) of the Act as of or after March 18, 2020, the state must maintain the beneficiary’s enrollment as follows, through the end of the month in which the public health emergency for COVID-19 ends:


(i)(A) For beneficiaries whose Medicaid coverage meets the definition of MEC in paragraph (b) of this section as of or after March 18, 2020, the state must continue to provide Medicaid coverage that meets the definition of MEC, except as provided in paragraph (c)(2)(i)(B) of this section.


(B) For beneficiaries described in paragraph (c)(2)(i)(A) whom the state subsequently determines are eligible for coverage under a Medicare Savings Program eligibility group, the state satisfies the requirement described in paragraph (c)(2) of this section if it furnishes the medical assistance available through the Medicare Savings Program.


(ii) For beneficiaries whose Medicaid coverage as of or after March 18, 2020 does not meet the definition of MEC in paragraph (b) of this section but does include coverage for testing services and treatments for COVID-19, including vaccines, specialized equipment, and therapies, the state must continue to provide Medicaid coverage that includes such testing services and treatments.


(iii) For beneficiaries not described in paragraph (c)(2)(i) or (ii) of this section, the state must continue to provide at least the same level of medical assistance as was provided as of or after March 18, 2020.


(iv) If a state determines that a validly enrolled beneficiary is no longer eligible for Medicaid, including on a procedural basis, the state meets the requirements described in paragraph (c)(2)(i), (ii), or (iii) of this section by continuing to provide the same Medicaid coverage that the beneficiary would have received absent the determination of ineligibility.


(3) Otherwise permissible changes to beneficiary coverage, cost sharing, and post-eligibility treatment of income, including both changes affecting an individual beneficiary and approved changes to the state plan, a section 1115 demonstration and/or a waiver authorized under section 1915 of the Act impacting multiple beneficiaries, will not impact a state’s ability to claim the temporary FMAP increase provided that any such changes do not violate the requirement to maintain beneficiary enrollment described at paragraph (c)(2) of this section or the requirement in section 6008(b)(4) of the FFCRA.


(d) Exceptions. (1) Consistent with the condition to claim the temporary FMAP increase described in paragraph (c)(2) of this section, a state may terminate a beneficiary’s Medicaid enrollment prior to the first day of the month after the public health emergency for COVID-19 ends in the following circumstances:


(i) The beneficiary or the beneficiary’s representative requests a voluntary termination of eligibility;


(ii) The beneficiary ceases to be a resident of the state; or


(iii) The beneficiary dies.


(2) States which have elected the option under section 1903(v)(4) of the Act to provide full benefits to lawfully residing children or pregnant women must limit coverage for such beneficiaries if they no longer meet the definition of a lawfully residing child or pregnant woman under such section to services necessary for treatment of an emergency medical condition, as defined in section 1903(v)(3) of the Act.


(3)(i) For purposes of paragraph (d)(1)(i) of this section, a beneficiary may request a voluntary termination of eligibility from the Medicaid coverage in which the beneficiary is enrolled to transition to other Medicaid coverage for which the beneficiary is eligible, even if the transition to the new Medicaid coverage would not be consistent with paragraph (c)(2) of this section.


(ii) For purposes of paragraph (d)(1)(ii) of this section, beneficiaries who were identified through a data match with the Public Assistance Reporting Information System in accordance with § 435.945(d) of this chapter indicating simultaneous enrollment in two or more states, and who fail to respond to a request for information to verify their residency, may be treated as not being a state resident for purposes of paragraph (d)(1)(ii) of this section, provided that the state takes all reasonably available measures to attempt to verify the beneficiary’s state residency. If a beneficiary’s enrollment is terminated under the exception at paragraph (d)(1)(ii) of this section based on a PARIS data match and the state subsequently obtains information verifying residency, the state must reinstate the beneficiary’s Medicaid enrollment retroactive to the date of termination.


PART 434 – CONTRACTS


Authority:Sec. 1102 of the Social Security Act (42 U.S.C. 1302).


Source:48 FR 54020, Nov. 30, 1983, unless otherwise noted.

Subpart A – General Provisions

§ 434.1 Basis and scope.

(a) Statutory basis. This part is based on section 1902(a)(4) of the Act, which requires that the State plan provide for methods of administration that the Secretary finds necessary for the proper and efficient operation of the plan.


(b) Scope. This part sets forth the requirements for contracts with certain organizations for furnishing Medicaid services or processing or paying Medicaid claims, or enchancing the agency’s capability for effective administration of the program.


[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 67 FR 41095, June 14, 2002]


§ 434.2 Definitions.

As used in this part, unless the context indicates otherwise –


Fiscal agent means an entity that processes or pays vendor claims for the agency.


Health care projects grant center means an entity that –


(a) Is supported in whole or in part by Federal project grant financial assistance; and


(b) Provides or arranges for medical services to beneficiaries.


Private nonmedical institution means an institution (such as a child-care facility or a maternity home) that –


(a) Is not, as a matter of regular business, a health insuring organization or a community health care center;


(b) Provides medical care to its residents through contracts or other arrangements with medical providers; and


(c) Receives capitation payments from the Medicaid agency, under a nonrisk contract, for its residents who are eligible for Medicaid.


Professional management service or consultant firm means a firm that performs management services such as auditing or staff training, or carries out studies or provides consultation aimed at improving State Medicaid operations, for example, with respect to reimbursement formulas or accounting systems.


[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 52 FR 22322, June 11, 1987; 55 FR 51295, Dec. 13, 1990; 67 FR 41095, June 14, 2002]


§ 434.4 State plan requirement.

If the State plan provides for contracts of the types covered by this part, the plan must also provide for meeting the applicable requirements of this part.


§ 434.6 General requirements for all contracts and subcontracts.

(a) Contracts. All contracts under this part must include all of the following:


(1) Include provisions that define a sound and complete procurement contract, as required by 45 CFR part 75.


(2) Identify the population covered by the contract.


(3) Specify any procedures for enrollment or reenrollment of the covered population.


(4) Specify the amount, duration, and scope of medical services to be provided or paid for.


(5) Provide that the agency and HHS may evaluate through inspection or other means, the quality, appropriateness and timeliness of services performed under the contract.


(6) Specify procedures and criteria for terminating the contract, including a requirement that the contractor promptly supply all information necessary for the reimbursement of any outstanding Medicaid claims.


(7) Provide that the contractor maintains an appropriate record system for services to enrolled beneficiaries.


(8) Provide that the contractor safeguards information about beneficiaries as required by part 431, subpart F of this chapter.


(9) Specify any activities to be performed by the contractor that are related to third party liability requirements in part 433, subpart D of this chapter.


(10) Specify which functions may be subcontracted.


(11) Provide that any subcontracts meet the requirements of paragraph (b) of this section.


(12) Specify the following:


(i) No payment will be made by the contractor to a provider for provider-preventable conditions, as identified in the State plan.


(ii) The contractor will require that all providers agree to comply with the reporting requirements in § 447.26(d) of this subchapter as a condition of payment from the contractor.


(iii) The contractor will comply with such reporting requirements to the extent the contractor directly furnishes services.


(b) Subcontracts. All subcontracts must be in writing and fulfill the requirements of this part that are appropriate to the service or activity delegated under the subcontract.


(c) Continued responsibility of contractor. No subcontract terminates the legal responsibility of the contractor to the agency to assure that all activities under the contract are carried out.


[48 FR 54020, Nov. 30, 1983, as amended at 67 FR 41095, June 14, 2002; 76 FR 32837, June 6, 2011; 81 FR 3011, Jan. 20, 2016]


Subpart B – Contracts with Fiscal Agents and Private Nonmedical Institutions

§ 434.10 Contracts with fiscal agents.

Contracts with fiscal agents must –


(a) Meet the requirements of § 434.6;


(b) Include termination procedures that require the contractors to supply promptly all material necessary for continued operation of payment and related systems. This material includes –


(1) Computer programs;


(2) Data files;


(3) User and operation manuals, and other documentation;


(4) System and program documentation; and


(5) Training programs for Medicaid agency staff, their agents or designated representatives in the operation and maintenance of the system;


(c) Offer to the State one or both of the following options, if the fiscal agent or the fiscal agent’s subcontractor has a proprietary right to material specified in paragraph (b) of this section:


(1) Purchasing the material; or


(2) Purchasing the use of the material through leasing or other means; and


(d) State that payment to providers will be made in accordance with part 447 of this chapter.


§ 434.12 Contracts with private nonmedical institutions.

Contracts with private nonmedical institutions must –


(a) Meet the requirements of § 434.6;


(b) Specify a capitation fee based on the cost of the services provided, in accordance with the reimbursement requirements prescribed in part 447 of this chapter; and


(c) Specify when the capitation fee must be paid.


§ 434.14 [Reserved]

Subpart C [Reserved]

Subpart D – Contracts With Health Insuring Organizations

§ 434.40 Contract requirements.

(a) Contracts with health insuring organizations that are not subject to the requirements in section 1903(m)(2)(A) must:


(1) Meet the general requirements for all contracts and subcontracts specified in § 434.6;


(2) Specify that the contractor assumes at least part of the underwriting risk and;


(i) If the contractor assumes the full underwriting risk, specify that payment of the capitation fees to the contractor during the contract period constitutes full payment by the agency for the cost of medical services provided under the contract;


(ii) If the contractor assumes less than the full underwriting risk, specify how the risk is apportioned between the agency and the contractor;


(3) Specify whether the contractor returns to the agency part of any savings remaining after the allowable costs are deducted from the capitations fees, and if savings are returned, the apportionment between agency and the contractor; and


(4) Specify the extent, if any, to which the contractor may obtain reinsurance of a portion of the underwriting risk.


(b) The contract must –


(1) Specify that the capitation fee will not exceed the limits set forth under part 447 of this chapter.


(2) Specify that, except as permitted under paragraph (b) of this section, the capitation fee paid on behalf of each beneficiary may not be renegotiated –


(i) During the contract period if the contract period is 1 year or less; or


(ii) More often than annually if the contract period is for more than 1 year.


(3) Specify that the capitation fee will not include any amount for recoupment of any specific losses suffered by the contractor for risks assumed under the same contract or a prior contract with the agency; and


(4) Specify the actuarial basis for computation of the capitation fee.


(c) The capitation fee may be renegotiated more frequently than annually for beneficiaries who are not enrolled at the time of renegotiation or if the renegotiation is required by changes in Federal or State law.


[55 FR 51295, Dec. 13, 1990]


Subpart E [Reserved]

Subpart F – Federal Financial Participation


Source:48 FR 54020, Nov. 20, 1983, unless otherwise noted. Redesignated at 55 FR 51295, Dec. 13, 1990.

§ 434.70 Conditions for Federal Financial Participation (FFP).

(a) Basic requirements. FFP is available only for periods during which the contract –


(1) Meets the requirements of this part;


(2) Meets the applicable requirements of 45 CFR part 75; and


(3) Is in effect.


(b) Basis for withholding. CMS may withhold FFP for any period during which the State fails to meet the State plan requirements of this part.


[67 FR 41095, June 14, 2002, as amended at 81 FR 3011, Jan. 20, 2016]


§ 434.76 Costs under fiscal agent contracts.

Under each contract with a fiscal agent –


(a) The amount paid to the provider of medical services is a medical assistance cost; and


(b) The amount paid to the contractor for performing the agreed-upon functions is an administrative cost.


§ 434.78 Right to reconsideration of disallowance.

A Medicaid agency dissatisfied with a disallowance of FFP under this subpart may request and will be granted reconsideration in accordance with 45 CFR part 16.


PART 435 – ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA


Authority:Sec. 1102 of the Social Security Act (42 U.S.C. 1302).


Source:43 FR 45204, Sept. 29, 1978, unless otherwise noted.

Subpart A – General Provisions and Definitions

§ 435.2 Purpose and applicability.

This part sets forth, for the 50 States, the District of Columbia, the Northern Mariana Islands, and American Samoa –


(a) The eligibility provisions that a State plan must contain;


(b) The mandatory and optional groups of individuals to whom Medicaid is provided under a State plan;


(c) The eligibility requirements and procedures that the Medicaid agency must use in determining and redetermining eligibility, and requirements it may not use;


(d) The availability of FFP for providing Medicaid and for administering the eligibility provisions of the plan; and


(e) Other requirements concerning eligibility determinations, such as use of an institutionalized individual’s income for the cost of care.


[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 51 FR 41350, Nov. 14, 1986]


§ 435.3 Basis.

(a) This part implements the following sections of the Act and public laws that mandate eligibility requirements and standards:



402(a)(22) Eligibility of deemed beneficiaries of AFDC who receive zero payments because of recoupment of overpayments.

402(a)(37) Eligibility of individuals who lose AFDC eligibility due to increased earnings.

414(g) Eligibility of certain individuals participating in work supplementation programs.

473(b) Eligibility of children in foster care and adopted children who are deemed AFDC beneficiaries.

1619(b) Benefits for blind individuals or those with disabling impairments whose income equals or exceeds a specific SSI limit.

1634(b) Preservation of benefit status for disabled widows and widowers who lost SSI benefits because of 1983 changes in actuarial reduction formula.

1634(d) Individuals who lose eligibility for SSI benefits due to entitlement to early widow’s or widower’s social security disability benefits under section 202(e) or (f) of the Act.

1902(a)(8) Opportunity to apply; assistance must be furnished promptly.

1902(a)(10) Required and optional groups.

1902(a)(12) Determination of blindness.

1902(a)(17) Standards for determining eligibility: flexibility in the application of income eligibility standards.

1902(a)(19) Safeguards for simplicity of administration and best interests of beneficiaries.

1902(a)(34) Three-month retroactive eligibility.

1902(a)(46)(B) Requirement to verify citizenship.

1902(a) (second paragraph after (47)) Eligibility despite increased monthly insurance benefits under title II.

1902(a)(55) Mandatory use of outstation locations other than welfare offices to receive and initially process applications of certain low-income pregnant women, infants, and children under age 19.

1902(b) Prohibited conditions for eligibility: Age requirement of more that 65 years;

State residence requirements excluding individuals who reside in the state; and


Citizenship requirement excluding United States citizens.


1902(e) Four-month continued eligibility for families ineligible because of increased hours or income from employment.

1902(e)(2) Minimum eligibility period for beneficiary enrolled in an HMO.

1902(e)(3) Optional coverage of certain disabled children being cared for at home.

1902(e)(4) Eligibility of newborn children of Medicaid eligible women.

1902(e)(5) Eligibility of pregnant woman for extended coverage for specified postpartum period after pregnancy ends.

1902(f) State option to restrict Medicaid eligibility for aged, blind, or disabled individuals to those who would have been eligible under State plan in effect in January 1972.

1902(j) Medicaid program in American Samoa.

1902(ee) Option to verify citizenship through electronic data sharing with the Social Security Administration.

1903(f) Income limitations for medically needy and individuals covered by State supplement eligibility requirements.

1903(v) Payment for emergency services under Medicaid provided to non-citizens.

1905(a) Definition of medical assistance.

1905(a) (clause following (21)) Prohibitions against providing Medicaid to certain institutionalized individuals.

1905(a) (second sentence) Definition of essential person.

1905(a) Definition of medical assistance.

1905(a)(i)-(viii) List of eligible individuals.

1905(d)(2) Definition of resident of an intermediate care facility for individuals with intellectual disabilities.

1905(j) Definition of State supplementary payment.

1905(k) Eligibility of essential spouses of eligible individuals.

1905(n) Definition of qualified pregnant woman and child.

1912(a) Conditions of eligibility.

1915(c) Home or community-based services.

1915(d) Home or community-based services for individuals age 65 or older.

412(e)(5) of Immigration and Nationality Act – Eligibility of certain refugees.

Pub. L. 93-66, section 230 Deemed eligibility of certain essential persons.

Pub. L. 93-66, section 231 Deemed eligibility of certain persons in medical institutions.

Pub. L. 93-66, section 232 Deemed eligibility of certain blind and disabled medically indigent persons.

Pub. L. 93-233, section 13(c) Deemed eligibility of certain individuals receiving mandatory State supplementary payments.

Pub. L. 94-566, section 503 Deemed eligibility of certain individuals who would be eligible for supplemental security income benefits but for cost-of-living increases in social security benefits.

Pub. L. 96-272, section 310(b)(1) Continued eligibility of certain beneficiaries of Veterans Administration pensions.

Pub. L. 99-509, section 9406 Payment for emergency medical services provided to aliens.

Pub. L. 99-603, section 201 Aliens granted legalized status under section 245A of the Immigration and Nationality Act (8 U.S.C. 1255a) may under certain circumstances be eligible for Medicaid.

Pub. L. 99-603, section 302 Aliens granted legalized status under section 210 of the Immigration and Nationality Act may under certain circumstances be eligible for Medicaid (8 U.S.C. 1160).

Pub. L. 99-603, section 303 Aliens granted legal status under section 210A of the Immigration and Nationality Act may under certain circumstances be eligible for Medicaid (8 U.S.C. 1161).

(b) This part implements the following other provisions of the Act or public laws that establish additional State plan requirements:



1618 Requirement for operation of certain State supplementation programs.

Pub. L. 93-66, section 212(a) Required mandatory minimum State supplementation of SSI benefits programs.

[52 FR 43071, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 FR 36819, Sept. 7, 1990; 55 FR 48607, Nov. 21, 1990; 57 FR 29155, June 30, 1992; 59 FR 48809, Sept. 23, 1994; 81 FR 86450, Nov. 30, 2016]


§ 435.4 Definitions and use of terms.

As used in this part –


AABD means aid to the aged, blind, and disabled under title XVI of the Act;


AB means aid to the blind under title X of the Act;


Advance payments of the premium tax credit (APTC) has the meaning given the term in 45 CFR 155.20.


AFDC means aid to families with dependent children under title IV-A of the Act;


Affordable Care Act means the Patient Protection and Affordable Care Act of 2010 (Pub. L. 111-148), as amended by the Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152), as amended by the Three Percent Withholding Repeal and Job Creation Act (Pub. L. 112-56).


Affordable Insurance Exchanges (Exchanges) has the meaning given the term “Exchanges” in 45 CFR 155.20.


Agency means a single State agency designated or established by a State in accordance with § 431.10(b) of this subchapter.


Applicable modified adjusted gross income (MAGI) standard has the meaning provided in § 435.911(b)(1) of this part.


Applicant means an individual who is seeking an eligibility determination for himself or herself through an application submission or a transfer from another agency or insurance affordability program.


Application means the single streamlined application described at § 435.907(b) of this part or an application described in § 435.907(c)(2) of this part submitted by or on behalf of an individual.


APTD means aid to the permanently and totally disabled under title XIV of the Act;


Beneficiary means an individual who has been determined eligible and is currently receiving Medicaid.


Caretaker relative means a relative of a dependent child by blood, adoption, or marriage with whom the child is living, who assumes primary responsibility for the child’s care (as may, but is not required to, be indicated by claiming the child as a tax dependent for Federal income tax purposes), and who is one of the following –


(1) The child’s father, mother, grandfather, grandmother, brother, sister, stepfather, stepmother, stepbrother, stepsister, uncle, aunt, first cousin, nephew, or niece.


(2) The spouse of such parent or relative, even after the marriage is terminated by death or divorce.


(3) At State option, another relative of the child based on blood (including those of half-blood), adoption, or marriage; the domestic partner of the parent or other caretaker relative; or an adult with whom the child is living and who assumes primary responsibility for the dependent child’s care.


Categorically needy refers to families and children, aged, blind, or disabled individuals, and pregnant women, described under subparts B and C of this part who are eligible for Medicaid. Subpart B of this part describes the mandatory eligibility groups who, generally, are receiving or deemed to be receiving cash assistance under the Act. These mandatory groups are specified in sections 1902(a)(10)(A)(i), 1902(e), 1902(f), and 1928 of the Act. Subpart C of this part describes the optional eligibility groups of individuals who, generally, meet the categorical requirements or income or resource requirements that are the same as or less restrictive than those of the cash assistance programs and who are not receiving cash payments. These optional groups are specified in sections 1902(a)(10)(A)(ii), 1902(e), and 1902(f) of the Act.


Citizenship includes status as a “national of the United States,” and includes both citizens of the United States and non-citizen nationals of the United States described in 8 U.S.C. 1101(a)(22).


Combined eligibility notice means an eligibility notice that informs an individual or multiple family members of a household of eligibility for each of the insurance affordability programs and enrollment in a qualified health plan through the Exchange, for which a determination or denial of eligibility was made, as well as any right to request a fair hearing or appeal related to the determination made for each program. A combined notice must meet the requirements of § 435.917(a) and contain the content described in § 435.917(b) and (c), except that information described in § 435.917(b)(1)(iii) and (iv) may be included in a combined notice issued by another insurance affordability program or in a supplemental notice provided by the agency. A combined eligibility notice must be issued in accordance with the agreement(s) consummated by the agency in accordance with § 435.1200(b)(3).


Coordinated content means information included in an eligibility notice regarding, if applicable –


(1) The transfer of an individual’s or household’s electronic account to another insurance affordability program;


(2) Any notice sent by the agency to another insurance affordability program regarding an individual’s eligibility for Medicaid;


(3) The potential impact, if any, of –


(i) The agency’s determination of eligibility or ineligibility for Medicaid on eligibility for another insurance affordability program; or


(ii) A determination of eligibility for, or enrollment in, another insurance affordability program on an individual’s eligibility for Medicaid; and


(4) The status of household members on the same application or renewal form whose eligibility is not yet determined.


Dependent child means a child who meets both of the following criteria:


(1) Is under the age of 18, or, at State option, is age 18 and a full-time student in secondary school (or equivalent vocational or technical training), if before attaining age 19 the child may reasonably be expected to complete such school or training.


(2) Is deprived of parental support by reason of the death, absence from the home, physical or mental incapacity, or unemployment of at least one parent, unless the State has elected in its State plan to eliminate such deprivation requirement. A parent is considered to be unemployed if he or she is working less than 100 hours per month, or such higher number of hours as the State may elect in its State plan.


Effective income level means the income standard applicable under the State plan for an eligibility group, after taking into consideration any disregard of a block of income applied in determining financial eligibility for such group.


Electronic account means an electronic file that includes all information collected and generated by the agency regarding each individual’s Medicaid eligibility and enrollment, including all documentation required under § 435.914 and including any information collected or generated as part of a fair hearing process conducted under subpart E of this part, the Exchange appeals process conducted under 45 CFR part 155, subpart F or other insurance affordability program appeals process.


Eligibility determination means an approval or denial of eligibility in accordance with § 435.911 as well as a renewal or termination of eligibility in accordance with § 435.916 of this part.


Family size has the meaning provided in § 435.603(b) of this part.


Federal poverty level (FPL) means the Federal poverty level updated periodically in the Federal Register by the Secretary of Health and Human Services under the authority of 42 U.S.C. 9902(2), as in effect for the applicable budget period used to determine an individual’s eligibility in accordance with § 435.603(h) of this part.


Household income has the meaning provided in § 435.603(d) of this part.


Insurance affordability program means a program that is one of the following:


(1) A State Medicaid program under title XIX of the Act.


(2) A State children’s health insurance program (CHIP) under title XXI of the Act.


(3) A State basic health program established under section 1331 of the Affordable Care Act.


(4) A program that makes coverage in a qualified health plan through the Exchange with advance payments of the premium tax credit established under section 36B of the Internal Revenue Code available to qualified individuals.


(5) A program that makes available coverage in a qualified health plan through the Exchange with cost-sharing reductions established under section 1402 of the Affordable Care Act.


MAGI-based income has the meaning provided in § 435.603(e) of this part.


Mandatory State supplement means a cash payment a State is required to make under section 212, Pub. L. 93-66 (July 9, 1973) to an aged, blind, or disabled individual. Its purpose is to provide an individual with the same amount of cash assistance he was receiving under OAA, AB, APTD, or AABD if his SSI payment is less than that amount;


Medically needy refers to families, children, aged, blind, or disabled individuals, and pregnant women listed under subpart D of this part who are not listed in subparts B and C of this part as categorically needy but who may be eligible for Medicaid under this part because their income and resources are within limits set by the State under its Medicaid plan (including persons whose income and resources fall within these limits after their incurred expenses for medical or remedial care are deducted) (Specific financial requirements for determining eligibility of the medically needy appear in subpart I of this part.);


Minimum essential coverage means coverage defined in section 5000A(f) of subtitle D of the Internal Revenue Code, as added by section 1401 of the Affordable Care Act, and implementing regulations of such section issued by the Secretary of the Treasury.


Modified adjusted gross income (MAGI) has the meaning provided at 26 CFR 1.36B-1(e)(2).


Non-applicant means an individual who is not seeking an eligibility determination for himself or herself and is included in an applicant’s or beneficiary’s household to determine eligibility for such applicant or beneficiary.


Non-citizen has the same meaning as the term “alien,” as defined at 8 U.S.C. 1101(a)(3) and includes any individual who is not a citizen or national of the United States, defined at 8 U.S.C. 1101(a)(22).


OAA means old age assistance under title I of the Act;


OASDI means old age, survivors, and disability insurance under title II of the Act;


Optional State supplement means a cash payment made by a State, under section 1616 of the Act, to an aged, blind, or disabled individual;


Optional targeted low-income child means a child under age 19 who meets the financial and categorical standards described below.


(1) Financial need. An optional targeted low-income child:


(i) Has a household income at or below 200 percent of the Federal poverty line for a family of the size involved; and


(ii) Resides in a State with no Medicaid applicable income level (as defined at § 457.10 of this chapter); or


(iii) Resides in a State that has a Medicaid applicable income level (as defined at § 457.10 of this chapter) and has household income that either:


(A) Exceeds the Medicaid applicable income level for the age of such child, but not by more than 50 percentage points; or


(B) Does not exceed the income level specified for such child to be eligible for medical assistance under the policies of the State plan under title XIX on June 1, 1997.


(2) No other coverage and State maintenance of effort. An optional targeted low-income child is not covered under a group health plan or health insurance coverage, or would not be eligible for Medicaid under the policies of the State plan in effect on March 31, 1997; except that, for purposes of this standard –


(i) A child shall not be considered to be covered by health insurance coverage based on coverage offered by the State under a program in operation prior to July 1, 1997 if that program received no Federal financial participation;


(ii) A child shall not be considered to be covered under a group health plan or health insurance coverage if the child did not have reasonable geographic access to care under that coverage.


(3) For purposes of this section, policies of the State plan a under title XIX plan include policies under a Statewide demonstration project under section 1115(a) of the Act other than a demonstration project that covered an expanded group of eligible children but that either –


(i) Did not provide inpatient hospital coverage; or


(ii) Limited eligibility to children previously enrolled in Medicaid, imposed premiums as a condition of initial or continued enrollment, and did not impose a general time limit on eligibility.


Pregnant woman means a woman during pregnancy and the post partum period, which begins on the date the pregnancy ends, extends 60 days, and then ends on the last day of the month in which the 60-day period ends.


Qualified non-citizen includes the term “qualified alien” as defined at 8 U.S.C. 1641(b) and (c).


Secure electronic interface means an interface which allows for the exchange of data between Medicaid and other insurance affordability programs and adheres to the requirements in part 433, subpart C of this chapter.


Shared eligibility service means a common or shared eligibility system or service used by a State to determine individuals’ eligibility for insurance affordability programs.


SSI means supplemental security income under title XVI of the Act.


SWICA means the State Wage Information Collection Agency under section 1137(a) of the Act. It is the State agency administering the State unemployment compensation law; a separate agency administering a quarterly wage reporting system; or a State agency administering an alternative system which has been determined by the Secretary of Labor, in consultation with the Secretary of Agriculture and the Secretary of Health and Human Services, to be as effective and timely in providing employment related income and eligibility data.


Tax dependent has the same meaning as the term “dependent” under section 152 of the Internal Revenue Code, as an individual for whom another individual claims a deduction for a personal exemption under section 151 of the Internal Revenue Code for a taxable year.


[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 46 FR 6909, Jan. 22, 1981; 46 FR 47984, Sept. 30, 1981; 51 FR 7211, Feb. 28, 1986; 58 FR 4925, Jan. 19, 1993; 66 FR 2666, Jan. 11, 2001; 77 FR 17203, Mar. 23, 2012; 81 FR 86450, Nov. 30, 2016]


§ 435.10 State plan requirements.

A State plan must –


(a) Provide that the requirements of this part are met; and


(b) Specify the groups to whom Medicaid is provided, as specified in subparts B, C, and D of this part, and the conditions of eligibility for individuals in those groups.


Subpart B – Mandatory Coverage

§ 435.100 Scope.

This subpart prescribes requirements for coverage of categorically needy individuals.


Mandatory Coverage of Families and Children

§ 435.110 Parents and other caretaker relatives.

(a) Basis. This section implements sections 1931(b) and (d) of the Act.


(b) Scope. The agency must provide Medicaid to parents and other caretaker relatives, as defined in § 435.4, and, if living with such parent or other caretaker relative, his or her spouse, whose household income is at or below the income standard established by the agency in the State plan, in accordance with paragraph (c) of this section.


(c) Income standard. The agency must establish in its State plan the income standard as follows:


(1) The minimum income standard is a State’s AFDC income standard in effect as of May 1, 1988 for the applicable family size converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


(2) The maximum income standard is the higher of –


(i) The effective income level in effect for section 1931 low-income families under the Medicaid State plan or waiver of the State plan as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act; or


(ii) A State’s AFDC income standard in effect as of July 16, 1996 for the applicable family size, increased by no more than the percentage increase in the Consumer Price Index for all urban consumers between July 16, 1996 and the effective date of such increase.


[77 FR 17204, Mar. 23, 2012, as amended at 78 FR 42302, July 15, 2013]


§ 435.112 Families terminated from AFDC because of increased earnings or hours of employment.

(a) If a family loses AFDC solely because of increased income from employment or increased hours of employment, the agency must continue to provide Medicaid for 4 months to all members of the family if –


(1) The family received AFDC in any 3 or more months during the 6-month period immediately before the month in which it became ineligible for AFDC; and


(2) At least one member of the family is employed throughout the 4-month period, although this need not be the same member for the whole period.


(b) The 4 calendar month period begins on the date AFDC is terminated. If AFDC benefits are terminated retroactively, the 4 calendar month period also begins retroactively with the first month in which AFDC was erroneously paid.


[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]


§ 435.115 Families with Medicaid eligibility extended because of increased collection of spousal support.

(a) Basis. This section implements sections 408(a)(11)(B) and 1931(c)(1) of the Act.


(b) Eligibility. (1) The extended eligibility period is for 4 months.


(2) The agency must provide coverage during an extended eligibility period to a parent or other caretaker relative who was eligible and enrolled for Medicaid under § 435.110, and any dependent child of such parent or other caretaker relative who was eligible and enrolled under § 435.118, in at least 3 out of the 6 months immediately preceding the month that eligibility for the parent or other caretaker relative under § 435.110 is lost due to increased collection of spousal support under title IV-D of the Act.


[81 FR 86451, Nov. 30, 2016]


Mandatory Coverage of Pregnant Women, Children Under 19, and Newborn Children

§ 435.116 Pregnant women.

(a) Basis. This section implements sections 1902(a)(10)(A)(i)(III) and (IV); 1902(a)(10)(A)(ii)(I), (IV), and (IX); and 1931(b) and (d) of the Act.


(b) Scope. The agency must provide Medicaid to pregnant women whose household income is at or below the income standard established by the agency in its State plan, in accordance with paragraph (c) of this section.


(c) Income standard. The agency must establish in its State plan the income standard as follows:


(1) The minimum income standard is the higher of:


(i) 133 percent FPL for the applicable family size; or


(ii) Such higher income standard up to 185 percent FPL, if any, as the State had established as of December 19, 1989 for determining eligibility for pregnant women, or, as of July 1, 1989, had authorizing legislation to do so.


(2) The maximum income standard is the higher of –


(i) The highest effective income level in effect under the Medicaid State plan for coverage under the sections specified at paragraph (a) of this section, or waiver of the State plan covering pregnant women, as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act; or


(ii) 185 percent FPL.


(d) Covered services. (1) Pregnant women are covered under this section for the full Medicaid coverage described in paragraph (d)(2) of this section, except that the agency may provide only pregnancy-related services described in paragraph (d)(3) of this section for pregnant women whose income exceeds the applicable income limit established by the agency in its State plan, in accordance with paragraph (d)(4) of this section.


(2) Full Medicaid coverage consists of all services which the State is required to cover under § 440.210(a)(1) of this subchapter and all services which it has opted to cover under § 440.225 and § 440.250(p) of this subchapter.


(3) Pregnancy-related services consists of services covered under the State plan consistent with § 440.210(a)(2) and § 440.250(p) of this subchapter.


(4) Applicable income limit for full Medicaid coverage of pregnant women. For purposes of paragraph (d)(1) of this section –


(i) The minimum applicable income limit is the State’s AFDC income standard in effect as of May 1, 1988 for the applicable family size converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


(ii) The maximum applicable income limit is the highest effective income level for coverage under section 1902(a)(10)(A)(i)(III) of the Act or under section 1931(b) and (d) of the Act in effect under the Medicaid State plan or waiver of the State plan as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard.


[77 FR 17204, Mar. 23, 2012, as amended at 78 FR 42302, July 15, 2013]


§ 435.117 Deemed newborn children.

(a) Basis. This section implements sections 1902(e)(4) and 2112(e) of the Act.


(b) Eligibility. (1) The agency must provide Medicaid to children from birth until the child’s first birthday without application if, for the date of the child’s birth, the child’s mother was eligible for and received covered services under –


(i) The Medicaid State plan (including during a period of retroactive eligibility under § 435.915) regardless of whether payment for services for the mother is limited to services necessary to treat an emergency medical condition, as defined in section 1903(v)(3) of the Act; or


(ii) The CHIP State plan as a targeted low-income pregnant woman in accordance with section 2112 of the Act, with household income at or below the income standard established by the agency under § 435.118 for infants under age 1.


(2) The agency may provide coverage under this section to children from birth until the child’s first birthday without application who are not described in (b)(1) of this section if, for the date of the child’s birth, the child’s mother was eligible for and received covered services under –


(i) The Medicaid State plan of any State (including during a period of retroactive eligibility under § 435.915); or


(ii) Any of the following, provided that household income of the child’s mother at the time of the child’s birth is at or below the income standard established by the agency under § 435.118 for infants under age 1:


(A) The State’s separate CHIP State plan as a targeted low-income child;


(B) The CHIP State plan of any State as a targeted low-income pregnant woman or child; or


(C) A Medicaid or CHIP demonstration project authorized under section 1115 of the Act.


(3) The child is deemed to have applied and been determined eligible under the Medicaid State plan effective as of the date of birth, and remains eligible regardless of changes in circumstances until the child’s first birthday, unless the child dies or ceases to be a resident of the State or the child’s representative requests a voluntary termination of eligibility.


(c) Medicaid identification number. (1) The Medicaid identification number of the mother serves as the child’s identification number, and all claims for covered services provided to the child may be submitted and paid under such number, unless and until the State issues the child a separate identification number.


(2) The State must issue a separate Medicaid identification number for the child prior to the effective date of any termination of the mother’s eligibility or prior to the date of the child’s first birthday, whichever is sooner, except that the State must issue a separate Medicaid identification number in the case of a child born to a mother:


(i) Whose coverage is limited to services necessary for the treatment of an emergency medical condition, consistent with § 435.139 or § 435.350;


(ii) Covered under the State’s separate CHIP; or


(iii) Who received Medicaid in another State on the date of birth.


(d) Renewal of eligibility. A redetermination of eligibility must be completed on behalf of the children described in this provision in accordance with the procedures at § 435.916. At that time, the State must collect documentary evidence of citizenship and identity as required under § 435.406.


[72 FR 38690, July 13, 2007, as amended at 81 FR 86451, Nov. 30, 2016]


Mandatory Coverage of Qualified Family Members

§ 435.118 Infants and children under age 19.

(a) Basis. This section implements sections 1902(a)(10)(A)(i)(III), (IV), (VI), and (VII); 1902(a)(10)(A)(ii)(IV) and (IX); and 1931(b) and (d) of the Act.


(b) Scope. The agency must provide Medicaid to children under age 19 whose household income is at or below the income standard established by the agency in its State plan, in accordance with paragraph (c) of this section.


(c) Income standard. (1) The minimum income standard is the higher of –


(i) 133 percent FPL for the applicable family size; or


(ii) For infants under age 1, such higher income standard up to 185 percent FPL, if any, as the State had established as of December 19, 1989 for determining eligibility for infants, or, as of July 1, 1989 had authorizing legislation to do so.


(2) The maximum income standard for each of the age groups of infants under age 1, children age 1 through age 5, and children age 6 through age 18 is the higher of –


(i) 133 percent FPL;


(ii) The highest effective income level for each age group in effect under the Medicaid State plan for coverage under the applicable sections of the Act listed at paragraph (a) of this section or waiver of the State plan covering such age group as of March 23, 2010 or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act; or


(iii) For infants under age 1, 185 percent FPL.


[77 FR 17205, Mar. 23, 2012]


Mandatory Coverage for Individuals Age 19 Through 64

§ 435.119 Coverage for individuals age 19 or older and under age 65 at or below 133 percent FPL.

(a) Basis. This section implements section 1902(a)(10)(A)(i)(VIII) of the Act.


(b) Eligibility. Effective January 1, 2014, the agency must provide Medicaid to individuals who:


(1) Are age 19 or older and under age 65;


(2) Are not pregnant;


(3) Are not entitled to or enrolled for Medicare benefits under part A or B of title XVIII of the Act;


(4) Are not otherwise eligible for and enrolled for mandatory coverage under a State’s Medicaid State plan in accordance with subpart B of this part; and


(5) Have household income that is at or below 133 percent FPL for the applicable family size.


(c) Coverage for dependent children. (1) A State may not provide Medicaid under this section to a parent or other caretaker relative living with a dependent child if the child is under the age specified in paragraph (c)(2) of this section, unless such child is receiving benefits under Medicaid, the Children’s Health Insurance Program under subchapter D of this chapter, or otherwise is enrolled in minimum essential coverage as defined in § 435.4 of this part.


(2) For the purpose of paragraph (c)(1) of this section, the age specified is under age 19, unless the State had elected as of March 23, 2010 to provide Medicaid to individuals under age 20 or 21 under § 435.222 of this part, in which case the age specified is such higher age.


[58 FR 48614, Sept. 17, 1993, as amended at 77 FR 17205, Mar. 23, 2012; 78 FR 42302, July 15, 2013]


Mandatory Coverage of the Aged, Blind, and Disabled

§ 435.120 Individuals receiving SSI.

Except as allowed under § 435.121, the agency must provide Medicaid to aged, blind, and disabled individuals or couples who are receiving or are deemed to be receiving SSI. This includes individuals who are –


(a) Receiving SSI pending a final determination of blindness or disability;


(b) Receiving SSI under an agreement with the Social Security Administration to dispose of resources that exceed the SSI dollar limits on resources; or


(c) Receiving benefits under section 1619(a) of the Act or in section 1619(b) status (blind individuals or those with disabling impairments whose income equals or exceeds a specific Supplemental Security Income limit). (Regulations at 20 CFR 416.260 through 416.269 contain requirements governing determinations of eligibility under this provision.) For purposes of this paragraph (c), this mandatory categorically needy group of individuals includes those qualified severely impaired individuals defined in section 1905(q) of the Act.


[55 FR 33705, Aug. 17, 1990]


§ 435.121 Individuals in States using more restrictive requirements for Medicaid than the SSI requirements.

(a) Basic eligibility group requirements. (1) If the agency does not provide Medicaid under § 435.120 to aged, blind, and disabled individuals who are SSI beneficiaries, the agency must provide Medicaid to aged, blind, and disabled individuals who meet eligibility requirements that are specified in this section.


(2) Except to the extent provided in paragraph (a)(3) of this section, the agency may elect to apply more restrictive eligibility requirements to the aged, blind, and disabled that are more restrictive than those of the SSI program. The more restrictive requirements may be no more restrictive than those requirements contained in the State’s Medicaid plan in effect on January 1, 1972. If any of the State’s 1972 Medicaid plan requirements were more liberal than of the SSI program, the State must use the SSI requirement instead of the more liberal requirements, except to the extent the State elects to use more liberal criteria under § 435.601.


(3) The agency must not apply a more restrictive requirement under the provisions of paragraph (a)(2) of this section if:


(i) The requirement conflicts with the requirements of section 1924 of the Act, which governs the eligibility and post-eligibility treatment of income and resources of institutionalized individuals with community spouses;


(ii) The requirement conflicts with a more liberal requirement which the agency has elected to use under § 435.601; or


(iii) The more restrictive requirement conflicts with a more liberal requirement the State has elected to use under § 435.234(c) in determining eligibility for State supplementary payments.


(b) Mandatory coverage. If the agency chooses to apply more restrictive requirements than SSI to aged, blind, or disabled individuals, it must provide Medicaid to:


(1) Individuals who meet the requirements of section 1619(b)(3) of the Act even though they may not continue to meet the requirements of this section; and


(2) Qualified Medicare beneficiaries described in section 1905(p) of the Act and qualified working disabled individuals described in section 1905(s) of the Act without consideration of the more restrictive eligibility requirements specified in this section.


(3) Individuals who:


(i) Qualify for benefits under section 1619(a) or are in eligibility status under section 1619(b)(1) of the Act as determined by SSA; and


(ii) Were eligible for Medicaid under the more restrictive criteria in the State’s approved Medicaid plan in the reference month – the month immediately preceding the first month in which they became eligible under section 1619(a) or (b)(1) of the Act. “Were eligible for Medicaid” means that individuals were issued Medicaid cards by the State for the reference month. Under this provision, the reference month for determining Medicaid eligibility for all individuals under section 1619 of the Act is the month immediately preceding the first month of the most recent period of eligibility under section 1619 of the Act.


(c) Group composition. The agency may apply more restrictive requirements only to the aged, to the blind, to the disabled, or to any combination of these groups. For example, the agency may apply more restrictive requirements to the aged and disabled under this provision and provide Medicaid to all blind individuals who are SSI beneficiaries.


(d) Nonfinancial conditions. The agency may apply more restrictive requirements that are nonfinancial conditions of eligibility. For example, the agency may use a more restrictive definition of disability or may limit eligibility of the disabled to individuals age 18 and older, or both. If the agency limits eligibility of disabled individuals to individuals age 18 or older, it must provide Medicaid to individuals under age 18 who receive SSI benefits and who would be eligible to receive AFDC under the State’s approved plan if they did not receive SSI. If the agency imposed an age limit for disabled individuals under its 1972 approved State plan but does not use that limit, it must apply the same nonfinancial requirement to individuals under age 18 that it applies to disabled individuals age 18 and older.


(e) Financial conditions. (1) The agency may apply more restrictive requirements that are financial conditions of eligibility.


(2) Any income eligibility standards that the agency applies must:


(i) Equal the income standard (or Federal Benefit Rate (FBR)) that would be used under SSI based on an individual’s living arrangement; or


(ii) Be a more restrictive standard which is no more restrictive than that under the approved State’s January 1, 1972 Medicaid plan.


(3) If the categorically needy income standard established under paragraph (e)(2) of this section is less than the optional categorically needy standard established under § 435.230, the agency must provide Medicaid to all aged, blind, and disabled individuals who have income equal to or below the higher standard.


(4) In a State that does not have a medically needy program that covers aged, blind, and disabled individuals, the agency must allow individuals to deduct from income incurred medical and remedial expenses (that is, spend down) to become eligible under this section. However, individuals with income above the categorically needy standards may only spend down to the standard selected by the State under paragraph (e)(2) of this section which applies to the individual’s living arrangement.


(5) In a State that elects to provide medically needy coverage to aged, blind, and disabled individuals, the agency must allow individuals to deduct from income incurred medical and remedial care expenses (spend down) to become categorically needy when they are SSI beneficiaries (including individuals deemed to be SSI beneficiaries under §§ 435.135, 435.137, and 435.138), eligible spouses of SSI beneficiaries, State supplement beneficiaries, and individuals who are eligible for a supplement but who do not receive supplementary payments. Such persons may only spend down to the standard selected by the State under paragraph (e)(2) of this section. Individuals who are not SSI beneficiaries, eligible spouses of SSI beneficiaries, State supplement beneficiaries, or individuals who are eligible for a supplement must spend down to the State’s medically needy income standards for aged, blind, and disabled individuals in order to become Medicaid eligible.


(f) Deductions from income. (1) In addition to any income disregards specified in the approved State plan in accordance with § 435.601(b), the agency must deduct from income:


(i) SSI payments;


(ii) State supplementary payments that meet the conditions specified in §§ 435.232 and 435.234; and


(iii) Expenses incurred by the individual or financially responsible relatives for necessary medical and remedial services that are recognized under State law and are not subject to payment by a third party, unless the third party is a public program of a State or political subdivision of a State. These expenses include Medicare and other health insurance premiums, deductions and coinsurance charges, and copayments or deductibles imposed under § 447.52, § 447.53, or § 447.54 of this chapter. The agency may set reasonable limits on the amounts of incurred medical expenses that are deducted.


(2) For purposes of counting income with respect to individuals who are receiving benefits under section 1619(a) f the Act or are in section 1619(b)(1) of the Act status but who do not meet the requirements of paragraph (b)(3)(ii) of this section, the agency may disregard some or all of the amount of the individual’s income that is in excess of the SSI Federal benefit rate under section 1611(b) of the Act.


[58 FR 4926, Jan. 19, 1993, as amended at 78 FR 42302, July 15, 2013]


§ 435.122 Individuals who are ineligible for SSI or optional State supplements because of requirements that do not apply under title XIX of the Act.

If an agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or optional State supplements, it must provide Medicaid to individuals who would be eligible for SSI or optional State supplements except for an eligibility requirement used in those programs that is specifically prohibited under title XIX.


[47 FR 43648, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]


§ 435.130 Individuals receiving mandatory State supplements.

The agency must provide Medicaid to individuals receiving mandatory State supplements.


§ 435.131 Individuals eligible as essential spouses in December 1973.

(a) The agency must provide Medicaid to any person who was eligible for Medicaid in December 1973 as an essential spouse of an aged, blind, or disabled individual who was receiving cash assistance, if the conditions in paragraph (b) of this section are met. An “essential spouse” is defined in section 1905(a) of the Act as one who is living with the individual; whose needs were included in determining the amount of cash payment to the individual under OAA, AB, APTD, or AABD; and who is determined essential to the individual’s well-being.


(b) The agency must continue Medicaid if –


(1) The aged, blind, or disabled individual continues to meet the December 1973 eligibility requirements of the applicable State cash assistance plan; and


(2) The essential spouse continues to meet the conditions that were in effect in December 1973 under the applicable cash assistance plan for having his needs included in computing the payment to the aged, blind, or disabled individual.


§ 435.132 Institutionalized individuals who were eligible in December 1973.

The agency must provide Medicaid to individuals who were eligible for Medicaid in December 1973, or any part of that month, as inpatients of medical institutions or residents of intermediate care facilities that were participating in the Medicaid program and who –


(a) For each consecutive month after December 1973 –


(1) Continue to meet the requirements for Medicaid eligibility that were in effect under the State’s plan in December 1973 for institutionalized individuals; and


(2) Remain institutionalized; and


(b) Are determined by the State or a professional standards review organization to continue to need institutional care.


§ 435.133 Blind and disabled individuals eligible in December 1973.

The agency must provide Medicaid to individuals who –


(a) Meet all current requirements for Medicaid eligibility except the criteria for blindness or disability;


(b) Were eligible for Medicaid in December 1973 as blind or disabled individuals, whether or not they were receiving cash assistance in December 1973; and


(c) For each consecutive month after December 1973, continue to meet the criteria for blindness or disability and the other conditions of eligibility used under the Medicaid plan in December 1973.


§ 435.134 Individuals who would be eligible except for the increase in OASDI benefits under Pub. L. 92-336 (July 1, 1972).

The agency must provide Medicaid to individuals who meet the following conditions:


(a) In August 1972, the individual was entitled to OASDI and –


(1) He was receiving OAA, AB, APTD, or AABD; or


(2) He would have been eligible for one of those programs except that he had not applied, and the Medicaid plan covered this optional group; or


(3) He would have been eligible for one of those programs if he were not in a medical institution or intermediate care facility, and the Medicaid plan covered this optional group.


(b) The individual would currently be eligible for SSI or a State supplement except that the increase in OASDI under Pub. L. 92-336 raised his income over the limit allowed under SSI. This includes an individual who –


(1) Meets all current SSI requirements except for the requirement to file an application; or


(2) Would meet all current SSI requirements if he were not in a medical institution or intermediate care facility, and the State’s Medicaid plan covers this optional group.


[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]


§ 435.135 Individuals who become ineligible for cash assistance as a result of OASDI cost-of-living increases received after April 1977.

(a) If an agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, it must provide Medicaid to individuals who –


(1) Are receiving OASDI;


(2) Were eligible for and receiving SSI or State supplements but became ineligible for those payments after April 1977; and


(3) Would still be eligible for SSI or State supplements if the amount of OASDI cost-of-living increases paid under section 215(i) of the Act, after the last month after April 1977 for which those individuals were both eligible for and received SSI or a State supplement and were entitled to OASDI, were deducted from current OASDI benefits.


(b) Cost-of-living increases include the increases received by the individual or his or her financially responsible spouse or other family member (e.g., a parent).


(c) If the agency adopts more restrictive eligibility requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or State supplements. If the individual incurs enough medical expenses to reduce his or her income to the financial eligibility standard for the categorically needy, the agency must cover that individual as categorically needy. In determining the amount of his or her income, the agency may deduct the cost-of-living increases paid under section 215(i) after the last month after April 1977 for which that individual was both eligible for and received SSI or a State supplement and was entitled to OASDI, up to the amount that made him or her ineligible for SSI.


[51 FR 12330, Apr. 10, 1986]


§ 435.136 State agency implementation requirements for one-time notice and annual review system.

An agency must –


(a) Provide a one-time notice of potential Medicaid eligibility under § 435.135 to all individuals who meet the requirements of § 435.135 (a) or (c) who were not receiving Medicaid as of March 9, 1984; and


(b) Establish an annual review system to identify individuals who meet the requirements of § 435.135 (a) or (c) and who lose categorically needy eligibility for Medicaid because of a loss of SSI. States without medically needy programs must send notices of potential eligibility for Medicaid to these individuals for 3 consecutive years following their identification through the annual review system.


[51 FR 12330, Apr. 10, 1986]


§ 435.137 Disabled widows and widowers who would be eligible for SSI except for the increase in disability benefits resulting from elimination of the reduction factor under Pub. L. 98-21.

(a) If the agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, the agency much provide Medicaid to disabled widows and widowers who –


(1) Became ineligible for SSI or a mandatory or optional State supplement as a result of the elimination of the additional reduction factor for disabled widows and widowers under age 60 required by section 134 of Pub. L. 98-21, and for purposes of title XIX, are deemed to be title XVI payment beneficiaries under section 1634(b) of the Social Security Act; and


(2) Meet the conditions of paragraphs (b) and (e) of this section.


(b) The individuals must meet the following conditions:


(1) They were entitled to monthly OASDI benefits under title II of the Act for December 1983:


(2) They were entitled to and received widow’s or widower’s disability benefits under section 202(e) or (f) of the Act for January 1984;


(3) They became ineligible for SSI or a mandatory or optional State supplement in the first month in which the increase under Pub. L. 98-21 was paid (and in which a retroactive payment for that increase for prior months was not made);


(4) They have been continously entitled to widow’s or widower’s disability benefits under section 202(e) or (f) from the first month that the increase under Pub. L. 98-21 was received; and


(5) They would be eligible for SSI benefits or a mandatory or optional State supplement if the amount of the increase under Pub. L. 98-21 and subsequent cost-of-living adjustments in widow’s or widower’s benefits under section 215(i) of the Act were deducted from their income.


(c) If the agency adopts more restrictive requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or a mandatory or optional State supplement. The State must consider the individuals specified in paragraph (a) of this section to have no more income than the SSI Federal benefit rate if the individual was eligible for SSI in the month prior to the first month in which the increase under Public Law 98-21 was paid (and in which retroactive payments for that increase for prior months was not being made), and the individual would be eligible for SSI except for the amount of the increase under Public Law 98-21 and subsequent cost-of-living adjustments in his or her widow’s or widower’s benefits under section 215(i) of the Act. The State must consider individuals who qualify under paragraph (a) of this section on the basis of loss of a mandatory or optional State supplementary payment, rather than the loss of SSI, to have no more income than the relevant SSP rate. If the State’s income eligibility level is lower than the SSP or SSI Federal benefit rates, individuals qualifying under paragraph (a) of this section who are deemed to have income at either the SSP rate or the SSI Federal benefit rate may further reduce their countable income by incurring medical expenses in the amount by which their income exceeds the State’s income eligibility standard. When the individual has reduced his or her income by this amount, he or she will be eligible for Medicaid as categorically needy.


(d) The agency must notify each individual who may be eligible for Medicaid under this section of his or her potential eligibility, in accordance with instructions issued by the Secretary.


(e)(1) Except as provided in paragraph (e)(2) of this section, the provisions of this section apply only to those individuals who filed a written application for Medicaid on or before June 30, 1988, to obtain protected Medicaid coverage.


(2) Individuals who may be eligible under this section residing in States that use a more restrictive income standard than that of the SSI program, under section 1902(f) of the Act, have up to six months after the State sends notice pursuant to the District Court’s order in Darling v. Bowen (685 F. Supp. 1125 (W.D.Mo. 1988) to file a written application to obtain protected Medicaid coverage.


[55 FR 48607, Nov. 21, 1990]


§ 435.138 Disabled widows and widowers aged 60 through 64 who would be eligible for SSI except for early receipt of social security benefits.

(a) If the agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, the agency must provide Medicaid to disabled widows and widowers who –


(1) Are at least age 60;


(2) Are not entitled to hospital insurance benefits under Medicare Part A; and


(3) Become ineligible for SSI or a State supplement because of mandatory application (under section 1611(e)(2)) for and receipt of widow’s or widower’s social security disability benefits under section 202(e) or (f) (or any other provision of section 202 if they are also eligible for benefits under subsections (e) or (f)) of the Act.


For purposes of title XIX, individuals who meet these requirements are deemed to be title XVI payment beneficiaries under section 1634(d) of the Act.


(b) If the agency adopts more restrictive eligibility requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or a mandatory or optional State supplement. If the individual incurs enough medical expenses to reduce his or her income to the financial eligibility standard for the categorically needy under the State’s more restrictive eligibility criteria, the agency must cover the individual as categorically needy. In determining the amount of his or her income, the agency may deduct all, part, or none of the amount of the social security disability benefits that made him or her ineligible for SSI or a State supplement, up to the amount that made him or her ineligible for SSI.


(c) Individuals who may be eligible under this section must file a written application for Medicaid. Medicaid coverage may begin no earlier than July 1, 1988.


(d) The agency must determine whether individuals may be eligible for Medicaid under this section.


[55 FR 48608, Nov. 21, 1990]


Mandatory Coverage of Certain Aliens

§ 435.139 Coverage for certain aliens.

The agency must provide services necessary for the treatment of an emergency medical condition, as defined in § 440.255(c) of this chapter, to those aliens described in § 435.406(c) of this subpart.


[55 FR 36819, Sept. 7, 1990]


Mandatory Coverage of Adoption Assistance and Foster Care Children

§ 435.145 Children with adoption assistance, foster care, or guardianship care under title IV-E.

(a) Basis. This section implements sections 1902(a)(10)(A)(i)(I) and 473(b)(3) of the Act.


(b) Eligibility. The agency must provide Medicaid to individuals for whom –


(1) An adoption assistance agreement is in effect with a State or Tribe under title IV-E of the Act, regardless of whether adoption assistance is being provided or an interlocutory or other judicial decree of adoption has been issued; or


(2) Foster care or kinship guardianship assistance maintenance payments are being made by a State or Tribe under title IV-E of the Act.


[81 FR 86451, Nov. 30, 2016]


§ 435.150 Former foster care children.

(a) Basis. This section implements section 1902(a)(10)(A)(i)(IX) of the Act.


(b) Eligibility. The agency must provide Medicaid to individuals who:


(1) Are under age 26;


(2) Are not eligible and enrolled for mandatory coverage under §§ 435.110 through 435.118 or §§ 435.120 through 435.145; and


(3) Were in foster care under the responsibility of the State or a Tribe within the State and enrolled in Medicaid under the State’s Medicaid State plan or under a section 1115 demonstration project upon attaining:


(i) Age 18; or


(ii) A higher age at which the State’s or such Tribe’s foster care assistance ends under title IV-E of the Act.


(c) Options. At the State option, the agency may provide Medicaid to individuals who meet the requirements at paragraphs (b)(1) and (2) of this section, were in foster care under the responsibility of the State or Tribe within the State upon attaining either age described in paragraph (b)(3)(i) or (ii) of this section, and were:


(1) Enrolled in Medicaid under the State’s Medicaid State plan or under a section 1115 demonstration project at some time during the period in foster care during which the individual attained such age; or


(2) Placed by the State or Tribe in another State and, while in such placement, were enrolled in the other State’s Medicaid State plan or under a section 1115 demonstration project:


(i) Upon attaining either age described in paragraph (b)(3)(i) or (ii) of this section; or


(ii) At state option, at some time during the period in foster care during which the individual attained such age.


[81 FR 86451, Nov. 30, 2016]


Mandatory Coverage of Special Groups

§ 435.170 Pregnant women eligible for extended or continuous eligibility.

(a) Basis. This section implements sections 1902(e)(5) and 1902(e)(6) of the Act.


(b) Extended eligibility for pregnant women. For a pregnant woman who was eligible and enrolled under subpart B, C, or D of this part on the date her pregnancy ends, the agency must provide coverage described in paragraph (d) of this section through the last day of the month in which the 60-day postpartum period ends.


(c) Continuous eligibility for pregnant women. For a pregnant woman who was eligible and enrolled under subpart B, C, or D of this part and who, because of a change in household income, will not otherwise remain eligible, the agency must provide coverage described in paragraph (d) of this section through the last day of the month in which the 60-day post-partum period ends.


(d) Covered Services. The coverage described in this paragraph (d) consists of –


(1) Full Medicaid coverage, as described in § 435.116(d)(2); or


(2) Pregnancy-related services described in § 435.116(d)(3), if the agency has elected to establish an income limit under § 435.116(d)(4), above which pregnant women enrolled for coverage under § 435.116 receive pregnancy-related services described in § 435.116(d)(3).


(e) Presumptive Eligibility. This section does not apply to pregnant women covered during a presumptive eligibility period under section 1920 of the Act.


[81 FR 86452, Nov. 30, 2016]


§ 435.172 Continuous eligibility for hospitalized children.

(a) Basis. This section implements section 1902(e)(7) of the Act.


(b) Requirement. The agency must provide Medicaid to an individual eligible and enrolled under § 435.118 until the end of an inpatient stay for which inpatient services are furnished, if the individual:


(1) Was receiving inpatient services covered by Medicaid on the date the individual is no longer eligible under § 435.118 based on the child’s age; and


(2) Would remain eligible but for attaining such age.


[81 FR 86452, Nov. 30, 2016]


Subpart C – Options for Coverage

§ 435.200 Scope.

This subpart specifies options for coverage of individuals as categorically needy.


§ 435.201 Individuals included in optional groups.

(a) The agency may choose to cover as optional categorically needy any group or groups of the following individuals who are not receiving cash assistance and who meet the appropriate eligibility criteria for groups specified in the separate sections of this subpart:


(1) Aged individuals (65 years of age of older);


(2) Blind individuals (as defined in § 435.530);


(3) Disabled individuals (as defined in § 435.541);


(4) Individuals under age 21 (or, at State option, under age 20, 19, or 18) or reasonable classifications of these individuals; and


(5) Parents and other caretaker relatives (as defined in § 435.4).


(b) If the agency provides Medicaid to any individual in an optional group specified in paragraph (a) of this section, the agency must provide Medicaid to all individuals who apply and are found eligible to be members of that group.


(c) States that elect to use more restrictive eligibility requirements for Medicaid than the SSI requirements for any group or groups of aged, blind, and disabled individuals under § 435.121 must apply the specific requirements of § 435.230 in establishing eligibility of these groups of individuals as optional categorically needy.


[58 FR 4927, Jan. 19, 1993, as amended at 81 FR 86452, Nov. 30, 2016]


Options for Coverage of Families and Children and the Aged, Blind, and Disabled

§ 435.210 Optional eligibility for individuals who meet the income and resource requirements of the cash assistance programs.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(I) of the Act.


(b) Eligibility. The agency may provide Medicaid to any group or groups of individuals specified in § 435.201(a)(1) through (3) who meet the income and resource requirements of SSI or an optional State supplement program in States that provide Medicaid to optional State supplement recipients.


[81 FR 86452, Nov. 30, 2016]


§ 435.211 Optional eligibility for individuals who would be eligible for cash assistance if they were not in medical institutions.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(IV) of the Act.


(b) Eligibility. The agency may provide Medicaid to any group or groups of individuals specified in § 435.201(a)(1) through (3) who are institutionalized in a title XIX reimbursable medical institution and who:


(1) Are ineligible for the SSI or an optional State supplement program in States that provide Medicaid to optional State supplement recipients, because of lower income standards used under the program to determine eligibility for institutionalized individuals; but


(2) Would be eligible for aid or assistance under SSI or an optional State supplement program (as specified in § 435.232 or § 435.234) if they were not institutionalized.


[81 FR 86452, Nov. 30, 2016]


§ 435.212 Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.

The State agency may provide that a beneficiary who is enrolled in an MCO or PCCM and who becomes ineligible for Medicaid is considered to continue to be eligible –


(a) For a period specified by the agency, ending no later than 6 months from the date of enrollment; and


(b) Except for family planning services (which the beneficiary may obtain from any qualified provider) only for services furnished to him or her as an MCO enrollee.


[56 FR 8849, Mar. 1, 1991, as amended at 67 FR 41095, June 14, 2002]


§ 435.213 Optional eligibility for individuals needing treatment for breast or cervical cancer.

(a) Basis. This section implements sections 1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act.


(b) Eligibility. The agency may provide Medicaid to individuals who –


(1) Are under age 65;


(2) Are not eligible and enrolled for mandatory coverage under the State’s Medicaid State plan in accordance with subpart B of this part;


(3) Have been screened under the Centers for Disease Control and Prevention (CDC) breast and cervical cancer early detection program (BCCEDP), established in accordance with the requirements of section 1504 of the Public Health Service Act, and found to need treatment for breast or cervical cancer; and


(4) Do not otherwise have creditable coverage, as defined in section 2704(c) of the Public Health Service Act, for treatment of the individual’s breast or cervical cancer. An individual is not considered to have creditable coverage just because the individual may:


(i) Receive medical services provided by the Indian Health Service, a tribal organization, or an Urban Indian organization; or


(ii) Obtain health insurance coverage after a waiting period of uninsurance.


(c) Need for treatment. An individual is considered to need treatment for breast or cervical cancer if the initial screen under BCCEDP or, subsequent to the initial period of eligibility, the individual’s treating health professional determines that:


(1) Definitive treatment for breast or cervical cancer is needed, including treatment of a precancerous condition or early stage cancer, and including diagnostic services as necessary to determine the extent and proper course of treatment; and


(2) More than routine diagnostic services or monitoring services for a precancerous breast or cervical condition are needed.


[81 FR 86452, Nov. 30, 2016]


§ 435.214 Eligibility for Medicaid limited to family planning and related services.

(a) Basis. This section implements sections 1902(a)(10)(A)(ii)(XXI) and 1902(ii) and clause (XVI) in the matter following section 1902(a)(10)(G) of the Act.


(b) Eligibility. (1) The agency may provide Medicaid limited to the services described in paragraph (d) of this section to individuals (of any gender) who –


(i) Are not pregnant; and


(ii) Meet the income eligibility requirements at paragraph (c) of this section.


(2) [Reserved]


(c) Income standard. (1) The income standard established in the State plan may not exceed the higher of the income standard for pregnant women in effect under –


(i) The Medicaid State plan in accordance with § 435.116.


(ii) A Medicaid demonstration under section 1115 of the Act.


(iii) The CHIP State plan under section 2112 of the Act.


(iv) A CHIP demonstration under section 1115 of the Act.


(2) The individual’s household income is determined in accordance with § 435.603. The agency must indicate in its State plan the options selected by it under § 435.603(k).


(d) Covered services. Individuals eligible under this section are covered for family planning and family planning-related benefits as described in clause (XVI) of the matter following section 1902(a)(10)(G) of the Act.


[81 FR 86453, Nov. 30, 2016]


§ 435.215 Individuals infected with tuberculosis.

(a) Basis. This section implements sections 1902(a)(10)(A)(ii)(XII) and 1902(z)(1) of the Act.


(b) Eligibility. The agency may provide Medicaid to individuals who –


(1) Are infected with tuberculosis;


(2) Are not eligible for full coverage under the State’s Medicaid State plan (that is, all services which the State is required to cover under § 440.210(a)(1) of this chapter and all services which it has opted to cover under § 440.225 of this chapter, or which the State covers under an approved alternative benefits plan under § 440.325 of this chapter), including coverage for tuberculosis treatment as elected by the State for this group; and


(3) Have household income that does not exceed the income standard established by the State in its State plan, which standard must not exceed the higher of –


(i) The maximum income standard applicable to disabled individuals for mandatory coverage under subpart B of this part; or


(ii) The effective income level for coverage of individuals infected with tuberculosis under the State plan in effect as of March 23, 2010, or December 31, 2013, if higher, converted, at State option, to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


(c) Covered Services. Individuals eligible under this section are covered for the following services related to the treatment of infection with tuberculosis:


(1) Prescribed drugs, described in § 440.120 of this chapter;


(2) Physician’s services, described in § 440.50 of this chapter;


(3) Outpatient hospital and rural health clinic described in § 440.20 of this chapter, and Federally-qualified health center services;


(4) Laboratory and x-ray services (including services to confirm the presence of the infection), described in § 440.30 of this chapter;


(5) Clinic services, described in § 440.90 of this chapter;


(6) Case management services defined in § 440.169 of this chapter; and


(7) Services other than room and board designated to encourage completion of regimens of prescribed drugs by outpatients including services to observe directly the intake of prescription drugs.


[81 FR 86453, Nov. 30, 2016]


§ 435.217 Individuals receiving home and community-based services.

The agency may provide Medicaid to any group or groups of individuals in the community who meet the following requirements:


(a) The group would be eligible for Medicaid if institutionalized.


(b) In the absence of home and community-based services under a waiver granted under part 441 –


(1) Subpart G of this subchapter, the group would otherwise require the level of care furnished in a hospital, NF, or an ICF/IID; or


(2) Subpart H of this subchapter, the group would otherwise require the level of care furnished in an NF and are age 65 or older.


(c) The group receives the waivered services.


[57 FR 29155, June 30, 1992]


§ 435.218 Individuals with MAGI-based income above 133 percent FPL.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(XX) of the Act.


(b) Eligibility – (1) Criteria. The agency may provide Medicaid to individuals who:


(i) Are under age 65;


(ii) Are not eligible for and enrolled for mandatory coverage under a State’s Medicaid State plan in accordance with subpart B of this part;


(iii) Are not otherwise eligible for and enrolled for optional coverage under a State’s Medicaid State plan in accordance with section 1902(a)(10)(A)(ii)(I) through (XIX) of the Act and subpart C of this part, based on information available to the State from the application filed by or on behalf of the individual; and


(iv) Have household income that exceeds 133 percent FPL but is at or below the income standard elected by the agency and approved in its Medicaid State plan, for the applicable family size.


(2) Limitations. (i) A State may not, except as permitted under an approved phase-in plan adopted in accordance with paragraph (b)(3) of this section, provide Medicaid to higher income individuals described in paragraph (b)(1) of this section without providing Medicaid to lower income individuals described in such paragraph.


(ii) The limitation on eligibility of parents and other caretaker relatives specified in § 435.119(c) of this section also applies to eligibility under this section.


(3) Phase-in plan. A State may phase in coverage to all individuals described in paragraph (b)(1) of this section under a phase-in plan submitted in a State plan amendment to and approved by the Secretary.


[77 FR 17205, Mar. 23, 2012]


§ 435.219 Individuals receiving State plan home and community-based services.

If the agency provides State plan home and community-based services to individuals described in section 1915(i)(1), the agency, under its State plan, may, in addition, provide Medicaid to individuals in the community who are described in one or both of paragraphs (a) or (b) of this section.


(a) Individuals who –


(1) Are not otherwise eligible for Medicaid;


(2) Have income that does not exceed 150 percent of the Federal poverty line (FPL);


(3) Meet the needs-based criteria under § 441.715 of this chapter; and


(4) Will receive State plan home and community-based services as defined in § 440.182 of this chapter.


(b) Individuals who –


(1) Would be determined eligible by the agency under an existing waiver or demonstration project under sections 1915(c), 1915(d), 1915(e) or 1115 of the Act, but are not required to receive services under such waivers or demonstration projects;


(2) Have income that does not exceed 300 percent of the Supplemental Security Income Federal Benefit Rate (SSI/FBR); and


(3) Will receive State plan home and community-based services as defined in § 440.182 of this chapter.


(c) For purposes of determining eligibility under paragraph (a) of this section, the agency may not take into account an individual’s resources and must use income standards that are reasonable, consistent with the objectives of the Medicaid program, simple to administer, and in the best interests of the beneficiary. Income methodologies may include use of existing income methodologies, such as the SSI program rules. However, subject to the Secretary’s approval, the agency may use other income methodologies that meet the requirements of this paragraph.


[79 FR 3028, Jan. 16, 2014]


Options for Coverage of Families and Children

§ 435.220 Optional eligibility for parents and other caretaker relatives.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(I) of the Act for optional eligibility of parents and other caretaker relatives as defined at § 435.4.


(b) Eligibility. The agency may provide Medicaid to parents and other caretaker relatives defined in § 435.4 and, if living with such parent or other caretaker relative, his or her spouse, whose household income is at or below the income standard established by the agency in its State plan, in accordance with paragraph (c) of this section.


(c) Income standard. The income standard under this section –


(1) Must exceed the income standard established by the agency under § 435.110(c); and


(2) May not exceed the higher of the State’s AFDC payment standard in effect as of July 16, 1996, or the State’s highest effective income level for eligibility of parents and other caretaker relatives in effect under the Medicaid State plan or demonstration program under section 1115 of the Act as of March 23, 2010, or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


[81 FR 86453, Nov. 30, 2016]


§ 435.221 [Reserved]

§ 435.222 Optional eligibility for reasonable classifications of individuals under age 21.

(a) Basis. This section implements sections 1902(a)(10)(A)(ii)(I) and (IV) of the Act for optional eligibility of individuals under age 21.


(b) Eligibility. The agency may provide Medicaid to all – or to one or more reasonable classifications, as defined in the State plan, of – individuals under age 21 (or, at State option, under age 20, 19 or 18) who have household income at or below the income standard established by the agency in its State plan in accordance with paragraph (c) of this section.


(c) Income standard. The income standard established under this section may not exceed the higher of the State’s AFDC payment standard in effect as of July 16, 1996, or the State’s highest effective income level, if any, for such individuals under the Medicaid State plan or a demonstration program under section 1115 of the Act as of March 23, 2010, or December 31, 2013, if higher, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


[81 FR 86453, Nov. 30, 2016]


§ 435.225 Individuals under age 19 who would be eligible for Medicaid if they were in a medical institution.

(a) The agency may provide Medicaid to children 18 years of age or younger who qualify under section 1614(a) of the Act, who would be eligible for Medicaid if they were in a medical institution, and who are receiving, while living at home, medical care that would be provided in a medical institution.


(b) If the agency elects the option provided by paragraph (a) of this section, it must determine, in each case, that the following conditions are met:


(1) The child requires the level of care provided in a hospital, SNF, or ICF.


(2) It is appropriate to provide that level of care outside such an institution.


(3) The estimated Medicaid cost of care outside an institution is no higher than the estimated Medicaid cost of appropriate institutional care.


(c) The agency must specify in its State plan the method by which it determines the cost-effectiveness of caring for disabled children at home.


[55 FR 48608, Nov. 21, 1990]


§ 435.226 Optional eligibility for independent foster care adolescents.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(XVII) of the Act.


(b) Eligibility. The agency may provide Medicaid to individuals under age 21 (or, at State option, under age 20 or 19) who were in foster care under the responsibility of a State or Tribe (or, at State or Tribe option, only to such individuals for whom Federal foster care assistance under title IV-E of the Act was being provided) on the individual’s 18th birthday and have household income at or below the income standard, if any, established by the agency in its State plan in accordance with paragraph (c) of this section.


(c) Income standard. (1) The income standard established under this section may not be lower than the State’s income standard established under § 435.110.


(2) The State may elect to have no income standard for eligibility under this section.


[81 FR 86453, Nov. 30, 2016]


§ 435.227 Optional eligibility for individuals under age 21 who are under State adoption assistance agreements.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(VIII) of the Act.


(b) Eligibility. The agency may provide Medicaid to individuals under age 21 (or, at State option, under age 20, 19, or 18):


(1) For whom an adoption assistance agreement (other than an agreement under title IV-E of the Act) between a State and the adoptive parent(s) is in effect;


(2) Who the State agency which entered into the adoption agreement determined could not be placed for adoption without Medicaid coverage because the child has special needs for medical or rehabilitative care; and


(3) Who, prior to the adoption agreement being entered into –


(i) Were eligible under the Medicaid State plan of the State with the adoption assistance agreement; or


(ii) Had household income at or below the income standard established by the agency in its State plan in accordance with paragraph (c) of this section.


(c) Income standard. The income standard established under this section may not exceed the effective income level (converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act) under the State plan or under a demonstration program under section 1115 of the Act as of March 23, 2010 or December 31, 2013, whichever is higher, that was applied by the State to the household income of a child prior to the execution of an adoption assistance agreement for purposes of determining eligibility of children described in paragraphs (b)(1) and (2) of this section.


(d) Limit Eligibility The agency may limit eligibility under this section to children for whom the State, or another State identified in the State plan, has entered into an adoption assistance agreement.


[81 FR 86454, Nov. 30, 2016]


§ 435.229 Optional targeted low-income children.

(a) Basis. This section implements section 1902(a)(10)(A)(ii)(XIV) of the Act.


(b) Eligibility. The agency may provide Medicaid to individuals under age 19, or at State option within a range of ages under age 19 established in the State plan, who meet the definition of an optional targeted low-income child in § 435.4 and have household income at or below the income standard established by the agency in its State plan in accordance with paragraph (c) of this section.


(c) Income standard. The income standard established under this section may not exceed the higher of –


(1) 200 percent of the Federal poverty level (FPL);


(2) A percentage of the FPL which exceeds the State’s Medicaid applicable income level, defined at § 457.10 of this chapter, by no more than 50 percentage points (converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act); and


(3) The highest effective income level for coverage of such individuals under the Medicaid State plan or demonstration program under section 1115 of the Act or for coverage of targeted low-income children, defined in § 457.10 of this chapter, under the CHIP State plan or demonstration program under section 1115 of the Act, as of March 23, 2010, or December 31, 2013, converted to a MAGI-equivalent standard in accordance with guidance issued by the Secretary under section 1902(e)(14)(A) and (E) of the Act.


[81 FR 86454, Nov. 30, 2016]


Options for Coverage of the Aged, Blind, and Disabled

§ 435.230 Aged, blind, and disabled individuals in States that use more restrictive requirements for Medicaid than SSI requirements: Optional coverage.

(a) Basic optional coverage rule. If the agency elects the option under § 435.121 to provide mandatory eligibility for aged, blind, and disabled SSI beneficiaries using more restrictive requirements than those used under SSI, the agency may provide eligibility as optional categorically needy to additional individuals who meet the requirements of this section.


(b) Group composition. Subject to the conditions specified in paragraphs (d) and (e) of this section, the agency may provide Medicaid to individuals who:


(1) Meet the nonfinancial criteria that the State has elected to apply under § 435.121;


(2) Meet the resource requirements that the State has elected to apply under § 435.121; and


(3) Meet the income eligibility standards specified in paragraph (c) of this section.


(c) Criteria for income standards. The agency may provide Medicaid to the following individuals who meet the requirements of paragraphs (b)(1) and (b)(2) of this section:


(1) Individuals who are financially eligible for but not receiving SSI benefits and who, before deduction of incurred medical and remedial expenses, meet the State’s more restrictive eligibility requirements described in § 435.121;


(2) Individuals who meet the income standards of the following eligibility groups:


(i) Individuals who would be eligible for cash assistance except for institutional status described in § 435.211;


(ii) Individuals who are enrolled in an HMO or other entity and who are deemed to continue to be Medicaid eligible for a period specified by the agency up to 6 months from the date of enrollment and who became ineligible during the specified enrollment period, as described in § 435.212;


(iii) Individuals receiving home and community-based waiver services described in § 435.217;


(iv) Individuals receiving only optional State supplements described in § 435.234;


(v) Institutionalized individuals with income below a special income level described in § 435.236;


(vi) Aged and disabled individuals who have income below 100 percent of the Federal poverty level described in section 1905(m) of the Act.


(3) Individuals who qualify for special status under §§ 435.135 and 435.138, and with respect to whom the State elects to disregard some or the maximum amount of title II payments permitted to be disregarded under those sections.


(d) Use of more liberal methods. The agency may elect to apply more liberal methods of counting income and resources that are approved for this eligibility group under the provisions of § 435.601.


[58 FR 4928, Jan. 19, 1993]


§ 435.232 Individuals receiving only optional State supplements.

(a) If the agency provides Medicaid to individuals receiving SSI under § 435.120, it may provide Medicaid, in one or more of the following classifications, to individuals who receive only an optional State supplement that meets the conditions specified in paragraph (b) of this section and who would be eligible for SSI except for the level of their income.


(1) All aged individuals.


(2) All blind individuals.


(3) All disabled individuals.


(4) Only aged individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(5) Only blind individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(6) Only disabled individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(7) Individuals receiving a federally administered optional State supplement that meets the conditions specified in this section.


(8) Individuals in additional classifications specified by the Secretary for federally administered supplementary payments under 20 CFR 416.2020(d).


(9) Reasonable groups of individuals, as specified by the State, receiving State-administered supplementary payments.


(b) Payments under the optional supplement program must be –


(1) Based on need and paid in cash on a regular basis;


(2) Equal to the difference between the individual’s countable income and the income standard used to determine eligibility for supplement. Countable income is income remaining after deductions required under SSI or, at State option, more liberal deductions are made (see § 435.1006 for limitations on FFP in Medicaid expenditures for individuals receiving optional State supplements); and


(3) Available to all individuals in each classification in paragraph (a) of this section and available on a statewide basis. However, the plan may provide for variations in the income standard by political subdivision according to cost-of-living differences.


[43 FR 45204, Sept. 29, 1978. Redesignated and amended at 58 FR 4928, Jan. 19, 1993]


§ 435.234 Individuals receiving only optional State supplements in States using more restrictive eligibility requirements than SSI and certain States using SSI criteria.

(a) In States using more restrictive eligibility requirements than SSI or in States that use SSI criteria but do not have section 1616 or 1634 agreements with the Social Security Administration for eligibility determinations, the agency may provide Medicaid to individuals specified in paragraph (b) of this section who receive only a State supplement if the State supplement meets the conditions specified in paragraph (c) of this section.


(b) The agency may provide Medicaid to all individuals receiving only State supplements if, except for their income, the individuals meet the more restrictive eligibility requirements under § 435.121 or SSI criteria, or to one or more of the following classifications of individuals who meet these criteria:


(1) All aged individuals.


(2) All blind individuals.


(3) All disabled individuals.


(4) Only aged individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(5) Only blind individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(6) Only disabled individuals in domiciliary facilities or other group living arrangements as defined under SSI.


(7) Individuals receiving a Federally-administered optional State supplement that meets the conditions specified in this section.


(8) Individuals in additional classifications specified by the Secretary.


(9) Reasonable groups of individuals, as specified by the State, receiving State-administered supplementary payments.


(c) Payments under the optional supplement program must be:


(1) Based on need and paid in cash on a regular basis;


(2) Equal to the difference between the individual’s countable income and the income standard used to determine eligibility for supplements. Countable income is income remaining after deductions are applied. The income deductions may be more restrictive than required under SSI (see § 435.1006 for limitations on FFP in Medicaid expenditures for individuals receiving optional State supplements); and


(3) Available to all individuals in each classification in paragraph (b) of this section and available on a statewide basis. However, the plan may provide for variations in the income standard by political subdivision according to cost-of-living differences.


[58 FR 4928, Jan. 19, 1993]


§ 435.236 Individuals in institutions who are eligible under a special income level.

(a) If the agency provides Medicaid under § 435.211 to individuals in institutions who would be eligible for AFDC, SSI, or State supplements except for their institutional status, it may also cover aged, blind, and disabled individuals in institutions who –


(1) Because of their income, would not be eligible for SSI or State supplements if they were not institutionalized; but


(2) Have income below a level specified in the plan under § 435.722. (See § 435.1005 for limitations on FFP in Medicaid expenditures for individuals specified in this section.)


(b) The agency may cover individuals under this section whether or not the State pays optional supplements.


[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980. Redesignated at 58 FR 4928, Jan. 19, 1993]


Subpart D – Optional Coverage of the Medically Needy

§ 435.300 Scope.

This subpart specifies the option for coverage of medically needy individuals.


§ 435.301 General rules.

(a) An agency may provide Medicaid to individuals specified in this subpart who:


(1) Either:


(i) Have income that meets the applicable standards in §§ 435.811 and 435.814; or


(ii) If their income is more than allowed under the standard, have incurred medical expenses at least equal to the difference between their income and the applicable income standard; and


(2) Have resources that meet the applicable standards in §§ 435.840 and 435.843.


(b) If the agency chooses this option, the following provisions apply:


(1) The agency must provide Medicaid to the following individuals who meet the requirements of paragraph (a) of this section:


(i) All pregnant women during the course of their pregnancy who, except for income and resources, would be eligible for Medicaid as mandatory or optional categorically needy under subparts B or C of this part;


(ii) All individuals under 18 years of age who, except for income and resources, would be eligible for Medicaid as mandatory categorically needy under subpart B of this part;


(iii) Women who, while pregnant, applied for, were eligible for, and received Medicaid services as medically needy on the day that their pregnancy ends. The agency must provide medically needy eligibility to these women for an extended period following termination of pregnancy. This period extends from the last day of the pregnancy through the end of the month in which a 60-day period, beginning on the last day of pregnancy, ends. Eligibility must be provided, regardless of changes in the woman’s financial circumstances that may occur within this extended period. These women are eligible for the extended period for all services under the plan that are pregnancy-related (as defined in § 440.210(c)(1) of this subchapter).


(2) The agency may provide Medicaid to any of the following groups of individuals;


(i) Individuals under age 21 (§ 435.308).


(ii) Parents and other caretaker relatives (§ 435.310).


(iii) Aged (§§ 435.320 and 435.330).


(iv) Blind (§§ 435.322, 435.330 and 435.340).


(v) Disabled (§§ 435.324, 435.330, and 435.340).


(3) If the agency provides Medicaid to any individual in a group specified in paragraph (b)(2) of this section, the agency must provide Medicaid to all individuals eligible to be members of that group.


[46 FR 47986, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987; 55 FR 48609, Nov. 21, 1990; 58 FR 4929, Jan. 19, 1993; 81 FR 86454, Nov. 30, 2016]


§ 435.308 Medically needy coverage of individuals under age 21.

(a) If the agency provides Medicaid to the medically needy, it may provide Medicaid to individuals under age 21 (or, at State option, under age 20, 19, or 18), as specified in paragraph (b) of this section:


(1) Who would not be covered under the mandatory medically needy group of individuals under 18 under § 435.301(b)(1)(ii); and


(2) Who meet the income and resource requirements of subpart I of this part.


(b) The agency may cover all individuals described in paragraph (a) of this section or reasonable classifications of those individuals. Examples of reasonable classifications are as follows:


(1) Individuals in foster homes or private institutions for whom a public agency is assuming a full or partial financial responsibility. If the agency covers these individuals, it may also provide Medicaid to individuals placed in foster homes or private institutions by private nonprofit agencies.


(2) Individuals in adoptions subsidized in full or in part by a public agency.


(3) Individuals in nursing facilities when nursing facility services are provided under the plan to individuals within the age group selected under this provision. When the agency covers such individuals, it may also provide Medicaid to individuals in intermediate care facilities for individuals with intellectual disabilities.


(4) Individuals receiving active treatment as inpatients in psychiatric facilities or programs, if inpatient psychiatric services for individuals under 21 are provided under the plan.


[46 FR 47986, Sept. 30, 1981, as amended at 58 FR 4929, Jan. 19, 1993]


§ 435.310 Medically needy coverage of parents and other caretaker relatives.

If the agency provides Medicaid for the medically needy, it may provide Medicaid to parents and other caretaker relatives who meet:


(a) The definition of “caretaker relative” at § 435.4, or are the spouse of a parent or caretaker relative; and


(b) The medically needy income and resource requirements at subpart I of this part.


[81 FR 86454, Nov. 30, 2016]


§ 435.320 Medically needy coverage of the aged in States that cover individuals receiving SSI.

If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to individuals who –


(a) Are 65 years of age and older, as specified in § 435.520; and


(b) Meet the income and resource requirements of subpart I of this part.


[46 FR 47986, Sept. 30, 1981]


§ 435.322 Medically needy coverage of the blind in States that cover individuals receiving SSI.

If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to blind individuals who meet –


(a) The requirements for blindness, as specified in §§ 435.530 and 435.531; and


(b) The income and resource requirements of subpart I of this part.


[46 FR 47986, Sept. 30, 1981]


§ 435.324 Medically needy coverage of the disabled in States that cover individuals receiving SSI.

If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to disabled individuals who meet –


(a) The requirements for disability, as specified in §§ 435.540 and 435.541; and


(b) The income and resource requirements of subpart I of this part.


[46 FR 47986, Sept. 30, 1981; 46 FR 54743, Nov. 11, 1981]


§ 435.326 Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.

If the agency provides Medicaid to the categorically needy under § 435.212, it may provide it under the same rules to medically needy beneficiaries who are enrolled in MCOs or PCCMs.


[67 FR 41095, June 14, 2002]


§ 435.330 Medically needy coverage of the aged, blind, and disabled in States using more restrictive eligibility requirements for Medicaid than those used under SSI.

(a) If an agency provides Medicaid as categorically needy only to those aged, blind, or disabled individuals who meet more restrictive requirements than used under SSI and elects to cover the medically needy, it may provide Medicaid as medically needy to those aged, blind, or disabled individuals who:


(1) Do not qualify for Medicaid as categorically needy under § 435.121 or § 435.230; and


(2) If applying as blind or disabled, meet the definition of blindness or disability established under § 435.121.


(b) Except as specified in paragraph (c) of this section, the agency must apply to individuals covered under the option of this section the same financial and nonfinancial requirements that are applied to individuals covered as categorically needy under §§ 435.121 and 435.230.


(c) In determining the financial eligibility of individuals who are considered as medically needy under this section, the agency must apply the financial eligibility requirements of subparts G and I of this part.


[58 FR 4929, Jan. 19, 1993]


§ 435.340 Protected medically needy coverage for blind and disabled individuals eligible in December 1973.

If an agency provides Medicaid to the medically needy, it must cover individuals who –


(a) Where eligible as medically needy under the Medicaid plan in December 1973 on the basis of the blindness or disability criteria of the AB, APTD, or AABD plan;


(b) For each consecutive month after December 1973, continue to meet –


(1) Those blindness or disability criteria; and


(2) The eligibility requirements for the medically needy under the December 1973 Medicaid plan; and


(c) Meet the current requirements for eligibility as medically needy under the Medicaid plan except for blindness or disability criteria.


[46 FR 47987, Sept. 30, 1981]


§ 435.350 Coverage for certain aliens.

If an agency provides Medicaid to the medically needy, it must provide the services necessary for the treatment of an emergency medical condition, as defined in § 440.255(c) of this chapter, to those aliens described in § 435.406(c) of this subpart.


[55 FR 36819, Sept. 7, 1990]


Subpart E – General Eligibility Requirements

§ 435.400 Scope.

This subpart prescribes general requirements for determining the eligibility of both categorically and medically needy individuals specified in subparts B, C, and D of this part.


§ 435.401 General rules.

(a) A Medicaid agency may not impose any eligibility requirement that is prohibited under Title XIX of the Act.


(b) The agency must base any optional group covered under subparts B and C of this part on reasonable classifications that do not result in arbitrary or inequitable treatment of individuals and groups and that are consistent with the objectives of Title XIX.


(c) The agency must not use requirements for determining eligibility for optional coverage groups that are –


(1) [Reserved]


(2) For aged, blind, and disabled individuals, more restrictive than those used under SSI, except for individuals receiving an optional State supplement as specified in § 435.230 or individuals in categories specified by the agency under § 435.121.


[43 FR 45204, Sept. 29, 1978, as amended at 81 FR 86454, Nov. 30, 2016]


§ 435.402 [Reserved]

§ 435.403 State residence.

(a) Requirement. The agency must provide Medicaid to eligible residents of the State, including residents who are absent from the State. The conditions under which payment for services is provided to out-of-State residents are set forth in § 431.52 of this chapter.


(b) Definition. For purposes of this section – Institution has the same meaning as Institution and Medical institution, as defined in § 435.1010. For purposes of State placement, the term also includes foster care homes, licensed as set forth in 45 CFR 1355.20, and providing food, shelter and supportive services to one or more persons unrelated to the proprietor.


(c) Incapability of indicating intent. For purposes of this section, an individual is considered incapable of indicating intent if the individual –


(1) Has an I.Q. of 49 or less or has a mental age of 7 or less, based on tests acceptable to the Intellectual Disability agency in the State:


(2) Is judged legally incompetent; or


(3) Is found incapable of indicating intent based on medical documentation obtained from a physician, psychologist, or other person licensed by the State in the field of intellectual disability.


(d) Who is a State resident. A resident of a State is any individual who:


(1) Meets the conditions in paragraphs (e) through (i) of this section; or


(2) Meets the criteria specified in an interstate agreement under paragraph (k) of this section.


(e) Placement by a State in an out-of-State institution – (1) General rule. Any agency of the State, including an entity recognized under State law as being under contract with the State for such purposes, that arranges for an individual to be placed in an institution located in another State, is recognized as acting on behalf of the State in making a placement. The State arranging or actually making the placement is considered as the individual’s State of residence.


(2) Any action beyond providing information to the individual and the individual’s family would constitute arranging or making a State placement. However, the following actions do not constitute State placement:


(i) Providing basic information to individuals about another State’s Medicaid program, and information about the availability of health care services and facilities in another State.


(ii) Assisting an individual in locating an institution in another State, provided the individual is capable of indicating intent and independently decides to move.


(3) When a competent individual leaves the facility in which the individual is placed by a State, that individual’s State of residence for Medicaid purposes is the State where the individual is physically located.


(4) Where a placement is initiated by a State because the State lacks a sufficient number of appropriate facilities to provide services to its residents, the State making the placement is the individual’s State of residence for Medicaid purposes.


(f) Individuals receiving a State supplementary payment (SSP). For individuals of any age who are receiving an SSP, the State of residence is the State paying the SSP.


(g) Individuals receiving Title IV-E payments. For individuals of any age who are receiving Federal payments for foster care and adoption assistance under title IV-E of the Social Security Act, the State of residence is the State where the child lives.


(h) Individuals age 21 and over. Except as provided in paragraph (f) of this section, with respect to individuals age 21 and over –


(1) For an individual not residing in an institution as defined in paragraph (b) of this section, the State of residence is the State where the individual is living and –


(i) Intends to reside, including without a fixed address; or


(ii) Has entered the State with a job commitment or seeking employment (whether or not currently employed).


(2) For an individual not residing in an institution as defined in paragraph (b) of this section who is not capable of stating intent, the State of residency is the State where the individual is living.


(3) For any institutionalized individual who became incapable of indicating intent before age 21, the State of residence is –


(i) That of the parent applying for Medicaid on the individual’s behalf, if the parents reside in separate States (if a legal guardian has been appointed and parental rights are terminated, the State of residence of the guardian is used instead of the parent’s);


(ii) The parent’s or legal guardian’s State of residence at the time of placement (if a legal guardian has been appointed and parental rights are terminated, the State of residence of the guardian is used instead of the parent’s); or


(iii) The current State of residence of the parent or legal guardian who files the application if the individual is institutionalized in that State (if a legal guardian has been appointed and parental rights are terminated, the State of residence of the guardian is used instead of the parent’s).


(iv) The State of residence of the individual or party who files an application is used if the individual has been abandoned by his or her parent(s), does not have a legal guardian and is institutionalized in that State.


(4) For any institutionalized individual who became incapable of indicating intent at or after age 21, the State of residence is the State in which the individual is physically present, except where another State makes a placement.


(5) For any other institutionalized individual, the State of residence is the State where the individual is living and intends to reside.


(i) Individuals under age 21. For an individual under age 21 who is not eligible for Medicaid based on receipt of assistance under title IV-E of the Act, as addressed in paragraph (g) of this section, and is not receiving a State supplementary payment, as addressed in paragraph (f) of this section, the State of residence is as follows:


(1) For an individual who is capable of indicating intent and who is emancipated from his or her parent or who is married, the State of residence is determined in accordance with paragraph (h)(1) of this section.


(2) For an individual not described in paragraph (i)(1) of this section, not living in an institution as defined in paragraph (b) of this section and not eligible for Medicaid based on receipt of assistance under title IV-E of the Act, as addressed in paragraph (g) of this section, and is not receiving a State supplementary payment, as addressed in paragraph (f) of this section, the State of residence is:


(i) The State where the individual resides, including without a fixed address; or


(ii) The State of residency of the parent or caretaker, in accordance with paragraph (h)(1) of this section, with whom the individual resides.


(3) For any institutionalized individual who is neither married nor emancipated, the State of residence is –


(i) The parent’s or legal guardian’s State of residence at the time of placement (if a legal guardian has been appointed and parental rights are terminated, the State of residence of the guardian is used instead of the parent’s); or


(ii) The current State of residence of the parent or legal guardian who files the application if the individual is institutionalized in that State (if a legal guardian has been appointed and parental rights are terminated, the State or residence of the guardian is used instead of the parent’s).


(iii) The State of residence of the individual or party who files an application is used if the individual has been abandoned by his or her parent(s), does not have a legal guardian and is institutionalized in that State.


(j) Specific prohibitions. (1) The agency may not deny Medicaid eligibility because an individual has not resided in the State for a specified period.


(2) The agency may not deny Medicaid eligibility to an individual in an institution, who satisfies the residency rules set forth in this section, on the grounds that the individual did not establish residence in the State before entering the institution.


(3) The agency may not deny or terminate a resident’s Medicaid eligibility because of that person’s temporary absence from the State if the person intends to return when the purpose of the absence has been accomplished, unless another State has determined that the person is a resident there for purposes of Medicaid.


(k) Interstate agreements. A State may have a written agreement with another State setting forth rules and procedures resolving cases of disputed residency. These agreements may establish criteria other than those specified in paragraphs (c) through (i) of this section, but must not include criteria that result in loss of residency in both States or that are prohibited by paragraph (j) of this section. The agreements must contain a procedure for providing Medicaid to individuals pending resolution of the case. States may use interstate agreements for purposes other than cases of disputed residency to facilitate administration of the program, and to facilitate the placement and adoption of title IV-E individuals when the child and his or her adoptive parent(s) move into another State.


(l) Continued Medicaid for institutionalized beneficiaries. If an agency is providing Medicaid to an institutionalized beneficiary who, as a result of this section, would be considered a resident of a different State –


(1) The agency must continue to provide Medicaid to that beneficiary from June 24, 1983 until July 5, 1984, unless it makes arrangements with another State of residence to provide Medicaid at an earlier date: and


(2) Those arrangements must not include provisions prohibited by paragraph (i) of this section.


(m) Cases of disputed residency. Where two or more States cannot resolve which State is the State of residence, the State where the individual is physically located is the State of residence.


[49 FR 13531, Apr. 5, 1984, as amended at 55 FR 48609, Nov. 21, 1990; 71 FR 39222, July 12, 2006; 77 FR 17206, Mar. 23, 2012]


§ 435.404 Applicant’s choice of category.

The agency must allow an individual who would be eligible under more than one category to have his eligibility determined for the category he selects.


§ 435.406 Citizenship and non-citizen eligibility.

(a) The agency must provide Medicaid to otherwise eligible individuals who are –


(1) Citizens and nationals of the United States, provided that –


(i) The individual has made a declaration of United States citizenship, as defined in § 435.4, or an individual described in paragraph (a)(3) of this section has made such declaration on the individual’s behalf, and such status is verified in accordance with paragraph (c) of this section; and


(ii) For purposes of the declaration and citizenship verification requirements discussed in paragraphs (a)(1)(i) of this section, an individual includes applicants under a section 1115 demonstration (including a family planning demonstration project) for which a State receives Federal financial participation in its expenditures.


(iii) The following groups of individuals are exempt from the requirement to provide documentation to verify citizenship in paragraph (c) of this section:


(A) Individuals receiving SSI benefits under title XVI of the Act.


(B) Individuals entitled to or enrolled in any part of Medicare.


(C) Individuals receiving disability insurance benefits under section 223 of the Act or monthly benefits under section 202 of the Act, based on the individual’s disability (as defined in section 223(d) of the Act).


(D) Individuals who are in foster care and who are assisted under Title IV-B of the Act, and individuals who are beneficiaries of foster care maintenance or adoption assistance payments under Title IV-E of the Act.


(E)(1) Individuals who are or were deemed eligible for Medicaid in the State under § 435.117 or § 457.360 of this chapter on or after July 1, 2006, based on being born to a pregnant woman eligible under the State’s Medicaid or CHIP state plan or waiver of such plan;


(2) At State option, individuals who were deemed eligible for coverage under § 435.117 or § 457.360 of this chapter in another State on or after July 1, 2006, provided that the agency verifies such deemed eligibility.


(2)(i) Except as specified in 8 U.S.C. 1612(b)(1) (permitting States an option with respect to coverage of certain qualified non-citizens), qualified non-citizens as described in section 431 of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 1641) (including qualified non-citizens subject to the 5-year bar) who have provided satisfactory documentary evidence of Qualified Non-Citizen status, which status has been verified with the Department of Homeland Security (DHS) under a declaration required by section 1137(d) of the Act that the applicant or beneficiary is an non-citizen in a satisfactory immigration status.


(ii) The eligibility of qualified non-citizens who are subject to the 5-year bar in 8 U.S.C. 1613 is limited to the benefits described in paragraph (b) of this section.


(3) For purposes of paragraphs (a)(1) and (2), of this section, a declaration of citizenship or satisfactory immigration status may be provided, in writing and under penalty of perjury, by an adult member of the individual’s household, an authorized representative, as defined in § 435.923, or if the applicant is a minor or incapacitated, someone acting responsibly for the applicant provided that such individual attests to having know