[Title 42 CFR ]
[Code of Federal Regulations (annual edition) - October 1, 2009 Edition]
[From the U.S. Government Printing Office]



[[Page 1]]

          
          
          42


          Parts 430 to 481

                         Revised as of October 1, 2009


          Public Health
          
          


________________________

          Containing a codification of documents of general 
          applicability and future effect

          As of October 1, 2009
          With Ancillaries
                    Published by
                    Office of the Federal Register
                    National Archives and Records
                    Administration
                    A Special Edition of the Federal Register

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As of October 1, 2009

Title 42, Part 430 to End

Revised as of October 1, 2008

Is Replaced by

Title 40, Parts 430 to 481

and

Title 42, Part 482 to End



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                            Table of Contents



                                                                    Page
  Explanation.................................................     vii

  Title 42:
          Chapter IV--Centers for Medicare & Medicaid 
          Services, Department of Health and Human Services 
          (Continued)                                                3
  Finding Aids:
      Table of CFR Titles and Chapters........................     539
      Alphabetical List of Agencies Appearing in the CFR......     559
      Table of OMB Control Numbers............................     569
      List of CFR Sections Affected...........................     571

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                     ----------------------------

                     Cite this Code: CFR
                     To cite the regulations in 
                       this volume use title, 
                       part and section number. 
                       Thus, 42 CFR 430.0 refers 
                       to title 42, part 430, 
                       section 0.

                     ----------------------------

[[Page vii]]



                               EXPLANATION

    The Code of Federal Regulations is a codification of the general and 
permanent rules published in the Federal Register by the Executive 
departments and agencies of the Federal Government. The Code is divided 
into 50 titles which represent broad areas subject to Federal 
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name of the issuing agency. Each chapter is further subdivided into 
parts covering specific regulatory areas.
    Each volume of the Code is revised at least once each calendar year 
and issued on a quarterly basis approximately as follows:

Title 1 through Title 16.................................as of January 1
Title 17 through Title 27..................................as of April 1
Title 28 through Title 41...................................as of July 1
Title 42 through Title 50................................as of October 1

    The appropriate revision date is printed on the cover of each 
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LEGAL STATUS

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HOW TO USE THE CODE OF FEDERAL REGULATIONS

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[[Page viii]]

Many agencies have begun publishing numerous OMB control numbers as 
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the revision dates of the 50 CFR titles.




[[Page ix]]



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    Raymond A. Mosley,
    Director,
    Office of the Federal Register.
    October 1, 2009.







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                               THIS TITLE

    Title 42--Public Health is composed of five volumes. The parts in 
these volumes are arranged in the following order: Parts 1-399, parts 
400-413, parts 414-429, parts 430 to 481, and part 482 to end. The first 
volume (parts 1-399) contains current regulations issued under chapter 
I--Public Health Service (HHS). The second, third, and fourth volumes 
(parts 400-413, parts 414-429, and parts 430 to 481) include regulations 
issued under chapter IV--Centers for Medicare & Medicaid Services (HHS) 
and the fifth volume (part 482 to end) contains the remaining 
regulations in chapter IV and the regulations issued under chapter V by 
the Office of Inspector General-Health Care (HHS). The contents of these 
volumes represent all current regulations codified under this title of 
the CFR as of October 1, 2009.

    The OMB control numbers for the Centers for Medicare & Medicaid 
Services appear in Sec.  400.310 of chapter IV. For the convenience of 
the user, subpart C consisting of Sec. Sec.  400.300-400.310 is 
reprinted in the Finding Aids section of the third, fourth and fifth 
volumes.

    For this volume, Jonn V. Lilyea was Chief Editor. The Code of 
Federal Regulations publication program is under the direction of 
Michael L. White, assisted by Ann Worley.

[[Page 1]]



                         TITLE 42--PUBLIC HEALTH




                           (Parts 430 to 481)

  --------------------------------------------------------------------
                                                                    Part

chapter iv--Centers for Medicare & Medicaid Services, 
  Department of Health and Human Services (Continued).......         430

[[Page 3]]



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




  --------------------------------------------------------------------


  Editorial Note: Nomenclature changes to chapter IV appear at 66 FR 
39452, July 31, 2001; 67 FR 36540, May 24, 2002; and 69 FR 18803, Apr. 
9, 2004.

                SUBCHAPTER C--MEDICAL ASSISTANCE PROGRAMS
Part                                                                Page
430             Grants to States for Medical Assistance 
                    Programs................................           5
431             State organization and general 
                    administration..........................          19
432             State personnel administration..............          67
433             State fiscal administration.................          72
434             Contracts...................................         109
435             Eligibility in the States, District of 
                    Columbia, the Northern Mariana Islands, 
                    and American Samoa......................         111
436             Eligibility in Guam, Puerto Rico, and the 
                    Virgin Islands..........................         177
438             Managed care................................         211
440             Services: General provisions................         250
441             Services: Requirements and limits applicable 
                    to specific services....................         275
442             Standards for payment to nursing facilities 
                    and intermediate care facilities for the 
                    mentally retarded.......................         319
447             Payments for services.......................         325
455             Program integrity: Medicaid.................         369

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456             Utilization control.........................         380
    SUBCHAPTER D--STATE CHILDREN'S HEALTH INSURANCE PROGRAMS (SCHIPS)
457             Allotments and grants to States.............         417
   SUBCHAPTER E--PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)
460             Programs of all-inclusive care for the 
                    elderly (PACE)..........................         469
             SUBCHAPTER F--QUALITY IMPROVEMENT ORGANIZATIONS
475             Quality improvement organizations...........         503
476             Utilization and quality control review......         506
478             Reconsiderations and appeals................         518
480             Acquisition, protection, and disclosure of 
                    quality improvement organization 
                    information.............................         524
481

[RESERVED]

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                SUBCHAPTER C_MEDICAL ASSISTANCE PROGRAMS





PART 430_GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS--Table of Contents




               Subpart A_Introduction; General Provisions

Sec.
430.0 Program description.
430.1 Scope of subchapter C.
430.2 Other applicable Federal regulations.
430.3 Appeals under Medicaid.
430.5 Definitions.

                          Subpart B_State Plans

430.10 The State plan.
430.12 Submittal of State plans and plan amendments.
430.14 Review of State plan material.
430.15 Basis and authority for action on State plan material.
430.16 Timing and notice of action on State plan material.
430.18 Administrative review of action on State plan material.
430.20 Effective dates of State plans and plan amendments.
430.25 Waivers of State plan requirements.

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.
430.32 Program reviews.
430.33 Audits.
430.35 Withholding of payment for failure to comply with Federal 
          requirements.
430.38 Judicial review.
430.40 Deferral of claims for FFP.
430.42 Disallowance of claims for FFP.
430.45 Reduction of Federal Medicaid payments.
430.48 Repayment of Federal funds by installments.

Subpart D_Hearings on Conformity of State Medicaid Plans and Practice to 
                          Federal Requirements

430.60 Scope.
430.62 Records to be public.
430.63 Filing and service of papers.
430.64 Suspension of rules.
430.66 Designation of presiding officer for hearing.
430.70 Notice of hearing or opportunity for hearing.
430.72 Time and place of hearing.
430.74 Issues at hearing.
430.76 Parties to the hearing.
430.80 Authority of the presiding officer.
430.83 Rights of parties.
430.86 Discovery.
430.88 Evidence.
430.90 Exclusion from hearing for misconduct.
430.92 Unsponsored written material.
430.94 Official transcript.
430.96 Record for decision.
430.100 Posthearing briefs.
430.102 Decisions following hearing.
430.104 Decisions that affect FFP.

    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



Sec.  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.



Sec.  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

[[Page 6]]

plan (section 1902(a)(4)), those statutory provisions are simply cited 
without further description.



Sec.  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 74--Administration of Grants.
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]



Sec.  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]



Sec.  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



Sec.  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.



Sec.  430.12  Submittal of State plans and plan amendments.

    (a) Format. A State plan for Medicaid consists of preprinted 
material that covers the basic requirements, and individualized content 
that reflects the characteristics of the particular State's program.
    (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

[[Page 7]]

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 Sec.  
430.20.

[53 FR 36571, Sept. 21, 1988, as amended at 60 FR 33293, June 27, 1995]



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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 Sec.  430.15 may, within 
60 days after receipt of the notice provided under Sec.  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

[[Page 8]]

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 Sec.  
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.



Sec.  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 Sec.  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]



Sec.  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 recipients. 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 recipients 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 recipients to choose among competing health care plans.
    (iii) Share with recipients (through provision of additional 
services) cost-savings made possible through the recipients' use of more 
cost-effective medical care.
    (iv) Limit recipients' 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 recipients who would otherwise need 
inpatient care that is furnished in a hospital, SNF, ICF, or ICF/

[[Page 9]]

MR, 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 recipients 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 recipients 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 Sec.  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 recipients 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). The initial waiver is for a period of three years and 
may be renewed thereafter for periods of five years.
    (ii) Waivers under sections 1915(b) and 1916. The initial waiver is 
for a period of two years and may be renewed for additional periods of 
up to two 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

[[Page 10]]

waived, the Administrator may consider it a new waiver, and approve it 
for a period of three years.

[56 FR 8846, Mar. 1, 1991]



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



Sec.  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-25 
(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 part 74, which establish uniform 
administrative requirements and cost principles, apply to all grants 
made to States under this subpart:

45 CFR part 74
Subpart G--Matching and Cost Sharing
Subpart I--Financial Report Requirements



Sec.  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.

[[Page 11]]



Sec.  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 Appeals Board. (Specific rules are set forth in 
Sec.  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]



Sec.  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.



Sec.  430.38  Judicial review.

    (a) Right to judicial review. Any State dissatisfied with the 
Administrator's final determination on approvability of plan material 
(Sec.  430.18) or compliance with Federal requirements (Sec.  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

[[Page 12]]

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.



Sec.  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 Regional Administrator or the Administrator questions its 
allowability and needs additional information in order 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 
Regional Administrator 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 Regional Administrator 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 Regional Administrator disallows the claim.
    (5) The Regional Administrator has 90 days, after all documentation 
is available in readily reviewable form, to determine the allowability 
of the claim.
    (6) If the Regional Administrator 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 Regional 
Administrator or the Administrator 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.

[[Page 13]]



Sec.  430.42  Disallowance of claims for FFP.

    (a) Notice of disallowance and of right to reconsideration. When the 
Regional Administrator or the Administrator 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) of this section.
    (b) Reconsideration of FFP disallowance. (1) The Departmental 
Appeals Board reviews disallowances of FFP under title XIX.
    (2) A State that wishes to request reconsideration must submit the 
request to the Chair, Departmental Appeals Board, within 30 days after 
receipt of the disallowance letter, and include--
    (i) A copy of the disallowance letter;
    (ii) A statement of the amount in dispute; and
    (iii) A brief statement of why the disallowance is wrong.
    (c) Reconsideration procedures. The reconsideration procedures are 
those set forth in 45 CFR part 16 for Medicaid and for many other 
programs administered by the Department.
    (d) Implementation of decisions. If the reconsideration decision 
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]



Sec.  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 Sec.  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.



Sec.  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 the following conditions are met:
    (1) The amount to be repaid exceeds 2\1/2\ percent of the estimated 
or actual annual State share for the Medicaid program; and
    (2) The State has given the Regional Administrator 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 2\1/2\ percent of the annual State share as 
follows:
    (1) If the Medicaid program is ongoing, CMS uses the annual 
estimated

[[Page 14]]

State share of Medicaid expenditures. This is the sum of the estimated 
State shares for four consecutive quarters, beginning with the quarter 
in which the first installment is to be paid, as shown on the State's 
latest CMS-25 form.
    (2) If the Medicaid program has been terminated by Federal law or by 
the State, CMS uses the actual State share. The actual State share is 
that shown on the State's Statement of Expenditures reports for the last 
four quarters before the program was terminated.
    (c) 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 number of quarters allowed for repayment 
is determined on the basis of the ratio of the repayment amount to the 
annual State share of Medicaid expenditures. The higher the ratio of the 
total repayment amount is to the annual State share, the greater the 
number of quarters allowed, as follows:

------------------------------------------------------------------------
                                                               Number of
   Total repayment amount as percentage of State share of      quarters
              annual expenditures for Medicaid                  to make
                                                               repayment
------------------------------------------------------------------------
2.5 pct. or less............................................           1
Greater than 2.5, but not greater than 5....................           2
Greater than 5, but not greater than 7.5....................           3
Greater than 7.5, but not greater than 10...................           4
Greater than 10, but not greater than 15....................           5
Greater than 15, but not greater than 20....................           6
Greater than 20, but not greater than 25....................           7
Greater than 25, but not greater than 30....................           8
Greater than 30, but not greater than 47.5..................           9
Greater than 47.5, but not greater than 65..................          10
Greater than 65, but not greater than 82.5..................          11
Greater than 82.5, but not greater than 100.................          12
------------------------------------------------------------------------

    (3) Quarterly repayment amounts. The quarterly repayment amounts for 
each of the quarters in the repayment schedule may not be less than the 
following percentages of the estimated State share of the annual 
expenditures for Medicaid:

------------------------------------------------------------------------
                                                              Repayment
                                                             installment
                                                              may not be
             For each of the following quarters               less than
                                                                these
                                                             percentages
------------------------------------------------------------------------
1 to 4.....................................................          2.5
5 to 8.....................................................          5.0
9 to 12....................................................         17.5
------------------------------------------------------------------------

    (4) Extended schedule. The repayment schedule may be extended beyond 
12 quarterly installments if the total repayment amount exceeds 100% of 
the estimated State share of annual expenditures. In these 
circumstances, paragraph (c)(2) of this section is followed for 
repayment of the amount equal to 100 percent of the annual State share. 
The remaining amount of the repayment is in quarterly amounts equal to 
not less than 17.5 percent of the estimated State share of annual 
expenditures.
    (5) Repayment process. Repayment is accomplished through adjustment 
in the quarterly grants over the period covered by the repayment 
schedule.

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 neccessary.
    (6) Offsetting of retroactive claims. The amount of a retroactive 
claim to be paid a State will be offset against any amounts to be, or 
already being, repaid by the State in installments. Under this 
provision, the State may choose to:
    (i) Suspend payments until the retroactive claim due the State has, 
in fact, been offset; or
    (ii) Continue payments until the reduced amount of its debt 
(remaining after the offset), has been paid in full.

This second option would result in a shorter payment period.

A retroactive claim for the purpose of this regulation is a claim 
applicable to any period ending 12 months or more before the beginning 
of the quarter in which CMS would pay that claim.



Subpart D_Hearings on Conformity of State Medicaid Plans and Practice to 
                          Federal Requirements



Sec.  430.60  Scope.

    (a) This subpart sets forth the rules for hearings to States that 
appeal a decision to disapprove State plan material (under Sec.  430.18) 
or to withhold Federal funds (under Sec.  430.35), because the

[[Page 15]]

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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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 Sec.  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.

[[Page 16]]

    (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 
Sec.  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.



Sec.  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;

[[Page 17]]

    (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.



Sec.  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.



Sec.  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.



Sec.  430.86  Discovery.

    CMS and any party named in the notice issued under Sec.  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

[[Page 18]]

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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.

[[Page 19]]



Sec.  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 Sec.  430.38. The Administrator's decision is 
promptly served on all parties and amici.



Sec.  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 Sec.  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 Sec.  430.64.



PART 431_STATE ORGANIZATION AND GENERAL ADMINISTRATION--Table of Contents




Sec.
431.1 Purpose.

                      Subpart A_Single State Agency

431.10 Single State agency.
431.11 Organization for administration.
431.12 Medical care advisory committee.
431.15 Methods of administration.
431.16 Reports.
431.17 Maintenance of records.
431.18 Availability of agency program manuals.
431.20 Advance directives.

              Subpart B_General Administrative Requirements

431.40 Basis and scope.
431.50 Statewide operation.
431.51 Free choice of providers.
431.52 Payments for services furnished out of State.
431.53 Assurance of transportation.
431.54 Exceptions to certain State plan requirements.
431.55 Waiver of other Medicaid requirements.
431.56 Special waiver provisions applicable to American Samoa and the 
          Northern Mariana Islands.
431.57 Waiver of cost-sharing requirements.

        Subpart C_Administrative Requirements: Provider Relations

431.105 Consultation to medical facilities.
431.107 Required provider agreement.
431.108 Effective date of provider agreements.
431.110 Participation by Indian Health Service facilities.
431.115 Disclosure of survey information and provider or contractor 
          evaluation.
431.120 State requirements with respect to nursing facilities.

              Subpart D_Appeals Process for NFs and ICFs/MR

431.151 Scope and applicability.
431.152 State plan requirements.
431.153 Evidentiary hearing.

[[Page 20]]

431.154 Informal reconsideration for ICFs/MR.

          Subpart E_Fair Hearings for Applicants and Recipients

                           General Provisions

431.200 Basis and purpose.
431.201 Definitions.
431.202 State plan requirements.
431.205 Provision of hearing system.
431.206 Informing applicants and recipients.

                                 Notice

431.210 Content of notice.
431.211 Advance notice.
431.213 Exceptions from advance notice.
431.214 Notice in cases of probable fraud.

                            Right to Hearing

431.220 When a hearing is required.
431.221 Request for hearing.
431.222 Group hearings.
431.223 Denial or dismissal of request for a hearing.

                               Procedures

431.230 Maintaining services.
431.231 Reinstatement of services.
431.232 Adverse decision of local evidentiary hearing.
431.233 State agency hearing after adverse decision of local evidentiary 
          hearing.
431.240 Conducting the hearing.
431.241 Matters to be considered at the hearing.
431.242 Procedural rights of the applicant or recipient.
431.243 Parties in cases involving an eligibility determination.
431.244 Hearing decisions.
431.245 Notifying the applicant or recipient of a State agency decision.
431.246 Corrective action.

                     Federal Financial Participation

431.250 Federal financial participation.

     Subpart F_Safeguarding Information on Applicants and Recipients

431.300 Basis and purpose.
431.301 State plan requirements.
431.302 Purposes directly related to State plan administration.
431.303 State authority for safeguarding information.
431.304 Publicizing safeguarding requirements.
431.305 Types of information to be safeguarded.
431.306 Release of information.
431.307 Distribution of information materials.

Subparts G-L [Reserved]

                 Subpart M_Relations With Other Agencies

431.610 Relations with standard-setting and survey agencies.
431.615 Relations with State health and vocational rehabilitation 
          agencies and title V grantees.
431.620 Agreement with State mental health authority or mental 
          institutions.
431.621 State requirements with respect to nursing facilities.
431.625 Coordination of Medicaid with Medicare part B.
431.630 Coordination of Medicaid with QIOs.
431.635 Coordination of Medicaid with Special Supplemental Food Program 
          for Women, Infants, and Children (WIC).
431.636 Coordination of Medicaid with the State Children's Health 
          Insurance Program (SCHIP).

   Subpart N_State Programs for Licensing Nursing Home Administrators

431.700 Basis and purpose.
431.701 Definitions.
431.702 State plan requirement.
431.703 Licensing requirement.
431.704 Nursing homes designated by other terms.
431.705 Licensing authority.
431.706 Composition of licensing board.
431.707 Standards.
431.708 Procedures for applying standards.
431.709 Issuance and revocation of license.
431.710 Provisional licenses.
431.711 Compliance with standards.
431.712 Failure to comply with standards.
431.713 Continuing study and investigation.
431.714 Waivers.
431.715 Federal financial participation.

Subpart O [Reserved]

                        Subpart P_Quality Control

                           General Provisions

431.800 Scope of subpart.
431.802 Basis.
431.804 Definitions.
431.806 State plan requirements.
431.808 Protection of recipient rights.

           Medicaid Eligibility Quality Control (MEQC) Program

431.810 Basic elements of the Medicaid eligibility quality control 
          (MEQC) program.
431.812 Review procedures.
431.814 Sampling plan and procedures.
431.816 Case review completion deadlines and submittal of reports.
431.818 Access to records: MEQC program.
431.820 Corrective action under the MEQC program.
431.822 Resolution of differences in State and Federal case eligibility 
          or payment findings.

[[Page 21]]

   Medicaid Quality Control (MQC) Claims Processing Assessment System

431.830 Basic elements of the Medicaid quality control (MQC) claims 
          processing assessment system.
431.832 Reporting requirements for claims processing assessment systems.
431.834 Access to records: Claims processing assessment systems.
431.836 Corrective action under the MQC claims processing assessment 
          systems.

                     Federal Financial Participation

431.861-431.864 [Reserved]
431.865 Disallowance of Federal financial participation for erroneous 
          State payments (for annual assessment periods ending after 
          July 1, 1990).

Subpart Q_Requirements for Estimating Improper Payments in Medicaid and 
                                  SCHIP

431.950 Purpose.
431.954 Basis and scope.
431.958 Definitions and use of terms.
431.970 Information submission requirements.
431.974 Basic elements of Medicaid and SCHIP eligibility reviews.
431.978 Eligibility sampling plan and procedures.
431.980 Eligibility review procedures.
431.988 Eligibility case review completion deadlines and submittal of 
          reports.
431.992 Corrective action plan.
431.998 Difference resolution process.
431.1002 Recoveries.

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

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



Sec.  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



Sec.  431.10  Single State agency.

    (a) Basis and purpose. This section implements section 1902(a)(5) of 
the Act, which provides for designation of a 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.
    (c) Determination of eligibility. (1) The plan must specify whether 
the agency that determines eligibility for families and for individuals 
under 21 is--
    (i) The Medicaid agency; or
    (ii) 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 plan must specify whether the agency that determines 
eligibility for the aged, blind, or disabled is--
    (i) The Medicaid agency;
    (ii) 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; or
    (iii) The Federal agency administering the supplemental security 
income program under title XVI (SSI). In this case, the plan must also 
specify whether the Medicaid agency or the title IV-A agency determines 
eligibility for any groups whose eligibility is not determined by the 
Federal agency.
    (d) Agreement with Federal or State agencies. The plan must provide 
for written agreements between the Medicaid agency and the Federal or 
other State agencies that determine eligibility for Medicaid, stating 
the relationships and respective responsibilities of the agencies.
    (e) Authority of the single State agency. In order for an agency to 
qualify as the Medicaid agency--
    (1) The agency must not delegate, to other than its own officials, 
authority to--

[[Page 22]]

    (i) Exercise administrative discretion in the administration or 
supervision of the plan, or
    (ii) Issue policies, rules, and regulations on program matters.
    (2) The authority of the agency must not be impaired if any of its 
rules, regulations, or decisions are subject to review, clearance, or 
similar action by other offices or agencies of the State.
    (3) If other State or local agencies or offices perform services for 
the Medicaid agency, they must not have the authority to change or 
disapprove any administrative decision of that agency, or otherwise 
substitute their judgment for that of the Medicaid agency with respect 
to the application of policies, rules, and regulations issued by the 
Medicaid agency.

[44 FR 17930, Mar. 23, 1979]



Sec.  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) Medical assistance unit. A State plan must provide for a medical 
assistance unit within the Medicaid agency, staffed with a program 
director and other appropriate personnel who participate in the 
development, analysis, and evaluation of the Medicaid program.
    (c) Description of organization. (1) The plan must include--
    (i) A description of the organization and functions of the Medicaid 
agency and an organization chart;
    (ii) A description of the organization and functions of the medical 
assistance unit and an organization chart; and
    (iii) A description of the kinds and number of professional medical 
personnel and supporting staff used in the administration of the plan 
and their responsibilities.
    (d) Eligibility determined by other agencies. If eligibility is 
determined by State agencies 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 agencies 
and the functions they perform in carrying out their responsibility.

[44 FR 17931, Mar. 23, 1979]



Sec.  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 recipients, 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 recipient 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 recipient members.

[[Page 23]]

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



Sec.  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]



Sec.  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]



Sec.  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 recipient 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 Sec. Sec.  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]



Sec.  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

[[Page 24]]

policies that affect the public, including those that govern 
eligibility, provision of medical assistance, covered services, and 
recipient 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 recipient 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 recipient, 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]



Sec.  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 
Sec.  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.



Sec.  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.



Sec.  431.50  Statewide operation.

    (a) Statutory basis. Section 1902(a)(1) of the Act requires a State 
plan to be

[[Page 25]]

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 recipients who live in that area and chose to 
receive services from that HMO or rural health clinic. Recipients 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 
Sec. Sec.  431.54 and 431.55.

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



Sec.  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 recipients 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 recipient 
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 recipient 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 recipient.

This includes an organization that furnishes, or arranges for the 
furnishing of, Medicaid services on a prepayment basis.
    (2) A recipient 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--

[[Page 26]]

    (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 
recipients' free choice of providers in accordance with one or more of 
the exceptions set forth in Sec.  431.54, or under a waiver as provided 
in Sec.  431.55; or
    (4) Limiting the providers who are available to furnish targeted 
case management services defined in Sec.  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 
Sec.  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 Sec.  
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 Sec.  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]



Sec.  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 recipient 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 recipient'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 recipients 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.



Sec.  431.53  Assurance of transportation.

    A State plan must--
    (a) Specify that the Medicaid agency will ensure necessary 
transportation for recipients to and from providers; and
    (b) Describe the methods that the agency will use to meet this 
requirement.

[74 FR 31195, June 30, 2009]



Sec.  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.
    (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

[[Page 27]]

recipients 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 Sec.  440.30 of this chapter) through a competitive 
bidding process or otherwise, if the State assures, in the certification 
required under Sec.  431.51(d), and CMS finds, as follows:
    (1) Adequate services or devices are available to recipients 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 recipients.
    (e) Lock-in of recipients who over-utilize Medicaid services. If a 
Medicaid agency finds that a recipient 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 recipient 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 recipient notice and opportunity for a 
hearing (in accordance with procedures established by the agency) before 
imposing the restrictions.
    (2) The agency ensures that the recipient 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 recipient.
    (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 recipients 
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 Sec.  
431.50(b) relating to the statewide operation of a State plan and Sec.  
440.240 of this chapter related to comparability of services do not 
apply with respect to targeted case management services defined in Sec.  
440.169 of this chapter.

[56 FR 8847, Mar. 1, 1991, as amended at 72 FR 68091, Dec. 4, 2007]

[[Page 28]]



Sec.  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 Sec.  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 
recipient. 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 
recipients 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 recipients 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.

[[Page 29]]

    (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 
recipients the cost savings resulting from the recipients' 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 recipient; and
    (ii) Services expressly offered by the State as an inducement for 
recipients 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 recipients 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 recipients residing at a long-term care facility 
when a restriction is imposed unless the State arranges for reasonable 
and adequate recipient 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 Sec.  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]

[[Page 30]]



Sec.  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 Sec.  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.



Sec.  431.57  Waiver of cost-sharing requirements.

    (a) Sections 1916(a)(3) and 1916(b)(3) of the Act specify the 
circumstances under which the Secretary is authorized to waive the 
requirement that cost-sharing amounts be nominal.
    (b) For nonemergency services furnished in a hospital emergency 
room, the Secretary may by waiver permit a State to impose a copayment 
of up to double the ``nominal'' copayment amounts determined under Sec.  
447.54(a)(3) of this subchapter.
    (c) Nonemergency services are services that do not meet the 
definition of emergency services at Sec.  447.53(b)(4) of this 
subchapter.
    (d) In order for a waiver to be approved under this section, the 
State must establish to the satisfaction of CMS that alternative sources 
of nonemergency, outpatient services are available and accessible to 
recipients.
    (e) Although, in accordance with Sec.  431.55(b)(3) of this part, a 
waiver will generally be granted for a 2-year duration, CMS will 
reevaluate waivers approved under this section if the State increases 
the nominal copayment amounts in effect when the waiver was approved.
    (f) A waiver approved under this section cannot apply to services 
furnished before the waiver was granted.

[59 FR 4600, Feb. 1, 1994]



        Subpart C_Administrative Requirements: Provider Relations



Sec.  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 recipients.
    (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.



Sec.  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).

[[Page 31]]

    (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 recipients;
    (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 Sec.  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 Sec.  
417.436(d) of this chapter.

[44 FR 41644, July 17, 1979, as amended at 57 FR 8202, Mar. 6, 1992]



Sec.  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 
Sec.  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.

[[Page 32]]

    (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 
recipient, covered services for which it has not been paid.

[62 FR 43935, Aug. 18, 1997]



Sec.  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.



Sec.  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 
recipients may receive services.
    (c) State plan requirements. A State plan must provide that the 
requirements of this section and Sec.  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 Sec.  
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 Sec.  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,

[[Page 33]]

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]



Sec.  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/MR 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/MR

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



Sec.  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 the mentally retarded (ICF/
MR) 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/MR that is dissatisfied with a determination as 
to

[[Page 34]]

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]



Sec.  431.152  State plan requirements.

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

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



Sec.  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 Sec.  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/MR. If an ICF/MR 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/MR an 
informal reconsideration that meets the requirements of Sec.  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 Sec.  488.452 of this chapter), the NF is entitled only 
to the appeals procedures

[[Page 35]]

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 Sec.  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]



Sec.  431.154  Informal reconsideration for ICFs/MR.

    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 Recipients

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

                           General Provisions



Sec.  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 PAHP takes action, as stated in this subpart, to 
suspend, terminate, or reduce services, or an MCO or PIHP takes action 
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.

[67 FR 41094, June 14, 2002]



Sec.  431.201  Definitions.

    For purposes of this subpart:
    Action means a termination, suspension, or reduction of Medicaid 
eligibility or covered services. It also means determinations by skilled 
nursing facilities and nursing facilities to transfer or discharge 
residents and adverse determinations made by a State with regard to the 
preadmission screening and annual 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.

[[Page 36]]

    De novo hearing means a hearing that starts over from the beginning.
    Evidentiary hearing means a hearing conducted so that evidence may 
be presented.
    Notice means a written statement that meets the requirements of 
Sec.  431.210.
    Request for a hearing means a clear expression by the applicant or 
recipient, or his authorized representative, that he wants the 
opportunity to present his case to a reviewing authority.
    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]



Sec.  431.202  State plan requirements.

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



Sec.  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 the agency; or
    (2) An evidentiary hearing at the local level, with a right of 
appeal to a State agency hearing.
    (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.



Sec.  431.206  Informing applicants and recipients.

    (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 recipient in writing--
    (1) Of his right to a hearing;
    (2) Of the method by which he may obtain a hearing; and
    (3) That he may represent himself or use legal counsel, a relative, 
a friend, or other spokesman.
    (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 of any action affecting his or her claim;
    (3) At the time a skilled nursing facility or a nursing facility 
notifies a resident in accordance with Sec.  483.12 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.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993]

                                 Notice



Sec.  431.210  Content of notice.

    A notice required under Sec.  431.206 (c)(2), (c)(3), or (c)(4) of 
this subpart must contain--
    (a) A statement of what action the State, skilled nursing facility, 
or nursing facility intends to take;
    (b) The reasons for 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 an 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]



Sec.  431.211  Advance notice.

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

[[Page 37]]



Sec.  431.213  Exceptions from advance notice.

    The agency may mail a notice not later than the date of action if--
    (a) The agency has factual information confirming the death of a 
recipient;
    (b) The agency receives a clear written statement signed by a 
recipient 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 recipient has been admitted to an institution where he is 
ineligible under the plan for further services;
    (d) The recipient's whereabouts are unknown and the post office 
returns agency mail directed to him indicating no forwarding address 
(See Sec.  431.231 (d) of this subpart for procedure if the recipient's 
whereabouts become known);
    (e) The agency establishes the fact that the recipient 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 
recipient'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 Sec.  483.12(a)(5)(ii), which provides exceptions to the 
30 days notice requirements of Sec.  483.12(a)(5)(i).

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56505, Nov. 30, 1992; 
58 FR 25784, Apr. 28, 1993]



Sec.  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 recipient; and
    (b) The facts have been verified, if possible, through secondary 
sources.

                            Right to Hearing



Sec.  431.220  When a hearing is required.

    (a) The State agency must grant an opportunity for a hearing to the 
following:
    (1) Any applicant who requests it because his claim for services is 
denied or is not acted upon with reasonable promptness.
    (2) Any recipient who requests it because he or she believes the 
agency has taken an action erroneously.
    (3) 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.
    (4) 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.
    (5) Any MCO or PIHP enrollee who is entitled to a hearing under 
subpart F of part 438 of this chapter.
    (6) Any PAHP enrollee who has an action as stated in this subpart.
    (7) 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 recipients.

[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]



Sec.  431.221  Request for hearing.

    (a) The agency may require that a request for a hearing be in 
writing.
    (b) The agency may not limit or interfere with the applicant's or 
recipient's freedom to make a request for a hearing.
    (c) The agency may assist the applicant or recipient in submitting 
and processing his request.
    (d) The agency must allow the applicant or recipient a reasonable 
time, not to exceed 90 days from the date that notice of action is 
mailed, to request a hearings.



Sec.  431.222  Group hearings.

    The agency--

[[Page 38]]

    (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.



Sec.  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 recipient withdraws the request in writing; or
    (b) The applicant or recipient fails to appear at a scheduled 
hearing without good cause.

                               Procedures



Sec.  431.230  Maintaining services.

    (a) If the agency mails the 10-day or 5-day notice as required under 
Sec.  431.211 or Sec.  431.214 of this subpart, and the recipient 
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 recipient 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 
recipient to recoup the cost of any services furnished the recipient, 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]



Sec.  431.231  Reinstatement of services.

    (a) The agency may reinstate services if a recipient 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 Sec.  
431.211 or Sec.  431.214 of this subpart;
    (2) The recipient requests a hearing within 10 days of the mailing 
of the notice of action; and
    (3) The agency determines that the action resulted from other than 
the application of Federal or State law or policy.
    (d) If a recipient'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.



Sec.  431.232  Adverse decision of local evidentiary hearing.

    If the decision of a local evidentiary hearing is adverse to the 
applicant or recipient, the agency must--
    (a) Inform the applicant or recipient of the decision;
    (b) Inform the applicant or recipient that he has the right to 
appeal the decision to the State agency, in writing, within 15 days of 
the mailing of the notice of the adverse decision;
    (c) Inform the applicant or recipient of his right to request that 
his appeal be a de novo hearing; and
    (d) Discontinue services after the adverse decision.



Sec.  431.233  State agency hearing after adverse decision of local evidentiary hearing.

    (a) Unless the applicant or recipient 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.

[[Page 39]]



Sec.  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.



Sec.  431.241  Matters to be considered at the hearing.

    The hearing must cover--
    (a) Agency action or failure to act with reasonable promptness on a 
claim for services, including both initial and subsequent decisions 
regarding eligibility;
    (b) Agency decisions regarding changes in the type or amount of 
services;
    (c) A decision by a skilled nursing facility or nursing facility to 
transfer or discharge a resident; and
    (d) 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]



Sec.  431.242  Procedural rights of the applicant or recipient.

    The applicant or recipient, 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 recipient's case file; 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.

[44 FR 17932, Mar. 29, 1979, as amended at 57 FR 56506, Nov. 30, 1992]



Sec.  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.



Sec.  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 recipient 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 the earlier of the following:
    (i) The date the enrollee filed an MCO or PIHP appeal, not including 
the number of days the enrollee took to subsequently file for a State 
fair hearing; or
    (ii) If permitted by the State, the date the enrollee filed for 
direct access to a State fair hearing.

[[Page 40]]

    (2) As expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, from the MCO 
or PIHP, the case file and information for any appeal of a denial of a 
service that, as indicated by the MCO or PIHP--
    (i) Meets the criteria for expedited resolution as set forth in 
Sec.  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) If the State agency permits direct access to a State fair 
hearing, as expeditiously as the enrollee's health condition requires, 
but no later than 3 working days after the agency receives, directly 
from an MCO or PIHP enrollee, a fair hearing request on a decision to 
deny a service that it determines meets the criteria for expedited 
resolution, as set forth in Sec.  438.410(a) of this chapter.
    (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]



Sec.  431.245  Notifying the applicant or recipient of a State agency decision.

    The agency must notify the applicant or recipient 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.



Sec.  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 recipient; 
or
    (b) The agency decides in the applicant's or recipient's favor 
before the hearing.

[57 FR 56506, Nov. 30, 1992]

                     Federal Financial Participation



Sec.  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 recipient, his 
representative, and witnesses to and from the hearing;
    (2) Meeting other expenses of the applicant or recipient in 
connection with the hearing;
    (3) Carrying out the hearing procedures, including expenses of 
obtaining the additional medical assessment specified in Sec.  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 Recipients

    Source: 44 FR 17934, Mar. 29, 1979, unless otherwise noted.



Sec.  431.300  Basis and purpose.

    (a) Section 1902(a)(7) of the Act requires that a State plan must 
provide

[[Page 41]]

safeguards that restrict the use or disclosure of information concerning 
applicants and recipients 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) Section 1137 of the Act, which requires agencies to exchange 
information in order to verify the income and eligibility of applicants 
and recipients (see Sec.  435.940ff), 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) of the Internal Revenue Code of 1954 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.

[51 FR 7210, Feb. 28, 1986]



Sec.  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 
recipients to purposes directly connected with the administration of the 
plan.



Sec.  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 recipients; and
    (d) Conducting or assisting an investigation, prosecution, or civil 
or criminal proceeding related to the administration of the plan.



Sec.  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 recipients.



Sec.  431.304  Publicizing safeguarding requirements.

    (a) The agency must publicize provisions governing the confidential 
nature of information about applicants and recipients, including the 
legal sanctions imposed for improper disclosure and use.
    (b) The agency must provide copies of these provisions to applicants 
and recipients and to other persons and agencies to whom information is 
disclosed.



Sec.  431.305  Types of information to be safeguarded.

    (a) The agency must have criteria that govern the types of 
information about applicants and recipients 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 Sec.  435.940ff). Income 
information received from SSA or the Internal Revenue Service must be 
safeguarded according to the requirements of the agency that furnished 
the data.
    (7) Any information received in connection with the identification 
of legally liable third party resources under Sec.  433.138 of this 
chapter.

[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 
FR 5975, Feb. 27, 1987]



Sec.  431.306  Release of information.

    (a) The agency must have criteria specifying the conditions for 
release and use of information about applicants and recipients.

[[Page 42]]

    (b) Access to information concerning applicants or recipients 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 recipients.
    (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 Sec. Sec.  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 recipient, 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 Sec. Sec.  435.940 through 435.965 of this chapter, the 
agency must execute data exchange agreements with those agencies, as 
specified in Sec.  435.945(f).
    (h) Before requesting information from, or releasing information to, 
other agencies to identify legally liable third party resources under 
Sec.  433.138(d) of this chapter, the agency must execute data exchanges 
agreements, as specified in Sec.  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]



Sec.  431.307  Distribution of information materials.

    (a) All materials distributed to applicants, recipients, 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 recipients, 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]

Subparts G-L [Reserved]



                 Subpart M_Relations With Other Agencies



Sec.  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

[[Page 43]]

    (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 recipients, 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 
Sec.  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 recipients.
    (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 Sec.  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 and ICFs/MR, 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;

[[Page 44]]

    (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 
Sec.  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 Sec. Sec.  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]



Sec.  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 
recipients 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 recipients;
    (iv) Payment or reimbursement;
    (v) Exchange of reports of services furnished to recipients;

[[Page 45]]

    (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 recipients through an 
arrangement under this section.



Sec.  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 recipients 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 recipients 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 
recipient who is in alternative care;
    (4) Access by the agency to the institution, the recipient, and the 
recipient's records when necessary to carry out the agency's 
responsibilities;
    (5) Recording, reporting, and exchanging medical and social 
information about recipients; and
    (6) Other procedures needed to carry out the agreement.

[44 FR 17935, Mar. 23, 1979]



Sec.  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 mental 
retardation 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 mental retardation 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 mental retardation authorities, including arrangements for--
(1) Joint planning between the parties to the agreement;
    (2) Access by the agency to the State mental health and mental 
retardation 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 Sec. Sec.  483.112(c) 
and 483.114(c) of this part;
    (5) Ensuring that, if the State mental health and mental retardation 
authorities delegate their respective responsibilities, these 
delegations comply with Sec.  483.106(e) of this part;
    (6) Ensuring that PASARR determinations made by the State mental

[[Page 46]]

health and mental retardation authorities are not countermanded by the 
State Medicaid agency, except through the appeals process, but that the 
State mental health and mental retardation 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 Sec. Sec.  483.100 through 
483.136 are met.

[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]



Sec.  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 
recipients 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 recipients enrolled under Medicare 
Part B without obligating itself to provide the range of Part B benefits 
to other recipients; and
    (3) Section 1903 (a)(1) and (b) of the Act authorizes FFP for State 
payment of Medicare Part B premiums for certain recipients.
    (4) This section--
    (i) Specifies the exception, relating to Part B coverage, from the 
requirement to provide comparable services to all recipients; 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 
recipients enrolled under Medicare Part B, the portion that is to be 
paid by a Medicaid recipient must be reasonably related to the 
recipient'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 recipients 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 
recipient does not obligate it to pay on the recipient'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 recipient'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 recipient'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 recipients unless the recipients 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 Sec. Sec.  435.112 
and 436.116 of this subchapter, those eligible for continued Medicaid 
coverage despite increased income from employment;
    (ii) Recipients required to be covered under Sec. Sec.  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) Recipients required to be covered under Sec.  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) Recipients of foster care maintenance payments or adoption 
assistance

[[Page 47]]

payments who, under Part E of title IV of the Act are considered as 
receiving AFDC;
    (v) Individuals required to be covered under Sec.  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 Sec. Sec.  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 recipients 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 recipients 
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 Sec. Sec.  435.914 and 436.901 of this 
subchapter for retroactive coverage of recipients.

[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]



Sec.  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 Sec.  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]



Sec.  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:

[[Page 48]]

    (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 
recipients (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]



Sec.  431.636  Coordination of Medicaid with the State Children's Health Insurance Program (SCHIP).

    (a) Statutory basis. This section implements--
    (1) Section 2102(b)(3)(B) of the Act, which provides that children 
who apply for coverage under a separate child health plan under title 
XXI, but are found to be eligible for medical assistance under the State 
Medicaid plan, must be enrolled in the State Medicaid plan; and
    (2) Section 2102(c)(2) of the Act, which requires coordination 
between a State child health program and other public health insurance 
programs.
    (b) Obligations of State Medicaid Agency. The State Medicaid agency 
must adopt procedures to facilitate the Medicaid application process 
for, and the enrollment of children for whom the Medicaid application 
and enrollment process has been initiated in accordance with Sec.  
457.350(f) of this chapter. The procedures must ensure that--
    (1) The applicant is not required to provide information or 
documentation that has been provided to the State agency responsible for 
determining eligibility under a separate child health program under 
title XXI and forwarded by such agency to the Medicaid agency on behalf 
of the child in accordance with Sec.  457.350(f) of this chapter;
    (2) Eligibility is determined in a timely manner in accordance with 
Sec.  435.911 of this chapter;
    (3) The Medicaid agency promptly notifies the State agency 
responsible for determining eligibility under a separate child health 
program when a child who was screened as potentially eligible for 
Medicaid is determined ineligible or eligible for Medicaid; and
    (4) The Medicaid agency adopts a process that facilitates enrollment 
in a State child health program when a child is determined ineligible 
for Medicaid at initial application or redetermination.

[66 FR 2666, Jan. 11, 2001]



   Subpart N_State Programs for Licensing Nursing Home Administrators



Sec.  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.



Sec.  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

[[Page 49]]

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 Sec.  
431.704 to be included under the requirements of this subpart. The term 
does not include--
    (a) A religious nonmedical institution as defined in Sec.  
440.170(b) of this chapter; or
    (b) A distinct part of a hospital, if the hospital meets the 
definition in Sec.  440.10 or Sec.  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]



Sec.  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 
Sec. Sec.  431.703 through 431.713 of this subpart.



Sec.  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.



Sec.  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.



Sec.  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 Sec. Sec.  431.707 through 431.713 and the board must meet 
the membership requirements specified in Sec.  431.706 of this subpart.



Sec.  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.



Sec.  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.



Sec.  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.

[[Page 50]]



Sec.  431.709  Issuance and revocation of license.

    Except as provided in Sec.  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.



Sec.  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 Sec.  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.



Sec.  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.



Sec.  431.712  Failure to comply with standards.

    The agency or board must investigate and act on all complaints it 
receives of violations of standards.



Sec.  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.



Sec.  431.714  Waivers.

    The agency or board may waive any standards developed under Sec.  
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.



Sec.  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

                           General Provisions

    Source: Sections 431.800 through 431.808 appear at 55 FR 22166, May 
31, 1990, unless otherwise noted.



Sec.  431.800  Scope of subpart.

    This subpart--
    (a) Establishes State plan requirements for a Medicaid eligibility 
quality control (MEQC) program designed to reduce erroneous expenditures 
by monitoring eligibility determinations and a claims processing 
assessment system that monitors claims processing operations.
    (b) Establishes rules and procedures for disallowing Federal 
financial participation (FFP) in erroneous Medicaid payments due to 
eligibility and recipient liability errors as detected through the MEQC 
program.



Sec.  431.802  Basis.

    This subpart implements the following sections of the Act, which 
establish requirements for State plans and for payment of Federal 
financial participation (FFP) to States:

    1902(a)(4) Administrative methods for proper and efficient operation 
of the State plan.
    1903(u) Limitation of FFP for erroneous medical assistance 
expenditures.



Sec.  431.804  Definitions.

    As used in this subpart--
    Active case means an individual or family determined to be currently 
authorized as eligible for Medicaid by the agency.
    Administrative period means the period of time recognized by the 
MEQC program for State agencies to reflect

[[Page 51]]

changes in case circumstances, i.e., a change in a common program area, 
during which no case error based on the circumstance change would be 
cited. This period consists of the review month and the month prior to 
the review month.
    Claims processing error means FFP has been claimed for a Medicaid 
payment that was made--
    (1) For a service not authorized under the State plan;
    (2) To a provider not certified for participation in the Medicaid 
program;
    (3) For a service already paid for by Medicaid; or
    (4) In an amount above the allowable reimbursement level for that 
service.
    Eligibility error means that Medicaid coverage has been authorized 
or payment has been made for a recipient or family under review who--
    (1) Was ineligible when authorized or when he received services; or
    (2) Was eligible for Medicaid but was ineligible for certain 
services he received; or
    (3) Had not met recipient liability requirements when authorized 
eligible for Medicaid; that is, he had not incurred medical expenses 
equal to the amount of his excess income over the State's financial 
eligibility level or he had incurred medical expenses that exceeded the 
amount of excess income over the State's financial eligibility level, or 
was making an incorrect amount of payment toward the cost of services.
    Negative case action means an action that was taken to deny or 
otherwise dispose of a Medicaid application without a determination of 
eligibility (for instance, because the application was withdrawn or 
abandoned) or an action to deny, suspend, or terminate an individual or 
family.
    State agency means either the State Medicaid agency or a State 
agency that is responsible for determining eligibility for Medicaid.



Sec.  431.806  State plan requirements.

    (a) MEQC program. A State plan must provide for operating a Medicaid 
eligibility quality control program that meets the requirements of 
Sec. Sec.  431.810 through 431.822 of this subpart.
    (b) 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 Sec. Sec.  431.830 through 431.836 of 
this subpart.



Sec.  431.808  Protection of recipient 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 Sec. Sec.  435.902 
and 436.901 of this subchapter concerning the rights of recipients.

           Medicaid Eligibility Quality Control (MEQC) Program

    Source: Sections 431.810 through 431.822 appear at 55 FR 22167, May 
31, 1990, unless otherwise noted.



Sec.  431.810  Basic elements of the Medicaid eligibility quality control (MEQC) program.

    (a) General requirements. The agency must operate the MEQC program 
in accordance with this section and Sec. Sec.  431.812 through 431.822 
and other instructions established by CMS.
    (b) Review requirements. The agency must conduct MEQC reviews in 
accordance with the requirements specified in Sec.  431.812 and other 
instructions established by CMS.
    (c) Sampling requirements. The agency must conduct MEQC sampling in 
accordance with the requirements specified in Sec.  431.814 and other 
instructions established by CMS.



Sec.  431.812  Review procedures.

    (a) Active case reviews. (1) Except as provided in paragraph (a)(2) 
of this section, the agency must review all active cases selected from 
the State agency's lists of cases authorized eligible for the review 
month, to determine if the cases were eligible for services during all 
or part of the month under review, and, if appropriate, whether the 
proper amount of recipient liability was computed.

[[Page 52]]

    (2) The agency is not required to conduct reviews of the following 
cases:
    (i) Supplemental Security Income (SSI) recipient cases in States 
with contracts under section 1634 of the Act for determining Medicaid 
eligibility;
    (ii) Foster care and adoption assistance cases under title IV-E of 
the Act found eligible for Medicaid; and
    (iii) Cases under programs that are 100 percent federally funded.
    (b) Negative case reviews. Except as provided in paragraph (c) of 
this section, or unless a State is utilizing an approved sampling plan 
to conduct negative case action reviews under Sec.  431.978(a) and Sec.  
431.980(b), the agency must review those negative cases selected from 
the State agency's list of cases that are denied, suspended, or 
terminated in the review month to determine if the reason for the 
denial, suspension, or termination was correct and if requirements for 
timely notice of negative action were met. A State's negative case 
sample size is determined on the basis of the number of negative case 
actions in the universe.
    (c) Alternate systems of negative case reviews--(1) Basic provision. 
A State may be exempt from the negative case review requirements 
specified in paragraphs (b) and (e)(2) of this section and in Sec.  
431.814(d) upon CMS's approval of a plan for the use of a superior 
system.
    (2) Submittal of plan for alternate system. An agency must submit 
its plan for the use of a superior system to CMS for approval at least 
60 days before the beginning of the review period in which it is to be 
implemented. If a plan is unchanged from a previous period, the agency 
is not required to resubmit it.

The agency must receive approval for a plan before it can be 
implemented.
    (3) Requirement for alternate system. To be approved, the State's 
plan must--
    (i) Clearly define the purpose of the system and demonstrate how the 
system is superior to the current negative case review requirements.
    (ii) Contain a methodology for identifying significant problem areas 
that could result in erroneous denials, suspensions, and terminations of 
applicants and recipients. Problem areas selected for review must 
contain at least as many applicants and recipients as were included in 
the negative case sample size previously required for the State.
    (iii) Provide a detailed methodology describing how the extent of 
the problem area will be measured through sampling and review 
procedures, the findings expected from the review, and planned 
corrective actions to resolve the problem.
    (iv) Include documentation supporting the use of the system 
methodology. Documentation must include the timeframes under which the 
system will be operated.
    (v) Provide a superior means of monitoring denials, terminations, 
and suspensions than that required under paragraph (b) of this section.
    (vi) Provide a statistically valid error rate that can be projected 
to the universe that is being studied.
    (d) Reviews for erroneous payments. The agency must review all 
claims for services furnished during the review month and paid within 4 
months of the review month to all members of each active case related in 
the sample to identify erroneous payments resulting from--
    (1) Ineligibility for Medicaid;
    (2) Ineligibility for certain Medicaid services; and
    (3) Recipient understated or overstated liability.
    (e) Reviews for verification of eligibility status. The agency must 
collect and verify all information necessary to determine the 
eligibility status of each individual included in an active case 
selected in the sample as of the review month and whether Medicaid 
payments were for services which the individual was eligible to receive.

The agency must apply the administrative period described in Sec.  
431.804 when considering the case circumstances and the case 
correctness. In order to verify eligibility information, the agency 
must--
    (1) Examine and analyze each case record for all cases under review 
to establish what information is available for use in determining 
eligibility in the review month;
    (2) Conduct field investigations including in-person recipient 
interviews for each case in the active case sample, and conduct in-
person interviews only

[[Page 53]]

when the correctness of the agency action cannot be determined by review 
of the case record with recipients for cases in the negative case action 
sample (unless this is otherwise addressed in a superior system provided 
for in paragraph (c)(1) of this section);
    (3) Verify all appropriate elements of eligibility for active cases 
through at least one primary source of evidence or two secondary sources 
of evidence as defined by CMS by documentation or by collateral contacts 
as required, or both, and fully record the information on the 
appropriate forms;
    (4) Determine the basis on which eligibility was established and the 
eligibility status of the active case and each case member;
    (5) Collect copies of State paid claims or recipient profiles for 
services delivered during the review month and, if indicated, any months 
prior to the review month in the agency's selected spenddown period, for 
all members of the active case under review;
    (6) Associate dollar values with eligibility status for each active 
case under review; and
    (7) Complete the payment, case, and review information for all 
individuals in the active case under review on the appropriate forms.

[55 FR 22167, May 31, 1990, as amended at 72 FR 50513, Aug. 31, 2007]



Sec.  431.814  Sampling plan and procedures.

    (a) Plan approval. The agency must submit a basic MEQC sampling plan 
(or revisions to a current plan) that meets the requirements of this 
section to the appropriate CMS regional office for approval at least 60 
days before the beginning of the review period in which it is to be 
implemented. If a plan is unchanged from a previous period, the agency 
is not required to resubmit the entire plan. Universe estimates and 
sampling intervals are required 2 weeks before the first monthly sample 
selection for each review period. The agency must receive approval for a 
plan before it can be implemented.
    (b) Plan requirements. The agency must have an approved sampling 
plan in effect for the full 6-month sampling period that includes the 
following:
    (1) The population to be sampled;
    (2) The list(s) from which the sample is selected and the following 
characteristics of the list(s):
    (i) Sources;
    (ii) All types of cases in the selection lists;
    (iii) Accuracy and completeness of sample lists in reference to the 
population(s) of interest;
    (iv) Whether or not the selection list was constructed by combining 
more than one list;
    (v) The form of the selection list (whether the list or part of the 
list is automated);
    (vi) Frequency and length of delays in updating the selection lists 
or their sources;
    (vii) Number of items on the lists and proportion of listed-in-error 
items:
    (viii) Methods of deleting unwanted items from the selection lists; 
and
    (ix) Structure of the selection lists.
    (3) The sample size, including the minimum number of reviews to be 
completed and the expected number of cases to be selected. Minimum 
sample sizes are based on the State's relative level of Medicaid annual 
expenditures for services for active cases, and on the total number of 
negative case actions in the universe for negative cases. When the 
sample is substratified, there can be no fewer than 75 cases in each 
substratum, except as provided in paragraph (c) of this section or as 
provided in an exception documented in an approved sampling plan which 
contains a statement accepting the precision and reliability of the 
reduced sample.
    (4) The sample selection procedure. Systematic random sampling is 
recommended. Alternative procedures must provide a representative 
sample, conform to principles of probability sampling, and yield 
estimates with the same or better precision than achieved in systematic 
random sampling.
    (5) Procedures used to identify amounts paid for services received 
in the review month.
    (6) Specification as to whether the agency chooses to--
    (i) Use billed amounts to offset recipient liability toward cost of 
care (No indication will be interpreted to mean that the agency will use 
paid claims); and

[[Page 54]]

    (ii) Use denied claims to offset recipient liability toward cost of 
care in the payment review. (No indication will be interpreted to mean 
denied claims will not be used.)
    (7) Indication of whether the agency opts to drop or complete cases 
selected more than once in a sample period. (No indication will be 
interpreted to mean that the agency will complete cases selected more 
than once.)
    (c) Eligibility universe--active cases. The MEQC universe for active 
cases must be divided into two strata, the Aid to Families with 
Dependent Children (AFDC) stratum and the Medical Assistance Only (MAO) 
stratum.
    (1) All States must use the AFDC quality control sample for the AFDC 
stratum.
    (2) States must include in the MAO stratum all cases certified as 
eligible for Medicaid that are not in the AFDC stratum, excluding 
individuals specified in paragraph (c)(4) of this section.
    (3) States that do not have an agreement with the Social Security 
Administration under section 1634 of the Act and do not have more 
restrictive eligibility criteria under section 1902(f) of the Act but 
require a separate Medicaid application for recipients of SSI and 
determine Medicaid eligibility using SSI criteria must divide the MAO 
stratum into two substrata: MAO cases and SSI cash cases for the first 
review period beginning after July 1, 1990 and for review periods 
thereafter. The SSI substratum sample size must be 75 cases or one-half 
of the total MAO sample, whichever is smaller. The non-SSI MAO 
substratum sample will be the remainder of the MAO stratum cases.

States may be exempt from this requirement when implementing an approved 
sampling option that does not accommodate this stratification method.
    (4) States must exclude from the MEQC universe SSI beneficiaries 
whose eligibility determinations were made exclusively by the Social 
Security Administration under an agreement under section 1634 of the 
Act, individuals in foster care or receiving adoption assistance whose 
eligibility is determined under title IV-E of the Act, and individuals 
receiving Medicaid under programs that are 100 percent federally funded.
    (d) Eligibility universe--negative cases. Unless the agency has an 
approved superior system under Sec.  431.812(c) that provides otherwise, 
the universe for negative Medicaid eligibility cases must consist of all 
denied applications, suspensions, and terminations occurring during the 
review month except transfers between counties without any break in 
eligibility, cases in which eligibility is exclusively determined by SSA 
under a section 1634 contract, cases determined eligible for foster care 
and adoption assistance under title IV-E of the Act, and cases under 
programs that are 100 percent federally funded.
    (e) Sampling procedures. The agency must document all sampling 
procedures used by the State agency, including 98 percent accuracy of 
program identifier codes used in the sampling frame to separate listed-
in-error cases from those in the population of interest, must make them 
available for review by CMS, and must be able to demonstrate the 
integrity of its sampling procedures in accordance with this section.
    (f) Sampling periods. The agency must use 6-month sampling periods, 
from April through September and from October through March.
    (g) Statistical samples. The agency must select statistically valid 
samples of both active and negative case actions.
    (h) Sample selection lists. The agency must submit to CMS monthly a 
list of cases selected in the sample to be reviewed, after the State's 
sample selection and before commencing MEQC reviews on the cases in the 
sample.
    (i) Universe estimates and sampling intervals. The agency must 
submit detailed universe estimates and sampling intervals to CMS for 
approval at least 2 weeks before the first sample selection of the 
review period if the estimates differ from the previous period. The 
sampling intervals must be used continuously throughout the sampling 
period unless otherwise specified in an approved sampling plan. Final 
universe counts based on the actual sampling

[[Page 55]]

universe must be determined and reported to CMS for each stratum/
substratum designated in the sampling plan.

The agency also must submit universe counts for cases eligible for 
foster care and adoption assistance under title IV-E of the Act, and, 
for States with an agreement under section 1634 of the Act, for cases 
found eligible by the Social Security Administration.
    (j) Sample size and methodology options. The agency may select a 
sample size in accordance with the minimum established under paragraph 
(b)(3) of this section or use one of the methodologies specified in 
paragraph (j)(1) or (2) of this section.
    (1) Increase in size. The agency may, at its option, increase its 
sample size for a sampling period above the federally prescribed minimum 
sample size provided for under paragraph (b)(3) of this section, and 
receive FFP for any increased administrative costs the agency incurs by 
exercising this option.
    (2) Retrospective sampling. The agency may, at its option, implement 
retrospective sampling in which cases are stratified by dollar value of 
claims paid. If the agency selects retrospective sampling, it must--
    (i) Draw an initial case sample size each month that is no less than 
5 times the required sample size. The sample will be selected from the 
universe of cases that were certified eligible in the fourth month prior 
to the month of case selection;
    (ii) Identify claims paid for services furnished to all individuals 
during the review month (and, if indicated, any months prior to the 
review month in the agency's selected spenddown period) for these cases;
    (iii) Stratify the cases by dollar value of the claims into three 
strata; and
    (iv) Select a second statistically valid sample within each group 
subject to the sample size requirements specified in paragraph (b)(3) or 
(j)(1) of this section.



Sec.  431.816  Case review completion deadlines and submittal of reports.

    (a) The agency 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 Sec.  
431.814 relating to sampling, the agency must complete case reviews and 
submit reports of findings to CMS in accordance with paragraphs (b)(1) 
through (6) of this section for review periods beginning after July 1, 
1990. The agency must not combine or otherwise integrate case findings 
from the MAO and AFDC strata to meet the case percentage deadlines as 
specified in paragraphs (b)(1) through (6) of this section.
    (1) Active case eligibility reviews--MAO stratum. (i) The agency 
must complete case eligibility reviews and report the findings 
electronically through the system prescribed by CMS for 90 percent of 
all active MAO cases within 105 days of the end of the review month for 
which those cases were reviewed, within 125 days for 95 percent of all 
active MAO cases, and within 150 days for 100 percent of all MAO active 
cases.
    (ii) The agency must submit a report on cases selected for the 
review month.
    (2) Active case eligibility reviews--AFDC stratum. (i) The agency 
must complete case eligibility reviews for AFDC ineligible and overpaid 
error cases caused by ineligible individuals and report the findings 
electronically through the system prescribed by CMS within 105 days of 
the end of the review month for which those cases were reviewed for 90 
percent of the total reviews; within 125 days of the end of the review 
month for which those cases were reviewed for 95 percent of the total 
reviews; and within 150 days of the end of the review month for which 
those cases were reviewed for 100 percent of the total reviews.
    (ii) The agency must report findings electronically through the 
system prescribed by CMS for 100 percent of the State agency-reported 
eligible individuals within 30 days after the final timeframe required 
by the AFDC program as specified in program regulations at 45 CFR 
205.40(b)(2)(ii).
    (3) Negative case eligibility reviews. The agency must submit a 
monthly

[[Page 56]]

progress report on negative case reviews completed during the month 
unless the agency has an approved superior system in effect. The agency 
must submit a report on its findings by June 30 of each year for the 
previous April-September sampling period and by December 31, for the 
October-March sampling period.
    (4) Payment reviews. (i) The agency must submit payment review 
findings electronically through the system prescribed by CMS.
    (ii) The agency must complete payment review findings for 100 
percent of the active case reviews in its sample and report the findings 
within 60 days after the first day of the month in which the claims 
collection process begins. The agency must wait 5 months after the end 
of each review month before associating the amount of claims paid for 
each case for services furnished during the review month unless 
retrospective sampling is elected.
    (iii) The agency must make any necessary corrections to claims 
payments during the month the claim is paid and the following month. CMS 
will take necessary action to reject any State adjustment adversely 
affecting the error rate, for example, by not paying claims on error 
cases.
    (5) Summary of reviews and findings. The agency must submit summary 
reports of the findings for all active cases in the 6-month sample by 
July 31 of each year for the previous April-September sampling period 
and by January 31 for the October-March sampling period. These summary 
reports must include findings changed in the Federal re-review process.
    (6) Other data and reports. The agency must report other requested 
data and reports in a manner prescribed by CMS.



Sec.  431.818  Access to records: MEQC program.

    (a) The agency, upon written request, must mail to the HHS staff 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.
    (b) The agency must mail requested records within 10 working days of 
receipt of a request, unless the State has an alternate method of 
submitting these records that is approved by CMS or has received, on an 
as-needed basis, approval from CMS to extend this timeframe by 3 
additional working days to allow for exceptional circumstances.



Sec.  431.820  Corrective action under the MEQC program.

    The agency must--
    (a) Take action to correct any active or negative case action errors 
found in the sample cases;
    (b) Take administrative action to prevent or reduce the incidence of 
those errors; and
    (c) By September 15 each year, submit to CMS a report on its error 
rate analysis and a corrective action plan based on that analysis. The 
agency must submit revisions to the plan within 60 days of 
identification of additional error-prone areas, other significant 
changes in the error rate (that is, changes that the State experiences 
that increase or decrease its error rate and necessitate immediate 
corrective action or discontinuance of corrective actions that 
effectively control the cause of the error rate change), or changes in 
planned corrective action.



Sec.  431.822  Resolution of differences in State and Federal case eligibility or payment findings.

    (a) When a difference exists between State and Federal case 
eligibility or payment findings, the Regional Office will notify the 
agency by a difference letter.
    (b) The agency must return the difference letter to the Regional 
Office within 28 calendar days of the date of the letter indicating 
either agreement with the Federal finding or reasons for disagreement 
and if the agency desires a conference to resolve the difference. This 
period may be shortened if the Regional Office finds that it is 
necessary to do so in order to meet a case completion deadline, and the 
State still has a reasonable period of time in which to respond to the 
letter. If the agency fails to submit the difference letter indicating 
its agreement or disagreement

[[Page 57]]

with the Federal findings within the 28 calendar days (or the shorter 
period designated as described above), the Federal findings will be 
sustained.
    (c) If the Regional Office disagrees with the agency's response, a 
difference conference will be scheduled within 20 days of the request of 
the agency. If a difference cannot be resolved, the State may request a 
direct presentation of its position to the Regional Administrator. The 
Regional Administrator has final authority for resolving the difference.

   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.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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.

                     Federal Financial Participation



Sec. Sec.  431.861-431.864  [Reserved]



Sec.  431.865  Disallowance of Federal financial participation for erroneous State payments (for annual assessment periods ending after July 1, 1990).

    (a) Purpose and applicability--
    (1) Purpose. This section establishes rules and procedures for 
disallowing Federal financial participation (FFP) in erroneous medical 
assistance payments due to eligibility and beneficiary liability errors, 
as detected through the Medicaid eligibility quality control (MEQC) 
program required under Sec.  431.806 in effect on and after July 1, 
1990.
    (2) Applicability. This section applies to all States except Puerto 
Rico, Guam, the Virgin Islands, the Northern

[[Page 58]]

Mariana Islands, and American Samoa beginning July 1, 1990.
    (b) Definitions. For purposes of this section--
    Administrator means the Administrator, Centers for Medicare & 
Medicaid Services or his or her designee.
    Annual assessment period means the 12-month period October 1 through 
September 30 and includes two 6-month sample periods (October-March and 
April-September).
    Beneficiary liability means--
    (1) The amount of excess income that must be offset with incurred 
medical expenses to gain eligibility; or
    (2) The amount of payment a recipient must make toward the cost of 
services.
    Erroneous payments means the Medicaid payment that was made for an 
individual or family under review who--
    (1) Was ineligible for the review month or, if full month coverage 
is not provided, at the time services were received;
    (2) Was ineligible to receive a service provided during the review 
month; or
    (3) Had not properly met enrollee liability requirements prior to 
receiving Medicaid services.
    (4) The term does not include payments made for care and services 
covered under the State plan and furnished to children during a 
presumptive eligibility period as described in Sec.  435.1102 of this 
chapter.
    National mean error rate means the payment weighted average of the 
eligibility payment error rates for all States.
    National standard means a 3-percent eligibility payment error rate.
    State payment error rate means the ratio of erroneous payments for 
medical assistance to total expenditures for medical assistance (less 
payments to Supplemental Security Income beneficiaries in section 1634 
contract States and payments for children eligible for foster care and 
adoption assistance under title IV-E of the Act) for cases under review 
under the MEQC system for each assessment period.
    Technical error means an error in an eligibility condition that, if 
corrected, would not result in a difference in the amount of medical 
assistance paid. These errors include work incentive program 
requirements, assignment of social security numbers, the requirement for 
a separate Medicaid application, monthly reporting requirements, 
assignment of rights to third party benefits, and failure to apply for 
benefits for which the family or individual is not eligible. Errors 
other than those listed in this definition, identified by CMS in 
subsequent instructions, or approved by CMS are not technical errors.
    (c) Setting of State's payment error rate. (1) Each State must, for 
each annual assessment period, have a payment error rate no greater than 
3 percent or be subject to a disallowance of FFP.
    (2) A payment error rate for each State is determined by CMS for 
each annual assessment period by computing the statistical estimate of 
the ratio of erroneous payments for medical assistance made on behalf of 
individuals or cases in the sample for services received during the 
review month to total expenditures for medical assistance for that State 
made on behalf of individuals or cases in the sample for services 
received during the review month. This ratio incorporates the findings 
of a federally re-reviewed subsample of the State's review findings and 
is projected to the universe of total medical assistance payments for 
calculating the amount of disallowance under paragraph (d)6) of this 
section.
    (3) The State's payment error rate does not include payments made on 
behalf of individuals whose eligibility determinations were made 
exclusively by the Social Security Administration under an agreement 
under section 1634 of the Act or children found eligible for foster care 
and adoption assistance under title IV-E of the Act.
    (4) The amount of erroneous payments is determined as follows:
    (i) For ineligible cases resulting from excess resources, the amount 
of error is the lesser of--
    (A) The amount of the payment made on behalf of the family or 
individual for the review month; or
    (B) The difference between the actual amount of countable resources 
of the family or individual for the review month and the State's 
applicable resources standard.

[[Page 59]]

    (ii) For ineligible cases resulting from other than excess 
resources, the amount of error is the total amount of medical assistance 
payments made for the individual or family under review for the review 
month.
    (iii) For erroneous payments resulting from failure to properly meet 
beneficiary liability, the amount of error is the lesser of--
    (A) The amount of payments made on behalf of the family or 
individual for the review month; or
    (B) The difference between the correct amount of beneficiary 
liability and the amount of beneficiary liability met by the individual 
or family for the review month.
    (iv) The amount of payments made for services provided during the 
review month for which the individual or family was not eligible.
    (5) In determining the amount of erroneous payments, errors caused 
by technical errors are not included.
    (6) If a State fails to cooperate in completing a valid MEQC sample 
or individual reviews in a timely and appropriate fashion as required, 
CMS will establish the State's payment error rate based on either--
    (i) A special sample or audit;
    (ii) The Federal subsample; or
    (iii) Other arrangements as the Administrator may prescribe.
    (7) When it is necessary for CMS to exercise the authority in 
paragraph (c)(6) of this section, the amount that would otherwise be 
payable to the State under title XIX of the Act is reduced by the full 
costs incurred by CMS in making these determinations. CMS may make these 
determinations either directly or under contractual or other 
arrangements.
    (d) Computation of anticipated error rate. (1) Before the beginning 
of each quarter, CMS will project the anticipated medical assistance 
payment error rate for each State for that quarter. The anticipated 
error rate is the lower of the weighted average error rate of the two 
most recent 6-month review periods or the error rate of the most recent 
6-month review period. In either case, cases in the review periods must 
have been completed by the State and CMS. If a State fails to provide 
CMS with information needed to project anticipated excess erroneous 
expenditures, CMS will assign the State an error rate as prescribed in 
paragraph (c)(6) of this section.
    (2) If the State believes that the anticipated error rate 
established in accordance with paragraph (d)(1) of this section is based 
on erroneous data, the State may submit evidence that demonstrates the 
data were erroneous. If the State satisfactorily demonstrates that CMS's 
data were erroneous, the State's anticipated error rate will be adjusted 
accordingly. Submittal of evidence is subject to the following 
conditions:
    (i) The State must inform CMS of its intent to submit evidence at 
least 70 days prior to the beginning of the quarter.
    (ii) The State may request copies of data that CMS used to compute 
its anticipated error rate within 7 days of receiving notification of 
its projected error rate.
    (iii) The State has up to 40 days before the quarter begins to 
present the evidence.
    (iv) The evidence is restricted to documentation of suspected CMS 
data entry errors, processing errors, and resolutions of Federal 
subsample difference cases subsequent to calculation of the error rate 
projection as contained in the original notice to the State.
    (v) The State may not submit other evidence, such as that consisting 
of revisions to State errors as a result of changes to the original 
State review findings submitted to CMS.
    (vi) The State may not submit evidence challenging the error rate 
computational methodology.
    (3) Based on the anticipated error rate established in paragraph 
(d)(1) or (d)(2) of this section, CMS reduces its estimate of the 
State's requirements for FFP for medical assistance for the quarter by 
the percentage by which the anticipated payment error rate exceeds the 
3-percent national standard. This reduction is applied against CMS's 
total estimate of FFP for medical assistance expenditures (less payments 
to Supplemental Security Income beneficiaries in 1634 contract States 
and payments to children found eligible for foster care and adoption 
assistance

[[Page 60]]

under title IV-E of the Act) prior to any other required reductions. The 
reduction is noted on the State's grant award for the quarter and does 
not constitute a disallowance, and, therefore, is not appealable.
    (4) After the end of each quarter, an adjustment to the reduction 
will be made based on the State's actual expenditures.
    (5) After the actual payment error rate has been established for 
each annual assessment period, CMS will compute the actual amount of the 
disallowance and adjust the FFP payable to each State based on the 
difference between the amounts previously withheld for each of the 
quarters during the appropriate assessment period and the amount that 
should have been withheld based on the State's actual final error rate. 
If CMS determines that the amount withheld for the period exceeds the 
amount of the actual disallowance, the excess amount withheld will be 
returned to the States through the normal grant awards process within 30 
days of the date the actual disallowance is calculated.
    (6) CMS will compute the amount to be withheld or disallowed as 
follows:
    (i) Subtract the 3-percent national standard from the State's 
anticipated or actual payment error rate percentage.
    (ii) If the difference is greater than zero, the Federal medical 
assistance funds for the period, excluding payments for those 
individuals whose eligibility for Medicaid was determined exclusively by 
the Social Security Administration under a section 1634 agreement and 
children found eligible for foster care and adoption assistance under 
title IV-E of the Act, are multiplied by that percentage. This product 
is the amount of the disallowance or withholding.
    (7) A State's payment error rate for an annual assessment period is 
the weighted average of the payment error rates in the two 6-month 
review periods comprising the annual assessment period.
    (8) The weights are established as the percent of the total annual 
payments, excluding payments for those individuals whose eligibility for 
Medicaid was determined exclusively by the Social Security 
Administration under a section 1634 agreement and children found 
eligible for foster care and adoption assistance under title IV-E of the 
Act, that occur in each of the 6-month periods.
    (e) Notice to States and showing of good faith. (1) When the actual 
payment error rate data are finalized for each annual assessment period 
ending after July 1, 1990, CMS will establish each State's error rate 
and the amount of any disallowance. States that have error rates above 
the national standard will be notified by letter of their error rates 
and the amount of the disallowance.
    (i) The State has 65 days from the date of receipt of this 
notification to show that this disallowance should not be made because 
it failed to meet the national standard despite a good faith effort to 
do so.
    (ii) If CMS is satisfied that the State did not meet the national 
standard despite a good faith effort, CMS may reduce the funds being 
disallowed in whole or in part as it finds appropriate under the 
circumstances shown by the State.
    (iii) A finding that a State did not meet the national standard 
despite a good faith effort will be limited to extraordinary 
circumstances.
    (iv) The burden of establishing that a good faith effort was made 
rests entirely with the State.
    (2) Some examples of circumstances under which CMS may find that a 
State did not meet the national standard despite a good faith effort 
are--
    (i) Disasters such as fire, flood, or civil disorders that--
    (A) Require the diversion of significant personnel normally assigned 
to Medicaid eligibility administration; or
    (B) Destroyed or delayed access to significant records needed to 
make or maintain accurate eligibility determinations;
    (ii) Strikes of State staff or other government or private personnel 
necessary to the determination of eligibility or processing of case 
changes;
    (iii) Sudden and unanticipated workload changes that result from 
changes in Federal law and regulation, or rapid,

[[Page 61]]

unpredictable caseload growth in excess of, for example, 15 percent for 
a 6-month period;
    (iv) State actions resulting from incorrect written policy 
interpretations to the State by a Federal official reasonably assumed to 
be in a position to provide that interpretation; and
    (v) The State has taken the action it believed was needed to meet 
the national standard, but the national standard was not met. CMS will 
consider request for a waiver under this criterion only if a State has 
achieved an error rate for the sample period that (after reducing the 
error rate by taking into account the cases determined by CMS to be in 
error as a result of conditions listed in paragraphs (e)(2) (i) through 
(iv) of this section) is less than its error rate for the preceding 
sample year and does not exceed the national mean error rate for the 
sample period under review (unless that national mean error rate is at 
or below the 3-percent national standard). If the agency has met this 
error reduction requirement or had error rates of 3 percent or below for 
the prior two review periods, and its error rate for the review period 
under consideration is less than one-third above the national standard, 
CMS will evaluate a request for a good faith waiver based on the 
following factors:
    (A) The State has fully met the performance standards in the 
operation of a quality control system in accordance with Federal 
regulations and CMS guidelines (e.g., adherence to Federal case 
completion timeliness requirements and verification standards).
    (B) The State has achieved substantial performance in the 
formulation of error reduction initiatives based on the following 
processes:
    (1) Performance of an accurate and thorough statistical and program 
analysis for error reduction which utilized quality control and other 
data:
    (2) The translation of such analysis into specific and appropriate 
error reduction practices for major error elements; and
    (3) The use of monitoring systems to verify that the error reduction 
initiatives were implemented at the local office level.
    (C) The State has achieved substantial performance in the operation 
of the following systems supported by evidence of the timely utilization 
of their outputs in the determination of case eligibility:
    (1) The operation of the Income and Eligibility Verification System 
in accordance with the requirements of parts 431 and 435 of this 
chapter, and
    (2) The operation of systems that interface with Social Security 
data and, where State laws do not restrict agency access, records from 
agencies responsible for motor vehicles, vital statistics, and State or 
local income and property taxes (where these taxes exist).
    (D) The State has achieved substantial performance in the use of the 
following accountability mechanisms to ensure that agency staff adhere 
to error reduction initiatives. The following are minimum requirements:
    (1) Accuracy of eligibility and liability determinations and timely 
processing of case actions are used as quantitative measures of employee 
performance and reflected in performance standards and appraisal forms:
    (2) Selective second-party case reviews are conducted. The second-
party review results are periodically reported to higher level 
management, as well as supervisors and workers and are used in 
performance standards and appraisal forms; and
    (3) Regular operational reviews of local offices are performed by 
the State to evaluate the offices' effectiveness in meeting error 
reduction goals with periodic monitoring to ensure that review 
recommendations have been implemented.
    (vi) A State that meets the performance standards specified in 
paragraphs (e)(2)(v) (A) through (D) of this section will be considered 
for a full or partial waiver of its disallowance amount. The State must 
submit only specific documentation that verifies that the necessary 
actions were accomplished. For example, a State could submit worker 
performance standards reflecting timeliness and case accuracy as 
quantitative measures of performance.
    (3) The failure of a State to act upon necessary legislative changes 
or to obtain budget authorization for needed

[[Page 62]]

resources is not a basis for finding that a State failed to meet the 
national standard despite a good faith effort.
    (f) Disallowance subject to appeal. (1) If a 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.
    (2) This appeal provision, as it applies to MEQC disallowances, is 
not applicable to the Administrator's decision on a State's waiver 
request provided for under paragraph (e) of this section.

[55 FR 22171, May 31, 1990, as amended at 61 FR 38398, July 24, 1996; 66 
FR 2666, Jan. 11, 2001]



Subpart Q_Requirements for Estimating Improper Payments in Medicaid and 
                                  SCHIP

    Source: 71 FR 51081, Aug. 28, 2006, unless otherwise noted.



Sec.  431.950  Purpose.

    This subpart requires States and providers to submit information 
necessary to enable the Secretary to produce national improper payment 
estimates for Medicaid and the State Children's Health Insurance Program 
(SCHIP).



Sec.  431.954  Basis and scope.

    (a) Basis. The statutory bases for this subpart are 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. In 
addition, this rule supports 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. 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.
    (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 Sec.  431.970 for, among other purposes, estimating 
improper payments in the fee-for-service (FFS) and managed care 
components of the Medicaid and SCHIP 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.



Sec.  431.958  Definitions and use of terms.

    Active case means a case containing information on a beneficiary who 
is enrolled in the Medicaid or SCHIP program in the month that 
eligibility is reviewed.
    Active fraud investigation means a beneficiary's name has been 
referred to the State Fraud and Abuse Control or similar investigation 
unit and the unit is currently actively pursuing an investigation to 
determine whether the beneficiary committed fraud.
    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.
    Agency means, for purposes of the PERM eligibility reviews and this 
regulation, the agency that performs the Medicaid and SCHIP eligibility 
determinations under PERM and excludes the State agency as defined in 
the regulation.
    Application means an application form for Medicaid or SCHIP benefits

[[Page 63]]

deemed complete by the State, with respect to which such State approved 
or denied eligibility.
    Beneficiary means an applicant for, or recipient of, Medicaid or 
SCHIP program benefits.
    Case means an individual beneficiary.
    Case error rate means an error rate that reflects the number of 
cases in error in the eligibility sample for the active cases plus the 
number of cases in error in the eligibility sample for the negative 
cases expressed as a percentage of the total number of cases examined in 
the sample.
    Case record means either a hardcopy or electronic file that contains 
information on a beneficiary regarding program eligibility.
    Eligibility means meeting the State's categorical and financial 
criteria for receipt of benefits under the Medicaid or SCHIP programs.
    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 recipient, 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.
    Last action means the most recent date on which the State agency 
took action to grant, deny, or terminate program benefits based on the 
State agency's eligibility determination; and is the point in time for 
the PERM eligibility reviews unless the last action occurred outside of 
12 months prior to the sample month.
    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.
    Negative case means a case containing information on a beneficiary 
who applied for benefits and was denied or whose program benefits were 
terminated, based on the State agency's eligibility determination or on 
a completed redetermination.
    Payment means any payment to a provider, insurer, or managed care 
organization for a Medicaid or SCHIP beneficiary for which there is 
Medicaid or SCHIP Federal financial participation. It may also mean a 
direct payment to a Medicaid or SCHIP beneficiary in limited 
circumstances permitted by CMS regulation or policy.
    Payment error rate means an annual estimate of improper payments 
made under Medicaid and SCHIP 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.
    Payment review means the process by which payments for services are 
associated with cases reviewed for eligibility. Payments are collected 
for services received in the review month or in the sample month, 
depending on the case reviewed.
    PERM means the Payment Error Rate Measurement process to measure 
improper payment in Medicaid and SCHIP.
    Provider means any qualified provider recognized under Medicaid and 
SCHIP statute and regulations.
    Review cycle means the complete timeframe to complete the improper 
payments measurement including the fiscal year being measured; generally 
this timeframe begins in October of the fiscal year reviewed and ends in 
August of the following fiscal year.
    Review month means the month in which eligibility is reviewed and is 
usually when the State took its last action to grant or redetermine 
eligibility. If the State's last action was taken beyond 12 months prior 
to the sample month, the review month shall be the sample month.
    Review year means the Federal fiscal year being analyzed for errors 
by Federal contractors or the State.
    Sample month means the month the State selects a case from the 
sample for an eligibility review.
    State agency means the State agency that is responsible for 
determining program eligibility for Medicaid and SCHIP, as applicable, 
based on applications and redeterminations.
    State Children's Health Insurance Program (SCHIP) means the program 
authorized and funded under Title XXI of the Act.

[[Page 64]]

    States means the 50 States and the District of Columbia.
    Undetermined means a beneficiary case subject to a Medicaid or SCHIP 
eligibility determination under this regulation about which a definitive 
determination of eligibility could not be made.



Sec.  431.970  Information submission requirements.

    (a) States must submit information to the Secretary for, among other 
purposes, estimating improper payments in Medicaid and SCHIP, that 
include but are not limited to--
    (1) All adjudicated fee-for-service (FFS) and managed care claims 
information, 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 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 for SCHIP and, as 
requested, for Medicaid;
    (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) For the eligibility improper payment measurement, information as 
set forth in Sec.  431.978 through Sec.  431.988;
    (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 
error rates in Medicaid and SCHIP.
    (b) Providers must submit information to the Secretary for, among 
other purposes, estimating improper payments in Medicaid and SCHIP, 
which include but are not limited to, Medicaid and SCHIP beneficiary 
medical records.

[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007]



Sec.  431.974  Basic elements of Medicaid and SCHIP eligibility reviews.

    (a) General requirements. (1) States selected in any given year for 
Medicaid and SCHIP improper payments measurement under the Improper 
Payments Information Act of 2002 must conduct reviews of a statistically 
valid random sample of beneficiary cases for such programs to determine 
if improper payments were made based on errors in the State agency's 
eligibility determinations.
    (2) The agency and personnel responsible for the development, 
direction, implementation, and evaluation of the eligibility reviews and 
associated activities, including calculation of the error rates under 
this section, must be functionally and physically separate from the 
State agencies and personnel that are responsible for Medicaid and SCHIP 
policy and operations, including eligibility determinations.
    (3) Any individual performing activities under this section must do 
so in a manner that is consistent with the provisions of Sec.  435.901, 
concerning the rights of recipients.
    (b) Sampling requirements. The State must have in effect a CMS-
approved sampling plan for the review year in accordance with the 
requirements specified in Sec.  431.978.
    (c) Review requirements. The State must conduct eligibility reviews 
in accordance with the requirements specified in Sec.  431.980.



Sec.  431.978  Eligibility sampling plan and procedures.

    (a) Plan approval. For the review year beginning October 1, 2006, 
the agency must submit a Medicaid and a SCHIP sampling plan for both 
active and negative cases to CMS for approval by November 15, 2006. For 
review years beginning October 1, 2007 and beyond, the agency must 
submit a Medicaid or

[[Page 65]]

SCHIP sampling plan (or revisions to a current plan) for both active and 
negative cases to CMS for approval by the August 1 before the review 
year and must receive approval of the plan before implementation. The 
agency must notify CMS that it will be using the same plan from the 
previous review year if the plan is unchanged.
    (b) Maintain current plan. States must keep the plan current, for 
example, by making adjustments to the plan when necessary due to 
fluctuations in the universe. The State must review and determine that 
the approved plan is unchanged from the previous review year and submit 
a revised plan for CMS approval if changes have occurred.
    (c) Sample size. Total sample size must be estimated to achieve 
within a 3 percent precision level at 95 percent confidence interval for 
the eligibility component of the program.
    (d) Sample selection. The sample must be stratified in accordance 
with Sec.  431.978(d)(3). Cases must be selected each month throughout 
the fiscal year under review. Each month throughout the year and before 
commencing the eligibility reviews, States must submit to CMS a monthly 
sample selection list that identifies the cases selected in that month.
    (1) Eligibility universe-active cases--(i) Medicaid. The Medicaid 
active universe consists of all active Medicaid cases funded through 
Title XIX for the sample month. Cases for which the Social Security 
Administration, under a section 1634 agreement with a State, determines 
Medicaid eligibility for Supplemental Security Income recipients are 
excluded from the universe. All foster care and adoption assistance 
cases under Title IV-E of the Act are excluded from the universe in all 
States. Cases under active fraud investigations shall be excluded from 
the universe. If the State cannot identify cases under active fraud 
investigations for exclusion from the universe previous to the sample 
selection, the State shall drop these cases from review if they are 
selected in the sample and are later determined to be under active fraud 
investigation at the time of selection.
    (ii) SCHIP. The SCHIP active universe consists of all active SCHIP 
and Medicaid expansion cases that are funded through Title XXI for the 
sample month. Cases under active fraud investigations shall be excluded 
from the SCHIP active universe. If the State cannot identify cases under 
active fraud investigations for exclusion from the universe previous to 
sample selection, the State shall drop these cases from review if they 
are selected in the sample and are later determined to be under active 
fraud investigation at the time of selection.
    (2) Eligibility universe--negative cases. The Medicaid and SCHIP 
negative universe consists of all negative cases for the sample month. 
The negative case universe is not stratified.
    (3) Stratifying the universe. Each month, the State stratifies the 
Medicaid and SCHIP active case universe into three strata:
    (i) Program applications completed by the beneficiaries in which the 
State took action in the sample month to approve such beneficiaries for 
Medicaid or SCHIP based on the eligibility determination.
    (ii) Redeterminations of eligibility in which the State took action 
in the sample month to approve the beneficiaries for Medicaid or SCHIP 
based on information obtained through the completed redetermination.
    (iii) All other cases.
    (4) Sample selection. Each month, an equal number of cases are 
selected from each stratum for review, unless otherwise provided for in 
the plan approved by CMS.

[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007]



Sec.  431.980  Eligibility review procedures.

    (a) Active case reviews. The agency must verify eligibility for all 
selected active cases for Medicaid and SCHIP for the review month for 
compliance with the State's eligibility criteria.
    (b) Negative case reviews. The agency must review all selected 
negative cases for Medicaid and SCHIP for the review month to determine 
whether the cases were properly denied or terminated.
    (c) Payment review. The agency must identify all Medicaid and SCHIP 
payments made for services furnished, either in the first 30 days of 
eligibility or in the review month for applications

[[Page 66]]

under Sec.  431.978(d)(3)(i) and redeterminations under Sec.  
431.978(d)(3)(ii) in accordance to State policy or from the sample month 
for all other cases under Sec.  431.978(d)(3)(iii), to identify 
erroneous payments resulting from ineligibility for services or for the 
program.
    (d) Eligibility determination. The agency must verify program 
eligibility for all active cases in the sample based on acceptable 
documentation contained in the case file or obtained independently 
through the review process.
    (1) Active cases--Medicaid. The agency must--
    (i) Review the cases specified at Sec.  431.978(d)(3)(i) and Sec.  
431.978(d)(3)(ii) in accordance with the State's categorical and 
financial eligibility criteria as of the review month and identify with 
a specific beneficiary payments made on behalf of such beneficiary for 
services received in the first 30 days of eligibility or in the review 
month;
    (ii) For cases specified in Sec.  431.978(d)(3)(iii), if the last 
action was 12 months prior to the sample month, review in accordance 
with the State's categorical and financial eligibility criteria as of 
the last action and identify with a specific beneficiary payments made 
on behalf of such beneficiary for services received in the sample month. 
If the last action occurred more than 12 months prior to the sample 
month, review in accordance with the State's categorical and financial 
eligibility criteria as of the sample month and identify payments made 
on behalf of the specific beneficiary for services received in the 
sample month;
    (iii) Examine the evidence in the case file that supports 
categorical and financial eligibility for the category of coverage in 
which the case is assigned, and independently verify information that is 
missing, older than 12 months, likely to change, based on self 
declaration, or otherwise as needed, to verify eligibility; and
    (iv) For managed care cases, also verify residency and eligibility 
for and actual enrollment in the managed care plan during the month 
under review.
    (v) If the case is ineligible under paragraphs (d)(1)(i) through 
(d)(1)(iv) of this section, review the case to determine whether the 
case is eligible under any coverage category within the program.
    (vi) As a result of paragraphs (d)(1)(i) through (d)(1)(v) of this 
section--
    (A) Cite the case as eligible or ineligible based on the review 
findings and identify with the particular beneficiary the payments made 
on behalf of the particular beneficiary for services received in the 
first 30 days of eligibility, the review month or sample month, as 
appropriate; or
    (B) Cite the case as undetermined if after due diligence an 
eligibility determination could not be made and identify with the 
particular beneficiary the payments made on behalf of the particular 
beneficiary for services received in the first 30 days of eligibility, 
the review month or sample month, as appropriate.
    (2) Active cases--SCHIP. In addition to the procedures for active 
cases as set forth in paragraphs (d)(1)(i) through (d)(1)(v) of this 
section, once the agency establishes SCHIP eligibility, the agency must 
verify that the case is not eligible for Medicaid by determining that 
the child has income above the Medicaid levels in accordance with the 
requirements in Sec.  457.350 of this chapter. Upon verification, the 
agency must--
    (i) Cite the case as eligible or ineligible based on the review 
findings and identify with the particular beneficiary the payments made 
on behalf of the particular beneficiary for services received in the 
review month or sample month, as appropriate; or
    (ii) Cite the case as undetermined if after due diligence an 
eligibility determination could not be made and identify with the 
particular beneficiary the payments made on behalf of the particular 
beneficiary for services received in the review month or sample month, 
as appropriate.
    (e) Negative cases--Medicaid and SCHIP. The agency must--
    (1) Identify the reason the State agency determined ineligibility;
    (2) Examine the evidence in the case file to determine whether the 
State agency's denial or termination was correct or whether there is any 
reason the case should have been denied or terminated; and

[[Page 67]]

    (i) Record the State agency's finding as correct if the case record 
review substantiates that the individual was not eligible; or
    (ii) Record the case as an error if there is no valid reason for the 
denial or termination.



Sec.  431.988  Eligibility case review completion deadlines and submittal of reports.

    (a) States must complete and report to CMS the findings, including 
the error causes if known, for all active case reviews listed on the 
monthly sample selection lists, including cases dropped from review due 
to active fraud investigations and cases for which eligibility could not 
be determined. States must submit a summary report of the active case 
eligibility and payment review findings to CMS by July 1 following the 
review year.
    (b) The agency must report by July 1 following the review year, 
information as follows:
    (1) Case and payment error rates for active cases.
    (2) Case error rates for negative cases.
    (3) The number and amounts of undetermined cases in the sample and 
the total amount of payments from all undetermined cases.
    (4) The number of cases dropped from review due to active fraud 
investigations.



Sec.  431.992  Corrective action plan.

    The State agency must submit to CMS a corrective action plan to 
reduce improper payments in its Medicaid and SCHIP programs based on its 
analysis of the error causes in the FFS, managed care, and eligibility 
components.



Sec.  431.998  Difference resolution process.

    (a) The State may file, in writing, a request with the Federal 
contractor to resolve differences in the Federal contractor's findings 
based on medical or data processing reviews on FFS and managed care 
claims in Medicaid and SCHIP. The State must have a factual basis for 
filing the difference and must provide the Federal contractor with valid 
evidence directly related to the error finding to support the State's 
position that the claim was properly paid.
    (b) For a claim in which the State and the Federal contractor cannot 
resolve the difference in findings, the State may appeal to CMS for 
final resolution.
    (1) The difference in findings must be in the amount of $100 or 
greater; and
    (2) The agency must provide CMS with the facts and valid 
documentation to support its determination that the claim was correctly 
paid, as well as the Federal contractor's justification for upholding 
its initial error finding.
    (3) CMS will make the final decision on the claim. There will be no 
further judicial or administrative review of CMS' decision.
    (c) All differences, including those pending in CMS for final 
decision that are not resolved in time to be included in the error rate 
calculation, will be considered as errors for meeting the reporting 
requirements of the IPIA. Upon State request, CMS will calculate a 
subsequent State-specific error rate that reflects any reversed 
disposition of the unresolved claims.



Sec.  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) SCHIP. 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.



PART 432_STATE PERSONNEL ADMINISTRATION--Table of Contents




                      Subpart A_General Provisions

Sec.
432.1 Basis and purpose.
432.2 Definitions.
432.10 Standards of personnel administration.

[[Page 68]]

   Subpart B_Training Programs; Subprofessional and Volunteer Programs

432.30 Training programs: General requirements.
432.31 Training and use of subprofessional staff.
432.32 Training and use of volunteers.

              Subpart C_Staffing and Training Expenditures

432.45 Applicability of provisions in subpart.
432.50 FFP: Staffing and training costs.
432.55 Reporting training and administrative costs.

    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



Sec.  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.



Sec.  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]

[[Page 69]]



Sec.  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



Sec.  432.30  Training programs: General requirements.

    (a) A State plan must provide for a program of training for Medicaid 
agency personnel. (See also Sec. Sec.  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.



Sec.  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) Recipients.
    (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:

[[Page 70]]

    (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.



Sec.  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 recipients; 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



Sec.  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]



Sec.  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 Sec.  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.

[[Page 71]]

    (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]



Sec.  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.

[[Page 72]]

    (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 
Sec.  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--Table of Contents




Sec.
433.1 Purpose.

    Subpart A_Federal Matching and General Administration Provisions

433.8 [Reserved]
433.10 Rates of FFP for program services.
433.11 Enhanced FMAP rate for children.
433.15 Rates of FFP for administration.
433.32 Fiscal policies and accountability.
433.34 Cost allocation.
433.35 Equipment--Federal financial participation.
433.36 Liens and recoveries.
433.37 Reporting provider payments to Internal Revenue Service.
433.38 Interest charge on disallowed claims for FFP.
433.40 Treatment of uncashed or cancelled (voided) Medicaid checks.

     Subpart B_General Administrative Requirements State Financial 
                              Participation

433.50 Basis, scope, and applicability.
433.51 Funds from units of government as the State share of financial 
          participation.
433.52 General definitions.
433.53 State plan requirements.
433.54 Bona fide donations.
433.55 Health care-related taxes defined.
433.56 Classes of health care services and providers defined.
433.57 General rules regarding revenues from provider-related donations 
          and health care-related taxes.
433.58-433.60 [Reserved]
433.66 Permissible provider-related donations.
433.67 Limitations on level of FFP for permissible provider-related 
          donations.
433.68 Permissible health care-related taxes.
433.70 Limitation on level of FFP for revenues from health care-related 
          taxes.
433.72 Waiver provisions applicable to health care-related taxes.
433.74 Reporting requirements.

Subpart C_Mechanized Claims Processing and Information Retrieval Systems

433.110 Basis, purpose, and applicability.
433.111 Definitions.
433.112 FFP for design, development, installation or enhancement of 
          mechanized claims processing and information retrieval 
          systems.
433.113 Reduction of FFP for failure to operate a system and obtain 
          initial approval.
433.114 Procedures for obtaining initial approval; notice of decision.
433.116 FFP for operation of mechanized claims processing and 
          information retrieval systems.
433.117 Initial approval of replacement systems.
433.119 Conditions for reapproval; notice of decision.
433.120 Procedures for reduction of FFP after reapproval review.
433.121 Reconsideration of the decision to reduce FFP after reapproval 
          review.
433.122 Reapproval of a disapproved system.
433.123 Notification of changes in system requirements, performance 
          standards or other conditions for approval or reapproval.
433.127 Termination of FFP for failure to provide access to claims 
          processing and information retrieval systems.
433.130 Waiver of conditions of initial operation and approval.
433.131 Waiver for noncompliance with conditions of approval and 
          reapproval.

[[Page 73]]

                     Subpart D_Third Party Liability

433.135 Basis and purpose.
433.136 Definitions.
433.137 State plan requirements.
433.138 Identifying liable third parties.
433.139 Payment of claims.
433.140 FFP and repayment of Federal share.

                    Assignment of Rights to Benefits

433.145 Assignment of rights to benefits--State plan requirements.
433.146 Rights assigned; assignment method.
433.147 Cooperation in establishing paternity 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.
433.148 Denial or termination of eligibility.

              Cooperative Agreements and Incentive Payments

433.151 Cooperative agreements and incentive payments--State plan 
          requirements.
433.152 Requirements for cooperative agreements for third party 
          collections.
433.153 Incentive payments to States and political subdivisions.
433.154 Distribution of collections.

Subpart E [Reserved]

    Subpart F_Refunding of Federal Share of Medicaid Overpayment to 
                                Providers

433.300 Basis.
433.302 Scope of subpart.
433.304 Definitions.
433.310 Applicability of requirements.
433.312 Basic requirements for refunds.
433.316 When discovery of overpayment occurs and its significance.
433.318 Overpayments involving providers who are bankrupt or out of 
          business.
433.320 Procedures for refunds to CMS.
433.322 Maintenance of records.

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

    Source: 43 FR 45201, Sept. 29, 1978, unless otherwise noted.



Sec.  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



Sec.  433.8  [Reserved]



Sec.  433.10  Rates of FFP for program services.

    (a) Basis. Sections 1903(a)(1), 1903(g), and 1905(b) 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\] x 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

[[Page 74]]

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 Sec.  433.11(a) for services 
provided to children, is the enhanced FMAP rate determined in accordance 
with Sec.  457.622(b) of this chapter, subject to the conditions 
explained in Sec.  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 x 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.

(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]

[[Page 75]]



Sec.  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 Sec.  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 Sec.  435.4 or Sec.  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 Sec.  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]



Sec.  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 Sec.  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 Sec.  432.50(b)(2).)
    (5) Compensation and training of skilled professional medical 
personnel and staff directly supporting those personnel if the criteria 
specified in Sec.  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 Sec.  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 Sec.  438.358

[[Page 76]]

of this chapter when they are performed by an external quality review 
organization as defined in Sec.  438.320 of this chapter: 75 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]



Sec.  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]



Sec.  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]



Sec.  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]



Sec.  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 recipient'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 recipient 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

[[Page 77]]

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 
Sec. Sec.  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]

[[Page 78]]



Sec.  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.



Sec.  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(d) 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 Sec.  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 a State interest on FFP 
when--
    (i) CMS has notified the Medicaid agency under 45 CFR 74.304 that a 
State claim for FFP is not allowable;
    (ii) The agency has appealed the disallowance to the Grant 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; and
    (iii)(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 appeal on part of the 
disallowance and therefore returns only that part of the funds on which 
it has withdrawn its 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 appealed a 
disallowance to the Board and wishes to retain the disallowed funds 
until the Board issues a final determination, the agency must notify the 
CMS Regional Administrator in writing of its decision to do so.
    (2) The agency must mail its notice to the CMS Regional 
Administrator within 30 days of the date of receipt of the notice of the 
disallowance, as established by the certified mail receipt accompanying 
the notices.
    (3) If the agency withdraws either its decision to retain the FFP or 
its appeal on all or part of the FFP or both, the agency must notify CMS 
in writing.
    (4) If the agency does not notify the CMS Regional Administrator 
within the time limit set forth in paragraph (c)(2) of this section. CMS 
will recover the amount of the disallowed funds

[[Page 79]]

from the next possible Medicaid grant award to the State.
    (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 the Board;
    (ii) On the date CMS receives written notice from the State that it 
is withdrawing its appeal on all of the disallowed funds; or
    (iii) 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
    (iv) 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]



Sec.  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.

[[Page 80]]

    (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.



Sec.  433.50  Basis, scope, and applicability.

    (a) Basis. This subpart interprets and implements--(1) Section 
1902(a)(2) and section 1903(w)(7)(G) of the Act, which require States to 
share in the cost of medical assistance expenditures and permit State 
and local units of government to participate in the financing of the 
non-Federal portion of medical assistance expenditures.
    (i) A unit of government is a State, a city, a county, a special 
purpose district, or other governmental unit in the State that: has 
taxing authority, has direct access to tax revenues, is a State 
university teaching hospital with direct appropriations from the State 
treasury, or is an Indian tribe as defined in Section 4 of the Indian 
Self-Determination and Education Assistance Act, as amended [25 U.S.C. 
450b].
    (ii) A health care provider may be considered a unit of government 
only when it is operated by a unit of government as demonstrated by a 
showing of the following:
    (A) The health care provider has generally applicable taxing 
authority; or
    (B) The health care provider has direct access to generally 
applicable tax revenues. This means the health care provider is able to 
directly access funding as an integral part of a unit of government with 
taxing authority which is legally obligated to fund the health care 
provider's expenses, liabilities, and deficits, so that a contractual 
arrangement with the State or local government is not the primary or 
sole basis for the health care provider to receive tax revenues;
    (C) The health care provider receives appropriated funding as a 
State university teaching hospital providing supervised teaching 
experiences to graduate medical school interns and residents enrolled in 
a State university in the State; or
    (D) The health care provider is an Indian Tribe or Tribal 
organization (as those terms are defined in Section 4 of the Indian 
Self-Determination and Education Assistance Act (ISDEAA); 25 U.S.C. 
450b) and meets the following criteria:
    (1) If the entity is a Tribal organization, it is--
    (a) Carrying out health programs of the IHS, including health 
services which are eligible for reimbursement by Medicaid, under a 
contract or compact entered into between the Tribal organization and the 
Indian Health Service pursuant to the Indian Self-Determination and 
Education Assistance Act, Public Law 93-638, as amended, and
    (b) Either the recognized governing body of an Indian tribe, or an 
entity which is formed solely by, wholly owned or comprised of, and 
exclusively controlled by Indian tribes.
    (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

[[Page 81]]

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]



Sec.  433.51  Funds from units of government as the State share of financial participation.

    (a) Funds from units of government 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 funds from units of government are appropriated directly to 
the State or local Medicaid agency, or are transferred from other units 
of government (including Indian tribes) to the State or local agency and 
are under its administrative control, or are certified by the 
contributing unit of government as representing expenditures eligible 
for FFP under this section. Certified public expenditures must be 
expenditures within the meaning of 45 CFR 95.13 that are supported by 
auditable documentation in a form approved by the Secretary that, at a 
minimum--
    (1) Identifies the relevant category of expenditures under the State 
plan;
    (2) Explains whether the contributing unit of government is within 
the scope of the exception to limitations on provider-related taxes and 
donations;
    (3) Demonstrates the actual expenditures incurred by the 
contributing unit of government in providing services to eligible 
individuals receiving medical assistance or in administration of the 
State plan; and
    (4) Is subject to periodic State audit and review.
    (c) The funds from units of government are not Federal funds, or are 
Federal funds authorized by Federal law to be used to match other 
Federal funds.

[72 FR 29833, May 29, 2007]



Sec.  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

[[Page 82]]

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.



Sec.  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]



Sec.  433.54  Bona fide donations.

    (a) A bona fide donation means a provider-related donation, as 
defined in Sec.  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]



Sec.  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--

[[Page 83]]

    (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.



Sec.  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 the mentally retarded);
    (4) Intermediate care facility services for the mentally retarded, 
and similar services furnished by community-based residences for the 
mentally retarded, 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/MRs 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]

[[Page 84]]



Sec.  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 Sec.  
433.66(b); or
    (b) Health care-related taxes, as specified in Sec.  433.68(b).

[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]



Sec. Sec.  433.58-433.60  [Reserved]



Sec.  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 
Sec.  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 Sec.  
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]



Sec.  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 Sec.  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 Sec.  
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 Sec.  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 Sec.  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]

[[Page 85]]



Sec.  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 Sec.  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 Sec.  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

[[Page 86]]

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 Sec.  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 Sec.  412.62(f)(1)(ii) of this chapter);
    (4) Sole community hospitals as defined in Sec.  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

[[Page 87]]

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 Sec.  
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 Sec.  433.68(c)) nor 
uniform (as specified in Sec.  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 Sec.  412.62(f)(1)(ii) of this chapter;
    (4) Sole community hospitals as defined in Sec.  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

[[Page 88]]

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]



Sec.  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 Sec.  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 Sec.  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]



Sec.  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 
Sec.  433.68c); and/or
    (ii) The tax is not imposed uniformly but meets the criteria 
specified in Sec.  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

[[Page 89]]

State under the Medicaid program is generally redistributive, as 
described in Sec.  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 Sec.  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]



Sec.  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



Sec.  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 74, 45 
CFR part 95, subpart F, and part 11, State Medicaid Manual; and
    (2) Section 1903(r) of the Act, which--(i) Requires reductions in 
FFP otherwise due a State under section 1903(a) if a State fails to meet 
certain deadlines for operating a mechanized claims processing and 
information retrieval system or if the system fails to meet certain 
conditions of approval or conditions of reapproval;
    (ii) Requires a Federal performance review at least every three 
years of the mechanized claims processing and information retrieval 
systems; and
    (iii) Allows waivers of conditions of approval, conditions of 
reapproval, and FFP reductions under certain circumstances.
    (b) The requirements under section 1903(r) of the Act do not apply 
to Puerto Rico, Guam, the Virgin Islands, American Samoa and the 
Northern Mariana Islands.

[50 FR 30846, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989]

[[Page 90]]



Sec.  433.111  Definitions.

    For purposes of this section:
    (a) The following terms are defined at 45 CFR part 95, subpart F 
Sec.  95.605:

``Advance Planning Document''; ``Design'' or ``System Design''; 
``Development''; ``Enhancement''; ``Hardware''; ``Installation''; 
``Operation''; and, ``Software''.

    (b) ``Mechanized claims processing and information retrieval 
system'' or ``system'' means the system of software and hardware used to 
process Medicaid claims from providers of medical care and services for 
the medical care and services furnished to recipients under the medical 
assistance program 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. The 
system consists of
    (1) Required subsystems specified in the State Medicaid Manual;
    (2) Required changes to the required system or subsystem that are 
published in accordance with Sec.  433.123 of this subpart and specified 
in the State Medicaid Manual; and
    (3) Approved enhancements to the system. Eligibility determination 
systems are not part of mechanized claims processing and information 
retrieval systems or enhancements to those systems.

[51 FR 45330, Dec. 18, 1986, as amended at 54 FR 41973, Oct. 13, 1989]



Sec.  433.112  FFP for design, development, installation or enhancement of mechanized claims processing and information retrieval systems.

    (a) 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 system described in the APD if the 
following conditions are met:
    (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 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 
74.171.
    (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.
    (c) Eligibility determination systems are not part of mechanized 
claims processing and information retrieval systems and are not eligible 
for 75 percent FFP under this subpart. These systems are also not 
eligible for 90 percent FFP for any APD approved after November 13, 
1989.

[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]



Sec.  433.113  Reduction of FFP for failure to operate a system and obtain initial approval.

    (a) Except as waived under Sec.  433.130 or 433.131, FFP will be 
reduced as specified

[[Page 91]]

in paragraph (b) of this section unless the Medicaid agency has in 
continuous operation a mechanized claims processing and information 
retrieval system that meets the following conditions:
    (1) The APD for the system was approved by CMS;
    (2) The system is operational by September 30, 1985; and
    (3) The system is initially approved by the last day of the fourth 
quarter that begins after the date the system became operational as 
determined by CMS.
    (b) CMS will reduce FFP in expenditures for compensation and 
training of skilled professional medical personnel and support staff 
under section 1903(a)(2) of the Act, and for general administration 
under section 1903(a)(7) of the Act, by the following increments applied 
separately to those two categories of expenditures:
    (1) Five percentage points for the first two quarters beginning 
after a deadline in paragraph (a) of this section;
    (2) An additional five percentage points during each additional two-
quarter period, through the quarter in which the State achieves 
compliance with the conditions for initial operation or initial approval 
of an operating system. FFP reductions will not exceed 25 percentage 
points for each type of reduction.
    (c) The amount of FFP (determined under section 1903(a)(3)(B)) that 
would be available retroactively for operating a system that later 
receives initial approval will be reduced by CMS by the same percentage 
points for the identical periods of time described in subparagraph 
(b)(1) of this section, until the system is initially approved. No 
reduction will be made after the first quarter during which the system 
is initially approved.

[50 FR 30847, July 30, 1985, as amended at 54 FR 41973, Oct. 13, 1989]



Sec.  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 Sec.  
433.116(c) through (h).
    (b) If CMS disapproves the system, or determines that the system met 
requirements for initial approval on a date later than the date required 
under Sec.  433.113(a)(3), the notice will include--
    (1) The findings of fact upon which the determination was made; and
    (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]



Sec.  433.116  FFP for operation of mechanized claims processing and information retrieval systems.

    (a) Subject to 42 CFR 433.113(c), 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 the system operation if the conditions 
specified in paragraphs (c) through (h) of this section are met.
    (c) The conditions of Sec.  433.112(b) (1) through (4) and (7) 
through (9), as periodically modified under Sec.  433.112(b)(2), must be 
met.
    (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;

[[Page 92]]

    (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 Sec.  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 Sec.  455.21 of this chapter 
for State plan requirements.)

[45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, 
July 30, 1985; 55 FR 4375, Feb. 7, 1990]



Sec.  433.117  Initial approval of replacement systems.

    (a) A replacement system must meet all 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 Sec.  433.112; and
    (2) 75 percent in expenditures for operation of an approved 
replacement system in accordance with the provisions of Sec.  433.116(b) 
through (h), 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 Sec.  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]



Sec.  433.119  Conditions for reapproval; notice of decision.

    (a) CMS will review at least once every three years each system 
operation initially approved under Sec.  433.114 and reapprove it for 
FFP at 75 percent of expenditures if the following conditions are met:
    (1) The system meets the conditions of Sec.  433.112(b) (1), (3), 
(4), and (7) through (9).
    (2) The system meets the conditions of Sec.  433.116 (d) through 
(h).
    (3) The system meets the performance standards for reapproval and 
the system requirements in part 11 of the State Medicaid Manual as 
periodically amended.
    (4) Automated eligibility determination systems approved or 
operating on or before November 13, 1989, will not qualify for FFP at 75 
percent of expenditures after November 13, 1989.
    (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) CMS will issue to each Medicaid agency, by the end of the first 
quarter after the review period, a written notice informing the agency 
whether its system is reapproved or disapproved. If the system is 
disapproved, the notice will also include--
    (1) CMS's decision to reduce FFP for system operations, and the 
percentage to which it is reduced, beginning with the next calender 
quarter;
    (2) The findings of fact upon which the determination was made; and
    (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]

[[Page 93]]



Sec.  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 of reapproval in Sec.  433.119, CMS will 
reduce FFP for system operations for at least four quarters. However, no 
system will be subject to reduction of FFP for at least the first four 
quarters after the quarter in which the system is initially approved as 
eligible for 75 percent FFP.
    (b) CMS will reduce FFP in expenditures for system operations from 
75 percent to no more than 70 percent and no less than 50 percent; 
however, CMS will not reduce FFP by more than 10 percentage points in 
any four-quarter period. The percentage to which the FFP is reduced will 
depend primarily on the following criteria:
    (1) The number of conditions judged unsatisfactory;
    (2) The extent to which conditions were not met;
    (3) The significance of the unsatisfactory conditions in overall 
mechanized claims processing and information retrieval system 
operations; and
    (4) The actual and potential program impact attributable to the 
unsatisfactory conditions.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



Sec.  433.121  Reconsideration of the decision to reduce FFP after reapproval review.

    (a) The agency may appeal to the Departmental Appeals Board under 45 
CFR part 16, a disallowance concerning a reduction in FFP claimed for 
system operation caused by a disapproval of the State's system. If the 
Board finds such a disallowance to be appropriate, the discretionary 
determination to reduce FFP by a particular percentage amount (instead 
of by a lesser percentage) is not subject to review by the Board unless 
the percentage reduction exceeds the range authorized by section 
1903(r)(4)(B) of the Act.
    (b) The decisions concerning whether to restore any FFP 
retroactively and the actual number of quarters for which FFP will be 
restored under Sec.  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]



Sec.  433.122  Reapproval of a disapproved system.

    When FFP has been reduced under Sec.  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]



Sec.  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 Sec.  433.112 or Sec.  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

[[Page 94]]

    (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 Sec.  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]



Sec.  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]



Sec.  433.130  Waiver of conditions of initial operation and approval.

    (a) CMS will waive requirements for initial operation and approval 
of systems under Sec.  433.113 for a State meeting the requirements of 
paragraph (b) of this section and that had a 1976 population of less 
than one million and made total Federal and State Medicaid expenditures 
of less than $100 million in fiscal year 1976. Population figures are 
those reported by the Bureau of the Census. Expenditures for fiscal year 
1976 are those reported by the State for that year.
    (b) To be eligible for this waiver, the agency must submit its 
reasons to CMS in writing and demonstrate to CMS's satisfaction that a 
system will not significantly improve the efficiency of the 
administration of the State plan.
    (c) If CMS denies the waiver request, the notice of denial will 
include--
    (1) The findings of fact upon which the denial was made; and
    (2) The procedures for appeal of the denial.
    (d) If CMS determines, after granting a waiver, that a system would 
significantly improve the administration of the State Medicaid program, 
CMS may withdraw the waiver and require that a State obtain initial 
approval of a system within two years of the date of waiver withdrawal.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



Sec.  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.

[50 FR 30848, July 30, 1985, as amended at 54 FR 41974, Oct. 13, 1989]



                     Subpart D_Third Party Liability

    Source: 45 FR 8984, Feb. 11, 1980, unless otherwise noted.



Sec.  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;

[[Page 95]]

    (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]



Sec.  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]



Sec.  433.137  State plan requirements.

    (a) A State plan must provide that the requirements of Sec. Sec.  
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 Sec. Sec.  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 Sec. Sec.  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]



Sec.  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 recipient 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 Sec.  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 recipient, the social security 
number (SSN) of the policy holder, and the name and address of insurance 
company and policy number.

[[Page 96]]

    (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 recipient 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 recipient 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 Sec.  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 recipients 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 
Sec.  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 Sec.  435.945 of this chapter, 
from the State wage information collection agency (SWICA) defined in 
Sec.  435.4 of this chapter and from the SSA wage and earnings files 
data as specified in Sec.  435.948(a)(2) of this chapter, the agency 
must--
    (i) Use the information that identifies Medicaid recipients 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 recipients 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 Sec.  
435.948(a)(6)(i), from the State title IV-A agency, information not 
previously reported that identifies those Medicaid recipients that 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 recipients and, 
(if their names and SSNs were available to the agency under paragraph 
(c) of this section) absent or custodial parents of Medicaid recipients 
with employment-related injuries or illnesses; and
    (ii) From State Motor Vehicle accident report files, information 
that identifies those Medicaid recipients 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

[[Page 97]]

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. (1) Except as specified under 
paragraph (e)(2) or (l) of this section, or both, the agency must take 
action to identify those paid claims for Medicaid recipients that 
contain diagnosis codes 800 through 999 International Classification of 
Disease, 9th Revision, Clinical Modification, Volume 1 (ICD-9-CM) 
inclusive, 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 Sec.  433.139(b) through (f).
    (2) The agency may exclude code 994.6, Motion Sickness, from the 
edits required under paragraph (e)(1) of this section.
    (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 (d)(3) of this section 
in accordance with the intervals specified in Sec.  435.948 of this 
chapter, 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) Except as specified in Sec.  435.952(d) of this chapter, within 
45 days, the agency must followup (if appropriate) on such information 
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 Sec.  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 Sec.  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 Sec.  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 Sec.  433.139 (b) through (f) 
(Methods must include a procedure

[[Page 98]]

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 
Sec.  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 Sec.  
433.139;
    (iv) Recover reimbursement from third parties after Medicaid claims 
payment as required in Sec.  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 Sec.  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 Sec.  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.

[[Page 99]]

    (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]



Sec.  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) The agency may pay the full amount allowed under the agency's 
payment schedule for the claim and then seek reimbursement from any 
liable third party to the limit of legal liability if the claim is for 
labor and delivery and postpartum care. (Costs associated with the 
inpatient hospital stay for labor and delivery and postpartum care must 
be cost-avoided.)
    (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 prenatal care for pregnant women, or preventive 
pediatric services (including early and periodic screening, diagnosis 
and treatment services provided for under part 441, subpart B of this 
chapter), that is covered under the State plan; or
    (ii) The claim is for a service covered under the State plan that is 
provided

[[Page 100]]

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) The provider certifies that before billing Medicaid, if the 
provider has billed a third party, the provider has waited 30 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 recipient'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.

[[Page 101]]

    (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]



Sec.  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 Sec. Sec.  
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 Sec.  433.153.

                    Assignment of Rights to Benefits



Sec.  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 recipient 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 paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902(l)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; 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 Sec. Sec.  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 recipient 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]



Sec.  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,

[[Page 102]]

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.



Sec.  433.147  Cooperation in establishing paternity 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) Establishing paternity of a child born out of wedlock and 
obtaining medical support and payments for himself or herself and any 
other person for whom the individual can legally assign rights, except 
that individuals described in section 1902(l)(1)(A) of the Act (poverty 
level pregnant women) are exempt from these requirements involving 
paternity and obtaining medical support and payments from, or derived 
from, the father of the child born out of wedlock; 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) With respect to establishing paternity of a child born out of 
wedlock 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 the cooperation is against the best 
interests of the child, in accordance with factors specified for the 
Child Support Enforcement Program at 45 CFR part 232. If the State title 
IV-A agency has made a finding that good cause for refusal to cooperate 
does or does not exist, the Medicaid agency must adopt that finding as 
its own for this purpose.
    (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.
    (d) Procedures for waiving cooperation. With respect to establishing 
paternity, obtaining medical care support and payments, or identifying 
and providing information to assist the State in pursuing liable third 
parties for a child for whom the individual can legally assign rights, 
the agency must use the procedures specified for the Child Support 
Enforcement Program at 45 CFR part 232. With respect to obtaining 
medical care support and payments or to identifying and providing 
information to assist the State in pursuing liable third parties for any 
other individual, the agency must adopt procedures similar

[[Page 103]]

to those specified in 45 CFR part 232, excluding those procedures 
applicable only to children.

[45 FR 8984, Feb. 11, 1980, as amended at 55 FR 48606, Nov. 21, 1990; 58 
FR 4907, Jan. 19, 1993]



Sec.  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 recipient 
who--
    (1) Refuses to assign his own rights or those of any other 
individual for whom he can legally make an assignment; or
    (2) Refuses to cooperate as required under Sec.  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.

              Cooperative Agreements and Incentive Payments



Sec.  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 Sec.  433.152.
    (b) A State plan must provide that the requirements for making 
incentive payments and for distributing third party collections 
specified in Sec. Sec.  433.153 and 433.154 are met.

[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]



Sec.  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 the 
Medicaid agency will--
    (1) Meet the requirements of the Office of Child Support Enforcement 
for cooperative agreements under 45 CFR Part 306; and
    (2) 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]



Sec.  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

[[Page 104]]

the collection, unless an alternative allocation is agreed upon by all 
jurisdictions involved.



Sec.  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 Sec.  433.153.
    (c) To the recipient, 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 [Reserved]



    Subpart F_Refunding of Federal Share of Medicaid Overpayments to 
                                Providers

    Source: 54 FR 5460, Feb. 3, 1989, unless otherwise noted.



Sec.  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 60 days 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 60 days, 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.



Sec.  433.302  Scope of subpart.

    This subpart sets forth the requirements and procedures under which 
States have 60 days 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.



Sec.  433.304  Definitions.

    As used in this subpart--
    Abuse (in accordance with Sec.  455.2) means provider practices that 
are inconsistent with sound fiscal, business, or medical practices, and 
result in an unnecessary cost to the Medicaid program, or in 
reimbursement for services that are not medically necessary or that fail 
to meet professionally recognized standards for health care.
    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 Sec.  433.316.
    Fraud (in accordance with Sec.  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 Sec.  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.

[[Page 105]]

    Third party (in accordance with Sec.  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]



Sec.  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 
recipients, 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.



Sec.  433.312  Basic requirements for refunds.

    (a) Basic rules. (1) Except as provided in paragraph (b) of this 
section, the Medicaid agency has 60 days 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 agency must refund the Federal share of overpayments at the 
end of the 60-day 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 Sec.  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.



Sec.  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 60-calendar day period allowed a State to 
recover or seek to

[[Page 106]]

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 or 
abuse. An overpayment resulting from a situation other than fraud or 
abuse 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 or abuse. An overpayment that 
results from fraud or abuse is discovered on the date of the final 
written notice of the State's overpayment determination that a Medicaid 
agency official or other State official sends to the provider.
    (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 60-day 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 60-day recovery period:
    (1) A downward adjustment in the amount of an overpayment subject to 
recovery that occurs after discovery does not change the original 60-day 
recovery period for the outstanding balance.
    (2) An upward adjustment in the amount of an overpayment subject to 
recovery that occurs during the 60-day period following discovery does 
not change the 60-day recovery period for the original overpayment 
amount. A new 60-day 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 60-day 
period following discovery does not change the 60-day recovery period 
for 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]



Sec.  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 Sec.  
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

[[Page 107]]

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 60-day 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 60-
day 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 60-day 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 60-day 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 60-day 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 60-day 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 60-day 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 Sec.  
433.320.

[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]



Sec.  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 Federal share of overpayments subject to recovery must be 
credited on the Form CMS-64 report submitted for the quarter in which 
the 60-day period following discovery, established in accordance with 
Sec.  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.
    (b) Effect of reporting collections and submitting reduced 
expenditure claims. (1) The State is not required to refund the Federal 
share of an overpayment when the State reports a collection or submits 
an expenditure claim reduced by a discrete amount to recover an 
overpayment prior to the end of the 60-day 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

[[Page 108]]

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 60-day recovery period. If an overpayment has not 
been determined uncollectable in accordance with the requirements of 
Sec.  433.318 at the end of the 60-day 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 60-day 
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 60-day 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 Sec.  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 60-day 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.



Sec.  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 part 74, subpart D.

[[Page 109]]



PART 434_CONTRACTS--Table of Contents




                      Subpart A_General Provisions

Sec.
434.1 Basis and scope.
434.2 Definitions.
434.4 State plan requirement.
434.6 General requirements for all contracts and subcontracts.

     Subpart B_Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions

434.10 Contracts with fiscal agents.
434.12 Contracts with private nonmedical institutions.
434.14 [Reserved]

Subpart C [Reserved]

         Subpart D_Contracts With Health Insuring Organizations

434.40 Contract requirements.

Subpart E [Reserved]

                Subpart F_Federal Financial Participation

434.70 Conditions for Federal Financial Participation (FFP).
434.76 Costs under fiscal agent contracts.
434.78 Right to reconsideration of disallowance.

    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



Sec.  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]



Sec.  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 recipients.
    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]



Sec.  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.



Sec.  434.6  General requirements for all contracts and subcontracts.

    (a) Contracts. All contracts under this part must--
    (1) Include provisions that define a sound and complete procurement 
contract, as required by 45 CFR part 74;
    (2) Identify the population covered by the contract;
    (3) Specify any procedures for enrollment or reenrollment of the 
covered population;

[[Page 110]]

    (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 recipients;
    (8) Provide that the contractor safeguards information about 
recipients 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; and
    (11) Provide that any subcontracts meet the requirements of 
paragraph (b) of this section.
    (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]



     Subpart B_Contracts with Fiscal Agents and Private Nonmedical 
                              Institutions



Sec.  434.10  Contracts with fiscal agents.

    Contracts with fiscal agents must--
    (a) Meet the requirements of Sec.  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.



Sec.  434.12  Contracts with private nonmedical institutions.

    Contracts with private nonmedical institutions must--
    (a) Meet the requirements of Sec.  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.



Sec.  434.14  [Reserved]

Subpart C [Reserved]



         Subpart D_Contracts With Health Insuring Organizations



Sec.  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 Sec.  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

[[Page 111]]

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 recipient 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 recipients 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.



Sec.  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 74; 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]



Sec.  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.



Sec.  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--Table of Contents




              Subpart A_General Provisions and Definitions

Sec.
435.2 Purpose and applicability.
435.3 Basis.
435.4 Definitions and use of terms.
435.10 State plan requirements.

         Subpart B_Mandatory Coverage of the Categorically Needy

435.100 Scope.

               Mandatory Coverage of Families and Children

435.110 Individuals receiving aid to families with dependent children.

[[Page 112]]

435.112 Families terminated from AFDC because of increased earnings or 
          hours of employment.
435.113 Individuals who are ineligible for AFDC because of requirements 
          that do not apply under title XIX of the Act.
435.114 Individuals who would be eligible for AFDC except for increased 
          OASDI income under Pub. L. 92-336 (July 1, 1972).
435.115 Individuals deemed to be receiving AFDC.

  Mandatory Coverage of Pregnant Women, Children under 8, and Newborn 
                                Children

435.116 Qualified pregnant women and children who are not qualified 
          family members.
435.117 Newborn children.

             Mandatory Coverage of Qualified Family Members

435.119 Qualified family members.

           Mandatory Coverage of the Aged, Blind, and Disabled

435.120 Individuals receiving SSI.
435.121 Individuals in States using more restrictive requirements for 
          Medicaid than the SSI requirements.
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.
435.130 Individuals receiving mandatory State supplements.
435.131 Individuals eligible as essential spouses in December 1973.
435.132 Institutionalized individuals who were eligible in December 
          1973.
435.133 Blind and disabled individuals eligible 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).
435.135 Individuals who become ineligible for cash assistance as a 
          result of OASDI cost-of-living increases received after April 
          1977.
435.136 State agency implementation requirements for one-time notice and 
          annual review system.
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 under Pub. L. 98-31.
435.138 Disabled widows and widowers aged 60 through 64 who would be 
          eligible for SSI benefits except for receipt of early social 
          security benefits.

                  Mandatory Coverage of Certain Aliens

435.139 Coverage for certain aliens.

   Mandatory Coverage of Adoption Assistance and Foster Care Children

435.145 Children for whom adoption assistance or foster care maintenance 
          payments are made.

                  Mandatory Coverage of Special Groups

435.170 Pregnant women eligible for extended coverage.

          Subpart C_Options for Coverage as Categorically Needy

435.200 Scope.
435.201 Individuals included in optional groups.

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled

435.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
435.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
435.212 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
435.217 Individuals receiving home and community-based services.

              Options for Coverage of Families and Children

435.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.
435.221 [Reserved]
435.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.
435.223 Individuals who would be eligible for AFDC if coverage under the 
          State's AFDC plan were as broad as allowed under title IV-A.
435.225 Individuals under age 19 who would be eligible for Medicaid if 
          they were in a medical institution.
435.227 Individuals under age 21 who are under State adoption assistance 
          agreements.
435.229 Optional targeted low-income children.

          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.
435.232 Individuals receiving only optional State supplements.
435.234 Individuals receiving only optional State supplements in States 
          using more

[[Page 113]]

          restrictive eligibility requirements than SSI and certain 
          States using SSI criteria.
435.236 Individuals in institutions who are eligible under a special 
          income level.

           Subpart D_Optional Coverage of the Medically Needy

435.300 Scope.
435.301 General rules.
435.308 Medically needy coverage of individuals under age 21.
435.310 Medically needy coverage of specified relatives.
435.320 Medically needy coverage of the aged in States that cover 
          individuals receiving SSI.
435.322 Medically needy coverage of the blind in States that cover 
          individuals receiving SSI.
435.324 Medically needy coverage of the disabled in States that cover 
          individuals receiving SSI.
435.326 Individuals who would be ineligible if they were not enrolled in 
          an MCO or PCCM.
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.
435.340 Protected medically needy coverage for blind and disabled 
          individuals eligible in December 1973.
435.350 Coverage for certain aliens.

               Subpart E_General Eligibility Requirements

435.400 Scope.
435.401 General rules.
435.402 [Reserved]
435.403 State residence.
435.404 Applicant's choice of category.
435.406 Citizenship and alienage.
435.407 Types of acceptable documentary evidence of citizenship.

           Subpart F_Categorical Requirements for Eligibility

435.500 Scope.

                               Dependency

435.510 Determination of dependency.

                                   Age

435.520 Age requirements for the aged.
435.522 Determination of age.

                                Blindness

435.530 Definition of blindness.
435.531 Determinations of blindness.

                               Disability

435.540 Definition of disability.
435.541 Determinations of disability.

    Subpart G_General Financial Eligibility Requirements and Options

435.600 Scope.
435.601 Application of financial eligibility methodologies.
435.602 Financial responsibility of relatives and other individuals.
435.604 [Reserved]
435.606 [Reserved]
435.608 Applications for other benefits.
435.610 Assignment of rights to benefits.
435.622 Individuals in institutions who are eligible under a special 
          income level.
435.631 General requirements for determining income eligibility in 
          States using more restrictive requirements for Medicaid than 
          SSI.
435.640 Protected Medicaid eligibility for individuals eligible in 
          December 1973.

   Subpart H_Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy

435.700 Scope.
435.725 Post-eligibility treatment of income of institutionalized 
          individuals in SSI States: Application of patient income to 
          the cost of care.
435.726 Post-eligibility treatment of income of individuals receiving 
          home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.
435.733 Post-eligibility treatment of income of institutionalized 
          individuals in States using more restrictive requirements than 
          SSI: Application of patient income to the cost of care.
435.735 Post-eligibility treatment of income and resources of 
          individuals receiving home and community-based services 
          furnished under a waiver: Application of patient income to the 
          cost of care.

     Subpart I_Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy

435.800 Scope.

                     Medically Needy Income Standard

435.811 Medically needy income standard: General requirements.
435.814 Medically needy income standard: State plan requirements.

                   Medically Needy Income Eligibility

435.831 Income eligibility.
435.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

[[Page 114]]

                    Medically Needy Resource Standard

435.840 Medically needy resource standard: General requirements.
435.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

435.845 Medically needy resource eligibility.
435.850-435.852 [Reserved]

      Subpart J_Eligibility in the States and District of Columbia

435.900 Scope.

                    General Methods of Administration

435.901 Consistency with objectives and statutes.
435.902 Simplicity of administration.
435.903 Adherence of local agencies to State plan requirements.
435.904 Establishment of outstation locations to process applications 
          for certain low-income eligibility groups.

                              Applications

435.905 Availability of program information.
435.906 Opportunity to apply.
435.907 Written application.
435.908 Assistance with application.
435.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.
435.910 Use of social security number.

                  Determination of Medicaid Eligibility

435.911 Timely determination of eligibility.
435.912 Notice of agency's decision concerning eligibility.
435.913 Case documentation.
435.914 Effective date.

                Redeterminations of Medicaid Eligibility

435.916 Periodic redeterminations of Medicaid eligibility.
435.919 Timely and adequate notice concerning adverse actions.
435.920 Verification of SSNs.

                           Furnishing Medicaid

435.930 Furnishing Medicaid.

            Income and Eligibility Verification Requirements

435.940 Basis and scope.
435.945 General requirements.
435.948 Requesting information.
435.952 Use of information.
435.953 Identifying items of information to use.
435.955 Additional requirements regarding information released by a 
          Federal agency.
435.960 Standardized formats for furnishing and obtaining information to 
          verifying income and eligibility.
435.965 Delay of effective date.

                Subpart K_Federal Financial Participation

435.1000 Scope.

 FFP in Expenditures for Determining Eligibility and Providing Services

435.1001 FFP for administration.
435.1002 FFP for services.
435.1003 FFP for redeterminations.
435.1004 Recipients overcoming certain conditions of eligibility.

                           Limitations on FFP

435.1005 Recipients in institutions eligible under a special income 
          standard.
435.1006 Recipients of optional State supplements only.
435.1007 Categorically needy, medically needy, and qualified Medicare 
          beneficiaries.
435.1008 FFP in expenditures for medical assistance for individuals who 
          have declared United States citizenship or nationality under 
          section 1137(d) of the Act and with respect to whom the State 
          has not documented citizenship and identity.
435.1009 Institutionalized individuals.
435.1010 Definitions relating to institutional status.

                   Requirements for State Supplements

435.1011 Requirement for mandatory State supplements.
435.1012 Requirement for maintenance of optional State supplement 
          expenditures.

             Subpart L_Option for Coverage of Special Groups

435.1100 Basis and scope.

                  Presumptive Eligibility for Children

435.1101 Definitions related to presumptive eligibility for children.
435.1102 General rules.

    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



Sec.  435.2  Purpose and applicability.

    This part sets forth, for the 50 States, the District of Columbia, 
the Northern Mariana Islands, and American Samoa--

[[Page 115]]

    (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]



Sec.  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 recipients 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 recipients.
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 recipients.
1902(a)(34) Three-month retroactive eligibility.
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 recipient 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.
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 
aliens.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
to certain institutionalized individuals.
1905(a) (second sentence) Definition of essential person.
1905(a)(i)-(viii) List of eligible individuals.
1905(d)(2) Definition of resident of an intermediate care facility for 
the mentally retarded.
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.

[[Page 116]]

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 
recipients 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]



Sec.  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;
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    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.
    Families and children refers to eligible members of families with 
children who are financially eligible under AFDC or medically needy 
rules and who are deprived of parental support or care as defined under 
the AFDC program (see 45 CFR 233.90, 233.100). In addition, this group 
includes individuals under age 21 who are not deprived of parental 
support or care but are financially eligible under AFDC rules or 
medically needy rules (see optional coverage group, Sec.  435.222). It 
does not include individuals under age 21 whose eligibility for Medicaid 
is based on blindness or disability--for these individuals, SSI rules 
govern;
    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

[[Page 117]]

eligibility of the medically needy appear in subpart I of this part.);
    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 family 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 Sec.  457.10 of this chapter); or
    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined at Sec.  457.10 of this chapter) and has family 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.
    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.

[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]



Sec.  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 of the Categorically Needy



Sec.  435.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.

[[Page 118]]

               Mandatory Coverage of Families and Children



Sec.  435.110  Individuals receiving aid to families with dependent children.

    (a) A Medicaid agency must provide Medicaid to individuals receiving 
AFDC.
    (b) For purposes of this section, an individual is receiving AFDC if 
his needs are included in determining the amount of the AFDC payment. 
This includes an individual whose presence in the home is considered 
essential to the well-being of a recipient (see 45 CFR 233.20(a)(2)(vi)) 
and who could be a recipient under the State's AFDC plan if that plan 
were as broad as allowed under the Act for FFP.



Sec.  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]



Sec.  435.113  Individuals who are ineligible for AFDC because of requirements that do not apply under title XIX of the Act.

    The agency must provide Medicaid to:
    (a) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act;
    (1) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (2) Grandparents;
    (3) Legal guardians;
    (4) Alien sponsors who are not organizations; and
    (5) Siblings.
    (b) [Reserved]

[58 FR 4926, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.114  Individuals who would be eligible for AFDC except for increased OASDI income 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 AFDC; or
    (2) He would have been eligible for AFDC if he had applied, and the 
Medicaid plan covered this optional group; or
    (3) He would have been eligible for AFDC 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 AFDC except that 
the increase in OASDI under Pub. L. 92-336 raised his income over the 
limit allowed under AFDC. This includes an individual who--
    (1) Meets all current AFDC requirements except for the requirement 
to file an application; or
    (2) Would meet all current AFDC requirements if he were not in a 
medical institution or intermediate care facility, and the current 
Medicaid plan covers this optional group.



Sec.  435.115  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of

[[Page 119]]

the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--
    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E of the Act, whether or not adoption assistance is being 
provided or an interlocutory or other judicial decree of adoption has 
been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of the child or spousal 
support collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals who are eligible for extended Medicaid lose this coverage if 
they move to another State during the 4-month period. However, if they 
move back to and reestablish residence in the State in which they have 
extended coverage, they are eligible for any of the months remaining in 
the 4-month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in income or changes in other 
circumstances and the other changes in income or circumstances cannot 
alone or in combination result in termination without the change in 
support.
    (2) In cases of increases in the amounts of both support collections 
and earned income, eligibility under this section does not preclude 
eligibility under 45 CFR 233.20(a)(14) or section 1925 of the Social 
Security Act (which was added by section 303(a) of the Family Support 
Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting from both 
an increase in the

[[Page 120]]

amount of the support collection and from an increase in earned income 
must run concurrently.

[46 FR 47985, Sept. 30, 1981, as amended at 52 FR 43071, Nov. 9, 1987; 
55 FR 48607, Nov. 21, 1990; 59 FR 59376, Nov. 17, 1994]

  Mandatory Coverage of Pregnant Women, Children Under 8, and Newborn 
                                Children



Sec.  435.116  Qualified pregnant women and children who are not qualified family members.

    (a) The agency must provide Medicaid to a pregnant woman whose 
pregnancy has been medically verified and who--
    (1) Would be eligible for an AFDC cash payment (or would be eligible 
for an AFDC cash payment if coverage under the State's AFDC plan 
included an AFDC-unemployed parents program) if her child had been born 
and was living with her in the month of payment;
    (2) Is a member of a family that would be eligible for an AFDC cash 
payment if the State's AFDC plan included an AFDC-unemployed parents 
program; or
    (3) Meets the income and resource requirements of the State's 
approved AFDC plan. In determining whether the woman meets the AFDC 
income and resource requirements, the unborn child or children are 
considered members of the household, and the woman's family is treated 
as though deprivation exists.
    (b) The provisions of paragraphs (a) (1) and (2) of this section are 
effective October 1, 1984. The provisions of paragraph (a)(3) of this 
section are effective July 1, 1986.
    (c) The agency must provide Medicaid to children who meet all of the 
following criteria:
    (1) They are born after September 30, 1983;
    (2) Effective October 1, 1988, they are under age 6 (or if 
designated by the State, any age that exceeds age 6 but does not exceed 
age 8), and effective October 1, 1989, they are under age 7 (or if 
designated by the State, any age that exceeds age 7 but does not exceed 
age 8); and
    (3) They meet the income and resource requirements of the State's 
approved AFDC plan.

[52 FR 43071, Nov. 9, 1987, as amended at 55 FR 48607, Nov. 21, 1990; 58 
FR 48614, Sept. 17, 1993]



Sec.  435.117  Newborn children.

    (a) The agency must provide Medicaid eligibility to a child born to 
a woman who has applied for, has been determined eligible and is 
receiving Medicaid on the date of the child's birth. The child is deemed 
to have applied and been found eligible for Medicaid on the date of 
birth and remains eligible for one year so long as the woman remains (or 
would remain if pregnant) eligible and the child is a member of the 
woman's household. This provision applies in instances where the labor 
and delivery services were furnished prior to the date of application 
and covered by Medicaid based on retroactive eligibility.
    (b) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible qualified alien woman subject to the 5-year bar so 
long as the woman has filed a complete Medicaid application, including 
but not limited to meeting residency, income and resource requirements, 
has been determined eligible, is receiving Medicaid on the date of the 
child's birth, and remains (or would remain if pregnant) Medicaid 
eligible. All standard Medicaid application procedures apply, including 
timely determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A 5-year bar qualified alien receiving 
emergency medical services only under Sec.  435.139 is considered to be 
Medicaid-eligible and receiving Medicaid for purposes of this provision. 
With respect to whether the mother remains (or would remain if pregnant) 
eligible for Medicaid after the birth of the child, the State must 
determine whether a 5-year bar qualified alien would remain eligible for 
emergency services under Sec.  435.139. In determining whether the woman 
would remain eligible for these services, the State must consider 
whether the

[[Page 121]]

woman would remain eligible if pregnant. This provision applies in 
instances where the labor and delivery services were furnished prior to 
the date of application and covered by Medicaid based on retroactive 
eligibility.
    (c) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible non-qualified alien woman so long as the woman has 
filed a complete Medicaid application (other than providing a social 
security number or demonstrating immigration status), including but not 
limited to meeting residency, income and resource requirements, has been 
determined eligible, is receiving Medicaid on the date of the child's 
birth, and remains (or would remain if pregnant) Medicaid eligible. All 
standard Medicaid application procedures apply, including timely 
determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A non-qualified alien receiving 
emergency medical services only under Sec.  435.139 is considered to be 
Medicaid-eligible and receiving Medicaid for purposes of this provision. 
With respect to whether the mother remains (or would remain if pregnant) 
eligible for Medicaid after the birth of the child, the State must 
determine whether a non-qualified alien would remain eligible for 
emergency services under Sec.  435.139. In determining whether the woman 
would remain eligible for these services, the State must consider 
whether the woman would remain eligible if pregnant. This provision 
applies in instances where the labor and delivery services were 
furnished prior to the date of application and covered by Medicaid based 
on retroactive eligibility.
    (d) A redetermination of eligibility must be completed on behalf of 
the children described in this provision in accordance with the 
procedures at Sec.  435.916. At that time, the State must collect 
documentary evidence of citizenship and identity as required under Sec.  
435.406.

[72 FR 38690, July 13, 2007]

             Mandatory Coverage of Qualified Family Members



Sec.  435.119  Qualified family members.

    (a) Definition. A qualified family member is any member of a family, 
including pregnant women and children eligible for Medicaid under Sec.  
435.116 of this subpart, who would be receiving AFDC cash benefits on 
the basis of the unemployment of the principal wage earner under section 
407 of the Act had the State not chosen to place time limits on those 
benefits as permitted under section 407(b)(2)(B)(i) of the Act.
    (b) State plan requirement. The State plan must provide that the 
State makes Medicaid available to any individual who meets the 
definition of ``qualified family member'' as specified in paragraph (a) 
of this section.
    (c) Applicability. The provisions in this section are applicable in 
the 50 States and the District of Columbia from October 1, 1990, through 
September 30, 1998. The provisions are applicable in American Samoa from 
October 1, 1992, through September 30, 1998.

[58 FR 48614, Sept. 17, 1993]

           Mandatory Coverage of the Aged, Blind, and Disabled



Sec.  435.120  Individuals receiving SSI.

    Except as allowed under Sec.  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

[[Page 122]]

those qualified severely impaired individuals defined in section 1905(q) 
of the Act.

[55 FR 33705, Aug. 17, 1990]



Sec.  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 Sec.  435.120 to aged, blind, and disabled 
individuals who are SSI recipients, 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 Sec.  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 Sec.  435.601; or
    (iii) The more restrictive requirement conflicts with a more liberal 
requirement the State has elected to use under Sec.  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 recipients.
    (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

[[Page 123]]

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 Sec.  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 recipients 
(including individuals deemed to be SSI recipients under Sec. Sec.  
435.135, 435.137, and 435.138), eligible spouses of SSI recipients, 
State supplement recipients, 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 
recipients, eligible spouses of SSI recipients, State supplement 
recipients, 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 Sec.  
435.601(b), the agency must deduct from income:
    (i) SSI payments;
    (ii) State supplementary payments that meet the conditions specified 
in Sec. Sec.  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 Sec.  447.51 or Sec.  447.53 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]

[[Page 124]]



Sec.  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]



Sec.  435.130  Individuals receiving mandatory State supplements.

    The agency must provide Medicaid to individuals receiving mandatory 
State supplements.



Sec.  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.



Sec.  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.



Sec.  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.



Sec.  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

[[Page 125]]

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]



Sec.  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]



Sec.  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 Sec.  435.135 to all individuals who meet the requirements of 
Sec.  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 Sec.  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]



Sec.  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 recipients 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:

[[Page 126]]

    (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]



Sec.  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

[[Page 127]]

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 recipients 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



Sec.  435.139  Coverage for certain aliens.

    The agency must provide services necessary for the treatment of an 
emergency medical condition, as defined in Sec.  440.255(c) of this 
chapter, to those aliens described in Sec.  435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]

   Mandatory Coverage of Adoption Assistance and Foster Care Children



Sec.  435.145  Children for whom adoption assistance or foster care maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28665, July 1, 1982. Redesignated at 55 FR 48607, Nov. 21, 1990. 
Redesignated at 58 FR 48614, Sept. 17, 1993]

                  Mandatory Coverage of Special Groups



Sec.  435.170  Pregnant women eligible for extended coverage.

    (a) The agency must provide categorically needy Medicaid eligibility 
for an extended period following termination of pregnancy to women who, 
while pregnant, applied for, were eligible for, and received Medicaid 
services on the day that their pregnancy ends. This period extends from 
the last day of pregnancy through the end of the month in which a 60-day 
period, beginning on the last day of the 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 Sec.  440.210(c)(1) of this 
subchapter).
    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48608, Nov. 21, 1990]



          Subpart C_Options for Coverage as Categorically Needy



Sec.  435.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec.  435.201  Individuals included in optional groups.

    (a) The agency may choose to cover as optional categorically needy 
any

[[Page 128]]

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 Sec.  435.530);
    (3) Disabled individuals (as defined in Sec.  435.541);
    (4) Individuals under age 21 (or, at State option, under age 20, 19, 
or 18) or reasonable classifications of these individuals;
    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent (or would, 
if needy, be dependent) as specified in Sec.  435.510; and
    (6) Pregnant women.
    (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 Sec.  435.121 must 
apply the specific requirements of Sec.  435.230 in establishing 
eligibility of these groups of individuals as optional categorically 
needy.

[58 FR 4927, Jan. 19, 1993]

 Options for Coverage of Families and Children and the Aged, Blind, and 
                                Disabled



Sec.  435.210  Individuals who meet the income and resource requirements of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec.  435.201 (a)(1) through (a)(3) and (a)(5) 
and (a)(6) who are not mandatory categorically needy, who meet the 
income and resource requirements of the appropriate cash assistance 
program for their status (that is, the State's approved AFDC plan or 
SSI, or optional State supplements in States that provide Medicaid to 
optional State supplement recipients).

[58 FR 4927, Jan. 19, 1993]



Sec.  435.211  Individuals who would be eligible for cash assistance if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec.  435.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, AFDC or SSI, or optional State supplements 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
    (b) Would be eligible for aid or assistance under the State's 
approved AFDC plan, SSI, or an optional State supplement as specified in 
Sec. Sec.  435.232 and 435.234 if they were not institutionalized.

[58 FR 4927, Jan. 19, 1993]



Sec.  435.212  Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.

    The State agency may provide that a recipient 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 recipient 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]



Sec.  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

[[Page 129]]

of care furnished in a hospital, NF, or an ICF/MR; 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]

              Options for Coverage of Families and Children



Sec.  435.220  Individuals who would meet the income and resource requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec.  435.201 (a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's 
approved AFDC plan if their work-related child care costs were paid from 
their earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4927, Jan. 19, 1993]



Sec.  435.221  [Reserved]



Sec.  435.222  Individuals under age 21 who meet the income and resource requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or, 
at State option, under age 20, 19, or 18); or reasonable categories of 
these individuals as specified in paragraph (b) of this section, who are 
not receiving cash assistance under any program but who meet the income 
and resource requirements of the State's approved AFDC plan.
    (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 of the same age 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. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (4) Individuals under age 21 receiving active treatment as 
inpatients in pyschiatric facilities or programs, if inpatient 
psychiatric services for individuals under 21 are provided under the 
plan.

[46 FR 47985, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
58 FR 4927, Jan. 19, 1993]



Sec.  435.223  Individuals who would be eligible for AFDC if coverage under the State's AFDC plan were as broad as allowed under title IV-A.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec.  435.210 (a)(4), (a)(5), and (a)(6) 
who:
    (1) Would be eligible for AFDC if the State's AFDC plan included 
individuals whose coverage under title IV-A is optional (for example, 
Medicaid may be provided to members of families with an unemployed 
parent even though AFDC is not available to them under the State's AFDC 
plan); or
    (2) Would be eligible for AFDC if the State's AFDC plan did not 
contain eligibility requirements more restrictive than, or in addition 
to, those required under title IV-A.
    (b) The agency may cover any AFDC optional group without covering 
all such groups.

[46 FR 47985, Sept. 30, 1981, as amended at 58 FR 4927, Jan. 19, 1993]



Sec.  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

[[Page 130]]

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]



Sec.  435.227  Individuals under age 21 who are under State adoption assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and the adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance, has 
determined cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the title IV-E foster care program were used without 
employing the threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraphs (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid before the adoption assistance agreement was 
entered into.

[55 FR 48608, Nov. 21, 1990]



Sec.  435.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined in Sec.  435.4; or
    (b) Reasonable categories of these individuals.

[66 FR 2667, Jan. 11, 2001]

          Options for Coverage of the Aged, Blind, and Disabled



Sec.  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 Sec.  435.121 to provide mandatory eligibility for aged, blind, 
and disabled SSI recipients 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 Sec.  435.121;
    (2) Meet the resource requirements that the State has elected to 
apply under Sec.  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

[[Page 131]]

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 Sec.  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 Sec.  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 Sec.  
435.212;
    (iii) Individuals receiving home and community-based waiver services 
described in Sec.  435.217;
    (iv) Individuals receiving only optional State supplements described 
in Sec.  435.234;
    (v) Institutionalized individuals with income below a special income 
level described in Sec.  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 Sec. Sec.  
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 Sec.  435.601.

[58 FR 4928, Jan. 19, 1993]



Sec.  435.232  Individuals receiving only optional State supplements.

    (a) If the agency provides Medicaid to individuals receiving SSI 
under Sec.  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 Sec.  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]

[[Page 132]]



Sec.  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 Sec.  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 Sec.  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]



Sec.  435.236  Individuals in institutions who are eligible under a special income level.

    (a) If the agency provides Medicaid under Sec.  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 Sec.  
435.722. (See Sec.  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



Sec.  435.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec.  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 Sec. Sec.  
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

[[Page 133]]

and the applicable income standard; and
    (2) Have resources that meet the applicable standards in Sec. Sec.  
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) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and is receiving Medicaid on 
the date of the child's birth. The child is deemed to have applied and 
been found eligible for Medicaid on the date of birth and remains 
eligible as medically needy for one year so long as the woman remains 
eligible and the child is a member of the woman's household. If the 
woman's basis of eligibility changes to categorically needy, the child 
is eligible as categorically needy under Sec.  435.117. The woman is 
considered to remain eligible if she meets the spend-down requirements 
in any consecutive budget period following the birth of the child.
    (iv) 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 Sec.  
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 (Sec.  435.308).
    (ii) Specified relatives (Sec.  435.310).
    (iii) Aged (Sec.  435.330.320 and 435.330).
    (iv) Blind (Sec. Sec.  435.322, 435.330 and 435.340).
    (v) Disabled (Sec. Sec.  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]



Sec.  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 Sec.  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

[[Page 134]]

such individuals, it may also provide Medicaid to individuals in 
intermediate care facilities for the mentally retarded.
    (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]



Sec.  435.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, as defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified in Sec.  435.510.

[58 FR 4929, Jan. 19, 1993]



Sec.  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 Sec.  435.520; 
and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47986, Sept. 30, 1981]



Sec.  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 Sec. Sec.  
435.530 and 435.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47986, Sept. 30, 1981]



Sec.  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 Sec. Sec.  
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]



Sec.  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 
Sec.  435.212, it may provide it under the same rules to medically needy 
recipients who are enrolled in MCOs or PCCMs.

[67 FR 41095, June 14, 2002]



Sec.  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 Sec.  
435.121 or Sec.  435.230; and
    (2) If applying as blind or disabled, meet the definition of 
blindness or disability established under Sec.  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 Sec. Sec.  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

[[Page 135]]

eligibility requirements of subparts G and I of this part.

[58 FR 4929, Jan. 19, 1993]



Sec.  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]



Sec.  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 Sec.  440.255(c) of this chapter, to those 
aliens described in Sec.  435.406(c) of this subpart.

[55 FR 36819, Sept. 7, 1990]



               Subpart E_General Eligibility Requirements



Sec.  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.



Sec.  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) For families and children, more restrictive than those used 
under the State's AFDC plan; and
    (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 Sec.  435.230 or individuals in categories 
specified by the agency under Sec.  435.121.



Sec.  435.402  [Reserved]



Sec.  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 Sec.  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 Sec.  
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 mental retardation 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 mental retardation.
    (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.

[[Page 136]]

    (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 under Age 21. (1) For any individual who is 
emancipated from his or her parents or who is married and capable of 
indicating intent, the State of residence is the State where the 
individual is living with the intention to remain there permanently or 
for an indefinite period.
    (2) For any individual not residing in an institution as defined in 
paragraph (b) whose Medicaid eligibility is based on blindness or 
disability, the State of residence is the State in which the individual 
is living.
    (3) For any other non-institutionalized individual not subject to 
paragraph (h)(1) or (h)(2) of this section, the State of residence is 
determined in accordance with 45 CFR 233.40, the rules governing 
residence under the AFDC program.
    (4) 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.
    (i) Individuals Age 21 and over. (1) For any individual not residing 
in an institution as defined in paragraph (b), the State of residence is 
the State where the individual is--
    (i) Living with the intention to remain there permanently or for an 
indefinite period (or if incapable of stating intent, where the 
individual is living); or
    (ii) Living and which the individual entered with a job commitment 
or seeking employment (whether or not currently employed).
    (2) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--

[[Page 137]]

    (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.
    (3) 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.
    (4) For any other institutionalized individual, the State of 
residence is the State where the individual is living with the intention 
to remain there permanently or for an indefinite period.
    (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 agreeements 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 recipients. If an 
agency is providing Medicaid to an institutionalized recipient 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 recipient 
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 (h) 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]



Sec.  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.



Sec.  435.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--

[[Page 138]]

    (1) Citizens: (i) Under a declaration required by section 1137(d) of 
the Act that the individual is a citizen or national of the United 
States; and
    (ii) The individual has provided satisfactory documentary evidence 
of citizenship or national status, as described in Sec.  435.407.
    (iii) An individual for purposes of the declaration and citizenship 
documentation requirements discussed in paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section includes both applicants and recipients under 
a section 1115 demonstration (including a family planning demonstration 
project) for which a State receives Federal financial participation in 
their expenditures, as though the expenditures were for medical 
assistance.
    (iv) Individuals must declare their citizenship and the State must 
document the individual's citizenship in the individual's eligibility 
file on initial applications and initial redeterminations effective July 
1, 2006.
    (v) The following groups of individuals are exempt from the 
requirements in paragraph (a)(1)(ii) 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 recipients of foster care 
maintenance or adoption assistance payments under Title IV-E of the Act.
    (2)(i) Except as specified in 8 U.S.C. 1612(b)(1) (permitting States 
an option with respect to coverage of certain qualified aliens), 
qualified aliens as described in section 431 of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1641) (including qualified aliens subject to the 5-year bar) who have 
provided satisfactory documentary evidence of Qualified Alien 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 recipient is an alien in a satisfactory immigration 
status.
    (ii) The eligibility of qualified aliens 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.
    (b) The agency must provide payment for the services described in 
Sec.  440.255(c) of this chapter to residents of the State who otherwise 
meet the eligibility requirements of the State plan (except for receipt 
of AFDC, SSI, or State Supplementary payments) who are qualified aliens 
subject to the 5-year bar or who are non-qualified aliens who meet all 
Medicaid eligibility criteria, except non-qualified aliens need not 
present a social security number or document immigration status.

[55 FR 36819, Sept. 7, 1990, as amended at 56 FR 10807, Mar. 14, 1991; 
71 FR 39222, July 12, 2006; 72 FR 38691, July 13, 2007]



Sec.  435.407  Types of acceptable documentary evidence of citizenship.

    For purposes of this section, the term ``citizenship'' includes 
status as a ``national of the United States'' as defined by section 
101(a)(22) of the Immigration and Nationality Act (8 U.S.C. 1101(a)(22)) 
to include both citizens of the United States and non-citizen nationals 
of the United States.
    (a) Primary evidence of citizenship and identity. The following 
evidence must be accepted as satisfactory documentary evidence of both 
identity and citizenship:
    (1) A U.S. passport. The Department of State issues this. A U.S. 
passport does not have to be currently valid to be accepted as evidence 
of U.S. citizenship, as long as it was originally issued without 
limitation. Note: Spouses and children were sometimes included on one 
passport through 1980. U.S. passports issued after 1980 show only one 
person. Consequently, the citizenship and identity of the included 
person can be established when one of these passports is presented. 
Exception: Do not accept any passport as evidence of U.S. citizenship 
when it was issued with a limitation. However, such a passport may be 
used as proof of identity.
    (2) A Certificate of Naturalization (DHS Forms N-550 or N-570.) 
Department of

[[Page 139]]

Homeland Security issues for naturalization.
    (3) A Certificate of U.S. Citizenship (DHS Forms N-560 or N-561.) 
Department of Homeland Security issues certificates of citizenship to 
individuals who derive citizenship through a parent.
    (4) A valid State-issued driver's license, but only if the State 
issuing the license requires proof of U.S. citizenship before issuance 
of such license or obtains a social security number from the applicant 
and verifies before certification that such number is valid and assigned 
to the applicant who is a citizen. (This provision is not effective 
until such time as a State makes providing evidence of citizenship a 
condition of issuing a driver's license and evidence that the license 
holder is a citizen is included on the license or in a system of records 
available to the Medicaid agency. The State must ensure that the process 
complies with this statutory provision in section 6036 of the Deficit 
Reduction Act of 2005. CMS will monitor compliance of States 
implementing this provision.).
    (b) Secondary evidence of citizenship. If primary evidence from the 
list in paragraph (a) of this section is unavailable, an applicant or 
recipient should provide satisfactory documentary evidence of 
citizenship from the list specified in this section to establish 
citizenship and satisfactory documentary evidence from paragraph (e) of 
this section to establish identity, in accordance with the rules 
specified in this section.
    (1) A U.S. public birth certificate showing birth in one of the 50 
States, the District of Columbia, Puerto Rico (if born on or after 
January 13, 1941), Guam (on or after April 10, 1899), the Virgin Islands 
of the U.S. (on or after January 17, 1917), American Samoa, Swain's 
Island, or the Northern Mariana Islands (after November 4, 1986 (NMI 
local time)). A State, at its option, may use a cross match with a State 
vital statistics agency to document a birth record. The birth record 
document may be issued by the State, Commonwealth, Territory, or local 
jurisdiction. It must have been recorded before the person was 5 years 
of age. A delayed birth record document that is recorded at or after 5 
years of age is considered fourth level evidence of citizenship. (Note: 
If the document shows the individual was born in Puerto Rico, the Virgin 
Islands of the U.S., or the Northern Mariana Islands before these areas 
became part of the U.S., the individual may be a collectively 
naturalized citizen. Collective naturalization occurred on certain dates 
listed for each of the territories.) The following will establish U.S. 
citizenship for collectively naturalized individuals:
    (i) Puerto Rico:
    (A) Evidence of birth in Puerto Rico on or after April 11, 1899 and 
the applicant's statement that he or she was residing in the U.S., a 
U.S. possession, or Puerto Rico on January 13, 1941; or
    (B) Evidence that the applicant was a Puerto Rican citizen and the 
applicant's statement that he or she was residing in Puerto Rico on 
March 1, 1917 and that he or she did not take an oath of allegiance to 
Spain.
    (ii) U.S. Virgin Islands:
    (A) Evidence of birth in the U.S. Virgin Islands, and the 
applicant's statement of residence in the U.S., a U.S. possession, or 
the U.S. Virgin Islands on February 25, 1927; or
    (B) The applicant's statement indicating residence in the U.S. 
Virgin Islands as a Danish citizen on January 17, 1917 and residence in 
the U.S., a U.S. possession, or the U.S. Virgin Islands on February 25, 
1927, and that he or she did not make a declaration to maintain Danish 
citizenship; or
    (C) Evidence of birth in the U.S. Virgin Islands and the applicant's 
statement indicating residence in the U.S., a U.S. possession or 
Territory, or the Canal Zone on June 28, 1932.
    (iii) Northern Mariana Islands (NMI) (formerly part of the Trust 
Territory of the Pacific Islands (TTPI)):
    (A) Evidence of birth in the NMI, TTPI citizenship and residence in 
the NMI, the U.S., or a U.S. Territory or possession on November 3, 1986 
NMI local time) and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time); or
    (B) Evidence of TTPI citizenship, continuous residence in the NMI 
since before November 3, 1981 (NMI local

[[Page 140]]

time), voter registration before January 1, 1975 and the applicant's 
statement that he or she did not owe allegiance to a foreign State on 
November 4, 1986 (NMI local time); or
    (C) Evidence of continuous domicile in the NMI since before January 
1, 1974 and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time).
    (D) Note: If a person entered the NMI as a nonimmigrant and lived in 
the NMI since January 1, 1974, this does not constitute continuous 
domicile and the individual is not a U.S. citizen.
    (2) A Certification of Report of Birth (DS-1350). The Department of 
State issues a DS-1350 to U.S. citizens in the U.S. who were born 
outside the U.S. and acquired U.S. citizenship at birth, based on the 
information shown on the FS-240. When the birth was recorded as a 
Consular Report of Birth (FS-240), certified copies of the Certification 
of Report of Birth Abroad (DS-1350) can be issued by the Department of 
State in Washington, DC. The DS-1350 contains the same information as 
that on the current version of Consular Report of Birth FS-240. The DS-
1350 is not issued outside the U.S.
    (3) A Report of Birth Abroad of a U.S. Citizen (Form FS-240). The 
Department of State consular office prepares and issues this. A Consular 
Report of Birth can be prepared only at an American consular office 
overseas while the child is under the age of 18. Children born outside 
the U.S. to U.S. military personnel usually have one of these.
    (4) A Certification of birth issued by the Department of State (Form 
FS-545 or DS-1350). Before November 1, 1990, Department of State 
consulates also issued Form FS-545 along with the prior version of the 
FS-240. In 1990, U.S. consulates ceased to issue Form FS-545. Treat an 
FS-545 the same as the DS-1350.
    (5) A U.S. Citizen I.D. card. (This form was issued until the 1980s 
by INS. Although no longer issued, holders of this document may still 
use it consistent with the provisions of section 1903(x) of the Act.) 
INS issued the I-179 from 1960 until 1973. It revised the form and 
renumbered it as Form I-197. INS issued the I-197 from 1973 until April 
7, 1983. INS issued Form I-179 and I-197 to naturalized U.S. citizens 
living near the Canadian or Mexican border who needed it for frequent 
border crossings. Although neither form is currently issued, either form 
that was previously issued is still valid.
    (6) A Northern Mariana Identification Card (I-873). (Issued by the 
DHS to a collectively naturalized citizen of the United States who was 
born in the Northern Mariana Islands before November 4, 1986.) The 
former Immigration and Naturalization Service (INS) issued the I-873 to 
a collectively naturalized citizen of the U.S. who was born in the NMI 
before November 4, 1986. The card is no longer issued, but those 
previously issued are still valid.
    (7) An American Indian Card (I-872) issued by the Department of 
Homeland Security with the classification code ``KIC.'' (Issued by DHS 
to identify U.S. citizen members of the Texas Band of Kickapoos living 
near the United States/Mexican border.) DHS issues this card to identify 
a member of the Texas Band of Kickapoos living near the U.S./Mexican 
border. A classification code ``KIC'' and a statement on the back denote 
U.S. citizenship.
    (8) A final adoption decree showing the child's name and U.S. place 
of birth. The adoption decree must show the child's name and U.S. place 
of birth. In situations where an adoption is not finalized and the State 
in which the child was born will not release a birth certificate prior 
to final adoption, a statement from a State approved adoption agency 
that shows the child's name and U.S. place of birth is acceptable. The 
adoption agency must state in the certification that the source of the 
place of birth information is an original birth certificate.
    (9) Evidence of U.S. Civil Service employment before June 1, 1976. 
The document must show employment by the U.S. government before June 1, 
1976. Individuals employed by the U.S. Civil Service prior to June 1, 
1976 had to be U.S. citizens.
    (10) U.S. Military Record showing a U.S. place of birth. The 
document must show a U.S. place of birth (for example a DD-214 or 
similar official document showing a U.S. place of birth.)

[[Page 141]]

    (11) A data verification with the Systematic Alien Verification for 
Entitlements (SAVE) Program for naturalized citizens. A State may 
conduct a verification with SAVE to determine if an individual is a 
naturalized citizen, provided that such verification is conducted 
consistent with the terms of a Memorandum of Understanding or other 
agreement with the Department of Homeland Security (DHS) authorizing 
verification of claims to U.S. citizenship through SAVE, including but 
not limited to provision of the individual's alien registration number 
if required by DHS.
    (12) Child Citizenship Act. Adopted or biological children born 
outside the United States may establish citizenship obtained 
automatically under section 320 of the Immigration and Nationality Act 
(8 U.S.C. 1431), as amended by the Child Citizenship Act of 2000 (Pub. 
L. 106-395, enacted on October 30, 2000). The State must obtain 
documentary evidence that verifies that at any time on or after February 
27, 2001, the following conditions have been met:
    (i) At least one parent of the child is a United States citizen by 
either birth or naturalization (as verified under the requirements of 
this Part);
    (ii) The child is under the age of 18;
    (iii) The child is residing in the United States in the legal and 
physical custody of the U.S. citizen parent;
    (iv) The child was admitted to the United States for lawful 
permanent residence (as verified under the requirements of 8 U.S.C. 1641 
pertaining to verification of qualified alien status); and
    (v) If adopted, the child satisfies the requirements of section 
101(b)(1) of the Immigration and Nationality Act (8 U.S.C. 1101(b)(1) 
pertaining to international adoptions (admission for lawful permanent 
residence as IR-3 (child adopted outside the United States)), or as IR-4 
(child coming to the United States to be adopted) with final adoption 
having subsequently occurred).
    (c) Third level evidence of citizenship. Third level evidence of 
U.S. citizenship is documentary evidence of satisfactory reliability 
that is used when both primary and secondary evidence is unavailable. 
Third level evidence may be used only when the applicant or recipient 
alleges being born in the U.S. A second document from paragraph (e) of 
this section to establish identity must also be presented:
    (1) Extract of a hospital record on hospital letterhead established 
at the time of the person's birth that was created 5 years before the 
initial application date and that indicates a U.S. place of birth. (For 
children under 16 the document must have been created near the time of 
birth or 5 years before the date of application.) Do not accept a 
souvenir ``birth certificate'' issued by the hospital.
    (2) Life, health, or other insurance record showing a U.S. place of 
birth that was created at least 5 years before the initial application 
date that indicates a U.S. place of birth. (For children under 16 the 
document must have been created near the time of birth or 5 years before 
the date of application.) Life or health insurance records may show 
biographical information for the person including place of birth; the 
record can be used to establish U.S. citizenship when it shows a U.S. 
place of birth.
    (3) Religious record recorded in the U.S. within 3 months of birth 
showing the birth occurred in the U.S. and showing either the date of 
the birth or the individual's age at the time the record was made. The 
record must be an official record recorded with the religious 
organization. CAUTION: In questionable cases (for example, where the 
child's religious record was recorded near a U.S. international border 
and the child may have been born outside the U.S.), the State must 
verify the religious record and/or document that the mother was in the 
U.S. at the time of birth.
    (4) Early school record showing a U.S. place of birth. The school 
record must show the name of the child, the date of admission to the 
school, the date of birth, a U.S. place of birth, and the name(s) and 
place(s) of birth of the applicant's parents.
    (d) Fourth level evidence of citizenship. Fourth level evidence of 
citizenship is documentary evidence of the lowest reliability. Fourth 
level evidence should only be used in the rarest of circumstances. This 
level of evidence is used only when primary, secondary and third level 
evidence is unavailable. With the exception of the affidavit

[[Page 142]]

process described in paragraph (d)(5) of this section, the applicant may 
only use fourth level evidence of citizenship if alleging a U.S. place 
of birth. In addition, a second document establishing identity must be 
presented as described in paragraph (e) of this section.
    (1) Federal or State census record showing U.S. citizenship or a 
U.S. place of birth. (Generally for persons born 1900 through 1950.) The 
census record must also show the applicant's age. Note: Census records 
from 1900 through 1950 contain certain citizenship information. To 
secure this information the applicant, recipient or State should 
complete a Form BC-600, Application for Search of Census Records for 
Proof of Age. Add in the remarks portion ``U.S. citizenship data 
requested.'' Also add that the purpose is for Medicaid eligibility. This 
form requires a fee.
    (2) One of the following documents that show a U.S. place of birth 
and was created at least 5 years before the application for Medicaid. 
(For children under 16 the document must have been created near the time 
of birth or 5 years before the date of application.) This document must 
be one of the following and show a U.S. place of birth:
    (i) Seneca Indian tribal census.
    (ii) Bureau of Indian Affairs tribal census records of the Navajo 
Indians.
    (iii) U.S. State Vital Statistics official notification of birth 
registration.
    (iv) A delayed U.S. public birth record that is recorded more than 5 
years after the person's birth.
    (v) Statement signed by the physician or midwife who was in 
attendance at the time of birth.
    (vi) The Roll of Alaska Natives maintained by the Bureau of Indian 
Affairs.
    (3) Institutional admission papers from a nursing facility, skilled 
care facility or other institution created at least 5 years before the 
initial application date that indicates a U.S. place of birth. Admission 
papers generally show biographical information for the person including 
place of birth; the record can be used to establish U.S. citizenship 
when it shows a U.S. place of birth.
    (4) Medical (clinic, doctor, or hospital) record created at least 5 
years before the initial application date that indicates a U.S. place of 
birth. (For children under 16 the document must have been created near 
the time of birth or 5 years before the date of application.)
    Medical records generally show biographical information for the 
person including place of birth; the record can be used to establish 
U.S. citizenship when it shows a U.S. place of birth. (Note:An 
immunization record is not considered a medical record for purposes of 
establishing U.S. citizenship.)
    (5) Written affidavit. Affidavits should ONLY be used in rare 
circumstances. If the documentation requirement needs to be met through 
affidavits, the following rules apply:
    (i) There must be at least two affidavits by two individuals who 
have personal knowledge of the event(s) establishing the applicant's or 
recipient's claim of citizenship (the two affidavits could be combined 
in a joint affidavit).
    (ii) At least one of the individuals making the affidavit cannot be 
related to the applicant or recipient. Neither of the two individuals 
can be the applicant or recipient.
    (iii) In order for the affidavit to be acceptable the persons making 
them must be able to provide proof of their own citizenship and 
identity.
    (iv) If the individual(s) making the affidavit has (have) 
information which explains why documentary evidence establishing the 
applicant's claim or citizenship does not exist or cannot be readily 
obtained, the affidavit should contain this information as well.
    (v) The State must obtain a separate affidavit from the applicant/
recipient or other knowledgeable individual (guardian or representative) 
explaining why the evidence does not exist or cannot be obtained.
    (vi) The affidavits must be signed under penalty of perjury and need 
not be notarized.
    (e) Evidence of identity. The following documents may be accepted as 
proof of identity and must accompany a document establishing citizenship 
from the groups of documentary evidence of citizenship in the groups in 
paragraphs (b) through (d) of this section.
    (1) Identity documents described in 8 CFR 274a.2(b)(1)(v)(B)(1).
    (i) Driver's license issued by State or Territory either with a 
photograph of the individual or other identifying information of the 
individual such as

[[Page 143]]

name, age, sex, race, height, weight or eye color.
    (ii) School identification card with a photograph of the individual.
    (iii) U.S. military card or draft record.
    (iv) Identification card issued by the Federal, State, or local 
government with the same information included on drivers' licenses.
    (v) Military dependent's identification card.
    (vi) Certificate of Degree of Indian Blood, or other American 
Indian/Alaska Native Tribal document with a photograph or other personal 
identifying information relating to the individual. Acceptable if the 
document carries a photograph of the applicant or recipient, or has 
other personal identifying information relating to the individual such 
as age, weight, height, race, sex, and eye color.
    (vii) U.S. Coast Guard Merchant Mariner card.

    Note to paragraph (e)(1): Exception: Do not accept a voter's 
registration card or Canadian driver's license as listed in 8 CFR 
274a.2(b)(1)(v)(B)(1). CMS does not view these as reliable for identity.
    (2) At State option, a State may use a cross match with a Federal or 
State governmental, public assistance, law enforcement or corrections 
agency's data system to establish identity if the agency establishes and 
certifies true identity of individuals. Such agencies may include food 
stamps, child support, corrections, including juvenile detention, motor 
vehicle, or child protective services. The State Medicaid Agency is 
still responsible for assuring the accuracy of the identity 
determination.
    (3) At State option, a State may accept three or more documents that 
together reasonably corroborate the identity of an individual provided 
such documents have not been used to establish the individual's 
citizenship and the individual submitted second or third tier evidence 
of citizenship. The State must first ensure that no other evidence of 
identity is available to the individual prior to accepting such 
documents. Such documents must at a minimum contain the individual's 
name, plus any additional information establishing the individual's 
identity. All documents used must contain consistent identifying 
information. These documents include employer identification cards, high 
school and college diplomas from accredited institutions (including 
general education and high school equivalency diplomas), marriage 
certificates, divorce decrees and property deeds/titles.
    (f) Special identity rules for children. For children under 16, a 
clinic, doctor, hospital or school record may be accepted for purposes 
of establishing identity. School records may include nursery or daycare 
records and report cards. If the State accepts such records, it must 
verify them with the issuing school. If none of the above documents in 
the preceding groups are available, an affidavit may be used. An 
affidavit is only acceptable if it is signed under penalty of perjury by 
a parent, guardian or caretaker relative (as defined in the regulations 
at 45 CFR 233.90(c)(v)) stating the date and place of the birth of the 
child and cannot be used if an affidavit for citizenship was provided. 
The affidavit is not required to be notarized. A State may accept an 
identity affidavit on behalf of a child under the age of 18 in instances 
when school ID cards and drivers' licenses are not available to the 
individual in that area until that age.
    (g) Special identity rules for disabled individuals in institutional 
care facilities. A State may accept an identity affidavit signed under 
penalty of perjury by a residential care facility director or 
administrator on behalf of an institutionalized individual in the 
facility. States should first pursue all other means of verifying 
identity prior to accepting an affidavit. The affidavit is not required 
to be notarized.
    (h) Special populations needing assistance. States must assist 
individuals to secure satisfactory documentary evidence of citizenship 
when because of incapacity of mind or body the individual would be 
unable to comply with the requirement to present satisfactory 
documentary evidence of citizenship in a timely manner and the 
individual lacks a representative to assist him or her.
    (i) Documentary evidence. (1) All documents must be either originals 
or copies certified by the issuing agency.

[[Page 144]]

Uncertified copies, including notarized copies, shall not be accepted.
    (2) States must maintain copies of citizenship and identification 
documents in the case record or electronic data base and make these 
copies available for compliance audits.
    (3) States may permit applicants and recipients to submit such 
documentary evidence without appearing in person at a Medicaid office. 
States may accept original documents in person, by mail, or by a 
guardian or authorized representative.
    (4) If documents are determined to be inconsistent with pre-existing 
information, are counterfeit, or altered, States should investigate for 
potential fraud and abuse, including but not limited to, referral to the 
appropriate State and Federal law enforcement agencies.
    (5) Presentation of documentary evidence of citizenship is a one 
time activity; once a person's citizenship is documented and recorded in 
a State database subsequent changes in eligibility should not require 
repeating the documentation of citizenship unless later evidence raises 
a question of the person's citizenship. The State need only check its 
databases to verify that the individual already established citizenship.
    (6) CMS requires that as a check against fraud, using currently 
available automated capabilities, States will conduct a match of the 
applicant's name against the corresponding Social Security number that 
was provided. In addition, in cooperation with other agencies of the 
Federal government, CMS encourages States to use automated capabilities 
to verify citizenship and identity of Medicaid applicants. Automated 
capabilities may fall within the computer matching provisions of the 
Privacy Act of 1974, and CMS will explore any implementation issues that 
may arise with respect to those requirements. When these capabilities 
become available, States will be required to match files for individuals 
who used third or fourth tier documents to verify citizenship and 
documents to verify identity, and CMS will make available to States 
necessary information in this regard. States must ensure that all case 
records within this category will be so identified and made available to 
conduct these automated matches. CMS may also require States to match 
files for individuals who used first or second level documents to verify 
citizenship as well. CMS may provide further guidance to States with 
respect to actions required in a case of a negative match.
    (j) Record retention. The State must retain documents in accordance 
with 45 CFR 74.53.
    (k) Reasonable opportunity to present satisfactory documentary 
evidence of citizenship. States must give an applicant or recipient a 
reasonable opportunity to submit satisfactory documentary evidence of 
citizenship before taking action affecting the individual's eligibility 
for Medicaid. The time States give for submitting documentation of 
citizenship should be consistent with the time allowed to submit 
documentation to establish other facets of eligibility for which 
documentation is requested. (See Sec.  435.930 and Sec.  435.911.)

[71 FR 39222, July 12, 2006, as amended at 72 FR 38691, July 13, 2007]



           Subpart F_Categorical Requirements for Eligibility



Sec.  435.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part.

                               Dependency



Sec.  435.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures set forth under the 
State's AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45204, Sept. 29, 1978, as amended at 58 FR 4929, Jan. 19, 1993]

[[Page 145]]

                                   Age



Sec.  435.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4929, Jan. 19, 1993]



Sec.  435.522  Determination of age.

    (a) Except as specified in paragraphs (b) and (c) of this section, 
in determining age, the agency must use the common-law method (under 
which an age reached the day before the anniversary of birth).
    (b) For families and children, the agency must use the popular usage 
method (under which an age is reached on the anniversary of birth), if 
this method is used under the State's AFDC plan.
    (c) For aged, blind, or disabled individuals, the agency must use 
the popular usage method, if the plan provides under Sec.  435.121, 
Sec.  435.230, or Sec.  435.330, for coverage of aged, blind, or 
disabled individuals who meet more restrictive eligibility requirements 
than those under SSI.
    (d) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4929, Jan. 19, 1993]

                                Blindness



Sec.  435.530  Definition of blindness.

    (a) Definition. The agency must use the same definition of blindness 
as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Sec. Sec.  435.130 through 435.134, the 
agency must use the definition of blindness that was used under the 
Medicaid plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility under Sec.  435.121, if the definition is no more 
restrictive than that used under the Medicaid plan on January 1, 1972.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec.  435.531  Determinations of blindness.

    (a) Except as specified in paragraph (b) of this section, in 
determining blindness--
    (1) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine him, unless 
both of the applicant's eyes are missing;
    (2) The examiner must submit a report of examination to the Medicaid 
agency; and
    (3) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (i) Whether the individual meets the definition of blindness; and
    (ii) Whether and when re-examinations are necessary for periodic 
redeterminations of eligibility, as required under Sec.  435.916 of this 
part.
    (b) If an agency provides Medicaid to individuals receiving SSI on 
the basis of blindness, this section does not apply for those 
individuals.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979]

                               Disability



Sec.  435.540  Definition of disability.

    (a) Definition. The agency must use the same definition of 
disability as used under SSI, except that--
    (1) In determining the eligibility of individuals whose Medicaid 
eligibility is protected under Sec. Sec.  435.130 through 435.134, the 
agency must use the definition of disability that was used under the 
Medicaid plan in December 1973; and
    (2) The agency may use a more restrictive definition to determine 
eligibility under Sec.  435.121, if the definition is no more 
restrictive than that used under the Medicaid plan on January 1, 1972.
    (b) State plan requirements. The State plan must contain the 
definition of disability.



Sec.  435.541  Determinations of disability.

    (a) Determinations made by SSA. The following rules and those under 
paragraph (b) of this section apply where an individual has applied for 
Medicaid on the basis of disability.

[[Page 146]]

    (1) If the agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act, the agency may not 
make a determination of disability when the only application is filed 
with SSA.
    (2) The agency may not make an independent determination of 
disability if SSA has made a disability determination within the time 
limits set forth in Sec.  435.911 on the same issues presented in the 
Medicaid application. A determination of eligibility for SSI payments 
based on disability that is made by SSA automatically confers Medicaid 
eligibility, as provided for under Sec.  435.909.
    (b) Effect of SSA determinations. (1) Except in the circumstances 
specified in paragraph (c)(3) of this section--
    (i) An SSA disability determination is binding on an agency until 
the determination is changed by SSA.
    (ii) If the SSA determination is changed, the new determination is 
also binding on the agency.
    (2) The agency must refer to SSA all applicants who allege new 
information or evidence affecting previous SSA determinations of 
ineligibility based upon disability for reconsideration or reopening of 
the determination, except in cases specified in paragraph (c)(4) of this 
section.
    (c) Determinations made by the Medicaid agency. The agency must make 
a determination of disability in accordance with the requirements of 
this section if any of the following circumstances exist:
    (1) The individual applies for Medicaid as a non-cash recipient and 
has not applied to SSA for SSI cash benefits, whether or not a State has 
a section 1634 agreement with SSA; or an individual applies for Medicaid 
and has applied to SSA for SSI benefits and is found ineligible for SSI 
for a reason other than disability.
    (2) The individual applies both to SSA for SSI and to the State 
Medicaid agency for Medicaid, the State agency has a section 1634 
agreement with SSA, and SSA has not made an SSI disability determination 
within 90 days from the date of the individual's application for 
Medicaid.
    (3) The individual applies to SSA for SSI and to the State Medicaid 
agency for Medicaid, the State does not have a section 1634 agreement 
with SSA, and either the State uses more restrictive criteria than SSI 
for determining Medicaid eligibility under its section 1902(f) option 
or, in the case of a State that uses SSI criteria, SSA has not made an 
SSI disability determination in time for the State to comply with the 
Medicaid time limit for making a prompt determination on an individual's 
application for Medicaid.
    (4) The individual applies for Medicaid as a non-cash recipient, 
whether or not the State has a section 1634 agreement with SSA, and--
    (i) Alleges a disabling condition different from, or in addition to, 
that considered by SSA in making its determination; or
    (ii) Alleges more than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination and alleges a new period of 
disability which meets the durational requirements of the Act, and has 
not applied to SSA for a determination with respect to these 
allegations.
    (iii) Alleges less than 12 months after the most recent SSA 
determination denying disability that his or her condition has changed 
or deteriorated since that SSA determination, alleges a new period of 
disability which meets the durational requirements of the Act, and--
    (A) Has applied to SSA for reconsideration or reopening of its 
disability decision and SSA refused to consider the new allegations; 
and/or
    (B) He or she no longer meets the nondisability requirements for SSI 
but may meet the State's nondisability requirements for Medicaid 
eligibility.
    (d) Basis for determinations. The agency must make a determination 
of disability as provided in paragraph (c) of this section--
    (1) On the basis of the evidence required under paragraph (e) of 
this section; and
    (2) In accordance with the requirements for evaluating that evidence 
under the SSI program specified in 20 CFR 416.901 through 416.998.

[[Page 147]]

    (e) Medical and nonmedical evidence. The agency must obtain a 
medical report and other nonmedical evidence for individuals applying 
for Medicaid on the basis of disability. The medical report and 
nonmedical evidence must include diagnosis and other information in 
accordance with the requirements for evidence applicable to disability 
determinations under the SSI program specified in 20 CFR part 416, 
subpart I.
    (f) Disability review teams--(1) Function. A review team must review 
the medical report and other evidence required under paragraph (e) of 
this section and determine on behalf of the agency whether the 
individual's condition meets the definition of disability.
    (2) Composition. The review team must be composed of a medical or 
psychological consultant and another individual who is qualified to 
interpret and evaluate medical reports and other evidence relating to 
the individual's physical or mental impairments and, as necessary, to 
determine the capacities of the individual to perform substantial 
gainful activity, as specified in 20 CFR part 416, subpart J.
    (3) Periodic reexaminations. The review team must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required under Sec.  435.916 of this part, using the 
principles set forth in 20 CFR 416.989 and 416.990. If a State uses the 
same definition of disability as SSA, as provided for under Sec.  
435.540, and a recipient is Medicaid eligible because he or she receives 
SSI, this paragraph (f)(3) does not apply. The reexamination will be 
conducted by SSA.

[54 FR 50761, Dec. 11, 1989]



    Subpart G_General Financial Eligibility Requirements and Options



Sec.  435.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically and medically needy individuals 
specified in subparts B, C, and D of this part. Subparts H and I of this 
part prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the AFDC, SSI, or State supplement programs, or, for aged, blind, and 
disabled individuals in States that use more restrictive criteria than 
SSI, the methodologies established in accordance with the requirements 
of Sec. Sec.  435.121 and 435.230.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section or in Sec.  435.121 
in determining financial eligibility of individuals as categorically and 
medically needy, the agency must apply the financial methodologies and 
requirements of the cash assistance program that is most closely 
categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec.  435.602.
    (d) Use of less restrictive methodologies than those under cash 
assistance programs. (1) At State option, and subject to the conditions 
of paragraphs (d)(2) through (d)(5) of this section, the agency may 
apply income and resource methodologies that are less restrictive than 
the cash assistance methodologies in determining eligibility of the 
following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group under Sec.  435.116;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i)(IV), 1902(a)(10)(A)(i)(VI), and 
1902(a)(10)(A)(i)(VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act;
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act; 
and

[[Page 148]]

    (vi) Aged, blind, and disabled individuals in States using more 
restrictive eligibility requirements than SSI under groups established 
under Sec. Sec.  435.121 and 435.230.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals described in paragraph (d)(1) of this 
section may be less restrictive, but no more restrictive (except in 
States using more restrictive requirements than SSI), than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind, or disabled, or AFDC related) within an eligibility group. For 
example, if the agency chooses to apply less restrictive income or 
resource methodology to an eligibility group of aged individuals, it 
must apply that methodology to all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded in Sec.  435.602, in determining 
financial eligibility of individuals, the agency will apply the cash 
assistance financial methodologies and requirements, unless the agency 
chooses to apply less restrictive income and resource methodologies in 
accordance with paragraph (d) of this section.
    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will be used; and
    (ii) The eligibility group or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4929, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.602  Financial responsibility of relatives and other individuals.

    (a) Basic requirements. Subject to the provisions of paragraphs (b) 
and (c) of this section, in determining financial responsibility of 
relatives and other persons for individuals under Medicaid, the agency 
must apply the following requirements and methodologies:
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under age 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies that apply include considering the income and resources of 
parents or spouses whose income and resources would be considered if the 
individual under age 21 were dependent under the State's approved AFDC 
plan, whether or not they are actually contributed, except as specified 
under paragraphs (c) and (d) of this section. These requirements and 
methodologies must be applied in accordance with the provisions of the 
State's approved AFDC plan.
    (3) When a couple ceases to live together, the agency must count 
only the income of the individual spouse in determining his or her 
eligibility, beginning the first month following the month the couple 
ceases to live together.
    (4) In the case of eligible institutionalized spouses who are aged, 
blind, and disabled and who have shared the same room in a title XIX 
Medicaid institution, the agency has the option of considering these 
couples as eligible couples for purposes of counting income and 
resources or as eligible individuals, whichever is more advantageous to 
the couple.
    (b) Requirements for States using more restrictive requirements. 
Subject to the

[[Page 149]]

provisions of paragraph (c) of this section, in determining financial 
eligibility of aged, blind, or disabled individuals in States that apply 
eligibility requirements more restrictive than those used under SSI, the 
agency must apply:
    (1) The requirements and methodologies for financial responsibility 
of relatives used under the SSI program; or
    (2) More extensive requirements for relative responsibility than 
specified in Sec.  435.602(a) but no more extensive than the 
requirements under the Medicaid plan in effect on January 1, 1972.
    (c) Use of less restrictive methodologies. The agency may apply 
income and resources methodologies that are less restrictive than those 
used under the cash assistance programs as specified in the State 
Medicaid plan in accordance with Sec.  435.601(d).
    (d) [Reserved]

[58 FR 4930, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]



Sec.  435.604  [Reserved]



Sec.  435.606  [Reserved]



Sec.  435.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and recipients to take all necessary steps to obtain any 
annuities, pensions, retirement, and disability benefits to which they 
are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, retirement and disability benefits include, 
but are not limited to, veterans' compensation and pensions, OASDI 
benefits, railroad retirement benefits, and unemployment compensation.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4931, Jan. 19, 1993]



Sec.  435.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and recipients to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section 1902 (1)(1)(A) of the Act (poverty level pregnant 
women), who are exempt from cooperating in establishing paternity and 
obtaining medical support and payments from, or derived from, the father 
of the child born out of wedlock; 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) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for the 
assignment of rights to medical support and other payments and 
cooperation in obtaining medical support and payments are effective for 
medical assistance furnished on or after October 1, 1984. The 
requirement for cooperation in identifying and providing information for 
pursuing liable third parties is effective for medical assistance 
furnished on or after July 1, 1988.

[55 FR 48609, Nov. 21, 1990, as amended at 58 FR 4907, Jan. 19, 1993. 
Redesignated at 58 FR 4931, Jan. 19, 1993]



Sec.  435.622  Individuals in institutions who are eligible under a special income level.

    (a) If an agency, under Sec.  435.231, provides Medicaid to 
individuals in medical institutions, nursing facilities, and 
intermediate care facilities for the mentally retarded who would not be 
eligible for SSI or State supplements if they were not 
institutionalized, the agency must use income standards based on the 
greater need for financial assistance that the individuals would have if 
they were not in the institution. The standards may vary by the level of 
institutional care needed by the individual (hospital, nursing facility, 
or intermediate level care for the mentally retarded), or by other 
factors related to individual needs. (See Sec.  435.1005 for FFP limits 
on income standards established under this section.)

[[Page 150]]

    (b) In determining the eligibility of individuals under the income 
standards established under this section, the agency must not take into 
account income that would be disregarded in determining eligibility for 
SSI or for an optional State supplement.
    (c) The agency must apply the income standards established under 
this section effective with the first day of a period of not less than 
30 consecutive days of institutionalization.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
53 FR 3595, Feb. 8, 1988. Redesignated and amended at 58 FR 4932, Jan. 
19, 1993]



Sec.  435.631  General requirements for determining income eligibility in States using more restrictive requirements for Medicaid than SSI.

    (a) Income eligibility methods. In determining income eligibility of 
aged, blind, and disabled individuals in a State using more restrictive 
eligibility requirements than SSI, the agency must use the methods for 
treating income elected under Sec. Sec.  435.121 and 435.230, under 
Sec.  435.601. The methods used must be comparable for all individuals 
within each category of individuals under Sec.  435.121 and each 
category of individuals within each optional categorically needy group 
included under Sec.  435.230 and for each category of individuals under 
the medically needy option described under Sec.  435.800.
    (b) Categorically needy versus medically needy eligibility. (1) 
Individuals who have income equal to, or below, the categorically needy 
income standards described in Sec. Sec.  435.121 and 435.230 are 
categorically needy in States that include the medically needy under 
their plans.
    (2) Categorically needy eligibility in States that do not include 
the medically needy is determined in accordance with the provisions of 
Sec.  435.121 (e)(4) and (e)(5).

[58 FR 4932, Jan. 19, 1993]



Sec.  435.640  Protected Medicaid eligibility for individuals eligible in December 1973.

    In determining whether individuals continue to meet the income 
requirements used in December 1973, for purposes of determining 
eligibility under Sec. Sec.  435.131, 435.132, and 435.133, the agency 
must deduct increased OASDI payments to the same extent that these 
deductions were in effect in December 1973. These deductions are 
required by section 306 of the Social Security Amendments of 1972 (Pub. 
L. 92-603) and section 1007 of Pub. L. 91-172 (enacted Dec. 30, 1969), 
modified by section 304 of Pub. L. 92-603.

[43 FR 45204, Sept. 29, 1978. Redesignated at 58 FR 4932, Jan. 19, 1993]



   Subpart H_Specific Post-Eligibility Financial Requirements for the 
                           Categorically Needy



Sec.  435.700  Scope.

    This subpart prescribes specific financial requirements for 
determining the post-eligibility treatment of income of categorically 
needy individuals, including requirements for applying patient income to 
the cost of care.

[58 FR 4931, Jan. 19, 1993]



Sec.  435.725  Post-eligibility treatment of income of institutionalized individuals in SSI States: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income,
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities.
    (1) Individuals receiving cash assistance under SSI or AFDC who are 
eligible for Medicaid under Sec.  435.110 or Sec.  435.120.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid under Sec.  435.211.

[[Page 151]]

    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, under Sec.  435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. In reducing its payment to the institution, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income, as determined under paragraph (e) of 
this section. Income that was disregarded in determining eligibility 
must be considered in this process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home, if the agency provides 
Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement recipients 
under Sec.  435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec.  435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under Sec.  
435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (3) For single individuals and couples, an amount (in addition to 
the personal needs allowance) for maintenance of the individual's or 
couple's home if--
    (i) The amount is deducted for not more than a 6-month period; and

[[Page 152]]

    (ii) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project monthly income for a prospective period not to exceed 6 months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and on medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980; 
48 FR 5735, Feb. 8, 1983; 53 FR 3595, Feb. 8, 1988; 55 FR 33705, Aug. 
17, 1990; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]



Sec.  435.726  Post-eligibility treatment of income of individuals receiving home and community-based services furnished under a waiver: Application of patient 
          income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid under Sec.  435.217 and are receiving home and community-based 
services furnished under a waiver of Medicaid requirements specified in 
part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.
    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the highest 
of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home, if the agency provides 
Medicaid only to individuals receiving SSI;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement recipients 
under Sec.  435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec. Sec.  435.811 and 435.814, if the agency 
provides Medicaid under the medically needy coverage option.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;

[[Page 153]]

    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's AFDC plan or 
the medically needy income standard established under Sec.  435.811 for 
a family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.

[46 FR 48539, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37715, July 
25, 1994]



Sec.  435.733  Post-eligibility treatment of income of institutionalized individuals in States using more restrictive requirements than SSI: Application of 
          patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to the following individuals 
in medical institutions and intermediate care facilities:
    (1) Individuals receiving cash assistance under AFDC who are 
eligible for Medicaid under Sec.  435.110 and individuals eligible under 
Sec.  435.121.
    (2) Individuals who would be eligible for AFDC, SSI, or an optional 
State supplement except for their institutional status and who are 
eligible for Medicaid under Sec.  435.211.
    (3) Aged, blind, and disabled individuals who are eligible for 
Medicaid, under Sec.  435.231, under a higher income standard than the 
standard used in determining eligibility for SSI or optional State 
supplements.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the higher of--
    (i) The more restrictive income standard established under Sec.  
435.121; or
    (ii) The amount of the medically needy income standard for one 
person established under Sec.  435.811, if the agency provides Medicaid 
under the medically needy coverage option.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;

[[Page 154]]

    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under Sec.  
435.811, if the agency provides Medicaid under the medically needy 
coverage option for a family of the same size.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (5) Continued SSI and SSP benefits. The full amount of SSI and SSP 
benefits that the individual continues to receive under sections 
1611(e)(1) (E) and (G) of the Act.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received, or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses that may be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24884, Apr. 11, 1980, as amended at 48 FR 5735, Feb. 8, 1983; 53 
FR 3596, Feb. 8, 1988; 55 FR 33705, Aug. 17, 1990; 56 FR 8850, 8854, 
Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]



Sec.  435.735  Post-eligibility treatment of income and resources of individuals receiving home and community-based services furnished under a waiver: 
          Application of patient income to the cost of care.

    (a) The agency must reduce its payment for home and community-based 
services provided to an individual specified in paragraph (b) of this 
section, by the amount that remains after deducting the amounts 
specified in paragraph (c) of this section from the individual's income.
    (b) This section applies to individuals who are eligible for 
Medicaid under Sec.  435.217, and are eligible for home and community-
based services furnished under a waiver of State plan requirements 
specified in part 441, subpart G or H of this subchapter.
    (c) In reducing its payment for home and community-based services, 
the agency must deduct the following amounts, in the following order, 
from the individual's total income (including amounts disregarded in 
determining eligibility):
    (1) An amount for the maintenance needs of the individual that the 
State may set at any level, as long as the following conditions are met:
    (i) The deduction amount is based on a reasonable assessment of 
need.

[[Page 155]]

    (ii) The State establishes a maximum deduction amount that will not 
be exceeded for any individual under the waiver.
    (2) For an individual with only a spouse at home, an additional 
amount for the maintenance needs of the spouse. This amount must be 
based on a reasonable assessment of need but must not exceed the higher 
of--
    (i) The more restrictive income standard established under Sec.  
435.121; or
    (ii) The medically needy standard for an individual.
    (3) For an individual with a family at home, an additional amount 
for the maintenance needs of the family. This amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the higher of the need standard for a family of the 
same size used to determine eligibility under the State's approved AFDC 
plan or the medically needy income standard established under Sec.  
435.811 for a family of the same size.
    (4) Amounts for incurred expenses for medical or remedial care that 
are not subject to payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.

[46 FR 48540, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 57 
FR 29155, June 30, 1992; 58 FR 4932, Jan. 19, 1993; 59 FR 37716, July 
25, 1994]



     Subpart I_Specific Eligibility and Post-Eligibility Financial 
                  Requirements for the Medically Needy



Sec.  435.800  Scope.

    This subpart prescribes specific financial requirements for 
determining the eligibility of medically needy individuals under subpart 
D of this part.

[58 FR 4932, Jan. 19, 1993]

                     Medically Needy Income Standard



Sec.  435.811  Medically needy income standard: General requirements.

    (a) Except as provided in paragraph (d)(2) of this section, to 
determine eligibility of medically needy individuals, a Medicaid agency 
must use a single income standard under this subpart that meets the 
requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. Subject to the limitations specified in 
paragraph (e) of this section. The standard may not diminish by an 
increase in the number of persons in the assistance unit. For example, 
if the income level in the standard for an assistance unit of two is set 
at $400, the income level in the standard for an assistance unit of 
three may not be less than $400.
    (c) In States that do not use more restrictive requirements than 
SSI, the income standard must be set at an amount that is no lower than 
the lowest income standards used under the cash assistance programs that 
are related to the State's covered medically needy eligibility group or 
groups of individuals under Sec.  435.301. The amount of the income 
standard is subject to the limitations specified in paragraph (e) of 
this section.
    (d) In States that use more restrictive requirements for aged, 
blind, and disabled individuals than SSI:
    (1) For all individuals except aged, blind, and disabled 
individuals, the income standard must be set in accordance with 
paragraph (c) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy income standard that is more restrictive than the 
single income standard set under paragraph (c) of this section. However, 
the amount of the more restrictive separate standard for aged, blind, or 
disabled individuals must be no lower than the higher of the lowest 
categorically needy income standard currently applied under the

[[Page 156]]

State's more restrictive criteria under Sec.  435.121 or the medically 
needy income standard in effect under the State's Medicaid plan on 
January 1, 1972. The amount of the income standard is subject to the 
limitations specified in paragraph (e) of this section.
    (e) The income standards specified in paragraphs (c) and (d) of this 
section must not exceed the maximum dollar amount of income allowed for 
purposes of FFP under Sec.  435.1007.
    (f) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4932, Jan. 19, 1993]



Sec.  435.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

                   Medically Needy Income Eligibility



Sec.  435.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency may include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec.  435.914. The budget period can begin no earlier than the first 
month in the retroactive period in which the individual received covered 
services. This provision applies to all medically needy individuals 
except in groups for whom criteria more restrictive than that used in 
the SSI program apply.
    (3) If the agency elects to begin the first budget period for the 
medically needy in any month of the 3-month period prior to the date of 
the application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must deduct the 
following amounts from income to determine the individual's countable 
income.
    (1) For individuals under age 21 and caretaker relatives, the agency 
must deduct amounts that would be deducted in determining eligibility 
under the State's AFDC plan.
    (2) For aged, blind, or disabled individuals in States covering all 
SSI recipients, the agency must deduct amounts that would be deducted in 
determining eligibility under SSI. However, the agency must also deduct 
the highest amounts from income that would be deducted in determining 
eligibility for optional State supplements if these supplements are paid 
to all individuals who are receiving SSI or would be eligible for SSI 
except for their income.
    (3) For aged, blind, or disabled individuals in States using income 
requirements more restrictive than SSI, the agency must deduct amounts 
that are no more restrictive than those used under the Medicaid plan on 
January 1, 1972 and no more liberal than those used in determining 
eligibility under SSI or an optional State supplement. However, the 
amounts must be at least the same as those that would be deducted in 
determining eligibility, under Sec.  435.121, of the categorically 
needy.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard under Sec.  435.814, the individual or 
family is eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f), and (g) of this section and deduct those expenses 
in accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g), in determining

[[Page 157]]

incurred medical expenses to be deducted from income, the agency must 
include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed under Sec.  447.51 or Sec.  447.53 of 
this subchapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration, or scope of services.
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g), in determining incurred medical expenses to be deducted 
from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or unpaid, to the 
extent that the expenses have not been deducted previously in 
establishing eligibility;
    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such budget period and any of the 3 preceding months, whether paid or 
unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income in 
establishing eligibility, to the extent that such expenses are unpaid 
and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses to be deducted from 
income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the State and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application (except States using more restrictive 
eligibility criteria under the option in section 1902(f) of the Act must 
deduct incurred expenses regardless of when the expenses were incurred); 
and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section in the

[[Page 158]]

order prescribed under one of the following three options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of expense or service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed limitations on amounts, duration, 
or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance or 
deductible charges, the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.
    (i) Eligibility based on incurred medical expenses. (1) Whether a 
State elects partial or full month coverage, an individual who is 
expected to contribute a portion of his or her income toward the costs 
of institutional care or home and community-based services under 
Sec. Sec.  435.725, 435.726, 435.733, 435.735 or 435.832 is eligible on 
the first day of the applicable budget (spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses under 
Sec. Sec.  435.725, 435.726, 435.733, 435.735 or 435.832 greater than 
the individual's contributable income determined under these sections.
    (2) At the end of the prospective period specified in paragraphs 
(f)(2) and (f)(3) of this section, and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, in 
States that elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, in 
States that elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. To the extent necessary to prevent the transfer of an 
individual's spenddown liability to the Medicaid program, States must 
reduce the amount of provider charges that would otherwise be 
reimbursable under Medicaid.

[59 FR 1672, Jan. 12, 1994]



Sec.  435.832  Post-eligibility treatment of income of institutionalized individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section, from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.

[[Page 159]]

    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income, as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
diability.
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, and disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the highest of--
    (i) The amount of the income standard used to determine eligibility 
for SSI for an individual living in his own home;
    (ii) The amount of the highest income standard, in the appropriate 
category of age, blindness, or disability, used to determine eligibility 
for an optional State supplement for an individual in his own home, if 
the agency provides Medicaid to optional State supplement recipients 
under Sec.  435.230; or
    (iii) The amount of the medically needy income standard for one 
person established under Sec.  435.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (B) The medically needy income standard established under Sec.  
435.811.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance permiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total monthly income for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.

[[Page 160]]

    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24886, Apr. 11, 1980, as amended at 46 FR 47988, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3596, Feb. 8, 1988; 53 FR 5344, Feb. 23, 
1988; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR 4933, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec.  435.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, a 
Medicaid agency must use a single resource standard that meets the 
requirements of this section.
    (b) In States that do not use more restrictive criteria than SSI for 
aged, blind, and disabled individuals, the resource standard must be 
established at an amount that is no lower than the lowest resource 
standard used under the cash assistance programs that relate to the 
State's covered medically needy eligibility group or groups of 
individuals under Sec.  435.301.
    (c) In States using more restrictive requirements than SSI:
    (1) For all individuals except aged, blind, and disabled 
individuals, the resource standard must be set in accordance with 
paragraph (b) of this section; and
    (2) For all aged, blind, and disabled individuals or any combination 
of these groups of individuals, the agency may establish a separate 
single medically needy resource standard that is more restrictive than 
the single resource standard set under paragraph (b) of this section. 
However, the amount of the more restrictive separate standard for aged, 
blind, or disabled individuals must be no lower than the higher of the 
lowest categorically needy resource standard currently applied under the 
State's more restrictive criteria under Sec.  435.121 or the medically 
needy resource standard in effect under the State's Medicaid plan on 
January 1, 1972.
    (d) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource standard for an assistance 
unit of three may not be less than that set for a unit of two.

[58 FR 4933, Jan. 19, 1993]



Sec.  435.843  Medically needy resource standard: State plan requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4933, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec.  435.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must:
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives in Sec.  435.602.
    (b) Deduct the amounts that would be deducted in determining 
resource eligibility for the medically needy group as provided for in 
Sec.  435.601 or under the criteria of States using more restrictive 
criteria than SSI as provided for in Sec.  435.121. In determining the 
amount of an individual's resources for Medicaid eligibility, States 
must count amounts of resources that otherwise would not be counted 
under the conditional eligibility provisions of the SSI or AFDC 
programs.
    (c) Apply the resource standard specified under Sec.  435.840.

[58 FR 4933, Jan. 19, 1993]

[[Page 161]]



Sec. Sec.  435.850-435.852  [Reserved]



      Subpart J_Eligibility in the States and District of Columbia

    Source: 44 FR 17937, Mar. 23, 1979, unless otherwise noted.



Sec.  435.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.

                    General Methods of Administration



Sec.  435.901  Consistency with objectives and statutes.

    The Medicaid agency's standards and methods for determining 
eligibility must be consistent with the objectives of the program and 
with the rights of individuals under 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, and all other relevant provisions 
of Federal and State laws.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec.  435.902  Simplicity of administration.

    The agency's policies and procedures must ensure that eligibility is 
determined in a manner consistent with simplicity of administration and 
the best interests of the applicant or recipient.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec.  435.903  Adherence of local agencies to State plan requirements.

    The agency must--
    (a) Have methods to keep itself currently informed of the adherence 
of local agencies to the State plan provisions and the agency's 
procedures for determining eligibility; and
    (b) Take corrective action to ensure their adherence.

[44 FR 17937, Mar. 23, 1979. Redesignated at 59 FR 48809, Sept. 23, 
1994]



Sec.  435.904  Establishment of outstation locations to process applications for certain low-income eligibility groups.

    (a) State plan requirements. The Medicaid State plan must specify 
that the requirements of this section are met.
    (b) Opportunity to apply. The agency must provide an opportunity for 
the following groups of low-income pregnant women, infants, and children 
under age 19 to apply for Medicaid at outstation locations other than 
AFDC offices:
    (1) The groups of pregnant women or infants with incomes up to 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(IV) of the Act;
    (2) The group of children age 1 up to age 6 with incomes at 133 
percent of the Federal poverty level as specified under section 
1902(a)(10)(A)(i)(VI) of the Act;
    (3) The group of children age 6 up to age 19 born after September 
30, 1983, with incomes up to 100 percent of the Federal poverty level as 
specified under section 1902(a)(10)(A)(i)(VII) of the Act; and
    (4) The groups of pregnant women or infants, children age 1 up to 
age 6, and children age 6 up to age 19, who are not eligible as a 
mandatory group, with incomes up to 185 percent of the Federal poverty 
level as specified under section 1902(a)(10)(A)(ii)(IX) of the Act.
    (c) Outstation locations: general requirements. (1) The agency must 
establish either--
    (i) Outstation locations at each disproportionate share hospital, as 
defined in section 1923(a)(1)(A) of the Act, and each Federally-
qualified health center, as defined in section 1905(1)(2)(B) of the Act, 
participating in the Medicaid program and providing services to 
Medicaid-eligible pregnant women and children; or
    (ii) Other outstation locations, which include at least some, 
disproportionate share hospitals and federally-qualified health centers, 
as specified under an alternative State plan that is submitted to and 
approved by CMS if the following conditions are met:
    (A) The State must demonstrate that the alternative plan for 
outstationing

[[Page 162]]

is equally effective as, or more effective than, a plan that would meet 
the requirements of paragraph (c)(1)(i) of this section in enabling the 
individuals described in paragraph (b) of this section to apply for and 
receive Medicaid; and
    (B) The State must provide assurances that the level of staffing and 
funding committed by the State under the alternative plan equals or 
exceeds the level of staffing and funding under a plan that would meet 
the requirements of establishing the outstation locations at the sites 
specified in paragraph (c)(1)(i) of this section.
    (2) The agency must establish outstation locations at Indian health 
clinics operated by a tribe or tribal organization as these clinics are 
specifically included in the definition of Federally-qualified health 
centers under section 1905(l)(2)(B) of the Act and are also included in 
the definition of rural health clinics under part 491, subpart A of this 
chapter.
    (3) The agency may establish additional outstation locations at any 
other site where potentially eligible pregnant women or children receive 
services--for example, at school-linked service centers and family 
support centers. These additional sites may also include sites other 
than the main outstation location of those Federally-qualified health 
centers or disproportionate share hospitals providing services to 
Medicaid-eligible pregnant women and to children and that operate more 
than one site.
    (4) The agency may, at its option, enter into reciprocal agreements 
with neighboring States to ensure that the groups described in paragraph 
(b) of this section who customarily receive services in a neighboring 
State have the opportunity to apply at outstation locations specified in 
paragraphs (c)(l) and (2) of this section.
    (d) Outstation functions. (1) The agency must provide for the 
receipt and initial processing of Medicaid applications from the 
designated eligibility groups at each outstation location.
    (2) ``Initial processing'' means taking applications, assisting 
applicants in completing the application, providing information and 
referrals, obtaining required documentation to complete processing of 
the application, assuring that the information contained on the 
application form is complete, and conducting any necessary interviews. 
It does not include evaluating the information contained on the 
application and the supporting documentation nor making a determination 
of eligibility or ineligibility.
    (3) The agency may, at its option, allow appropriate State 
eligibility workers assigned to outstation locations to evaluate the 
information contained on the application and the supporting 
documentation and make a determination of eligibility if the workers are 
authorized to determine eligibility for the agency which determines 
Medicaid eligibility under Sec.  431.10 of this subchapter.
    (e) Staffing. (1) Except for outstation locations that are 
infrequently used by the low-income eligibility groups, the State agency 
must have staff available at each outstation location during the regular 
office operating hours of the State Medicaid agency to accept 
applications and to assist applicants with the application process.
    (2) The agency may station staff at one outstation location or 
rotate staff among several locations as workload and staffing 
availability dictate.
    (3) The agency may use State employees, provider or contractor 
employees, or volunteers who have been properly trained to staff 
outstation locations under the following conditions:
    (i) State outstation intake staff may perform all eligibility 
processing functions, including the eligibility determination, if the 
staff is authorized to do so at the regular Medicaid intake office.
    (ii) Provider or contractor employees and volunteers may perform 
only initial processing functions as defined in paragraph (d)(2) of this 
section.
    (4) Provider and contractor employees and volunteers are subject to 
the confidentiality of information rules specified in part 431, subpart 
F, of this subchapter, to the prohibition against reassignment of 
provider claims specified in Sec.  447.10 of this subchapter, and to all 
other State or Federal laws concerning conflicts of interest.

[[Page 163]]

    (5) At locations that are infrequently used by the designated low-
income eligibility groups, the State agency may use volunteers, provider 
or contractor employees, or its own eligibility staff, or telephone 
assistance.
    (i) The agency must display a notice in a prominent place at the 
outstation location advising potential applicants of when outstation 
intake workers will be available.
    (ii) The notice must include a telephone number that applicants may 
call for assistance.
    (iii) The agency must comply with Federal and State laws and 
regulations governing the provision of adequate notice to persons who 
are blind or deaf or who are unable to read or understand the English 
language.

[59 FR 48809, Sept. 23, 1994]

                              Applications



Sec.  435.905  Availability of program information.

    (a) The agency must furnish the following information in written 
form, and orally as appropriate, to all applicants and to all other 
individuals who request it:
    (1) The eligibility requirements.
    (2) Available Medicaid services.
    (3) The rights and responsibilities of applicants and recipients.
    (b) The agency must publish in quantity and make available bulletins 
or pamphlets that explain the rules governing eligibility and appeals in 
simple and understandable terms.

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980]



Sec.  435.906  Opportunity to apply.

    The agency must afford an individual wishing to do so the 
opportunity to apply for Medicaid without delay.



Sec.  435.907  Written application.

    (a) The agency must require a written application from the 
applicant, an authorized representative, or, if the applicant is 
incompetent or incapacitated, someone acting responsibly for the 
applicant.
    (b) Subject to the conditions specified in paragraph (c) of this 
section, the application must be on a form prescribed by the agency and 
signed under a penalty of perjury.
    (c) The application form used at outstation locations for low-income 
pregnant women, infants, and children specified in Sec.  435.904 must 
not be the application form used to apply for AFDC. The application form 
(including any computerized application form) for these designated 
eligibility groups may be--
    (1) A Medicaid-only form prescribed by the agency specifically for 
the designated eligibility groups;
    (2) An existing Medicaid-only application; or
    (3) A multiple-program application that contains clearly 
identifiable Medicaid-only sections or parts.

[59 FR 48810, Sept. 23, 1994]



Sec.  435.908  Assistance with application.

    The agency must allow an individual or individuals of the 
applicant's choice to accompany, assist, and represent the applicant in 
the application process or a redetermination of eligibility.



Sec.  435.909  Automatic entitlement to Medicaid following a determination of eligibility under other programs.

    The agency must not require a separate application for Medicaid from 
an individual, if--
    (a) The individual receives AFDC; or
    (b) The agency has an agreement with the Social Security 
Administration (SSA) under section 1634 of the Act for determining 
Medicaid eligibility; and--
    (1) The individual receives SSI;
    (2) The individual receives a mandatory State supplement under 
either a federally-administered or State-administered program; or
    (3) The individual receives an optional State supplement and the 
agency provides Medicaid to recipients of optional supplements under 
Sec.  435.230.



Sec.  435.910  Use of social security number.

    (a) The agency must require, as a condition of eligibility, that 
each individual (including children) requesting Medicaid services 
furnish each of his or her social security numbers (SSNs).
    (b) The agency must advise the applicant of--

[[Page 164]]

    (1) [Reserved]
    (2) The statute or other authority under which the agency is 
requesting the applicant's SSN; and
    (3) The uses the agency will make of each SSN, including its use for 
verifying income, eligibility, and amount of medical assistance payments 
under Sec. Sec.  435.940 through 435.960.
    (c)-(d) [Reserved]
    (e) If an applicant cannot recall his SSN or SSNs or has not been 
issued a SSN the agency must--
    (1) Assist the applicant in completing an application for an SSN;
    (2) Obtain evidence required under SSA regulations to establish the 
age, the citizenship or alien status, and the true identity of the 
applicant; and
    (3) Either send the application to SSA or, if there is evidence that 
the applicant has previously been issued a SSN, request SSA to furnish 
the number.
    (f) The agency must not deny or delay services to an otherwise 
eligible applicant pending issuance or verification of the individual's 
SSN by SSA.
    (g) The agency must verify each SSN of each applicant and recipient 
with SSA, as prescribed by the Commissioner, to insure that each SSN 
furnished was issued to that individual, and to determine whether any 
others were issued.
    (h) Exception. (1) A State may give a Medicaid identification number 
to an applicant who, because of well established religious objections, 
refuses to obtain a Social Security Number (SSN). The identification 
number may be either an SSN obtained by the State on the applicant's 
behalf or another unique identifier.
    (2) The term well established religious objections means that the 
applicant--
    (i) Is a member of a recognized religious sect or division of the 
sect; and
    (ii) Adheres to the tenets or teachings of the sect or division of 
the sect and for that reason is conscientiously opposed to applying for 
or using a national identification number.
    (3) A State may use the Medicaid identification number established 
by the State to the same extent as an SSN is used for purposes described 
in paragraph (b)(3) of this section.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986; 66 
FR 2667, Jan. 11, 2001]

                  Determination of Medicaid Eligibility



Sec.  435.911  Timely determination of eligibility.

    (a) The agency must establish time standards for determining 
eligibility and inform the applicant of what they are. These standards 
may not exceed--
    (1) Ninety days for applicants who apply for Medicaid on the basis 
of disability; and
    (2) Forty-five days for all other applicants.
    (b) The time standards must cover the period from the date of 
application to the date the agency mails notice of its decision to the 
applicant.
    (c) The agency must determine eligibility within the standards 
except in unusual circumstances, for example--
    (1) When the agency cannot reach a decision because the applicant or 
an examining physician delays or fails to take a required action, or
    (2) When there is an administrative or other emergency beyond the 
agency's control.
    (d) The agency must document the reasons for delay in the 
applicant's case record.
    (e) The agency must not use the time standards--
    (1) As a waiting period before determining eligibility; or
    (2) As a reason for denying eligibility (because it has not 
determined eligibility within the time standards).

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
54 FR 50762, Dec. 11, 1989]



Sec.  435.912  Notice of agency's decision concerning eligibility.

    The agency must send each applicant a written notice of the agency's 
decision on his application, and, if eligibility is denied, the reasons 
for the action, the specific regulation supporting the action, and an 
explanation of his right to request a hearing. (See subpart

[[Page 165]]

E of part 431 of this subchapter for rules on hearings.)

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]



Sec.  435.913  Case documentation.

    (a) The agency must include in each applicant's case record facts to 
support the agency's decision on his application.
    (b) The agency must dispose of each application by a finding of 
eligibility or ineligibility, unless--
    (1) There is an entry in the case record that the applicant 
voluntarily withdrew the application, and that the agency sent a notice 
confirming his decision;
    (2) There is a supporting entry in the case record that the 
applicant has died; or
    (3) There is a supporting entry in the case record that the 
applicant cannot be located.



Sec.  435.914  Effective date.

    (a) The agency must make eligibility for Medicaid effective no later 
than the third month before the month of application if the individual--
    (1) Received Medicaid services, at any time during that period, of a 
type covered under the plan; and
    (2) Would have been eligible for Medicaid at the time he received 
the services if he had applied (or someone had applied for him), 
regardless of whether the individual is alive when application for 
Medicaid is made.
    (b) The agency may make eligiblity for Medicaid effective on the 
first day of a month if an individual was eligible at any time during 
that month.
    (c) The State plan must specify the date on which eligibility will 
be made effective.

                Redeterminations of Medicaid Eligibility



Sec.  435.916  Periodic redeterminations of Medicaid eligibility.

    (a) The agency must redetermine the eligibility of Medicaid 
recipients, with respect to circumstances that may change, at least 
every 12 months, however--
    (1) The agency may consider blindness as continuing until the review 
physician under Sec.  435.531 determines that a recipient's vision has 
improved beyond the definition of blindness contained in the plan; and
    (2) The agency may consider disability as continuing until the 
review team under Sec.  435.541 determines that a recipient's disability 
no longer meets the definition of disability contained in the plan.
    (b) Procedures for reporting changes. The agency must have 
procedures designed to ensure that recipients make timely and accurate 
reports of any change in circumstances that may affect their 
eligibility.
    (c) Agency action on information about changes. (1) The agency must 
promptly redetermine eligibility when it receives information about 
changes in a recipient's circumstances that may affect his eligibility.
    (2) If the agency has information about anticipated changes in a 
recipient's circumstances, it must redetermine eligibility at the 
appropriate time based on those changes.



Sec.  435.919  Timely and adequate notice concerning adverse actions.

    (a) The agency must give recipients timely and adequate notice of 
proposed action to terminate, discontinue, or suspend their eligibility 
or to reduce or discontinue services they may receive under Medicaid.
    (b) The notice must meet the requirements of subpart E of part 431 
of this subchapter.

[44 FR 17937, Mar. 23, 1979, as amended at 45 FR 24887, Apr. 11, 1980; 
51 FR 7211, Feb. 28, 1986]



Sec.  435.920  Verification of SSNs.

    (a) In redetermining eligibility, the agency must review case 
records to determine whether they contain the recipient's SSN or, in the 
case of families, each family member's SSN.
    (b) If the case record does not contain the required SSNs, the 
agency must require the recipient to furnish them and meet other 
requirements of Sec.  435.910.
    (c) For any recipient whose SSN was established as part of the case 
record without evidence required under the SSA regulations as to age, 
citizenship,

[[Page 166]]

alien status, or true identity, the agency must obtain verification of 
these factors in accordance with Sec.  435.910.

[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]

                           Furnishing Medicaid



Sec.  435.930  Furnishing Medicaid.

    The agency must--
    (a) Furnish Medicaid promptly to recipients without any delay caused 
by the agency's administrative procedures;
    (b) Continue to furnish Medicaid regularly to all eligible 
individuals until they are found to be ineligible; and
    (c) Make arrangements to assist applicants and recipients to get 
emergency medical care whenever needed, 24 hours a day and 7 days a 
week.

            Income and Eligibility Verification Requirements

    Source: Sections 435.940 through 935.965 appear at 51 FR 7211, Feb. 
28, 1986, unless otherwise noted.



Sec.  435.940  Basis and scope.

    (a) Section 1137 of the Act requires certain Federally-funded, 
State-administered public assistance programs to establish procedures 
for obtaining, using and verifying information relevant to 
determinations as to eligibility and the amount of assistance. Section 
1902(a)(4) of the Act allows the Secretary to prescribe methods of 
administration found necessary for the proper and efficient operation of 
a State's Medicaid plan.
    (b) The agency must maintain information, as enumerated in Sec.  
435.960, to exchange for the purpose of enabling any agency or program 
referenced in Sec.  435.945(b) to verify income, eligibility of, and the 
amount of assistance for its applicants and recipients.



Sec.  435.945  General requirements.

    (a) The agency must request and use information timely in accordance 
with Sec. Sec.  435.948, 435.952, and 435.953 of this subpart for 
verifying Medicaid eligibility and the amount of medical assistance 
payments.
    (b) The agency must furnish timely to other agencies in the State 
and in other States and to Federal programs income, eligibility and 
medical assistance payment information for verifying eligibility or 
benefit amounts for the programs listed in Sec.  435.948(a)(6) of this 
subpart. In addition, the agency must furnish income and eligibility 
information to--
    (1) The child support enforcement program under part D of title IV 
of the Act; and
    (2) SSA for old age, survivors and disability benefits under title 
II and for SSI benefits under title XVI of the Act.
    (c) The agency must, upon request, reimburse another agency listed 
in Sec.  435.948(a)(6) of this subpart or paragraph (b) of this section 
for reasonable costs incurred in furnishing information, including new 
developmental costs associated with furnishing the information to 
another agency.
    (d) The agency must inform all applicants in writing at the time of 
application that the agency will obtain and use information available to 
it under section 1137 of the Act to verify income, eligibility and the 
correct amount of medical assistance payments. The agency must give each 
recipient the same notice when it redetermines eligibility. The 
requirements in this paragraph do not apply in the case of applicants or 
recipients whose eligibility is determined by AFDC or by SSA under 
section 1634 of the Act.
    (e) The agency must report as the Secretary prescribes for the 
purposes of determining compliance with Sec. Sec.  431.305, 431.800, 
435.910, 435.919 and 435.940 through 435.965 of this chapter and of 
evaluating the effectiveness of the income and eligibility verification 
system.
    (f) The agency must execute written agreements with other agencies 
before releasing data to or requesting data from, those agencies. The 
agreements, at a minimum, must specify:
    (1) The information to be exchanged;
    (2) The titles of all agency officials with the authority to request 
income and eligibility information;
    (3) The methods, including the formats to be used, and the timing 
for requesting and providing the information (see also paragraph (f)(6) 
of this section);

[[Page 167]]

    (4) The safeguards limiting the use and disclosure of the 
information as required by Federal or State law or regulations;
    (5) The method, if any, the agency will use to reimburse reasonable 
costs of furnishing the information; and
    (6) In the case of an agreement between a SWICA or a UC agency and 
the Medicaid agency, that the Medicaid agency will obtain information on 
applicants at least twice monthly; and
    (7) In the case of an agreement between any Federal agency and the 
Medicaid agency for data on individuals, provisions relating to--
    (i) Purpose and legal authority;
    (ii) Justification and expected results;
    (iii) Records description (including specific identification of the 
system of records, the number of records, what data elements will be 
included in the match, and projected starting and completion dates);
    (iv) Notice procedures;
    (v) Verification procedures;
    (vi) Disposition of matched items;
    (vii) Security procedures;
    (viii) Records usage, duplication and redisclosure restrictions;
    (ix) Records accuracy assessments; and
    (x) Access by the Comptroller General.
    (g) SWICA that does not use the quarterly wages reported by 
employers as required by Section 1137 of the Act of unemployment 
insurance benefit calculations must maintain wage information that:
    (1) Contains the SSN, full name, wages earned for the period of the 
report, and an identifier of the employer;
    (2) Includes all employers covered by the States' UC law;
    (3) Accumulates earnings reported by employers for no longer periods 
than calendar quarters;
    (4) Is reported to the SWICA within 30 days after the end of the 
quarter;
    (5) Is machine readable; and
    (6) Is accessible to agencies in other States that have executed 
agreements as required in Sec.  435.945(f) of this chapter and to SSA 
for use in making eligibility or benefit determinations under Title II 
or XVI of the Act.

[51 FR 7211, Feb. 28, 1986, as amended at 52 FR 5977, Feb. 27, 1987; 54 
FR 8741, Mar. 2, 1989; 57 FR 46097, Oct. 7, 1992; 59 FR 4254, Jan. 31, 
1994]



Sec.  435.948  Requesting information.

    (a) Except as provided in paragraphs (d), (e), and (f) of this 
section, the agency must request information from the sources specified 
in this paragraph for verifying Medicaid eligibility and the correct 
amount of medical assistance payments for each applicant (unless 
obviously ineligible on the face of his or her application) and 
recipient. The agency must request--
    (1) State wage information maintained by the SWICA during the 
application period and at least on a quarterly basis;
    (2) Information about net earnings from self-employment, wage and 
payment of retirement income, maintained by SSA and available under 
Section 6103(l)(7)(A) of the Internal Revenue Code of 1954, for 
applicants during the application period and for recipients for whom the 
information has not previously been requested;
    (3) Information about benefit and other eligibility related 
information available from SSA under titles II and XVI of the Social 
Security Act for applicants during the application period and for 
recipients for whom the information has not previously been requested;
    (4) Unearned income information from the Internal Revenue Service 
available under Section 6103(l)(7)(B) of the Internal Revenue Code of 
1954, during the application period and at least yearly;
    (5) Unemployment compensation information maintained by the agency 
administering State unemployment compensation laws (under the provisions 
of section 3304 of the Internal Revenue Code and section 303 of the Act) 
as follows:
    (i) For an applicant, during the application period and at least for 
each of the three subsequent months;
    (ii) For a recipient that reports a loss of employment, at the time 
the recipient reports that loss and for at least each of the three 
subsequent months.

[[Page 168]]

    (iii) For an applicant or a recipient who is found to be receiving 
unemployment compensation benefits, at least for each month until the 
benefits are reported to be exhausted.
    (6) Any additional income, resource, or eligibility information 
relevant to determinations concerning eligibility or correct amount of 
medical assistance payments available from agencies in the State or 
other States administering the following programs as provided in the 
agency's State plan:
    (i) AFDC;
    (ii) Medicaid;
    (iii) State-administered supplementary payment programs under 
Section 1616(a) of the Act;
    (iv) SWICA;
    (v) Unemployment compensation;
    (vi) Food stamps; and
    (vii) Any State program administered under a plan approved under 
Title I (assistance to the aged), X (aid to the blind), XIV (aid to the 
permanently and totally disabled), or XVI (aid to the aged, blind, and 
disabled in Puerto Rico, Guam, and the Virgin Islands) of the Act.
    (b) The agency must request information on applicants from the 
sources listed in paragraph (a)(1) through (a)(5) of this section at the 
first opportunity provided by these sources following the receipt of the 
application. If an applicant cannot provide an SSN at application, the 
agency must request the information at the next available opportunity 
after receiving the SSN.
    (c) The agency must request the information required in paragraph 
(a) of this section by SSN, using each SSN furnished by the individual 
or received through verification.
    (d) Exception: In cases where the individual is institutionalized, 
the agency needs to obtain and use information from SWICA only during 
the application period and on a yearly basis, and from unemployment 
compensation agencies only during the application period. An individual 
is institutionalized for purposes of this section when he or she is 
required to apply his or her income to the cost of medical care as 
required by Sec. Sec.  435.725, 435.733, and 435.832.
    (e) Exception: Alternate sources--(1) The Secretary may, upon 
application from a State agency, permit an agency to request and use 
income information from a source or sources alternative to those listed 
in paragraph (a) of this section. The agency must demonstrate to the 
Secretary that the alternative source(s) is as timely, complete and 
useful for verifying eligibility and benefit amounts. The Secretary will 
consult with the Secretary of Agriculture and the Secretary of Labor 
before determining whether an agency may use an alternate source.
    (2) The agency must continue to meet the requirements of this 
section unless the Secretary has approved the request.
    (f) Exception: If the agency administering the AFDC program, or SSA 
under section 1634 of the Act, determines the eligibility of an 
applicant or recipient, the requirements of this section do not apply to 
that applicant or recipient.



Sec.  435.952  Use of information.

    (a) Except as provided under Sec.  435.953, the agency must review 
and compare against the case file all information received under 
Sec. Sec.  435.940 through 435.960 to determine whether it affects the 
applicant's or recipient's eligibility or amount of medical assistance 
payment. The agency also must independently verify the information if 
required by Sec.  435.955 or if determined appropriate by agency 
experience.
    (b) For applicants, if the information is received during the 
application period, it must be used, to the extent possible, making 
eligibility determinations. If it is received after the eligibility 
determination, it must be used as specified for recipients in paragraphs 
(c) and (d) of this section.
    (c) Except as specified in Sec.  435.953 of this subpart and 
paragraph (d) of this section, for recipients, the agency must, within 
45 days of receipt of an item of information, request verification (if 
appropriate), determine whether the information affects eligibility or 
the amount of medical assistance payment, and either initiate a notice 
of case action to advise the recipient of any adverse action the agency 
intends to take or make an entry in the casefile that no further action 
is necessary.

[[Page 169]]

    (d) Subject to paragraph (e) of this section, if the agency does not 
receive requested third party verification within the 45-day period 
after receipt of information, the agency may determine whether the 
information affects eligibility or correct amount of medical assistance 
payment after the 45-day period. However, the agency must make any 
delayed determinations permitted under this paragraph--
    (1) Promptly, as required by Sec.  435.916, if the verification is 
received before the next redetermination; or
    (2) In conjunction with the next redetermination if no verification 
is received before that redetermination.
    (e) The number of determinations delayed beyond 45 days from receipt 
of an item of information (as permitted by paragraph (d) of this 
section) must not exceed twenty percent of the number of items of 
information for which verification was requested.
    (f) The agency must use appropriate procedures to monitor the 
timeliness requirements of this section.
    (g) The requirements of this section do not relieve the agency of 
its responsibility for determinations of erroneous payments or the 
agency's liability for those erroneous payments, as defined in subpart P 
of part 431 of this chapter.

[51 FR 7211, Feb. 28, 1986, as amended at 53 FR 6648, March 2, 1988; 54 
FR 8741, Mar. 2, 1989; 59 FR 4255, Jan. 31, 1994]



Sec.  435.953  Identifying items of information to use.

    (a) With respect to information received on recipients under 
Sec. Sec.  435.940 through 435.960, the agency may either review and 
compare against the case file all items of information received or it 
may identify (target) separately for each data source the information 
items that are most likely to be most productive in identifying and 
preventing ineligibility and incorrect payments.
    (b) An agency that wishes to exclude categories of information items 
must submit for the Secretary's approval a follow-up plan describing the 
categories that it proposes to exclude. For each category, the agency 
must provide a reasonable justification that follow-up is not cost-
effective; a formal cost/benefit analysis is not required.
    (c) If an agency receives an item of unemployment compensation 
information from the Internal Revenue Service or earnings information 
from SSA that duplicates an item of information previously received from 
another source and followed up, the agency may exclude that information 
item without justification.
    (d) An agency may submit a follow-up plan or alter its plan at any 
time by notifying the Secretary and submitting the necessary 
justification. The Secretary approves or disapproves categories of items 
to be excluded under the plan within 60 days of its submission. The 
categories approved by the Secretary constitute an approved agency 
follow-up plan for IEVS.

[54 FR 8742, Mar. 2, 1989]



Sec.  435.955  Additional requirements regarding information released by a Federal agency.

    (a) Unless waived under paragraph (d) of this section, based on 
information received from a computerized data match in which information 
on an individual is provided to the agency by a Federal agency, the 
agency may not terminate, deny, suspend, or reduce medical assistance to 
that individual until it has taken appropriate steps to verify the 
information independently. The agency must independently verify 
information relating to--
    (1) The amount of the income and resource that generated the income 
involved;
    (2) Whether the applicant or recipient actually has (or had) access 
to the resource or income (or both) for his or her own use;
    (3) The period or periods when the individual actually has (or had) 
access to the resource or income or both.
    (b) The agency must verify the information by either
    (1) Requesting the entity from which the information originally came 
to verify the fact and amount of income or resource; or
    (2) Sending the applicant or recipient a letter informing that 
individual of the information received and asking him or her to respond 
within a specified period. The letter must clearly explain the 
information the agency has

[[Page 170]]

and its possible relevance to the individual's past or future 
eligibility, and be as neutral in tone as possible.
    (c)(1) If the original source of the income or resource or the 
applicant or recipient verifies the information, and the agency intends 
to reduce, suspend, terminate or deny medical assistance based on the 
information, the agency must send the applicant or recipient a notice of 
the action to be taken and include information on the right to appeal 
and opportunity for a hearing under Sec. Sec.  431.200 through 431.246 
of this chapter (see also Sec.  435.912 and Sec.  435.919).
    (2) If the applicant or recipient fails to respond after reasonable 
attempts to contact him or her, the agency must proceed to deny, 
terminate, reduce or suspend medical assistance based on the applicant's 
or recipient's failure to cooperate.
    (3) If the applicant or recipient disputes the information, the 
agency must obtain evidence (from the source of the data, applicant, 
recipient, or otherwise) to substantiate any negative case action it may 
take.
    (d) The independent verification requirement concerning a category 
of data received from a Federal benefit agency may be waived if the 
Federal agency's Data Integrity Board approves the waiver. The Federal 
benefit agency involved in the data exchange will develop the request by 
petitioning its Data Integrity Board for a waiver of independent 
verification by a Medicaid State agency. The State agency must furnish 
the Federal agency with any information it needs to seek the Data 
Integrity Board's approval of the waiver.
    (e) In accordance with the Federal agency's procedures, the agency 
must provide data on the costs and benefits of the matching program to 
the Federal agency from which it receives information on individuals.
    (f) In accordance with the Federal agency's procedures, the agency 
must certify to the Federal agency that it will not take adverse action 
against an individual until the information has been independently 
verified and until 10 days (or sooner if permitted by Sec.  431.213 or 
Sec.  431.214) after the individual has been notified of the findings 
and given an opportunity to contest.
    (g) In accordance with the Federal agency's procedures for renewals 
of matching programs, the agency must certify to the Federal agency that 
the terms of the agreement have been followed.

[59 FR 4255, Jan. 31, 1994]



Sec.  435.960  Standardized formats for furnishing and obtaining information to verifying income and eligibility.

    (a) The agency must maintain for all applicants and recipients 
within an agency file the SSN, surname and other data elements in a 
format that at a minimum allows the agency to furnish and to obtain 
eligibility and income information from the agencies or programs 
referenced in Sec.  435.945(b) and Sec.  435.948(a).
    (b) The format to be used will be prescribed by--
    (1) CMS when the agency furnishes information to, or requests 
information from, any Federal or State agency, except SSA and the 
Internal Revenue Service as specified in paragraphs (b) (2) and (3), 
respectively;
    (2) The Commissioner of Social Security when the agency requests 
information from SSA; and
    (3) The Commissioner of Internal Revenue when the agency requests 
information from the Internal Revenue Service.

[52 FR 5977, Feb. 27, 1987]



Sec.  435.965  Delay of effective date.

    (a) If the agency submits, by May 29, 1986, a plan describing a good 
faith effort to come into compliance with the requirements of section 
1137 of the Act and of Sec. Sec.  435.910 and 435.940 through 435.960 of 
this subpart, the Secretary may, after consultation with the Secretary 
of Agriculture and the Secretary of Labor, grant a delay in the 
effective date of Sec. Sec.  435.910 and 435.940 through 435.960, but 
not beyond September 30, 1986.
    (b) The Secretary may not grant a delay of the effective date of 
section 1137(c) of the Act, which is implemented by Sec.  435.955 (a) 
and (c). (The provisions of these statutory and regulation sections 
require the agency to follow certain procedures before taking

[[Page 171]]

any adverse actions based on information from the Internal Revenue 
Service concerning unearned income.)



                Subpart K_Federal Financial Participation



Sec.  435.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP in Expenditures for Determining Eligibility and Providing Services



Sec.  435.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45204, Sept. 29, 1978, as amended at 66 FR 2667, Jan. 11, 2001]



Sec.  435.1002  FFP for services.

    (a) Except for the limitations and conditions specified in 
Sec. Sec.  435.1007, 35.1008, 435.1009, and 438.814 of this chapter, FFP 
is available in expenditures for Medicaid services for all recipients 
whose coverage is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
recipients who were eligible for Medicaid in the month in which the 
medical care or services were provided except that, for recipients who 
establish eligibility for Medicaid by deducting incurred medical 
expenses from income, FFP is not available for expenses that are the 
recipient's liability. (See Sec. Sec.  435.914 and 436.901 of this 
subchapter for regulations on retroactive eligibility for Medicaid.)
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
66 FR 2667, Jan. 11, 2001; 67 FR 41095, June 14, 2002; 71 FR 39225, July 
12, 2006]



Sec.  435.1003  FFP for redeterminations.

    (a) If the Social Security Administration (SSA) notifies an agency 
that a recipient has been determined ineligible for SSI, FFP is 
available in Medicaid expenditures for services to the recipient as 
follows:
    (1) If the agency receives the SSA notice by the 10th day of the 
month, FFP is available under this section only through the end of the 
month unless the recipient requests a hearing under subpart E, part 431 
of this subchapter.
    (2) If the agency receives the SSA notice after the 10th day of the 
month, FFP is available only through the end of the following month, 
unless the recipient requests a hearing under subpart E, part 431 of 
this subchapter.
    (3) If a recipient requests a hearing, FFP is available as specified 
in subpart E, part 431 of this subchapter.
    (b) The agency must take prompt action to determine eligibility 
after receiving the SSA notice.
    (c) When a change in Federal law affects the eligibility of 
substantial numbers of Medicaid recipients, the Secretary may waive the 
otherwise applicable FFP requirements and redetermination time limits of 
this section, in order to provide a reasonable time to complete such 
redeterminations. The Secretary will designate an additional amount of 
time beyond that allowed

[[Page 172]]

under paragraphs (a) and (b) of this section, within which FFP will be 
available, to perform large numbers of redeterminations arising from a 
change in Federal law.

[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979; 
62 FR 1685, Jan. 13, 1997]



Sec.  435.1004  Recipients overcoming certain conditions of eligibility.

    (a) FFP is available, as specified in paragraph (b) of this section, 
in expenditures for services provided to recipients who are overcoming 
certain eligibility conditions, including blindness, disability, 
continued absence or incapacity of a parent, or unemployment of a 
parent.
    (b) FFP is available for a period not to exceed--
    (1) The period during which a recipient of AFDC, SSI or an optional 
State supplement continues to receive cash payments while these 
conditions are being overcome; or
    (2) For recipients eligible for Medicaid only and recipients of 
AFDC, SSI or an optional State supplement who do not continue to receive 
cash payments, the second month following the month in which the 
recipient's Medicaid eligibility would have been terminated.

[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]

                           Limitations on FFP



Sec.  435.1005  Recipients in institutions eligible under a special income standard.

    For recipients in institutions whose Medicaid eligibility is based 
on a special income standard established under Sec.  435.236, FFP is 
available in expenditures for services provided to those individuals 
only if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual in his own 
home who has no income or resources.

[58 FR 4933, Jan. 19, 1993]



Sec.  435.1006  Recipients of optional State supplements only.

    FFP is available in expenditures for services provided to 
individuals receiving optional State supplements but not receiving SSI, 
if their income before deductions, as determined by SSI budget 
methodology, does not exceed 300 percent of the SSI benefit amount 
payable under section 1611(b)(1) of the Act to an individual who has no 
income and resources.

[45 FR 24887, Apr. 11, 1980]



Sec.  435.1007  Categorically needy, medically needy, and qualified Medicare beneficiaries.

    (a) FFP is available in expenditures for covered services provided 
to categorically needy recipients, medically needy recipients, and 
qualified Medicare beneficiaries, subject to the restrictions contained 
in subpart K of this part and as provided in paragraphs (b) and (e) of 
this section. However, the restrictions listed in paragraphs (b) and (e) 
of this section do not apply to expenditures for medical assistance made 
on behalf of qualified Medicare beneficiaries under section 1905(p) of 
the Act; individuals receiving Medicaid as categorically needy under 
section 1902(a)(10)(A)(i) (I), (II), (III), (IV), (V), (VI), or (VII) 
and section 1902(a)(10)(A)(ii) (I), (IX), or (X) and section 1905(u) of 
the Act; individuals who are eligible to receive benefits (or would be 
eligible for those benefits if they were not in a medical institution); 
and any individuals deemed to be members of the groups identified in 
this sentence.
    (b) Except as provided in paragraphs (c) and (d) of this section, 
FFP is not available in State expenditures for individuals (including 
the medically needy) whose annual income after deductions specified in 
Sec.  435.831(a) and (c) exceeds the following amounts, rounded to the 
next higher multiple of $100.
    (c) In the case of a family consisting only of two individuals, both 
of whom are adults and at least one of whom is aged, blind, or disabled, 
the State of California may use the amount of the AFDC payment most 
frequently made to a family of one adult and two children for purposes 
of computing the

[[Page 173]]

133\1/3\ percent limitation (under the authority of section 4106 of 
Public Law 100-230).
    (d) For purposes of paragraph (b)(1) of this section, a State that 
as of June 1, 1989, has in its State plan (as defined in section 
2373(c)(5) of Public Law 98-369 as amended by section 9 of Public Law 
100-93) an amount for individuals that was reasonably related to 133\1/
3\ percent of the highest amount of AFDC which would ordinarily be paid 
to a family of two without income or resources may use an amount based 
upon a reasonable relationship to such an AFDC standard for a family of 
two.
    (e) FFP is not available in expenditures for services provided to 
categorically needy and medically needy recipients subject to the FFP 
limits if their annual income, after the cash assistance income 
deductions and any income disregards in the State plan authorized under 
section 1902(r)(2) of the Act are applied, exceeds the 133\1/3\ percent 
limitation described under paragraphs (b), (c), and (d) of this section.
    (f) A State may use the less restrictive income methodologies 
included under its State plan as authorized under Sec.  435.601 in 
determining whether a family's income exceeds the limitation described 
in paragraph (b) of this section.

[58 FR 4933, Jan. 19, 1993, as amended at 66 FR 2321, 2667, Jan. 11, 
2001]



Sec.  435.1008  FFP in expenditures for medical assistance for individuals who have declared United States citizenship or nationality under section 1137(d) of 
          the Act and with respect to whom the State has not documented 
          citizenship and identity.

    Except for individuals described in Sec.  435.406(a)(1)(v), FFP will 
not be available to a State with respect to expenditures for medical 
assistance furnished to individuals unless the State has obtained 
satisfactory documentary evidence of citizenship or national status, as 
described in Sec.  435.407 that complies with the requirements of 
section 1903(x) of the Act.

[72 FR 38694, July 13, 2007]



Sec.  435.1009  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec.  435.1010; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services under Sec.  440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
tuberculosis or mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not considered to be a patient in 
that institution. However, such an individual who is under age 22 and 
has been receiving inpatient psychiatric services under Sec.  440.160 of 
this subchapter is considered to be a patient in the institution until 
he is unconditionally released or, if earlier, the date he reaches age 
22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13199, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985. Redesignated and amended at 71 FR 39225, 
July 12, 2006]



Sec.  435.1010  Definitions relating to institutional status.

    For purposes of FFP, the following definitions apply:
    Active treatment in intermediate care facilities for the mentally 
retarded means treatment that meets the requirements specified in the 
standard concerning active treatment for intermediate care facilities 
for persons with mental retardation under Sec.  483.440(a) of this 
subchapter.
    Child-care institution means a nonprofit private child-care 
institution, or a public child-care institution that accommodates no 
more than twenty-five children, which is licensed by the State in which 
it is situated, or has been approved by the agency of the State 
responsible for licensing or approval of institutions of this type, as 
meeting the standards established for licensing.

[[Page 174]]

The term does not include detention facilities, forestry camps, training 
schools or any other facility operated primarily for the detention of 
children who are determined to be delinquent.
    In an institution refers to an individual who is admitted to live 
there and receive treatment or services provided there that are 
appropriate to his requirements.
    Inmate of a public institution means a person who is living in a 
public institution. An individual is not considered an inmate if--
    (a) He is in a public educational or vocational training institution 
for purposes of securing education or vocational training; or
    (b) He is in a public institution for a temporary period pending 
other arrangements appropriate to his needs.
    Inpatient means a patient who has been admitted to a medical 
institution as an inpatient on recommendation of a physician or dentist 
and who--
    (1) Receives room, board and professional services in the 
institution for a 24 hour period or longer, or
    (2) Is expected by the institution to receive room, board and 
professional services in the institution for a 24 hour period or longer 
even though it later develops that the patient dies, is discharged or is 
transferred to another facility and does not actually stay in the 
institution for 24 hours.
    Institution means an establishment that furnishes (in single or 
multiple facilities) food, shelter, and some treatment or services to 
four or more persons unrelated to the proprietor.
    Institution for mental diseases means a hospital, nursing facility, 
or other institution of more than 16 beds that is primarily engaged in 
providing diagnosis, treatment or care of persons with mental diseases, 
including medical attention, nursing care and related services. Whether 
an institution is an institution for mental diseases is determined by 
its overall character as that of a facility established and maintained 
primarily for the care and treatment of individuals with mental 
diseases, whether or not it is licensed as such. An institution for the 
mentally retarded is not an institution for mental diseases.
    Institution for the mentally retarded or persons with related 
conditions means an institution (or distinct part of an institution) 
that--
    (a) Is primarily for the diagnosis, treatment, or rehabilitation of 
the mentally retarded or persons with related conditions; and
    (b) Provides, in a protected residential setting, ongoing 
evaluation, planning, 24-hour supervision, coordination, and integration 
of health or rehabilitative services to help each individual function at 
his greatest ability.
    Institution for tuberculosis means an institution that is primarily 
engaged in providing diagnosis, treatment, or care of persons with 
tuberculosis, including medical attention, nursing care, and related 
services. Whether an institution is an institution for tuberculosis is 
determined by its overall character as that of a facility established 
and maintained primarily for the care and treatment of tuberculosis, 
whether or not it is licensed as such.
    Medical institution means an institution that--
    (a) Is organized to provide medical care, including nursing and 
convalescent care;
    (b) Has the necessary professional personnel, equipment, and 
facilities to manage the medical, nursing, and other health needs of 
patients on a continuing basis in accordance with accepted standards;
    (c) Is authorized under State law to provide medical care; and
    (d) Is staffed by professional personnel who are responsible to the 
institution for professional medical and nursing services. The services 
must include adequate and continual medical care and supervision by a 
physician; registered nurse or licensed practical nurse supervision and 
services and nurses' aid services, sufficient to meet nursing care 
needs; and a physician's guidance on the professional aspects of 
operating the institution.
    Outpatient means a patient of an organized medical facility or 
distinct part of that facility who is expected by the facility to 
receive, and who does receive, professional services for less than a 24-
hour period regardless of the hour of admission, whether or not a

[[Page 175]]

bed is used or whether or not the patient remains in the facility past 
midnight.
    Patient means an individual who is receiving needed professional 
services that are directed by a licensed practitioner of the healing 
arts toward maintenance, improvement, or protection of health, or 
lessening of illness, disability, or pain.
    Persons with related conditions means individuals who have a severe, 
chronic disability that meets all of the following conditions:
    (a) It is attributable to--
    (1) Cerebral palsy or epilepsy; or
    (2) Any other condition, other than mental illness, found to be 
closely related to mental retardation because this condition results in 
impairment of general intellectual functioning or adaptive behavior 
similar to that of mentally retarded persons, and requires treatment or 
services similar to those required for these persons.
    (b) It is manifested before the person reaches age 22.
    (c) It is likely to continue indefinitely.
    (d) It results in substantial functional limitations in three or 
more of the following areas of major life activity:
    (1) Self-care.
    (2) Understanding and use of language.
    (3) Learning.
    (4) Mobility.
    (5) Self-direction.
    (6) Capacity for independent living.
    Public institution means an institution that is the responsibility 
of a governmental unit or over which a governmental unit exercises 
administrative control. The term ``public institution'' does not 
include--
    (a) A medical institution as defined in this section;
    (b) An intermediate care facility as defined in Sec. Sec.  440.140 
and 440.150 of this chapter;
    (c) A publicly operated community residence that serves no more than 
16 residents, as defined in this section; or
    (d) A child-care institution as defined in this section with respect 
to--
    (1) Children for whom foster care maintenance payments are made 
under title IV-E of the Act; and
    (2) Children receiving AFDC--foster care under title IV-A of the 
Act.
    Publicly operated community residence that serves no more than 16 
residents is defined in 20 CFR 416.231(b)(6)(i). A summary of that 
definition is repeated here for the information of readers.
    (a) In general, a publicly operated community residence means--
    (1) It is publicly operated as defined in 20 CFR 416.231(b)(2).
    (2) It is designed or has been changed to serve no more than 16 
residents and it is serving no more than 16; and
    (3) It provides some services beyond food and shelter such as social 
services, help with personal living activities, or training in 
socialization and life skills. Occasional medical or remedial care may 
also be provided as defined in 45 CFR 228.1; and
    (b) A publicly operated community residence does not include the 
following facilities, even though they accommodate 16 or fewer 
residents:
    (1) Residential facilities located on the grounds of, or immediately 
adjacent to, any large institution or multiple purpose complex.
    (2) Educational or vocational training institutions that primarily 
provide an approved, accredited, or recognized program to individuals 
residing there.
    (3) Correctional or holding facilities for individuals who are 
prisoners, have been arrested or detained pending disposition of 
charges, or are held under court order as material witnesses or 
juveniles.
    (4) Hospitals, nursing facilities, and intermediate care facilities 
for the mentally retarded.

[43 FR 45204, Sept. 29, 1978, as amended at 47 FR 28655, July 1, 1982; 
47 FR 31532, July 20, 1982; 51 FR 19181, May 28, 1986; 52 FR 47934, Dec. 
17, 1987; 53 FR 657, Jan. 11, 1988; 53 FR 20495, June 3, 1988; 56 FR 
8854, Mar. 1, 1991; 56 FR 23022, May 20, 1991; 59 FR 56233, Nov. 10, 
1994. Redesignated at 71 FR 39225, July 12, 2006]

                   Requirements for State Supplements



Sec.  435.1011  Requirement for mandatory State supplements.

    (a) Except as specified in paragraph (b) of this section, FFP is not 
available in Medicaid expenditures in any quarter in which the State 
does not have in

[[Page 176]]

effect an agreement with the Secretary under section 212 of Pub. L. 93-
66 (July 9, 1973) for minimum mandatory State supplements of the basic 
SSI benefit.
    (b) This section does not apply to any State that meets the 
conditions of section 212(f) of Pub. L. 93-66.

[43 FR 45204, Sept. 29, 1978. Redesignated at 71 FR 39225, July 12, 
2006]



Sec.  435.1012  Requirement for maintenance of optional State supplement expenditures.

    (a) This section applies to States that make optional State 
supplement payments under section 1616(a) of the Act and mandatory 
supplement payments under section 212(a) of Pub. L. 93-66.
    (b) FFP in Medicaid expenditures is not available during any period 
in which the State does not have in effect an agreement with the 
Secretary under section 1618 of the Act to maintain its supplementary 
payments.

[43 FR 45204, Sept. 29, 1978, as amended at 55 FR 48609, Nov. 21, 1990. 
Redesignated at 71 FR 39225, July 12, 2006]



             Subpart L_Option for Coverage of Special Groups

    Source: 66 FR 2667, Jan. 11, 2001, unless otherwise noted.



Sec.  435.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.
    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec.  435.1101  Definitions related to presumptive eligibility for children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or
    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);

[[Page 177]]

    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under title XIX, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter).

[66 FR 2667, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec.  435.1102  General rules.

    (a) The agency may provide services to children under age 19 during 
one or more periods of presumptive eligibility following a determination 
by a qualified entity that the child's estimated gross family income or, 
at the State's option, the child's estimated family income after 
applying simple disregards, does not exceed the applicable income 
standard.
    (b) If the agency elects to provide services to children during a 
period of presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a regular 
Medicaid application form;
    (iii) Within five working days after the date that the determination 
is made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last day of the following month, the child's presumptive eligibility 
will end on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application; 
and
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and
    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency;
    (3) Provide all services covered under the plan, including EPSDT; 
and
    (4) Allow determinations of presumptive eligibility to be made by 
qualified entities on a Statewide basis.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.



PART 436_ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS--Table of Contents




              Subpart A_General Provisions and Definitions

Sec.
436.1 Purpose and applicability.
436.2 Basis.
436.3 Definitions and use of terms.
436.10 State plan requirements.

[[Page 178]]

         Subpart B_Mandatory Coverage of the Categorically Needy

436.100 Scope.
436.110 Individuals receiving cash assistance.
436.111 Individuals who are not eligible for cash assistance because of 
          a requirement not applicable under Medicaid.
436.112 Individuals who would be eligible for cash assistance except for 
          increased OASDI under Pub. L. 92-336 (July 1, 1972).
436.114 Individuals deemed to be receiving AFDC.
436.116 Families terminated from AFDC because of increased earnings or 
          hours of employment.
436.118 Children for whom adoption assistance or foster care maintenance 
          payments are made.
436.120 Qualified pregnant women and children who are not qualified 
          family members.
436.121 Qualified family members.
436.122 Pregnant women eligible for extended coverage.
436.124 Newborn children.
436.128 Coverage for certain qualified aliens.

          Subpart C_Options for Coverage as Categorically Needy

436.200 Scope.
436.201 Individuals included in optional groups.

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women

436.210 Individuals who meet the income and resource requirements of the 
          cash assistance programs.
436.211 Individuals who would be eligible for cash assistance if they 
          were not in medical institutions.
436.212 Individuals who would be eligible for cash assistance if the 
          State plan for OAA, AFDC, AB, APTD, or AABD were as broad as 
          allowed under the Act.
436.217 Individuals receiving home and community-based services.
436.220 Individuals who would meet the income and resource requirements 
          under AFDC if child care costs were paid from earnings.
436.222 Individuals under age 21 who meet the income and resource 
          requirements of AFDC.
436.224 Individuals under age 21 who are under State adoption assistance 
          agreements.
436.229 Optional targeted low-income children.

          Options for Coverage of the Aged, Blind, and Disabled

436.230 Essential spouses of aged, blind, or disabled individuals 
          receiving cash assistance.

           Subpart D_Optional Coverage of the Medically Needy

436.300 Scope.
436.301 General rules.
436.308 Medically needy coverage of individuals under age 21.
436.310 Medically needy coverage of specified relatives.
436.320 Medically needy coverage of the aged.
436.321 Medically needy coverage of the blind.
436.322 Medically needy coverage of the disabled.
436.330 Coverage for certain aliens.

               Subpart E_General Eligibility Requirements

436.400 Scope.
436.401 General rules.
436.402 [Reserved]
436.403 State residence.
436.404 Applicant's choice of category.
436.406 Citizenship and alienage.
436.407 Types of acceptable documentary evidence of citizenship.
436.408 [Reserved]

       Subpart F_Categorical Requirements for Medicaid Eligibility

436.500 Scope.

                               Dependency

436.510 Determination of dependency.

                                   Age

436.520 Age requirements for the aged.
436.522 Determination of age.

                                Blindness

436.530 Definition of blindness.
436.531 Determination of blindness.

                               Disability

436.540 Definition of disability.
436.541 Determination of disability.

    Subpart G_General Financial Eligibility Requirements and Options

436.600 Scope.
436.601 Application of financial eligibility methodologies.
436.602 Financial responsibility of relatives and other individuals.
436.604 [Reserved]
436.606 [Reserved]
436.608 Applications for other benefits.

[[Page 179]]

436.610 Assignment of rights to benefits.

Subpart H [Reserved]

        Subpart I_Financial Requirements for the Medically Needy

436.800 Scope.

                     Medically Needy Income Standard

436.811 Medically needy income standard: General requirements.
436.814 Medically needy income standard: State plan requirements.

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses

436.831 Income eligibility.
436.832 Post-eligibility treatment of income of institutionalized 
          individuals: Application of patient income to the cost of 
          care.

                    Medically Needy Resource Standard

436.840 Medically needy resource standard: General requirements.
436.843 Medically needy resource standard: State plan requirements.

            Determining Eligibility on the Basis of Resources

436.845 Medically needy resource eligibility.

   Subpart J_Eligibility in Guam, Puerto Rico, and the Virgin Islands

436.900 Scope.
436.901 General requirements.
436.909 Automatic entitlement to Medicaid following a determination of 
          eligibility under other programs.

             Subpart K_Federal Financial Participation (FFP)

436.1000 Scope.

 FFP for Expenditures for Determining Eligibility and Providing Services

436.1001 FFP for administration.
436.1002 FFP for services.
436.1003 Recipients overcoming certain conditions of eligibility.
436.1004 FFP in expenditures for medical assistance for individuals who 
          have declared United States citizenship or nationality under 
          section 1137(d) of the Act and with respect to whom the State 
          has not documented citizenship and identity.
436.1005 Institutionalized individuals.
436.1006 Definitions relating to institutional status.

             Subpart L_Option for Coverage of Special Groups

436.1100 Basis and scope.

                  Presumptive Eligibility for Children

436.1101 Definitions related to presumptive eligibility for children.
436.1102 General rules.

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

    Source: 43 FR 45218, Sept. 29, 1978, unless otherwise noted.



              Subpart A_General Provisions and Definitions



Sec.  436.1  Purpose and applicability.

    This part sets forth, for Guam, Puerto Rico, and the Virgin 
Islands--
    (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 a Medicaid 
agency must use in determining and redetermining eligibility, and 
requirements it may not use; and
    (d) The availability of FFP for providing Medicaid and for 
administering the eligibility provisions of the plan.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]



Sec.  436.2  Basis.

    This part implements the following sections of the Act and public 
laws that state requirements and standards for eligibility:

402(a)(22) Eligibility of deemed recipients 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 recipients.
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)(16) Out-of-State care for State residents.

[[Page 180]]

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 recipients.
1902(a)(34) Three-month retroactive eligibility.
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 requirements of more than 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 recipients enrolled in HMO.
1902(e)(3) Optional coverage of certain disabled children at home.
1902(e)(4) Eligibility of newborn children of Medicaid-eligible women.
1902(e)(5) Eligibility of pregnant women for extended coverage for a 
specified period after pregnancy ends.
1903(v) Payment for emergency services under Medicaid provided to 
aliens.
1905(a) (i)-(viii) List of eligible individuals.
1905(a) (clause following (21)) Prohibitions against providing Medicaid 
to certain institutionalized individuals.
1905(a) (second sentence) Definition f essential person.
1905(d)(2) Definition of resident of an intermediate care facility for 
the mentally retarded.
1905(n) Definition of qualified pregnant woman and child.
1912(a) Conditions of eligibility.
1915(c) Home or community based services.
1915(d) Home and 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. 96-272, section 310(b)(1) Continued eligibility of certain 
recipients 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).

[52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 55 
FR 36820, Sept. 7, 1990; 55 FR 48609, Nov. 21, 1990; 57 FR 29155, June 
30, 1992; 59 FR 48811, Sept. 23, 1994]



Sec.  436.3  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;
    AFDC means aid to families with dependent children under title IV-A 
of the Act;
    APTD means aid to the permanently and totally disabled under title 
XIV of the Act;
    Categorically needy refers to families and children, aged, blind or 
disabled individuals, and pregnant women listed 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) and 1902(e) of the 
Act. Subpart C of this part describes the optional eligibility groups of 
individuals who, generally, meet the categorical requirements that are 
the same as or less restrictive than those of the cash assistance 
programs but are not receiving cash payments. These optional groups are 
specified in sections 1902(a)(10)(A)(ii) and 1902(e) of the Act.
    Families and children refers to eligible members of families with 
children who are financially eligible under AFDC or medically needy 
rules and who are deprived of parental support or care as defined under 
the AFDC program (see 45 CFR 233.90; 233.100). In addition, this group 
includes individuals under age 21

[[Page 181]]

who are not deprived of parental support or care but who are financially 
eligible under AFDC or medically needy rules (see optional coverage 
group, Sec.  436.222);
    Medically needy means families, children, aged, blind, or disabled 
individuals, and pregnant women listed in 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.)
    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 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 family income at or below 200 percent of the Federal 
poverty line for a family of the size involved;
    (ii) Resides in a State with no Medicaid applicable income level (as 
defined in Sec.  457.10 of this chapter); or,
    (iii) Resides in a State that has a Medicaid applicable income level 
(as defined in Sec.  457.10) and has family income that either:
    (A) Exceeds the Medicaid applicable income level for the age of such 
child, but not by more than 50 percentage points (expressed as a 
percentage of the Federal poverty line); 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 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.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47989, Sept. 30, 1981; 58 FR 4934, Jan. 19, 1993; 66 FR 2668, Jan. 
11, 2001]



Sec.  436.10  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 of the Categorically Needy



Sec.  436.100  Scope.

    This subpart prescribes requirements for coverage of categorically 
needy individuals.



Sec.  436.110  Individuals receiving cash assistance.

    (a) A Medicaid agency must provide Medicaid to individuals receiving 
cash assistance under OAA, AFDC, AB, APTD, or AABD.

[[Page 182]]

    (b) For purposes of this section, an individual is receiving cash 
assistance if his needs are considered in determining the amount of the 
payment. This includes an individual whose presence in the home is 
considered essential to the well-being of a recipient under the State's 
plan for OAA, AFDC, AB, APTD, or AABD if that plan were as broad as 
allowed under the Act for FFP.



Sec.  436.111  Individuals who are not eligible for cash assistance because of a requirement not applicable under Medicaid.

    (a) The agency must provide Medicaid to individuals who would be 
eligible for OAA, AB, APTD, or AABD except for an eligibility 
requirement used in those programs that is specifically prohibited under 
title XIX of the Act.
    (b) The agency also must provide Medicaid to:
    (1) Individuals denied AFDC solely because of policies requiring the 
deeming of income and resources of the following individuals who are not 
included as financially responsible relatives under section 
1902(a)(17)(D) of the Act:
    (i) Stepparents who are not legally liable for support of 
stepchildren under a State law of general applicability;
    (ii) Grandparents
    (iii) Legal guardians;
    (iv) Aliens sponsors who are not organizations; and
    (v) Siblings.
    (2) [Reserved]

[58 FR 4934, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.112  Individuals who would be eligible for cash assistance except for increased OASDI 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 cash assistance; or
    (2) He would have been eligible for cash assistance if he had 
applied, and the Medicaid plan covered this optional group; or
    (3) He would have been eligible for cash assistance 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 cash assistance 
except that the increase in OASDI under Pub. L. 92-336 raised his income 
over the limit allowed under the cash assistance program. This includes 
an individual who--
    (1) Meets all current requirements for cash assistance except for 
the requirement to file an application; or
    (2) Would meet all current requirements for cash assistance if he 
were not in a medical institution or intermediate care facility, and the 
Medicaid plan covers this optional group.



Sec.  436.114  Individuals deemed to be receiving AFDC.

    (a) The Medicaid agency must provide Medicaid to individuals deemed 
to be receiving AFDC, as specified in this section.
    (b) The State must deem individuals to be receiving AFDC who are 
denied a cash payment from the title IV-A State agency solely because 
the amount of the AFDC payment would be less than $10.
    (c) The State may deem participants in a work supplementation 
program to be receiving AFDC under section 414(g) of the Act. This 
section permits States, for purposes of title XIX, to deem an individual 
and any child or relative of the individual (or other individual living 
in the same household) to be receiving AFDC, if the individual--
    (1) Participates in a State-operated work supplementation program 
under section 414 of the Act; and
    (2) Would be eligible for an AFDC cash payment if the individual 
were not participating in the work supplementation program.
    (d) The State must deem to be receiving AFDC those individuals who 
are denied AFDC payments from the title IV-A State agency solely because 
that agency is recovering an overpayment.
    (e) The State must deem to be receiving AFDC individuals described 
in section 473(a)(1) of the Act--
    (1) For whom an adoption assistance agreement is in effect under 
title IV-E

[[Page 183]]

of the Act, whether or not adoption assistance is being provided or an 
interlocutory or other judicial decree of adoption has been issued; or
    (2) For whom foster care maintenance payments are made under title 
IV-E of the Act.
    (f) The State must deem an individual to be receiving AFDC if a new 
collection or increased collection of child or spousal support under 
title IV-D of the Social Security Act results in the termination of AFDC 
eligibility in accordance with section 406(h) of the Social Security 
Act. States must continue to provide Medicaid for four consecutive 
calendar months, beginning with the first month of AFDC ineligibility, 
to each dependent child and each relative with whom such a child is 
living (including the eligible spouse of such relative as described in 
section 406(b) of the Social Security Act) who:
    (1) Becomes ineligible for AFDC on or after August 16, 1984; and
    (2) Has received AFDC for at least three of the six months 
immediately preceding the month in which the individual becomes 
ineligible for AFDC; and
    (3) Becomes ineligible for AFDC wholly or partly as a result of the 
initiation of or an increase in the amount of a child or spousal support 
collection under title IV-D.
    (g)(1) Except as provided in paragraph (g)(2) of this section, 
individuals who are eligible for extended Medicaid lose this coverage if 
they move to another State during the 4-month period. However, if they 
move back to and reestablish residence in the State in which they have 
extended coverage, they are eligible for any of the months remaining in 
the 4-month period in which they are residents of the State.
    (2) If a State has chosen in its State plan to provide Medicaid to 
non-residents, the State may continue to provide the 4-month extended 
benefits to individuals who have moved to another State.
    (h) For purposes of paragraph (f) of this section:
    (1) The new collection or increased collection of child or spousal 
support results in the termination of AFDC eligibility when it actively 
causes or contributes to the termination. This occurs when:
    (i) The change in support collection in and of itself is sufficient 
to cause ineligibility. This rule applies even if the support collection 
must be added to other, stable income. It also applies even if other 
independent factors, alone or in combination with each other, might 
simultaneously cause ineligibility; or
    (ii) The change in support contributes to ineligibility but does not 
by itself cause ineligibility. Ineligibility must result when the change 
in support is combined with other changes in income or changes in other 
circumstances and the other changes in income or circumstances cannot 
alone or in combination result in termination without the change in 
support.
    (2) In cases of increases in the amounts of both the support 
collections and earned income, eligibility under this section does not 
preclude eligibility under 45 CFR 233.20(a)(14) or section 1925 of the 
Social Security Act (which was added by section 303(a) of the Family 
Support Act of 1988 (42 U.S.C. 1396r-6)). Extended periods resulting 
from both an increase in the amount of the support collection and from 
an increase in earned income must run concurrently.

[46 FR 47989, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 
52 FR 48438, Dec. 22, 1987; 55 FR 48610, Nov. 21, 1990; 59 FR 59377, 
Nov. 17, 1994]



Sec.  436.116  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

[[Page 184]]

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 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980]



Sec.  436.118  Children for whom adoption assistance or foster care maintenance payments are made.

    The agency must provide Medicaid to children for whom adoption 
assistance or foster care maintenance payments are made under title IV-E 
of the Act.

[47 FR 28656, July 1, 1982]



Sec.  436.120  Qualified pregnant women and children who are not qualified family members.

    (a) The Medicaid agency must provide Medicaid to a pregnant woman 
whose pregnancy has been medically verified and who--
    (1) Would be eligible for an AFDC cash payment (or would be eligible 
for an AFDC cash payment if coverage under the State's AFDC plan 
included the AFDC-unemployed parents program) if her child had been born 
and was living with her in the month of payment;
    (2) Is a member of a family that would be eligible for an AFDC cash 
payment if the State's AFDC plan included an AFDC-unemployed parents 
program; or
    (3) Meets the income and resource requirements of the State's 
approved AFDC plan. In determining whether the woman meets the AFDC 
income and resource requirements, the unborn child or children are 
considered members of the household, and the woman's family is treated 
as though deprivation exists.
    (b) The provisions of paragraphs (a) (1) and (2) of this section are 
effective October 1, 1984. The provisions of paragraph (a)(3) of this 
section are effective July 1, 1986.
    (c) The agency must provide Medicaid to children who meet all of the 
following criteria:
    (1) They are born after September 30, 1983;
    (2) Effective October 1, 1988, they are under age 6 (or if 
designated by the State, any age that exceeds age 6 but does not exceed 
age 8), and effective October 1, 1989 they are under age 7 (or if 
designated by the State, any age that exceeds age 7 but does not exceed 
age 8); and
    (3) They meet the income and resource requirements of the State's 
approved AFDC plan.

[52 FR 43072, Nov. 9, 1987, as amended at 55 FR 48610, Nov. 21, 1990; 58 
FR 48614, Sept. 17, 1993]



Sec.  436.121  Qualified family members.

    (a) Definition. A qualified family member is any member of a family, 
including pregnant women and children eligible for Medicaid under Sec.  
436.120 of this subpart, who would be receiving AFDC cash benefits on 
the basis of the unemployment of the principal wage earner under section 
407 of the Act had the State not chosen to place time limits on those 
benefits as permitted under section 407(b)(2)(B)(i) of the Act.
    (b) State plan requirement. The State plan must provide that the 
State makes Medicaid available to any individual who meets the 
definition of ``qualified family member'' as specified in paragraph (a) 
of this section.
    (c) Applicability. The provisions in this section are applicable 
from October 1, 1992, through September 30, 1998.

[58 FR 48614, Sept. 17, 1993]



Sec.  436.122  Pregnant women eligible for extended coverage.

    (a) The Medicaid agency must provide categorically needy Medicaid 
eligibility for an extended period following termination of pregnancy to 
women who, while pregnant, applied for, were eligible for, and received 
Medicaid services on the day that their pregnancy ends. This period 
extends from the last day of pregnancy through the end of the month in 
which a 60-day period, beginning on the last day of the pregnancy, ends. 
Eligibility must be provided, regardless of changes in the woman's 
financial circumstances that may occur within this extended period. 
These pregnant women are eligible for the extended period for all 
services under the plan that are pregnancy-related (as defined in Sec.  
440.210(c)(1) of this subchapter).

[[Page 185]]

    (b) The provisions of paragraph (a) of this section apply to 
Medicaid furnished on or after April 7, 1986.

[55 FR 48610, Nov. 21, 1990]



Sec.  436.124  Newborn children.

    (a) The agency must provide Medicaid eligibility to a child born to 
a woman who has applied for, has been determined eligible and is 
receiving Medicaid on the date of the child's birth. The child is deemed 
to have applied and been found eligible for Medicaid on the date of 
birth and remains eligible for one year so long as the woman remains (or 
would remain if pregnant) eligible and the child is a member of the 
woman's household. This provision applies in instances where the labor 
and delivery services were furnished prior to the date of application 
and covered by Medicaid based on retroactive eligibility.
    (b) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible qualified alien woman subject to the 5-year bar so 
long as the woman has filed a complete Medicaid application, including 
but not limited to meeting residency, income and resource requirements, 
has been determined eligible, is receiving Medicaid on the date of the 
child's birth, and remains (or would remain if pregnant) Medicaid 
eligible. All standard Medicaid application procedures apply, including 
timely determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A 5-year bar qualified alien receiving 
emergency medical services only under Sec.  435.139 of this chapter is 
considered to be Medicaid-eligible and receiving Medicaid for purposes 
of this provision. With respect to whether the mother remains (or would 
remain if pregnant) eligible for Medicaid after the birth of the child, 
the State must determine whether a 5-year bar qualified alien would 
remain eligible for emergency services under Sec.  435.139 of this 
chapter. In determining whether the woman would remain eligible for 
these services, the State must consider whether the woman would remain 
eligible if pregnant. This provision applies in instances where the 
labor and delivery services were furnished prior to the date of 
application and covered by Medicaid based on retroactive eligibility.
    (c) The agency must provide Medicaid eligibility in the same manner 
described in paragraph (a) of this section to a child born to an 
otherwise-eligible non-qualified alien woman so long as the woman has 
filed a complete Medicaid application (other than providing a social 
security number or demonstrating immigration status), including but not 
limited to meeting residency, income and resource requirements, has been 
determined eligible, is receiving Medicaid on the date of the child's 
birth, and remains (or would remain if pregnant) Medicaid eligible. All 
standard Medicaid application procedures apply, including timely 
determination of eligibility and adequate notice of the agency's 
decision concerning eligibility. A non-qualified alien receiving 
emergency medical services only under Sec.  435.139 of this chapter is 
considered to be Medicaid-eligible and receiving Medicaid for purposes 
of this provision. With respect to whether the mother remains (or would 
remain if pregnant) eligible for Medicaid after the birth of the child, 
the State must determine whether a non-qualified alien would remain 
eligible for emergency services under Sec.  435.139 of this chapter. In 
determining whether the woman would remain eligible for these services, 
the State must consider whether the woman would remain eligible if 
pregnant. This provision applies in instances where the labor and 
delivery services were furnished prior to the date of application and 
covered by Medicaid based on retroactive eligibility.
    (d) A redetermination of eligibility must be completed on behalf of 
the children described in this provision in accordance with the 
procedures at Sec.  435.916. At that time, the State must collect 
documentary evidence of citizenship and identity as required under Sec.  
436.406.

[52 FR 43073, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 72 
FR 38694, July 13, 2007]

[[Page 186]]



Sec.  436.128  Coverage for certain qualified aliens.

    The agency must provide the services necessary for the treatment of 
an emergency medical condition as defined in Sec.  440.255(c) of this 
chapter to those aliens described in Sec.  436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



          Subpart C_Options for Coverage as Categorically Needy



Sec.  436.200  Scope.

    This subpart specifies options for coverage of individuals as 
categorically needy.



Sec.  436.201  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 or older);
    (2) Blind individuals (as defined in Sec.  436.530);
    (3) Disabled individuals (as defined in Sec.  436.541);
    (4) Individuals under age 21 (or, at State option), under age 20, 
19, or 18) or reasonable classifications of these individuals;
    (5) Specified relatives under section 406(b)(1) of the Act who have 
in their care an individual who is determined to be dependent) as 
specified in Sec.  436.510;
    (6) Pregnant women; and
    (7) Essential spouses specified under Sec.  436.230.
    (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.

[58 FR 4934, Jan. 19, 1993]

   Options for Coverage of Families and Children and Aged, Blind, and 
             Disabled Individuals, Including Pregnant Women



Sec.  436.210  Individuals who meet the income and resource requirements of the cash assistance programs.

    The agency may provide Medicaid to any group or groups of 
individuals specified under Sec.  436.201(a)(1), (a)(2), (a)(3), (a)(5), 
and (a)(6) who are not mandatory categorically needy and who meet the 
income and resource requirements of the appropriate cash assistance 
program for their status (that is, OAA, AFDC, AB, APTD, or AABD).

[58 FR 4935, Jan. 19, 1993]



Sec.  436.211  Individuals who would be eligible for cash assistance if they were not in medical institutions.

    The agency may provide Medicaid to any group or groups of 
individuals specified in Sec.  436.201(a) who are in title XIX 
reimbursable medical institutions and who:
    (a) Are ineligible for the cash assistance program appropriate for 
their status (that is, OAA, AFDC, AB, APTD, or AABD) because of lower 
income standards used under the program to determine eligibility for 
institutionalized individuals; but
    (b) Would be eligible for aid or assistance under the State's 
approved plan under OAA, AFDC, AB, APTD, or AABD if they were not 
institutionalized.

[58 FR 4935, Jan. 19, 1993]



Sec.  436.212  Individuals who would be eligible for cash assistance if the State plan for OAA, AFDC, AB, APTD, or AABD were as broad as allowed under the Act.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec.  436.201(a) who:
    (1) Would be eligible for OAA, AFDC, AB, APTD, or AABD if the 
State's plan under those programs included individuals whose coverage 
under title I, IV-A, X, XIV, or XVI of the Act is optional (for example, 
the agency may provide Medicaid to individuals who are 18

[[Page 187]]

years of age and who are attending secondary school full-time and are 
expected to complete their education before age 19, even though the 
State's AFDC plan does not include them); or
    (2) Would qualify for OAA, AFDC, AB, APTD, or AABD if the State's 
plan under those programs did not contain eligibility requirements more 
restrictive than, or in addition to, those required under the 
appropriate title of the Act. (For example, the agency may provide 
Medicaid to individuals who would meet the Federal definition of 
disability, 45 CFR 233.80, but who do not meet the State's more 
restrictive definitions.)
    (b) The agency may cover one or more optional groups under any of 
the titles of the Act without covering all such groups.

[43 FR 45218, Sept. 29, 1978, as amended at 45 FR 24887, Apr. 11, 1980; 
46 FR 47990, Sept. 30, 1981; 58 FR 4935, Jan. 19, 1993]



Sec.  436.217  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/MR; or
    (2) Subpart H of this subchapter, the group would otherwise require 
the level of care furnished in a NF and are age 65 or older.
    (c) The group receives the waivered services.

[57 FR 29155, June 30, 1992]



Sec.  436.220  Individuals who would meet the income and resource requirements under AFDC if child care costs were paid from earnings.

    (a) The agency may provide Medicaid to any group or groups of 
individuals specified under Sec.  436.201(a)(4), (a)(5), and (a)(6) who 
would meet the income and resource requirements under the State's AFDC 
plan if their work-related child care costs were paid from their 
earnings rather than by a State agency as a service expenditure.
    (b) The agency may use this option only if the State's AFDC plan 
deducts work-related child care costs from income to determine the 
amount of AFDC.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4935, Jan. 19, 1993]



Sec.  436.222  Individuals under age 21 who meet the income and resource requirements of AFDC.

    (a) The agency may provide Medicaid to individuals under age 21 (or 
at State option, under age 20, 19, or 18) or reasonable categories of 
these individuals as specified in paragraph (b) of this section, who are 
not receiving cash assistance but who meet the income and resource 
requirements of the State's approved AFDC plan.
    (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 of the same age 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. If the agency covers these individuals, it may 
also provide Medicaid to individuals in intermediate care facilities for 
the mentally retarded.
    (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 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]

[[Page 188]]



Sec.  436.224  Individuals under age 21 who are under State adoption assistance agreements.

    (a) The agency may provide Medicaid to individuals under the age of 
21 (or, at State option, age 20, 19, or 18)--
    (1) For whom an adoption agreement (other than an agreement under 
title IV-E) between the State and adoptive parent(s) is in effect;
    (2) Who, the State agency responsible for adoption assistance has 
determined, cannot be placed with adoptive parents without Medicaid 
because the child has special needs for medical or rehabilitative care; 
and
    (3) Who meet either of the following:
    (i) Were eligible for Medicaid under the State plan before the 
adoption agreement was entered into; or
    (ii) Would have been eligible for Medicaid before the adoption 
agreement was entered into, if the eligibility standards and 
methodologies of the foster care program were used without employing the 
threshold title IV-A eligibility determination.
    (b) For adoption assistance agreements entered into before April 7, 
1986--
    (1) The agency must deem the requirements of paragraph (a)(1) and 
(2) of this section to be met if the State adoption assistance agency 
determines that--
    (i) At the time of the adoption placement, the child had special 
needs for medical or rehabilitative care that made the child difficult 
to place; and
    (ii) There is in effect an adoption assistance agreement between the 
State and the adoptive parent(s).
    (2) The agency must deem the requirements of paragraph (a)(3) of 
this section to be met if the child was found by the State to be 
eligible for Medicaid before the adoption assistance agreement was 
entered into.

[55 FR 48610, Nov. 21, 1990]



Sec.  436.229  Optional targeted low-income children.

    The agency may provide Medicaid to--
    (a) All individuals under age 19 who are optional targeted low-
income children as defined in Sec.  436.3; or
    (b) Reasonable categories of these individuals.

[66 FR 2668, Jan. 11, 2001]

          Options for Coverage of the Aged, Blind, and Disabled



Sec.  436.230  Essential spouses of aged, blind, or disabled individuals receiving cash assistance.

    The agency may provide Medicaid to the spouse of an individual 
receiving OAA, AB, APTD, or AABD, if--
    (a) The spouse is living with the individual receiving cash 
assistance;
    (b) The cash assistance agency has determined that the spouse is 
essential to the well-being of the individual and has considered the 
spouse's needs in determining the amount of cash assistance provided to 
the individual.



           Subpart D_Optional Coverage of the Medically Needy



Sec.  436.300  Scope.

    This subpart specifies the option for coverage of medically needy 
individuals.



Sec.  436.301  General rules.

    (a) A Medicaid agency may provide Medicaid to individuals specified 
in this subpart who:
    (1) Either:
    (i) Have income that meets the standard in Sec.  436.811; 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 standards; and
    (2) Have resources that meet the standard in Sec. Sec.  436.840 and 
436.843.
    (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 and C of this 
part;

[[Page 189]]

    (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) All newborn children born on or after October 1, 1984, to a 
woman who is eligible as medically needy and receiving Medicaid on the 
date of the child's birth. The child is deemed to have applied and been 
found eligible for Medicaid on the date of birth and remains eligible as 
medically needy for ne year so long as the woman remains eligible and 
the child is a member of the woman's household. If the woman's basis of 
eligibility changes to categorically needy, the child is eligible as 
categorically needy under Sec.  436.124. The woman is considered to 
remain eligible if she meets the spend-down requirements in any 
consecutive budget period following the birth of the child.
    (iv) Women who, while pregnant, applied for, were eligible for, and 
received Medicaid services as medically needed 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 begins on the last day of the pregnancy and extends through 
the end of the month in which a 60-day period following termination of 
pregnancy ends. Eligibility must be provided, regardless of changes in 
the women'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 Sec.  
440.210(c)(1) of this subchapter).
    (2) The agency may provide Medicaid to any or all of the following 
groups of individuals:
    (i) Individuals under age 21 (Sec.  436.308).
    (ii) Specified relatives (Sec.  436.310).
    (iii) Aged (Sec.  436.320).
    (iv) Blind (Sec.  436.321).
    (v) Disabled (Sec.  436.322).
    (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 47990, Sept. 30, 1981; 46 FR 54743, Nov. 4, 1981, as amended at 
52 FR 43073, Nov. 9, 1987; 55 FR 48610, Nov. 21, 1990; 58 FR 4935, Jan. 
19, 1993]



Sec.  436.308  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 Sec.  436.301(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 in paragraph (a) of this 
section or individuals in reasonable classifications. 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 
the mentally retarded.
    (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 47990, Sept. 30, 1981, as amended at 58 FR 4935, Jan. 19, 1993]

[[Page 190]]



Sec.  436.310  Medically needy coverage of specified relatives.

    (a) If the agency provides for the medically needy, it may provide 
Medicaid to specified relatives, defined in paragraph (b) of this 
section, who meet the income and resource requirements of subpart I of 
this part.
    (b) Specified relatives means individuals who:
    (1) Are listed under section 406(b)(1) of the Act and in 45 CFR 
233.90(c)(1)(v)(A); and
    (2) Have in their care an individual who is determined to be (or 
would, if needy, be) dependent, as specified in Sec.  436.510.

[58 FR 4936, Jan. 19, 1993]



Sec.  436.320  Medically needy coverage of the aged.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to individuals who--
    (a) Are 65 years of age and older, as provided for in Sec.  436.520; 
and
    (b) Meet the income and resource requirements of subpart I of this 
part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.321  Medically needy coverage of the blind.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to blind individuals who meet--
    (a) The requirements for blindness, as specified in Sec. Sec.  
436.530 and 436.531; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.322  Medically needy coverage of the disabled.

    If the agency provides Medicaid to the medically needy, it may 
provide Medicaid to disabled individuals who meet--
    (a) The requirements for disability, as specified in Sec. Sec.  
436.540 and 436.541; and
    (b) The income and resource requirements of subpart I of this part.

[46 FR 47991, Sept. 30, 1981]



Sec.  436.330  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 Sec.  440.255(c) of this chapter to those 
aliens described in Sec.  436.406(c) of this subpart.

[55 FR 36820, Sept. 7, 1990]



               Subpart E_General Eligibility Requirements



Sec.  436.400  Scope.

    This subpart prescribes general requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of the part.



Sec.  436.401  General rules.

    (a) The agency may not impose any eligibility requirement that is 
prohibited under title XIX.
    (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 are 
consistent with the objectives of title XIX.
    (c) The agency must not use requirements for determining eligibility 
for optional coverage groups that are more restrictive than those used 
under the State plans for OAA, AFDC, AB, APTD, or AABD.



Sec.  436.402  [Reserved]



Sec.  436.403  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 service is provided to 
out-of-State residents are set forth in Sec.  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 Sec.  
435.1010 of this chapter. 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.

[[Page 191]]

    (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 mental retardation 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 mental retardation.
    (d) Who is a State resident. A resident of a State is any individual 
who:
    (1) Meets the conditions in paragraphs (e) through (h) of this 
section; or
    (2) Meets the criteria specified in an interstate agreement under 
paragraph (j) 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 residency 
for Medicaid purposes is the State where the individual is physically 
located.
    (4) Where 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 title IV-E payments. For individuals of 
any age who are receiving Federal payment 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.
    (g) Individuals under age 21. (1) For any individual who is 
emancipated from his or her parents or who is married and capable of 
indicating intent, the State of residence is the State where the 
individual is living with the intention to remain there permanently or 
for an indefinite period.
    (2) For any individual not residing in an institution as defined in 
paragraph (b) whose Medicaid eligibility is based on blindness or 
disability, the State of residence is the State in which the individual 
is living.
    (3) For any other non-institutionalized individual not subject to 
paragraph (h)(1) or (h)(2) of this section, the State of residence is 
determined in accordance with 45 CFR 233.40, the rules governing 
residence under the AFDC program.
    (4) For any institutionalized individual who is neither married nor 
emancipated, the State of residence is--
    (i) The parents' or legal guardian's current State of residence at 
the time of placement; 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 the parental 
rights are terminated, the State of 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.
    (h) Individuals age 21 and over. (1) For any individual not residing 
in an institution as defined in paragraph (b), the

[[Page 192]]

State of residence is the State where the individual is--
    (i) Living with the intention to remain there permanently or for an 
indefinite period (or if incapable of stating intent, where the 
individual is living); or
    (ii) Living and which the individual entered with a job commitment 
or seeking employment (whether or not currently employed).
    (2) For any institutionalized individual who became incapable of 
indicating intent before age 21, the State of residence is--
    (i) That of the parents applying for Medicaid on the individual's 
behalf, if the parents reside in separate States;
    (ii) The parent's or legal guardian's State of residence at the time 
of placement; 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 legal 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.
    (3) 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.
    (4) For any other institutionalized individual, the State of 
residence is the State where the individual is living with the intention 
to remain there permanently or for an indefinite period.
    (i) 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.
    (j) 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 (h) of this section, but must 
not include criteria that result in loss of residency in both States or 
that are prohibited by paragraph (i) 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.
    (k) Continued Medicaid for institutionalized recipients. An agency 
is providing Medicaid to an institutionalized recipient 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 recipient 
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 (g) of this section.
    (l) 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 13533, Apr. 5, 1984, as amended at 55 FR 48610, Nov. 21, 1990; 71 
FR 39225, July 12, 2006]



Sec.  436.404  Applicant's choice of category.

    The agency must allow an individual who would be eligible under more 
than

[[Page 193]]

one category to have his eligibility determined for the category he 
selects.



Sec.  436.406  Citizenship and alienage.

    (a) The agency must provide Medicaid to otherwise eligible residents 
of the United States who are--
    (1) Citizens: (i) Under a declaration required by section 1137(d) of 
the Act that the individual is a citizen or national of the United 
States; and
    (ii) The individual has provided satisfactory documentary evidence 
of citizenship or national status, as described in Sec.  435.407.
    (iii) An individual for purposes of the declaration and citizenship 
documentation requirements discussed in paragraphs (a)(1)(i) and 
(a)(1)(ii) of this section includes both applicants and recipients under 
a section 1115 demonstration (including a family planning demonstration 
project) for which a State receives Federal financial participation in 
their expenditures, as though the expenditures were for medical 
assistance.
    (iv) Individuals must declare their citizenship and the State must 
document an individual's eligibility file on initial applications and 
initial redeterminations effective July 1, 2006.
    (v) The following groups of individuals are exempt from the 
requirements in paragraph (a)(1)(ii) 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); and
    (D) Individuals who are in foster care and who are assisted under 
Title IV-B of the Act, and individuals who are recipients of foster care 
maintenance or adoption assistance payments under Title IV-E of the Act.
    (2)(i) Except as specified in 8 U.S.C. 1612(b)(1) (permitting States 
an option with respect to coverage of certain qualified aliens), 
qualified aliens as described in section 431 of the Personal 
Responsibility and Work Opportunity Reconciliation Act of 1996 (8 U.S.C. 
1641) (including qualified aliens subject to the 5-year bar) who have 
provided satisfactory documentary evidence of Qualified Alien 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 recipient is an alien in a satisfactory immigration 
status.
    (ii) The eligibility of qualified aliens 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.
    (b) The agency must provide payment for the services described in 
Sec.  440.255(c) of this chapter to residents of the State who otherwise 
meet the eligibility requirements of the State plan (except for receipt 
of AFDC, SSI, or State Supplementary payments) who are qualified aliens 
subject to the 5-year bar or who are non-qualified aliens who meet all 
Medicaid eligibility criteria, except non-qualified aliens need not 
present a social security number or document immigration status.

[55 FR 36820, Sept. 7, 1990, as amended at 71 FR 39225, July 12, 2006; 
72 FR 38694, July 13, 2007]



Sec.  436.407  Types of acceptable documentary evidence of citizenship.

    For purposes of this section, the term ``citizenship'' includes 
status as a ``national of the United States'' as defined by section 
101(a)(22) of the Immigration and Nationality Act (8 U.S.C. Sec.  
1101(a)(22)) to include both citizens of the United States and non-
citizen nationals of the United States.
    (a) Primary evidence of citizenship and identity. The following 
evidence must be accepted as satisfactory documentary evidence of both 
identity and citizenship:
    (1) A U.S. passport. The Department of State issues this. A U.S. 
passport does not have to be currently valid to be accepted as evidence 
of U.S. citizenship, as long as it was originally issued without 
limitation. Note: Spouses and children were sometimes included on one 
passport through 1980. U.S. passports issued after 1980 show only one 
person. Consequently, the citizenship and identity of the included 
person can be established when one of these passports is presented. 
Exception: Do not accept any passport as evidence of U.S.

[[Page 194]]

citizenship when it was issued with a limitation. However, such a 
passport may be used as proof of identity.
    (2) A Certificate of Naturalization (DHS Forms N-550 or N-570.) 
Department of Homeland Security issues for naturalization.
    (3) A Certificate of U.S. Citizenship (DHS Forms N-560 or N-561.) 
Department of Homeland Security issues certificates of citizenship to 
individuals who derive citizenship through a parent.
    (4) A valid State-issued driver's license, but only if the State 
issuing the license requires proof of U.S. citizenship before issuance 
of such license or obtains a social security number from the applicant 
and verifies before certification that such number is valid and assigned 
to the applicant who is a citizen. (This provision is not effective 
until such time as a State makes providing evidence of citizenship a 
condition of issuing a driver's license and evidence that the license 
holder is a citizen is included on the license or in a system of records 
available to the Medicaid agency. States must ensure that the process 
complies with this statutory provision in section 6036 of the Deficit 
Reduction Act of 2005. CMS will monitor compliance of States 
implementing this provision.)
    (b) Secondary evidence of citizenship. If primary evidence from the 
list in paragraph (a) of this section is unavailable, an applicant or 
recipient should provide satisfactory documentary evidence of 
citizenship from the list specified in this section to establish 
citizenship and satisfactory documentary evidence from paragraph (e) of 
this section to establish identity, in accordance with the rules 
specified in this section.
    (1) A U.S. public birth certificate showing birth in one of the 50 
States, the District of Columbia, Puerto Rico (if born on or after 
January 13, 1941), Guam (on or after April 10, 1899), the Virgin Islands 
of the U.S.(on or after January 17, 1917), American Samoa, Swain's 
Island, or the Northern Mariana Islands (after November 4, 1986 (NMI 
local time)). A State, at its option, may use a cross match with a State 
vital statistics agency to document a birth record. The birth record 
document may be issued by the State, Commonwealth, Territory, or local 
jurisdiction. It must have been recorded before the person was 5 years 
of age. A delayed birth record document that is recorded at or after 5 
years of age is considered fourth level evidence of citizenship. (Note: 
If the document shows the individual was born in Puerto Rico, the Virgin 
Islands of the U.S., or the Northern Mariana Islands before these areas 
became part of the U.S., the individual may be a collectively 
naturalized citizen. Collective naturalization occurred on certain dates 
listed for each of the territories.) The following will establish U.S. 
citizenship for collectively naturalized individuals:
    (i) Puerto Rico:
    (A) Evidence of birth in Puerto Rico on or after April 11, 1899 and 
the applicant's statement that he or she was residing in the U.S., a 
U.S. possession, or Puerto Rico on January 13, 1941; or
    (B) Evidence that the applicant was a Puerto Rican citizen and the 
applicant's statement that he or she was residing in Puerto Rico on 
March 1, 1917 and that he or she did not take an oath of allegiance to 
Spain.
    (ii) U.S. Virgin Islands:
    (A) Evidence of birth in the U.S. Virgin Islands, and the 
applicant's statement of residence in the U.S., a U.S. possession, or 
the U.S. Virgin Islands on February 25, 1927; or
    (B) The applicant's statement indicating residence in the U.S. 
Virgin Islands as a Danish citizen on January 17, 1917 and residence in 
the U.S., a U.S. possession, or the U.S. Virgin Islands on February 25, 
1927, and that he or she did not make a declaration to maintain Danish 
citizenship; or
    (C) Evidence of birth in the U.S. Virgin Islands and the applicant's 
statement indicating residence in the U.S., a U.S. possession, or 
Territory or the Canal Zone on June 28, 1932.
    (iii) Northern Mariana Islands (NMI) (formerly part of the Trust 
Territory of the Pacific Islands (TTPI)):
    (A) Evidence of birth in the NMI, TTPI citizenship and residence in 
the NMI, the U.S., or a U.S. Territory or possession on November 3, 1986 
(NMI

[[Page 195]]

local time) and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time); or
    (B) Evidence of TTPI citizenship, continuous residence in the NMI 
since before November 3, 1981 (NMI local time), voter registration 
before January 1, 1975 and the applicant's statement that he or she did 
not owe allegiance to a foreign State on November 4, 1986 (NMI local 
time); or
    (C) Evidence of continuous domicile in the NMI since before January 
1, 1974 and the applicant's statement that he or she did not owe 
allegiance to a foreign State on November 4, 1986 (NMI local time).
    (D) Note: If a person entered the NMI as a nonimmigrant and lived in 
the NMI since January 1, 1974, this does not constitute continuous 
domicile and the individual is not a U.S. citizen.
    (2) A Certification of Report of Birth (DS-1350). The Department of 
State issues a DS-1350 to U.S. citizens in the U.S. who were born 
outside the U.S. and acquired U.S. citizenship at birth, based on the 
information shown on the FS-240. When the birth was recorded as a 
Consular Report of Birth (FS-240), certified copies of the Certification 
of Report of Birth Abroad (DS-1350) can be issued by the Department of 
State in Washington, DC. The DS-1350 contains the same information as 
that on the current version of Consular Report of Birth FS-240. The DS-
1350 is not issued outside the U.S.
    (3) A Report of Birth Abroad of a U.S. Citizen (Form FS-240). The 
Department of State consular office prepares and issues this. A Consular 
Report of Birth can be prepared only at an American consular office 
overseas while the child is under the age of 18. Children born outside 
the U.S. to U.S. military personnel usually have one of these.
    (4) A Certification of birth issued by the Department of State (Form 
FS-545 or DS-1350). Before November 1, 1990, Department of State 
consulates also issued Form FS-545 along with the prior version of the 
FS-240. In 1990, U.S. consulates ceased to issue Form FS-545. Treat an 
FS-545 the same as the DS-1350.
    (5) A U.S. Citizen I.D. card. (This form was issued until the 1980s 
by INS. Although no longer issued, holders of this document may still 
use it consistent with the provisions of section 1903(x) of the Act.) 
INS issued the I-179 from 1960 until 1973. It revised the form and 
renumbered it as Form I-197. INS issued the I-197 from 1973 until April 
7, 1983. INS issued Form I-179 and I-197 to naturalized U.S. citizens 
living near the Canadian or Mexican border who needed it for frequent 
border crossings. Although neither form is currently issued, either form 
that was previously issued is still valid.
    (6) A Northern Mariana Identification Card (I-873). (Issued by the 
DHS to a collectively naturalized citizen of the United States who was 
born in the Northern Mariana Islands before November 4, 1986.) The 
former Immigration and Naturalization Service (INS) issued the I-873 to 
a collectively naturalized citizen of the U.S. who was born in the NMI 
before November 4, 1986. The card is no longer issued, but those 
previously issued are still valid.
    (7) An American Indian Card (I-872) issued by the Department of 
Homeland Security with the classification code ``KIC.'' (Issued by DHS 
to identify U.S. citizen members of the Texas Band of Kickapoos living 
near the United States/Mexican border.) DHS issues this card to identify 
a member of the Texas Band of Kickapoos living near the U.S./Mexican 
border. A classification code ``KIC'' and a statement on the back denote 
U.S. citizenship
    (8) A final adoption decree showing the child's name and U.S. place 
of birth. The adoption decree must show the child's name and U.S. place 
of birth. In situations where an adoption is not finalized and the State 
in which the child was born will not release a birth certificate prior 
to final adoption, a statement from a State approved adoption agency 
that shows the child's name and U.S. place of birth is acceptable. The 
adoption agency must state in the certification that the source of the 
place of birth information is an original birth certificate.
    (9) Evidence of U.S. Civil Service employment before June 1, 1976. 
The document must show employment by the U.S. government before June 1, 
1976. Individuals employed by the U.S. Civil

[[Page 196]]

Service prior to June 1, 1976 had to be U.S. citizens.
    (10) U.S. Military Record showing a U.S. place of birth. T he 
document must show a U.S. place of birth (for example a DD-214 or 
similar official document showing a U.S. place of birth.)
    (11) A data verification with the Systematic Alien Verification for 
Entitlements (SAVE) Program for naturalized citizens. A State may 
conduct a verification with SAVE to determine if an individual is a 
naturalized citizen, provided that such verification is conducted 
consistent with the terms of a Memorandum of Understanding or other 
agreement with the Department of Homeland Security (DHS) authorizing 
verification of claims to U.S. citizenship through SAVE, including but 
not limited to provision of the individual's alien registration number 
if required by DHS.
    (12) Child Citizenship Act. Adopted or biological children born 
outside the United States may establish citizenship obtained 
automatically under section 320 of the Immigration and Nationality Act 
(8 U.S.C. 1431), as amended by the Child Citizenship Act of 2000 (Pub. 
L. 106-395, enacted on October 30, 2000). The State must obtain 
documentary evidence that verifies that at any time on or after February 
27, 2001, the following conditions have been met:
    (i) At least one parent of the child is a United States citizen by 
either birth or naturalization (as verified under the requirements of 
this Part);
    (ii) The child is under the age of 18;
    (iii) The child is residing in the United States in the legal and 
physical custody of the U.S. citizen parent;
    (iv) The child was admitted to the United States for lawful 
permanent residence (as verified under the requirements of 8 U.S.C. 1641 
pertaining to verification of qualified alien status); and
    (v) If adopted, the child satisfies the requirements of section 
101(b)(1) of the Immigration and Nationality Act (8 U.S.C. 1101(b)(1) 
pertaining to international adoptions (admission for lawful permanent 
residence as IR-3 (child adopted outside the United States)), or as IR-4 
(child coming to the United States to be adopted) with final adoption 
having subsequently occurred).
    (c) Third level evidence of citizenship. Third level evidence of 
U.S. citizenship is documentary evidence of satisfactory reliability 
that is used when both primary and secondary evidence is unavailable. 
Third level evidence may be used only when the applicant or recipient 
alleges birth in the U.S. A second document from paragraph (e) of this 
section to establish identity must also be presented:
    (1) Extract of a hospital record on hospital letterhead established 
at the time of the person's birth that was created 5 years before the 
initial application date and that indicates a U.S. place of birth. (For 
children under 16 the document must have been created near the time of 
birth or 5 years before the date of application.) Do not accept a 
souvenir ``birth certificate'' issued by the hospital.
    (2) Life, health, or other insurance record showing a U.S. place of 
birth that was created at least 5 years before the initial application 
date that indicates a U.S. place of birth. (For children under 16 the 
document must have been created near the time of birth or 5 years before 
the date of application.) Life or health insurance records may show 
biographical information for the person including place of birth; the 
record can be used to establish U.S. citizenship when it shows a U.S. 
place of birth.
    (3) Religious record recorded in the U.S. within 3 months of birth 
showing the birth occurred in the U.S. and showing either the date of 
the birth or the individual's age at the time the record was made. The 
record must be an official record recorded with the religious 
organization. Caution: In questionable cases (for example, where the 
child's religious record was recorded near a U.S. international border 
and the child may have been born outside the U.S.), the State must 
consider verifying the religious record and/or documenting that the 
mother was in the U.S. at the time of the birth.
    (4) Early school record showing a U.S. place of birth. The school 
record must show the name of the child, the date of admission to the 
school, the date of birth (or age at the time the record was made), a 
U.S. place of birth,

[[Page 197]]

and the name(s) and place(s) of birth of the applicant's parents.
    (d) Fourth level evidence of citizenship. Fourth level evidence of 
citizenship is documentary evidence of the lowest reliability. Fourth 
level evidence should only be used in the rarest of circumstances. This 
level of evidence is used only when primary, secondary and third level 
evidence is unavailable. With the exception of the affidavit process 
described in paragraph (d)(5) of this section, the applicant may only 
use fourth level evidence of citizenship if alleging a U.S. place of 
birth. In addition, a second document establishing identity must be 
presented as described in paragraph (e) of this section
    (1) Federal or State census record showing U.S. citizenship or a 
U.S. place of birth. (Generally for persons born 1900 through 1950.) The 
census record must also show the applicant's age. Note: Census records 
from 1900 through 1950 contain certain citizenship information. To 
secure this information the applicant, recipient or State should 
complete a Form BC-600, Application for Search of Census Records for 
Proof of Age. Add in the remarks portion ``U.S. citizenship data 
requested.'' Also add that the purpose is for Medicaid eligibility. This 
form requires a fee.
    (2) One of the following documents that show a U.S. place of birth 
and was created at least 5 years before the application for Medicaid. 
(For children under 16 the document must have been created near the time 
of birth or 5 years before the date of application.) This document must 
be one of the following and show a U.S. place of birth:
    (i) Seneca Indian tribal census.
    (ii) Bureau of Indian Affairs tribal census records of the Navajo 
Indians.
    (iii) U.S. State Vital Statistics official notification of birth 
registration.
    (iv) A delayed U.S. public birth record that is recorded more than 5 
years after the person's birth.
    (v) Statement signed by the physician or midwife who was in 
attendance at the time of birth.
    (vi) The Roll of Alaska Natives maintained by the Bureau of Indian 
Affairs.
    (3) Institutional admission papers from a nursing facility, skilled 
care facility or other institution created at least 5 years before the 
initial application date that indicates a U.S. place of birth. Admission 
papers generally show biographical information for the person including 
place of birth; the record can be used to establish U.S. citizenship 
when it shows a U.S. place of birth.
    (4) Medical (clinic, doctor, or hospital) record created at least 5 
years before the initial application date that indicates a U.S. place of 
birth. (For children under 16 the document must have been created near 
the time of birth or 5 years before the date of application.) Medical 
records generally show biographical information for the person including 
place of birth; the record can be used to establish U.S. citizenship 
when it shows a U.S. place of birth. (Note: An immunization record is 
not considered a medical record for purposes of establishing U.S. 
citizenship.)
    (5) Written affidavit. Affidavits should ONLY be used in rare 
circumstances. If the documentation requirement needs to be met through 
affidavits, the following rules apply:
    (i) There must be at least two affidavits by two individuals who 
have personal knowledge of the event(s) establishing the applicant's or 
recipient's claim of citizenship (the two affidavits could be combined 
in a joint affidavit).
    (ii) At least one of the individuals making the affidavit cannot be 
related to the applicant or recipient. Neither of the two individuals 
can be the applicant or recipient.
    (iii) In order for the affidavit to be acceptable the persons making 
them must be able to provide proof of their own citizenship and 
identity.
    (iv) If the individual(s) making the affidavit has (have) 
information which explains why documentary evidence establishing the 
applicant's claim or citizenship does not exist or cannot be readily 
obtained, the affidavit should contain this information as well.
    (v) The State must obtain a separate affidavit from the applicant/
recipient or other knowledgeable individual (guardian or representative) 
explaining why the evidence does not exist or cannot be obtained.
    (vi) The affidavits must be signed under penalty of perjury and need 
not be notarized.

[[Page 198]]

    (e) Evidence of identity. The following documents may be accepted as 
proof of identity and must accompany a document establishing citizenship 
from the groups of documentary evidence of citizenship in the groups in 
paragraphs (b) through (d) of this section.
    (1) Identity documents described in 8 CFR 274a.2(b)(1)(v)(B)(1).
    (i) Driver's license issued by State or Territory either with a 
photograph of the individual or other identifying information of the 
individual such as name, age, sex, race, height, weight, or eye color.
    (ii) School identification card with a photograph of the individual.
    (iii) U.S. military card or draft record.
    (iv) Identification card issued by the Federal, State, or local 
government with the same information included on driver's licenses.
    (v) Military dependent's identification card.
    (vi) Certificate of Degree of Indian Blood, or other American 
Indian/Alaska Native Tribal document with a photograph or other personal 
identifying information relating to the individual. Acceptable if the 
document carries a photograph of the applicant or recipient, or has 
other personal identifying information relating to the individual such 
as age, weight, height, race, sex, and eye color.
    (vii) U.S. Coast Guard Merchant Mariner card.

    Note to paragraph (e)(1): Exception: Do not accept a voter's 
registration card or Canadian driver's license as listed in 8 CFR 
274a.2(b)(1)(v)(B)(1). CMS does not view these as reliable for identity.

    (2) At State option, a State may use a cross match with a Federal or 
State governmental, public assistance, law enforcement or corrections 
agency's data system to establish identity if the agency establishes and 
certifies true identity of individuals. Such agencies may include food 
stamps, child support, corrections, including juvenile detention, motor 
vehicle, or child protective services. The State Medicaid Agency is 
still responsible for assuring the accuracy of the identity 
determination.
    (3) At State option, a State may accept three or more documents that 
together reasonably corroborate the identity of an individual provided 
such documents have not been used to establish the individual's 
citizenship and the individual submitted second or third tier evidence 
of citizenship. The State must first ensure that no other evidence of 
identity is available to the individual prior to accepting such 
documents. Such documents must at a minimum contain the individual's 
name, plus any additional information establishing the individual's 
identity. All documents used must contain consistent identifying 
information. These documents include employer identification cards, high 
school and college diplomas from accredited institutions (including 
general education and high school equivalency diplomas), marriage 
certificates, divorce decrees, and property deeds/titles.
    (f) Special identity rules for children. For children under 16, a 
clinic, doctor, hospital or school record may be accepted for purposes 
of establishing identity. School records may include nursery or daycare 
records and report cards. If the State accepts such records, it must 
verify them with the issuing school. If none of the above documents in 
the preceding groups are available, an affidavit may be used. An 
affidavit is only acceptable if it is signed under penalty of perjury by 
a parent, guardian or caretaker relative (as defined in the regulations 
at 45 CFR 233.90(c)(v)) stating the date and place of the birth of the 
child and cannot be used if an affidavit for citizenship was provided. 
The affidavit is not required to be notarized. A State may accept an 
identity affidavit on behalf of a child under the age of 18 in instances 
when school ID cards and drivers' licenses are not available to the 
individual in that area until that age.
    (g) Special identity rules for disabled individuals in institutional 
care facilities. A State may accept an identity affidavit signed under 
penalty of perjury by a residential care facility director or 
administrator on behalf of an institutionalized individual in the 
facility. States should first pursue all other means of verifying 
identity prior to accepting an affidavit. The affidavit is not required 
to be notarized.

[[Page 199]]

    (h) Special populations needing assistance. States must assist 
individuals to secure satisfactory documentary evidence of citizenship 
when because of incapacity of mind or body the individual would be 
unable to comply with the requirement to present satisfactory 
documentary evidence of citizenship in a timely manner and the 
individual lacks a representative to assist him or her.
    (i) Documentary evidence. (1) All documents must be either originals 
or copies certified by the issuing agency. Uncertified copies, including 
notarized copies, shall not be accepted.
    (2) States must maintain copies of citizenship and identification 
documents in the case record or electronic data base and make these 
copies available for compliance audits.
    (3) States may permit applicants and recipients to submit such 
documentary evidence without appearing in person at a Medicaid office. 
States may accept original documents in person, by mail, or by a 
guardian or authorized representative.
    (4) If documents are determined to be inconsistent with pre-existing 
information, are counterfeit, or altered, States should investigate for 
potential fraud and abuse, including but not limited to, referral to the 
appropriate State and Federal law enforcement agencies.
    (5) Presentation of documentary evidence of citizenship is a one 
time activity; once a person's citizenship is documented and recorded in 
a State database subsequent changes in eligibility should not require 
repeating the documentation of citizenship unless later evidence raises 
a question of the person's citizenship. The State need only check its 
databases to verify that the individual already established citizenship.
    (6) CMS requires that as a check against fraud, using currently 
available automated capabilities, States will conduct a match of the 
applicant's name against the corresponding Social Security number that 
was provided. In addition, in cooperation with other agencies of the 
Federal government, CMS encourages States to use automated capabilities 
to verify citizenship and identity of Medicaid applicants. Automated 
capabilities may fall within the computer matching provisions of the 
Privacy Act of 1974, and CMS will explore any implementation issues that 
may arise with respect to those requirements. When these capabilities 
become available, States will be required to match files for individuals 
who used third or fourth tier documents to verify citizenship and 
documents to verify identity, and CMS will make available to States 
necessary information in this regard. States must ensure that all case 
records within this category will be so identified and made available to 
conduct these automated matches. CMS may also require States to match 
files for individuals who used first or second level documents to verify 
citizenship as well. CMS may provide further guidance to States with 
respect to actions required in a case of a negative match.
    (j) Record retention. The State must retain documents in accordance 
with 45 CFR 74.53.
    (k) Reasonable opportunity to present satisfactory documentary 
evidence of citizenship. States must give an applicant or recipient a 
reasonable opportunity to submit satisfactory documentary evidence of 
citizenship before taking action affecting the individual's eligibility 
for Medicaid. The time States give for submitting documentation of 
citizenship should be consistent with the time allowed to submit 
documentation to establish other facets of eligibility for which 
documentation is requested. (See Sec.  435.930 and Sec.  435.911 of this 
chapter.)

[71 FR 39226, July 12, 2006, as amended at 72 FR 38695, July 13, 2007]



Sec.  436.408  [Reserved]



       Subpart F_Categorical Requirements for Medicaid Eligibility



Sec.  436.500  Scope.

    This subpart prescribes categorical requirements for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part.

[[Page 200]]

                               Dependency



Sec.  436.510  Determination of dependency.

    For families with dependent children who are not receiving AFDC, the 
agency must use the definitions and procedures used under the State's 
AFDC plan to determine whether--
    (a) An individual is a dependent child because he is deprived of 
parental support or care; and
    (b) An individual is an eligible member of a family with dependent 
children.

[43 FR 45218, Sept. 29, 1978, as amended at 58 FR 4936, Jan. 19, 1993]

                                   Age



Sec.  436.520  Age requirements for the aged.

    The agency must not impose an age requirement of more than 65 years.

[58 FR 4936, Jan. 19, 1993]



Sec.  436.522  Determination of age.

    (a) In determining age, the agency must use the common law method 
(under which an age is reached the day before the anniversary of birth) 
or the popular usage method (under which a specific age is reached on 
the anniversary of birth), whichever is used under the corresponding 
State plan for OAA, AFDC, AB, APTD, or AABD.
    (b) The agency may use an arbitrary date, such as July 1, for 
determining an individual's age if the year, but not the month, of his 
birth is known.

[58 FR 4936, Jan. 19, 1993]

                                Blindness



Sec.  436.530  Definition of blindness.

    (a) Definition. The agency must use the definition of blindness that 
is used in the State plan for AB or AABD.
    (b) State plan requirement. The State plan must contain the 
definition of blindness, expressed in ophthalmic measurements.



Sec.  436.531  Determination of blindness.

    In determining blindness--
    (a) A physician skilled in the diseases of the eye or an 
optometrist, whichever the individual selects, must examine him, unless 
both of the applicant's eyes are missing;
    (b) The examiner must submit a report of examination to the Medicaid 
agency; and
    (c) A physician skilled in the diseases of the eye (for example, an 
ophthalmologist or an eye, ear, nose, and throat specialist) must review 
the report and determine on behalf of the agency--
    (1) Whether the individual meets the definition of blindness; and
    (2) Whether and when reexaminations are necessary for periodic 
redeterminations of eligibility, as required under Sec.  435.916 of this 
subchapter. Blindness is considered to continue until the reviewing 
physician determines that the recipient's vision no longer meets the 
definition.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17939, Mar. 23, 1979]

                               Disability



Sec.  436.540  Definition of disability.

    (a) Definition. The agency must use the definition of permanent and 
total disability that is used in the State plan for APTD or AABD. (See 
45 CFR 233.80(a)(1) for the Federal recommended definition of permanent 
and total disability.)
    (b) State plan requirement. The State plan must contain the 
definition of permanent and total disability.



Sec.  436.541  Determination of disability.

    (a) Basic requirements. (1) At a minimum, the agency must use the 
review team, information, and evidence requirements specified in 
paragraph (b) through (d) of this section in making a determination of 
disability.
    (2) If the requirements or determining disability under the State's 
APTD or AABD program are more restrictive than the minimum requirements 
specified in this section, the agency must use the requirements applied 
under the APTD or AABD program.
    (b) The agency must obtain a medical report and a social history for 
individuals applying for Medicaid on the basis of disability. The 
medical report must include a diagnosis based on medical

[[Page 201]]

evidence. The social history must contain enough information to enable 
the agency to determine disability.
    (c) A physician and social worker, qualified by professional 
training and experience, must review the medical report and social 
history and determine on behalf of the agency whether the individual 
meets the definition of disability. The physician must determine whether 
and when reexaminations will be necessary for periodic redeterminations 
of eligibility as required under Sec.  435.916 of this subchapter.
    (d) In subsequently determining disability, the physician and social 
worker must review reexamination reports and the social history and 
determine whether the individual continues to meet the definition. 
Disability is considered to continue until this determination is made.

[54 FR 50762, Dec. 11, 1989]



    Subpart G_General Financial Eligibility Requirements and Options



Sec.  436.600  Scope.

    This subpart prescribes:
    (a) General financial requirements and options for determining the 
eligibility of both categorically needy and medically needy individuals 
specified in subparts B, C, and D of this part. Subparts H and I of this 
part prescribe additional financial requirements.
    (b) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.601  Application of financial eligibility methodologies.

    (a) Definitions. For purposes of this section, cash assistance 
financial methodologies refers to the income and resources methodologies 
of the OAA, AFDC, AB, APTD, and AABD programs.
    (b) Basic rule for use of cash assistance methodologies. Except as 
specified in paragraphs (c) and (d) of this section, in determining 
financial eligibility of individuals as categorically and medically 
needy, the agency must apply the cash assistance financial methodologies 
and requirements of the cash assistance program that is most closely 
categorically related to the individual's status.
    (c) Financial responsibility of relatives. The agency must use the 
requirements for financial responsibility of relatives specified in 
Sec.  436.602.
    (d) Use of less restrictive methodologies than under cash assistance 
program. (1) At State option, and subject to the conditions of 
paragraphs (d)(2) through (d)(5) of this section, the agency may apply 
income and resource methodologies that are less restrictive than the 
cash assistance methodologies in determining financial eligibility of 
the following groups:
    (i) Qualified pregnant women and children under the mandatory 
categorically needy group under Sec.  436.120;
    (ii) Low-income pregnant women, infants, and children specified in 
section 1902(a)(10)(i) (IV), (VI), and (VII) of the Act;
    (iii) Qualified Medicare beneficiaries specified in sections 
1902(a)(10)(E) and 1905(p) of the Act;
    (iv) Optional categorically needy individuals under groups 
established under subpart C of this part and section 1902(a)(10)(A)(ii) 
of the Act; and
    (v) Medically needy individuals under groups established under 
subpart D of this part and section 1902(a)(10)(C)(i)(III) of the Act.
    (2) The income and resource methodologies that an agency elects to 
apply to groups of individuals under paragraph (c)(1) of this section 
may be less restrictive, but no more restrictive, than:
    (i) For groups of aged, blind, and disabled individuals, the SSI 
methodologies; or
    (ii) For all other groups, the methodologies under the State plan 
most closely categorically related to the individual's status.
    (3) A financial methodology is considered to be no more restrictive 
if, by using the methodology, additional individuals may be eligible for 
Medicaid and no individuals who are otherwise eligible are by use of 
that methodology made ineligible for Medicaid.
    (4) The less restrictive methodology applied under this section must 
be comparable for all persons within each category of assistance (aged, 
or blind,

[[Page 202]]

or disabled, or AFDC-related) within each eligibility group. For 
example, if the agency chooses to apply a less restrictive income or 
resource methodology to aged individuals, it must apply that methodology 
to an eligibility group of all aged individuals within the selected 
group.
    (5) The application of the less restrictive income and resource 
methodologies permitted under this section must be consistent with the 
limitations and conditions on FFP specified in subpart K of this part.
    (e) [Reserved]
    (f) State plan requirements. (1) The State plan must specify that, 
except to the extent precluded by Sec.  436.602 in determining financial 
eligibility of individuals, the agency will apply the cash assistance 
financial methodologies and requirements, unless the agency chooses to 
apply less restrictive income and resource methodologies, in accordance 
with paragraph (d) of this section.
    (2) If the agency chooses to apply less restrictive income and 
resource methodologies, the State plan must specify:
    (i) The less restrictive methodologies that will used; and
    (ii) The eligibility groups or groups to which the less restrictive 
methodologies will be applied.

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.602  Financial responsibility of relatives and other individuals.

    (a) Subject to the provisions of paragraphs (b) and (c) of this 
section, in determining financial responsibility of relatives and other 
persons for individuals under Medicaid, the agency must use the 
following financial eligibility requirements and methodologies.
    (1) Except for a spouse of an individual or a parent for a child who 
is under age 21 or blind or disabled, the agency must not consider 
income and resources of any relative as available to an individual.
    (2) In relation to individuals under 21 (as described in section 
1905(a)(i) of the Act), the financial responsibility requirements and 
methodologies include considering the income and resources of parents or 
spouses whose income and resources would be considered if the individual 
under age 21 were dependent under the State's approved AFDC plan, 
whether or not they are actually contributed. These requirements and 
methodologies must be applied in accordance with provisions of the 
State's approved AFDC plan.
    (3) When a couple ceases to live together, the agency must count 
only the income and resources of the individual in determining his or 
her eligibility, beginning the first month following the month the 
couple ceases to live together.
    (b) The agency may apply income and resource methodologies that are 
less restrictive than the cash assistance methodologies as specified in 
the State plan in accordance with Sec.  436.601(d).
    (c) [Reserved]

[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]



Sec.  436.604  [Reserved]



Sec.  436.606  [Reserved]



Sec.  436.608  Applications for other benefits.

    (a) As a condition of eligibility, the agency must require 
applicants and recipients to take all necessary steps to obtain any 
annuities, pensions, and retirement and disability benefits to which 
they are entitled, unless they can show good cause for not doing so.
    (b) Annuities, pensions, and retirement and disability benefits 
include, but are not limited to, veterans' compensation and pensions, 
OASDI benefits, railroad retirement benefits, and unemployment 
compensation.

[43 FR 45218, Sept. 29, 1978. Redesignated at 58 FR 4937, Jan. 19, 1993]



Sec.  436.610  Assignment of rights to benefits.

    (a) As a condition of eligibility, the agency must require legally 
able applicants and recipients to:
    (1) Assign rights to the Medicaid agency to medical support and to 
payment for medical care from any third party;
    (2) Cooperate with the agency in establishing paternity and in 
obtaining medical support and payments, unless the individual 
establishes good cause for not cooperating, and except for individuals 
described in section

[[Page 203]]

1902(l)(1)(A) of the Act (poverty level pregnant women), who are exempt 
from cooperating in establishing paternity and obtaining medical support 
and payments from, or derived from, the father of the child born out of 
wedlock; 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) The requirements for assignment of rights must be applied 
uniformly for all groups covered under the plan.
    (c) The requirements of paragraph (a) of this section for assignment 
of rights to medical support and other payments and cooperation in 
obtaining medical support and payments are effective for medical 
assistance furnished on or after October 1, 1984. The requirement for 
cooperation in identifying and providing information for pursuing liable 
third parties is effective for medical assistance furnished on or after 
July 1, 1986.

[55 FR 48610, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990, as amended at 
58 FR 4908, Jan. 19, 1993. Redesignated at 58 FR 4937, Jan. 19, 1993]

Subpart H [Reserved]



        Subpart I_Financial Requirements for the Medically Needy



Sec.  436.800  Scope.

    This subpart prescribes financial requirements for determining the 
eligibility of medically needy individuals under subpart D of this part.

                     Medically Needy Income Standard



Sec.  436.811  Medically needy income standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
agency must use a single income standard for all covered medically needy 
groups that meets the requirements of this section.
    (b) The income standard must take into account the number of persons 
in the assistance unit. The standard may not diminish by the number of 
persons in the unit (for example, if the income level in the standard 
for an assistance unit of two is set at $400, the income level in the 
standard for an assistance unit of three may not be less than $400).
    (c) The income standard must be set at an amount that is no lower 
than the lowest income standard used on or after January 1, 1966, to 
determine eligibility under the cash assistance programs that are 
related to the State's covered medically needy group or groups of 
individuals under Sec.  436.301.
    (d) The income standard may vary based on the variations between 
shelter costs in urban areas and rural areas.

[58 FR 4938, Jan. 19, 1993]



Sec.  436.814  Medically needy income standard: State plan requirements.

    The State plan must specify the income standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

Medically Needy Income Eligibility and Liability for Payment of Medical 
                                Expenses



Sec.  436.831  Income eligibility.

    The agency must determine income eligibility of medically needy 
individuals in accordance with this section.
    (a) Budget periods. (1) The agency must use budget periods of not 
more than 6 months to compute income. The agency may use more than one 
budget period.
    (2) The agency must include in the budget period in which income is 
computed all or part of the 3-month retroactive period specified in 
Sec.  435.914. The budget period can begin no earlier then the first 
month in the retroactive period in which the individual received covered 
services.
    (3) If the agency elects to begin the first budget period for the 
medically needy in any month of the 3-month period prior to the date of 
application in which the applicant received covered services, this 
election applies to all medically needy groups.
    (b) Determining countable income. The agency must, to determine 
countable income, deduct amounts that would be deducted in determining 
eligibility

[[Page 204]]

under the State's approved plan for OAA, AFDC, AB, APTD, or AABD.
    (c) Eligibility based on countable income. If countable income 
determined under paragraph (b) of this section is equal to or less than 
the applicable income standard under Sec.  436.814, the individual is 
eligible for Medicaid.
    (d) Deduction of incurred medical expenses. If countable income 
exceeds the income standard, the agency must deduct from income medical 
expenses incurred by the individual or family or financially responsible 
relatives that are not subject to payment by a third party. An expense 
is incurred on the date liability for the expense arises. The agency 
must determine deductible incurred expenses in accordance with 
paragraphs (e), (f) and (g) of this section and deduct those expenses in 
accordance with paragraph (h) of this section.
    (e) Determination of deductible incurred expenses: Required 
deductions based on kinds of services. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) Expenses for Medicare and other health insurance premiums, and 
deductibles or coinsurance charges, including enrollment fees, 
copayments, or deductibles imposed under Sec.  447.51 or Sec.  447.53 of 
this chapter;
    (2) Expenses incurred by the individual or family or financially 
responsible relatives for necessary medical and remedial services that 
are recognized under State law but not included in the plan;
    (3) Expenses incurred by the individual or family or by financially 
responsible relatives for necessary medical and remedial services that 
are included in the plan, including those that exceed agency limitations 
on amount, duration or scope of services;
    (f) Determination of deductible incurred expenses: Required 
deductions based on the age of bills. Subject to the provisions of 
paragraph (g) of this section, in determining incurred medical expenses 
to be deducted from income, the agency must include the following:
    (1) For the first budget period or periods that include only months 
before the month of application for medical assistance, expenses 
incurred during such period or periods, whether paid or unpaid, to the 
extent that the expenses have not been deducted previously in 
establishing eligibility;
    (2) For the first prospective budget period that also includes any 
of the 3 months before the month of application for medical assistance, 
expenses incurred during such budget period, whether paid or unpaid, to 
the extent that the expenses have not been deducted previously in 
establishing eligibility;
    (3) For the first prospective budget period that includes none of 
the months preceding the month of application, expenses incurred during 
such budget period and any of the 3 preceding months, whether paid or 
unpaid, to the extent that the expenses have not been deducted 
previously in establishing eligibility;
    (4) For any of the 3 months preceding the month of application that 
are not includable under paragraph (f)(2) of this section, expenses 
incurred in the 3-month period that were a current liability of the 
individual in any such month for which a spenddown calculation is made 
and that had not been previously deducted from income in establishing 
eligibility for medical assistance;
    (5) Current payments (that is, payments made in the current budget 
period) on other expenses incurred before the current budget period and 
not previously deducted from income in any budget period in establishing 
eligibility for such period; and
    (6) If the individual's eligibility for medical assistance was 
established in each such preceding period, expenses incurred before the 
current budget period but not previously deducted from income, to the 
extent that such expenses are unpaid and are:
    (i) Described in paragraphs (e)(1) through (e)(3) of this section; 
and
    (ii) Are carried over from the preceding budget period or periods 
because the individual had a spenddown liability in each such preceding 
period that was met without deducting all such incurred, unpaid 
expenses.
    (g) Determination of deductible incurred medical expenses: Optional 
deductions. In determining incurred medical expenses

[[Page 205]]

to be deducted from income, the agency--
    (1) May include medical institutional expenses (other than expenses 
in acute care facilities) projected to the end of the budget period at 
the Medicaid reimbursement rate;
    (2) May, to the extent determined by the agency and specified in its 
approved plan, include expenses incurred earlier than the third month 
before the month of application; and
    (3) May set reasonable limits on the amount to be deducted for 
expenses specified in paragraphs (e)(1), (e)(2), and (g)(2) of this 
section.
    (h) Order of deduction. The agency must deduct incurred medical 
expenses that are deductible under paragraphs (e), (f), and (g) of this 
section, in the order prescribed under one of the following three 
options:
    (1) Type of service. Under this option, the agency deducts expenses 
in the following order based on type of service:
    (i) Cost-sharing expenses as specified in paragraph (e)(1) of this 
section.
    (ii) Services not included in the State plan as specified in 
paragraph (e)(2) of this section.
    (iii) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that exceed agency limitations on amount, 
duration, or scope of services.
    (iv) Services included in the State plan as specified in paragraph 
(e)(3) of this section but that are within agency limitations on amount, 
duration, or scope of services.
    (2) Chronological order by service date. Under this option, the 
agency deducts expenses in chronological order by the date each service 
is furnished, or in the case of insurance premiums, coinsurance, or 
deductibles charges the date such amounts are due. Expenses for services 
furnished on the same day may be deducted in any reasonable order 
established by the State.
    (3) Chronological order by bill submission date. Under this option, 
the agency deducts expenses in chronological order by the date each bill 
is submitted to the agency by the individual. If more than one bill is 
submitted at one time, the agency must deduct the bills from income in 
the order prescribed in either paragraph (h)(1) or (h)(2) of this 
section.
    (i) Eligibility based on incurred medical expenses. (1) Whether a 
State elects partial or full month coverage, an individual who is 
expected to contribute a portion of his or her income toward the costs 
of institutional care or home and community-based services under Sec.  
436.832 is eligible on the first day of the applicable budget 
(spenddown) period--
    (i) If his or her spenddown liability is met after the first day of 
the budget period; and
    (ii) If beginning eligibility after the first day of the budget 
period makes the individual's share of health care expenses under Sec.  
436.832 greater than the individual's contributable income determined 
under this section.
    (2) At the end of the prospective period specified in paragraph 
(f)(2) or (f)(3) of this section and any subsequent prospective period 
or, if earlier, when any significant change occurs, the agency must 
reconcile the projected amounts with the actual amounts incurred, or 
with changes in circumstances, to determine if the adjusted deduction of 
incurred expenses reduces income to the income standard.
    (3) Except as provided in paragraph (i)(1) of this section, if 
agencies elect partial month coverage, an individual is eligible for 
Medicaid on the day that the deduction of incurred health care expenses 
(and of projected institutional expenses if the agency elects the option 
under paragraph (g)(1) of this section) reduces income to the income 
standard.
    (4) Except as provided in paragraph (i)(1) of this section, if 
agencies elect full month coverage, an individual is eligible on the 
first day of the month in which spenddown liability is met.
    (5) Expenses used to meet spenddown liability are not reimbursable 
under Medicaid. Therefore, to the extent necessary to prevent the 
transfer of an individual's spenddown liability to the Medicaid program, 
States must reduce the amount of provider charges that would otherwise 
be reimbursable under Medicaid.

[59 FR 1674, Jan. 12, 1994]

[[Page 206]]



Sec.  436.832  Post-eligibility treatment of income of institutionalized individuals: Application of patient income to the cost of care.

    (a) Basic rules. (1) The agency must reduce its payment to an 
institution, for services provided to an individual specified in 
paragraph (b) of this section, by the amount that remains after 
deducting the amounts specified in paragraphs (c) and (d) of this 
section from the individual's total income.
    (2) The individual's income must be determined in accordance with 
paragraph (e) of this section.
    (3) Medical expenses must be determined in accordance with paragraph 
(f) of this section.
    (b) Applicability. This section applies to medically needy 
individuals in medical institutions and intermediate care facilities.
    (c) Required deductions. The agency must deduct the following 
amounts, in the following order, from the individual's total income as 
determined under paragraph (e) of this section. Income that was 
disregarded in determining eligibility must be considered in this 
process.
    (1) Personal needs allowance. A personal needs allowance that is 
reasonable in amount for clothing and other personal needs of the 
individual while in the institution. This protected personal needs 
allowance must be at least--
    (i) $30 a month for an aged, blind, or disabled individual, 
including a child applying for Medicaid on the basis of blindness or 
disability;
    (ii) $60 a month for an institutionalized couple if both spouses are 
aged, blind, or disabled and their income is considered available to 
each other in determining eligibility; and
    (iii) For other individuals, a reasonable amount set by the agency, 
based on a reasonable difference in their personal needs from those of 
the aged, blind, or disabled.
    (2) Maintenance needs of spouse. For an individual with only a 
spouse at home, an additional amount for the maintenance needs of the 
spouse. This amount must be based on a reasonable assessment of need but 
must not exceed the higher of--
    (i) The amount of the highest need standard for an individual 
without income and resources under the State's approved plan for OAA, 
AFDC, AB, APTD, or AABD; or
    (ii) The amount of the highest medically needy income standard for 
one person established under Sec.  436.811.
    (3) Maintenance needs of family. For an individual with a family at 
home, an additional amount for the maintenance needs of the family. This 
amount must--
    (i) Be based on a reasonable assessment of their financial need;
    (ii) Be adjusted for the number of family members living in the 
home; and
    (iii) Not exceed the highest of the following need standards for a 
family of the same size:
    (A) The standard used to determine eligibility under the State's 
Medicaid plan, as provided for in Sec.  436.811.
    (B) The standard used to determine eligibility under the State's 
approved AFDC plan.
    (4) Expenses not subject to third party payment. Amounts for 
incurred expenses for medical or remedial care that are not subject to 
payment by a third party, including--
    (i) Medicare and other health insurance premiums, deductibles, or 
coinsurance charges; and
    (ii) Necessary medical or remedial care recognized under State law 
but not covered under the State's Medicaid plan, subject to reasonable 
limits the agency may establish on amounts of these expenses.
    (d) Optional deduction: Allowance for home maintenance. For single 
individuals and couples, an amount (in addition to the personal needs 
allowance) for maintenance of the individual's or couple's home if--
    (1) The amount is deducted for not more than a 6-month period; and
    (2) A physician has certified that either of the individuals is 
likely to return to the home within that period.
    (e) Determination of income--(1) Option. In determining the amount 
of an individual's income to be used to reduce the agency's payment to 
the institution, the agency may use total income received or it may 
project total

[[Page 207]]

monthly income for a prospective period not to exceed 6 months.
    (2) Basis for projection. The agency must base the projection on 
income received in the preceding period, not to exceed 6 months, and on 
income expected to be received.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (e)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with income received.
    (f) Determination of medical expenses--(1) Option. In determining 
the amount of medical expenses to be deducted from an individual's 
income, the agency may deduct incurred medical expenses, or it may 
project medical expenses for a prospective period not to exceed 6 
months.
    (2) Basis for projection. The agency must base the estimate on 
medical expenses incurred in the preceding period, not to exceed 6 
months, and medical expenses expected to be incurred.
    (3) Adjustments. At the end of the prospective period specified in 
paragraph (f)(1) of this section, or when any significant change occurs, 
the agency must reconcile estimates with incurred medical expenses.

[45 FR 24888, Apr. 11, 1980, as amended at 46 FR 47991, Sept. 30, 1981; 
48 FR 5735, Feb. 8, 1983; 53 FR 3597, Feb. 8, 1988; 56 FR 8851, 8854, 
Mar. 1, 1991; 58 FR 4938, Jan. 19, 1993]

                    Medically Needy Resource Standard



Sec.  436.840  Medically needy resource standard: General requirements.

    (a) To determine eligibility of medically needy individuals, the 
Medicaid agency must use a single resource standard that is set at an 
amount that is no lower than the lowest resource standard used on or 
after January 1, 1966, to determine eligibility under the cash 
assistance programs that are related to the State's covered medically 
needy group or groups of individuals under Sec.  436.301.
    (b) The resource standard established under paragraph (a) of this 
section may not diminish by an increase in the number of persons in the 
assistance unit. For example, the resource level in the standard for an 
assistance unit of three may not be less than that set for an assistance 
unit of two.

[58 FR 4938, Jan. 19, 1993]



Sec.  436.843  Medically needy resource standard: State plan requirements.

    The State plan must specify the resource standard for the covered 
medically needy groups.

[58 FR 4938, Jan. 19, 1993]

            Determining Eligibility on the Basis of Resources



Sec.  436.845  Medically needy resource eligibility.

    To determine eligibility on the basis of resources for medically 
needy individuals, the agency must--
    (a) Consider only the individual's resources and those that are 
considered available to him under the financial responsibility 
requirements for relatives under Sec.  436.602;
    (b) Consider only resources available during the period for which 
income is computed under Sec.  436.831(a);
    (c) Deduct the value of resources that would be deducted in 
determining eligibility under the State's plan for OAA, AFDC, AB, APTD, 
or AABD or under the State's less restrictive financial methodology 
specified in the State Medicaid plan in accordance with Sec.  436.601. 
In determining the amount of an individual's resources for Medicaid 
eligibility, States must count amounts of resources that otherwise would 
not be counted under the conditional eligibility provisions of the AFDC 
program.
    (d) Apply the resource standards established under Sec.  436.840.

[43 FR 45218, Sept. 29, 1978, as amended at 46 FR 47992, Sept. 30, 1981; 
58 FR 4938, Jan. 19, 1993]



   Subpart J_Eligibility in Guam, Puerto Rico, and the Virgin Islands

    Source: 44 FR 17939, Mar. 23, 1979, unless otherwise noted.



Sec.  436.900  Scope.

    This subpart sets forth requirements for processing applications, 
determining eligibility, and furnishing Medicaid.

[[Page 208]]



Sec.  436.901  General requirements.

    The Medicaid agency must comply with all the requirements of part 
435, subpart J, of this subchapter, except those specified in Sec.  
435.909.



Sec.  436.909  Automatic entitlement to Medicaid following a determination of eligibility under other programs.

    The agency may not require a separate application for Medicaid from 
an individual if the individual receives cash assistance under a State 
plan for OAA, AFDC, AB, APTD, or AABD.



             Subpart K_Federal Financial Participation (FFP)



Sec.  436.1000  Scope.

    This subpart specifies when, and the extent to which, FFP is 
available in expenditures for determining eligibility and for Medicaid 
services to individuals determined eligible under this part, and 
prescribes limitations and conditions on FFP for those expenditures.

 FFP for Expenditures for Determining Eligibility and Providing Services



Sec.  436.1001  FFP for administration.

    (a) FFP is available in the necessary administrative costs the State 
incurs in--
    (1) Determining and redetermining Medicaid eligibility and in 
providing Medicaid to eligible individuals; and
    (2) Determining presumptive eligibility for children and providing 
services to presumptively eligible children.
    (b) Administrative costs include any costs incident to an eye 
examination or medical examination to determine whether an individual is 
blind or disabled.

[43 FR 45218, Sept. 29, 1978, as amended at 66 FR 2668, Jan. 11, 2001]



Sec.  436.1002  FFP for services.

    (a) FFP is available in expenditures for Medicaid services for all 
recipients whose coverage is required or allowed under this part.
    (b) FFP is available in expenditures for services provided to 
recipients who were eligible for Medicaid in the month in which the 
medical care or services were provided, except that, for recipients who 
establish eligibility for Medicaid by deducting incurred medical 
expenses from income, FFP is not available for expenses that are the 
recipient's liability.
    (c) FFP is available in expenditures for services covered under the 
plan that are furnished--
    (1) To children who are determined by a qualified entity to be 
presumptively eligible;
    (2) During a period of presumptive eligibility;
    (3) By a provider that is eligible for payment under the plan; and
    (4) Regardless of whether the children are determined eligible for 
Medicaid following the period of presumptive eligibility.

[43 FR 45218, Sept. 29, 1978, as amended at 44 FR 17940, Mar. 23, 1979; 
66 FR 2669, Jan. 11, 2001]



Sec.  436.1003  Recipients overcoming certain conditions of eligibility.

    FFP is available for a temporary period specified in the State plan 
in expenditures for services provided to recipients who are overcoming 
certain eligibility conditions, including blindness, disability, 
continued absence or incapacity of a parent, or unemployment of a 
parent.

[45 FR 24888, Apr. 11, 1980]



Sec.  436.1004  FFP in expenditures for medical assistance for individuals who have declared United States citizenship or nationality under section 1137(d) of 
          the Act and with respect to whom the State has not documented 
          citizenship and identity.

    Except for individuals described in Sec.  436.406(a)(1)(v), FFP will 
not be available to a State with respect to expenditures for medical 
assistance furnished to individuals unless the State has obtained 
satisfactory documentary evidence of citizenship or national status, as 
described in Sec.  436.407 of this chapter that complies with the 
requirements of section 1903(x) of the Act.

[72 FR 38697, July 13, 2007]

[[Page 209]]



Sec.  436.1005  Institutionalized individuals.

    (a) FFP is not available in expenditures for services provided to--
    (1) Individuals who are inmates of public institutions as defined in 
Sec.  435.1010 of this chapter; or
    (2) Individuals under age 65 who are patients in an institution for 
mental diseases unless they are under age 22 and are receiving inpatient 
psychiatric services under Sec.  440.160 of this subchapter.
    (b) The exclusion of FFP described in paragraph (a) of this section 
does not apply during that part of the month in which the individual is 
not an inmate of a public institution or a patient in an institution for 
mental diseases.
    (c) An individual on conditional release or convalescent leave from 
an institution for mental diseases is not considered to be a patient in 
that institution. However, such an individual who is under age 22 and 
has been receiving inpatient pyschiatric services under Sec.  440.160 of 
this subchapter is considered to be a patient in the institution until 
he is unconditionally released or, if earlier, the date he reaches age 
22.

[43 FR 45204, Sept. 29, 1978, as amended at 50 FR 13200, Apr. 3, 1985; 
50 FR 38811, Sept. 25, 1985. Redesignated and amended at 71 FR 39229, 
July 12, 2006]



Sec.  436.1006  Definitions relating to institutional status.

    For purposes of FFP, the definitions in Sec.  435.1010 of this 
chapter apply to this part.

[44 FR 17939, Mar. 23, 1979. Redesignated and amended at 71 FR 39229, 
July 12, 2006]



             Subpart L_Option for Coverage of Special Groups

    Source: 66 FR 2669, Jan. 11, 2001, unless otherwise noted.



Sec.  436.1100  Basis and scope.

    (a) Statutory basis. Section 1920A of the Act allows States to 
provide Medicaid services to children under age 19 during a period of 
presumptive eligibility, prior to a formal determination of Medicaid 
eligibility.
    (b) Scope. This subpart prescribes the requirements for providing 
medical assistance to special groups who are not eligible for Medicaid 
as categorically or medically needy.

                  Presumptive Eligibility for Children



Sec.  436.1101  Definitions related to presumptive eligibility period for children.

    Application form means at a minimum the form used to apply for 
Medicaid under the poverty-level-related eligibility groups described in 
section 1902(l) of the Act or a joint form for children to apply for the 
State Children's Health Insurance Program and Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a Medicaid application 
has been filed, the day on which a decision is made on that application; 
or
    (2) In the case of a child on whose behalf a Medicaid application 
has not been filed, the last day of the month following the month in 
which the determination of presumptive eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish the regular Medicaid eligibility of a child of the age 
involved.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive

[[Page 210]]

assistance under the special nutrition program for women, infants, and 
children (WIC) under section 17 of the Child Nutrition Act of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance under the Medicaid State plan, or eligibility of a child for 
child health assistance under the State Children's Health Insurance 
Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under this title, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    Services means all services covered under the plan including EPSDT 
(see part 440 of this chapter.)

[66 FR 2669, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec.  436.1102  General rules.

    (a) The agency may provide services to children under age 19 during 
one or more periods of presumptive eligibility following a determination 
made by a qualified entity that the child's estimated gross family 
income or, at the State's option, the child's estimated family income 
after applying simple disregards, does not exceed the applicable income 
standard.
    (b) If the agency elects to provide services to children during a 
period of presumptive eligibility, the agency must--
    (1) Provide qualified entities with application forms for Medicaid 
and information on how to assist parents, caretakers and other persons 
in completing and filing such forms;
    (2) Establish procedures to ensure that qualified entities--
    (i) Notify the parent or caretaker of the child at the time a 
determination regarding presumptive eligibility is made, in writing and 
orally if appropriate, of such determination;
    (ii) Provide the parent or caretaker of the child with a Medicaid 
application form;
    (iii) Within 5 working days after the date that the determination is 
made, notify the agency that a child is presumptively eligible;
    (iv) For children determined to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate, that--
    (A) If a Medicaid application on behalf of the child is not filed by 
the last day of the following month, the child's presumptive eligibility 
will end on that last day; and
    (B) If a Medicaid application on behalf of the child is filed by the 
last day of the following month, the child's presumptive eligibility 
will end on the day that a decision is made on the Medicaid application; 
and
    (v) For children determined not to be presumptively eligible, notify 
the child's parent or caretaker at the time the determination is made, 
in writing and orally if appropriate--
    (A) Of the reason for the determination; and
    (B) That he or she may file an application for Medicaid on the 
child's behalf with the Medicaid agency; and
    (3) Provide all services covered under the plan, including EPSDT.
    (4) Allow determinations of presumptive eligibility to be made by 
qualified entities on a Statewide basis.
    (c) The agency must adopt reasonable standards regarding the number 
of periods of presumptive eligibility that will be authorized for a 
child in a given time frame.

[[Page 211]]



PART 438_MANAGED CARE--Table of Contents




                      Subpart A_General Provisions

Sec.
438.1 Basis and scope.
438.2 Definitions.
438.6 Contract requirements.
438.8 Provisions that apply to PIHPs and PAHPs.
438.10 Information requirements.
438.12 Provider discrimination prohibited.

                    Subpart B_State Responsibilities

438.50 State Plan requirements.
438.52 Choice of MCOs, PIHPs, PAHPs, and PCCMs.
438.56 Disenrollment: Requirements and limitations.
438.58 Conflict of interest safeguards.
438.60 Limit on payment to other providers.
438.62 Continued services to recipients.
438.66 Monitoring procedures.

                Subpart C_Enrollee Rights and Protections

438.100 Enrollee rights.
438.102 Provider-enrollee communications.
438.104 Marketing activities.
438.106 Liability for payment.
438.108 Cost sharing.
438.114 Emergency and poststabilization services.
438.116 Solvency standards.

        Subpart D_Quality Assessment and Performance Improvement

438.200 Scope.
438.202 State responsibilities.
438.204 Elements of State quality strategies.

                            Access Standards

438.206 Availability of services.
438.207 Assurances of adequate capacity and services.
438.208 Coordination and continuity of care.
438.210 Coverage and authorization of services.

                    Structure and Operation Standards

438.214 Provider selection.
438.218 Enrollee information.
438.224 Confidentiality.
438.226 Enrollment and disenrollment.
438.228 Grievance systems.
438.230 Subcontractual relationships and delegation.

                  Measurement and Improvement Standards

438.236 Practice guidelines.
438.240 Quality assessment and performance improvement program.
438.242 Health information systems.

                    Subpart E_External Quality Review

438.310 Basis, scope, and applicability.
438.320 Definitions.
438.350 State responsibilities.
438.352 External quality review protocols.
438.354 Qualifications of external quality review organizations.
438.356 State contract options.
438.358 Activities related to external quality review.
438.360 Nonduplication of mandatory activities.
438.362 Exemption from external quality review.
438.364 External quality review results.
438.370 Federal financial participation.

                       Subpart F_Grievance System

438.400 Statutory basis and definitions.
438.402 General requirements.
438.404 Notice of action.
438.406 Handling of grievances and appeals.
438.408 Resolution and notification: Grievances and appeals.
438.410 Expedited resolution of appeals.
438.414 Information about the grievance system to providers and 
          subcontractors.
438.416 Recordkeeping and reporting requirements.
438.420 Continuation of benefits while the MCO or PIHP appeal and the 
          State fair hearing are pending.
438.424 Effectuation of reversed appeal resolutions.

Subpart G [Reserved]

             Subpart H_Certifications and Program Integrity

438.600 Statutory basis.
438.602 Basic rule.
438.604 Data that must be certified.
438.606 Source, content, and timing of certification.
438.608 Program integrity requirements.
438.610 Prohibited affiliations with individuals debarred by Federal 
          agencies.

                           Subpart I_Sanctions

438.700 Basis for imposition of sanctions.
438.702 Types of intermediate sanctions.
438.704 Amounts of civil money penalties.
438.706 Special rules for temporary management.
438.708 Termination of an MCO or PCCM contract.
438.710 Due process: Notice of sanction and pre-termination hearing.
438.722 Disenrollment during termination hearing process.
438.724 Notice to CMS.
438.726 State plan requirement.
438.730 Sanction by CMS: Special rules for MCOs.

[[Page 212]]

        Subpart J_Conditions for Federal Financial Participation

438.802 Basic requirements.
438.806 Prior approval.
438.808 Exclusion of entities.
438.810 Expenditures for enrollment broker services.
438.812 Costs under risk and nonrisk contracts.

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

    Source: 67 FR 41095, June 14, 2002, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  438.1  Basis and scope.

    (a) Statutory basis. This part is based on sections 1902(a)(4), 
1903(m), 1905(t), and 1932 of the Act.
    (1) Section 1902(a)(4) requires that States provide for methods of 
administration that the Secretary finds necessary for proper and 
efficient operation of the State plan. The application of the 
requirements of this part to PIHPs and PAHPs that do not meet the 
statutory definition of an MCO or a PCCM is under the authority in 
section 1902(a)(4).
    (2) Section 1903(m) contains requirements that apply to 
comprehensive risk contracts.
    (3) Section 1903(m)(2)(H) provides that an enrollee who loses 
Medicaid eligibility for not more than 2 months may be enrolled in the 
succeeding month in the same MCO or PCCM if that MCO or PCCM still has a 
contract with the State.
    (4) Section 1905(t) contains requirements that apply to PCCMs.
    (5) Section 1932--
    (i) Provides that, with specified exceptions, a State may require 
Medicaid recipients to enroll in MCOs or PCCMs;
    (ii) Establishes the rules that MCOs, PCCMs, the State, and the 
contracts between the State and those entities must meet, including 
compliance with requirements in sections 1903(m) and 1905(t) of the Act 
that are implemented in this part;
    (iii) Establishes protections for enrollees of MCOs and PCCMs;
    (iv) Requires States to develop a quality assessment and performance 
improvement strategy;
    (v) Specifies certain prohibitions aimed at the prevention of fraud 
and abuse;
    (vi) Provides that a State may not enter into contracts with MCOs 
unless it has established intermediate sanctions that it may impose on 
an MCO that fails to comply with specified requirements; and
    (vii) Makes other minor changes in the Medicaid program.
    (b) Scope. This part sets forth requirements, prohibitions, and 
procedures for the provision of Medicaid services through MCOs, PIHPs, 
PAHPs, and PCCMs. Requirements vary depending on the type of entity and 
on the authority under which the State contracts with the entity. 
Provisions that apply only when the contract is under a mandatory 
managed care program authorized by section 1932(a)(1)(A) of the Act are 
identified as such.



Sec.  438.2  Definitions.

    As used in this part--
    Capitation payment means a payment the State agency makes 
periodically to a contractor on behalf of each recipient enrolled under 
a contract for the provision of medical services under the State plan. 
The State agency makes the payment regardless of whether the particular 
recipient receives services during the period covered by the payment.
    Comprehensive risk contract means a risk contract that covers 
comprehensive services, that is, inpatient hospital services and any of 
the following services, or any three or more of the following services:
    (1) Outpatient hospital services.
    (2) Rural health clinic services.
    (3) FQHC services.
    (4) Other laboratory and X-ray services.
    (5) Nursing facility (NF) services.
    (6) Early and periodic screening, diagnostic, and treatment (EPSDT) 
services.
    (7) Family planning services.
    (8) Physician services.
    (9) Home health services.
    Federally qualified HMO means an HMO that CMS has determined is a 
qualified HMO under section 1310(d) of the PHS Act.

[[Page 213]]

    Health care professional means a physician or any of the following: 
a podiatrist, optometrist, chiropractor, psychologist, dentist, 
physician assistant, physical or occupational therapist, therapist 
assistant, speech-language pathologist, audiologist, registered or 
practical nurse (including nurse practitioner, clinical nurse 
specialist, certified registered nurse anesthetist, and certified nurse 
midwife), licensed certified social worker, registered respiratory 
therapist, and certified respiratory therapy technician.
    Health insuring organization (HIO) means a county operated entity, 
that in exchange for capitation payments, covers services for 
recipients--
    (1) Through payments to, or arrangements with, providers;
    (2) Under a comprehensive risk contract with the State; and
    (3) Meets the following criteria--
    (i) First became operational prior to January 1, 1986; or
    (ii) Is described in section 9517(e)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as amended by section 4734 of the Omnibus 
Budget Reconciliation Act of 1990).
    Managed care organization (MCO) means an entity that has, or is 
seeking to qualify for, a comprehensive risk contract under this part, 
and that is--
    (1) A Federally qualified HMO that meets the advance directives 
requirements of subpart I of part 489 of this chapter; or
    (2) Any public or private entity that meets the advance directives 
requirements and is determined to also meet the following conditions:
    (i) Makes the services it provides to its Medicaid enrollees as 
accessible (in terms of timeliness, amount, duration, and scope) as 
those services are to other Medicaid recipients within the area served 
by the entity.
    (ii) Meets the solvency standards of Sec.  438.116.
    Nonrisk contract means a contract under which the contractor--
    (1) Is not at financial risk for changes in utilization or for costs 
incurred under the contract that do not exceed the upper payment limits 
specified in Sec.  447.362 of this chapter; and
    (2) May be reimbursed by the State at the end of the contract period 
on the basis of the incurred costs, subject to the specified limits.
    Prepaid ambulatory health plan (PAHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Does not provide or arrange for, and is not otherwise 
responsible for the provision of any inpatient hospital or institutional 
services for its enrollees; and
    (3) Does not have a comprehensive risk contract.
    Prepaid inpatient health plan (PIHP) means an entity that--
    (1) Provides medical services to enrollees under contract with the 
State agency, and on the basis of prepaid capitation payments, or other 
payment arrangements that do not use State plan payment rates;
    (2) Provides, arranges for, or otherwise has responsibility for the 
provision of any inpatient hospital or institutional services for its 
enrollees; and
    (3) Does not have a comprehensive risk contract.
    Primary care means all health care services and laboratory services 
customarily furnished by or through a general practitioner, family 
physician, internal medicine physician, obstetrician/gynecologist, or 
pediatrician, to the extent the furnishing of those services is legally 
authorized in the State in which the practitioner furnishes them.
    Primary care case management means a system under which a PCCM 
contracts with the State to furnish case management services (which 
include the location, coordination and monitoring of primary health care 
services) to Medicaid recipients.
    Primary care case manager (PCCM) means a physician, a physician 
group practice, an entity that employs or arranges with physicians to 
furnish primary care case management services or, at State option, any 
of the following:
    (1) A physician assistant.
    (2) A nurse practitioner.
    (3) A certified nurse-midwife.

[[Page 214]]

    Risk contract means a contract under which the contractor--
    (1) Assumes risk for the cost of the services covered under the 
contract; and
    (2) Incurs loss if the cost of furnishing the services exceeds the 
payments under the contract.



Sec.  438.6  Contract requirements.

    (a) Regional office review. The CMS Regional Office must review and 
approve all MCO, PIHP, and PAHP contracts, including those risk and 
nonrisk contracts that, on the basis of their value, are not subject to 
the prior approval requirement in Sec.  438.806.
    (b) Entities eligible for comprehensive risk contracts. A State 
agency may enter into a comprehensive risk contract only with the 
following:
    (1) An MCO.
    (2) The entities identified in section 1903(m)(2)(B)(i), (ii), and 
(iii) of the Act.
    (3) Community, Migrant, and Appalachian Health Centers identified in 
section 1903(m)(2)(G) of the Act. Unless they qualify for a total 
exemption under section 1903(m)(2)(B) of the Act, these entities are 
subject to the regulations governing MCOs under this part.
    (4) An HIO that arranges for services and became operational before 
January 1986.
    (5) An HIO described in section 9517(c)(3) of the Omnibus Budget 
Reconciliation Act of 1985 (as added by section 4734(2) of the Omnibus 
Budget Reconciliation Act of 1990).
    (c) Payments under risk contracts--(1) Terminology. As used in this 
paragraph, the following terms have the indicated meanings:
    (i) Actuarially sound capitation rates means capitation rates that--
    (A) Have been developed in accordance with generally accepted 
actuarial principles and practices;
    (B) Are appropriate for the populations to be covered, and the 
services to be furnished under the contract; and
    (C) Have been certified, as meeting the requirements of this 
paragraph (c), by actuaries who meet the qualification standards 
established by the American Academy of Actuaries and follow the practice 
standards established by the Actuarial Standards Board.
    (ii) Adjustments to smooth data means adjustments made, by cost-
neutral methods, across rate cells, to compensate for distortions in 
costs, utilization, or the number of eligibles.
    (iii) Cost neutral means that the mechanism used to smooth data, 
share risk, or adjust for risk will recognize both higher and lower 
expected costs and is not intended to create a net aggregate gain or 
loss across all payments.
    (iv) Incentive arrangement means any payment mechanism under which a 
contractor may receive additional funds over and above the capitation 
rates it was paid for meeting targets specified in the contract.
    (v) Risk corridor means a risk sharing mechanism in which States and 
contractors share in both profits and losses under the contract outside 
of predetermined threshold amount, so that after an initial corridor in 
which the contractor is responsible for all losses or retains all 
profits, the State contributes a portion toward any additional losses, 
and receives a portion of any additional profits.
    (2) Basic requirements. (i) All payments under risk contracts and 
all risk-sharing mechanisms in contracts must be actuarially sound.
    (ii) The contract must specify the payment rates and any risk-
sharing mechanisms, and the actuarial basis for computation of those 
rates and mechanisms.
    (3) Requirements for actuarially sound rates. In setting actuarially 
sound capitation rates, the State must apply the following elements, or 
explain why they are not applicable:
    (i) Base utilization and cost data that are derived from the 
Medicaid population, or if not, are adjusted to make them comparable to 
the Medicaid population.
    (ii) Adjustments made to smooth data and adjustments to account for 
factors such as medical trend inflation, incomplete data, MCO, PIHP, or 
PAHP administration (subject to the limits in paragraph (c)(4)(ii) of 
this section), and utilization;
    (iii) Rate cells specific to the enrolled population, by--
    (A) Eligibility category;
    (B) Age;

[[Page 215]]

    (C) Gender;
    (D) Locality/region; and
    (E) Risk adjustments based on diagnosis or health status (if used).
    (iv) Other payment mechanisms and utilization and cost assumptions 
that are appropriate for individuals with chronic illness, disability, 
ongoing health care needs, or catastrophic claims, using risk 
adjustment, risk sharing, or other appropriate cost-neutral methods.
    (4) Documentation. The State must provide the following 
documentation:
    (i) The actuarial certification of the capitation rates.
    (ii) An assurance (in accordance with paragraph (c)(3) of this 
section) that all payment rates are--
    (A) Based only upon services covered under the State plan (or costs 
directly related to providing these services, for example, MCO, PIHP, or 
PAHP administration).
    (B) Provided under the contract to Medicaid-eligible individuals.
    (iii) The State's projection of expenditures under its previous 
year's contract (or under its FFS program if it did not have a contract 
in the previous year) compared to those projected under the proposed 
contract.
    (iv) An explanation of any incentive arrangements, or stop-loss, 
reinsurance, or any other risk-sharing methodologies under the contract.
    (5) Special contract provisions. (i) Contract provisions for 
reinsurance, stop-loss limits or other risk-sharing methodologies must 
be computed on an actuarially sound basis.
    (ii) If risk corridor arrangements result in payments that exceed 
the approved capitation rates, these excess payments will not be 
considered actuarially sound to the extent that they result in total 
payments that exceed the amount Medicaid would have paid, on a fee-for-
service basis, for the State plan services actually furnished to 
enrolled individuals, plus an amount for MCO, PIHP, or PAHP 
administrative costs directly related to the provision of these 
services.
    (iii) Contracts with incentive arrangements may not provide for 
payment in excess of 105 percent of the approved capitation payments 
attributable to the enrollees or services covered by the incentive 
arrangement, since such total payments will not be considered to be 
actuarially sound.
    (iv) For all incentive arrangements, the contract must provide that 
the arrangement is--
    (A) For a fixed period of time;
    (B) Not to be renewed automatically;
    (C) Made available to both public and private contractors;
    (D) Not conditioned on intergovernmental transfer agreements; and
    (E) Necessary for the specified activities and targets.
    (v) If a State makes payments to providers for graduate medical 
education (GME) costs under an approved State plan, the State must 
adjust the actuarially sound capitation rates to account for the GME 
payments to be made on behalf of enrollees covered under the contract, 
not to exceed the aggregate amount that would have been paid under the 
approved State plan for FFS. States must first establish actuarially 
sound capitation rates prior to making adjustments for GME.
    (d) Enrollment discrimination prohibited. Contracts with MCOs, 
PIHPs, PAHPs, and PCCMs must provide as follows:
    (1) The MCO, PIHP, PAHP, or PCCM accepts individuals eligible for 
enrollment in the order in which they apply without restriction (unless 
authorized by the Regional Administrator), up to the limits set under 
the contract.
    (2) Enrollment is voluntary, except in the case of mandatory 
enrollment programs that meet the conditions set forth in Sec.  
438.50(a).
    (3) The MCO, PIHP, PAHP, or PCCM will not, on the basis of health 
status or need for health care services, discriminate against 
individuals eligible to enroll.
    (4) The MCO, PIHP, PAHP, or PCCM will not discriminate against 
individuals eligible to enroll on the basis of race, color, or national 
origin, and will not use any policy or practice that has the effect of 
discriminating on the basis of race, color, or national origin.
    (e) Services that may be covered. An MCO, PIHP, or PAHP contract may 
cover, for enrollees, services that are in addition to those covered 
under the State plan, although the cost of these

[[Page 216]]

services cannot be included when determining the payment rates under 
Sec.  438.6(c).
    (f) Compliance with contracting rules. All contracts under this 
subpart must:
    (1) Comply with all applicable Federal and State laws and 
regulations including title VI of the Civil Rights Act of 1964; title IX 
of the Education Amendments of 1972 (regarding education programs and 
activities); the Age Discrimination Act of 1975; the Rehabilitation Act 
of 1973; and the Americans with Disabilities Act; and
    (2) Meet all the requirements of this section.
    (g) Inspection and audit of financial records. Risk contracts must 
provide that the State agency and the Department may inspect and audit 
any financial records of the entity or its subcontractors.
    (h) Physician incentive plans. (1) MCO, PIHP, and PAHP contracts 
must provide for compliance with the requirements set forth in 
Sec. Sec.  422.208 and 422.210 of this chapter.
    (2) In applying the provisions of Sec. Sec.  422.208 and 422.210 of 
this chapter, references to ``M+C organization'', ``CMS'', and 
``Medicare beneficiaries'' must be read as references to ``MCO, PIHP, or 
PAHP'', ``State agency'' and ``Medicaid recipients'', respectively.
    (i) Advance directives. (1) All MCO and PIHP contracts must provide 
for compliance with the requirements of Sec.  422.128 of this chapter 
for maintaining written policies and procedures for advance directives.
    (2) All PAHP contracts must provide for compliance with the 
requirements of Sec.  422.128 of this chapter for maintaining written 
policies and procedures for advance directives if the PAHP includes, in 
its network, any of those providers listed in Sec.  489.102(a) of this 
chapter.
    (3) The MCO, PIHP, or PAHP subject to this requirement must provide 
adult enrollees with written information on advance directives policies, 
and include a description of applicable State law.
    (4) The information must reflect changes in State law as soon as 
possible, but no later than 90 days after the effective date of the 
change.
    (j) Special rules for certain HIOs. Contracts with HIOs that began 
operating on or after January 1, 1986, and that the statute does not 
explicitly exempt from requirements in section 1903(m) of the Act, are 
subject to all the requirements of this part that apply to MCOs and 
contracts with MCOs. These HIOs may enter into comprehensive risk 
contracts only if they meet the criteria of paragraph (a) of this 
section.
    (k) Additional rules for contracts with PCCMs. A PCCM contract must 
meet the following requirements:
    (1) Provide for reasonable and adequate hours of operation, 
including 24-hour availability of information, referral, and treatment 
for emergency medical conditions.
    (2) Restrict enrollment to recipients who reside sufficiently near 
one of the manager's delivery sites to reach that site within a 
reasonable time using available and affordable modes of transportation.
    (3) Provide for arrangements with, or referrals to, sufficient 
numbers of physicians and other practitioners to ensure that services 
under the contract can be furnished to enrollees promptly and without 
compromise to quality of care.
    (4) Prohibit discrimination in enrollment, disenrollment, and re-
enrollment, based on the recipient's health status or need for health 
care services.
    (5) Provide that enrollees have the right to disenroll from their 
PCCM in accordance with Sec.  438.56(c).
    (l) Subcontracts. All subcontracts must fulfill the requirements of 
this part that are appropriate to the service or activity delegated 
under the subcontract.
    (m) Choice of health professional. The contract must allow each 
enrollee to choose his or her health professional to the extent possible 
and appropriate.



Sec.  438.8  Provisions that apply to PIHPs and PAHPs.

    (a) The following requirements and options apply to PIHPs, PIHP 
contracts, and States with respect to PIHPs, to the same extent that 
they apply to MCOs, MCO contracts, and States for MCOs.
    (1) The contract requirements of Sec.  438.6, except for 
requirements that pertain to HIOs.

[[Page 217]]

    (2) The information requirements in Sec.  438.10.
    (3) The provision against provider discrimination in Sec.  438.12.
    (4) The State responsibility provisions of subpart B of this part 
except Sec.  438.50.
    (5) The enrollee rights and protection provisions in subpart C of 
this part.
    (6) The quality assessment and performance improvement provisions in 
subpart D of this part to the extent that they are applicable to 
services furnished by the PIHP.
    (7) The grievance system provisions in subpart F of this part.
    (8) The certification and program integrity protection provisions 
set forth in subpart H of this part.
    (b) The following requirements and options for PAHPs apply to PAHPs, 
PAHP contracts, and States.
    (1) The contract requirements of Sec.  438.6, except requirements 
for--
    (i) HIOs.
    (ii) Advance directives (unless the PAHP includes any of the 
providers listed in Sec.  489.102) of this chapter.
    (2) All applicable portions of the information requirements in Sec.  
438.10.
    (3) The provision against provider discrimination in Sec.  438.12.
    (4) The State responsibility provisions of subpart B of this part 
except Sec.  438.50.
    (5) The provisions on enrollee rights and protections in subpart C 
of this part.
    (6) Designated portions of subpart D of this part.
    (7) An enrollee's right to a State fair hearing under subpart E of 
part 431 of this chapter.
    (8) Prohibitions against affiliations with individuals debarred by 
Federal agencies in Sec.  438.610.

[67 FR 41095, June 14, 2002, as amended at 67 FR 65505, Oct. 25, 2002]



Sec.  438.10  Information requirements.

    (a) Terminology. As used in this section, the following terms have 
the indicated meanings:
    Enrollee means a Medicaid recipient who is currently enrolled in an 
MCO, PIHP, PAHP, or PCCM in a given managed care program.
    Potential enrollee means a Medicaid recipient who is subject to 
mandatory enrollment or may voluntarily elect to enroll in a given 
managed care program, but is not yet an enrollee of a specific MCO, 
PIHP, PAHP, or PCCM.
    (b) Basic rules. (1) Each State, enrollment broker, MCO, PIHP, PAHP, 
and PCCM must provide all enrollment notices, informational materials, 
and instructional materials relating to enrollees and potential 
enrollees in a manner and format that may be easily understood.
    (2) The State must have in place a mechanism to help enrollees and 
potential enrollees understand the State's managed care program.
    (3) Each MCO and PIHP must have in place a mechanism to help 
enrollees and potential enrollees understand the requirements and 
benefits of the plan.
    (c) Language. The State must do the following:
    (1) Establish a methodology for identifying the prevalent non-
English languages spoken by enrollees and potential enrollees throughout 
the State. ``Prevalent'' means a non-English language spoken by a 
significant number or percentage of potential enrollees and enrollees in 
the State.
    (2) Make available written information in each prevalent non-English 
language.
    (3) Require each MCO, PIHP, PAHP, and PCCM to make its written 
information available in the prevalent non-English languages in its 
particular service area.
    (4) Make oral interpretation services available and require each 
MCO, PIHP, PAHP, and PCCM to make those services available free of 
charge to each potential enrollee and enrollee. This applies to all non-
English languages, not just those that the State identifies as 
prevalent.
    (5) Notify enrollees and potential enrollees, and require each MCO, 
PIHP, PAHP, and PCCM to notify its enrollees--
    (i) That oral interpretation is available for any language and 
written information is available in prevalent languages; and
    (ii) How to access those services.
    (d) Format. (1) Written material must--
    (i) Use easily understood language and format; and

[[Page 218]]

    (ii) Be available in alternative formats and in an appropriate 
manner that takes into consideration the special needs of those who, for 
example, are visually limited or have limited reading proficiency.
    (2) All enrollees and potential enrollees must be informed that 
information is available in alternative formats and how to access those 
formats.
    (e) Information for potential enrollees. (1) The State or its 
contracted representative must provide the information specified in 
paragraph (e)(2) of this section to each potential enrollee as follows:
    (i) At the time the potential enrollee first becomes eligible to 
enroll in a voluntary program, or is first required to enroll in a 
mandatory enrollment program.
    (ii) Within a timeframe that enables the potential enrollee to use 
the information in choosing among available MCOs, PIHPs, PAHPs, or 
PCCMs.
    (2) The information for potential enrollees must include the 
following:
    (i) General information about--
    (A) The basic features of managed care;
    (B) Which populations are excluded from enrollment, subject to 
mandatory enrollment, or free to enroll voluntarily in the program; and
    (C) MCO, PIHP, PAHP, and PCCM responsibilities for coordination of 
enrollee care;
    (ii) Information specific to each MCO, PIHP, PAHP, or PCCM program 
operating in potential enrollee's service area. A summary of the 
following information is sufficient, but the State must provide more 
detailed information upon request:
    (A) Benefits covered.
    (B) Cost sharing, if any.
    (C) Service area.
    (D) Names, locations, telephone numbers of, and non-English language 
spoken by current contracted providers, and including identification of 
providers that are not accepting new patients. For MCOs, PIHPs, and 
PAHPs, this includes at a minimum information on primary care 
physicians, specialists, and hospitals.
    (E) Benefits that are available under the State plan but are not 
covered under the contract, including how and where the enrollee may 
obtain those benefits, any cost sharing, and how transportation is 
provided. For a counseling or referral service that the MCO, PIHP, PAHP, 
or PCCM does not cover because of moral or religious objections, the 
State must provide information about where and how to obtain the 
service.
    (f) General information for all enrollees of MCOs, PIHPs, PAHPs, and 
PCCMs. Information must be furnished to MCO, PIHP, PAHP, and PCCM 
enrollees as follows:
    (1) The State must notify all enrollees of their disenrollment 
rights, at a minimum, annually. For States that choose to restrict 
disenrollment for periods of 90 days or more, States must send the 
notice no less than 60 days before the start of each enrollment period.
    (2) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must notify all enrollees of their right to request and 
obtain the information listed in paragraph (f)(6) of this section and, 
if applicable, paragraphs (g) and (h) of this section, at least once a 
year.
    (3) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must furnish to each of its enrollees the information 
specified in paragraph (f)(6) of this section and, if applicable, 
paragraphs (g) and (h) of this section, within a reasonable time after 
the MCO, PIHP, PAHP, or PCCM receives, from the State or its contracted 
representative, notice of the recipient's enrollment.
    (4) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must give each enrollee written notice of any change (that 
the State defines as ``significant'') in the information specified in 
paragraphs (f)(6) of this section and, if applicable, paragraphs (g) and 
(h) of this section, at least 30 days before the intended effective date 
of the change.
    (5) The MCO, PIHP, and, when appropriate, the PAHP or PCCM, must 
make a good faith effort to give written notice of termination of a 
contracted provider, within 15 days after receipt or issuance of the 
termination notice, to each enrollee who received his or her primary 
care from, or was seen on a

[[Page 219]]

regular basis by, the terminated provider.
    (6) The State, its contracted representative, or the MCO, PIHP, 
PAHP, or PCCM must provide the following information to all enrollees:
    (i) Names, locations, telephone numbers of, and non-English 
languages spoken by current contracted providers in the enrollee's 
service area, including identification of providers that are not 
accepting new patients. For MCOs, PIHPs, and PAHPs this includes, at a 
minimum, information on primary care physicians, specialists, and 
hospitals.
    (ii) Any restrictions on the enrollee's freedom of choice among 
network providers.
    (iii) Enrollee rights and protections, as specified in Sec.  
438.100.
    (iv) Information on grievance and fair hearing procedures, and for 
MCO and PIHP enrollees, the information specified in Sec.  438.10(g)(1), 
and for PAHP enrollees, the information specified in Sec.  438.10(h)(1).
    (v) The amount, duration, and scope of benefits available under the 
contract in sufficient detail to ensure that enrollees understand the 
benefits to which they are entitled.
    (vi) Procedures for obtaining benefits, including authorization 
requirements.
    (vii) The extent to which, and how, enrollees may obtain benefits, 
including family planning services, from out-of-network providers.
    (viii) The extent to which, and how, after-hours and emergency 
coverage are provided, including:
    (A) What constitutes emergency medical condition, emergency 
services, and poststabilization services, with reference to the 
definitions in Sec.  438.114(a).
    (B) The fact that prior authorization is not required for emergency 
services.
    (C) The process and procedures for obtaining emergency services, 
including use of the 911-telephone system or its local equivalent.
    (D) The locations of any emergency settings and other locations at 
which providers and hospitals furnish emergency services and 
poststabilization services covered under the contract.
    (E) The fact that, subject to the provisions of this section, the 
enrollee has a right to use any hospital or other setting for emergency 
care.
    (ix) The poststabilization care services rules set forth at Sec.  
422.113(c) of this chapter.
    (x) Policy on referrals for specialty care and for other benefits 
not furnished by the enrollee's primary care provider.
    (xi) Cost sharing, if any.
    (xii) How and where to access any benefits that are available under 
the State plan but are not covered under the contract, including any 
cost sharing, and how transportation is provided. For a counseling or 
referral service that the MCO, PIHP, PAHP, or PCCM does not cover 
because of moral or religious objections, the MCO, PIHP, PAHP, or PCCM 
need not furnish information on how and where to obtain the service. The 
State must provide information on how and where to obtain the service.
    (g) Specific information requirements for enrollees of MCOs and 
PIHPs. In addition to the requirements in Sec.  438.10(f), the State, 
its contracted representative, or the MCO and PIHP must provide the 
following information to their enrollees:
    (1) Grievance, appeal, and fair hearing procedures and timeframes, 
as provided in Sec. Sec.  438.400 through 438.424, in a State-developed 
or State-approved description, that must include the following:
    (i) For State fair hearing--
    (A) The right to hearing;
    (B) The method for obtaining a hearing; and
    (C) The rules that govern representation at the hearing.
    (ii) The right to file grievances and appeals.
    (iii) The requirements and timeframes for filing a grievance or 
appeal.
    (iv) The availability of assistance in the filing process.
    (v) The toll-free numbers that the enrollee can use to file a 
grievance or an appeal by phone.
    (vi) The fact that, when requested by the enrollee--
    (A) Benefits will continue if the enrollee files an appeal or a 
request for State fair hearing within the timeframes specified for 
filing; and

[[Page 220]]

    (B) The enrollee may be required to pay the cost of services 
furnished while the appeal is pending, if the final decision is adverse 
to the enrollee.
    (vii) Any appeal rights that the State chooses to make available to 
providers to challenge the failure of the organization to cover a 
service.
    (2) Advance directives, as set forth in Sec.  438.6(i)(2).
    (3) Additional information that is available upon request, including 
the following:
    (i) Information on the structure and operation of the MCO or PIHP.
    (ii) Physician incentive plans as set forth in Sec.  438.6(h) of 
this chapter.
    (h) Specific information for PAHPs. The State, its contracted 
representative, or the PAHP must provide the following information to 
their enrollees:
    (1) The right to a State fair hearing, including the following:
    (i) The right to a hearing.
    (ii) The method for obtaining a hearing.
    (iii) The rules that govern representation.
    (2) Advance directives, as set forth in Sec.  438.6(i)(2), to the 
extent that the PAHP includes any of the providers listed in Sec.  
489.102(a) of this chapter.
    (3) Upon request, physician incentive plans as set forth in Sec.  
438.6(h).
    (i) Special rules: States with mandatory enrollment under State plan 
authority--(1) Basic rule. If the State plan provides for mandatory 
enrollment under Sec.  438.50, the State or its contracted 
representative must provide information on MCOs and PCCMs (as specified 
in paragraph (i)(3) of this section), either directly or through the MCO 
or PCCM.
    (2) When and how the information must be furnished. The information 
must be furnished as follows:
    (i) For potential enrollees, within the timeframe specified in Sec.  
438.10(e)(1).
    (ii) For enrollees, annually and upon request.
    (iii) In a comparative, chart-like format.
    (3) Required information. Some of the information is the same as the 
information required for potential enrollees under paragraph (e) of this 
section and for enrollees under paragraph (f) of this section. However, 
all of the information in this paragraph is subject to the timeframe and 
format requirements of paragraph (i)(2) of this section, and includes 
the following for each contracting MCO or PCCM in the potential 
enrollees and enrollee's service area:
    (i) The MCO's or PCCM's service area.
    (ii) The benefits covered under the contract.
    (iii) Any cost sharing imposed by the MCO or PCCM.
    (iv) To the extent available, quality and performance indicators, 
including enrollee satisfaction.

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.12  Provider discrimination prohibited.

    (a) General rules. (1) An MCO, PIHP, or PAHP may not discriminate 
for the participation, reimbursement, or indemnification of any provider 
who is acting within the scope of his or her license or certification 
under applicable State law, solely on the basis of that license or 
certification. If an MCO, PIHP, or PAHP declines to include individual 
or groups of providers in its network, it must give the affected 
providers written notice of the reason for its decision.
    (2) In all contracts with health care professionals, an MCO, PIHP, 
or PAHP must comply with the requirements specified in Sec.  438.214.
    (b) Construction. Paragraph (a) of this section may not be construed 
to--
    (1) Require the MCO, PIHP, or PAHP to contract with providers beyond 
the number necessary to meet the needs of its enrollees;
    (2) Preclude the MCO, PIHP, or PAHP from using different 
reimbursement amounts for different specialties or for different 
practitioners in the same specialty; or
    (3) Preclude the MCO, PIHP, or PAHP from establishing measures that 
are designed to maintain quality of services and control costs and are 
consistent with its responsibilities to enrollees.



                    Subpart B_State Responsibilities



Sec.  438.50  State Plan requirements.

    (a) General rule. A State plan that requires Medicaid recipients to 
enroll in

[[Page 221]]

managed care entities must comply with the provisions of this section, 
except when the State imposes the requirement--
    (1) As part of a demonstration project under section 1115 of the 
Act; or
    (2) Under a waiver granted under section 1915(b) of the Act.
    (b) State plan information. The plan must specify--
    (1) The types of entities with which the State contracts;
    (2) The payment method it uses (for example, whether fee-for-service 
or capitation);
    (3) Whether it contracts on a comprehensive risk basis; and
    (4) The process the State uses to involve the public in both design 
and initial implementation of the program and the methods it uses to 
ensure ongoing public involvement once the State plan has been 
implemented.
    (c) State plan assurances. The plan must provide assurances that the 
State meets applicable requirements of the following statute and 
regulations:
    (1) Section 1903(m) of the Act, for MCOs and MCO contracts.
    (2) Section 1905(t) of the Act, for PCCMs and PCCM contracts.
    (3) Section 1932(a)(1)(A) of the Act, for the State's option to 
limit freedom of choice by requiring recipients to receive their 
benefits through managed care entities.
    (4) This part, for MCOs and PCCMs.
    (5) Part 434 of this chapter, for all contracts.
    (6) Section 438.6(c), for payments under any risk contracts, and 
Sec.  447.362 of this chapter for payments under any nonrisk contracts.
    (d) Limitations on enrollment. The State must provide assurances 
that, in implementing the State plan managed care option, it will not 
require the following groups to enroll in an MCO or PCCM:
    (1) Recipients who are also eligible for Medicare.
    (2) Indians who are members of Federally recognized tribes, except 
when the MCO or PCCM is--
    (i) The Indian Health Service; or
    (ii) An Indian health program or Urban Indian program operated by a 
tribe or tribal organization under a contract, grant, cooperative 
agreement or compact with the Indian Health Service.
    (3) Children under 19 years of age who are--
    (i) Eligible for SSI under title XVI;
    (ii) Eligible under section 1902(e)(3) of the Act;
    (iii) In foster care or other out-of-home placement;
    (iv) Receiving foster care or adoption assistance; or
    (v) Receiving services through a family-centered, community-based, 
coordinated care system that receives grant funds under section 
501(a)(1)(D) of title V, and is defined by the State in terms of either 
program participation or special health care needs.
    (e) Priority for enrollment. The State must have an enrollment 
system under which recipients already enrolled in an MCO or PCCM are 
given priority to continue that enrollment if the MCO or PCCM does not 
have the capacity to accept all those seeking enrollment under the 
program.
    (f) Enrollment by default. (1) For recipients who do not choose an 
MCO or PCCM during their enrollment period, the State must have a 
default enrollment process for assigning those recipients to contracting 
MCOs and PCCMs.
    (2) The process must seek to preserve existing provider-recipient 
relationships and relationships with providers that have traditionally 
served Medicaid recipients. If that is not possible, the State must 
distribute the recipients equitably among qualified MCOs and PCCMs 
available to enroll them, excluding those that are subject to the 
intermediate sanction described in Sec.  438.702(a)(4).
    (3) An ``existing provider-recipient relationship'' is one in which 
the provider was the main source of Medicaid services for the recipient 
during the previous year. This may be established through State records 
of previous managed care enrollment or fee-for-service experience, or 
through contact with the recipient.
    (4) A provider is considered to have ``traditionally served'' 
Medicaid recipients if it has experience in serving the Medicaid 
population.

[[Page 222]]



Sec.  438.52  Choice of MCOs, PIHPs, PAHPs, and PCCMs.

    (a) General rule. Except as specified in paragraphs (b) and (c) of 
this section, a State that requires Medicaid recipients to enroll in an 
MCO, PIHP, PAHP, or PCCM must give those recipients a choice of at least 
two entities.
    (b) Exception for rural area residents. (1) Under any of the 
following programs, and subject to the requirements of paragraph (b)(2) 
of this section, a State may limit a rural area resident to a single 
MCO, PIHP, PAHP, or PCCM system:
    (i) A program authorized by a plan amendment under section 1932(a) 
of the Act.
    (ii) A waiver under section 1115 of the Act.
    (iii) A waiver under section 1915(b) of the Act.
    (2) A State that elects the option provided under paragraph (b)(1) 
of this section, must permit the recipient--
    (i) To choose from at least two physicians or case managers; and
    (ii) To obtain services from any other provider under any of the 
following circumstances:
    (A) The service or type of provider (in terms of training, 
experience, and specialization) is not available within the MCO, PIHP, 
PAHP, or PCCM network.
    (B) The provider is not part of the network, but is the main source 
of a service to the recipient, provided that--
    (1) The provider is given the opportunity to become a participating 
provider under the same requirements for participation in the MCO, PIHP, 
PAHP, or PCCM network as other network providers of that type.
    (2) If the provider chooses not to join the network, or does not 
meet the necessary qualification requirements to join, the enrollee will 
be transitioned to a participating provider within 60 days (after being 
given an opportunity to select a provider who participates).
    (C) The only plan or provider available to the recipient does not, 
because of moral or religious objections, provide the service the 
enrollee seeks.
    (D) The recipient's primary care provider or other provider 
determines that the recipient needs related services that would subject 
the recipient to unnecessary risk if received separately (for example, a 
cesarean section and a tubal ligation) and not all of the related 
services are available within the network.
    (E) The State determines that other circumstances warrant out-of-
network treatment.
    (3) As used in this paragraph, ``rural area'' is any area other than 
an ``urban area'' as defined in Sec.  412.62(f)(1)(ii) of this chapter.
    (c) Exception for certain health insuring organizations (HIOs). The 
State may limit recipients to a single HIO if--
    (1) The HIO is one of those described in section 1932(a)(3)(C) of 
the Act; and
    (2) The recipient who enrolls in the HIO has a choice of at least 
two primary care providers within the entity.
    (d) Limitations on changes between primary care providers. For an 
enrollee of a single MCO, PIHP, PAHP, or HIO under paragraph (b) or (c) 
of this section, any limitation the State imposes on his or her freedom 
to change between primary care providers may be no more restrictive than 
the limitations on disenrollment under Sec.  438.56(c).

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.56  Disenrollment: Requirements and limitations.

    (a) Applicability. The provisions of this section apply to all 
managed care arrangements whether enrollment is mandatory or voluntary 
and whether the contract is with an MCO, a PIHP, a PAHP, or a PCCM.
    (b) Disenrollment requested by the MCO, PIHP, PAHP, or PCCM. All 
MCO, PIHP, PAHP, and PCCM contracts must--(1) Specify the reasons for 
which the MCO, PIHP, PAHP, or PCCM may request disenrollment of an 
enrollee;
    (2) Provide that the MCO, PIHP, PAHP, or PCCM may not request 
disenrollment because of an adverse change in the enrollee's health 
status, or because of the enrollee's utilization of medical services, 
diminished mental capacity, or uncooperative or disruptive behavior 
resulting from his or her special needs (except when his or her 
continued enrollment in the MCO, PIHP, PAHP, or PCCM seriously impairs 
the entity's ability to furnish

[[Page 223]]

services to either this particular enrollee or other enrollees); and
    (3) Specify the methods by which the MCO, PIHP, PAHP, or PCCM 
assures the agency that it does not request disenrollment for reasons 
other than those permitted under the contract.
    (c) Disenrollment requested by the enrollee. If the State chooses to 
limit disenrollment, its MCO, PIHP, PAHP, and PCCM contracts must 
provide that a recipient may request disenrollment as follows:
    (1) For cause, at any time.
    (2) Without cause, at the following times:
    (i) During the 90 days following the date of the recipient's initial 
enrollment with the MCO, PIHP, PAHP, or PCCM, or the date the State 
sends the recipient notice of the enrollment, whichever is later.
    (ii) At least once every 12 months thereafter.
    (iii) Upon automatic reenrollment under paragraph (g) of this 
section, if the temporary loss of Medicaid eligibility has caused the 
recipient to miss the annual disenrollment opportunity.
    (iv) When the State imposes the intermediate sanction specified in 
Sec.  438.702(a)(3).
    (d) Procedures for disenrollment--(1) Request for disenrollment. The 
recipient (or his or her representative) must submit an oral or written 
request--
    (i) To the State agency (or its agent); or
    (ii) To the MCO, PIHP, PAHP, or PCCM, if the State permits MCOs, 
PIHP, PAHPs, and PCCMs to process disenrollment requests.
    (2) Cause for disenrollment. The following are cause for 
disenrollment:
    (i) The enrollee moves out of the MCO's, PIHP's, PAHP's, or PCCM's 
service area.
    (ii) The plan does not, because of moral or religious objections, 
cover the service the enrollee seeks.
    (iii) The enrollee needs related services (for example a cesarean 
section and a tubal ligation) to be performed at the same time; not all 
related services are available within the network; and the enrollee's 
primary care provider or another provider determines that receiving the 
services separately would subject the enrollee to unnecessary risk.
    (iv) Other reasons, including but not limited to, poor quality of 
care, lack of access to services covered under the contract, or lack of 
access to providers experienced in dealing with the enrollee's health 
care needs.
    (3) MCO, PIHP, PAHP, or PCCM action on request. (i) An MCO, PIHP, 
PAHP, or PCCM may either approve a request for disenrollment or refer 
the request to the State.
    (ii) If the MCO, PIHP, PAHP, PCCM, or State agency (whichever is 
responsible) fails to make a disenrollment determination so that the 
recipient can be disenrolled within the timeframes specified in 
paragraph (e)(1) of this section, the disenrollment is considered 
approved.
    (4) State agency action on request. For a request received directly 
from the recipient, or one referred by the MCO, PIHP, PAHP, or PCCM, the 
State agency must take action to approve or disapprove the request based 
on the following:
    (i) Reasons cited in the request.
    (ii) Information provided by the MCO, PIHP, PAHP, or PCCM at the 
agency's request.
    (iii) Any of the reasons specified in paragraph (d)(2) of this 
section.
    (5) Use of the MCO, PIHP, PAHP, or PCCM grievance procedures. (i) 
The State agency may require that the enrollee seek redress through the 
MCO, PIHP, PAHP, or PCCM's grievance system before making a 
determination on the enrollee's request.
    (ii) The grievance process, if used, must be completed in time to 
permit the disenrollment (if approved) to be effective in accordance 
with the timeframe specified in Sec.  438.56(e)(1).
    (iii) If, as a result of the grievance process, the MCO, PIHP, PAHP, 
or PCCM approves the disenrollment, the State agency is not required to 
make a determination.
    (e) Timeframe for disenrollment determinations. (1) Regardless of 
the procedures followed, the effective date of an approved disenrollment 
must be no later than the first day of the second month following the 
month in which the enrollee or the MCO, PIHP, PAHP, or PCCM files the 
request.

[[Page 224]]

    (2) If the MCO, PIHP, PAHP, or PCCM or the State agency (whichever 
is responsible) fails to make the determination within the timeframes 
specified in paragraph (e)(1) of this section, the disenrollment is 
considered approved.
    (f) Notice and appeals. A State that restricts disenrollment under 
this section must take the following actions:
    (1) Provide that enrollees and their representatives are given 
written notice of disenrollment rights at least 60 days before the start 
of each enrollment period.
    (2) Ensure access to State fair hearing for any enrollee 
dissatisfied with a State agency determination that there is not good 
cause for disenrollment.
    (g) Automatic reenrollment: Contract requirement. If the State plan 
so specifies, the contract must provide for automatic reenrollment of a 
recipient who is disenrolled solely because he or she loses Medicaid 
eligibility for a period of 2 months or less.



Sec.  438.58  Conflict of interest safeguards.

    (a) As a condition for contracting with MCOs, PIHPs, or PAHPs, a 
State must have in effect safeguards against conflict of interest on the 
part of State and local officers and employees and agents of the State 
who have responsibilities relating to the MCO, PIHP, or PAHP contracts 
or the default enrollment process specified in Sec.  438.50(f).
    (b) These safeguards must be at least as effective as the safeguards 
specified in section 27 of the Office of Federal Procurement Policy Act 
(41 U.S.C. 423).



Sec.  438.60  Limit on payment to other providers.

    The State agency must ensure that no payment is made to a provider 
other than the MCO, PIHP, or PAHP for services available under the 
contract between the State and the MCO, PIHP, or PAHP, except when these 
payments are provided for in title XIX of the Act, in 42 CFR, or when 
the State agency has adjusted the capitation rates paid under the 
contract, in accordance with Sec.  438.6(c)(5)(v), to make payments for 
graduate medical education.



Sec.  438.62  Continued services to recipients.

    The State agency must arrange for Medicaid services to be provided 
without delay to any Medicaid enrollee of an MCO, PIHP, PAHP, or PCCM 
whose contract is terminated and for any Medicaid enrollee who is 
disenrolled from an MCO, PIHP, PAHP, or PCCM for any reason other than 
ineligibility for Medicaid.



Sec.  438.66  Monitoring procedures.

    The State agency must have in effect procedures for monitoring the 
MCO's, PIHP's, or PAHP's operations, including, at a minimum, operations 
related to the following:
    (a) Recipient enrollment and disenrollment.
    (b) Processing of grievances and appeals.
    (c) Violations subject to intermediate sanctions, as set forth in 
subpart I of this part.
    (d) Violations of the conditions for FFP, as set forth in subpart J 
of this part.
    (e) All other provisions of the contract, as appropriate.



                Subpart C_Enrollee Rights and Protections



Sec.  438.100  Enrollee rights.

    (a) General rule. The State must ensure that--
    (1) Each MCO and PIHP has written policies regarding the enrollee 
rights specified in this section; and
    (2) Each MCO, PIHP, PAHP, and PCCM complies with any applicable 
Federal and State laws that pertain to enrollee rights, and ensures that 
its staff and affiliated providers take those rights into account when 
furnishing services to enrollees.
    (b) Specific rights--(1) Basic requirement. The State must ensure 
that each managed care enrollee is guaranteed the rights as specified in 
paragraphs (b)(2) and (b)(3) of this section.
    (2) An enrollee of an MCO, PIHP, PAHP, or PCCM has the following 
rights: The right to--
    (i) Receive information in accordance with Sec.  438.10.

[[Page 225]]

    (ii) Be treated with respect and with due consideration for his or 
her dignity and privacy.
    (iii) Receive information on available treatment options and 
alternatives, presented in a manner appropriate to the enrollee's 
condition and ability to understand. (The information requirements for 
services that are not covered under the contract because of moral or 
religious objections are set forth in Sec.  438.10(f)(6)(xii).)
    (iv) Participate in decisions regarding his or her health care, 
including the right to refuse treatment.
    (v) Be free from any form of restraint or seclusion used as a means 
of coercion, discipline, convenience or retaliation, as specified in 
other Federal regulations on the use of restraints and seclusion.
    (vi) If the privacy rule, as set forth in 45 CFR parts 160 and 164 
subparts A and E, applies, request and receive a copy of his or her 
medical records, and request that they be amended or corrected, as 
specified in 45 CFR Sec.  164.524 and 164.526.
    (3) An enrollee of an MCO, PIHP, or PAHP (consistent with the scope 
of the PAHP's contracted services) has the right to be furnished health 
care services in accordance with Sec. Sec.  438.206 through 438.210.
    (c) Free exercise of rights. The State must ensure that each 
enrollee is free to exercise his or her rights, and that the exercise of 
those rights does not adversely affect the way the MCO, PIHP, PAHP, or 
PCCM and its providers or the State agency treat the enrollee.
    (d) Compliance with other Federal and State laws. The State must 
ensure that each MCO, PIHP, PAHP, and PCCM complies with any other 
applicable Federal and State laws (such as: title VI of the Civil Rights 
Act of 1964 as implemented by regulations at 45 CFR part 80; the Age 
Discrimination Act of 1975 as implemented by regulations at 45 CFR part 
91; the Rehabilitation Act of 1973; and titles II and III of the 
Americans with Disabilities Act; and other laws regarding privacy and 
confidentiality).

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.102  Provider-enrollee communications.

    (a) General rules. (1) An MCO, PIHP, or PAHP may not prohibit, or 
otherwise restrict, a health care professional acting within the lawful 
scope of practice, from advising or advocating on behalf of an enrollee 
who is his or her patient, for the following:
    (i) The enrollee's health status, medical care, or treatment 
options, including any alternative treatment that may be self-
administered.
    (ii) Any information the enrollee needs in order to decide among all 
relevant treatment options.
    (iii) The risks, benefits, and consequences of treatment or 
nontreatment.
    (iv) The enrollee's right to participate in decisions regarding his 
or her health care, including the right to refuse treatment, and to 
express preferences about future treatment decisions.
    (2) Subject to the information requirements of paragraph (b) of this 
section, an MCO, PIHP, or PAHP that would otherwise be required to 
provide, reimburse for, or provide coverage of, a counseling or referral 
service because of the requirement in paragraph (a)(1) of this section 
is not required to do so if the MCO, PIHP, or PAHP objects to the 
service on moral or religious grounds.
    (b) Information requirements: MCO, PIHP, and PAHP responsibility. 
(1) An MCO, PIHP, or PAHP that elects the option provided in paragraph 
(a)(2) of this section must furnish information about the services it 
does not cover as follows:
    (i) To the State--
    (A) With its application for a Medicaid contract; and
    (B) Whenever it adopts the policy during the term of the contract.
    (ii) Consistent with the provisions of Sec.  438.10--
    (A) To potential enrollees, before and during enrollment; and
    (B) To enrollees, within 90 days after adopting the policy with 
respect to any particular service. (Although this timeframe would be 
sufficient to entitle the MCO, PIHP, or PAHP to the option provided in 
paragraph (a)(2) of this section, the overriding rule in Sec.  
438.10(f)(4)

[[Page 226]]

requires the State, its contracted representative, or MCO, PIHP, or PAHP 
to furnish the information at least 30 days before the effective date of 
the policy.)
    (2) As specified in Sec.  438.10, paragraphs (e) and (f), the 
information that MCOs, PIHPs, and PAHPs must furnish to enrollees and 
potential enrollees does not include how and where to obtain the service 
excluded under paragraph (a)(2) of this section.
    (c) Information requirements: State responsibility. For each service 
excluded by an MCO, PIHP, or PAHP under paragraph (a)(2) of this 
section, the State must provide information on how and where to obtain 
the service, as specified in Sec.  438.10, paragraphs (e)(2)(ii)(E) and 
(f)(6)(xii).
    (d) Sanction. An MCO that violates the prohibition of paragraph 
(a)(1) of this section is subject to intermediate sanctions under 
subpart I of this part.

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.104  Marketing activities.

    (a) Terminology. As used in this section, the following terms have 
the indicated meanings:
    Cold-call marketing means any unsolicited personal contact by the 
MCO, PIHP, PAHP, or PCCM with a potential enrollee for the purpose of 
marketing as defined in this paragraph.
    Marketing means any communication, from an MCO, PIHP, PAHP, or PCCM 
to a Medicaid recipient who is not enrolled in that entity, that can 
reasonably be interpreted as intended to influence the recipient to 
enroll in that particular MCO's, PIHP's, PAHP's, or PCCM's Medicaid 
product, or either to not enroll in, or to disenroll from, another 
MCO's, PIHP's, PAHP's, or PCCM's Medicaid product.
    Marketing materials means materials that--
    (1) Are produced in any medium, by or on behalf of an MCO, PIHP, 
PAHP, or PCCM; and
    (2) Can reasonably be interpreted as intended to market to potential 
enrollees.
    MCO, PIHP, PAHP, or PCCM include any of the entity's employees, 
affiliated providers, agents, or contractors.
    (b) Contract requirements. Each contract with an MCO, PIHP, PAHP, or 
PCCM must comply with the following requirements:
    (1) Provide that the entity--
    (i) Does not distribute any marketing materials without first 
obtaining State approval;
    (ii) Distributes the materials to its entire service area as 
indicated in the contract;
    (iii) Complies with the information requirements of Sec.  438.10 to 
ensure that, before enrolling, the recipient receives, from the entity 
or the State, the accurate oral and written information he or she needs 
to make an informed decision on whether to enroll;
    (iv) Does not seek to influence enrollment in conjunction with the 
sale or offering of any private insurance; and
    (v) Does not, directly or indirectly, engage in door-to-door, 
telephone, or other cold-call marketing activities.
    (2) Specify the methods by which the entity assures the State agency 
that marketing, including plans and materials, is accurate and does not 
mislead, confuse, or defraud the recipients or the State agency. 
Statements that will be considered inaccurate, false, or misleading 
include, but are not limited to, any assertion or statement (whether 
written or oral) that--
    (i) The recipient must enroll in the MCO, PIHP, PAHP, or PCCM in 
order to obtain benefits or in order to not lose benefits; or
    (ii) The MCO, PIHP, PAHP, or PCCM is endorsed by CMS, the Federal or 
State government, or similar entity.
    (c) State agency review. In reviewing the marketing materials 
submitted by the entity, the State must consult with the Medical Care 
Advisory Committee established under Sec.  431.12 of this chapter or an 
advisory committee with similar membership.



Sec.  438.106  Liability for payment.

    Each MCO, PIHP, and PAHP must provide that its Medicaid enrollees 
are not held liable for any of the following:
    (a) The MCO's, PIHP's, or PAHP's debts, in the event of the entity's 
insolvency.
    (b) Covered services provided to the enrollee, for which--
    (1) The State does not pay the MCO, PIHP, or PAHP; or

[[Page 227]]

    (2) The State, or the MCO, PIHP, or PAHP does not pay the individual 
or health care provider that furnishes the services under a contractual, 
referral, or other arrangement.
    (c) Payments for covered services furnished under a contract, 
referral, or other arrangement, to the extent that those payments are in 
excess of the amount that the enrollee would owe if the MCO, PIHP, or 
PAHP provided the services directly.



Sec.  438.108  Cost sharing.

    The contract must provide that any cost sharing imposed on Medicaid 
enrollees is in accordance with Sec. Sec.  447.50 through 447.60 of this 
chapter.



Sec.  438.114  Emergency and poststabilization services.

    (a) Definitions. As used in this section--
    Emergency medical condition means a medical condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
that a prudent layperson, who possesses an average knowledge of health 
and medicine, could reasonably expect the absence of immediate medical 
attention to result in the following:
    (1) Placing the health of the individual (or, with respect to a 
pregnant woman, the health of the woman or her unborn child) in serious 
jeopardy.
    (2) Serious impairment to bodily functions.
    (3) Serious dysfunction of any bodily organ or part.
    Emergency services means covered inpatient and outpatient services 
that are as follows:
    (1) Furnished by a provider that is qualified to furnish these 
services under this title.
    (2) Needed to evaluate or stabilize an emergency medical condition.
    Poststabilization care services means covered services, related to 
an emergency medical condition that are provided after an enrollee is 
stabilized in order to maintain the stabilized condition, or, under the 
circumstances described in paragraph (e) of this section, to improve or 
resolve the enrollee's condition.
    (b) Coverage and payment: General rule. The following entities are 
responsible for coverage and payment of emergency services and 
poststabilization care services.
    (1) The MCO, PIHP, or PAHP.
    (2) The PCCM that has a risk contract that covers these services.
    (3) The State, in the case of a PCCM that has a fee-for-service 
contract.
    (c) Coverage and payment: Emergency services--(1) The entities 
identified in paragraph (b) of this section--
    (i) Must cover and pay for emergency services regardless of whether 
the provider that furnishes the services has a contract with the MCO, 
PIHP, PAHP, or PCCM; and
    (ii) May not deny payment for treatment obtained under either of the 
following circumstances:
    (A) An enrollee had an emergency medical condition, including cases 
in which the absence of immediate medical attention would not have had 
the outcomes specified in paragraphs (1), (2), and (3) of the definition 
of emergency medical condition in paragraph (a) of this section.
    (B) A representative of the MCO, PIHP, PAHP, or PCCM instructs the 
enrollee to seek emergency services.
    (2) A PCCM must--
    (i) Allow enrollees to obtain emergency services outside the primary 
care case management system regardless of whether the case manager 
referred the enrollee to the provider that furnishes the services; and
    (ii) Pay for the services if the manager's contract is a risk 
contract that covers those services.
    (d) Additional rules for emergency services. (1) The entities 
specified in paragraph (b) of this section may not--
    (i) Limit what constitutes an emergency medical condition with 
reference to paragraph (a) of this section, on the basis of lists of 
diagnoses or symptoms; and
    (ii) Refuse to cover emergency services based on the emergency room 
provider, hospital, or fiscal agent not notifying the enrollee's primary 
care provider, MCO, PIHP, PAHP or applicable State entity of the 
enrollee's screening and treatment within 10 calendar days of 
presentation for emergency services.

[[Page 228]]

    (2) An enrollee who has an emergency medical condition may not be 
held liable for payment of subsequent screening and treatment needed to 
diagnose the specific condition or stabilize the patient.
    (3) The attending emergency physician, or the provider actually 
treating the enrollee, is responsible for determining when the enrollee 
is sufficiently stabilized for transfer or discharge, and that 
determination is binding on the entities identified in paragraph (b) of 
this section as responsible for coverage and payment.
    (e) Coverage and payment: Poststabilization care services. 
Poststabilization care services are covered and paid for in accordance 
with provisions set forth at Sec.  422.113(c) of this chapter. In 
applying those provisions, reference to ``M+C organization'' must be 
read as reference to the entities responsible for Medicaid payment, as 
specified in paragraph (b) of this section.
    (f) Applicability to PIHPs and PAHPs. To the extent that services 
required to treat an emergency medical condition fall within the scope 
of the services for which the PIHP or PAHP is responsible, the rules 
under this section apply.

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.116  Solvency standards.

    (a) Requirement for assurances (1) Each MCO, PIHP, and PAHP that is 
not a Federally qualified HMO (as defined in section 1310 of the Public 
Health Service Act) must provide assurances satisfactory to the State 
showing that its provision against the risk of insolvency is adequate to 
ensure that its Medicaid enrollees will not be liable for the MCO's, 
PIHP's, or PAHP's debts if the entity becomes insolvent.
    (2) Federally qualified HMOs, as defined in section 1310 of the 
Public Health Service Act, are exempt from this requirement.
    (b) Other requirements--(1) General rule. Except as provided in 
paragraph (b)(2) of this section, an MCO or PIHP, must meet the solvency 
standards established by the State for private health maintenance 
organizations, or be licensed or certified by the State as a risk-
bearing entity.
    (2) Exception. Paragraph (b)(1) of this section does not apply to an 
MCO or PIHP, that meets any of the following conditions:
    (i) Does not provide both inpatient hospital services and physician 
services.
    (ii) Is a public entity.
    (iii) Is (or is controlled by) one or more Federally qualified 
health centers and meets the solvency standards established by the State 
for those centers.
    (iv) Has its solvency guaranteed by the State.

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



        Subpart D_Quality Assessment and Performance Improvement



Sec.  438.200  Scope.

    This subpart implements section 1932(c)(1) of the Act and sets forth 
specifications for quality assessment and performance improvement 
strategies that States must implement to ensure the delivery of quality 
health care by all MCOs, PIHPs, and PAHPs. It also establishes standards 
that States, MCOs, PIHPs, and PAHPs must meet.



Sec.  438.202  State responsibilities.

    Each State contracting with an MCO or PIHP must do the following:
    (a) Have a written strategy for assessing and improving the quality 
of managed care services offered by all MCOs and PIHPs.
    (b) Obtain the input of recipients and other stakeholders in the 
development of the strategy and make the strategy available for public 
comment before adopting it in final.
    (c) Ensure that MCOs, PIHPs, and PAHPs comply with standards 
established by the State, consistent with this subpart.
    (d) Conduct periodic reviews to evaluate the effectiveness of the 
strategy, and update the strategy periodically, as needed.
    (e) Submit to CMS the following:
    (1) A copy of the initial strategy, and a copy of the revised 
strategy whenever significant changes are made.

[[Page 229]]

    (2) Regular reports on the implementation and effectiveness of the 
strategy.



Sec.  438.204  Elements of State quality strategies.

    At a minimum, State strategies must include the following:
    (a) The MCO and PIHP contract provisions that incorporate the 
standards specified in this subpart.
    (b) Procedures that--
    (1) Assess the quality and appropriateness of care and services 
furnished to all Medicaid enrollees under the MCO and PIHP contracts, 
and to individuals with special health care needs.
    (2) Identify the race, ethnicity, and primary language spoken of 
each Medicaid enrollee. States must provide this information to the MCO 
and PIHP for each Medicaid enrollee at the time of enrollment.
    (3) Regularly monitor and evaluate the MCO and PIHP compliance with 
the standards.
    (c) For MCOs and PIHPs, any national performance measures and levels 
that may be identified and developed by CMS in consultation with States 
and other relevant stakeholders.
    (d) Arrangements for annual, external independent reviews of the 
quality outcomes and timeliness of, and access to, the services covered 
under each MCO and PIHP contract.
    (e) For MCOs, appropriate use of intermediate sanctions that, at a 
minimum, meet the requirements of subpart I of this part.
    (f) An information system that supports initial and ongoing 
operation and review of the State's quality strategy.
    (g) Standards, at least as stringent as those in the following 
sections of this subpart, for access to care, structure and operations, 
and quality measurement and improvement.

                            Access Standards



Sec.  438.206  Availability of services.

    (a) Basic rule. Each State must ensure that all services covered 
under the State plan are available and accessible to enrollees of MCOs, 
PIHPs, and PAHPs.
    (b) Delivery network. The State must ensure, through its contracts, 
that each MCO, and each PIHP and PAHP consistent with the scope of the 
PIHP's or PAHP's contracted services, meets the following requirements:
    (1) Maintains and monitors a network of appropriate providers that 
is supported by written agreements and is sufficient to provide adequate 
access to all services covered under the contract. In establishing and 
maintaining the network, each MCO, PIHP, and PAHP must consider the 
following:
    (i) The anticipated Medicaid enrollment.
    (ii) The expected utilization of services, taking into consideration 
the characteristics and health care needs of specific Medicaid 
populations represented in the particular MCO, PIHP, and PAHP.
    (iii) The numbers and types (in terms of training, experience, and 
specialization) of providers required to furnish the contracted Medicaid 
services.
    (iv) The numbers of network providers who are not accepting new 
Medicaid patients.
    (v) The geographic location of providers and Medicaid enrollees, 
considering distance, travel time, the means of transportation 
ordinarily used by Medicaid enrollees, and whether the location provides 
physical access for Medicaid enrollees with disabilities.
    (2) Provides female enrollees with direct access to a women's health 
specialist within the network for covered care necessary to provide 
women's routine and preventive health care services. This is in addition 
to the enrollee's designated source of primary care if that source is 
not a women's health specialist.
    (3) Provides for a second opinion from a qualified health care 
professional within the network, or arranges for the enrollee to obtain 
one outside the network, at no cost to the enrollee.
    (4) If the network is unable to provide necessary services, covered 
under the contract, to a particular enrollee, the MCO, PIHP, or PAHP 
must adequately and timely cover these services out of network for the 
enrollee, for as long as the MCO, PIHP, or PAHP is unable to provide 
them.

[[Page 230]]

    (5) Requires out-of-network providers to coordinate with the MCO or 
PIHP with respect to payment and ensures that cost to the enrollee is no 
greater than it would be if the services were furnished within the 
network.
    (6) Demonstrates that its providers are credentialed as required by 
Sec.  438.214.
    (c) Furnishing of services. The State must ensure that each MCO, 
PIHP, and PAHP contract complies with the requirements of this 
paragraph.
    (1) Timely access. Each MCO, PIHP, and PAHP must do the following:
    (i) Meet and require its providers to meet State standards for 
timely access to care and services, taking into account the urgency of 
the need for services.
    (ii) Ensure that the network providers offer hours of operation that 
are no less than the hours of operation offered to commercial enrollees 
or comparable to Medicaid fee-for-service, if the provider serves only 
Medicaid enrollees.
    (iii) Make services included in the contract available 24 hours a 
day, 7 days a week, when medically necessary.
    (iv) Establish mechanisms to ensure compliance by providers.
    (v) Monitor providers regularly to determine compliance.
    (vi) Take corrective action if there is a failure to comply.
    (2) Cultural considerations. Each MCO, PIHP, and PAHP participates 
in the State's efforts to promote the delivery of services in a 
culturally competent manner to all enrollees, including those with 
limited English proficiency and diverse cultural and ethnic backgrounds.



Sec.  438.207  Assurances of adequate capacity and services.

    (a) Basic rule. The State must ensure, through its contracts, that 
each MCO, PIHP, and PAHP gives assurances to the State and provides 
supporting documentation that demonstrates that it has the capacity to 
serve the expected enrollment in its service area in accordance with the 
State's standards for access to care under this subpart.
    (b) Nature of supporting documentation. Each MCO, PIHP, and PAHP 
must submit documentation to the State, in a format specified by the 
State to demonstrate that it complies with the following requirements:
    (1) Offers an appropriate range of preventive, primary care, and 
specialty services that is adequate for the anticipated number of 
enrollees for the service area.
    (2) Maintains a network of providers that is sufficient in number, 
mix, and geographic distribution to meet the needs of the anticipated 
number of enrollees in the service area.
    (c) Timing of documentation. Each MCO, PIHP, and PAHP must submit 
the documentation described in paragraph (b) of this section as 
specified by the State, but no less frequently than the following:
    (1) At the time it enters into a contract with the State.
    (2) At any time there has been a significant change (as defined by 
the State) in the MCO's, PIHP's, or PAHP's operations that would affect 
adequate capacity and services, including--
    (i) Changes in MCO, PIHP, or PAHP services, benefits, geographic 
service area or payments; or
    (ii) Enrollment of a new population in the MCO, PIHP, or PAHP.
    (d) State review and certification to CMS. After the State reviews 
the documentation submitted by the MCO, PIHP, or PAHP, the State must 
certify to CMS that the MCO, PIHP, or PAHP has complied with the State's 
requirements for availability of services, as set forth in Sec.  
438.206.
    (e) CMS' right to inspect documentation. The State must make 
available to CMS, upon request, all documentation collected by the State 
from the MCO, PIHP, or PAHP.



Sec.  438.208  Coordination and continuity of care.

    (a) Basic requirement--(1) General rule. Except as specified in 
paragraphs (a)(2) and (a)(3) of this section, the State must ensure 
through its contracts, that each MCO, PIHP, and PAHP complies with the 
requirements of this section.
    (2) PIHP and PAHP exception. For PIHPs and PAHPs, the State 
determines, based on the scope of the entity's services, and on the way 
the State has organized the delivery of managed

[[Page 231]]

care services, whether a particular PIHP or PAHP is required to--
    (i) Meet the primary care requirement of paragraph (b)(1) of this 
section; and
    (ii) Implement mechanisms for identifying, assessing, and producing 
a treatment plan for an individual with special health care needs, as 
specified in paragraph (c) of this section.
    (3) Exception for MCOs that serve dually eligible enrollees. (i) For 
each MCO that serves enrollees who are also enrolled in and receive 
Medicare benefits from a Medicare+Choice plan, the State determines to 
what extent the MCO must meet the primary care coordination, 
identification, assessment, and treatment planning provisions of 
paragraphs (b) and (c) of this section with respect to dually eligible 
individuals.
    (ii) The State bases its determination on the services it requires 
the MCO to furnish to dually eligible enrollees.
    (b) Primary care and coordination of health care services for all 
MCO, PIHP, and PAHP enrollees. Each MCO, PIHP, and PAHP must implement 
procedures to deliver primary care to and coordinate health care service 
for all MCO, PIHP, and PAHP enrollees. These procedures must meet State 
requirements and must do the following:
    (1) Ensure that each enrollee has an ongoing source of primary care 
appropriate to his or her needs and a person or entity formally 
designated as primarily responsible for coordinating the health care 
services furnished to the enrollee.
    (2) Coordinate the services the MCO, PIHP, or PAHP furnishes to the 
enrollee with the services the enrollee receives from any other MCO, 
PIHP, or PAHP.
    (3) Share with other MCOs, PIHPs, and PAHPs serving the enrollee 
with special health care needs the results of its identification and 
assessment of that enrollee's needs to prevent duplication of those 
activities.
    (4) Ensure that in the process of coordinating care, each enrollee's 
privacy is protected in accordance with the privacy requirements in 45 
CFR parts 160 and 164 subparts A and E, to the extent that they are 
applicable.
    (c) Additional services for enrollees with special health care 
needs--(1) Identification. The State must implement mechanisms to 
identify persons with special health care needs to MCOs, PIHPs and 
PAHPs, as those persons are defined by the State. These identification 
mechanisms--
    (i) Must be specified in the State's quality improvement strategy in 
Sec.  438.202; and
    (ii) May use State staff, the State's enrollment broker, or the 
State's MCOs,
    PIHPs and PAHPs.
    (2) Assessment. Each MCO, PIHP, and PAHP must implement mechanisms 
to assess each Medicaid enrollee identified by the State (through the 
mechanism specified in paragraph (c)(1) of this section) and identified 
to the MCO, PIHP, and PAHP by the State as having special health care 
needs in order to identify any ongoing special conditions of the 
enrollee that require a course of treatment or regular care monitoring. 
The assessment mechanisms must use appropriate health care 
professionals.
    (3) Treatment plans. If the State requires MCOs, PIHPs, and PAHPs to 
produce a treatment plan for enrollees with special health care needs 
who are determined through assessment to need a course of treatment or 
regular care monitoring, the treatment plan must be--
    (i) Developed by the enrollee's primary care provider with enrollee 
participation, and in consultation with any specialists caring for the 
enrollee;
    (ii) Approved by the MCO, PIHP, or PAHP in a timely manner, if this 
approval is required by the MCO, PIHP, or PAHP; and
    (iii) In accord with any applicable State quality assurance and 
utilization review standards.
    (4) Direct access to specialists. For enrollees with special health 
care needs determined through an assessment by appropriate health care 
professionals (consistent with Sec.  438.208(c)(2)) to need a course of 
treatment or regular care monitoring, each MCO, PIHP, and PAHP must have 
a mechanism in place to allow enrollees to directly access a specialist 
(for example, through a

[[Page 232]]

standing referral or an approved number of visits) as appropriate for 
the enrollee's condition and identified needs.



Sec.  438.210  Coverage and authorization of services.

    (a) Coverage. Each contract with an MCO, PIHP, or PAHP must do the 
following:
    (1) Identify, define, and specify the amount, duration, and scope of 
each service that the MCO, PIHP, or PAHP is required to offer.
    (2) Require that the services identified in paragraph (a)(1) of this 
section be furnished in an amount, duration, and scope that is no less 
than the amount, duration, and scope for the same services furnished to 
beneficiaries under fee-for-service Medicaid, as set forth in Sec.  
440.230.
    (3) Provide that the MCO, PIHP, or PAHP--
    (i) Must ensure that the services are sufficient in amount, 
duration, or scope to reasonably be expected to achieve the purpose for 
which the services are furnished.
    (ii) May not arbitrarily deny or reduce the amount, duration, or 
scope of a required service solely because of diagnosis, type of 
illness, or condition of the beneficiary;
    (iii) May place appropriate limits on a service--
    (A) On the basis of criteria applied under the State plan, such as 
medical necessity; or
    (B) For the purpose of utilization control, provided the services 
furnished can reasonably be expected to achieve their purpose, as 
required in paragraph (a)(3)(i) of this section; and
    (4) Specify what constitutes ``medically necessary services'' in a 
manner that--
    (i) Is no more restrictive than that used in the State Medicaid 
program as indicated in State statutes and regulations, the State Plan, 
and other State policy and procedures; and
    (ii) Addresses the extent to which the MCO, PIHP, or PAHP is 
responsible for covering services related to the following:
    (A) The prevention, diagnosis, and treatment of health impairments.
    (B) The ability to achieve age-appropriate growth and development.
    (C) The ability to attain, maintain, or regain functional capacity.
    (b) Authorization of services. For the processing of requests for 
initial and continuing authorizations of services, each contract must 
require--
    (1) That the MCO, PIHP, or PAHP and its subcontractors have in 
place, and follow, written policies and procedures.
    (2) That the MCO, PIHP, or PAHP--
    (i) Have in effect mechanisms to ensure consistent application of 
review criteria for authorization decisions; and
    (ii) Consult with the requesting provider when appropriate.
    (3) That any decision to deny a service authorization request or to 
authorize a service in an amount, duration, or scope that is less than 
requested, be made by a health care professional who has appropriate 
clinical expertise in treating the enrollee's condition or disease.
    (c) Notice of adverse action. Each contract must provide for the 
MCO, PIHP, or PAHP to notify the requesting provider, and give the 
enrollee written notice of any decision by the MCO, PIHP, or PAHP to 
deny a service authorization request, or to authorize a service in an 
amount, duration, or scope that is less than requested. For MCOs and 
PIHPs, the notice must meet the requirements of Sec.  438.404, except 
that the notice to the provider need not be in writing.
    (d) Timeframe for decisions. Each MCO, PIHP, or PAHP contract must 
provide for the following decisions and notices:
    (1) Standard authorization decisions. For standard authorization 
decisions, provide notice as expeditiously as the enrollee's health 
condition requires and within State-established timeframes that may not 
exceed 14 calendar days following receipt of the request for service, 
with a possible extension of up to 14 additional calendar days, if--
    (i) The enrollee, or the provider, requests extension; or
    (ii) The MCO, PIHP, or PAHP justifies (to the State agency upon 
request) a need for additional information and how the extension is in 
the enrollee's interest.

[[Page 233]]

    (2) Expedited authorization decisions. (i) For cases in which a 
provider indicates, or the MCO, PIHP, or PAHP determines, that following 
the standard timeframe could seriously jeopardize the enrollee's life or 
health or ability to attain, maintain, or regain maximum function, the 
MCO, PIHP, or PAHP must make an expedited authorization decision and 
provide notice as expeditiously as the enrollee's health condition 
requires and no later than 3 working days after receipt of the request 
for service.
    (ii) The MCO, PIHP, or PAHP may extend the 3 working days time 
period by up to 14 calendar days if the enrollee requests an extension, 
or if the MCO, PIHP, or PAHP justifies (to the State agency upon 
request) a need for additional information and how the extension is in 
the enrollee's interest.
    (e) Compensation for utilization management activities. Each 
contract must provide that, consistent with Sec.  438.6(h), and Sec.  
422.208 of this chapter, compensation to individuals or entities that 
conduct utilization management activities is not structured so as to 
provide incentives for the individual or entity to deny, limit, or 
discontinue medically necessary services to any enrollee.

                    Structure and Operation Standards



Sec.  438.214  Provider selection.

    (a) General rules. The State must ensure, through its contracts, 
that each MCO, PIHP, or PAHP implements written policies and procedures 
for selection and retention of providers and that those policies and 
procedures include, at a minimum, the requirements of this section.
    (b) Credentialing and recredentialing requirements. (1) Each State 
must establish a uniform credentialing and recredentialing policy that 
each MCO, PIHP, and PAHP must follow.
    (2) Each MCO, PIHP, and PAHP must follow a documented process for 
credentialing and recredentialing of providers who have signed contracts 
or participation agreements with the MCO, PIHP, or PAHP.
    (c) Nondiscrimination. MCO, PIHP, and PAHP provider selection 
policies and procedures, consistent with Sec.  438.12, must not 
discriminate against particular providers that serve high-risk 
populations or specialize in conditions that require costly treatment.
    (d) Excluded providers. MCOs, PIHPs, and PAHPs may not employ or 
contract with providers excluded from participation in Federal health 
care programs under either section 1128 or section 1128A of the Act.
    (e) State requirements. Each MCO, PIHP, and PAHP must comply with 
any additional requirements established by the State.

[67 FR 41095, June 14, 2002; 67 FR 54532, Aug. 22, 2002]



Sec.  438.218  Enrollee information.

    The requirements that States must meet under Sec.  438.10 constitute 
part of the State's quality strategy at Sec.  438.204.



Sec.  438.224  Confidentiality.

    The State must ensure, through its contracts, that (consistent with 
subpart F of part 431 of this chapter), for medical records and any 
other health and enrollment information that identifies a particular 
enrollee, each MCO, PIHP, and PAHP uses and discloses such individually 
identifiable health information in accordance with the privacy 
requirements in 45 CFR parts 160 and 164, subparts A and E, to the 
extent that these requirements are applicable.



Sec.  438.226  Enrollment and disenrollment.

    The State must ensure that each MCO, PIHP, and PAHP contract 
complies with the enrollment and disenrollment requirements and 
limitations set forth in Sec.  438.56.



Sec.  438.228  Grievance systems.

    (a) The State must ensure, through its contracts, that each MCO and 
PIHP has in effect a grievance system that meets the requirements of 
subpart F of this part.
    (b) If the State delegates to the MCO or PIHP responsibility for 
notice of action under subpart E of part 431 of this chapter, the State 
must conduct random reviews of each delegated MCO or PIHP and its 
providers and subcontractors to ensure that they are notifying enrollees 
in a timely manner.

[[Page 234]]



Sec.  438.230  Subcontractual relationships and delegation.

    (a) General rule. The State must ensure, through its contracts, that 
each MCO, PIHP, and PAHP--
    (1) Oversees and is accountable for any functions and 
responsibilities that it delegates to any subcontractor; and
    (2) Meets the conditions of paragraph (b) of this section.
    (b) Specific conditions. (1) Before any delegation, each MCO, PIHP, 
and PAHP evaluates the prospective subcontractor's ability to perform 
the activities to be delegated.
    (2) There is a written agreement that--
    (i) Specifies the activities and report responsibilities delegated 
to the subcontractor; and
    (ii) Provides for revoking delegation or imposing other sanctions if 
the subcontractor's performance is inadequate.
    (3) The MCO, PIHP, or PAHP monitors the subcontractor's performance 
on an ongoing basis and subjects it to formal review according to a 
periodic schedule established by the State, consistent with industry 
standards or State MCO laws and regulations.
    (4) If any MCO, PIHP, or PAHP identifies deficiencies or areas for 
improvement, the MCO, PIHP, or PAHP and the subcontractor take 
corrective action.

                  Measurement and Improvement Standards



Sec.  438.236  Practice guidelines.

    (a) Basic rule: The State must ensure, through its contracts, that 
each MCO and, when applicable, each PIHP and PAHP meets the requirements 
of this section.
    (b) Adoption of practice guidelines. Each MCO and, when applicable, 
each PIHP and PAHP adopts practice guidelines that meet the following 
requirements:
    (1) Are based on valid and reliable clinical evidence or a consensus 
of health care professionals in the particular field.
    (2) Consider the needs of the MCO's, PIHP's, or PAHP's enrollees.
    (3) Are adopted in consultation with contracting health care 
professionals.
    (4) Are reviewed and updated periodically as appropriate.
    (c) Dissemination of guidelines. Each MCO, PIHP, and PAHP 
disseminates the guidelines to all affected providers and, upon request, 
to enrollees and potential enrollees.
    (d) Application of guidelines. Decisions for utilization management, 
enrollee education, coverage of services, and other areas to which the 
guidelines apply are consistent with the guidelines.



Sec.  438.240  Quality assessment and performance improvement program.

    (a) General rules. (1) The State must require, through its 
contracts, that each MCO and PIHP have an ongoing quality assessment and 
performance improvement program for the services it furnishes to its 
enrollees.
    (2) CMS, in consultation with States and other stakeholders, may 
specify performance measures and topics for performance improvement 
projects to be required by States in their contracts with MCOs and 
PIHPs.
    (b) Basic elements of MCO and PIHP quality assessment and 
performance improvement programs. At a minimum, the State must require 
that each MCO and PIHP comply with the following requirements:
    (1) Conduct performance improvement projects as described in 
paragraph (d) of this section. These projects must be designed to 
achieve, through ongoing measurements and intervention, significant 
improvement, sustained over time, in clinical care and nonclinical care 
areas that are expected to have a favorable effect on health outcomes 
and enrollee satisfaction.
    (2) Submit performance measurement data as described in paragraph 
(c) of this section.
    (3) Have in effect mechanisms to detect both underutilization and 
overutilization of services.
    (4) Have in effect mechanisms to assess the quality and 
appropriateness of care furnished to enrollees with special health care 
needs.
    (c) Performance measurement. Annually each MCO and PIHP must--

[[Page 235]]

    (1) Measure and report to the State its performance, using standard 
measures required by the State including those that incorporate the 
requirements of Sec.  438.204(c) and Sec.  438.240(a)(2);
    (2) Submit to the State, data specified by the State, that enables 
the State to measure the MCO's or PIHP's performance; or
    (3) Perform a combination of the activities described in paragraphs 
(c)(1) and (c)(2) of this section.
    (d) Performance improvement projects. (1) MCOs and PIHPs must have 
an ongoing program of performance improvement projects that focus on 
clinical and nonclinical areas, and that involve the following:
    (i) Measurement of performance using objective quality indicators.
    (ii) Implementation of system interventions to achieve improvement 
in quality.
    (iii) Evaluation of the effectiveness of the interventions.
    (iv) Planning and initiation of activities for increasing or 
sustaining improvement.
    (2) Each MCO and PIHP must report the status and results of each 
project to the State as requested, including those that incorporate the 
requirements of Sec.  438.240(a)(2). Each performance improvement 
project must be completed in a reasonable time period so as to generally 
allow information on the success of performance improvement projects in 
the aggregate to produce new information on quality of care every year.
    (e) Program review by the State. (1) The State must review, at least 
annually, the impact and effectiveness of each MCO's and PIHP's quality 
assessment and performance improvement program. The review must 
include--
    (i) The MCO's and PIHP's performance on the standard measures on 
which it is required to report; and
    (ii) The results of each MCO's and PIHP's performance improvement 
projects.
    (2) The State may require that an MCO or PIHP have in effect a 
process for its own evaluation of the impact and effectiveness of its 
quality assessment and performance improvement program.



Sec.  438.242  Health information systems.

    (a) General rule. The State must ensure, through its contracts, that 
each MCO and PIHP maintains a health information system that collects, 
analyzes, integrates, and reports data and can achieve the objectives of 
this subpart. The system must provide information on areas including, 
but not limited to, utilization, grievances and appeals, and 
disenrollments for other than loss of Medicaid eligibility.
    (b) Basic elements of a health information system. The State must 
require, at a minimum, that each MCO and PIHP comply with the following:
    (1) Collect data on enrollee and provider characteristics as 
specified by the State, and on services furnished to enrollees through 
an encounter data system or other methods as may be specified by the 
State.
    (2) Ensure that data received from providers is accurate and 
complete by--
    (i) Verifying the accuracy and timeliness of reported data;
    (ii) Screening the data for completeness, logic, and consistency; 
and
    (iii) Collecting service information in standardized formats to the 
extent feasible and appropriate.
    (3) Make all collected data available to the State and upon request 
to CMS, as required in this subpart.



                    Subpart E_External Quality Review

    Source: 68 FR 3635, Jan. 24, 2003, unless otherwise noted.



Sec.  438.310  Basis, scope, and applicability.

    (a) Statutory basis. This subpart is based on sections 1932(c)(2), 
1903(a)(3)(C)(ii), and 1902(a)(4) of the Act.
    (b) Scope. This subpart sets forth requirements for annual external 
quality reviews of each contracting managed care organization (MCO) and 
prepaid inpatient health plan (PIHP), including--
    (1) Criteria that States must use in selecting entities to perform 
the reviews;

[[Page 236]]

    (2) Specifications for the activities related to external quality 
review;
    (3) Circumstances under which external quality review may use the 
results of Medicare quality reviews or private accreditation reviews; 
and
    (4) Standards for making available the results of the reviews.
    (c) Applicability. The provisions of this subpart apply to MCOs, 
PIHPs, and to health insuring organizations (HIOs) that began on or 
after January 1, 1986 that the statute does not explicitly exempt from 
requirements in section 1903(m) of the Act.



Sec.  438.320  Definitions.

    As used in this subpart--
    EQR stands for external quality review.
    EQRO stands for external quality review organization.
    External quality review means the analysis and evaluation by an 
EQRO, of aggregated information on quality, timeliness, and access to 
the health care services that an MCO or PIHP, or their contractors 
furnish to Medicaid recipients.
    External quality review organization means an organization that 
meets the competence and independence requirements set forth in Sec.  
438.354, and performs external quality review, other EQR-related 
activities as set forth in Sec.  438.358, or both.
    Financial relationship means--
    (1) A direct or indirect ownership or investment interest (including 
an option or nonvested interest) in any entity. This direct or indirect 
interest may be in the form of equity, debt, or other means and includes 
any indirect ownership or investment interest no matter how many levels 
removed from a direct interest; or
    (2) A compensation arrangement with an entity.
    Quality, as it pertains to external quality review, means the degree 
to which an MCO or PIHP increases the likelihood of desired health 
outcomes of its enrollees through its structural and operational 
characteristics and through the provision of health services that are 
consistent with current professional knowledge.
    Validation means the review of information, data, and procedures to 
determine the extent to which they are accurate, reliable, free from 
bias, and in accord with standards for data collection and analysis.



Sec.  438.350  State responsibilities.

    Each State that contracts with MCOs or PIHPs must ensure that--
    (a) Except as provided in Sec.  438.362, a qualified EQRO performs 
an annual EQR for each contracting MCO or PIHP;
    (b) The EQRO has sufficient information to use in performing the 
review;
    (c) The information used to carry out the review must be obtained 
from the EQR-related activities described in Sec.  438.358.
    (d) For each EQR-related activity, the information must include the 
elements described in Sec.  438.364(a)(1)(i) through (a)(1)(iv);
    (e) The information provided to the EQRO in accordance with 
paragraph (c) of this section is obtained through methods consistent 
with the protocols established under Sec.  438.352; and
    (f) The results of the reviews are made available as specified in 
Sec.  438.364.



Sec.  438.352  External quality review protocols.

    Each protocol must specify--
    (a) The data to be gathered;
    (b) The sources of the data;
    (c) The activities and steps to be followed in collecting the data 
to promote its accuracy, validity, and reliability;
    (d) The proposed method or methods for validly analyzing and 
interpreting the data once obtained; and
    (e) Instructions, guidelines, worksheets, and other documents or 
tools necessary for implementing the protocol.



Sec.  438.354  Qualifications of external quality review organizations.

    (a) General rule. The State must ensure that an EQRO meets the 
requirements of this section.
    (b) Competence. The EQRO must have at a minimum the following:
    (1) Staff with demonstrated experience and knowledge of--
    (i) Medicaid recipients, policies, data systems, and processes;
    (ii) Managed care delivery systems, organizations, and financing;

[[Page 237]]

    (iii) Quality assessment and improvement methods; and
    (iv) Research design and methodology, including statistical 
analysis.
    (2) Sufficient physical, technological, and financial resources to 
conduct EQR or EQR-related activities.
    (3) Other clinical and nonclinical skills necessary to carry out EQR 
or EQR-related activities and to oversee the work of any subcontractors.
    (c) Independence. The EQRO and its subcontractors are independent 
from the State Medicaid agency and from the MCOs or PIHPs that they 
review. To qualify as ``independent''--
    (1) A State agency, department, university, or other State entity 
may not have Medicaid purchasing or managed care licensing authority; 
and
    (2) A State agency, department, university, or other State entity 
must be governed by a Board or similar body the majority of whose 
members are not government employees.
    (3) An EQRO may not--
    (i) Review a particular MCO or PIHP if either the EQRO or the MCO or 
PIHP exerts control over the other (as used in this paragraph, 
``control'' has the meaning given the term in 48 CFR 19.101) through--
    (A) Stock ownership;
    (B) Stock options and convertible debentures;
    (C) Voting trusts;
    (D) Common management, including interlocking management; and
    (E) Contractual relationships.
    (ii) Deliver any health care services to Medicaid recipients;
    (iii) Conduct, on the State's behalf, ongoing Medicaid managed care 
program operations related to oversight of the quality of MCO or PIHP 
services, except for the related activities specified in Sec.  438.358; 
or
    (iv) Have a present, or known future, direct or indirect financial 
relationship with an MCO or PIHP that it will review as an EQRO.



Sec.  438.356  State contract options.

    (a) The State--
    (1) Must contract with one EQRO to conduct either EQR alone or EQR 
and other EQR-related activities; and
    (2) May contract with additional EQROs to conduct EQR-related 
activities as set forth in Sec.  438.358.
    (b) Each EQRO must meet the competence requirements as specified in 
Sec.  438.354(b).
    (c) Each EQRO is permitted to use subcontractors. The EQRO is 
accountable for, and must oversee, all subcontractor functions.
    (d) Each EQRO and its subcontractors performing EQR or EQR-related 
activities must meet the requirements for independence, as specified in 
Sec.  438.354(c).
    (e) For each contract, the State must follow an open, competitive 
procurement process that is in accordance with State law and regulations 
and consistent with 45 CFR part 74 as it applies to State procurement of 
Medicaid services.



Sec.  438.358  Activities related to external quality review.

    (a) General rule. The State, its agent that is not an MCO or PIHP, 
or an EQRO may perform the mandatory and optional EQR-related activities 
in this section.
    (b) Mandatory activities. For each MCO and PIHP, the EQR must use 
information from the following activities:
    (1) Validation of performance improvement projects required by the 
State to comply with requirements set forth in Sec.  438.240(b)(1) and 
that were underway during the preceding 12 months.
    (2) Validation of MCO or PIHP performance measures reported (as 
required by the State) or MCO or PIHP performance measure calculated by 
the State during the preceding 12 months to comply with requirements set 
forth in Sec.  438.240(b)(2).
    (3) A review, conducted within the previous 3-year period, to 
determine the MCO's or PIHP's compliance with standards (except with 
respect to standards under Sec. Sec.  438.240(b)(1) and (2), for the 
conduct of performance improvement projects and calculation of 
performance measures respectively) established by the State to comply 
with the requirements of Sec.  438.204(g).
    (c) Optional activities. The EQR may also use information derived 
during the

[[Page 238]]

preceding 12 months from the following optional activities:
    (1) Validation of encounter data reported by an MCO or PIHP.
    (2) Administration or validation of consumer or provider surveys of 
quality of care.
    (3) Calculation of performance measures in addition to those 
reported by an MCO or PIHP and validated by an EQRO.
    (4) Conduct of performance improvement projects in addition to those 
conducted by an MCO or PIHP and validated by an EQRO.
    (5) Conduct of studies on quality that focus on a particular aspect 
of clinical or nonclinical services at a point in time.
    (d) Technical assistance. The EQRO may, at the State's direction, 
provide technical guidance to groups of MCOs or PIHPs to assist them in 
conducting activities related to the mandatory and optional activities 
that provide information for the EQR.



Sec.  438.360  Nonduplication of mandatory activities.

    (a) General rule. To avoid duplication, the State may use, in place 
of a Medicaid review by the State, its agent, or EQRO, information about 
the MCO or PIHP obtained from a Medicare or private accreditation review 
to provide information otherwise obtained from the mandatory activities 
specified in Sec.  438.358 if the conditions of paragraph (b) or 
paragraph (c) of this section are met.
    (b) MCOs or PIHPs reviewed by Medicare or private accrediting 
organizations. For information about an MCO's or PIHP's compliance with 
one or more standards required under Sec.  438.204(g), (except with 
respect to standards under Sec. Sec.  438.240(b)(1) and (2), for the 
conduct of performance improvement projects and calculation of 
performance measures respectively) the following conditions must be met:
    (1) The MCO or PIHP is in compliance with standards established by 
CMS for Medicare+Choice or a national accrediting organization. The CMS 
or national accreditation standards are comparable to standards 
established by the State to comply with Sec.  438.204(g) and the EQR-
related activity under Sec.  438.358(b)(3).
    (2) Compliance with the standards is determined either by--
    (i) CMS or its contractor for Medicare; or
    (ii) A private national accrediting organization that CMS has 
approved as applying standards at least as stringent as Medicare under 
the procedures in Sec.  422.158.
    (3) The MCO or PIHP provides to the State all the reports, findings, 
and other results of the Medicare or private accreditation review 
applicable to the standards provided for in Sec.  438.204(g); and the 
State provides the information to the EQRO.
    (4) In its quality strategy, the State identifies the standards for 
which the EQR will use information from Medicare or private 
accreditation reviews, and explains its rationale for why the standards 
are duplicative.
    (c) Additional provisions for MCOs or PIHPs serving only dually 
eligibles. The State may use information obtained from the Medicare 
program in place of information produced by the State, its agent, or 
EQRO with respect to the mandatory activities specified in Sec.  438.358 
(b)(1) and (b)(2) if the following conditions are met:
    (1) The MCO or PIHP serves only individuals who receive both 
Medicare and Medicaid benefits.
    (2) The Medicare review activities are substantially comparable to 
the State-specified mandatory activities in Sec.  438.358(b)(1) and 
(b)(2).
    (3) The MCO or PIHP provides to the State all the reports, findings, 
and other results of the Medicare review from the activities specified 
under Sec.  438.358(b)(1) and (b)(2) and the State provides the 
information to the EQRO.
    (4) In its quality strategy, the State identifies the mandatory 
activities for which it has exercised this option and explains its 
rationale for why these activities are duplicative.



Sec.  438.362  Exemption from external quality review.

    (a) Basis for exemption. The State may exempt an MCO or PIHP from 
EQR if the following conditions are met:
    (1) The MCO or PIHP has a current Medicare contract under part C of 
title

[[Page 239]]

XVIII or under section 1876 of the Act, and a current Medicaid contract 
under section 1903(m) of the Act.
    (2) The two contracts cover all or part of the same geographic area 
within the State.
    (3) The Medicaid contract has been in effect for at least 2 
consecutive years before the effective date of the exemption and during 
those 2 years the MCO or PIHP has been subject to EQR under this part, 
and found to be performing acceptably with respect to the quality, 
timeliness, and access to health care services it provides to Medicaid 
recipients.
    (b) Information on exempted MCOs or PIHPs. When the State exercises 
this option, the State must obtain either of the following:
    (1) Information on Medicare review findings. Each year, the State 
must obtain from each MCO or PIHP that it exempts from EQR the most 
recent Medicare review findings reported on the MCO or PIHP including--
    (i) All data, correspondence, information, and findings pertaining 
to the MCO's or PIHP's compliance with Medicare standards for access, 
quality assessment and performance improvement, health services, or 
delegation of these activities;
    (ii) All measures of the MCO's or PIHP's performance; and
    (iii) The findings and results of all performance improvement 
projects pertaining to Medicare enrollees.
    (2) Medicare information from a private, national accrediting 
organization that CMS approves and recognizes for Medicare+Choice 
deeming. (i) If an exempted MCO or PIHP has been reviewed by a private 
accrediting organization, the State must require the MCO or PIHP to 
provide the State with a copy of all findings pertaining to its most 
recent accreditation review if that review has been used for either of 
the following purposes:
    (A) To fulfill certain requirements for Medicare external review 
under subpart D of part 422 of this chapter.
    (B) To deem compliance with Medicare requirements, as provided in 
Sec.  422.156 of this chapter.
    (ii) These findings must include, but need not be limited to, 
accreditation review results of evaluation of compliance with individual 
accreditation standards, noted deficiencies, corrective action plans, 
and summaries of unmet accreditation requirements.



Sec.  438.364  External quality review results.

    (a) Information that must be produced. The State must ensure that 
the EQR produces at least the following information:
    (1) A detailed technical report that describes the manner in which 
the data from all activities conducted in accordance with Sec.  438.358 
were aggregated and analyzed, and conclusions were drawn as to the 
quality, timeliness, and access to the care furnished by the MCO or 
PIHP. The report must also include the following for each activity 
conducted in accordance with Sec.  438.358:
    (i) Objectives.
    (ii) Technical methods of data collection and analysis.
    (iii) Description of data obtained.
    (iv) Conclusions drawn from the data.
    (2) An assessment of each MCO's or PIHP's strengths and weaknesses 
with respect to the quality, timeliness, and access to health care 
services furnished to Medicaid recipients.
    (3) Recommendations for improving the quality of health care 
services furnished by each MCO or PIHP.
    (4) As the State determines, methodologically appropriate, 
comparative information about all MCOs and PIHPs.
    (5) An assessment of the degree to which each MCO or PIHP has 
addressed effectively the recommendations for quality improvement made 
by the EQRO during the previous year's EQR.
    (b) Availability of information. The State must provide copies of 
the information specified in paragraph (a) of this section, upon 
request, through print or electronic media, to interested parties such 
as participating health care providers, enrollees and potential 
enrollees of the MCO or PIHP, recipient advocacy groups, and members of 
the general public. The State must make this information available in 
alternative formats for persons with sensory impairments, when 
requested.
    (c) Safeguarding patient identity. The information released under 
paragraph

[[Page 240]]

(b) of this section may not disclose the identity of any patient.



Sec.  438.370  Federal financial participation.

    (a) FFP at the 75 percent rate is available in expenditures for EQR 
(including the production of EQR results) and EQR-related activities set 
forth in Sec.  438.358 conducted by EQROs and their subcontractors.
    (b) FFP at the 50 percent rate is available in expenditures for EQR-
related activities conducted by any entity that does not qualify as an 
EQRO.



                       Subpart F_Grievance System



Sec.  438.400  Statutory basis and definitions.

    (a) Statutory basis. This subpart is based on sections 1902(a)(3), 
1902(a)(4), and 1932(b)(4) of the Act.
    (1) Section 1902(a)(3) 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.
    (2) Section 1902(a)(4) requires that the State plan provide for 
methods of administration that the Secretary finds necessary for the 
proper and efficient operation of the plan.
    (3) Section 1932(b)(4) requires Medicaid managed care organizations 
to establish internal grievance procedures under which Medicaid 
enrollees, or providers acting on their behalf, may challenge the denial 
of coverage of, or payment for, medical assistance.
    (b) Definitions. As used in this subpart, the following terms have 
the indicated meanings:
    Action means--
    In the case of an MCO or PIHP--
    (1) The denial or limited authorization of a requested service, 
including the type or level of service;
    (2) The reduction, suspension, or termination of a previously 
authorized service;
    (3) The denial, in whole or in part, of payment for a service;
    (4) The failure to provide services in a timely manner, as defined 
by the State;
    (5) The failure of an MCO or PIHP to act within the timeframes 
provided in Sec.  438.408(b); or
    (6) For a resident of a rural area with only one MCO, the denial of 
a Medicaid enrollee's request to exercise his or her right, under Sec.  
438.52(b)(2)(ii), to obtain services outside the network.
    Appeal means a request for review of an action, as ``action'' is 
defined in this section.
    Grievance means an expression of dissatisfaction about any matter 
other than an action, as ``action'' is defined in this section. The term 
is also used to refer to the overall system that includes grievances and 
appeals handled at the MCO or PIHP level and access to the State fair 
hearing process. (Possible subjects for grievances include, but are not 
limited to, the quality of care or services provided, and aspects of 
interpersonal relationships such as rudeness of a provider or employee, 
or failure to respect the enrollee's rights.)



Sec.  438.402  General requirements.

    (a) The grievance system. Each MCO and PIHP must have a system in 
place for enrollees that includes a grievance process, an appeal 
process, and access to the State's fair hearing system.
    (b) Filing requirements--(1) Authority to file. (i) An enrollee may 
file a grievance and an MCO or PIHP level appeal, and may request a 
State fair hearing.
    (ii) A provider, acting on behalf of the enrollee and with the 
enrollee's written consent, may file an appeal. A provider may file a 
grievance or request a State fair hearing on behalf of an enrollee, if 
the State permits the provider to act as the enrollee's authorized 
representative in doing so.
    (2) Timing. The State specifies a reasonable timeframe that may be 
no less than 20 days and not to exceed 90 days from the date on the 
MCO's or PIHP's notice of action. Within that timeframe--
    (i) The enrollee or the provider may file an appeal; and
    (ii) In a State that does not require exhaustion of MCO and PIHP 
level appeals, the enrollee may request a State fair hearing.
    (3) Procedures. (i) The enrollee may file a grievance either orally 
or in writing and, as determined by the State, either with the State or 
with the MCO or the PIHP.

[[Page 241]]

    (ii) The enrollee or the provider may file an appeal either orally 
or in writing, and unless he or she requests expedited resolution, must 
follow an oral filing with a written, signed, appeal.



Sec.  438.404  Notice of action.

    (a) Language and format requirements. The notice must be in writing 
and must meet the language and format requirements of Sec.  438.10(c) 
and (d) to ensure ease of understanding.
    (b) Content of notice. The notice must explain the following:
    (1) The action the MCO or PIHP or its contractor has taken or 
intends to take.
    (2) The reasons for the action.
    (3) The enrollee's or the provider's right to file an MCO or PIHP 
appeal.
    (4) If the State does not require the enrollee to exhaust the MCO or 
PIHP level appeal procedures, the enrollee's right to request a State 
fair hearing.
    (5) The procedures for exercising the rights specified in this 
paragraph.
    (6) The circumstances under which expedited resolution is available 
and how to request it.
    (7) The enrollee's right to have benefits continue pending 
resolution of the appeal, how to request that benefits be continued, and 
the circumstances under which the enrollee may be required to pay the 
costs of these services.
    (c) Timing of notice. The MCO or PIHP must mail the notice within 
the following timeframes:
    (1) For termination, suspension, or reduction of previously 
authorized Medicaid-covered services, within the timeframes specified in 
Sec. Sec.  431.211, 431.213, and 431.214 of this chapter.
    (2) For denial of payment, at the time of any action affecting the 
claim.
    (3) For standard service authorization decisions that deny or limit 
services, within the timeframe specified in Sec.  438.210(d)(1).
    (4) If the MCO or PIHP extends the timeframe in accordance with 
Sec.  438.210(d)(1), it must--
    (i) Give the enrollee written notice of the reason for the decision 
to extend the timeframe and inform the enrollee of the right to file a 
grievance if he or she disagrees with that decision; and
    (ii) Issue and carry out its determination as expeditiously as the 
enrollee's health condition requires and no later than the date the 
extension expires.
    (5) For service authorization decisions not reached within the 
timeframes specified in Sec.  438.210(d) (which constitutes a denial and 
is thus an adverse action), on the date that the timeframes expire.
    (6) For expedited service authorization decisions, within the 
timeframes specified in Sec.  438.210(d).



Sec.  438.406  Handling of grievances and appeals.

    (a) General requirements. In handling grievances and appeals, each 
MCO and each PIHP must meet the following requirements:
    (1) Give enrollees any reasonable assistance in completing forms and 
taking other procedural steps. This includes, but is not limited to, 
providing interpreter services and toll-free numbers that have adequate 
TTY/TTD and interpreter capability.
    (2) Acknowledge receipt of each grievance and appeal.
    (3) Ensure that the individuals who make decisions on grievances and 
appeals are individuals--
    (i) Who were not involved in any previous level of review or 
decision-making; and
    (ii) Who, if deciding any of the following, are health care 
professionals who have the appropriate clinical expertise, as determined 
by the State, in treating the enrollee's condition or disease.
    (A) An appeal of a denial that is based on lack of medical 
necessity.
    (B) A grievance regarding denial of expedited resolution of an 
appeal.
    (C) A grievance or appeal that involves clinical issues.
    (b) Special requirements for appeals. The process for appeals must:
    (1) Provide that oral inquiries seeking to appeal an action are 
treated as appeals (to establish the earliest possible filing date for 
the appeal) and must be confirmed in writing, unless the enrollee or the 
provider requests expedited resolution.
    (2) Provide the enrollee a reasonable opportunity to present 
evidence, and allegations of fact or law, in person as

[[Page 242]]

well as in writing. (The MCO or PIHP must inform the enrollee of the 
limited time available for this in the case of expedited resolution.)
    (3) Provide the enrollee and his or her representative opportunity, 
before and during the appeals process, to examine the enrollee's case 
file, including medical records, and any other documents and records 
considered during the appeals process.
    (4) Include, as parties to the appeal--
    (i) The enrollee and his or her representative; or
    (ii) The legal representative of a deceased enrollee's estate.



Sec.  438.408  Resolution and notification: Grievances and appeals.

    (a) Basic rule. The MCO or PIHP must dispose of each grievance and 
resolve each appeal, and provide notice, as expeditiously as the 
enrollee's health condition requires, within State-established 
timeframes that may not exceed the timeframes specified in this section.
    (b) Specific timeframes--(1) Standard disposition of grievances. For 
standard disposition of a grievance and notice to the affected parties, 
the timeframe is established by the State but may not exceed 90 days 
from the day the MCO or PIHP receives the grievance.
    (2) Standard resolution of appeals. For standard resolution of an 
appeal and notice to the affected parties, the State must establish a 
timeframe that is no longer than 45 days from the day the MCO or PIHP 
receives the appeal. This timeframe may be extended under paragraph (c) 
of this section.
    (3) Expedited resolution of appeals. For expedited resolution of an 
appeal and notice to affected parties, the State must establish a 
timeframe that is no longer than 3 working days after the MCO or PIHP 
receives the appeal. This timeframe may be extended under paragraph (c) 
of this section.
    (c) Extension of timeframes--(1) The MCO or PIHP may extend the 
timeframes from paragraph (b) of this section by up to 14 calendar days 
if--
    (i) The enrollee requests the extension; or
    (ii) The MCO or PIHP shows (to the satisfaction of the State agency, 
upon its request) that there is need for additional information and how 
the delay is in the enrollee's interest.
    (2) Requirements following extension. If the MCO or PIHP extends the 
timeframes, it must--for any extension not requested by the enrollee, 
give the enrollee written notice of the reason for the delay.
    (d) Format of notice--(1) Grievances. The State must establish the 
method MCOs and PIHPs will use to notify an enrollee of the disposition 
of a grievance.
    (2) Appeals. (i) For all appeals, the MCO or PIHP must provide 
written notice of disposition.
    (ii) For notice of an expedited resolution, the MCO or PIHP must 
also make reasonable efforts to provide oral notice.
    (e) Content of notice of appeal resolution. The written notice of 
the resolution must include the following:
    (1) The results of the resolution process and the date it was 
completed.
    (2) For appeals not resolved wholly in favor of the enrollees--
    (i) The right to request a State fair hearing, and how to do so;
    (ii) The right to request to receive benefits while the hearing is 
pending, and how to make the request; and
    (iii) That the enrollee may be held liable for the cost of those 
benefits if the hearing decision upholds the MCO's or PIHP's action.
    (f) Requirements for State fair hearings--(1) Availability. The 
State must permit the enrollee to request a State fair hearing within a 
reasonable time period specified by the State, but not less than 20 or 
in excess of 90 days from whichever of the following dates applies--
    (i) If the State requires exhaustion of the MCO or PIHP level appeal 
procedures, from the date of the MCO's or PIHP's notice of resolution; 
or
    (ii) If the State does not require exhaustion of the MCO or PIHP 
level appeal procedures and the enrollee appeals directly to the State 
for a fair hearing, from the date on the MCO's or PIHP's notice of 
action.
    (2) Parties. The parties to the State fair hearing include the MCO 
or PIHP as well as the enrollee and his or her representative or the 
representative of a deceased enrollee's estate.

[[Page 243]]



Sec.  438.410  Expedited resolution of appeals.

    (a) General rule. Each MCO and PIHP must establish and maintain an 
expedited review process for appeals, when the MCO or PIHP determines 
(for a request from the enrollee) or the provider indicates (in making 
the request on the enrollee's behalf or supporting the enrollee's 
request) that taking the time for a standard resolution could seriously 
jeopardize the enrollee's life or health or ability to attain, maintain, 
or regain maximum function.
    (b) Punitive action. The MCO or PIHP must ensure that punitive 
action is neither taken against a provider who requests an expedited 
resolution or supports an enrollee's appeal.
    (c) Action following denial of a request for expedited resolution. 
If the MCO or PIHP denies a request for expedited resolution of an 
appeal, it must--
    (1) Transfer the appeal to the timeframe for standard resolution in 
accordance with Sec.  438.408(b)(2);
    (2) Make reasonable efforts to give the enrollee prompt oral notice 
of the denial, and follow up within two calendar days with a written 
notice.



Sec.  438.414  Information about the grievance system to providers and subcontractors.

    The MCO or PIHP must provide the information specified at Sec.  
438.10(g)(1) about the grievance system to all providers and 
subcontractors at the time they enter into a contract.



Sec.  438.416  Recordkeeping and reporting requirements.

    The State must require MCOs and PIHPs to maintain records of 
grievances and appeals and must review the information as part of the 
State quality strategy.



Sec.  438.420  Continuation of benefits while the MCO or PIHP appeal and the State fair hearing are pending.

    (a) Terminology. As used in this section, ``timely'' filing means 
filing on or before the later of the following:
    (1) Within ten days of the MCO or PIHP mailing the notice of action.
    (2) The intended effective date of the MCO's or PIHP's proposed 
action.
    (b) Continuation of benefits. The MCO or PIHP must continue the 
enrollee's benefits if--
    (1) The enrollee or the provider files the appeal timely;
    (2) The appeal involves the termination, suspension, or reduction of 
a previously authorized course of treatment;
    (3) The services were ordered by an authorized provider;
    (4) The original period covered by the original authorization has 
not expired; and
    (5) The enrollee requests extension of benefits.
    (c) Duration of continued or reinstated benefits. If, at the 
enrollee's request, the MCO or PIHP continues or reinstates the 
enrollee's benefits while the appeal is pending, the benefits must be 
continued until one of following occurs:
    (1) The enrollee withdraws the appeal.
    (2) Ten days pass after the MCO or PIHP mails the notice, providing 
the resolution of the appeal against the enrollee, unless the enrollee, 
within the 10-day timeframe, has requested a State fair hearing with 
continuation of benefits until a State fair hearing decision is reached.
    (3) A State fair hearing Office issues a hearing decision adverse to 
the enrollee.
    (4) The time period or service limits of a previously authorized 
service has been met.
    (d) Enrollee responsibility for services furnished while the appeal 
is pending. If the final resolution of the appeal is adverse to the 
enrollee, that is, upholds the MCO's or PIHP's action, the MCO or PIHP 
may recover the cost of the services furnished to the enrollee while the 
appeal is pending, to the extent that they were furnished solely because 
of the requirements of this section, and in accordance with the policy 
set forth in Sec.  431.230(b) of this chapter.



Sec.  438.424  Effectuation of reversed appeal resolutions.

    (a) Services not furnished while the appeal is pending. If the MCO 
or PIHP, or the State fair hearing officer reverses a decision to deny, 
limit, or delay services that were not furnished while the

[[Page 244]]

appeal was pending, the MCO or PIHP must authorize or provide the 
disputed services promptly, and as expeditiously as the enrollee's 
health condition requires.
    (b) Services furnished while the appeal is pending. If the MCO or 
PIHP, or the State fair hearing officer reverses a decision to deny 
authorization of services, and the enrollee received the disputed 
services while the appeal was pending, the MCO or the PIHP or the State 
must pay for those services, in accordance with State policy and 
regulations.

Subpart G [Reserved]



             Subpart H_Certifications and Program Integrity



Sec.  438.600  Statutory basis.

    This subpart is based on sections 1902(a)(4), 1902(a)(19), 1903(m), 
and 1932(d)(1) of the Act.
    (a) Section 1902(a)(4) 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) Section 1902(a)(19) requires that the State plan provide the 
safeguards necessary to ensure that eligibility is determined and 
services are provided in a manner consistent with simplicity of 
administration and the best interests of the recipients.
    (c) Section 1903(m) establishes conditions for payments to the State 
with respect to contracts with MCOs.
    (d) Section 1932(d)(1) prohibits MCOs and PCCMs from knowingly 
having certain types of relationships with individuals excluded under 
Federal regulations from participating in specified activities, or with 
affiliates of those individuals.



Sec.  438.602  Basic rule.

    As a condition for receiving payment under the Medicaid managed care 
program, an MCO, PCCM, PIHP, or PAHP must comply with the applicable 
certification, program integrity and prohibited affiliation requirements 
of this subpart.



Sec.  438.604  Data that must be certified.

    (a) Data certifications. When State payments to an MCO or PIHP are 
based on data submitted by the MCO or PIHP, the State must require 
certification of the data as provided in Sec.  438.606. The data that 
must be certified include, but are not limited to, enrollment 
information, encounter data, and other information required by the State 
and contained in contracts, proposals, and related documents.
    (b) Additional certifications. Certification is required, as 
provided in Sec.  438.606, for all documents specified by the State.



Sec.  438.606  Source, content, and timing of certification.

    (a) Source of certification. For the data specified in Sec.  
438.604, the data the MCO or PIHP submits to the State must be certified 
by one of the following:
    (1) The MCO's or PIHP's Chief Executive Officer.
    (2) The MCO's or PIHP's Chief Financial Officer.
    (3) An individual who has delegated authority to sign for, and who 
reports directly to, the MCO's or PIHP's Chief Executive Officer or 
Chief Financial Officer.
    (b) Content of certification. The certification must attest, based 
on best knowledge, information, and belief, as follows:
    (1) To the accuracy, completeness and truthfulness of the data.
    (2) To the accuracy, completeness and truthfulness of the documents 
specified by the State.
    (c) Timing of certification. The MCO or PIHP must submit the 
certification concurrently with the certified data.



Sec.  438.608  Program integrity requirements.

    (a) General requirement. The MCO or PIHP must have administrative 
and management arrangements or procedures, including a mandatory 
compliance plan, that are designed to guard against fraud and abuse.
    (b) Specific requirements. The arrangements or procedures must 
include the following:
    (1) Written policies, procedures, and standards of conduct that 
articulate

[[Page 245]]

the organization's commitment to comply with all applicable Federal and 
State standards.
    (2) The designation of a compliance officer and a compliance 
committee that are accountable to senior management.
    (3) Effective training and education for the compliance officer and 
the organization's employees.
    (4) Effective lines of communication between the compliance officer 
and the organization's employees.
    (5) Enforcement of standards through well-publicized disciplinary 
guidelines.
    (6) Provision for internal monitoring and auditing.
    (7) Provision for prompt response to detected offenses, and for 
development of corrective action initiatives relating to the MCO's or 
PIHP's contract.



Sec.  438.610  Prohibited affiliations with individuals debarred by Federal agencies.

    (a) General requirement. An MCO, PCCM, PIHP, or PAHP may not 
knowingly have a relationship of the type described in paragraph (b) of 
this section with the following:
    (1) An individual who is debarred, suspended, or otherwise excluded 
from participating in procurement activities under the Federal 
Acquisition Regulation or from participating in nonprocurement 
activities under regulations issued under Executive Order No. 12549 or 
under guidelines implementing Executive Order No. 12549.
    (2) An individual who is an affiliate, as defined in the Federal 
Acquisition Regulation, of a person described in paragraph (a)(1) of 
this section.
    (b) Specific requirements. The relationships described in this 
paragraph are as follow:
    (1) A director, officer, or partner of the MCO, PCCM, PIHP, or PAHP.
    (2) A person with beneficial ownership of five percent or more of 
the MCO's, PCCM's, PIHP's, or PAHP's equity.
    (3) A person with an employment, consulting or other arrangement 
with the MCO, PCCM, PIHP, or PAHP for the provision of items and 
services that are significant and material to the MCO's, PCCM's, PIHP's, 
or PAHP's obligations under its contract with the State.
    (c) Effect of Noncompliance. If a State finds that an MCO, PCCM, 
PIHP, or PAHP is not in compliance with paragraphs (a) and (b) of this 
section, the State:
    (1) Must notify the Secretary of the noncompliance.
    (2) May continue an existing agreement with the MCO, PCCM, PIHP, or 
PAHP unless the Secretary directs otherwise.
    (3) May not renew or otherwise extend the duration of an existing 
agreement with the MCO, PCCM, PIHP, or PAHP unless the Secretary 
provides to the State and to Congress a written statement describing 
compelling reasons that exist for renewing or extending the agreement.
    (d) Consultation with the Inspector General. Any action by the 
Secretary described in paragraphs (c)(2) or (c)(3) of this section is 
taken in consultation with the Inspector General.



                           Subpart I_Sanctions



Sec.  438.700  Basis for imposition of sanctions.

    (a) Each State that contracts with an MCO must, and each State that 
contracts with a PCCM may, establish intermediate sanctions, as 
specified in Sec.  438.702, that it may impose if it makes any of the 
determinations specified in paragraphs (b) through (d) of this section. 
The State may base its determinations on findings from onsite surveys, 
enrollee or other complaints, financial status, or any other source.
    (b) A State determines whether an MCO acts or fails to act as 
follows:
    (1) Fails substantially to provide medically necessary services that 
the MCO is required to provide, under law or under its contract with the 
State, to an enrollee covered under the contract.
    (2) Imposes on enrollees premiums or charges that are in excess of 
the premiums or charges permitted under the Medicaid program.
    (3) Acts to discriminate among enrollees on the basis of their 
health status or need for health care services. This includes 
termination of enrollment or refusal to reenroll a recipient, except as 
permitted under the Medicaid

[[Page 246]]

program, or any practice that would reasonably be expected to discourage 
enrollment by recipients whose medical condition or history indicates 
probable need for substantial future medical services.
    (4) Misrepresents or falsifies information that it furnishes to CMS 
or to the State.
    (5) Misrepresents or falsifies information that it furnishes to an 
enrollee, potential enrollee, or health care provider.
    (6) Fails to comply with the requirements for physician incentive 
plans, as set forth (for Medicare) in Sec. Sec.  422.208 and 422.210 of 
this chapter.
    (c) A State determines whether an MCO, PIHP, PAHP or PCCM has 
distributed directly, or indirectly through any agent or independent 
contractor, marketing materials that have not been approved by the State 
or that contain false or materially misleading information.
    (d) A State determines whether--
    (1) An MCO has violated any of the other requirements of 
sections1903(m) or 1932 of the Act, and any implementing regulations;
    (2) A PCCM has violated any of the other applicable requirements of 
sections 1932 or 1905(t)(3) of the Act and any implementing regulations;
    (3) For any of the violations under paragraphs (d)(1) and (d)(2) of 
this section, only the sanctions specified in Sec.  438.702, paragraphs 
(a)(3), (a)(4), and (a)(5) may be imposed.



Sec.  438.702  Types of intermediate sanctions.

    (a) The types of intermediate sanctions that a State may impose 
under this subpart include the following:
    (1) Civil money penalties in the amounts specified in Sec.  438.704.
    (2) Appointment of temporary management for an MCO as provided in 
Sec.  438.706.
    (3) Granting enrollees the right to terminate enrollment without 
cause and notifying the affected enrollees of their right to disenroll.
    (4) Suspension of all new enrollment, including default enrollment, 
after the effective date of the sanction.
    (5) Suspension of payment for recipients enrolled after the 
effective date of the sanction and until CMS or the State is satisfied 
that the reason for imposition of the sanction no longer exists and is 
not likely to recur.
    (b) State agencies retain authority to impose additional sanctions 
under State statutes or State regulations that address areas of 
noncompliance specified in Sec.  438.700, as well as additional areas of 
noncompliance. Nothing in this subpart prevents State agencies from 
exercising that authority.



Sec.  438.704  Amounts of civil money penalties.

    (a) General rule. The limit on, or the maximum civil money penalty 
the State may impose varies depending on the nature of the MCO's or 
PCCM's action or failure to act, as provided in this section.
    (b) Specific limits. (1) The limit is $25,000 for each determination 
under the following paragraphs of Sec.  438.700:
    (i) Paragraph (b)(1) (Failure to provide services).
    (ii) Paragraph (b)(5) (Misrepresentation or false statements to 
enrollees, potential enrollees, or health care providers).
    (iii) Paragraph (b)(6) (Failure to comply with physician incentive 
plan requirements).
    (iv) Paragraph (c) (Marketing violations).
    (2) The limit is $100,000 for each determination under paragraph 
(b)(3) (discrimination) or (b)(4) (Misrepresentation or false statements 
to CMS or the State) of Sec.  438.700.
    (3) The limit is $15,000 for each recipient the State determines was 
not enrolled because of a discriminatory practice under paragraph (b)(3) 
of Sec.  438.700. (This is subject to the overall limit of $100,000 
under paragraph (b)(2) of this section).
    (c) Specific amount. For premiums or charges in excess of the 
amounts permitted under the Medicaid program, the maximum amount of the 
penalty is $25,000 or double the amount of the excess charges, whichever 
is greater. The State must deduct from the penalty the amount of 
overcharge and return it to the affected enrollees.

[[Page 247]]



Sec.  438.706  Special rules for temporary management.

    (a) Optional imposition of sanction. The State may impose temporary 
management only if it finds (through onsite survey, enrollee complaints, 
financial audits, or any other means) that--
    (1) There is continued egregious behavior by the MCO, including but 
not limited to behavior that is described in Sec.  438.700, or that is 
contrary to any requirements of sections 1903(m) and 1932 of the Act; or
    (2) There is substantial risk to enrollees' health; or
    (3) The sanction is necessary to ensure the health of the MCO's 
enrollees--
    (i) While improvements are made to remedy violations under Sec.  
438.700; or
    (ii) Until there is an orderly termination or reorganization of the 
MCO.
    (b) Required imposition of sanction. The State must impose temporary 
management (regardless of any other sanction that may be imposed) if it 
finds that an MCO has repeatedly failed to meet substantive requirements 
in section 1903(m) or section 1932 of the Act, or this subpart. The 
State must also grant enrollees the right to terminate enrollment 
without cause, as described in Sec.  438.702(a)(3), and must notify the 
affected enrollees of their right to terminate enrollment.
    (c) Hearing. The State may not delay imposition of temporary 
management to provide a hearing before imposing this sanction.
    (d) Duration of sanction. The State may not terminate temporary 
management until it determines that the MCO can ensure that the 
sanctioned behavior will not recur.



Sec.  438.708  Termination of an MCO or PCCM contract.

    A State has the authority to terminate an MCO or PCCM contract and 
enroll that entity's enrollees in other MCOs or PCCMs, or provide their 
Medicaid benefits through other options included in the State plan, if 
the State determines that the MCO or PCCM has failed to do either of the 
following:
    (a) Carry out the substantive terms of its contract; or
    (b) Meet applicable requirements in sections 1932, 1903(m), and 
1905(t) of the Act.



Sec.  438.710  Due process: Notice of sanction and pre-termination hearing.

    (a) Notice of sanction. Except as provided in Sec.  438.706(c), 
before imposing any of the intermediate sanctions specified in this 
subpart, the State must give the affected entity timely written notice 
that explains the following:
    (1) The basis and nature of the sanction.
    (2) Any other due process protections that the State elects to 
provide.
    (b) Pre-termination hearing--(1) General rule. Before terminating an 
MCO or PCCM contract under Sec.  438.708, the State must provide the 
entity a pre-termination hearing.
    (2) Procedures. The State must do the following:
    (i) Give the MCO or PCCM written notice of its intent to terminate, 
the reason for termination, and the time and place of the hearing;
    (ii) After the hearing, give the entity written notice of the 
decision affirming or reversing the proposed termination of the contract 
and, for an affirming decision, the effective date of termination; and
    (iii) For an affirming decision, give enrollees of the MCO or PCCM 
notice of the termination and information, consistent with Sec.  438.10, 
on their options for receiving Medicaid services following the effective 
date of termination.



Sec.  438.722  Disenrollment during termination hearing process.

    After a State notifies an MCO or PCCM that it intends to terminate 
the contract, the State may do the following:
    (a) Give the entity's enrollees written notice of the State's intent 
to terminate the contract.
    (b) Allow enrollees to disenroll immediately without cause.



Sec.  438.724  Notice to CMS.

    (a) The State must give the CMS Regional Office written notice 
whenever it imposes or lifts a sanction for one of the violations listed 
in Sec.  438.700.
    (b) The notice must--

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    (1) Be given no later than 30 days after the State imposes or lifts 
a sanction; and
    (2) Specify the affected MCO, the kind of sanction, and the reason 
for the State's decision to impose or lift a sanction.



Sec.  438.726  State plan requirement.

    (a) The State plan must include a plan to monitor for violations 
that involve the actions and failures to act specified in this part and 
to implement the provisions of this part.
    (b) A contract with an MCO must provide that payments provided for 
under the contract will be denied for new enrollees when, and for so 
long as, payment for those enrollees is denied by CMS under section 
438.730(e).



Sec.  438.730  Sanction by CMS: Special rules for MCOs

    (a) Basis for sanction. (1) A State agency may recommend that CMS 
impose the denial of payment sanction specified in paragraph (e) of this 
section on an MCO with a contract under this part if the agency 
determines that the MCO acts or fails to act as specified in Sec.  
438.700(b)(1) through (b)(6).
    (b) Effect of an Agency Determination. (1) The State agency's 
determination becomes CMS's determination for purposes of section 
1903(m)(5)(A) of the Act unless CMS reverses or modifies it within 15 
days.
    (2) When the agency decides to recommend imposing the sanction 
described in paragraph (e) of this section, this recommendation becomes 
CMS's decision, for purposes of section 1903(m)(5)(B)(ii) of the Act, 
unless CMS rejects this recommendation within 15 days.
    (c) Notice of sanction. If the State agency's determination becomes 
CMS's determination under section (b)(2), the State agency takes the 
following actions:
    (1) Gives the MCO written notice of the nature and basis of the 
proposed sanction;
    (2) Allows the MCO 15 days from the date it receives the notice to 
provide evidence that it has not acted or failed to act in the manner 
that is the basis for the recommended sanction;
    (3) May extend the initial 15-day period for an additional 15 days 
if--
    (i) the MCO submits a written request that includes a credible 
explanation of why it needs additional time;
    (ii) the request is received by CMS before the end of the initial 
period; and
    (iii) CMS has not determined that the MCO's conduct poses a threat 
to an enrollee's health or safety.
    (d) Informal reconsideration. (1) If the MCO submits a timely 
response to the notice of sanction, the State agency--
    (i) Conducts an informal reconsideration that includes review of the 
evidence by a State agency official who did not participate in the 
original recommendation;
    (ii) Gives the MCO a concise written decision setting forth the 
factual and legal basis for the decision; and
    (iii) Forwards the decision to CMS.
    (2) The agency decision under paragraph (d)(1)(ii) of this section 
becomes CMS's decision unless CMS reverses or modifies the decision 
within 15 days from date of receipt by CMS.
    (3) If CMS reverses or modifies the State agency decision, the 
agency sends the MCO a copy of CMS's decision.
    (e) Denial of payment. (1) CMS, based upon the recommendation of the 
agency, may deny payment to the State for new enrollees of the HMO under 
section 1903(m)(5)(B)(ii) of the Act in the following situations:
    (i) If a CMS determination that an MCO has acted or failed to act, 
as described in paragraphs (b)(1) through (b)(6) of Sec.  438.700, is 
affirmed on review under paragraph (d) of this section.
    (ii) If the CMS determination is not timely contested by the MCO 
under paragraph (c) of this section.
    (2) Under Sec.  438.726(b), CMS's denial of payment for new 
enrollees automatically results in a denial of agency payments to the 
HMO for the same enrollees. (A new enrollee is an enrollee that applies 
for enrollment after the effective date in paragraph (f)(1) of this 
section.)
    (f) Effective date of sanction. (1) If the MCO does not seek 
reconsideration, a sanction is effective 15 days after the date the MCO 
is notified under paragraph (b) of this section of the decision to 
impose the sanction.

[[Page 249]]

    (2) If the MCO seeks reconsideration, the following rules apply:
    (i) Except as specified in paragraph (d)(2)(ii) of this section, the 
sanction is effective on the date specified in CMS's reconsideration 
notice.
    (ii) If CMS, in consultation with the State agency, determines that 
the MCO's conduct poses a serious threat to an enrollee's health or 
safety, the sanction may be made effective earlier than the date of the 
agency's reconsideration decision under paragraph (c)(1)(ii) of this 
section.
    (g) CMS's role. (1) CMS retains the right to independently perform 
the functions assigned to the State agency under paragraphs (a) through 
(d) of this section.
    (2) At the same time that the agency sends notice to the MCO under 
paragraph (c)(1)(i) of this section, CMS forwards a copy of the notice 
to the OIG.
    (3) CMS conveys the determination described in paragraph (b) of this 
section to the OIG for consideration of possible imposition of civil 
money penalties under section 1903(m)(5)(A) of the Act and part 1003 of 
this title. In accordance with the provisions of part 1003, the OIG may 
impose civil money penalties on the MCO in addition to, or in place of, 
the sanctions that may be imposed under this section.



        Subpart J_Conditions for Federal Financial Participation



Sec.  438.802  Basic requirements.

    FFP is available in expenditures for payments under an MCO contract 
only for the periods during which the contract--
    (a) Meets the requirements of this part; and
    (b) Is in effect.



Sec.  438.806  Prior approval.

    (a) Comprehensive risk contracts. FFP is available under a 
comprehensive risk contract only if--
    (1) The Regional Office has confirmed that the contractor meets the 
definition of an MCO or is one of the entities described in paragraphs 
(b)(2) through (b)(5) of Sec.  438.6; and
    (2) The contract meets all the requirements of section 1903(m)(2)(A) 
of the Act, the applicable requirements of section 1932 of the Act, and 
the implementing regulations in this part.
    (b) MCO contracts. Prior approval by CMS is a condition for FFP 
under any MCO contract that extends for less than one full year or that 
has a value equal to, or greater than, the following threshold amounts:
    (1) For 1998, the threshold is $1,000,000.
    (2) For subsequent years, the amount is increased by the percentage 
increase in the consumer price index for all urban consumers.
    (c) FFP is not available in an MCO contract that does not have prior 
approval from CMS under paragraph (b) of this section.



Sec.  438.808  Exclusion of entities.

    (a) General rule. FFP is available in payments under MCO contracts 
only if the State excludes from the contracts any entities described in 
paragraph (b) of this section.
    (b) Entities that must be excluded. (1) An entity that could be 
excluded under section 1128(b)(8) of the Act as being controlled by a 
sanctioned individual.
    (2) An entity that has a substantial contractual relationship as 
defined in Sec.  431.55(h)(3) of this chapter, either directly or 
indirectly, with an individual convicted of certain crimes as described 
in section 1128(b)(8)(B) of the Act.
    (3) An entity that employs or contracts, directly or indirectly, for 
the furnishing of health care, utilization review, medical social work, 
or administrative services, with one of the following:
    (i) Any individual or entity excluded from participation in Federal 
health care programs under either section 1128 or section 1128A of the 
Act.
    (ii) Any entity that would provide those services through an 
excluded individual or entity.



Sec.  438.810  Expenditures for enrollment broker services.

    (a) Terminology. As used in this section--
    Choice counseling means activities such as answering questions and 
providing information (in an unbiased manner) on available MCO, PIHP,

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PAHP, or PCCM delivery system options, and advising on what factors to 
consider when choosing among them and in selecting a primary care 
provider;
    Enrollment activities means activities such as distributing, 
collecting, and processing enrollment materials and taking enrollments 
by phone or in person;
    Enrollment broker means an individual or entity that performs choice 
counseling or enrollment activities, or both, and;
    Enrollment services means choice counseling, or enrollment 
activities, or both.
    (b) Conditions that enrollment brokers must meet. State expenditures 
for the use of enrollment brokers are considered necessary for the 
proper and efficient operation of the State plan and thus eligible for 
FFP only if the broker and its subcontractors meet the following 
conditions:
    (1) Independence. The broker and its subcontractors are independent 
of any MCO, PIHP, PAHP, PCCM, or other health care provider in the State 
in which they provide enrollment services. A broker or subcontractor is 
not considered ``independent'' if it--
    (i) Is an MCO, PIHP, PAHP, PCCM or other health care provider in the 
State;
    (ii) Is owned or controlled by an MCO, PIHP, PAHP, PCCM, or other 
health care provider in the State; or
    (iii) Owns or controls an MCO, PIHP, PAHP, PCCM or other health care 
provider in the State.
    (2) Freedom from conflict of interest. The broker and its 
subcontractor are free from conflict of interest. A broker or 
subcontractor is not considered free from conflict of interest if any 
person who is the owner, employee, or consultant of the broker or 
subcontractor or has any contract with them--
    (i) Has any direct or indirect financial interest in any entity or 
health care provider that furnishes services in the State in which the 
broker or subcontractor provides enrollment services;
    (ii) Has been excluded from participation under title XVIII or XIX 
of the Act;
    (iii) Has been debarred by any Federal agency; or
    (iv) Has been, or is now, subject to civil money penalties under the 
Act.
    (3) Approval. The initial contract or memorandum of agreement (MOA) 
for services performed by the broker has been reviewed and approved by 
CMS.

[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]



Sec.  438.812  Costs under risk and nonrisk contracts.

    (a) Under a risk contract, the total amount the State agency pays 
for carrying out the contract provisions is a medical assistance cost.
    (b) Under a nonrisk contract--
    (1) The amount the State agency pays for the furnishing of medical 
services to eligible recipients is a medical assistance cost; and
    (2) The amount the State agency pays for the contractor's 
performance of other functions is an administrative cost.



PART 440_SERVICES: GENERAL PROVISIONS--Table of Contents




                          Subpart A_Definitions

Sec.
440.1 Basis and purpose.
440.2 Specific definitions; definitions of services for FFP purposes.
440.10 Inpatient hospital services, other than services in an 
          institution for mental diseases.
440.20 Outpatient hospital services and rural health clinic services.
440.30 Other laboratory and X-ray services.
440.40 Nursing facility services for individuals age 21 or older (other 
          than services in an institution for mental disease), EPSDT, 
          and family planning services and supplies.
440.50 Physicians' services and medical and surgical services of a 
          dentist.
440.60 Medical or other remedial care provided by licensed 
          practitioners.
440.70 Home health services.
440.80 Private duty nursing services.
440.90 Clinic services.
440.100 Dental services.
440.110 Physical therapy, occupational therapy, and services for 
          individuals with speech, hearing, and language disorders.
440.120 Prescribed drugs, dentures, prosthetic devices, and eyeglasses.
440.130 Diagnostic, screening, preventive, and rehabilitative services.
440.140 Inpatient hospital services, nursing facility services, and 
          intermediate care

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          facility services for individuals age 65 or older in 
          institutions for mental diseases.
440.150 Intermediate care facility (ICF/MR) services.
440.155 Nursing facility services, other than in institutions for mental 
          diseases.
440.160 Inpatient pyschiatric services for individuals under age 21.
440.165 Nurse-midwife services.
440.166 Nurse practitioner services.
440.167 Personal care services.
440.168 Primary care case management services.
440.169 Case management services.
440.170 Any other medical or remedial care recognized under State law 
          and specified by the Secretary.
440.180 Home or community-based services.
440.181 Home and community-based services for individuals age 65 or 
          older.
440.185 Respiratory care for ventilator-dependent individuals.

      Subpart B_Requirements and Limits Applicable to All Services

440.200 Basis, purpose, and scope.
440.210 Required services for the categorically needy.
440.220 Required services for the medically needy.
440.225 Optional services.
440.230 Sufficiency of amount, duration, and scope.
440.240 Comparability of services for groups.
440.250 Limits on comparability of services.
440.255 Limited services available to certain aliens.
440.260 Methods and standards to assure quality of services.
440.270 Religious objections.



      Subpart C_Benchmark Benefit and Benchmark-Equivalent Coverage

440.300 Basis.
440.305 Scope.
440.310 Applicability.
440.315 Exempt individuals.
440.320 State plan requirements: Optional enrollment for exempt 
          individuals.
440.325 State plan requirements: Coverage and benefits.
440.330 Benchmark health benefits coverage.
440.335 Benchmark-equivalent health benefits coverage.
440.340 Actuarial report for benchmark-equivalent coverage.
440.345 EPSDT services requirement.
440.350 Employer-sponsored insurance health plans.
440.355 Payment of premiums.
440.360 State plan requirement for providing additional wrap-around 
          services.
440.365 Coverage of rural health clinic and federally qualified health 
          center (FQHC) services.
440.370 Cost-effectiveness.
440.375 Comparability and scope of coverage.
440.380 Statewideness.
440.385 Freedom of choice.
440.390 Assurance of transportation.

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

    Source: 43 FR 45224, Sept. 29, 1978, unless otherwise noted.



                          Subpart A_Definitions



Sec.  440.1  Basis and purpose.

    This subpart interprets and implements the following sections of the 
Act:

    1902(a)(70), State option to establish a non-emergency medical 
transportation program.
    1905(a) Services included in the term ``medical assistance.''
    1905 (c), (d), (f) through (i), (l), and (m) Definitions of 
institutions and services that are included in the term ``medical 
assistance.''
    1913 ``Swing-bed'' services. (See Sec. Sec.  447.280 and 482.66 of 
this chapter for related provisions on ``swing-bed'' services.)
    1915(c) Home and community-based services listed as ``medical 
assistance'' and furnished under waivers under that section to 
individuals who would otherwise require the level of care furnished in a 
hospital, NF, or ICF/MR.
    1915(d) Home and community-based services listed as ``medical 
assistance'' and furnished under waivers under that section to 
individuals age 65 or older who would otherwise require the level of 
care furnished in a NF.

[57 FR 29155, June 30, 1992, as amended at 61 FR 38398, July 24, 1996; 
73 FR 77530, Dec. 19, 2008]



Sec.  440.2  Specific definitions; definitions of services for FFP purposes.

    (a) Specific definitions.
    Inpatient means a patient who has been admitted to a medical 
institution as an inpatient on recommendation of a physician or dentist 
and who--
    (1) Receives room, board and professional services in the 
institution for a 24 hour period or longer, or
    (2) Is expected by the institution to receive room, board and 
professional services in the institution for a 24 hour period or longer 
even though it later

[[Page 252]]

develops that the patient dies, is discharged or is transferred to 
another facility and does not actually stay in the institution for 24 
hours.
    Outpatient means a patient of an organized medical facility, or 
distinct part of that facility who is expected by the facility to 
receive and who does receive professional services for less than a 24-
hour period regardless of the hour of admission, whether or not a bed is 
used, or whether or not the patient remains in the facility past 
midnight.
    Patient means an individual who is receiving needed professional 
services that are directed by a licensed practitioner of the healing 
arts toward the maintenance, improvement, or protection of health, or 
lessening of illness, disability, or pain. (See also Sec.  435.1010 of 
this chapter for definitions relating to institutional care.)
    (b) Definitions of services for FFP purposes. Except as limited in 
part 441, FFP is available in expenditures under the State plan for 
medical or remedial care and services as defined in this subpart.

[43 FR 45224, Sept. 29, 1978, as amended at 52 FR 47934, Dec. 17, 1987; 
71 FR 39229, July 12, 2006]



Sec.  440.10  Inpatient hospital services, other than services in an institution for mental diseases.

    (a) Inpatient hospital services means services that--
    (1) Are ordinarily furnished in a hospital for the care and 
treatment of inpatients;
    (2) Are furnished under the direction of a physician or dentist; and
    (3) Are furnished in an institution that--
    (i) Is maintained primarily for the care and treatment of patients 
with disorders other than mental diseases;
    (ii) Is licensed or formally approved as a hospital by an officially 
designated authority for State standard-setting;
    (iii) Meets the requirements for participation in Medicare as a 
hospital; and
    (iv) Has in effect a utilization review plan, applicable to all 
Medicaid patients, that meets the requirements of Sec.  482.30 of this 
chapter, unless a waiver has been granted by the Secretary.
    (b) Inpatient hospital services do not include SNF and ICF services 
furnished by a hospital with a swing-bed approval.

[47 FR 21050, May 17, 1982, as amended at 47 FR 31532, July 20, 1982; 51 
FR 22041, June 17, 1986, 52 FR 47934, Dec. 17, 1987; 60 FR 61486, Nov. 
30, 1995]



Sec.  440.20  Outpatient hospital services and rural health clinic services.

    (a) Outpatient hospital services means preventive, diagnostic, 
therapeutic, rehabilitative, or palliative services that--
    (1) Are furnished to outpatients;
    (2) Are furnished by or under the direction of a physician or 
dentist; and
    (3) Are furnished by an institution that--
    (i) Is licensed or formally approved as a hospital by an officially 
designated authority for State standard-setting; and
    (ii) Meets the requirements for participation in Medicare as a 
hospital; and
    (4) May be limited by a Medicaid agency in the following manner: A 
Medicaid agency may exclude from the definition of ``outpatient hospital 
services'' those types of items and services that are not generally 
furnished by most hospitals in the State.
    (b) Rural health clinic services. If nurse practitioners or 
physician assistants (as defined in Sec.  481.1 of this chapter) are not 
prohibited by State law from furnishing primary health care, ``rural 
health clinic services'' means the following services when furnished by 
a rural health clinic that has been certified in accordance with part 
491 of this chapter.
    (1) Services furnished by a physician within the scope of practice 
of his profession under State law, if the physician performs the 
services in the clinic or the services are furnished away from the 
clinic and the physician has an agreement with the clinic providing that 
he will be paid by it for such services.
    (2) Services furnished by a physician assistant, nurse practitioner, 
nurse midwife or other specialized nurse practitioner (as defined in 
Sec. Sec.  405.2401 and 491.2 of this chapter) if the services are 
furnished in accordance with the

[[Page 253]]

requirements specified in Sec.  405.2414(a) of this chapter.
    (3) Services and supplies that are furnished as an incident to 
professional services furnished by a physician, physician assistant, 
nurse practitioner, nurse midwife, or specialized nurse practitioner. 
(See Sec. Sec.  405.2413 and 405.2415 of this chapter for the criteria 
for determining whether services and supplies are included under this 
paragraph.)
    (4) Part-time or intermittent visiting nurse care and related 
medical supplies (other than drugs and biologicals) if:
    (i) The clinic is located in an area in which the Secretary has 
determined that there is a shortage of home health agencies (see Sec.  
405.2417 of this chapter):
    (ii) The services are furnished by a registered nurse or licensed 
practical nurse or a licensed vocational nurse employed by, or otherwise 
compensated for the services by, the clinic;
    (iii) The services are furnished under a written plan of treatment 
that is established and reviewed at least every 60 days by a supervising 
physician of the clinic or that is established by a physician, physician 
assistant, nurse practitioner, nurse midwife, or specialized nurse 
practitioner and reviewed and approved at least every 60 days by a 
supervising physician of the clinic; and
    (iv) The services are furnished to a homebound recipient. For 
purposes of visiting nurse care, a ``homebound'' recipient means one who 
is permanently or temporarily confined to his place of residence because 
of a medical or health condition. He may be considered homebound if he 
leaves the place of residence infrequently. For this purpose, ``place of 
residence'' does not include a hospital or a skilled nursing facility.
    (c) Other ambulatory services furnished by a rural health clinic. If 
the State plan covers rural health clinic services, other ambulatory 
services means ambulatory services other than rural health clinic 
services, as defined in paragraph (b) of this section, that are 
otherwise included in the plan and meet specific State plan requirements 
for furnishing those services. Other ambulatory services furnishd by a 
rural health clinic are not subject to the physician supervision 
requirements specified in Sec.  491.8(b) of this chapter, unless 
required by State law or the State plan.

[43 FR 45224, Sept. 29, 1978, as amended at 47 FR 21050, May 17, 1982; 
52 FR 47934, Dec. 17, 1987; 60 FR 61486, Nov. 30, 1995; 73 FR 66198, 
Nov. 7, 2008; 74 FR 31195, June 30, 2009]



Sec.  440.30  Other laboratory and X-ray services.

    Other laboratory and X-ray services means professional and technical 
laboratory and radiological services--
    (a) Ordered and provided by or under the direction of a physician or 
other licensed practioner of the healing arts within the scope of his 
practice as defined by State law or ordered by a physician but provided 
by referral laboratory;
    (b) Provided in an office or similar facility other than a hospital 
outpatient department or clinic; and
    (c) Furnished by a laboratory that meets the requirements of part 
493 of this chapter.

[46 FR 42672, Aug. 24, 1981, as amended at 57 FR 7135, Feb. 28, 1992]



Sec.  440.40  Nursing facility services for individuals age 21 or older (other than services in an institution for mental disease), EPSDT, and family planning 
          services and supplies.

    (a) Nursing facility services. (1) ``Nursing facility services for 
individuals age 21 or older, other than services in an institution for 
mental diseases'', means services that are--
    (i) Needed on a daily basis and required to be provided on an 
inpatient basis under Sec. Sec.  409.31 through 409.35 of this chapter.
    (ii) Provided by--
    (A) A facility or distinct part (as defined in Sec.  483.5(b) of 
this chapter) that meets the requirements for participation under 
subpart B of part 483 of this chapter, as evidenced by a valid agreement 
between the Medicaid agency and the facility for providing nursing 
facility services and making payments for services under the plan; or
    (B) If specified in the State plan, a swing-bed hospital that has an 
approval from CMS to furnish skilled nursing facility services in the 
Medicare program; and

[[Page 254]]

    (iii) Ordered by and provided under the direction of a physician.
    (2) Nursing facility services include services provided by any 
facility located on an Indian reservation and certified by the Secretary 
as meeting the requirements of subpart B of part 483 of this chapter.
    (b) EPSDT. ``Early and periodic screening and diagnosis and 
treatment'' means--
    (1) Screening and diagnostic services to determine physical or 
mental defects in recipients under age 21; and
    (2) Health care, treatment, and other measures to correct or 
ameliorate any defects and chronic conditions discovered. (See subpart B 
of part 441 of this chapter.)
    (c) Family planning services and supplies for individuals of child-
bearing age. [Reserved]

[59 FR 56233, Nov. 10, 1994; 60 FR 50117, Sept. 28, 1995, as amended at 
61 FR 59198, Nov. 21, 1996; 68 FR 46071, Aug. 4, 2003]



Sec.  440.50  Physicians' services and medical and surgical services of a dentist.

    (a) ``Physicians' services,'' whether furnished in the office, the 
recipient's home, a hospital, a skilled nursing facility, or elsewhere, 
means services furnished by a physician--
    (1) Within the scope of practice of medicine or osteopathy as 
defined by State law; and
    (2) By or under the personal supervision of an individual licensed 
under State law to practice medicine or osteopathy.
    (b) ``Medical and surgical services of a dentist'' means medical and 
surgical services furnished, on or after January 1, 1988, by a doctor of 
dental medicine or dental surgery if the services are services that--
    (1) If furnished by a physician, would be considered physician's 
services.
    (2) Under the law of the State where they are furnished, may be 
furnished either by a physician or by a doctor of dental medicine or 
dental surgery; and
    (3) Are furnished by a doctor of dental medicine or dental surgery 
who is authorized to furnish those services in the State in which he or 
she furnished the services.

[56 FR 8851, Mar. 1, 1991]



Sec.  440.60  Medical or other remedial care provided by licensed practitioners.

    (a) ``Medical care or any other type remedial care provided by 
licensed practitioners'' means any medical or remedial care or services, 
other than physicians' services, provided by licensed practitioners 
within the scope of practice as defined under State law.
    (b) Chiropractors' services include only services that--
    (1) Are provided by a chiropractor who is licensed by the State and 
meets standards issued by the Secretary under Sec.  405.232(b) of this 
chapter; and
    (2) Consists of treatment by means of manual manipulation of the 
spine that the chiropractor is legally authorized by the State to 
perform.



Sec.  440.70  Home health services.

    (a) ``Home health services'' means the services in paragraph (b) of 
this section that are provided to a recipient--
    (1) At his place of residence, as specified in paragraph (c) of this 
section; and
    (2) On his or her physician's orders as part of a written plan of 
care that the physician reviews every 60 days, except as specified in 
paragraph (b)(3) of this section.
    (b) Home health services include the following services and items. 
Those listed in paragraphs (b) (1), (2) and (3) of this section are 
required services; those in paragraph (b)(4) of this section are 
optional.
    (1) Nursing service, as defined in the State Nurse Practice Act, 
that is provided on a part-time or intermittent basis by a home health 
agency as defined in paragraph (d) of this section, or if there is no 
agency in the area, a registered nurse who--
    (i) Is currently licensed to practice in the State;
    (ii) Receives written orders from the patient's physician;
    (iii) Documents the care and services provided; and
    (iv) Has had orientation to acceptable clinical and administrative 
recordkeeping from a health department nurse.
    (2) Home health aide service provided by a home health agency,

[[Page 255]]

    (3) Medical supplies, equipment, and appliances suitable for use in 
the home.
    (i) A recipient's need for medical supplies, equipment, and 
appliances must be reviewed by a physician annually.
    (ii) Frequency of further physician review of a recipient's 
continuing need for the items is determined on a case-by-case basis, 
based on the nature of the item prescribed;
    (4) Physical therapy, occupational therapy, or speech pathology and 
audiology services, provided by a home health agency or by a facility 
licensed by the State to provide medical rehabilitation services. (See 
Sec.  441.15 of this subchapter.)
    (c) A recipient's place of residence, for home health services, does 
not include a hospital, nursing facility, or intermediate care facility 
for the mentally retarded, except for home health services in an 
intermediate care facility for the mentally retarded that are not 
required to be provided by the facility under subpart I of part 483. For 
example, a registered nurse may provide short-term care for a recipient 
in an intermediate care facility for the mentally retarded during an 
acute illness to avoid the recipient's transfer to a nursing facility.
    (d) ``Home health agency'' means a public or private agency or 
organization, or part of an agency or organization, that meets 
requirements for participation in Medicare, including the capitalization 
requirements under Sec.  489.28 of this chapter.
    (e) A ``facility licensed by the State to provide medical 
rehabilitation services'' means a facility that--
    (1) Provides therapy services for the primary purpose of assisting 
in the rehabilitation of disabled individuals through an integrated 
program of--
    (i) Medical evaluation and services; and
    (ii) Psychological, social, or vocational evaluation and services; 
and
    (2) Is operated under competent medical supervision either--
    (i) In connection with a hospital; or
    (ii) As a facility in which all medical and related health services 
are prescribed by or under the direction of individuals licensed to 
practice medicine or surgery in the State.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980; 
62 FR 47902, Sept. 11, 1997; 63 FR 310, Jan. 5, 1998]



Sec.  440.80  Private duty nursing services.

    Private duty nursing services means nursing services for recipients 
who require more individual and continuous care than is available from a 
visiting nurse or routinely provided by the nursing staff of the 
hospital or skilled nursing facility. These services are provided--
    (a) By a registered nurse or a licensed practical nurse;
    (b) Under the direction of the recipient's physician; and
    (c) To a recipient in one or more of the following locations at the 
option of the State--
    (1) His or her own home;
    (2) A hospital; or
    (3) A skilled nursing facility.

[52 FR 47934, Dec. 17, 1987]



Sec.  440.90  Clinic services.

    Clinic services means preventive, diagnostic, therapeutic, 
rehabilitative, or palliative services that are furnished by a facility 
that is not part of a hospital but is organized and operated to provide 
medical care to outpatients. The term includes the following services 
furnished to outpatients:
    (a) Services furnished at the clinic by or under the direction of a 
physician or dentist.
    (b) Services furnished outside the clinic, by clinic personnel under 
the direction of a physician, to an eligible individual who does not 
reside in a permanent dwelling or does not have a fixed home or mailing 
address.

[56 FR 8851, Mar. 1, 1991, as amended at 60 FR 61486, Nov. 30, 1995]



Sec.  440.100  Dental services.

    (a) ``Dental services'' means diagnostic, preventive, or corrective 
procedures provided by or under the supervision of a dentist in the 
practice of his profession, including treatment of--
    (1) The teeth and associated structures of the oral cavity; and

[[Page 256]]

    (2) Disease, injury, or impairment that may affect the oral or 
general health of the recipient.
    (b) ``Dentist'' means an individual licensed to practice dentistry 
or dental surgery.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980]



Sec.  440.110  Physical therapy, occupational therapy, and services for individuals with speech, hearing, and language disorders.

    (a) Physical therapy. (1) Physical therapy means services prescribed 
by a physician or other licensed practitioner of the healing arts within 
the scope of his or her practice under State law and provided to a 
recipient by or under the direction of a qualified physical therapist. 
It includes any necessary supplies and equipment.
    (2) A ``qualified physical therapist'' is an individual who is--
    (i) A graduate of a program of physical therapy approved by both the 
Committee on Allied Health Education and Accreditation of the American 
Medical Association and the American Physical Therapy Association or its 
equivalent; and
    (ii) Where applicable, licensed by the State.
    (b) Occupational therapy. (1) Occupational therapy means services 
prescribed by a physician or other licensed practitioner of the healing 
arts within the scope of his or her practice under State law and 
provided to a recipient by or under the direction of a qualified 
occupational therapist. It includes any necessary supplies and 
equipment.
    (2) A ``qualified occupation therapist'' is an individual who is--
    (i) Registered by the American Occupational Therapy Association; or
    (ii) A graduate of a program in occupational therapy approved by the 
Committee on Allied Health Education and Accreditation of the American 
Medical Association and engaged in the supplemental clinical experience 
required before registration by the American Occupational Therapy 
Association.
    (c) Services for individuals with speech, hearing, and language 
disorders. (1) Services for individuals with speech, hearing, and 
language disorders means diagnostic, screening, preventive, or 
corrective services provided by or under the direction of a speech 
pathologist or audiologist, for which a patient is referred by a 
physician or other licensed practitioner of the healing arts within the 
scope of his or her practice under State law. It includes any necessary 
supplies and equipment.
    (2) A ``speech pathologist'' is an individual who meets one of the 
following conditions:
    (i) Has a certificate of clinical competence from the American 
Speech and Hearing Association.
    (ii) Has completed the equivalent educational requirements and work 
experience necessary for the certificate.
    (iii) Has completed the academic program and is acquiring supervised 
work experience to qualify for the certificate.
    (3) A ``qualified audiologist'' means an individual with a master's 
or doctoral degree in audiology that maintains documentation to 
demonstrate that he or she meets one of the following conditions:
    (i) The State in which the individual furnishes audiology services 
meets or exceeds State licensure requirements in paragraph (c)(3)(ii)(A) 
or (c)(3)(ii)(B) of this section, and the individual is licensed by the 
State as an audiologist to furnish audiology services.
    (ii) In the case of an individual who furnishes audiology services 
in a State that does not license audiologists, or an individual exempted 
from State licensure based on practice in a specific institution or 
setting, the individual must meet one of the following conditions:
    (A) Have a Certificate of Clinical Competence in Audiology granted 
by the American Speech-Language-Hearing Association.
    (B) Have successfully completed a minimum of 350 clock-hours of 
supervised clinical practicum (or is in the process of accumulating that 
supervised clinical experience under the supervision of a qualified 
master or doctoral-level audiologist); performed at least 9 months of 
full-time audiology services under the supervision of a qualified master 
or doctoral-level audiologist after obtaining a master's or doctoral 
degree in audiology, or a related field; and successfully completed

[[Page 257]]

a national examination in audiology approved by the Secretary.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24888, Apr. 11, 1980; 
56 FR 8854, Mar. 1, 1991; 60 FR 19861, Apr. 21, 1995; 69 FR 30587, May 
28, 2004]



Sec.  440.120  Prescribed drugs, dentures, prosthetic devices, and eyeglasses.

    (a) ``Prescribed drugs'' means simple or compound substances or 
mixtures of substances prescribed for the cure, mitigation, or 
prevention of disease, or for health maintenance that are--
    (1) Prescribed by a physician or other licensed practitioner of the 
healing arts within the scope of this professional practice as defined 
and limited by Federal and State law;
    (2) Dispensed by licensed pharmacists and licensed authorized 
practitioners in accordance with the State Medical Practice Act; and
    (3) Dispensed by the licensed pharmacist or practitioner on a 
written prescription that is recorded and maintained in the pharmacist's 
or practitioner's records.
    (b) ``Dentures'' are artificial structures made by or under the 
direction of a dentist to replace a full or partial set of teeth.
    (c) ``Prosthetic devices'' means replacement, corrective, or 
supportive devices prescribed by a physician or other licensed 
practitioner of the healing arts within the scope of his practice as 
defined by State law to--
    (1) Artificially replace a missing portion of the body;
    (2) Prevent or correct physical deformity or malfunction; or
    (3) Support a weak or deformed portion of the body.
    (d) ``Eyeglasses'' means lenses, including frames, and other aids to 
vision prescribed by a physician skilled in diseases of the eye or an 
optometrist.



Sec.  440.130  Diagnostic, screening, preventive, and rehabilitative services.

    (a) ``Diagnostic services,'' except as otherwise provided under this 
subpart, includes any medical procedures or supplies recommended by a 
physician or other licensed practitioner of the healing arts, within the 
scope of his practice under State law, to enable him to identify the 
existence, nature, or extent of illness, injury, or other health 
deviation in a recipient.
    (b) ``Screening services'' means the use of standardized tests given 
under medical direction in the mass examination of a designated 
population to detect the existence of one or more particular diseases or 
health deviations or to identify for more definitive studies individuals 
suspected of having certain diseases.
    (c) ``Preventive services'' means services provided by a physician 
or other licensed practitioner of the healing arts within the scope of 
his practice under State law to--
    (1) Prevent disease, disability, and other health conditions or 
their progression;
    (2) Prolong life; and
    (3) Promote physical and mental health and efficiency.
    (d) ``Rehabilitative services,'' except as otherwise provided under 
this subpart, includes any medical or remedial services recommended by a 
physician or other licensed practitioner of the healing arts, within the 
scope of his practice under State law, for maximum reduction of physical 
or mental disability and restoration of a recipient to his best possible 
functional level.



Sec.  440.140  Inpatient hospital services, nursing facility services, and intermediate care facility services for individuals age 65 or older in institutions 
          for mental diseases.

    (a) Inpatient hospital services. ``Inpatient hospital services for 
individuals age 65 or older in institutions for mental diseases'' means 
services provided under the direction of a physician for the care and 
treatment of recipients in an institution for mental diseases that meets 
the requirements specified in Sec.  482.60(b), (c), and (e) of this 
chapter and--
    (1) Meets the requirements for utilization review in Sec.  
482.30(a), (b), (d), and (e) of this chapter; or
    (2) Has been granted a waiver of those utilization review 
requirements under section 1903(i)(4) of the Act and subpart H of part 
456 of this chapter.
    (b) Nursing facility services. ``Nursing facility services for 
individuals age 65 or older in institutions for mental diseases'' means 
nursing facility services as defined in Sec.  440.40 and in subpart B of

[[Page 258]]

part 483 of this chapter that are provided in institutions for mental 
diseases, as defined in Sec.  435.1010 of this chapter.

[59 FR 56234, Nov. 10, 1994, as a amended at 71 FR 39229, July 12, 2006]



Sec.  440.150  Intermediate care facility (ICF/MR) services.

    (a) ``ICF/MR services'' means those items and services furnished in 
an intermediate care facility for the mentally retarded if the following 
conditions are met:
    (1) The facility fully meets the requirements for a State license to 
provide services that are above the level of room and board;
    (2) The primary purpose of the ICF/MR is to furnish health or 
rehabilitative services to persons with mental retardation or persons 
with related conditions;
    (3) The ICF/MR meets the standards specified in subpart I of part 
483 of this chapter.
    (4) The recipient with mental retardation for whom payment is 
requested is receiving active treatment, as specified in Sec.  483.440 
of this chapter.
    (5) The ICF/MR has been certified to meet the requirements of 
subpart C of part 442 of this chapter, as evidenced by a valid agreement 
between the Medicaid agency and the facility for furnishing ICF/MR 
services and making payments for these services under the plan.
    (b) ICF/MR services may be furnished in a distinct part of a 
facility other than an ICF/MR if the distinct part--
    (1) Meets all requirements for an ICF/MR, as specified in subpart I 
of part 483 of this chapter;
    (2) Is clearly an identifiable living unit, such as an entire ward, 
wing, floor or building;
    (3) Consists of all beds and related services in the unit;
    (4) Houses all recipients for whom payment is being made for ICF/MR 
services; and
    (5) Is approved in writing by the survey agency.

[59 FR 56234, Nov. 10, 1994]



Sec.  440.155  Nursing facility services, other than in institutions for mental diseases.

    (a) ``Nursing facility services, other than in an institution for 
mental diseases'' means services provided in a facility that--
    (1) Fully meets the requirements for a State license to provide, on 
a regular basis, health-related services to individuals who do not 
require hospital care, but whose mental or physical condition requires 
services that--
    (i) Are above the level of room and board; and
    (ii) Can be made available only through institutional facilities;
    (2) Has been certified to meet the requirements of subpart C of part 
442 of this chapter as evidenced by a valid agreement between the 
Medicaid agency and the facility for providing nursing facility services 
and making payments for services under the plan; and
    (b) ``Nursing facility services'' include services--
    (1) Considered appropriate by the State and provided by a religious 
nonmedical institution as defined in Sec.  440.170(b); or
    (2) Provided by a facility located on an Indian reservation that--
    (i) Furnishes, on a regular basis, health-related services; and
    (ii) Is certified by the Secretary to meet the standards in subpart 
E of part 442 of this chapter.
    (c) ``Nursing facility services'' may include services provided in a 
distinct part (as defined in Sec.  483.5(b) of this chapter) of a 
facility other than a nursing facility if the distinct part (as defined 
in Sec.  483.5(b) of this chapter)--
    (1) Meets all requirements for a nursing facility;
    (2) Is an identifiable unit, such as an entire ward or contiguous 
ward, a wing, floor, or building;
    (3) Consists of all beds and related facilities in the unit;
    (4) Houses all recipients for whom payment is being made for nursing 
facility services, except as provided in paragraph (d) of this section;
    (5) Is clearly identified; and
    (6) Is approved in writing by the survey agency.
    (d) If a State includes as nursing facility services those services 
provided

[[Page 259]]

by a distinct part of a facility other than a nursing facility, it may 
not require transfer of a recipient within or between facilities if, in 
the opinion of the attending physician, it might be harmful to the 
physical or mental health of the recipient.
    (e) Nursing facility services may include services provided in a 
swing-bed hospital that has an approval to furnish nursing facility 
services.

[59 FR 56234, Nov. 10, 1994, as amended at 64 FR 67052, Nov. 30, 1999; 
68 FR 46071, Aug. 4, 2003]



Sec.  440.160  Inpatient psychiatric services for individuals under age 21.

    ``Inpatient psychiatric services for individuals under age 21'' 
means services that--
    (a) Are provided under the direction of a physician;
    (b) Are provided by--
    (1) A psychiatric hospital or an inpatient psychiatric program in a 
hospital, accredited by the Joint Commission on Accreditation of 
Healthcare Organizations, or
    (2) A psychiatric facility which is accredited by the Joint 
Commission on Accreditation of Healthcare Organizations, the Council on 
Accreditation of Services for Families and Children, the Commission on 
Accreditation of Rehabilitation Facilities, or by any other accrediting 
organization, with comparable standards, that is recognized by the 
State.
    (c) Meet the requirements in Sec.  441.151 of this subchapter.

[63 FR 64198, Nov. 19, 1998]



Sec.  440.165  Nurse-midwife service.

    (a) ``Nurse-midwife services'' means services that--
    (1) Are furnished by a nurse-midwife within the scope of practice 
authorized by State law or regulation and, in the case of inpatient or 
outpatient hospital services or clinic services, are furnished by or 
under the direction of a nurse-midwife to the extent permitted by the 
facility; and
    (2) Unless required by State law or regulations or a facility, are 
reimbursed without regard to whether the nurse-midwife is under the 
supervision of, or associated with, a physician or other health care 
provider. (See Sec.  441.21 of this chapter for provisions on 
independent provider agreements for nurse-midwives.)
    (b) ``Nurse-midwife'' means a registered professional nurse who 
meets the following requirements:
    (1) Is currently licensed to practice in the State as a registered 
professional nurse.
    (2) Is legally authorized under State law or regulations to practice 
as a nurse-midwife.
    (3) Except as provided in paragraph (b)(4) of this section, has 
completed a program of study and clinical experience for nurse-midwives, 
as specified by the State.
    (4) If the State does not specify a program of study and clinical 
experience that nurse-midwives must complete to practice in that State, 
meets one of the following conditions:
    (i) Is currently certified as a nurse-midwife by the American 
College of Nurse-Midwives (ACNM or by the ACNM Certification Council, 
Inc. (ACC).
    (ii) Has satisfactorily completed a formal education program (of at 
least one academic year) that, upon completion qualifies the nurse to 
take the certification examination offered by the American College of 
Nurse-Midwives (ACNM) or by the ACNM Certification Council, Inc. (ACC).
    (iii) Has successfully completed a formal educational program for 
preparing registered nurses to furnish gynecological and obstetrical 
care to women during pregnancy, delivery, and the postpartum period, and 
care to normal newborns, and was practicing as a nurse-midwife for a 
total of 12 months during any 18-month period from August 8, 1976 to 
July 16, 1982.

[47 FR 21050, May 17, 1982; 47 FR 23448, May 28, 1982, as amended at 55 
FR 48611, Nov. 21, 1990; 61 FR 61486, Nov. 30, 1996]



Sec.  440.166  Nurse practitioner services.

    (a) Definition of nurse practitioner services. Nurse practitioner 
services means services that are furnished by a registered professional 
nurse who meets a State's advanced educational and clinical practice 
requirements, if any, beyond the 2 to 4 years of basic nursing education 
required of all registered nurses.

[[Page 260]]

    (b) Requirements for certified pediatric nurse practitioner. The 
practitioner must be a registered professional nurse who meets the 
requirements specified in either paragraphs (b)(1) or (b)(2) of this 
section.
    (1) If the State specifies qualifications for pediatric nurse 
practitioners, the practitioner must--
    (i) Be currently licensed to practice in the State as a registered 
professional nurse; and
    (ii) Meet the State requirements for qualification of pediatric 
nurse practitioners in the State in which he or she furnishes the 
services.
    (2) If the State does not specify, by specialty, qualifications for 
pediatric nurse practitioners, but the State does define qualifications 
for nurses in advanced practice or general nurse practitioners, the 
practitioner must--
    (i) Meet qualifications for nurses in advanced practice or general 
nurse practitioners as defined by the State; and
    (ii) Have a pediatric nurse practice limited to providing primary 
health care to persons less than 21 years of age.
    (c) Requirements for certified family nurse practitioner. The 
practitioner must be a registered professional nurse who meets the 
requirements specified in either paragraph (c)(1) or (c)(2) of this 
section.
    (1) If the State specifies qualifications for family nurse 
practitioners, the practitioner must--
    (i) Be currently licensed to practice in the State as a registered 
professional nurse; and
    (ii) Meet the State requirements for qualification of family nurse 
practitioners in the State in which he or she furnishes the services.
    (2) If the State does not specify, by specialty, qualifications for 
family nurse practitioners, but the State does define qualifications for 
nurses in advanced practice or general nurse practitioners, the 
practitioner must--
    (i) Meet qualifications for nurses in advanced practice or general 
nurse practitioners as defined by the State; and
    (ii) Have a family nurse practice limited to providing primary 
health care to individuals and families.
    (d) Payment for nurse practitioner services. The Medicaid agency 
must reimburse nurse practitioners for their services in accordance with 
Sec.  441.22(c) of this subchapter.

[60 FR 19861, Apr. 21, 1995]



Sec.  440.167  Personal care services.

    Unless defined differently by a State agency for purposes of a 
waiver granted under part 441, subpart G of this chapter--
    (a) Personal care services means services furnished to an individual 
who is not an inpatient or resident of a hospital, nursing facility, 
intermediate care facility for the mentally retarded, or institution for 
mental disease that are--
    (1) Authorized for the individual by a physician in accordance with 
a plan of treatment or (at the option of the State) otherwise authorized 
for the individual in accordance with a service plan approved by the 
State;
    (2) Provided by an individual who is qualified to provide such 
services and who is not a member of the individual's family; and
    (3) Furnished in a home, and at the State's option, in another 
location.
    (b) For purposes of this section, family member means a legally 
responsible relative.

[42 FR 47902, Sept. 11, 1997]



Sec.  440.168  Primary care case management services.

    (a) Primary care case management services means case management 
related services that--
    (1) Include location, coordination, and monitoring of primary health 
care services; and
    (2) Are provided under a contract between the State and either of 
the following:
    (i) A PCCM who is a physician or may, at State option, be a 
physician assistant, nurse practitioner, or certified nurse-midwife.
    (ii) A physician group practice, or an entity that employs or 
arranges with physicians to furnish the services.
    (b) Primary care case management services may be offered by the 
State--
    (1) As a voluntary option under the State plan; or

[[Page 261]]

    (2) On a mandatory basis under section 1932 (a)(1) of the Act or 
under section 1915(b) or section 1115 waiver authority.

[67 FR 41115, June 14, 2002]



Sec.  440.169  Case management services.

    (a) Case management services means services furnished to assist 
individuals, eligible under the State plan who reside in a community 
setting or are transitioning to a community setting, in gaining access 
to needed medical, social, educational, and other services, in 
accordance with Sec.  441.18 of this chapter.
    (b) Targeted case management services means case management services 
furnished without regard to the requirements of Sec.  431.50(b) of this 
chapter (related to statewide provision of services) and Sec.  440.240 
(related to comparability). Targeted case management services may be 
offered to individuals in any defined location of the State or to 
individuals within targeted groups specified in the State plan.
    (c) [Reserved]
    (d) The assistance that case managers provide in assisting eligible 
individuals obtain services includes--
    (1) Comprehensive assessment and periodic reassessment of individual 
needs, to determine the need for any medical, educational, social, or 
other services. These assessment activities include the following:
    (i) Taking client history.
    (ii) Identifying the needs of the individual, and completing related 
documentation.
    (iii) Gathering information from other sources, such as family 
members, medical providers, social workers, and educators (if necessary) 
to form a complete assessment of the eligible individual.
    (2) Development (and periodic revision) of a specific care plan 
based on the information collected through the assessment, that includes 
the following:
    (i) Specifies the goals and actions to address the medical, social, 
educational, and other services needed by the eligible individual.
    (ii) Includes activities such as ensuring the active participation 
of the eligible individual and working with the individual (or the 
individual's authorized health care decision maker) and others to 
develop those goals.
    (iii) Identifies a course of action to respond to the assessed needs 
of the eligible individual.
    (3) Referral and related activities (such as scheduling appointments 
for the individual) to help the eligible individual obtain needed 
services, including activities that help link the individual with 
medical, social, and educational providers or other programs and 
services that are capable of providing needed services to address 
identified needs and achieve goals specified in the care plan.
    (4) Monitoring and follow-up activities, including activities and 
contacts that are necessary to ensure that the care plan is effectively 
implemented and adequately addresses the needs of the eligible 
individual and which may be with the individual, family members, service 
providers, or other entities or individuals and conducted as frequently 
as necessary, and including at least one annual monitoring, to help 
determine whether the following conditions are met:
    (i) Services are being furnished in accordance with the individual's 
care plan.
    (ii) Services in the care plan are adequate.
    (iii) There are changes in the needs or status of the eligible 
individual. Monitoring and follow-up activities include making necessary 
adjustments in the care plan and service arrangements with providers.
    (e) Case management may include contacts with non-eligible 
individuals that are directly related to the identification of the 
eligible individual's needs and care, for the purposes of helping the 
eligible individual access services, identifying needs and supports to 
assist the eligible individual in obtaining services, providing case 
managers with useful feedback, and alerting case managers to changes in 
the eligible individual's needs.

[72 FR 68091, Dec. 4, 2007, as amended at 74 FR 31196, June 30, 2009]

[[Page 262]]



Sec.  440.170  Any other medical care or remedial care recognized under State law and specified by the Secretary.

    (a) Transportation. (1) ``Transportation'' includes expenses for 
transportation and other related travel expenses determined to be 
necessary by the agency to secure medical examinations and treatment for 
a recipient.
    (2) Except as provided in paragraph (a)(4), transportation, as 
defined in this section, is furnished only by a provider to whom a 
direct vendor payment can appropriately be made by the agency.
    (3) ``Travel expenses'' include--
    (i) The cost of transportation for the recipient by ambulance, 
taxicab, common carrier, or other appropriate means;
    (ii) The cost of meals and lodging en route to and from medical 
care, and while receiving medical care; and
    (iii) The cost of an attendant to accompany the recipient, if 
necessary, and the cost of the attendant's transportation, meals, 
lodging, and, if the attendant is not a member of the recipient's 
family, salary.
    (4) Non-emergency medical transportation brokerage program. At the 
option of the State, and notwithstanding Sec.  431.50 (statewide 
operation) and Sec.  431.51 (freedom of choice of providers) of this 
chapter and Sec.  440.240 (comparability of services for groups), a 
State plan may provide for the establishment of a non-emergency medical 
transportation brokerage program in order to more cost-effectively 
provide non-emergency medical transportation services for individuals 
eligible for medical assistance under the State plan who need access to 
medical care or services, and have no other means of transportation. 
These transportation services include wheelchair vans, taxis, stretcher 
cars, bus passes and tickets, secured transportation containing an 
occupant protection system that addresses safety needs of disabled or 
special needs individuals, and other forms of transportation otherwise 
covered under the state plan.
    (i) Non-emergency medical transportation services may be provided 
under contract with individuals or entities that meet the following 
requirements:
    (A) Is selected through a competitive bidding process that is 
consistent with 45 CFR 92.36(b) through (i) and is based on the State's 
evaluation of the broker's experience, performance, references, 
resources, qualifications, and costs.
    (B) Has oversight procedures to monitor beneficiary access and 
complaints and ensure that transportation is timely and that transport 
personnel are licensed, qualified, competent, and courteous.
    (C) Is subject to regular auditing and oversight by the State in 
order to ensure the quality and timeliness of the transportation 
services provided and the adequacy of beneficiary access to medical care 
and services.
    (D) Is subject to a written contract that imposes the requirements 
related to prohibitions on referrals and conflicts of interest described 
at Sec.  440.170(a)(4)(ii), and provides for the broker to be liable for 
the full cost of services resulting from a prohibited referral or 
subcontract.
    (ii) Federal financial participation is available at the medical 
assistance rate for the cost of a written brokerage contract that:
    (A) Except as provided in paragraph (a)(4)(ii)(B) of this section, 
prohibits the broker (including contractors, owners, investors, Boards 
of Directors, corporate officers, and employees) from providing non-
emergency medical transportation services or making a referral or 
subcontracting to a transportation service provider if:
    (1) The broker has a financial relationship with the transportation 
provider as defined at Sec.  411.354(a) of this chapter with 
``transportation broker'' substituted for ``physician'' and ``non-
emergency transportation'' substituted for ``DHS''; or
    (2) The broker has an immediate family member, as defined at Sec.  
411.351 of this chapter, that has a direct or indirect financial 
relationship with the transportation provider, with the term 
``transportation broker'' substituted for ``physician.''
    (B) Exceptions: The prohibitions described at clause (A) of this 
paragraph do not apply if there is documentation to support the 
following:
    (1) Transportation is provided in a rural area, as defined at Sec.  
412.62(f), and there is no other available Medicaid

[[Page 263]]

participating provider or other provider determined by the State to be 
qualified except the non-governmental broker.
    (2) Transportation is so specialized that there is no other 
available Medicaid participating provider or other provider determined 
by the State to be qualified except the non-governmental broker.
    (3) Except for the non-governmental broker, the availability of 
other Medicaid participating providers or other providers determined by 
the State to be qualified is insufficient to meet the need for 
transportation.
    (4) The broker is a government entity and the individual service is 
provided by the broker, or is referred to or subcontracted with another 
government-owned or operated transportation provider generally available 
in the community, if the following conditions are met:
    (i) The contract with the broker provides for payment that does not 
exceed the actual costs calculated as though the broker were a distinct 
unit, and excludes from these payments any personnel or other costs 
shared with or allocated from parent or related entities; and the 
governmental broker maintains an accounting system such that all funds 
allocated to the Medicaid brokerage program and all costs charged to the 
brokerage program will be completely separate from any other program;
    (ii) The broker documents that, with respect to the individual's 
specific transportation needs, the government provider is the most 
appropriate and lowest cost alternative; and
    (iii) The broker documents that the Medicaid program is paying no 
more for fixed route public transportation than the rate charged to the 
general public and no more for public paratransit services than the rate 
charged to other State human services agencies for comparable services.
    (C) Transportation providers may not offer or make any payment or 
other form of remuneration, including any kickback, rebate, cash, gifts, 
or service in kind to the broker in order to influence referrals or 
subcontracting for non-emergency medical transportation provided to a 
Medicaid recipient.
    (D) In referring or subcontracting for non-emergency medical 
transportation with transportation providers, a broker may not withhold 
necessary non-emergency medical transportation from a Medicaid recipient 
or provide non-emergency medical transportation that is not the most 
appropriate and a cost-effective means of transportation for that 
recipient for the purpose of financial gain, or for any other purpose.
    (b) Services furnished in a religious nonmedical health care 
institution. Services furnished in a religious nonmedical health care 
institution are services furnished in an institution that:
    (1) Is an institution that is described in (c)(3) of section 501 of 
the Internal Revenue Code of 1986 and is exempt from taxes under section 
501(a) of that section.
    (2) Is lawfully operated under all applicable Federal, State, and 
local laws and regulations.
    (3) Furnishes only nonmedical nursing items and services to patients 
who choose to rely solely upon a religious method of healing and for 
whom the acceptance of medical health services would be inconsistent 
with their religious beliefs.
    (4) Furnishes nonmedical items and services exclusively through 
nonmedical nursing personnel who are experienced in caring for the 
physical needs of nonmedical patients.
    (5) Furnishes these nonmedical items and services to inpatients on a 
24-hour basis.
    (6) Does not furnish, on the basis of its religious beliefs, through 
its personnel or otherwise, medical items and services (including any 
medical screening, examination, diagnosis, prognosis, treatment, or the 
administration of drugs) for its patients.
    (7) Is not owned by, is not under common ownership with, or does not 
have an ownership interest of 5 percent or more in, a provider of 
medical treatment or services and is not affiliated with a provider of 
medical treatment or services or with an individual who has an ownership 
interest or 5 percent or more in a provider of medical treatment or 
services. Permissible affiliations are described in paragraph (c) of 
this section.

[[Page 264]]

    (8) Has in effect a utilization review plan that meets the following 
criteria:
    (i) Provides for the review of admissions to the institution, 
duration of stays, cases of continuous extended duration, and items and 
services furnished by the institution.
    (ii) Requires that the reviews be made by a committee of the 
institution that included the individuals responsible for overall 
administration and for supervision of nursing personnel at the 
institution.
    (iii) Provides that records be maintained of the meetings, 
decisions, and actions of the utilization review committee.
    (iv) Meets other requirements as CMS finds necessary to establish an 
effective utilization review plan.
    (9) Provides information CMS may require to implement section 1821 
of the Act, including information relating to quality of care and 
coverage determinations.
    (10) Meets other requirements as CMS finds necessary in the interest 
of the health and safety of patients who receive services in the 
institution. These requirements are the conditions of participation 
found at part 403, subpart G of this chapter.
    (c) Affiliations. An affiliation is permissible for purposes of 
paragraph (b)(7) of this section if it is between one of the following:
    (1) An individual serving as an uncompensated director, trustee, 
officer, or other member of the governing body of an RNHCI and a 
provider of medical treatment or services.
    (2) An individual who is a director, trustee, officer, employee, or 
staff member of an RNHCI and an another individual, with whom he or she 
has a family relationship, who is affiliated with (or has an ownership 
interest in) a provider of medical treatment or services.
    (3) The RNHCI and an individual or entity furnishing goods or 
services as a vendor to both providers of medical treatment or services 
and RNHCIs.
    (d) Skilled nursing facility services for individuals under age 21. 
``Skilled nursing facility services for individuals under 21'' means 
those services specified in Sec.  440.40 that are provided to recipients 
under 21 years of age.
    (e) Emergency hospital services. ``Emergency hospital services'' 
means services that--
    (1) Are necessary to prevent the death or serious impairment of the 
health of a recipient; and
    (2) Because of the threat to the life or health of the recipient 
necessitate the use of the most accessible hospital available that is 
equipped to furnish the services, even if the hospital does not 
currently meet--
    (i) The conditions for participation under Medicare; or
    (ii) The definitions of inpatient or outpatient hospital services 
under Sec. Sec.  440.10 and 440.20.
    (f) [Reserved]
    (g) Critical access hospital (CAH). (1) CAH services means services 
that (i) are furnished by a provider that meet the requirements for 
participation in Medicare as a CAH (see subpart F of part 485 of this 
chapter), and (ii) are of a type that would be paid for by Medicare when 
furnished to a Medicare beneficiary.
    (2) Inpatient CAH services do not include nursing facility services 
furnished by a CAH with a swing-bed approval.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
46 FR 48540, Oct. 1, 1981; 58 FR 30671, May 26, 1993; 62 FR 46037, Aug. 
29, 1997; 64 FR 67051, Nov. 30, 1999; 72 FR 73651, Dec. 28, 2007; 73 FR 
77530, Dec. 19, 2008; 74 FR 31196, June 30, 2009]



Sec.  440.180  Home or community-based services.

    (a) Description and requirements for services. ``Home or community-
based services'' means services, not otherwise furnished under the 
State's Medicaid plan, that are furnished under a waiver granted under 
the provisions of part 441, subpart G of this chapter.
    (1) These services may consist of any or all of the services listed 
in paragraph (b) of this section, as those services are defined by the 
agency and approved by CMS.
    (2) The services must meet the standards specified in Sec.  
441.302(a) of this chapter concerning health and welfare assurances.
    (3) The services are subject to the limits on FFP described in Sec.  
441.310 of this chapter.

[[Page 265]]

    (b) Included services. Home or community-based services may include 
the following services, as they are defined by the agency and approved 
by CMS:
    (1) Case management services.
    (2) Homemaker services.
    (3) Home health aide services.
    (4) Personal care services.
    (5) Adult day health services.
    (6) Habilitation services.
    (7) Respite care services.
    (8) Day treatment or other partial hospitalization services, 
psychosocial rehabilitation services and clinic services (whether or not 
furnished in a facility) for individuals with chronic mental illness, 
subject to the conditions specified in paragraph (d) of this section.
    (9) Other services requested by the agency and approved by CMS as 
cost effective and necessary to avoid institutionalization.
    (c) Expanded habilitation services, effective October 1, 1997--(1) 
General rule. Expanded habilitation services are those services 
specified in paragraph (c)(2) of this section.
    (2) Services included. The agency may include as expanded 
habilitation services the following services:
    (i) Prevocational services, which means services that prepare an 
individual for paid or unpaid employment and that are not job-task 
oriented but are, instead, aimed at a generalized result. These services 
may include, for example, teaching an individual such concepts as 
compliance, attendance, task completion, problem solving and safety. 
Prevocational services are distinguishable from noncovered vocational 
services by the following criteria:
    (A) The services are provided to persons who are not expected to be 
able to join the general work force or participate in a transitional 
sheltered workshop within one year (excluding supported employment 
programs).
    (B) If the recipients are compensated, they are compensated at less 
than 50 percent of the minimum wage;
    (C) The services include activities which are not primarily directed 
at teaching specific job skills but at underlying habilitative goals 
(for example, attention span, motor skills); and
    (D) The services are reflected in a plan of care directed to 
habilitative rather than explicit employment objectives.
    (ii) Educational services, which means special education and related 
services (as defined in sections 602(16) and (17) of the Education of 
the Handicapped Act) (20 U.S.C. 1401 (16 and 17)) to the extent they are 
not prohibited under paragraph (c)(3)(i) of this section.
    (iii) Supported employment services, which facilitate paid 
employment, that are--
    (A) Provided to persons for whom competitive employment at or above 
the minimum wage is unlikely and who, because of their disabilities, 
need intensive ongoing support to perform in a work setting;
    (B) Conducted in a variety of settings, particularly worksites in 
which persons without disabilities are employed; and
    (C) Defined as any combination of special supervisory services, 
training, transportation, and adaptive equipment that the State 
demonstrates are essential for persons to engage in paid employment and 
that are not normally required for nondisabled persons engaged in 
competitive employment.
    (3) Services not included. The following services may not be 
included as habilitation services:
    (i) Special education and related services (as defined in sections 
602(16) and (17) of the Education of the Handicapped Act) (20 U.S.C. 
1401 (16) and (17)) that are otherwise available to the individual 
through a local educational agency.
    (ii) Vocational rehabilitation services that are otherwise available 
to the individual through a program funded under section 110 of the 
Rehabilitation Act of 1973 (29 U.S.C. 730).
    (d) Services for the chronically mentally ill--(1) Services 
included. Services listed in paragraph (b)(8) of this section include 
those provided to individuals who have been diagnosed as being 
chronically mentally ill, for which the agency has requested approval as 
part of either a new waiver request or a renewal and which have been 
approved by CMS on or after October 21, 1986.

[[Page 266]]

    (2) Services not included. Any home and community-based service, 
including those indicated in paragraph (b)(8) of this section, may not 
be included in home and community-based service waivers for the 
following individuals:
    (i) For individuals aged 22 through 64 who, absent the waiver, would 
be institutionalized in an institution for mental diseases (IMD); and, 
therefore, subject to the limitation on IMDs specified in Sec.  
435.1009(a)(2) of this chapter.
    (ii) For individuals, not meeting the age requirements described in 
paragraph (d)(2)(i) of this section, who, absent the waiver, would be 
placed in an IMD in those States that have not opted to include the 
benefits defined in Sec.  440.140 or Sec.  440.160.

[59 FR 37716, July 25, 1994, as amended at 65 FR 60107, Oct. 10, 2000; 
71 FR 39229, July 12, 2006]



Sec.  440.181  Home and community-based services for individuals age 65 or older.

    (a) Description of services-- Home and community-based services for 
individuals age 65 or older means services, not otherwise furnished 
under the State's Medicaid plan, or services already furnished under the 
State's Medicaid plan but in expanded amount, duration, or scope, which 
are furnished to individuals age 65 or older under a waiver granted 
under the provisions of part 441, subpart H of this subchapter. Except 
as provided in Sec.  441.310, the services may consist of any of the 
services listed in paragraph (b) of this section that are requested by 
the State, approved by CMS, and furnished to eligible recipients. 
Service definitions for each service in paragraph (b) of this section 
must be approved by CMS.
    (b) Included services. (1) Case management services.
    (2) Homemaker services.
    (3) Home health aide services.
    (4) Personal care services.
    (5) Adult day health services.
    (6) Respite care services.
    (7) Other medical and social services requested by the Medicaid 
agency and approved by CMS, which will contribute to the health and 
well-being of individuals and their ability to reside in a community-
based care setting.

[57 FR 29156, June 30, 1992]



Sec.  440.185  Respiratory care for ventilator-dependent individuals.

    (a) ``Respiratory care for ventilator-dependent individuals'' means 
services that are not otherwise available under the State's Medicaid 
plan, provided on a part-time basis in the recipient's home by a 
respiratory therapist or other health care professional trained in 
respiratory therapy (as determined by the State) to an individual who--
    (1) Is medically dependent on a ventilator for life support at least 
6 hours per day;
    (2) Has been so dependent for at least 30 consecutive days (or the 
maximum number of days authorized under the State plan, whichever is 
less) as an inpatient in one or more hospitals, NFs, or ICFs/MR;
    (3) Except for the availability of respiratory care services, would 
require respiratory care as an inpatient in a hospital, NF, or ICF/MR 
and would be eligible to have payment made for inpatient care under the 
State plan;
    (4) Has adequate social support services to be cared for at home;
    (5) Wishes to be cared for at home; and
    (6) Receives services under the direction of a physician who is 
familiar with the technical and medical components of home ventilator 
support, and who has medically determined that in-home care is safe and 
feasible for the individual.
    (b) For purposes of paragraphs (a)(4) and (5) of this section, a 
recipient's home does not include a hospital, NF, ICF/MR or other 
institution as defined in Sec.  435.1010 of this chapter.

[59 FR 37717, July 25, 1994, as amended at 71 FR 39229, July 12, 2006]



      Subpart B_Requirements and Limits Applicable to All Services



Sec.  440.200  Basis, purpose, and scope.

    (a) This subpart implements the following statutory requirements--
    (1) Section 1902(a)(10), regarding comparability of services for 
groups of recipients, and the amount, duration, and scope of services 
described in section 1905(a) of the Act that the State plan must provide 
for recipients;

[[Page 267]]

    (2) Section 1902(a)(22)(D), which provides for standards and methods 
to assure quality of services;
    (3) Section 1903(v)(1), which provides that no payment may be made 
to a State under this section for medical assistance furnished to an 
alien who is not lawfully admitted for permanent residence or otherwise 
permanently residing in the United States under color of law;
    (4) Section 1903(v)(2) which provides that FFP will be available for 
services necessary to treat an emergency medical condition of an alien 
not described in paragraph (a)(3) of this section if that alien 
otherwise meets the eligibility requirements of the State plan;
    (5) Section 1907 on observance of religious beliefs;
    (6) Section 1915 on exceptions to section 1902(a)(10) and waivers of 
other requirements of section 1902 of the Act; and
    (7) Sections 245A(h), 210 and 210A of the Immigration and 
Nationality Act which provide that certain aliens who are legalized may 
be eligible for Medicaid.
    (b) The requirements and limits of this subpart apply for all 
services defined in subpart A of this part.

[55 FR 36822, Sept. 7, 1990]



Sec.  440.210  Required services for the categorically needy.

    (a) A State plan must specify that, at a minimum, categorically 
needy recipients are furnished the following services:
    (1) The services defined in Sec. Sec.  440.10 through 440.50, 
440.70, and (to the extent nurse-midwives and nurse practitioners are 
authorized to practice under State law or regulation) the services 
defined in Sec. Sec.  440.165 and 440.166, respectively.
    (2) Pregnancy-related services and services for other conditions 
that might complicate the pregnancy.
    (i) Pregnancy-related services are those services that are necessary 
for the health of the pregnant woman and fetus, or that have become 
necessary as a result of the woman having been pregnant. These include, 
but are not limited to, prenatal care, delivery, postpartum care, and 
family planning services.
    (ii) Services for other conditions that might complicate the 
pregnancy include those for diagnoses, illnesses, or medical conditions 
which might threaten the carrying of the fetus to full term or the safe 
delivery of the fetus; and
    (3) For women who, while pregnant, applied for, were eligible for, 
and received Medicaid services under the plan, all services under the 
plan that are pregnancy-related for an extended postpartum period. The 
postpartum period begins on the last day of pregnancy and extends 
through the end of the month in which the 60-day period following 
termination of pregnancy ends.
    (b) A State plan must specify that eligible aliens as defined in 
Sec. Sec.  435.406(a) and 436.406(a) of this subchapter will receive at 
least the services provided in paragraph (a) of this section.
    (c) A State plan must specify that aliens not defined in Sec. Sec.  
435.406(a) and 436.406(a) of this subchapter will only be provided the 
limited services specified in Sec.  440.255.

[56 FR 24010, May 28, 1991, as amended at 60 FR 19862, Apr. 21, 1995]



Sec.  440.220  Required services for the medically needy.

    (a) A State plan that includes the medically needy must specify that 
the medically needy are provided, as a minimum, the following services:
    (1) Prenatal care and delivery services for pregnant women.
    (2) Ambulatory services, as defined in the State plan, for:
    (i) Individuals under age 18; and
    (ii) Groups of individuals entitled to institutional services.
    (3) Home health services (Sec.  440.70) to any individual entitled 
to skilled nursing facility services.
    (4) If the State plan includes services in an institution for mental 
diseases (Sec.  440.140 or Sec.  440.160) or in an intermediate care 
facility for the mentally retarded (Sec.  440.150(c)) for any group of 
medically needy, either of the following sets of services to each of the 
medically needy groups:
    (i) The services contained in Sec. Sec.  440.10 through 440.50 and 
(to the extent nurse-midwives are authorized to practice

[[Page 268]]

under State law or regulation) Sec.  440.165; or
    (ii) The services contained in any seven of the sections in 
Sec. Sec.  440.10 through 440.165.
    (5) For women who, while pregnant, applied for, were eligible as 
medically needy for, and received Medicaid services under the plan, 
services under the plan that are pregnancy-related (as defined in Sec.  
440.210(a)(2)(i) of this subpart) for an extended postpartum period. The 
postpartum period begins on the last day of pregnancy and extends 
through the end of the month in which the 60-day period following 
termination of pregnancy ends.
    (b) A State plan must specify that eligible aliens as defined in 
Sec. Sec.  435.406(a) and 436.406(a) of this subchapter will receive at 
least the services provided in paragraphs (a)(4) (i) and (ii) of this 
section.
    (c) A State plan must specify that aliens defined in Sec. Sec.  
435.406(b), 435.406(c), 436.406(b) and 436.406(c) of this subchapter 
will only be provided the limited services specified in Sec.  440.255.

[56 FR 24011, May 28, 1991, as amended at 58 FR 4938, Jan. 19, 1993]



Sec.  440.225  Optional services.

    Any of the services defined in subpart A of this part that are not 
required under Sec. Sec.  440.210 and 440.220 may be furnished under the 
State plan at the State's option.

[60 FR 19862, Apr. 21, 1995]



Sec.  440.230  Sufficiency of amount, duration, and scope.

    (a) The plan must specify the amount, duration, and scope of each 
service that it provides for--
    (1) The categorically needy; and
    (2) Each covered group of medically needy.
    (b) Each service must be sufficient in amount, duration, and scope 
to reasonably achieve its purpose.
    (c) The Medicaid agency may not arbitrarily deny or reduce the 
amount, duration, or scope of a required service under Sec. Sec.  
440.210 and 440.220 to an otherwise eligible recipient solely because of 
the diagnosis, type of illness, or condition.
    (d) The agency may place appropriate limits on a service based on 
such criteria as medical necessity or on utilization control procedures.

[46 FR 47993, Sept. 30, 1981]



Sec.  440.240  Comparability of services for groups.

    Except as limited in Sec.  440.250--
    (a) The plan must provide that the services available to any 
categorically needy recipient under the plan are not less in amount, 
duration, and scope than those services available to a medically needy 
recipient; and
    (b) The plan must provide that the services available to any 
individual in the following groups are equal in amount, duration, and 
scope for all recipients within the group:
    (1) The categorically needy.
    (2) A covered medically needy group.

[46 FR 47993, Sept. 30, 1981]



Sec.  440.250  Limits on comparability of services.

    (a) Skilled nursing facility services (Sec.  440.40(a)) may be 
limited to recipients age 21 or older.
    (b) Early and periodic screening, diagnosis, and treatment (Sec.  
440.40(b)) must be limited to recipients under age 21.
    (c) Family planning services and supplies must be limited to 
recipients of childbearing age, including minors who can be considered 
sexually active and who desire the services and supplies.
    (d) If covered under the plan, services to recipients in 
institutions for mental diseases (Sec.  440.140) must be limited to 
those age 65 or older.
    (e) If covered under the plan, inpatient psychiatric services (Sec.  
440.160) must be limited to recipients under age 22 as specified in 
Sec.  441.151(c) of this subchapter.
    (f) If Medicare benefits under Part B of title XVIII are made 
available to recipients through a buy-in agreement or payment of 
premiums, or part or all of the deductibles, cost sharing or similar 
charges, they may be limited to recipients who are covered by the 
agreement or payment.
    (g) If services in addition to those offered under the plan are made 
available under a contract between the agency or

[[Page 269]]

political subdivision and an organization providing comprehensive health 
services, those additional services may be limited to recipients who 
reside in the geographic area served by the contracting organization and 
who elect to receive services from it.
    (h) Ambulatory services for the medically needy (Sec.  
440.220(a)(2)) may be limited to:
    (1) Individuals under age 18; and
    (2) Groups of individuals entitled to institutional services.
    (i) Services provided under an exception to requirements allowed 
under Sec.  431.54 may be limited as provided under that exception.
    (j) If CMS has approved a waiver of Medicaid requirements under 
Sec.  431.55, services may be limited as provided by the waiver.
    (k) If the agency has been granted a waiver of the requirements of 
Sec.  440.240 (Comparability of services) in order to provide for home 
or community-based services under Sec. Sec.  440.180 or 440.181, the 
services provided under the waiver need not be comparable for all 
individuals within a group.
    (l) If the agency imposes cost sharing on recipients in accordance 
with 447.53, the imposition of cost sharing on an individual who is not 
exempted by one of the conditions in section 447.53(b) shall not require 
the State to impose copayments on an individual who is eligible for such 
exemption.
    (m) Eligible legalized aliens who are not in the exempt groups 
described in Sec. Sec.  435.406(a) and 436.406(a), and considered 
categorically needy or medically needy must be furnished only emergency 
services (as defined in Sec.  440.255), and services for pregnant women 
as defined in section 1916(a)(2)(B) of the Social Security Act for 5 
years from the date the alien is granted lawful temporary resident 
status.
    (n) Aliens who are not lawful permanent residents, permanently 
residing in the United States under color of law, or granted lawful 
status under section 245A, 210 or 210A of the Immigration and 
Nationality Act, who, otherwise meet the eligibility requirements of the 
State plan (except for receipt of AFDC, SSI or a State Supplementary 
payment) must be furnished only those services necessary to treat an 
emergency medical condition of the alien as defined in Sec.  440.255(c).
    (o) If the agency makes respiratory care services available under 
Sec.  440.185, the services need not be made available in equal amount, 
duration, and scope to any individual not eligible for coverage under 
that section. However, the services must be made available in equal 
amount, duration, and scope to all individuals eligible for coverage 
under that section.
    (p) A State may provide a greater amount, duration, or scope of 
services to pregnant women than it provides under its plan to other 
individuals who are eligible for Medicaid, under the following 
conditions:
    (1) These services must be pregnancy-related or related to any other 
condition which may complicate pregnancy, as defined in Sec.  
440.210(a)(2) of this subpart; and
    (2) These services must be provided in equal amount, duration, and 
scope to all pregnant women covered under the State plan.
    (q) [Reserved]
    (r) If specified in the plan, targeted case management services may 
be limited to the following:
    (1) Certain geographic areas within a State, without regard to the 
statewide requirements in Sec.  431.50 of this chapter.
    (2) Targeted groups specified by the State.

[43 FR 45224, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
46 FR 48541, Oct. 1, 1981; 48 FR 5735, Jan. 8, 1983; 51 FR 22041, June 
17, 1986; 55 FR 36822, Sept. 7, 1990; 56 FR 24011, May 28, 1991; 57 FR 
29156, June 30, 1992; 58 FR 4939, Jan. 19, 1993; 59 FR 37717, July 25, 
1994; 72 FR 68092, Dec. 4, 2007]



Sec.  440.255  Limited services available to certain aliens.

    (a) FFP for services. FFP is available for services provided to 
aliens described in this section which are necessary to treat an 
emergency medical condition as defined in paragraphs (b)(1) and (c) or 
services for pregnant women described in paragraph (b)(2).
    (b) Legalized aliens eligible only for emergency services and 
services for pregnant women. Aliens granted lawful temporary resident 
status, or lawful permanent resident status under sections 245A, 210 or 
210A of the Immigration and Nationality Act, who are not in

[[Page 270]]

one of the exempt groups described in Sec. Sec.  435.406(a)(3) and 
436.406(a)(3) and who meet all other requirements for Medicaid will be 
eligible for the following services--
    (1) Emergency services required after the sudden onset of a medical 
condition manifesting itself by acute symptoms of sufficient severity 
(including severe pain) such that the absence of immediate medical 
attention could reasonably be expected to result in:
    (i) Placing the patient's health in serious jeopardy;
    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part.
    (2) Services for pregnant women which are included in the approved 
State plan. These services include routine prenatal care, labor and 
delivery, and routine post-partum care. States, at their option, may 
provide additional plan services for the treatment of conditions which 
may complicate the pregnancy or delivery.
    (c) Effective January 1, 1987, aliens who are not lawfully admitted 
for permanent residence in the United States or permanently residing in 
the United States under the color of law must receive the services 
necessary to treat the condition defined in paragraph (1) of this 
section if--
    (1) The alien has, after sudden onset, a medical condition 
(including emergency labor and delivery) manifesting itself by acute 
symptoms of sufficient severity (including severe pain) such that the 
absence of immediate medical attention could reasonably be expected to 
result in:
    (i) Placing the patient's health in serious jeopardy;
    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part, and
    (2) The alien otherwise meets the requirements in Sec. Sec.  
435.406(c) and 436.406(c) of this subpart.

[55 FR 36823, Sept. 7, 1990; 56 FR 10807, Mar. 14, 1991]



Sec.  440.260  Methods and standards to assure quality of services.

    The plan must include a description of methods and standards used to 
assure that services are of high quality.



Sec.  440.270  Religious objections.

    (a) Except as specified in paragraph (b) of this section, the agency 
may not require any individual to undergo any medical service, 
diagnosis, or treatment or to accept any other health service provided 
under the plan if the individual objects, or in the case of a child, a 
parent or guardian objects, on religious grounds.
    (b) If a physical examination is necessary to establish eligibility 
based on disability or blindness, the agency may not find an individual 
eligible for Medicaid unless he undergoes the examination.

    Source: 73 FR 73724, Dec. 3, 2008, unless otherwise noted.



 Subpart C_Subpart C_Benchmark Benefit and Benchmark-Equivalent Coverage

    Source: 73 FR 73724, Dec. 3, 2008, unless otherwise noted.

    Effective Date Note: At 73 FR 73724, Dec. 3, 2008, subpart C was 
added, effective Feb. 2, 2009. At 74 FR 5808, Feb. 2, 2009 the effective 
date was delayed until Apr. 3, 2009. At 74 FR 15221, Apr. 3, 2009 the 
effective date was delayed until Dec. 31, 2009.



Sec.  440.300  Basis.

    This subpart implements section 1937 of the Act, which authorizes 
States to provide for medical assistance to one or more groups of 
Medicaid-eligible recipients specified by the State under an approved 
State plan amendment through enrollment in coverage that provides 
benchmark or benchmark-equivalent health care benefit coverage.



Sec.  440.305  Scope.

    (a) General. This subpart sets out requirements for States that 
elect to provide medical assistance to certain Medicaid eligible 
recipients within one or more groups of individuals specified by the 
State, through enrollment of the recipients in coverage, identified as

[[Page 271]]

``benchmark'' or ``benchmark-equivalent.''
    (b) Limitations. A State may only apply the option in paragraph (a) 
of this section for an individual whose eligibility is based on an 
eligibility category under section 1905(a) of the Act that would have 
been covered under the State's plan on or before February 8, 2006.
    (c) A State may not require but may offer enrollment in benchmark or 
benchmark-equivalent coverage to the Medicaid eligible individuals 
listed in Sec.  440.315. States allowing individuals to opt in must be 
in compliance with the rules specified at Sec.  440.320.
    (d) Any State that opts to offer alternative benchmark or benchmark-
equivalent coverage to Medicaid beneficiaries must secure public input 
prior to the submission of any State plan amendment to CMS.
    (e) In implementing benchmark or benchmark-equivalent package, 
States must comply with the managed care rules at section 1932 of the 
Act and part 438 of this chapter if benchmark or benchmark-equivalent 
benefits are provided through managed care plans unless the State 
demonstrates that such requirements are impractical in the context of, 
or inconsistent with, methods of offering coverage appropriate to meet 
the health care needs of the targeted population.



Sec.  440.310  Applicability.

    (a) Enrollment. The State may require ``full benefit eligible'' 
recipients not excluded in Sec.  440.315 to enroll in benchmark or 
benchmark-equivalent coverage.
    (b) Full benefit eligible. A recipient is a full benefit eligible if 
determined by the State to be eligible to receive the standard full 
Medicaid benefit package under the approved State plan if not for the 
application of the option available under this subpart.



Sec.  440.315  Exempt individuals.

    For recipients within one (or more) of the following categories, the 
State plan may offer, but may not require under Sec.  440.310, the 
opportunity to obtain benefits through enrollment in benchmark or 
benchmark-equivalent coverage:
    (a) The recipient is a pregnant woman who is required to be covered 
under the State plan under section 1902(a)(10)(A)(i) of the Act.
    (b) The recipient qualifies for medical assistance under the State 
plan on the basis of being blind or disabled (or being treated as being 
blind or disabled) without regard to whether the individual is eligible 
for Supplemental Security Income benefits under title XVI on the basis 
of being blind or disabled and including an individual who is eligible 
for medical assistance on the basis of section 1902(e)(3) of the Act.
    (c) The recipient is entitled to benefits under any part of 
Medicare.
    (d) The recipient is terminally ill and is receiving benefits for 
hospice care under title XIX.
    (e) The recipient is an inpatient in a hospital, nursing facility, 
intermediate care facility for the mentally retarded, or other medical 
institution, and is required, as a condition of receiving services in 
that institution under the State plan, to spend for costs of medical 
care all but a minimal amount of the individual's income required for 
personal needs.
    (f) The recipient is medically frail or otherwise an individual with 
special medical needs. For these purposes, the State's definition of 
individuals with special needs must at least include those individuals 
described in Sec.  438.50(d)(3) of this chapter.
    (g) The recipient qualifies based on medical condition for medical 
assistance for long-term care services described in section 
1917(c)(1)(C) of the Act.
    (h) The recipient is an individual with respect to whom aid or 
assistance is made available under part B of title IV to children in 
foster care and individuals with respect to whom adoption or foster care 
assistance is made available under part E of title IV, without regard to 
age.
    (i) The recipient qualifies for medical assistance on the basis of 
eligibility to receive assistance under a State plan funded under part A 
of title IV (as in effect on or after welfare reform effective date 
defined in section 1931(i) of the Act). This provision relates to

[[Page 272]]

those individuals who qualify for Medicaid solely on the basis of 
qualification under the State's TANF rules.
    (j) The recipient is a woman who is receiving medical assistance by 
virtue of the application of sections 1902(a)(10)(ii)(XVIII) and 1902(a) 
of the Act.
    (k) The recipient qualifies for medical assistance on the basis of 
section 1902(a)(10)(A)(ii)(XII) of the Act.
    (l) The recipient is not a qualified alien (as defined in section 
431 of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996) and receives care and services necessary for the treatment 
of an emergency medical condition in accordance with section 1903(v) of 
the Act.
    (m) The recipient is determined eligible as medically needy or 
eligible because of a reduction of countable income based on costs 
incurred for medical or other remedial care under section 1902(f) of the 
Act or otherwise based on incurred medical costs.



Sec.  440.320  State plan requirements: Optional enrollment for exempt individuals.

    (a) General rule. A State plan that offers exempt individuals as 
defined in Sec.  440.315 the option to enroll in benchmark or benchmark-
equivalent coverage must identify in its State plan the exempt groups 
for which this coverage is available, and must comply with the following 
provisions:
    (1) In any case in which the State offers an exempt individual the 
option to obtain coverage in a benchmark or benchmark-equivalent benefit 
package, the State must effectively inform the individual prior to 
enrollment that the enrollment is voluntary and that the individual may 
opt out of the benchmark or benchmark-equivalent coverage at any time 
and regain immediate access to standard full Medicaid coverage under the 
State plan.
    (2) Prior to any enrollment in benchmark or benchmark-equivalent 
coverage, the State must inform the exempt recipient of the benefits 
available under the benchmark or benchmark-equivalent benefit package 
and provide a comparison of how they differ from the benefits available 
under the standard full Medicaid program.
    (3) The State must document in the exempt recipient's eligibility 
file that the recipient was informed in accordance with this section 
prior to enrollment, was given ample time to arrive at an informed 
choice, and voluntarily chose to enroll in the benchmark or benchmark-
equivalent benefit package.
    (4) For individuals who the State determines have become exempt 
individuals while enrolled in benchmark or benchmark-equivalent 
coverage, the State must comply with the requirements in paragraphs 
(a)(1) through (a)(3) of this section within 30 days after such 
determination.
    (b) Disenrollment or Opt/Out Process.
    (1) The State must act upon requests promptly for exempt individuals 
who choose to opt out of benchmark or benchmark-equivalent coverage.
    (2) The State must have a process in place to ensure that exempt 
individuals have continuous access to services while opt out requests 
are being processed.



Sec.  440.325  State plan requirements: Coverage and benefits.

    Subject to requirements in Sec.  440.345 and Sec.  440.365, States 
may elect to provide any of the following of types of health benefits 
coverage:
    (a) Benchmark coverage in accordance with Sec.  440.330.
    (b) Benchmark-equivalent coverage in accordance with Sec.  440.335.



Sec.  440.330  Benchmark health benefits coverage.

    Benchmark coverage is health benefits coverage that is equal to the 
coverage under one or more of the following benefit plans:
    (a) Federal Employees Health Benefit Plan Equivalent Coverage 
(FEHBP--Equivalent Health Insurance Coverage). A benefit plan equivalent 
to the standard Blue Cross/Blue Shield preferred provider option service 
benefit plan that is described in and offered to Federal employees under 
5 U.S.C. 8903(1).
    (b) State employee coverage. Health benefits coverage that is 
offered and generally available to State employees in the State.
    (c) Health maintenance organization (HMO) plan. A health insurance 
plan

[[Page 273]]

that is offered through an HMO, (as defined in section 2791(b)(3) of the 
Public Health Service Act) that has the largest insured commercial, non-
Medicaid enrollment in the State.
    (d) Secretary approved coverage. Any other health benefits coverage 
that the Secretary determines, upon application by a State, provides 
appropriate coverage to meet the needs of the population provided that 
coverage. States wishing to opt for Secretarial approved coverage should 
submit a full description of the proposed coverage, (including a 
benefit-by-benefit comparison of the proposed plan to one or more of the 
three other benchmark plans specified above or to the State's standard 
full Medicaid coverage package under section 1905(a) of the Act), and of 
the population to which the coverage would be offered. In addition, the 
State should submit any other information that would be relevant to a 
determination that the proposed health benefits coverage would be 
appropriate for the proposed population. The scope of a Secretary-
approved health benefits package will be limited to benefits within the 
scope of the categories available under a benchmark coverage package or 
the standard full Medicaid coverage package under section 1905(a) of the 
Act.



Sec.  440.335  Benchmark-equivalent health benefits coverage.

    (a) Aggregate actuarial value. Benchmark-equivalent coverage is 
health benefits coverage that has an aggregate actuarial value, as 
determined in Sec.  440.340 that is at least actuarially equivalent to 
the coverage under one of the benchmark benefit packages described in 
Sec.  440.330 for the identified Medicaid population to which it will be 
offered.
    (b) Required coverage. Benchmark-equivalent health benefits coverage 
must include coverage for the following categories of services:
    (1) Inpatient and outpatient hospital services.
    (2) Physicians' surgical and medical services.
    (3) Laboratory and x-ray services.
    (4) Well-baby and well-child care, including age-appropriate 
immunizations.
    (5) Other appropriate preventive services, such as emergency 
services as designated by the Secretary.
    (c) Additional coverage.
    (1) In addition to the categories of services of this section, 
benchmark-equivalent coverage may include coverage for any additional 
services in a category included in the benchmark plan or described in 
section 1905(a) of the Act.
    (2) If the benchmark coverage package used by the State for purposes 
of comparison in establishing the aggregate actuarial value of the 
benchmark-equivalent package includes any of the following four 
categories of services: prescription drugs; mental health services; 
vision services; and hearing services; then the actuarial value of the 
coverage for each of these categories of service in the benchmark-
equivalent coverage package must be at least 75 percent of the actuarial 
value of the coverage for that category of service in the benchmark plan 
used for comparison by the State.
    (3) If the benchmark coverage package does not cover one of the four 
categories of services in paragraph (c)(2) of this section, then the 
benchmark-equivalent coverage package may, but is not required to, 
include coverage for that category of service.



Sec.  440.340  Actuarial report for benchmark-equivalent coverage.

    (a) A State plan amendment that would provide for benchmark-
equivalent health benefits coverage described in Sec.  440.335, must 
include an actuarial report. The actuarial report must contain an 
actuarial opinion that the benchmark equivalent health benefits coverage 
meets the actuarial requirements set forth in Sec.  440.335. The report 
must also specify the benchmark coverage used for comparison.
    (b) The actuarial report must state that it was prepared according 
to the following requirements:
    (1) By an individual who is a member of the American Academy of 
Actuaries (AAA).
    (2) Using generally accepted actuarial principles and methodologies 
of the AAA.
    (3) Using a standardized set of utilization and price factors.

[[Page 274]]

    (4) Using a standardized population that is representative of the 
population involved.
    (5) Applying the same principles and factors in comparing the value 
of different coverage (or categories of services).
    (6) Without taking into account any differences in coverage based on 
the method of delivery or means of cost control or utilization used.
    (7) Taking into account the ability of the State to reduce benefits 
by taking into account the increase in actuarial value of health 
benefits coverage offered under the State plan that results from the 
limitations on cost sharing (with the exception of premiums) under that 
coverage.
    (c) The actuary preparing the opinion must select and specify the 
standardized set of factors and the standardized population to be used 
in paragraphs (b)(3) and (b)(4) of this section.
    (d) The State must provide sufficient detail to explain the basis of 
the methodologies used to estimate the actuarial value or, if requested 
by CMS, to replicate the State's result.



Sec.  440.345  EPSDT services requirement.

    (a) The State must assure access to early and periodic screening, 
diagnostic and treatment (EPSDT) services through benchmark or 
benchmark-equivalent plan benefits or as wrap-around benefits to those 
plans for any child under 19 years of age eligible under the State plan 
in a category under section 1902(a)(10)(A) of the Act.
    (1) Sufficiency: Any wrap-around EPSDT benefits must be sufficient 
so that, in combination with the benchmark or benchmark-equivalent 
benefits plan, these individuals have access to the full EPSDT benefit.
    (2) State Plan requirement: The State must include a description of 
how the wrap-around benefits will be provided to ensure that these 
recipients have access to the full EPSDT benefit.
    (b) Individuals must first seek coverage of EPSDT services through 
the benchmark or benchmark-equivalent plan before seeking coverage of 
such through wrap-around benefits.



Sec.  440.350  Employer-sponsored insurance health plans.

    (a) A State may provide benchmark or benchmark-equivalent coverage 
by obtaining employer sponsored health plans (either alone or with the 
addition of wrap-around services covered separately under Medicaid) for 
individuals with access to private health insurance.
    (b) The State must assure that employer sponsored plans meet the 
requirements of benchmark or benchmark-equivalent coverage, including 
the cost-effectiveness requirements at Sec.  440.370.
    (c) A State may provide benchmark or benchmark-equivalent coverage 
through a combination of employer sponsored health plans and additional 
benefit coverage provided by the State that wraps around the employer 
sponsored health plan which, in the aggregate, results in benchmark or 
benchmark-equivalent level of coverage for those recipients.



Sec.  440.355  Payment of premiums.

    Payment of premiums by the State, net of beneficiary contributions, 
to obtain benchmark or benchmark-equivalent benefit coverage on behalf 
of beneficiaries under this section will be treated as medical 
assistance under section 1905(a) of the Act.



Sec.  440.360  State plan requirement for providing additional wrap-around services.

    If the State opts to provide additional or wrap-around coverage to 
individuals enrolled in benchmark or benchmark-equivalent plans, the 
State plan must describe the populations covered and the payment 
methodology for these services. Additional or wrap-around services must 
be in categories that are within the scope of the benchmark coverage, or 
are described in section 1905(a) of the Act.



Sec.  440.365  Coverage of rural health clinic and federally qualified health center (FQHC) services.

    If a State provides benchmark or benchmark-equivalent coverage to 
individuals, it must assure that the individual has access, through that 
coverage or otherwise, to rural health

[[Page 275]]

clinic services and FQHC services as defined in subparagraphs (B) and 
(C) of section 1905(a)(2) of the Act. Payment for these services must be 
made in accordance with the payment provisions of section 1902(bb) of 
the Act.



Sec.  440.370  Cost-effectiveness.

    Benchmark and benchmark-equivalent coverage and any additional 
benefits must be provided in accordance with Federal upper payment 
limits, procurement requirements and other economy and efficiency 
principles that would otherwise be applicable to the services or 
delivery system through which the coverage and benefits are obtained.



Sec.  440.375  Comparability and scope of coverage.

    States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to comparability or requirements relating to the scope of coverage other 
than those contained in this subpart.



Sec.  440.380  Statewideness.

    States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to statewideness.



Sec.  440.385  Freedom of choice.

    (a) States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to the requirements for free choice of provider in Sec.  431.51 of this 
chapter.
    (b) States may restrict recipients to obtaining services from (or 
through) selectively procured provider plans or practitioners that meet, 
accept, and comply with reimbursement, quality and utilization standards 
under the State Plan, to the extent that the restrictions imposed meet 
the following requirements:
    (1) Do not discriminate among classes of providers on grounds 
unrelated to their demonstrated effectiveness and efficiency in 
providing the benchmark benefit package.
    (2) Do not apply in emergency circumstances.
    (3) Does not apply to family planning providers.
    (4) Require that all provider plans are paid on a timely basis in 
the same manner as health care practitioners must be paid under Sec.  
447.45 of this chapter.



Sec.  440.390  Assurance of transportation

    A State may at its option amend its State plan to provide benchmark 
or benchmark-equivalent coverage to recipients without regard to the 
assurance of transportation to medically necessary services requirement 
specified in Sec.  431.53 of this chapter.



PART 441_SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC SERVICES--Table of Contents




Sec.
441.1 Purpose.

                      Subpart A_General Provisions

441.10 Basis.
441.11 Continuation of FFP for institutional services.
441.12 Inpatient hospital tests.
441.13 Prohibitions on FFP: Institutionalized individuals.
441.15 Home health services.
441.16 Home health agency requirements for surety bonds; Prohibition on 
          FFP.
441.17 Laboratory services.
441.18 Case management services.
441.20 Family planning services.
441.21 Nurse-midwife services.
441.22 Nurse practitioner services.
441.25 Prohibition on FFP for certain prescribed drugs.
441.30 Optometric services.
441.35 Organ transplants.
441.40 End-stage renal disease.

Subpart B_Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) 
                       of Individuals Under Age 21

441.50 Basis and purpose.
441.55 State plan requirements.
441.56 Required activities.
441.57 Discretionary services.
441.58 Periodicity schedule.
441.59 Treatment of requests for EPSDT screening services.
441.60 Continuing care.
441.61 Utilization of providers and coordination with related programs.

[[Page 276]]

441.62 Transportation and scheduling assistance.

 Subpart C_Medicaid for Individuals Age 65 or Over in Institutions for 
                             Mental Diseases

441.100 Basis and purpose.
441.101 State plan requirements.
441.102 Plan of care for institutionalized recipients.
441.103 Alternate plans of care.
441.105 Methods of administration.
441.106 Comprehensive mental health program.

Subpart D_Inpatient Psychiatric Services for Individuals Under Age 21 in 
                   Psychiatric Facilities or Programs

441.150 Basis and purpose.
441.151 General requirements.
441.152 Certification of need for services.
441.153 Team certifying need for services.
441.154 Active treatment.
441.155 Individual plan of care.
441.156 Team developing individual plan of care.
441.180 Maintenance of effort: General rule.
441.181 Maintenance of effort: Explanation of terms and requirements.
441.182 Maintenance of effort: Computation.

                           Subpart E_Abortions

441.200 Basis and purpose.
441.201 Definition.
441.202 General rule.
441.203 Life of the mother would be endangered.
441.204-441.205 [Reserved]
441.206 Documentation needed by the Medicaid agency.
441.207 Drugs and devices and termination of ectopic pregnancies.
441.208 Recordkeeping requirements.

                        Subpart F_Sterilizations

441.250 Applicability.
441.251 Definitions.
441.252 State plan requirements.
441.253 Sterilization of a mentally competent individual aged 21 or 
          older.
441.254 Mentally incompetent or instititionalized individuals.
441.255 Sterilization by hysterectomy.
441.256 Additional condition for Federal financial participation (FFP).
441.257 Informed consent.
441.258 Consent form requirements.
441.259 Review of regulations.

Appendix to Subpart F--Required Consent Form

    Subpart G_Home and Community-Based Services: Waiver Requirements

441.300 Basis and purpose.
441.301 Contents of request for a waiver.
441.302 State assurances.
441.303 Supporting documentation required.
441.304 Duration of a waiver.
441.305 Replacement of recipients in approved waiver programs.
441.306 Cooperative arrangements with the Maternal and Child Health 
          program.
441.307 Notification of a waiver termination.
441.308 Hearings procedures for waiver terminations.
441.310 Limits on Federal financial participation (FFP).

Subpart H_Home and Community-Based Services Waivers for Individuals Age 
                    65 or Older: Waiver Requirements

441.350 Basis and purpose.
441.351 Contents of a request for a waiver.
441.352 State assurances.
441.353 Supporting documentation required.
441.354 Aggregate projected expenditure limit (APEL).
441.355 Duration, extension, and amendment of a waiver.
441.356 Waiver termination.
441.357 Hearing procedures for waiver denials.
441.360 Limits on Federal financial participation (FFP).
441.365 Periodic evaluation, assessment, and review.

       Subpart I_Community Supported Living Arrangements Services

441.400 Basis and purpose.
441.402 State plan requirements.
441.404 Minimum protection requirements.

  Subpart J_Optional Self-Directed Personal Assistance Services Program

441.450 Basis, scope, and definitions.
441.452 Self-direction: General.
441.454 Use of cash.
441.456 Voluntary disenrollment.
441.458 Involuntary disenrollment.
441.460 Participant living arrangements.
441.462 Statewideness, comparability, and limitations on number served.
441.464 State assurances.
441.466 Assessment of need.
441.468 Service plan elements.
441.470 Service budget elements.
441.472 Budget methodology.
441.474 Quality assurance and improvement plan.
441.476 Risk management.
441.478 Qualifications of providers of personal assistance.

[[Page 277]]

441.480 Use of a representative.
441.482 Permissible purchases.
441.484 Financial management services.

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

    Source: 43 FR 45229, Sept. 29, 1978, unless otherwise noted.



Sec.  441.1  Purpose.

    This part sets forth State plan requirements and limits on FFP for 
specific services defined in part 440 of this subchapter. Standards for 
payments for services provided in intermediate care facilities and 
skilled nursing facilities are set forth in part 442 of this subchapter.



                      Subpart A_General Provisions



Sec.  441.10  Basis.

    This subpart is based on the following sections of the Act which 
state requirements and limits on the services specified or provide 
Secretarial authority to prescribe regulations relating to services:
    (a) Section 1102 for end-stage renal disease (Sec.  441.40).
    (b) Section 1138(b) for organ procurement organization services 
(Sec.  441.13(c)).
    (c) Sections 1902(a)(10)(A) and 1905(a)(21) for nurse practitioner 
services (Sec.  441.22).
    (d) Sections 1902(a)(10)(D) and 1905(a)(7) for home health services 
(Sec.  441.15).
    (e) Section 1903(i)(1) for organ transplant procedures (Sec.  
441.35).
    (f) Section 1903(i)(5) for certain prescribed drugs (Sec.  441.25).
    (g) Section 1903(i)(6) for prohibition (except in emergency 
situations) of FFP in expenditures for inpatient hospital tests that are 
not ordered by the attending physician or other licensed practitioner 
(Sec.  441.12).
    (h) Section 1903(i)(18) for the requirement that each home health 
agency provide the Medicaid agency with a surety bond (Sec.  441.16).
    (i) Section 1905(a)(4)(C) for family planning (Sec.  441.20).
    (j) Sections 1905 (a)(12) and (e) for optometric services (Sec.  
441.30).
    (k) Section 1905(a)(17) for nurse-midwife services (Sec.  441.21).
    (l) Section 1905(a) (following (a)(24)) for prohibition of FFP in 
expenditures for certain services (Sec.  441.13).
    (m) Section 1905(a)(19) and 1915(g) of the Act for case management 
services as set forth in Sec.  441.18 and section 8435 of the Technical 
and Miscellaneous Revenue Act of 1988.

[60 FR 19862, Apr. 21, 1995, as amended at 63 FR 310, Jan. 5, 1998; 72 
FR 68092, Dec. 4, 2007]



Sec.  441.11  Continuation of FFP for institutional services.

    (a) Basic conditions for continuation of FFP. FFP may be continued 
for up to 30 days after the effective date of termination or expiration 
of a provider agreement, if the following conditions are met:
    (1) The Medicaid payments are for recipients admitted to the 
facility before the effective date of termination or expiration.
    (2) The State agency is making reasonable efforts to transfer those 
recipients to other facilities or to alternate care.
    (b) When the 30-day period begins. The 30-day period begins on one 
of the following:
    (1) The effective date of termination of the facility's provider 
agreement by CMS;
    (2) The effective date of termination of the facility's Medicaid 
provider agreement by the Medicaid agency on its own volition; or
    (3) In the case of an ICF/MR, the later of--
    (i) The effective date of termination or nonrenewal of the 
facility's provider agreement by the Medicaid agency on its own 
volition; or
    (ii) The date of issuance of an administrative hearing decision that 
upholds the agency's termination or nonrenewal action.
    (c) Services for which FFP may be continued. FFP may be continued 
for any of the following services, as defined in subpart A of part 440 
of this chapter:
    (1) Inpatient hospital services.
    (2) Inpatient hospital services for individuals age 65 or older in 
an institution for mental diseases.
    (3) Nursing facility services for individuals age 21 or older.

[[Page 278]]

    (4) Nursing facility services for individuals age 65 or older in an 
institution for mental diseases.
    (5) Inpatient psychiatric services for individuals under age 21.
    (6) Nursing facility services for individuals under 21.
    (7) Intermediate care facility services for the mentally retarded.

[59 FR 56234, Nov. 10, 1994]



Sec.  441.12  Inpatient hospital tests.

    Except in an emergency situation (see Sec.  440.170(e)(1) of this 
chapter for definition), FFP is not available in expenditures for 
inpatient hospital tests unless the tests are specifically ordered by 
the attending physician or other licensed practitioner, acting within 
the scope of practice as defined under State law, who is responsible for 
the diagnosis or treatment of a particular patient's condition.

[46 FR 48554, Oct. 1, 1981]



Sec.  441.13  Prohibitions on FFP: Institutionalized individuals.

    (a) FFP is not available in expenditures for services for--
    (1) Any individual who is in a public institution, as defined in 
Sec.  435.1010 of this chapter; or
    (2) Any individual who is under age 65 and is in an institution for 
mental diseases, except an individual who is under age 22 and receiving 
inpatient psychiatric services under subpart D of this part.
    (b) With the exception of active treatment services (as defined in 
Sec.  483.440(a) of this chapter for residents of ICFs/MR and in Sec.  
441.154 for individuals under age 21 receiving inpatient psychiatric 
services), payments to institutions for the mentally retarded or persons 
with related conditions and to psychiatric facilities or programs 
providing inpatient psychiatric services to individuals under age 21 may 
not include reimbursement for formal educational services or for 
vocational services. Formal educational services relate to training in 
traditional academic subjects. Subject matter rather than setting, time 
of day, or class size determines whether a service is educational. 
Traditional academic subjects include, but are not limited to, science, 
history, literature, foreign languages, and mathematics. Vocational 
services relate to organized programs that are directly related to the 
preparation of individuals for paid or unpaid employment. An example of 
vocational services is time-limited vocational training provided as a 
part of a regularly scheduled class available to the general public.
    (c) FFP is not available in expenditures for services furnished by 
an organ procurement organization on or after April 1, 1988, that does 
not meet the requirements of part 486 subpart G of this chapter.

[43 FR 45229, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986; 
53 FR 6549, Mar. 1, 1988; 57 FR 54709, Nov. 20, 1992; 71 FR 31046, May 
31, 2006; 71 FR 39229, July 12, 2006]



Sec.  441.15  Home health services.

    With respect to the services defined in Sec.  440.70 of this 
subchapter, a State plan must provide that--
    (a) Home health services include, as a minimum--
    (1) Nursing services;
    (2) Home health aide services; and
    (3) Medical supplies, equipment, and appliances.
    (b) The agency provides home health services to--
    (1) Categorically needy recipients age 21 or over;
    (2) Categorically needy recipients under age 21, if the plan 
provides skilled nursing facility services for them; individuals; and
    (3) Medically needy recipients to whom skilled nursing facility 
services are provided under the plan.
    (c) The eligibility of a recipient to receive home health services 
does not depend on his need for or discharge from institutional care.
    (d) The agency providing home health services meets the 
capitalization requirements included in Sec.  489.28 of this chapter.

[43 FR 45229, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980; 
63 FR 310, Jan. 5, 1998]



Sec.  441.16  Home health agency requirements for surety bonds; Prohibition on FFP.

    (a) Definitions. As used in this section, unless the context 
indicates otherwise--

[[Page 279]]

    Assets includes but is not limited to any listing that identifies 
Medicaid recipients to whom home health services were furnished by a 
participating or formerly participating HHA.
    Participating home health agency means a ``home health agency'' 
(HHA) as that term is defined at Sec.  440.70(d) of this subchapter.
    Surety bond means one or more bonds issued by one or more surety 
companies under 31 U.S.C. 9304 to 9308 and 31 CFR parts 223, 224, and 
225, provided the bond otherwise meets the requirements of this section.
    Uncollected overpayment means an ``overpayment,'' as that term is 
defined under Sec.  433.304 of this subchapter, plus accrued interest, 
for which the HHA is responsible, that has not been recouped by the 
Medicaid agency within a time period determined by the Medicaid agency.
    (b) Prohibition. FFP is not available in expenditures for home 
health services under Sec.  440.70 of this subchapter unless the home 
health agency furnishing these services meets the surety bond 
requirements of paragraphs (c) through (l) of this section.
    (c) Basic requirement. Except as provided in paragraph (d) of this 
section, each HHA that is a Medicaid participating HHA or that seeks to 
become a Medicaid participating HHA must--
    (1) Obtain a surety bond that meets the requirements of this section 
and instructions issued by the Medicaid agency; and
    (2) Furnish a copy of the surety bond to the Medicaid agency.
    (d) Requirement waived for Government-operated HHAs. An HHA operated 
by a Federal, State, local, or tribal government agency is deemed to 
have provided the Medicaid agency with a comparable surety bond under 
State law, and is therefore exempt from the requirements of this section 
if, during the preceding 5 years, the HHA has not had any uncollected 
overpayments.
    (e) Parties to the bond. The surety bond must name the HHA as 
Principal, the Medicaid agency as Obligee, and the surety company (and 
its heirs, executors, administrators, successors and assignees, jointly 
and severally) as Surety.
    (f) Authorized Surety and exclusion of surety companies. An HHA may 
obtain a surety bond required under this section only from an authorized 
Surety.
    (1) An authorized Surety is a surety company that--
    (i) Has been issued a Certificate of Authority by the U.S. 
Department of the Treasury in accordance with 31 U.S.C. 9304 to 9308 and 
31 CFR parts 223, 224, and 225 as an acceptable surety on Federal bonds 
and the Certificate has neither expired nor been revoked;
    (ii) Has not been determined by the Medicaid agency to be an 
unauthorized Surety for the purpose of an HHA obtaining a surety bond 
under this section; and
    (iii) Meets other conditions, as specified by the Medicaid agency.
    (2) The Medicaid agency may determine that a surety company is an 
unauthorized Surety under this section--
    (i) If, upon request by the Medicaid agency, the surety company 
fails to furnish timely confirmation of the issuance of, and the 
validity and accuracy of information appearing on, a surety bond that an 
HHA presents to the Medicaid agency that shows the surety company as 
Surety on the bond;
    (ii) If, upon presentation by the Medicaid agency to the surety 
company of a request for payment on a surety bond and of sufficient 
evidence to establish the surety company's liability on the bond, the 
surety company fails to timely pay the Medicaid agency in full the 
amount requested up to the face amount of the bond; or
    (iii) For other good cause.
    (3) The Medicaid agency must specify the manner by which public 
notification of a determination under paragraph (f)(2) of this section 
is given and the effective date of the determination.
    (4) A determination by the Medicaid agency that a surety company is 
an unauthorized Surety under paragraph (f)(2) of this section--
    (i) Has effect only within the State; and
    (ii) Is not a debarment, suspension, or exclusion for the purposes 
of Executive Order No. 12549 (3 CFR 1986 Comp., p. 189).
    (g) Amount of the bond--(1) Basic rule. The amount of the surety 
bond must be

[[Page 280]]

$50,000 or 15 percent of the annual Medicaid payments made to the HHA by 
the Medicaid agency for home health services furnished under this 
subchapter for which FFP is available, whichever is greater.
    (2) Computation of the 15 percent: Participating HHA. The 15 percent 
is computed by the Medicaid agency on the basis of Medicaid payments 
made to the HHA for the most recent annual period for which information 
is available as specified by the Medicaid agency.
    (3) Computation of 15 percent: An HHA that seeks to become a 
participating HHA by obtaining assets or ownership interest. For an HHA 
that seeks to become a participating HHA by purchasing the assets or the 
ownership interest of a participating or formerly participating HHA, the 
15 percent is computed on the basis of Medicaid payments made by the 
Medicaid agency to the participating or formerly participating HHA for 
the most recent annual period as specified by the Medicaid agency.
    (4) Computation of 15 percent: Change of ownership. For an HHA that 
undergoes a change of ownership (as ``change of ownership'' is defined 
by the State Medicaid agency) the 15 percent is computed on the basis of 
Medicaid payments made by the Medicaid agency to the HHA for the most 
recent annual period as specified by the Medicaid agency.
    (5) An HHA that seeks to become a participating HHA without 
obtaining assets or ownership interest. For an HHA that seeks to become 
a participating HHA without purchasing the assets or the ownership 
interest of a participating or formerly participating HHA, the 15 
percent computation does not apply.
    (6) Exception to the basic rule. If an HHA's overpayment in the most 
recent annual period exceeds 15 percent, the State Medicaid agency may 
require the HHA to secure a bond in an amount up to or equal to the 
amount of the overpayment, provided the amount of the bond is not less 
than $50,000.
    (7) Expiration of the 15 percent provision. For an annual surety 
bond, or for a rider on a continuous surety bond, that is required to be 
submitted on or after June 1, 2005, notwithstanding any reference in 
this section to 15 percent as a basis for determining the amount of the 
bond, the amount of the bond or rider, as applicable, must be $50,000 or 
such amount as the Medicaid agency specifies in accordance with 
paragraph (g)(6) of this section, whichever amount is greater.
    (h) Additional requirements of the surety bond. The surety bond that 
an HHA obtains under this section must meet the following additional 
requirements:
    (1) The bond must guarantee that, upon written demand by the 
Medicaid agency to the Surety for payment under the bond and the 
Medicaid agency furnishing to the Surety sufficient evidence to 
establish the Surety's liability under the bond, the Surety will timely 
pay the Medicaid agency the amount so demanded, up to the stated amount 
of the bond.
    (2) The bond must provide that the Surety is liable for uncollected 
overpayments, as defined in paragraph (a), provided such uncollected 
overpayments are determined during the term of the bond and regardless 
of when the overpayments took place. Further, the bond must provide that 
the Surety remains liable if the HHA fails to furnish a subsequent 
annual bond that meets the requirements of this subpart or fails to 
furnish a rider for a year for which a rider is required to be 
submitted, or if the HHA's provider agreement terminates and that the 
Surety's liability shall be based on the last bond or rider in effect 
for the HHA, which shall then remain in effect for an additional 2-year 
period.
    (3) The bond must provide that the Surety's liability to the 
Medicaid agency is not extinguished by any of the following:
    (i) Any action by the HHA or the Surety to terminate or limit the 
scope or term of the bond. The Surety's liability may be extinguished, 
however, when--
    (A) The Surety furnishes the Medicaid agency with notice of such 
action not later than 10 days after receiving notice from the HHA of 
action by the HHA to terminate or limit the scope of the bond, or not 
later than 60 days before the effective date of such action by the 
Surety; or
    (B) The HHA furnishes the Medicaid agency with a new bond that meets 
the requirements of both this section and the Medicaid agency.

[[Page 281]]

    (ii) The Surety's failure to continue to meet the requirements of 
paragraph (f)(1) of this section or the Medicaid agency's determination 
that the surety company is an unauthorized surety under paragraph (f)(2) 
of this section.
    (iii) Termination of the HHA's provider agreement described under 
Sec.  431.107 of this subchapter.
    (iv) Any action by the Medicaid agency to suspend, offset, or 
otherwise recover payments to the HHA.
    (v) Any action by the HHA to--
    (A) Cease operation;
    (B) Sell or transfer any assets or ownership interest;
    (C) File for bankruptcy; or
    (D) Fail to pay the Surety.
    (vi) Any fraud, misrepresentation, or negligence by the HHA in 
obtaining the surety bond or by the Surety (or by the Surety's agent, if 
any) in issuing the surety bond, except that any fraud, 
misrepresentation, or negligence by the HHA in identifying to the Surety 
(or to the Surety's agent) the amount of Medicaid payments upon which 
the amount of the surety bond is determined shall not cause the Surety's 
liability to the Medicaid agency to exceed the amount of the bond.
    (vii) The HHA's failure to exercise available appeal rights under 
Medicaid or to assign such rights to the Surety (provided the Medicaid 
agency permits such rights to be assigned).
    (4) The bond must provide that actions under the bond may be brought 
by the Medicaid agency or by an agent that the Medicaid agency 
designates.
    (i) Term and type of bond--(1) Initial term: Each participating HHA 
that is not exempted by paragraph (d) of this section must submit to the 
State Medicaid agency a surety bond for a term beginning January 1, 
1998. If an annual bond is submitted for the initial term it must be 
effective for an annual period specified by the State Medicaid agency.
    (2) Type of bond. The type of bond required to be submitted by an 
HHA, under this section, may be either--
    (i) An annual bond (that is, a bond that specifies an effective 
annual period that corresponds to an annual period specified by the 
Medicaid agency); or
    (ii) A continuous bond (that is, a bond that remains in full force 
and effect from term to term unless it is terminated or canceled as 
provided for in the bond or as otherwise provided by law) that is 
updated by the Surety for a particular period, via the issuance of a 
``rider,'' when the bond amount changes. For the purposes of this 
section, ``Rider'' means a notice issued by a Surety that a change to a 
bond has occurred or will occur. If the HHA has submitted a continuous 
bond and there is no increase or decrease in the bond amount, no action 
is necessary by the HHA to submit a rider as long as the continuous bond 
remains in full force and effect.
    (3) HHA that seeks to become a participating HHA. (i) An HHA that 
seeks to become a participating HHA must submit a surety bond before a 
provider agreement described under Sec.  431.107 of this subchapter can 
be entered into.
    (ii) An HHA that seeks to become a participating HHA through the 
purchase or transfer of assets or ownership interest of a participating 
or formerly participating HHA must also ensure that the surety bond is 
effective from the date of such purchase or transfer.
    (4) Change of ownership. An HHA that undergoes a change of ownership 
(as ``change of ownership'' is defined by the State Medicaid agency) 
must submit the surety bond to the State Medicaid agency by such time 
and for such term as is specified in the instructions of the State 
Medicaid agency.
    (5) Government-operated HHA that loses its waiver. A government-
operated HHA that, as of January 1, 1998, meets the criteria for waiver 
of the requirements of this section but thereafter is determined by the 
Medicaid agency to not meet such criteria, must submit a surety bond to 
the Medicaid agency within 60 days after it receives notice from the 
Medicaid agency that it does not meet the criteria for waiver.
    (6) Change of Surety. An HHA that obtains a replacement surety bond 
from a different Surety to cover the remaining term of a previously 
obtained bond must submit the new surety bond to the Medicaid agency 
within 60 days (or such earlier date as the Medicaid agency may specify) 
of obtaining the bond

[[Page 282]]

from the new Surety for a term specified by the Medicaid agency.
    (j) Effect of failure to obtain, maintain, and timely file a surety 
bond. (1) The Medicaid agency must terminate the HHA's provider 
agreement if the HHA fails to obtain, file timely, and maintain a surety 
bond in accordance with this section and the Medicaid agency's 
instructions.
    (2) The Medicaid agency must refuse to enter into a provider 
agreement with an HHA if an HHA seeking to become a participating HHA 
fails to obtain and file timely a surety bond in accordance with this 
section and instructions issued by the State Medicaid agency.
    (k) Evidence of compliance. (1) The Medicaid agency may at any time 
require an HHA to make a specific showing of being in compliance with 
the requirements of this section and may require the HHA to submit such 
additional evidence as the Medicaid agency considers sufficient to 
demonstrate the HHA's compliance.
    (2) The Medicaid agency may terminate the HHA's provider agreement 
or refuse to enter into a provider agreement if an HHA fails to timely 
furnish sufficient evidence at the Medicaid agency's request to 
demonstrate compliance with the requirements of this section.
    (l) Surety's standing to appeal Medicaid determinations. The 
Medicaid agency must establish procedures for granting appeal rights to 
Sureties.
    (m) Effect of conditions of payment. If a Surety has paid the 
Medicaid agency an amount on the basis of liability incurred under a 
bond obtained by an HHA under this section, and the Medicaid agency 
subsequently collects from the HHA, in whole or in part, on such 
overpayment that was the basis for the Surety's liability, the Medicaid 
agency must reimburse the Surety such amount as the Medicaid agency 
collected from the HHA, up to the amount paid by the Surety to the 
Medicaid agency, provided the Surety has no other liability under the 
bond.

[63 FR 310, Jan. 5, 1998, as amended at 63 FR 10731, Mar. 4, 1998; 63 FR 
29654, June 1, 1998; 63 FR 41170, July 31, 1998]



Sec.  441.17  Laboratory services.

    (a) The plan must provide for payment of laboratory services as 
defined in Sec.  440.30 of this subchapter if provided by--
    (1) An independent laboratory that meets the requirements for 
participation in the Medicare program found in Sec.  405.1316 of this 
chapter;
    (2) A hospital-based laboratory that meets the requirements for 
participation in the Medicare program found in Sec.  482.27 of this 
chapter;
    (3) A rural health clinic, as defined in Sec.  491.9 of this 
chapter; or
    (4) A skilled nursing facility--based clinical laboratory, as 
defined in Sec.  405.1128(a) of this chapter.
    (b) Except as provided under paragraph (c), if a laboratory or other 
entity is requesting payment under Medicaid for testing for the presence 
of the human immunodeficiency virus (HIV) antibody or for the isolation 
and identification of the HIV causative agent as described in Sec.  
405.1316(f) (2) and (3) of this chapter, the laboratory records must 
contain the name and other identification of the person from whom the 
specimen was taken.
    (c) An agency may choose to approve the use of alternative 
identifiers, in place of the requirement for patient's name, in 
paragraph (b) of this section for HIV antibody or causative agent 
testing of Medicaid recipients.

[54 FR 48647, Dec. 2, 1988. Redesignated at 63 FR 310, Jan. 5, 1998.]



Sec.  441.18  Case management services.

    (a) If a State plan provides for case management services (including 
targeted case management services), as defined in Sec.  440.169 of this 
chapter, the State must meet the following requirements:
    (1) Allow individuals the free choice of any qualified Medicaid 
provider within the specified geographic area identified in the plan 
when obtaining case management services, in accordance with Sec.  431.51 
of this chapter, except as specified in paragraph (b) of this section.
    (2) Not use case management (including targeted case management) 
services to restrict an individual's access to other services under the 
plan.

[[Page 283]]

    (3) Not compel an individual to receive case management services, 
condition receipt of case management (or targeted case management) 
services on the receipt of other Medicaid services, or condition receipt 
of other Medicaid services on receipt of case management (or targeted 
case management) services.
    (4) Indicate in the plan that case management services provided in 
accordance with section 1915(g) of the Act will not duplicate payments 
made to public agencies or private entities under the State plan and 
other program authorities;
    (5) [Reserved]
    (6) Prohibit providers of case management services from exercising 
the agency's authority to authorize or deny the provision of other 
services under the plan.
    (7) Require providers to maintain case records that document for all 
individuals receiving case management as follows:
    (i) The name of the individual.
    (ii) The dates of the case management services.
    (iii) The name of the provider agency (if relevant) and the person 
providing the case management service.
    (iv) The nature, content, units of the case management services 
received and whether goals specified in the care plan have been 
achieved.
    (v) Whether the individual has declined services in the care plan.
    (vi) The need for, and occurrences of, coordination with other case 
managers.
    (vii) A timeline for obtaining needed services.
    (viii) A timeline for reevaluation of the plan.
    (8) Include a separate plan amendment for each group receiving case 
management services that includes the following:
    (i) Defines the group (and any subgroups within the group) eligible 
to receive the case management services.
    (ii) Identifies the geographic area to be served.
    (iii) Describes the case management services furnished, including 
the types of monitoring.
    (iv) Specifies the frequency of assessments and monitoring and 
provides a justification for those frequencies.
    (v) Specifies provider qualifications that are reasonably related to 
the population being served and the case management services furnished.
    (vi) [Reserved]
    (vii) Specifies if case management services are being provided to 
Medicaid-eligible individuals who are in institutions (except 
individuals between ages 22 and 64 who are served in IMDs or individuals 
who are inmates of public institutions).
    (9) Include a separate plan amendment for each subgroup within a 
group if any of the following differs among the subgroups:
    (i) The case management services to be furnished;
    (ii) The qualifications of case management providers; or
    (iii) The methodology under which case management providers will be 
paid.
    (b) If the State limits qualified providers of case management 
services for target groups of individuals with developmental disability 
or chronic mental illness, in accordance with Sec.  431.51(a)(4) of this 
chapter, the plan must identify any limitations to be imposed on the 
providers and specify how these limitations enable providers to ensure 
that individuals within the target groups receive needed services.
    (c) Case management does not include, and FFP is not available in 
expenditures for, services defined in Sec.  441.169 of this chapter when 
the case management activities constitute the direct delivery of 
underlying medical, educational, social, or other services to which an 
eligible individual has been referred, including for foster care 
programs, services such as, but not limited to, the following:
    (1) Research gathering and completion of documentation required by 
the foster care program.
    (2) Assessing adoption placements.
    (3) Recruiting or interviewing potential foster care parents.
    (4) Serving legal papers.
    (5) Home investigations.
    (6) Providing transportation.
    (7) Administering foster care subsidies.
    (8) Making placement arrangements.
    (d) After the State assesses whether the activities are within the 
scope of

[[Page 284]]

the case management benefit (applying the limitations described above), 
in determining the allowable costs for case management (or targeted case 
management) services that are also furnished by another federally-funded 
program, the State must use cost allocation methodologies, consistent 
with OMB Circular A-87, CMS policies, or any subsequent guidance and 
reflected in an approved cost allocation plan.

[72 FR 68092, Dec. 4, 2007, as amended at 74 FR 31196, June 30, 2009]



Sec.  441.20  Family planning services.

    For recipients eligible under the plan for family planning services, 
the plan must provide that each recipient is free from coercion or 
mental pressure and free to choose the method of family planning to be 
used.



Sec.  441.21  Nurse-midwife services.

    If a State plan, under Sec.  440.210 or 440.220 of this subchapter, 
provides for nurse-midwife services, as defined in Sec.  440.165, the 
plan must provide that the nurse-midwife may enter into an independent 
provider agreement, without regard to whether the nurse-midwife is under 
the supervision of, or associated with, a physician or other health care 
provider.

[47 FR 21051, May 17, 1982]



Sec.  441.22  Nurse practitioner services.

    With respect to nurse practitioner services that meet the definition 
of Sec.  440.166(a) and the requirements of either Sec.  440.166(b) or 
Sec.  440.166(c), the State plan must meet the following requirements:
    (a) Provide that nurse practitioner services are furnished to the 
categorically needy.
    (b) Specify whether those services are furnished to the medically 
needy.
    (c) Provide that services furnished by a nurse practitioner, 
regardless of whether the nurse practitioner is under the supervision 
of, or associated with, a physician or other health care provider, may--
    (1) Be reimbursed by the State Medicaid agency through an 
independent provider agreement between the State and the nurse 
practitioner; or
    (2) Be paid through the employing provider.

[60 FR 19862, Apr. 21, 1995]



Sec.  441.25  Prohibition on FFP for certain prescribed drugs.

    (a) FFP is not available in expenditures for the purchase or 
administration of any drug product that meets all of the following 
conditions:
    (1) The drug product was approved by the Food and Drug 
Administration (FDA) before October 10, 1962.
    (2) The drug product is available only through prescription.
    (3) The drug product is the subject of a notice of opportunity for 
hearing issued under section 505(e) of the Federal Food, Drug, and 
Cosmetic Act and published in the Federal Register on a proposed order 
of FDA to withdraw its approval for the drug product because it has 
determined that the product is less than effective for all its labeled 
indications.
    (4) The drug product is presently not subject to a determination by 
FDA, made under its efficacy review program (see 21 CFR 310.6 for an 
explanation of this program), that there is a compelling justification 
of the drug product's medical need.
    (b) FFP is not available in expenditures for the purchase or 
administration of any drug product that is identical, related, or 
similar, as defined in 21 CFR 310.6, to a drug product that meets the 
conditions of paragraph (a) of this section.

[46 FR 48554, Oct. 1, 1981]



Sec.  441.30  Optometric services.

    The plan must provide for payment of optometric services as 
physician services, whether furnished by an optometrist or a physician, 
if--
    (a) The plan does not provide for payment for services provided by 
an optometrist, except for eligibility determinations under Sec. Sec.  
435.531 and 436.531 of this subchapter, but did provide for those 
services at an earlier period; and
    (b) The plan specifically provides that physicians' services include 
services an optometrist is legally authorized to perform.

[[Page 285]]



Sec.  441.35  Organ transplants.

    (a) FFP is available in expenditures for services furnished in 
connection with organ transplant procedures only if the State plan 
includes written standards for the coverage of those procedures, and 
those standards provide that--
    (1) Similarly situated individuals are treated alike; and
    (2) Any restriction on the practitioners or facilities that may 
provide organ transplant procedures is consistent with the accessibility 
of high quality care to individuals eligible for the procedures under 
the plan.
    (b) Nothing in paragraph (a) permits a State to provide, under its 
plan, services that are not reasonable in amount, duration, and scope to 
achieve their purpose.

[56 FR 8851, Mar. 1, 1991]



Sec.  441.40  End-stage renal disease.

    FFP in expenditures for services described in subpart A of part 440 
is available for facility treatment of end-stage renal disease only if 
the facility has been approved by the Secretary to furnish those 
services under Medicare. This requirement for approval of the facility 
does not apply under emergency conditions permitted under Medicare (see 
Sec.  482.2 of this chapter).

[43 FR 45229, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986]



Subpart B_Early and Periodic Screening, Diagnosis, and Treatment (EPSDT) 
                       of Individuals Under Age 21

    Source: 49 FR 43666, Oct. 31, 1984, unless otherwise noted.



Sec.  441.50  Basis and purpose.

    This subpart implements sections 1902(a)(43) and 1905(a)(4)(B) of 
the Social Security Act, by prescribing State plan requirements for 
providing early and periodic screening and diagnosis of eligible 
Medicaid recipients under age 21 to ascertain physical and mental 
defects, and providing treatment to correct or ameliorate defects and 
chronic conditions found.



Sec.  441.55  State plan requirements.

    A State plan must provide that the Medicaid agency meets the 
requirements of Sec. Sec.  441.56-441.62, with respect to EPSDT 
services, as defined in Sec.  440.40(b) of this subchapter.



Sec.  441.56  Required activities.

    (a) Informing. The agency must--
    (1) Provide for a combination of written and oral methods designed 
to inform effectively all EPSDT eligible individuals (or their families) 
about the EPSDT program.
    (2) Using clear and nontechnical language, provide information about 
the following--
    (i) The benefits of preventive health care;
    (ii) The services available under the EPSDT program and where and 
how to obtain those services;
    (iii) That the services provided under the EPSDT program are without 
cost to eligible individuals under 18 years of age, and if the agency 
chooses, to those 18 or older, up to age 21, except for any enrollment 
fee, premium, or similar charge that may be imposed on medically needy 
recipients; and
    (iv) That necessary transportation and scheduling assistance 
described in Sec.  441.62 of this subpart is available to the EPSDT 
eligible individual upon request.
    (3) Effectively inform those individuals who are blind or deaf, or 
who cannot read or understand the English language.
    (4) Provide assurance to CMS that processes are in place to 
effectively inform individuals as required under this paragraph, 
generally, within 60 days of the individual's initial Medicaid 
eligibility determination and in the case of families which have not 
utilized EPSDT services, annually thereafter.
    (b) Screening. (1) The agency must provide to eligible EPSDT 
recipients who request it, screening (periodic comprehensive child 
health assessments); that is, regularly scheduled examinations and 
evaluations of the general physical and mental health, growth, 
development, and nutritional status of infants, children, and youth. 
(See paragraph (c)(3) of this section for requirements relating to 
provision of

[[Page 286]]

immunization at the time of screening.) As a minimum, these screenings 
must include, but are not limited to:
    (i) Comprehensive health and developmental history.
    (ii) Comprehensive unclothed physical examination.
    (iii) Appropriate vision testing.
    (iv) Appropriate hearing testing.
    (v) Appropriate laboratory tests.
    (vi) Dental screening services furnished by direct referral to a 
dentist for children beginning at 3 years of age. An agency may request 
from CMS an exception from this age requirement (within an outer limit 
of age 5) for a two year period and may request additional two year 
exceptions. If an agency requests an exception, it must demonstrate to 
CMS's satisfaction that there is a shortage of dentists that prevents 
the agency from meeting the age 3 requirement.
    (2) Screening services in paragraph (b)(1) of this section must be 
provided in accordance with reasonable standards of medical and dental 
practice determined by the agency after consultation with recognized 
medical and dental organizations involved in child health care.
    (c) Diagnosis and treatment. In addition to any diagnostic and 
treatment services included in the plan, the agency must provide to 
eligible EPSDT recipients, the following services, the need for which is 
indicated by screening, even if the services are not included in the 
plan--
    (1) Diagnosis of and treatment for defects in vision and hearing, 
including eyeglasses and hearing aids;
    (2) Dental care, at as early an age as necessary, needed for relief 
of pain and infections, restoration of teeth and maintenance of dental 
health; and
    (3) Appropriate immunizations. (If it is determined at the time of 
screening that immunization is needed and appropriate to provide at the 
time of screening, then immunization treatment must be provided at that 
time.)
    (d) Accountability. The agency must maintain as required by 
Sec. Sec.  431.17 and 431.18--
    (1) Records and program manuals;
    (2) A description of its screening package under paragraph (b) of 
this section; and
    (3) Copies of rules and policies describing the methods used to 
assure that the informing requirement of paragraph (a)(1) of this 
section is met.
    (e) Timeliness. With the exception of the informing requirements 
specified in paragraph (a) of this section, the agency must set 
standards for the timely provision of EPSDT services which meet 
reasonable standards of medical and dental practice, as determined by 
the agency after consultation with recognized medical and dental 
organizations involved in child health care, and must employ processes 
to ensure timely initiation of treatment, if required, generally within 
an outer limit of 6 months after the request for screening services.

[49 FR 43666, Oct. 31, 1984; 49 FR 45431, Nov. 16, 1984]



Sec.  441.57  Discretionary services.

    Under the EPSDT program, the agency may provide for any other 
medical or remedial care specified in part 440 of this subchapter, even 
if the agency does not otherwise provide for these services to other 
recipients or provides for them in a lesser amount, duration, or scope.



Sec.  441.58  Periodicity schedule.

    The agency must implement a periodicity schedule for screening 
services that--
    (a) Meets reasonable standards of medical and dental practice 
determined by the agency after consultation with recognized medical and 
dental organizations involved in child health care;
    (b) Specifies screening services applicable at each stage of the 
recipient's life, beginning with a neonatal examination, up to the age 
at which an individual is no longer eligible for EPSDT services; and
    (c) At the agency's option, provides for needed screening services 
as determined by the agency, in addition to the otherwise applicable 
screening services specified under paragraph (b) of this section.



Sec.  441.59  Treatment of requests for EPSDT screening services.

    (a) The agency must provide the screening services described in

[[Page 287]]

Sec.  441.56(b) upon the request of an eligible recipient.
    (b) To avoid duplicate screening services, the agency need not 
provide requested screening services to an EPSDT eligible if written 
verification exists that the most recent age-appropriate screening 
services, due under the agency's periodicity schedule, have already been 
provided to the eligible.



Sec.  441.60  Continuing care.

    (a) Continuing care provider. For purposes of this subpart, a 
continuing care provider means a provider who has an agreement with the 
Medicaid agency to provide reports as required under paragraph (b) of 
this section and to provide at least the following services to eligible 
EPSDT recipients formally enrolled with the provider:
    (1) With the exception of dental services required under Sec.  
441.56, screening, diagnosis, treatment, and referral for follow-up 
services as required under this subpart.
    (2) Maintenance of the recipient's consolidated health history, 
including information received from other providers.
    (3) Physicians' services as needed by the recipient for acute, 
episodic or chronic illnesses or conditions.
    (4) At the provider's option, provision of dental services required 
under Sec.  441.56 or direct referral to a dentist to provide dental 
services required under Sec.  441.56(b)(1)(vi). The provider must 
specify in the agreement whether dental services or referral for dental 
services are provided. If the provider does not choose to provide either 
service, then the provider must refer recipients to the agency to obtain 
those dental services required under Sec.  441.56.
    (5) At the provider's option, provision of all or part of the 
transportation and scheduling assistance as required under Sec.  441.62. 
The provider must specify in the agreement the transportation and 
scheduling assistance to be furnished. If the provider does not choose 
to provide some or all of the assistance, then the provider must refer 
recipients to the agency to obtain the transportation and scheduling 
assistance required under Sec.  441.62.
    (b) Reports. A continuing care provider must provide to the agency 
any reports that the agency may reasonably require.
    (c) State monitoring. If the State plan provides for agreements with 
continuing care providers, the agency must employ methods described in 
the State plan to assure the providers' compliance with their 
agreements.
    (d) Effect of agreement with continuing care providers. Subject to 
the requirements of paragraphs (a), (b), and (c) of this section, CMS 
will deem the agency to meet the requirements of this subpart with 
respect to all EPSDT eligible recipients formally enrolled with the 
continuing care provider. To be formally enrolled, a recipient or 
recipient's family agrees to use one continuing care provider to be a 
regular source of the described set of services for a stated period of 
time. Both the recipient and the provider must sign statements that 
reflect their obligations under the continuing care arrangement.
    (e) If the agreement in paragraph (a) of this section does not 
provide for all or part of the transportation and scheduling assistance 
required under Sec.  441.62, or for dental service under Sec.  441.56, 
the agency must provide for those services to the extent they are not 
provided for in the agreement.



Sec.  441.61  Utilization of providers and coordination with related programs.

    (a) The agency must provide referral assistance for treatment not 
covered by the plan, but found to be needed as a result of conditions 
disclosed during screening and diagnosis. This referral assistance must 
include giving the family or recipient the names, addresses, and 
telephone numbers of providers who have expressed a willingness to 
furnish uncovered services at little or no expense to the family.
    (b) The agency must make available a variety of individual and group 
providers qualified and willing to provide EPSDT services.
    (c) The agency must make appropriate use of State health agencies, 
State vocational rehabilitation agencies, and Title V grantees (Maternal 
and Child Health/Crippled Children's Services). Further, the agency 
should

[[Page 288]]

make use of other public health, mental health, and education programs 
and related programs, such as Head Start, Title XX (Social Services) 
programs, and the Special Supplemental Food Program for Women, Infants 
and Children (WIC), to ensure an effective child health program.



Sec.  441.62  Transportation and scheduling assistance.

    The agency must offer to the family or recipient, and provide if the 
recipient requests--
    (a) Necessary assistance with transportation as required under Sec.  
431.53 of this chapter; and
    (b) Necessary assistance with scheduling appointments for services.



 Subpart C_Medicaid for Individuals Age 65 or Over in Institutions for 
                             Mental Diseases

    Source: 44 FR 17940, Mar. 23, 1979, unless otherwise noted.



Sec.  441.100  Basis and purpose.

    This subpart implements section 1905(a)(14) of the Act, which 
authorizes State plans to provide for inpatient hospital services, 
skilled nursing services, and intermediate care facility services for 
individuals age 65 or older in an institution for mental diseases, and 
sections 1902(a)(20)(B) and (C) and 1902(a)(21), which prescribe the 
conditions a State must meet to offer these services. (See Sec.  431.620 
of this subchapter for regulations implementing section 1902(a)(20)(A), 
which prescribe interagency requirements related to these services.)



Sec.  441.101  State plan requirements.

    A State plan that includes Medicaid for individuals age 65 or older 
in institutions for mental diseases must provide that the requirements 
of this subpart are met.



Sec.  441.102  Plan of care for institutionalized recipients.

    (a) The Medicaid agency must provide for a recorded individual plan 
of treatment and care to ensure that institutional care maintains the 
recipient at, or restores him to, the greatest possible degree of health 
and independent functioning.
    (b) The plan must include--
    (1) An initial review of the recipient's medical, psychiatric, and 
social needs--
    (i) Within 90 days after approval of the State plan provision for 
services in institutions for mental disease; and
    (ii) After that period, within 30 days after the date payments are 
initiated for services provided a recipient.
    (2) Periodic review of the recipient's medical, psychiatric, and 
social needs;
    (3) A determination, at least quarterly, of the recipient's need for 
continued institutional care and for alternative care arrangements;
    (4) Appropriate medical treatment in the institution; and
    (5) Appropriate social services.



Sec.  441.103  Alternate plans of care.

    (a) The agency must develop alternate plans of care for each 
recipient age 65 or older who would otherwise need care in an 
institution for mental diseases.
    (b) These alternate plans of care must--
    (1) Make maximum use of available resources to meet the recipient's 
medical, social, and financial needs; and
    (2) In Guam, Puerto Rico, and the Virgin Islands, make available 
appropriate social services authorized under sections 3(a)(4) (i) and 
(ii) or 1603(a)(4)(A) (i) and (ii) of the Act.



Sec.  441.105  Methods of administration.

    The agency must have methods of administration to ensure that its 
responsibilities under this subpart are met.



Sec.  441.106  Comprehensive mental health program.

    (a) If the plan includes services in public institutions for mental 
diseases, the agency must show that the State is making satisfactory 
progress in developing and implementing a comprehensive mental health 
program.
    (b) The program must--
    (1) Cover all ages;
    (2) Use mental health and public welfare resources; including--
    (i) Community mental health centers;
    (ii) Nursing homes; and

[[Page 289]]

    (iii) Other alternatives to public institutional care; and
    (3) Include joint planning with State authorities.
    (c) The agency must submit annual progress reports within 3 months 
after the end of each fiscal year in which Medicaid is provided under 
this subpart.



Subpart D_Inpatient Psychiatric Services for Individuals Under Age 21 in 
                   Psychiatric Facilities or Programs



Sec.  441.150  Basis and purpose.

    This subpart specifies requirements applicable if a State provides 
inpatient psychiatric services to individuals under age 21, as defined 
in Sec.  440.160 of this subchapter and authorized under section 1905 
(a)(16) and (h) of the Act.



Sec.  441.151  General requirements.

    (a) Inpatient psychiatric services for individuals under age 21 must 
be:
    (1) Provided under the direction of a physician;
    (2) Provided by--
    (i) A psychiatric hospital or an inpatient psychiatric program in a 
hospital, accredited by the Joint Commission on Accreditation of 
Healthcare Organizations; or
    (ii) A psychiatric facility that is not a hospital and is accredited 
by the Joint Commission on Accreditation of Healthcare Organizations, 
the Commission on Accreditation of Rehabilitation Facilities, the 
Council on Accreditation of Services for Families and Children, or by 
any other accrediting organization with comparable standards that is 
recognized by the State.
    (3) Provided before the individual reaches age 21, or, if the 
individual was receiving the services immediately before he or she 
reached age 21, before the earlier of the following--
    (i) The date the individual no longer requires the services; or
    (ii) The date the individual reaches 22; and
    (4) Certified in writing to be necessary in the setting in which the 
services will be provided (or are being provided in emergency 
circumstances) in accordance with Sec.  441.152.
    (b) Inpatient psychiatric services furnished in a psychiatric 
residential treatment facility as defined in Sec.  483.352 of this 
chapter, must satisfy all requirements in subpart G of part 483 of this 
chapter governing the use of restraint and seclusion.

[66 FR 7160, Jan. 22, 2001]



Sec.  441.152  Certification of need for services.

    (a) A team specified in Sec.  441.154 must certify that--
    (1) Ambulatory care resources available in the community do not meet 
the treatment needs of the recipient;
    (2) Proper treatment of the recipient's psychiatric condition 
requires services on an inpatient basis under the direction of a 
physician; and
    (3) The services can reasonably be expected to improve the 
recipient's condition or prevent further regression so that the services 
will no longer be needed.
    (b) The certification specified in this section and in Sec.  441.153 
satisfies the utilization control requirement for physician 
certification in Sec. Sec.  456.60, 456.160, and 456.360 of this 
subchapter.

[43 FR 45229, Sept. 29, 1978, as amended at 61 FR 38398, July 24, 1996]



Sec.  441.153  Team certifying need for services.

    Certification under Sec.  441.152 must be made by terms specified as 
follows:
    (a) For an individual who is a recipient when admitted to a facility 
or program, certification must be made by an independent team that--
    (1) Includes a physician;
    (2) Has competence in diagnosis and treatment of mental illness, 
preferably in child psychiatry; and
    (3) Has knowledge of the individual's situation.
    (b) For an individual who applies for Medicaid while in the facility 
of program, the certification must be--
    (1) Made by the team responsible for the plan of care as specified 
in Sec.  441.156; and
    (2) Cover any period before application for which claims are made.
    (c) For emergency admissions, the certification must be made by the 
team responsible for the plan of care

[[Page 290]]

(Sec.  441.156) within 14 days after admission.



Sec.  441.154  Active treatment.

    Inpatient psychiatric services must involve ``active treatment'', 
which means implementation of a professionally developed and supervised 
individual plan of care, described in Sec.  441.155 that is--
    (a) Developed and implemented no later than 14 days after admission; 
and
    (b) Designed to achieve the recipient's discharge from inpatient 
status at the earliest possible time.



Sec.  441.155  Individual plan of care.

    (a) ``Individual plan of care'' means a written plan developed for 
each recipient in accordance with Sec. Sec.  456.180 and 456.181 of this 
chapter, to improve his condition to the extent that inpatient care is 
no longer necessary.
    (b) The plan of care must--
    (1) Be based on a diagnostic evaluation that includes examination of 
the medical, psychological, social, behavioral and developmental aspects 
of the recipient's situation and reflects the need for inpatient 
psychiatric care;
    (2) Be developed by a team of professionals specified under Sec.  
441.156 in consultation with the recipient; and his parents, legal 
guardians, or others in whose care he will be released after discharge;
    (3) State treatment objectives;
    (4) Prescribe an integrated program of therapies, activities, and 
experiences designed to meet the objectives; and
    (5) Include, at an appropriate time, post-discharge plans and 
coordination of inpatient services with partial discharge plans and 
related community services to ensure continuity of care with the 
recipient's family, school, and community upon discharge.
    (c) The plan must be reviewed every 30 days by the team specified in 
Sec.  441.156 to--
    (1) Determine that services being provided are or were required on 
an inpatient basis, and
    (2) Recommend changes in the plan as indicated by the recipient's 
overall adjustment as an inpatient.
    (d) The development and review of the plan of care as specified in 
this section satisfies the utilization control requirements for--
    (1) Recertification under Sec. Sec.  456.60(b), 456.160(b), and 
456.360(b) of this subchapter; and
    (2) Establishment and periodic review of the plan of care under 
Sec. Sec.  456.80, 456.180, and 456.380 of this subchapter.

[43 FR 45229, Sept. 29, 1978, as amended at 46 FR 48560, Oct. 1, 1981; 
61 FR 38398, July 24, 1996]



Sec.  441.156  Team developing individual plan of care.

    (a) The individual plan of care under Sec.  441.155 must be 
developed by an interdisciplinary team of physicians and other personnel 
who are employed by, or provide services to patients in, the facility.
    (b) Based on education and experience, preferably including 
competence in child psychiatry, the team must be capable of--
    (1) Assessing the recipient's immediate and long-range therapeutic 
needs, developmental priorities, and personal strengths and liabilities;
    (2) Assessing the potential resources of the recipient's family;
    (3) Setting treatment objectives; and
    (4) Prescribing therapeutic modalities to achieve the plan's 
objectives.
    (c) The team must include, as a minimum, either--
    (1) A Board-eligible or Board-certified psychiatrist;
    (2) A clinical psychologist who has a doctoral degree and a 
physician licensed to practice medicine or osteopathy; or
    (3) A physician licensed to practice medicine or osteopathy with 
specialized training and experience in the diagnosis and treatment of 
mental diseases, and a psychologist who has a master's degree in 
clinical psychology or who has been certified by the State or by the 
State psychological association.
    (d) The team must also include one of the following:
    (1) A psychiatric social worker.
    (2) A registered nurse with specialized training or one year's 
experience in treating mentally ill individuals.
    (3) An occupational therapist who is licensed, if required by the 
State, and who has specialized training or one

[[Page 291]]

year of experience in treating mentally ill individuals.
    (4) A psychologist who has a master's degree in clinical psychology 
or who has been certified by the State or by the State psychological 
association.



Sec.  441.180  Maintenance of effort: General rule.

    FFP is available only if the State maintains fiscal effort as 
prescribed under this subpart.



Sec.  441.181  Maintenance of effort: Explanation of terms and requirements.

    (a) For purposes of Sec.  441.182:
    (1) The base year is the 4-quarter period ending December 31, 1971.
    (2) Quarterly per capita non-Federal expenditures are expenditures 
for inpatient psychiatric services determined by reimbursement 
principles under Medicare. (See part 405, subpart D.)
    (3) The number of individuals receiving inpatient psychiatric 
services in the current quarter means--
    (i) The number of individuals receiving services for the full 
quarter; plus
    (ii) The full quarter composite number of individuals receiving 
services for less than a full quarter.
    (4) In determining the per capita expenditures for the base year, 
the Medicaid agency must compute the number of individuals receiving 
services in a manner similar to that in paragraph (a)(3) of this 
section.
    (5) Non-Federal expenditures means the total amount of funds 
expended by the State and its political subdivisions, excluding Federal 
funds received directly or indirectly from any source.
    (6) Expenditures for the current calendar quarter exclude Federal 
funds received directly or indirectly from any source.
    (b) As a basis for determining the correct amount of Federal 
payments, each State must submit estimated and actual cost data and 
other information necessary for this purpose in the form and at the 
times specified in this subchapter and by CMS guidelines.
    (c) The agency must have on file adequate records to substantiate 
compliance with the requirements of Sec.  441.182 and to ensure that all 
necessary adjustments have been made.
    (d) Facilities that did not meet the requirements of Sec. Sec.  
441.151-441.156 in the base year, but are providing inpatient 
psychiatric services under those sections in the current quarter, must 
be included in the maintenance of effort computation if, during the base 
year, they were--
    (1) Providing inpatient psychiatric services for individuals under 
age 21; and
    (2) Receiving State aid.



Sec.  441.182  Maintenance of effort: Computation.

    (a) For expenditures for inpatient psychiatric services for 
individuals under age 21, in any calendar quarter, FFP is available only 
to the extent that the total State Medicaid expenditures in the current 
quarter for inpatient psychiatric services and outpatient psychiatric 
treatment for individuals under age 21 exceed the sum of the following:
    (1) The total number of individuals receiving inpatient psychiatric 
services in the current quarter times the average quarterly per capita 
non-Federal expenditures for the base year; and
    (2) The average non-Federal quarterly expenditures for the base year 
for outpatient psychiatric services for individuals under age 21.
    (b) FFP is available for 100 percent of the increase in expenditures 
over the base year period, but may not exceed the Federal medical 
assistance percentage times the expenditures under this subpart for 
inpatient psychiatric services for individuals under age 21.



                           Subpart E_Abortions



Sec.  441.200  Basis and purpose.

    This subpart implements section 402 of Pub. L. 97-12, and subsequent 
laws that appropriate funds for the Medicaid program, including section 
204 of Pub. L. 98-619. All of these laws prohibit the use of Federal 
funds to pay for abortions except when continuation of the pregnancy 
would endanger the mother's life.

[52 FR 47935, Dec. 17, 1987]

[[Page 292]]



Sec.  441.201  Definition.

    As used in this subpart, ``physician'' means a doctor of medicine or 
osteopathy who is licensed to practice in the State.

[52 FR 47935, Dec. 17, 1987]



Sec.  441.202  General rule.

    FFP is not available in expenditures for an abortion unless the 
conditions specified in Sec. Sec.  441.203 and 441.206 are met.

[52 FR 47935, Dec. 17, 1987]



Sec.  441.203  Life of the mother would be endangered.

    FFP is available in expenditures for an abortion when a physician 
has found, and certified in writing to the Medicaid agency, that on the 
basis of his professional judgment, the life of the mother would be 
endangered if the fetus were carried to term. The certification must 
contain the name and address of the patient.



Sec. Sec.  441.204-441.205  [Reserved]



Sec.  441.206  Documentation needed by the Medicaid agency.

    FFP is not available in any expenditures for abortions or other 
medical procedures otherwise provided for under Sec.  441.203 if the 
Medicaid agency has paid without first having received the 
certifications and documentation specified in that section.

[52 FR 47935, Dec. 17, 1987]



Sec.  441.207  Drugs and devices and termination of ectopic pregnancies.

    FFP is available in expenditures for drugs or devices to prevent 
implantation of the fertilized ovum and for medical procedures necessary 
for the termination of an ectopic pregnancy.



Sec.  441.208  Recordkeeping requirements.

    Medicaid agencies must maintain copies of the certifications and 
documentation specified in Sec.  441.203 for 3 years under the 
recordkeeping requirements at 45 CFR 74.20.

[52 FR 47935, Dec. 17, 1987]



                        Subpart F_Sterilizations

    Source: 43 FR 52171, Nov. 8, 1978, unless otherwise noted.



Sec.  441.250  Applicability.

    This subpart applies to sterilizations and hysterectomies reimbursed 
under Medicaid.



Sec.  441.251  Definitions.

    As used in this subpart:
    Hysterectomy means a medical procedure or operation for the purpose 
of removing the uterus.
    Institutionalized individual means an individual who is (a) 
involuntarily confined or detained, under a civil or criminal statute, 
in a correctional or rehabilitative facility, including a mental 
hospital or other facility for the care and treatment of mental illness; 
or (b) confined, under a voluntary commitment, in a mental hospital or 
other facility for the care and treatment of mental illness.
    Mentally incompetent individual means an individual who has been 
declared mentally incompetent by a Federal, State, or local court of 
competent jurisdiction for any purpose, unless the individual has been 
declared competent for purposes which include the ability to consent to 
sterilization.
    Sterilization means any medical procedure, treatment, or operation 
for the purpose of rendering an individual permanently incapable of 
reproducing.



Sec.  441.252  State plan requirements.

    A State plan must provide that the Medicaid agency will make payment 
under the plan for sterilization procedures and hysterectomies only if 
all the requirements of this subpart were met.



Sec.  441.253  Sterilization of a mentally competent individual aged 21 or older.

    FFP is available in expenditures for the sterilization of an 
individual only if--
    (a) The individual is at least 21 years old at the time consent is 
obtained;
    (b) The individual is not a mentally incompetent individual;
    (c) The individual has voluntarily given informed consent in 
accordance

[[Page 293]]

with all the requirements precribed in Sec. Sec.  441.257 and 441.258; 
and
    (d) At least 30 days, but not more than 180 days, have passed 
between the date of informed consent and the date of the sterilization, 
except in the case of premature delivery or emergency abdominal surgery. 
An individual may consent to be sterilized at the time of a premature 
delivery or emergency abdominal surgery, if at least 72 hours have 
passed since he or she gave informed consent for the sterilization. In 
the case of premature delivery, the informed consent must have been 
given at least 30 days before the expected date of delivery.



Sec.  441.254  Mentally incompetent or institutionalized individuals.

    FFP is not available for the sterilization of a mentally incompetent 
or institutionalized individual.



Sec.  441.255  Sterilization by hysterectomy.

    (a) FFP is not available in expenditures for a hysterectomy if--
    (1) It was performed solely for the purpose of rendering an 
individual permanently incapable of reproducing; or
    (2) If there was more than one purpose to the procedure, it would 
not have been performed but for the purpose of rendering the individual 
permanently incapable of reproducing.
    (b) FFP is available in expenditures for a hysterectomy not covered 
by paragraph (a) of this section only under the conditions specified in 
paragraph (c), (d), or (e) of this section.
    (c) FFP is available if--
    (1) The person who secured authorization to perform the hysterectomy 
has informed the individual and her representative, if any, orally and 
in writing, that the hysterectomy will make the individual permanently 
incapable of reproducing; and
    (2) The individual or her representative, if any, has signed a 
written acknowledgment of receipt of that information.
    (d) Effective on March 8, 1979 or any date thereafter through the 
date of publication of these regulations at the option of the State, FFP 
is available if--
    (1) The individual--
    (i) Was already sterile before the hysterectomy; or
    (ii) Requires a hysterectomy because of a life-threatening emergency 
situation in which the physician determines that prior acknowledgment is 
not possible; and
    (2) The physician who performs the hysterectomy--
    (i) Certifies in writing that the individual was already sterile at 
the time of the hysterectomy, and states the cause of the sterility; or
    (ii) Certifies in writing that the hysterectomy was performed under 
a life-threatening emergency situation in which he or she determined 
prior acknowledgment was not possible. He or she must also include a 
description of the nature of the emergency.
    (e) Effective March 8, 1979, or any date thereafter through the date 
of publication of these regulations at the option of the State, FFP is 
available for hysterectomies performed during a period of an 
individual's retroactive Medicaid eligibility if the physician who 
performed the hysterectomy certifies in writing that--
    (1) The individual was informed before the operation that the 
hysterectomy would make her permanently incapable of reproducing; or
    (2) One of the conditions in paragraph (d)(1) of this section was 
met. The physician must supply the information specified in paragraph 
(d)(2) of this section.

[47 FR 33702, Aug. 4, 1982]



Sec.  441.256  Additional condition for Federal financial participation (FFP).

    (a) FFP is not available in expenditures for any sterilization or 
hysterectomy unless the Medicaid agency, before making payment, obtained 
documentation showing that the requirements of this subpart were met. 
This documentation must include a consent from, an acknowledgement of 
receipt of hysterectomy information or a physician's certification under 
Sec.  441.255(d)(2), as applicable.

[[Page 294]]

    (b) With regard to the requirements of Sec.  441.255(d) for 
hysterectomies performed from March 8, 1979 through November 2, 1982, 
FFP is available in expenditures for those services if the documentation 
showing that the requirements of that paragraph were met is obtained by 
the Medicaid agency before submitting a claim for FFP for that 
procedure.

[47 FR 33702, Aug. 4, 1982]



Sec.  441.257  Informed consent.

    (a) Informing the individual. For purposes of this subpart, an 
individual has given informed consent only if--
    (1) The person who obtained consent for the sterilization procedure 
offered to answer any questions the individual to be sterilized may have 
concerning the procedure, provided a copy of the consent form and 
provided orally all of the following information or advice to the 
individual to be sterilized:
    (i) Advice that the individual is free to withhold or withdraw 
consent to the procedure at any time before the sterilization without 
affecting the right to future care or treatment and without loss or 
withdrawal of any federally funded program benefits to which the 
individual might be otherwise entitled.
    (ii) A description of available alternative methods of family 
planning and birth control.
    (iii) Advice that the sterilization procedure is considered to be 
irreversible.
    (iv) A thorough explanation of the specific sterilization procedure 
to be performed.
    (v) A full description of the discomforts and risks that may 
accompany or follow the performing of the procedure, including an 
explanation of the type and possible effects of any anesthetic to be 
used.
    (vi) A full description of the benefits or advantages that may be 
expected as a result of the sterilization.
    (vii) Advice that the sterilization will not be performed for at 
least 30 days, except under the circumstances specified in Sec.  
441.253(c).
    (2) Suitable arrangements were made to insure that the information 
specified in paragraph (a)(1) of this section was effectively 
communicated to any individual who is blind, deaf, or otherwise 
handicapped;
    (3) An interpreter was provided if the individual to be sterilized 
did not understand the language used on the consent form or the language 
used by the person obtaining consent;
    (4) The individual to be sterilized was permitted to have a witness 
of his or her choice present when consent was obtained;
    (5) The consent form requirements of Sec.  441.258 were met; and
    (6) Any additional requirement of State or local law for obtaining 
consent, except a requirement for spousal consent, was followed.
    (b) When informed consent may not be obtained. Informed consent may 
not be obtained while the individual to be sterilized is--
    (1) In labor or childbirth;
    (2) Seeking to obtain or obtaining an abortion; or
    (3) Under the influence of alcohol or other substances that affect 
the individual's state of awareness.



Sec.  441.258  Consent form requirements.

    (a) Content of consent form. The consent form must be a copy of the 
form appended to this subpart or another form approved by the Secretary.
    (b) Required signatures. The consent form must be signed and dated 
by--
    (1) The individual to be sterilized;
    (2) The interpreter, if one was provided;
    (3) The person who obtained the consent; and
    (4) The physician who performed the sterilization procedure.
    (c) Required certifications. (1) The person securing the consent 
must certify, by signing the consent form, that
    (i) Before the individual to be sterilized signed the consent form, 
he or she advised the individual to be sterilized that no Federal 
benefits may be withdrawn because of the decision not to be sterilized;
    (ii) He or she explained orally the requirements for informed 
consent as set forth on the consent form; and
    (iii) To the best of his or her knowledge and belief, the individual 
to be sterilized appeared mentally competent and knowingly and 
voluntarily consented to be sterilized.

[[Page 295]]

    (2) The physician performing the sterilization must certify, by 
signing the consent form, that:
    (i) Shortly before the performance of sterilization, he or she 
advised the individual to be sterilized that no Federal benefits may be 
withdrawn because of the decision not to be sterilized;
    (ii) He or she explained orally the requirements for informed 
consent as set forth on the consent form; and
    (iii) To the best of his or her knowledge and belief, the individual 
appeared mentally competent and knowingly and voluntarily consented to 
be sterilized.

Except in the case of premature delivery or emergency abdominal surgery, 
the physician must further certify that at least 30 days have passed 
between the date of the individual's signature on the consent form and 
the date upon which the sterilization was performed.
    (3) In the case of premature delivery or emergency abdominal surgery 
performed within 30 days of consent, the physician must certify that the 
sterilization was performed less than 30 days, but not less than 72 
hours after informed consent was obtained because of premature delivery 
or emergency abdominal surgery and--
    (i) In the case of premature delivery, must state the expected date 
of delivery; or
    (ii) In the case of abdominal surgery, must describe the emergency.
    (4) If an interpreter is provided, the interpreter must certify that 
he or she translated the information and advice presented orally and 
read the consent form and explained its contents to the individual to be 
sterilized and that, to the best of the interpreter's knowledge and 
belief, the individual understood what the interpreter told him or her.



Sec.  441.259  Review of regulations.

    The Secretary will request public comment on the operation of this 
subpart not later than 3 years after its effective date.



      Sec. Appendix to Subpart F of Part 441--Required Consent Form

    Notice: Your decision at any time not to be sterilized will not 
result in the withdrawal or withholding of any benefits provided by 
programs or projects receiving Federal funds.

                        consent to sterilization

    I have asked for and received information about sterilization from 
(doctor or clinic). When I first asked for the information, I was told 
that the decision to be sterilized is completely up to me. I was told 
that I could decide not to be sterilized. If I decide not to be 
sterilized, my decision will not affect my right to future care or 
treatment. I will not lose any help or benefits from programs receiving 
Federal funds, such as A.F.D.C. or Medicaid that I am now getting or for 
which I may become eligible.
    I understand that the sterilization must be considered permanent and 
not reversible. I have decided that I do not want to become pregnant, 
bear children or father children.
    I was told about those temporary methods of birth control that are 
available and could be provided to me which will allow me to bear or 
father a child in the future. I have rejected these alternatives and 
chosen to be sterilized.
    I understand that I will be sterilized by an operation known as a --
----------. The discomforts, risks and benefits associated with the 
operation have been explained to me. All my questions have been answered 
to my satisfaction.
    I understand that the operation will not be done until at least 30 
days after I sign this form. I understand that I can change my mind at 
any time and that my decision at any time not to be sterilized will not 
result in the withholding of any benefits or medical services provided 
by Federally funded programs.
    I am at least 21 years of age and was born on (Day) (Month) (Year).
    I, ------------, hereby consent of my own free will to be sterilized 
by ------------ by a method called ------------. My consent expires 180 
days from the date of my signature below.
    I also consent to the release of this form and other medical records 
about the operation to:
    Representatives of the Department of Health and Human Services or
    Employees of programs or projects funded by that Department but only 
for determining if Federal laws were observed.
    I have received a copy of this form. (Signature) (Date) (Month) 
(Day) (Year).
    You are requested to supply the following information, but it is not 
required: (Race and ethnicity designation (please check)) Black (not of 
Hispanic origin); Hispanic; Asian or Pacific Islander; American Indian 
or Alaskan native; or White (not of Hispanic origin).

[[Page 296]]

                         interpreter's statement

    If an interpreter is provided to assist the individual to be 
sterilized:
    I have translated the information and advice presented orally to the 
individual to be sterilized by the person obtaining this consent. I have 
also read him/her the consent form in ------------ ------------ language 
and explained its contents to him/her. To the best of my knowledge and 
belief he/she understood this explanation. (Interpreter) (Date).

                  statement of person obtaining consent

    Before (name of individual) signed the consent form, I explained to 
him/her the nature of the sterilization operation ------------, the fact 
that it is intended to be a final and irreversible procedure and the 
discomforts, risks and benefits associated with it.
    I counseled the individual to be sterilized that alternative methods 
of birth control are available which are temporary. I explained that 
sterilization is different because it is permanent.
    I informed the individual to be sterilized that his/her consent can 
be withdrawn at any time and that he/she will not lose any health 
services or any benefits provided by Federal funds.
    To the best of my knowledge and belief the individual to be 
sterilized is at least 21 years old and appears mentally competent. He/
She knowingly and voluntarily requested to be sterilized and appears to 
understand the nature and consequence of the procedure. (Signature of 
person obtaining consent) (Date) (Facility) (Address).

                          physician's statement

    Shortly before I performed a sterilization operation upon (Name of 
individual to be sterilized) on (Date of sterilization) (operation), I 
explained to him/her the nature of the sterilization operation (specify 
type of operation), the fact that it is intended to be a final and 
irreversible procedure and the discomforts, risks and benefits 
associated with it.
    I counseled the individual to be sterilized that alternative methods 
of birth control are available which are temporary. I explained that 
sterilization is different because it is permanent.
    I informed the individual to be sterilized that his/her consent can 
be withdrawn at any time and that he/she will not lose any health 
services or benefits provided by Federal funds.
    To the best of my knowledge and belief the individual to be 
sterilized is at least 21 years old and appears mentally competent. He/
She knowingly and voluntarily requested to be sterilized and appeared to 
understand the nature and consequences of the procedure.
    (Instructions for use of alternative final paragraphs: Use the first 
paragraph below except in the case of premature delivery or emergency 
abdominal surgery where the sterilization is performed less than 30 days 
after the date of the individual's signature on the consent form. In 
those cases, the second paragraph below must be used. Cross out the 
paragraph which is not used.)
    (1) At least 30 days have passed between the date of the 
individual's signature on this consent form and the date the 
sterilization was performed.
    (2) This sterilization was performed less than 30 days but more than 
72 hours after the date of the individual's signature on this consent 
form because of the following circumstances (check applicable box and 
fill in information requested): Premature delivery.
    Individual's expected date of delivery: ------------
    [ballot] Emergency abdominal surgery: (describe circumstances):----
-------- (Physician) (Date).



    Subpart G_Home and Community-Based Services: Waiver Requirements

    Source: 46 FR 48541, Oct. 1, 1981, unless otherwise noted.



Sec.  441.300  Basis and purpose.

    Section 1915(c) of the Act permits States to offer, under a waiver 
of statutory requirements, an array of home and community-based services 
that an individual needs to avoid institutionalization. Those services 
are defined in Sec.  440.180 of this subchapter. This subpart describes 
what the Medicaid agency must do to obtain a waiver.



Sec.  441.301  Contents of request for a waiver.

    (a) A request for a waiver under this section must consist of the 
following:
    (1) The assurances required by Sec.  441.302 and the supporting 
documentation required by Sec.  441.303.
    (2) When applicable, requests for waivers of the requirements of 
section 1902(a)(1), section 1902(a)(10)(B), or section 
1902(a)(10)(C)(i)(III) of the Act, which concern respectively, statewide 
application of Medicaid, comparability of services, and income and 
resource rules applicable to medically needy individuals living in the 
community.
    (3) A statement explaining whether the agency will refuse to offer 
home or

[[Page 297]]

community-based services to any recipient if the agency can reasonably 
expect that the cost of the services would exceed the cost of an 
equivalent level of care provided in--
    (i) A hospital (as defined in Sec.  440.10 of this chapter);
    (ii) A NF (as defined in section 1919(a) of the Act); or
    (iii) An ICF/MR (as defined in Sec.  440.150 of this chapter), if 
applicable.
    (b) If the agency furnishes home and community-based services, as 
defined in Sec.  440.180 of this subchapter, under a waiver granted 
under this subpart, the waiver request must--
    (1) Provide that the services are furnished--
    (i) Under a written plan of care subject to approval by the Medicaid 
agency;
    (ii) Only to recipients who are not inpatients of a hospital, NF, or 
ICF/MR; and
    (iii) Only to recipients who the agency determines would, in the 
absence of these services, require the Medicaid covered level of care 
provided in--
    (A) A hospital (as defined in Sec.  440.10 of this chapter);
    (B) A NF (as defined in section 1919(a) of the Act); or
    (C) An ICF/MR (as defined in Sec.  440.150 of this chapter);
    (2) Describe the qualifications of the individual or individuals who 
will be responsible for developing the individual plan of care;
    (3) Describe the group or groups of individuals to whom the services 
will be offered;
    (4) Describe the services to be furnished so that each service is 
separately defined. Multiple services that are generally considered to 
be separate services may not be consolidated under a single definition. 
Commonly accepted terms must be used to describe the service and 
definitions may not be open ended in scope. CMS will, however, allow 
combined service definitions (bundling) when this will permit more 
efficient delivery of services and not compromise either a recipient's 
access to or free choice of providers.
    (5) Provide that the documentation requirements regarding individual 
evaluation, specified in Sec.  441.303(c), will be met; and
    (6) Be limited to one of the following target groups or any subgroup 
thereof that the State may define:
    (i) Aged or disabled, or both.
    (ii) Mentally retarded or developmentally disabled, or both.
    (iii) Mentally ill.

[46 FR 48541, Oct. 1, 1981, as amended at 50 FR 10026, Mar. 13, 1985; 59 
FR 37717, July 25, 1994; 65 FR 60107, Oct. 10, 2000]



Sec.  441.302  State assurances.

    Unless the Medicaid agency provides the following satisfactory 
assurances to CMS, CMS will not grant a waiver under this subpart and 
may terminate a waiver already granted:
    (a) Health and Welfare--Assurance that necessary safeguards have 
been taken to protect the health and welfare of the recipients of the 
services. Those safeguards must include--
    (1) Adequate standards for all types of providers that provide 
services under the waiver;
    (2) Assurance that the standards of any State licensure or 
certification requirements are met for services or for individuals 
furnishing services that are provided under the waiver; and
    (3) Assurance that all facilities covered by section 1616(e) of the 
Act, in which home and community-based services will be provided, are in 
compliance with applicable State standards that meet the requirements of 
45 CFR Part 1397 for board and care facilities.
    (b) Financial accountability-- The agency will assure financial 
accountability for funds expended for home and community-based services, 
provide for an independent audit of its waiver program (except as CMS 
may otherwise specify for particular waivers), and it will maintain and 
make available to HHS, the Comptroller General, or other designees, 
appropriate financial records documenting the cost of services provided 
under the waiver, including reports of any independent audits conducted.
    (c) Evaluation of need. Assurance that the agency will provide for 
the following:
    (1) Initial evaluation. An evaluation of the need for the level of 
care provided in a hospital, a NF, or an ICF/MR when there is a 
reasonable indication that a recipient might need the services in

[[Page 298]]

the near future (that is, a month or less) unless he or she receives 
home or community-based services. For purposes of this section, 
``evaluation'' means a review of an individual recipient's condition to 
determine--
    (i) If the recipient requires the level of care provided in a 
hospital as defined in Sec.  440.10 of this subchapter, a NF as defined 
in section 1919(a) of the Act, or an ICF/MR as defined by Sec.  440.150 
of this subchapter; and
    (ii) That the recipient, but for the provision of waiver services, 
would otherwise be institutionalized in such a facility.
    (2) Periodic reevaluations. Reevaluations, at least annually, of 
each recipient receiving home or community-based services to determine 
if the recipient continues to need the level of care provided and would, 
but for the provision of waiver services, otherwise be institutionalized 
in one of the following institutions:
    (i) A hospital;
    (ii) A NF; or
    (iii) An ICF/MR.
    (d) Alternatives--Assurance that when a recipient is determined to 
be likely to require the level of care provided in a hospital, NF, or 
ICF/MR, the recipient or his or her legal representative will be--
    (1) Informed of any feasible alternatives available under the 
waiver; and
    (2) Given the choice of either institutional or home and community-
based services.
    (e) Average per capita expenditures. Assurance that the average per 
capita fiscal year expenditures under the waiver will not exceed 100 
percent of the average per capita expenditures that would have been made 
in the fiscal year for the level of care provided in a hospital, NF, or 
ICF/MR under the State plan had the waiver not been granted.
    (1) These expenditures must be reasonably estimated and documented 
by the agency.
    (2) The estimate must be on an annual basis and must cover each year 
of the waiver period.
    (f) Actual total expenditures. Assurance that the agency's actual 
total expenditures for home and community-based and other Medicaid 
services under the waiver and its claim for FFP in expenditures for the 
services provided to recipients under the waiver will not, in any year 
of the waiver period, exceed 100 percent of the amount that would be 
incurred by the State's Medicaid program for these individuals, absent 
the waiver, in--
    (1) A hospital;
    (2) A NF; or
    (3) An ICF/MR.
    (g) Institutionalization absent waiver. Assurance that, absent the 
waiver, recipients in the waiver would receive the appropriate type of 
Medicaid-funded institutional care (hospital, NF, or ICF/MR) that they 
require.
    (h) Reporting. Assurance that annually, the agency will provide CMS 
with information on the waiver's impact. The information must be 
consistent with a data collection plan designed by CMS and must address 
the waiver's impact on--
    (1) The type, amount, and cost of services provided under the State 
plan; and
    (2) The health and welfare of recipients.
    (i) Habilitation services. Assurance that prevocational, 
educational, or supported employment services, or a combination of these 
services, if provided as habilitation services under the waiver, are--
    (1) Not otherwise available to the individual through a local 
educational agency under section 602 (16) and (17) of the Education of 
the Handicapped Act (20 U.S.C. 1401 (16 and 17)) or as services under 
section 110 of the Rehabilitation Act of 1973 (29 U.S.C. 730); and
    (2) Furnished as part of expanded habilitation services, if the 
State has requested and received CMS's approval under a waiver or an 
amendment to a waiver.
    (j) Day treatment or partial hospitalization, psychosocial 
rehabilitation services, and clinic services for individuals with 
chronic mental illness. Assurance that FFP will not be claimed in 
expenditures for waiver services including, but not limited to, day 
treatment or partial hospitalization, psychosocial rehabilitation 
services, and clinic services provided as home and community-based 
services to individuals with

[[Page 299]]

chronic mental illnesses if these individuals, in the absence of a 
waiver, would be placed in an IMD and are--
    (1) Age 22 to 64;
    (2) Age 65 and older and the State has not included the optional 
Medicaid benefit cited in Sec.  440.140; or
    (3) Age 21 and under and the State has not included the optional 
Medicaid benefit cited in Sec.  440.160.

[50 FR 10026, Mar. 13, 1985, as amended at 59 FR 37717, July 25, 1994; 
65 FR 60107, Oct. 10, 2000]



Sec.  441.303  Supporting documentation required.

    The agency must furnish CMS with sufficient information to support 
the assurances required by Sec.  441.302. Except as CMS may otherwise 
specify for particular waivers, the information must consist of the 
following:
    (a) A description of the safeguards necessary to protect the health 
and welfare of recipients. This information must include a copy of the 
standards established by the State for facilities that are covered by 
section 1616(e) of the Act.
    (b) A description of the records and information that will be 
maintained to support financial accountability.
    (c) A description of the agency's plan for the evaluation and 
reevaluation of recipients, including--
    (1) A description of who will make these evaluations and how they 
will be made;
    (2) A copy of the evaluation form to be used; and if it differs from 
the form used in placing recipients in hospitals, NFs, or ICFs/MR, a 
description of how and why it differs and an assurance that the outcome 
of the new evaluation form is reliable, valid, and fully comparable to 
the form used for hospital, NF, or ICF/MR placement;
    (3) The agency's procedure to ensure the maintenance of written 
documentation on all evaluations and reevaluations; and
    (4) The agency's procedure to ensure reevaluations of need at 
regular intervals.
    (d) A description of the agency's plan for informing eligible 
recipients of the feasible alternatives available under the waiver and 
allowing recipients to choose either institutional services or home and 
community-based services.
    (e) An explanation of how the agency will apply the applicable 
provisions regarding the post-eligibility treatment of income and 
resources of those individuals receiving home and community-based 
services who are eligible under a special income level (included in 
Sec.  435.217 of this chapter).
    (f) An explanation with supporting documentation satisfactory to CMS 
of how the agency estimated the average per capita expenditures for 
services.
    (1) The annual average per capita expenditure estimate of the cost 
of home and community-based and other Medicaid services under the waiver 
must not exceed the estimated annual average per capita expenditures of 
the cost of services in the absence of a waiver. The estimates are to be 
based on the following equation:

D+D' <= G+G'.

The symbol ``<='' means that the result of the left side of the equation 
must be less than or equal to the result of the right side of the 
equation.
D = the estimated annual average per capita Medicaid cost for home and 
community-based services for individuals in the waiver program.
D' = the estimated annual average per capita Medicaid cost for all other 
services provided to individuals in the waiver program.
G = the estimated annual average per capita Medicaid cost for hospital, 
NF, or ICF/MR care that would be incurred for individuals served in the 
waiver, were the waiver not granted.
G' = the estimated annual average per capita Medicaid costs for all 
services other than those included in factor G for individuals served in 
the waiver, were the waiver not granted.

    (2) For purposes of the equation, the prime factors include the 
average per capita cost for all State plan services and expanded EPSDT 
services provided that are not accounted for in other formula values.
    (3) In making estimates of average per capita expenditures for a 
waiver that applies only to individuals with a particular illness (for 
example, acquired immune deficiency syndrome) or condition (for example, 
chronic mental illness) who are inpatients in or who would require the 
level of care provided in hospitals as defined by Sec.  440.10,

[[Page 300]]

NFs as defined in section 1919(a) of the Act, or ICFs/MR, the agency may 
determine the average per capita expenditures for these individuals 
absent the waiver without including expenditures for other individuals 
in the affected hospitals, NFs, or ICFs/MR.
    (4) In making estimates of average per capita expenditures for a 
separate waiver program that applies only to individuals identified 
through the preadmission screening annual resident review (PASARR) 
process who are developmentally disabled, inpatients of a NF, and 
require the level of care provided in an ICF/MR as determined by the 
State on the basis of an evaluation under Sec.  441.303(c), the agency 
may determine the average per capita expenditures that would have been 
made in a fiscal year for those individuals based on the average per 
capita expenditures for inpatients in an ICF/MR. When submitting 
estimates of institutional costs without the waiver, the agency may use 
the average per capita costs of ICF/MR care even though the 
deinstitutionalized developmentally disabled were inpatients of NFs.
    (5) For persons diverted rather than deinstitutionalized, the 
State's evaluation process required by Sec.  441.303(c) must provide for 
a more detailed description of their evaluation and screening procedures 
for recipients to ensure that waiver services will be limited to persons 
who would otherwise receive the level of care provided in a hospital, 
NF, or ICF/MR, as applicable.
    (6) The State must indicate the number of unduplicated beneficiaries 
to which it intends to provide waiver services in each year of its 
program. This number will constitute a limit on the size of the waiver 
program unless the State requests and the Secretary approves a greater 
number of waiver participants in a waiver amendment.
    (7) In determining the average per capita expenditures that would 
have been made in a waiver year, for waiver estimates that apply to 
persons with mental retardation or related conditions, the agency may 
include costs of Medicaid residents in ICFs/MR that have been terminated 
on or after November 5, 1990.
    (8) In submitting estimates for waivers that include personal 
caregivers as a waiver service, the agency may include a portion of the 
rent and food attributed to the unrelated personal caregiver who resides 
in the home or residence of the recipient covered under the waiver. The 
agency must submit to CMS for review and approval the method it uses to 
apportion the costs of rent and food. The method must be explained fully 
to CMS. A personal caregiver provides a waiver service to meet the 
recipient's physical, social, or emotional needs (as opposed to services 
not directly related to the care of the recipient; that is, housekeeping 
or chore services). FFP for live-in caregivers is not available if the 
recipient lives in the caregiver's home or in a residence that is owned 
or leased by the caregiver.
    (9) In submitting estimates for waivers that apply to individuals 
with mental retardation or a related condition, the agency may adjust 
its estimate of average per capita expenditures to include increases in 
expenditures for ICF/MR care resulting from implementation of a PASARR 
program for making determinations for individuals with mental 
retardation or related conditions on or after January 1, 1989.
    (10) For a State that has CMS approval to bundle waiver services, 
the State must continue to compute separately the costs and utilization 
of the component services that make up the bundled service to support 
the final cost and utilization of the bundled service that will be used 
in the cost-neutrality formula.
    (g) The State, at its option, may provide for an independent 
assessment of its waiver that evaluates the quality of care provided, 
access to care, and cost-neutrality. The results of the assessment 
should be submitted to CMS at least 90 days prior to the expiration date 
of the approved waiver-period and cover the first 24 or 48 months of the 
waiver. If a State chooses to provide for an independent assessment, FFP 
is available for the costs attributable to the independent assessment.
    (h) For States offering habilitation services that include 
prevocational, educational, or supported employment services, or a 
combination of these services, consistent with the provisions

[[Page 301]]

of Sec.  440.180(c) of this chapter, an explanation of why these 
services are not available as special education and related services 
under sections 602 (16) and (17) of the Education of the Handicapped Act 
(20 U.S.C. 1401 (16 and 17)) or as services under section 110 of the 
Rehabilitation Act of 1973 (29 U.S.C. section 730);
    (i) For States offering home and community-based services for 
individuals diagnosed as chronically mentally ill, an explanation of why 
these individuals would not be placed in an institution for mental 
diseases (IMD) absent the waiver, and the age group of these 
individuals.

[46 FR 48532, Oct. 1, 1981, as amended at 50 FR 10027, Mar. 13, 1985; 50 
FR 25080, June 17, 1985; 59 FR 37718, July 25, 1994]



Sec.  441.304  Duration of a waiver.

    (a) The effective date for a new waiver of Medicaid requirements to 
provide home and community-based services approved under this subpart is 
established by CMS prospectively on or after the date of approval and 
after consultation with the State agency. The initial approved waiver 
continues for a 3-year period from the effective date. If the agency 
requests it, the waiver may be extended for additional periods unless--
    (1) CMS's review of the prior waiver period shows that the 
assurances required by Sec.  441.302 were not met; and
    (2) CMS is not satisfied with the assurances and documentation 
provided by the State in regard to the extension period.
    (b) CMS will determine whether a request for extension of an 
existing waiver is actually an extension request or a request for a new 
waiver. If a State submits an extension request that would add a new 
group to the existing group of recipients covered under the waiver (as 
defined under Sec.  441.301(b)(6)), CMS will consider it to be two 
requests: One as an extension request for the existing group, and the 
other as a new waiver request for the new group. Waivers may be extended 
for additional 5-year periods.
    (c) CMS may grant a State an extension of its existing waiver for up 
to 90 days to permit the State to document more fully the satisfaction 
of statutory and regulatory requirements needed to approve a new waiver 
request. CMS will consider this option when it requests additional 
information on a new waiver request submitted by a State to extend its 
existing waiver or when CMS disapproves a State's request for extension.
    (d) If CMS finds that an agency is not meeting one or more of the 
requirements for a waiver contained in this subpart, the agency is given 
a notice of CMS's findings and an opportunity for a hearing to rebut the 
findings. If CMS determines that the agency is not in compliance with 
this subpart after the notice and any hearing, CMS may terminate the 
waiver. For example, a State submits to CMS a waiver request for home 
and community-based services that includes an estimate of the 
expenditures that would be incurred if the services were provided to the 
covered individuals in a hospital, NF, or ICF/MR in the absence of the 
waiver. CMS approves the waiver. At the end of the waiver year, the 
State submits to CMS a report of its actual expenditures under the 
waiver. CMS finds that the actual expenditures under the waiver exceed 
100 percent of the State's approved estimate of expenditures for these 
individuals in a hospital, NF, or ICF/MR in the absence of the waiver. 
CMS next requires the State to amend its estimates for subsequent waiver 
year(s). CMS then compares the revised estimates with the State's actual 
experience to determine if the revised estimates are reasonable. CMS may 
terminate the waiver if the revised estimates indicate that the waiver 
is not cost-neutral or that the revised estimates are unreasonable.

[50 FR 10028, Mar. 13, 1985; 50 FR 25080, June 17, 1985, as amended at 
59 FR 37719, July 25, 1994]



Sec.  441.305  Replacement of recipients in approved waiver programs.

    (a) Regular waivers. A State's estimate of the number of individuals 
who may receive home and community-based services must include those who 
will replace recipients who leave the program for any reason. A State 
may replace recipients who leave the program due to death or loss of 
eligibility under the State plan without regard to

[[Page 302]]

any federally-imposed limit on utilization, but must maintain a record 
of recipients replaced on this basis.
    (b) Model waivers. (1) The number of individuals who may receive 
home and community-based services under a model waiver may not exceed 
200 recipients at any one time.
    (2) The agency may replace any individuals who die or become 
ineligible for State plan services to maintain a count up to the number 
specified by the State and approved by CMS within the 200-maximum limit.

[59 FR 37719, July 25, 1994]



Sec.  441.306  Cooperative arrangements with the Maternal and Child Health program.

    Whenever appropriate, the State agency administering the plan under 
Medicaid may enter into cooperative arrangements with the State agency 
responsible for administering a program for children with special health 
care needs under the Maternal and Child Health program (Title V of the 
Act) in order to ensure improved access to coordinated services to meet 
the children's needs.

[59 FR 37720, July 25, 1994]



Sec.  441.307  Notification of a waiver termination.

    (a) If a State chooses to terminate its waiver before the initial 3-
year period or 5-year renewal period expires, it must notify CMS in 
writing 30 days before terminating services to recipients.
    (b) If CMS or the State terminates the waiver, the State must notify 
recipients of services under the waiver in accordance with Sec.  431.210 
of this subchapter and notify them 30 days before terminating services.

[46 FR 48541, Oct. 1, 1981. Redesignated at 59 FR 37719, July 25, 1994, 
as amended at 65 FR 60107, Oct. 10, 2000]



Sec.  441.308  Hearings procedures for waiver terminations.

    The procedures specified in subpart D of part 430 of this chapter 
are applicable to State requests for hearings on terminations.

[50 FR 10028, Mar. 13, 1985. Redesignated at 59 FR 37720, July 25, 1994]



Sec.  441.310  Limits on Federal financial participation (FFP).

    (a) FFP for home and community-based services listed in Sec.  
440.180 of this chapter is not available in expenditures for the 
following:
    (1) Services provided in a facility subject to the health and 
welfare requirements described in Sec.  441.302(a) during any period in 
which the facility is found not to be in compliance with the applicable 
State standards described in that section.
    (2) The cost of room and board except when provided as--
    (i) Part of respite care services in a facility approved by the 
State that is not a private residence; or
    (ii) For waivers that allow personal caregivers as providers of 
approved waiver services, a portion of the rent and food that may be 
reasonably attributed to the unrelated caregiver who resides in the same 
household with the waiver recipient. FFP for a live-in caregiver is not 
available if the recipient lives in the caregiver's home or in a 
residence that is owned or leased by the provider of Medicaid services 
(the caregiver). For purposes of this provision, ``board'' means 3 meals 
a day or any other full nutritional regimen and does not include meals 
provided as part of a program of adult day health services as long as 
the meals provided do not constitute a ``full'' nutritional regimen.
    (3) Prevocational, educational, or supported employment services, or 
any combination of these services, as part of habilitation services that 
are--
    (i) Provided in approved waivers that include a definition of 
``habilitation services'' but which have not included prevocational, 
educational, and supported employment services in that definition; or
    (ii) Otherwise available to the recipient under either special 
education and related services as defined in section 602(16) and (17) of 
the Education of the Handicapped Act (20 U.S.C. 1401(16) and (17)) or 
vocational rehabilitation services available to the individual through a 
program funded under section 110 of the Rehabilitation Act of 1973 (29 
U.S.C. 730).
    (4) For waiver applications and renewals approved on or after 
October 21,

[[Page 303]]

1986, home and community-based services provided to individuals aged 22 
through 64 diagnosed as chronically mentally ill who would be placed in 
an institution for mental diseases. FFP is also not available for such 
services provided to individuals aged 65 and over and 21 and under as an 
alternative to institutionalization in an IMD if the State does not 
include the appropriate optional Medicaid benefits specified at 
Sec. Sec.  440.140 and 440.160 of this chapter in its State plan.
    (b) FFP is available for expenditures for expanded habilitation 
services, as described in Sec.  440.180 of this chapter, if the services 
are included under a waiver or waiver amendment approved by CMS.

[59 FR 37720, July 25, 1994, as amended at 65 FR 60107, Oct. 10, 2000]



Subpart H_Home and Community-Based Services Waivers for Individuals Age 
                    65 or Older: Waiver Requirements

    Source: 57 FR 29156, June 30, 1992, unless otherwise noted.



Sec.  441.350  Basis and purpose.

    Section 1915(d) of the Act permits States to offer, under a waiver 
of statutory requirements, home and community-based services not 
otherwise available under Medicaid to individuals age 65 or older, in 
exchange for accepting an aggregate limit on the amount of expenditures 
for which they claim FFP for certain services furnished to these 
individuals. The home and community-based services that may be furnished 
are listed in Sec.  440.181 of this subchapter. This subpart describes 
the procedures the Medicaid agency must follow to request a waiver.



Sec.  441.351  Contents of a request for a waiver.

    A request for a waiver under this section must meet the following 
requirements:
    (a) Required signatures. The request must be signed by the Governor, 
the Director of the Medicaid agency or the Director of the larger State 
agency of which the Medicaid agency is a component or any official of 
the Medicaid agency to whom this authority has been delegated. A request 
from any other agency of State government will not be accepted.
    (b) Assurances and supporting documentation. The request must 
provide the assurances required by Sec.  441.352 of this part and the 
supporting documentation required by Sec.  441.353.
    (c) Statement for sections of the Act. The request must provide a 
statement as to whether waiver of section 1902(a)(1), 1902(a)(10)(B), or 
1902(a)(10)(C)(i)(III) of the Act is requested. If the State requests a 
waiver of section 1902(a)(1) of the Act, the waiver must clearly specify 
the geographic areas or political subdivisions in which the services 
will be offered. The State must indicate whether it is requesting a 
waiver of one or all of these sections. The State may request a waiver 
of any one of the sections cited above.
    (d) Identification of services. The request must identify all 
services available under the approved State plan, which are also 
included in the APEL and which are identified under Sec.  440.181, and 
any limitations that the State has imposed on the provision of any 
service. The request must also identify and describe each service 
specified in Sec.  440.181 of this subchapter to be furnished under the 
waiver, and any additional services to be furnished under the authority 
of Sec.  440.181(b)(7). Descriptions of additional services must explain 
how each additional service included under Sec.  440.181(b)(7) will 
contribute to the health and well-being of the recipients and to their 
ability to reside in a community-based setting.
    (e) Recipients served. The request must provide that the home and 
community-based services described in Sec.  440.181 of this subchapter, 
are furnished only to individuals who--
    (1) Are age 65 or older;
    (2) Are not inpatients of a hospital, NF, or ICF/MR; and
    (3) The agency determines would be likely to require the care 
furnished in a NF under Medicaid.
    (f) Plan of care. The request must provide that the home and 
community-based services described in Sec.  440.181 of this subchapter, 
are furnished under a

[[Page 304]]

written plan of care based on an assessment of the individual's health 
and welfare needs and developed by qualified individuals for each 
recipient under the waiver. The qualifications of the individual or 
individuals who will be responsible for developing the individual plan 
of care must be described. Each plan of care must contain, at a minimum, 
the medical and other services to be provided, their frequency, and the 
type of provider to furnish them. Plans of care must be subject to the 
approval of the Medicaid agency.
    (g) Medicaid agency review. The request must assure that the State 
agency maintain and exercise its authority to review (at a minimum) a 
valid statistical sample of each month's plans of care. When the 
services in a plan do not comport with the stated disabilities and needs 
of the recipient, the agency must implement immediate corrective action 
procedures to ensure that the needs of the recipient are adequately 
addressed.
    (h) Groups served. The request must describe the group or groups of 
individuals to whom the services will be offered.
    (i) Assurances regarding amount expended. The request must assure 
that the total amount expended by the State under the plan for 
individuals age 65 or older during a waiver year for medical assistance 
with respect to NF, home health, private duty nursing, personal care, 
and home and community-based services described in Sec. Sec.  440.180 
and 440.181 of this subchapter and furnished as an alternative to NF 
care will not exceed the aggregate projected expenditure limit (APEL) 
defined in Sec.  441.354.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec.  441.351 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget.



Sec.  441.352  State assurances.

    Unless the Medicaid agency provides the following satisfactory 
assurances to CMS, CMS will not grant a waiver under this subpart and 
may terminate a waiver already granted.
    (a) Health and welfare. The agency must assure that necessary 
safeguards have been taken to protect the health and welfare of the 
recipients of services by assuring that the following conditions are 
met:
    (1) Adequate standards for all types of providers that furnish 
services under the waiver are met. (These standards must be reasonably 
related to the requirements of the waiver service to be furnished.)
    (2) The standards of any State licensure or certification 
requirements are met for services or for individuals furnishing services 
under the waiver.
    (3) All facilities covered by section 1616(e) of the Act, in which 
home and community-based services are furnished, are in compliance with 
applicable State standards that meet the requirements of 45 CFR part 
1397 for board and care facilities.
    (4) Physician reviews of prescribed psychotropic drugs (when 
prescribed for purposes of behavior control of waiver recipients) occur 
at least every 30 days.
    (b) Financial accountability. The agency must assure financial 
accountability for funds expended for home and community-based services. 
The State must provide for an independent audit f its waiver program. 
The performance of a single financial audit, in accordance with the 
Single Audit Act of 1984 (Pub. L. 98-502, enacted on October 19, 1984), 
is deemed to satisfy the requirement for an independent audit. The 
agency must maintain and make available to HHS, the Comptroller General, 
or other designees, appropriate financial records documenting the cost 
of services furnished to individuals age 65 or older under the waiver 
and the State plan, including reports of any independent audits 
conducted.
    (c) Evaluation of need. The agency must provide for an initial 
evaluation (and periodic reevaluations) of the need for the level of 
care furnished in a NF when there is a reasonable indication that 
individuals age 65 or older might need those services in the near 
future, but for the availability of home and community-based services. 
The procedures used to assess level of care for a potential waiver 
recipient must be at least as stringent as any existing State procedures 
applicable to individuals

[[Page 305]]

entering a NF. The qualifications of individuals performing the waiver 
assessment must be as high as those of individuals assessing the need 
for NF care, and the assessment instrument itself must be the same as 
any assessment instrument used to establish level of care of prospective 
inpatients in NFs. A periodic reevaluation of the level of care must be 
performed. The period of reevaluation of level of care cannot extend 
beyond 1 year.
    (d) Expenditures. The agency must assure that the total amount 
expended by the State for medical assistance with respect to NF, home 
health, private duty nursing, personal care services, home and 
community-based services furnished under a section 1915(c) waiver 
granted under Subpart G of this part to individuals age 65 or older, and 
the home and community-based services approved and furnished under a 
section 1915(d) waiver for individuals age 65 or older during a waiver 
year will not exceed the APEL, calculated in accordance with Sec.  
441.354.
    (e) Reporting. The agency must assure that it will provide CMS 
annually with information on the waiver's impact. The information must 
be consistent with a reasonable data collection plan designed by CMS and 
must address the waiver's impact on--
    (1) The type, amount, and cost of services furnished under the State 
plan; and
    (2) The health and welfare of recipients of the services described 
in Sec.  440.181 of this chapter.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec.  441.352 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget.



Sec.  441.353  Supporting documentation required.

    The agency must furnish CMS with sufficient information to support 
the assurances required under Sec.  441.352, in order to meet the 
requirement that the assurances are satisfactory. At a minimum, this 
information must consist of the following:
    (a) Safeguards. A description of the safeguards necessary to protect 
the health and welfare of recipients.
    This information must include:
    (1) A copy of the standards established by the State for facilities 
(in which services will be furnished) that are covered by section 
1616(e) of the Act.
    (2) The minimum educational or professional qualifications of the 
providers of the services.
    (3) A description of the administrative oversight mechanisms 
established by the State to ensure quality of care.
    (b) Records. A description of the records and information that are 
maintained by the agency and by providers of services to support 
financial accountability, information regarding how the State meets the 
requirement for financial accountability, and an explanation of how the 
State assures that there is an audit trail for State and Federal funds 
expended for section 1915(d) home and community-based waiver services. 
If the State has an approved Medicaid Management Information System 
(MMIS), this system must be used to process individual claims data and 
account for funds expended for services furnished under the waiver.
    (c) Evaluation and reevaluation of recipients. A description of the 
agency's plan for the evaluation and reevaluation of recipients' level 
of care, including the following:
    (1) A description of who makes these evaluations and how they are 
made.
    (2) A copy of the evaluation instrument.
    (3) The agency's procedure to assure the maintenance of written 
documentation on all evaluations and reevaluations and copies of the 
forms. In accordance with regulations at 45 CFR part 74, written 
documentation of all evaluations and reevaluations must be maintained 
for a minimum period of 3 years.
    (4) The agency's procedure to assure reevaluations of need at 
regular intervals.
    (5) The intervals at which reevaluations occur, which may be no less 
frequent than for institutionalized individuals at comparable levels of 
care.
    (6) The procedures and criteria used for evaluation and reevaluation 
of waiver recipients must be the same or more stringent than those used 
for individuals served in NFs.

[[Page 306]]

    (d) Alternatives available. A description of the agency's plan for 
informing eligible recipients of the feasible alternatives available 
under the waiver and allowing recipients to choose either institutional 
or home and community-based services must be submitted to CMS. A copy of 
the forms or documentation used by the agency to verify that this choice 
has been offered and that recipients of waiver services, or their legal 
representatives, have been given the free choice of the providers of 
both waiver and State plan services must also be available for CMS 
review. The Medicaid agency must provide an opportunity for a fair 
hearing, under 42 CFR part 431, subpart E, to recipients who are not 
given the choice of home or community-based services as an alternative 
to institutional care in a NF or who are denied the service(s) or the 
providers of their choice.
    (e) Post-eligibility of income. An explanation of how the agency 
applies the applicable provisions regarding the post-eligibility 
treatment of income and resources of those individuals receiving home 
and community-based services who are eligible under a special income 
level (included in Sec.  435.217 of this subchapter).

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec.  441.353 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget.



Sec.  441.354  Aggregate projected expenditure limit (APEL).

    (a) Definitions. For purposes of this section, the term base year 
means--
    (1) Federal fiscal year (FFY) 1987 (that is, October 1, 1986 through 
September 30, 1987); or
    (2) In the case of a State which did not report expenditures on the 
basis of age categories during FFY 1987, the base year means FFY 1989 
(that is, October 1, 1988 through September 30, 1989).
    (b) General. (1) The total amount expended by the State for medical 
assistance with respect to NF, home and community-based services under 
the waiver, home health services, personal care services, private duty 
nursing services, and services furnished under a waiver under subpart G 
of this part to individuals age 65 or older furnished as an alternative 
to care in an SNF or ICF (NF effective October 1, 1990), may not exceed 
the APEL calculated in accordance with paragraph (c) of this section.
    (2) In applying for a waiver under this subpart, the agency must 
clearly identify the base year it intends to use.
    (3) The State may make a preliminary calculation of the expenditure 
limit at the time of the waiver approval; however, CMS makes final 
calculations of the aggregate limit after base data have been verified 
and accepted.
    (4) All base year and waiver year data are subject to final cost 
settlement within 2 years from the end of the base or waiver year 
involved.
    (c) Formula for calculating APEL. Except as provided in paragraph 
(d) of this section, the formula for calculating the APEL follows:

APEL=P x (1+Y) + V x (1+Z), where

P=The aggregate amount of the State's medical assistance under title XIX 
for SNF and ICF (NF effective October 1, 1990) services furnished to 
individuals who have reached age 65, defined as the total medical 
assistance payments (Federal and State) reported on line 6 of form CMS 
64 (as adjusted) for SNF services, ICF-other services, and mental health 
facility services for the base year, multiplied by the ratio of 
expenditures for SNF and ICF-other services for the aged to total 
expenditures for these services as reported on form CMS 2082 for the 
base year.
Q=The market basket index for SNF and ICF (NF effective October 1, 1990) 
services for the waiver year involved, defined as the total SNF Input 
Price Index used in the Medicare program, identified as the third 
quarter data available from CMS's Office of National Cost Estimates in 
August preceding the start of the fiscal year.
R=The SNF Input Price Index for the base year.
S=The number of residents in the State in the waiver year involved who 
have reached age 65, defined as the number of aged Medicare 
beneficiaries in the State, equal to the Mid-Period Enrollment in HI or 
SMI in that State on July 1 preceding the start of the fiscal year.
T=The number of aged Medicare beneficiaries in the State who are 
enrolled in either the HI or SMI programs in the base year, as defined 
in S, above.
U=The number of years beginning after the base year and ending on the 
last day of the waiver year involved.

[[Page 307]]

V=The aggregate amount of the State's medical assistance under title XIX 
in the base year for home and community-based services for individuals 
who have reached age 65, defined as the total medical assistance 
payments (Federal and State) reported on line 6 of form CMS 64 (as 
adjusted) for home health, personal care, and home and community-based 
services waivers, which provide services as an alternative to care in a 
SNF or ICF (NF effective October 1, 1990), increased by an estimate 
(acceptable to CMS) of expenditures for private duty nursing services, 
multiplied by the ratio of expenditures for home health services for the 
aged to total expenditures for home health services, as reported on form 
CMS 2082, for the base year.
W=The market basket index for home and community-based services for the 
waiver year involved, defined as the Home Agency Input Price Index, used 
in the Medicare program identified as the third quarter data available 
from CMS's Office of National Cost Estimates in August preceding the 
start of the fiscal year.
X=The Home Health Agency Input Price Index for the base year.
Y=The greater of--
    (Ux.07), or (Q/R)-1+(S/T)-1+(Ux.02).
Z=The greater of--
    (Ux.07), or (W/X)-1+(S/T)-1++(Ux.02).

    (d) Amendment of the APEL. The State may request amendment of its 
APEL to reflect an increase in the aggregate amount of medical 
assistance for NF services and for services included in the calculation 
of the APEL as required by paragraph (c) of this section when the 
increase is directly attributable to legislation enacted on or after 
December 22, 1987, which amends title XIX of the Act. Costs attributable 
to laws enacted before December 22, 1987 will not be considered. Because 
the APEL for each year of the waiver is computed separately from the 
APEL for any other waiver year, a separate amendment must be submitted 
for each year in which the State chooses to raise its APEL. 
Documentation specific to the waiver year involved must be submitted to 
CMS.



Sec.  441.355  Duration, extension, and amendment of a waiver.

    (a) Effective dates and extension periods. (1) The effective date 
for a waiver of Medicaid requirements to furnish home and community-
based services to individuals age 65 or older under this subpart is 
established by CMS prospectively on the first day of the FFY following 
the date on which the waiver is approved.
    (2) The initial waiver is approved for a 3-year period from the 
effective date. Subsequent renewals are approved for 5-year periods.
    (3) If the agency requests it, the waiver may be extended for an 
additional 5-year period if CMS's review of the prior period shows that 
the assurances required by Sec.  441.352 were met.
    (4) The agency may request that waiver modifications be made 
effective retroactive to the first day of the waiver year in which the 
amendment is submitted, unless the amendment involves substantive 
change. Substantive changes may include, but are not limited to, 
addition of services under the waiver, a change in the qualifications of 
service providers, or a change in the eligible population.
    (5) A request for an amendment that involves a substantive change is 
given a prospective effective date, but this date need not coincide with 
the start of the next FFY.
    (b) Extension or new waiver request. CMS determines whether a 
request for extension of an existing waiver is actually an extension 
request, or a request for a new waiver. Generally, if a State's 
extension request proposes a substantive change in services furnished, 
eligible population, service area, statutory sections waived, or 
qualifications of service providers, CMS considers it a new waiver 
request.
    (c) Reconsideration of denial. A determination of CMS to deny a 
request for a waiver (or for extension of a waiver) under this subpart 
may be reconsidered in accordance with Sec.  441.357.
    (d) Existing waiver effectiveness after denial. If CMS denies a 
request for an extension of an existing waiver under this subpart:
    (1) The existing waiver remains in effect for a period of not less 
than 90 days after the date on which CMS denies the request, or, if the 
State seeks reconsideration in accordance with Sec.  441.357, the date 
on which a final determination is made with respect to that review.
    (2) CMS calculates an APEL for the period for which the waiver 
remains in effect, and this calculation is used to

[[Page 308]]

pro-rate the limit according to the number of days to which it applies.



Sec.  441.356  Waiver termination.

    (a) Termination by the State. If a State chooses to terminate its 
waiver before an approved program is due to expire, the following 
conditions apply:
    (1) The State must notify CMS in writing at least 30 days before 
terminating services to recipients.
    (2) The State must notify recipients of services under the waiver at 
least 30 days before terminating services in accordance with Sec.  
431.210 of this chapter.
    (3) CMS continues to apply the APEL described in Sec.  441.354 
through the end of the waiver year, but this limit is not applied in 
subsequent years.
    (4) The State may not decrease the services available under the 
approved State plan to individuals age 65 or older by an amount that 
violates the comparability of service requirements set forth in Sec.  
440.240 of this chapter.
    (b) Termination by CMS. (1) If CMS finds, during an approved waiver 
period, that an agency is not meeting one or more of the requirements 
for a waiver contained in this subpart, CMS notifies the agency in 
writing of its findings and grants an opportunity for a hearing in 
accordance with Sec.  441.357. If CMS determines that the agency is not 
in compliance with this subpart after the notice and any hearing, CMS 
may terminate the waiver.
    (2) If CMS terminates the waiver, the following conditions apply:
    (i) The State must notify recipients of services under the waiver at 
least 30 days before terminating services in accordance with Sec.  
431.210 of this chapter.
    (ii) CMS continues to apply the APEL in Sec.  441.354 of this 
subpart, but the limit is prorated according to the number of days in 
the fiscal year during which waiver services were offered. The limit 
expires concurrently with the termination of home and community-based 
services under the waiver.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec.  441.356 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget.



Sec.  441.357  Hearing procedures for waiver denials.

    The procedures specified in Sec.  430.18 of this subchapter apply to 
State requests for hearings on denials, renewals, or amendments of 
waivers for home and community-based services for individuals age 65 or 
older.



Sec.  441.360  Limits on Federal financial participation (FFP).

    FFP for home and community-based services listed in Sec.  440.181 of 
this subchapter is not available in expenditures for the following:
    (a) Services furnished in a facility subject to the health and 
welfare requirements described in Sec.  441.352(a) during any period in 
which the facility is found not to be in compliance with the applicable 
State requirements described in that section.
    (b) The cost of room and board except when furnished as part of 
respite care services in a facility, approved by the State, that is not 
a private residence. For purposes of this subpart, ``board'' means three 
meals a day or any other full nutritional regimen. ``Board'' does not 
include meals, which do not comprise a full nutritional regimen, 
furnished as part of adult day health services.
    (c) The portion of the cost of room and board attributed to 
unrelated, live-in personal caregivers when the waiver recipient lives 
in the caregiver's home or a residence owned or leased by the provider 
of the Medicaid services (the caregiver).
    (d) Services that are not included in the approved State plan and 
not approved as waiver services by CMS.
    (e) Services furnished to recipients who are ineligible under the 
terms of the approved waiver.
    (f) Services furnished by a provider when either the services or the 
provider do not meet the standards that are set by the State and 
included in the approved waiver.
    (g) Services furnished to a recipient by his or her spouse.



Sec.  441.365  Periodic evaluation, assessment, and review.

    (a) Purpose. This section prescribes requirements for periodic 
evaluation, assessment, and review of the care and

[[Page 309]]

services furnished to individuals receiving home and community-based 
waiver services under this subpart.
    (b) Evaluation and assessment review team. (1) A review team, as 
described in paragraphs (b)(2) and (c) of this section, must 
periodically evaluate and assess the care and services furnished to 
recipients under this subpart. The review team must be created by the 
State agency directly, or (through interagency agreement) by other 
departments of State government (such as the Department of Health or the 
Agency on Aging).
    (2) Each review team must consist of at least one physician or 
registered nurse, and at least one other individual with health and 
social service credentials who the State believes is qualified to 
properly evaluate and assess the care and services provided under the 
waiver. If there is no physician on the review team, the Medicaid agency 
must ensure that a physician is available to provide consultation to the 
review team.
    (3) For waiver services furnished to individuals who have been found 
to be likely to require the level of care furnished in a NF that is also 
an IMD, each review team must have a psychiatrist or physician and other 
appropriate mental health or social service personnel who are 
knowledgeable about geriatric mental illness.
    (c) Financial interests and employment of review team members. (1) 
No member of a review team may have a financial interest in or be 
employed by any entity that furnishes care and services under the waiver 
to a recipient whose care is under review.
    (2) No physician member of a review team may evaluate or assess the 
care of a recipient for whom he or she is the attending physician.
    (3) No individual who serves as case manager, caseworker, benefit 
authorizer, or any similar position, may serve as member of a review 
team that evaluates and assesses care furnished to a recipient with whom 
he or she has had a professional relationship.
    (d) Number and location of review teams. A sufficient number of 
teams must be located within the State so that onsite inspections can be 
made at appropriate intervals at sites where waiver recipients receive 
care and services.
    (e) Frequency of periodic evaluations and assessments. Periodic 
evaluations and assessments must be conducted at least annually for each 
recipient under the waiver. The review team and the agency have the 
option to determine the frequency of further periodic evaluations and 
assessments, based on the quality of services and access to care being 
furnished under the waiver and the condition of patients receiving care 
and services.
    (f) Notification before inspection. No provider of care and services 
under the waiver may be notified in advance of a periodic evaluation, 
assessment, and review. However, when a recipient receives services in 
his own home or the home of a relative, notification must be provided to 
the residents of the household at least 48 hours in advance. The 
recipient must have an opportunity to decline access to the home. If the 
recipient declines access to his or her own home, or the home of a 
relative, the review is limited solely to the review of the provider's 
records. If the recipient is incompetent, the head of the household has 
the authority to decline access to the home.
    (g) Personal contact with and observation of recipients and review 
of records. (1) For recipients of care and services under a waiver, the 
review team's evaluation and assessment must include--
    (i) A review of each recipient's medical record, the evaluation and 
reevaluation required by Sec.  441.353(c), and the plan of care under 
which the waiver and other services are furnished; and
    (ii) If the records described in paragraph (g)(1)(i) of this section 
are inadequate or incomplete, personal contact and observation of each 
recipient.
    (2) The review team may personally contact and observe any recipient 
whose care the team evaluates and assesses.
    (3) The review team may consult with both formal and informal 
caregivers when the recipient's records are inadequate or incomplete and 
when any apparent discrepancy exists between services required by the 
recipient and services furnished under the waiver.

[[Page 310]]

    (h) Determinations by the review team. The review team must 
determine in its evaluation and assessment whether--
    (1) The services included in the plan of care are adequate to meet 
the health and welfare needs of each recipient;
    (2) The services included in the plan of care have been furnished to 
the recipient as planned;
    (3) It is necessary and in the interest of the recipient to continue 
receiving services through the waiver program; and
    (4) It is feasible to meet the recipient's health and welfare needs 
through the waiver program.
    (i) Other information considered by review team. When making 
determinations, under paragraph (h) of this section, for each recipient, 
the review team must consider the following information and may consider 
other information as it deems necessary:
    (1) Whether the medical record, the determination of level of care, 
and the plan of care are consistent, and whether all ordered services 
have been furnished and properly recorded.
    (2) Whether physician review of prescribed psychotropic medications 
(when required for behavior control) has occurred at least every 30 
days.
    (3) Whether tests or observations of each recipient indicated by his 
or her medical record are made at appropriate times and properly 
recorded.
    (4) Whether progress notes entered in the record by formal and 
informal caregivers are made as required and appear to be consistent 
with the observed condition of the recipient.
    (5) Whether reevaluations of the recipient's level of care have 
occurred at least as frequently as would be required if that individual 
were served in a NF.
    (6) Whether the recipient receives adequate care and services, 
based, at a minimum, on the following when observations are necessary 
(the requirements for the necessity of observations are set forth in new 
Sec.  441.365(g)(3)):
    (i) Cleanliness.
    (ii) Absence of bedsores.
    (iii) Absence of signs of malnutrition or dehydration.
    (7) Whether the recipient needs any service that is not included in 
the plan of care, or if included, is not being furnished by formal or 
informal caregivers under the waiver or through arrangements with 
another public or private source of assistance.
    (8) Determination as to whether continued home and community-based 
services are required by the recipient to avoid the likelihood of 
placement in a NF.
    (j) Submission of review team's results. The review team must submit 
to the Medicaid agency the results of its periodic evaluation, 
assessment and review of the care of the recipient:
    (1) Within 1 month of the completion of the review.
    (2) Immediately upon its determination that conditions exist that 
may constitute a threat to the life or health of a recipient.
    (k) Agency's action. The Medicaid agency must establish and adhere 
to procedures for taking appropriate action in response to the findings 
reported by the review team. These procedures must provide for immediate 
response to any finding that the life or health of a recipient may be 
jeopardized.

    Effective Date Note: At 57 FR 29156, June 30, 1992, Sec.  441.365 
was added. This section contains information collection and 
recordkeeping requirements and will not become effective until approval 
has been given by the Office of Management and Budget.



       Subpart I_Community Supported Living Arrangements Services

    Source: 56 FR 48114, Sept. 24, 1991, unless otherwise noted.



Sec.  441.400  Basis and purpose.

    This subpart implements section 1905(a)(24) of the Act, which adds 
community supported living arrangements services to the list of services 
that States may provide as medical assistance under title XIX (to the 
extent and as defined in section 1930 of the Act), and section 
1930(h)(1)(B) of the Act, which specifies minimum protection 
requirements that a State which provides community supported living 
arrangements services as an optional Medicaid service to developmentally 
disabled individuals must meet to ensure the health, safety and welfare 
of those individuals.

[[Page 311]]



Sec.  441.402  State plan requirements.

    If a State that is eligible to provide community supported living 
arrangements services as an optional Medicaid service to developmentally 
disabled individuals provides such services, the State plan must specify 
that it complies with the minimum protection requirements in Sec.  
441.404.



Sec.  441.404  Minimum protection requirements.

    To be eligible to provide community supported living arrangements 
services to developmentally disabled individuals, a State must assure, 
through methods other than reliance on State licensure processes or the 
State quality assurance programs described under section 1930(d) of the 
Act, that:
    (a) Individuals receiving community supported living arrangements 
services are protected from neglect, physical and sexual abuse, and 
financial exploitation;
    (b) Providers of community supported living arrangements services--
    (1) Do not use individuals who have been convicted of child or 
client abuse, neglect, or mistreatment, or of a felony involving 
physical harm to an individual; and
    (2) Take all reasonable steps to determine whether applicants for 
employment by the provider have histories indicating involvement in 
child or client abuse, neglect, or mistreatment, or a criminal record 
involving physical harm to an individual;
    (c) Providers of community supported living arrangements services 
are not unjustly enriched as a result of abusive financial arrangements 
(such as owner lease-backs) with developmentally disabled clients; and
    (d) Providers of community supported living arrangements services, 
or the relatives of such providers, are not named beneficiaries of life 
insurance policies purchased by or on behalf of developmentally disabled 
clients.



  Subpart J_Optional Self-Directed Personal Assistance Services Program

    Source: 73 FR 57881, Oct. 3, 2008, unless otherwise noted.



Sec.  441.450  Basis, scope, and definitions.

    (a) Basis. This subpart implements section 1915(j) of the Act 
concerning the self-directed personal assistance services (PAS) option 
through a State Plan.
    (b) Scope. A self-directed PAS option is designed to allow 
individuals, or their representatives, if applicable, to exercise 
decision-making authority in identifying, accessing, managing and 
purchasing their PAS. This authority includes, at a minimum, all of the 
following:
    (1) The purchase of PAS and supports for PAS.
    (2) Recruiting workers.
    (3) Hiring and discharging workers.
    (4) Training workers and accessing training provided by or through 
the State if additional worker training is required or desired by the 
participant, or participant's representative, if applicable.
    (5) Specifying worker qualifications.
    (6) Determining worker duties.
    (7) Scheduling workers.
    (8) Supervising workers.
    (9) Evaluating worker performance.
    (10) Determining the amount paid for a service, support or item.
    (11) Scheduling when services are provided.
    (12) Identifying service workers.
    (13) Reviewing and approving invoices.
    (c) Definitions. As used in this part--
    Assessment of need means an evaluation of the needs, strengths, and 
preferences of participants for services. This includes one or more 
processes to obtain information about an individual, including health 
condition, personal goals and preferences, functional limitation, age, 
school, employment, household, and other factors that are relevant to 
the authorization and provision of services. Assessment information 
supports the development of the service plan and the subsequent service 
budget.
    Individualized backup plan means a written plan that meets all of 
the following:
    (1) Is sufficiently individualized to address each participant's 
critical contingencies or incidents that would pose a risk of harm to 
the participant's health or welfare;

[[Page 312]]

    (2) Must demonstrate an interface with the risk management provision 
at Sec.  441.476 which requires States to assess and identify the 
potential risks to the participant (such as any critical health needs), 
and ensure that the risks and how they will be managed are the result of 
discussion and negotiation among the persons involved in the service 
plan development;
    (3) Must not include the 911 emergency system or other emergency 
system as the sole backup feature of the plan; and
    (4) Must be incorporated into the participant's service plan.
    Legally liable relatives means persons who have a duty under the 
provisions of State law to care for another person. Legally liable 
relatives may include any of the following:
    (1) The parent (biological or adoptive) of a minor child or the 
guardian of a minor child who must provide care to the child.
    (2) Legally-assigned caretaker relatives.
    (3) A spouse.
    Self-directed personal assistance services (PAS) means personal care 
and related services, or home and community-based services otherwise 
available under the State plan or a 1915(c) waiver program that are 
provided to an individual who has been determined eligible for the PAS 
option. Self-directed PAS also includes, at the State's option, items 
that increase the individual's independence or substitutes (such as a 
microwave oven or an accessibility ramp) for human assistance, to the 
extent the expenditures would otherwise be made for the human 
assistance.
    Self-direction means the opportunity for participants or their 
representatives to exercise choice and control over the budget, 
planning, and purchase of self-directed PAS, including the amount, 
duration, scope, provider, and location of service provision.
    Service budget means an amount of funds that is under the control 
and direction of a participant, or the participant's representative, if 
any, when the State has selected the State plan option for provision of 
self-directed PAS. It is developed using a person-centered and directed 
process and is individually tailored in accordance with the 
participant's needs and personal preferences as established in the 
service plan.
    Service plan means the written document that specifies the services 
and supports (regardless of funding source) that are to be furnished to 
meet the needs of a participant in the self-directed PAS option and to 
assist the participant to direct the PAS and to remain in the community. 
The service plan is developed based on the assessment of need using a 
person-centered and directed process. The service plan builds upon the 
participant's capacity to engage in activities that promote community 
life and respects the participant's preferences, choices, and abilities. 
The participant's representative, if any, families, friends and 
professionals, as desired or required by the participant, will be 
involved in the service-planning process.
    Support system means information, counseling, training, and 
assistance that support the participant (or the participant's family or 
representative, as appropriate) in identifying, accessing, managing, and 
directing their PAS and supports and in purchasing their PAS identified 
in the service plan and budget.
    Supports broker or consultant means an individual who supports 
participants in directing their PAS and service budgets. The supports 
broker or consultant is an agent of the participants and takes direction 
from the participants, or their representatives, if applicable, about 
what information, counseling, training or assistance is needed or 
desired. The supports broker or consultant is primarily responsible for 
facilitating participants' development of a service budget and effective 
management of the participants' PAS and budgets in a manner that 
comports with the participants' preferences. States must develop a 
protocol to ensure that supports brokers or consultants: are accessible 
to participants; have regularly scheduled phone and in-person contacts 
with participants; monitor whether participants' health status has 
changed and whether expenditure of funds are being made in accordance 
with service budgets. States must also develop the training requirements 
and qualifications for

[[Page 313]]

supports brokers or consultants that include, at a minimum, the 
following:
    (1) An understanding of the philosophy of self-direction and person-
centered and directed planning;
    (2) The ability to facilitate participants' independence and 
participants' preferences in managing PAS and budgets, including any 
risks assumed by participants;
    (3) The ability to develop service budgets and ensure appropriate 
documentation; and
    (4) Knowledge of the PAS and resources available in the 
participant's community and how to access them.
    The availability of a supports broker or consultant to each 
participant is a requirement of the support system.



Sec.  441.452  Self-direction: General.

    (a) States must have in place, before electing the self-directed PAS 
option, personal care services through the State plan, or home and 
community-based services under a section 1915(c) waiver.
    (b) The State must have both traditional service delivery and the 
self-directed PAS service delivery option available in the event that an 
individual voluntarily disenrolls or is involuntarily disenrolled, from 
the self-directed PAS service delivery option.
    (c) The State's assessment of an individual's needs must form the 
basis of the level of services for which the individual is eligible.
    (d) Nothing in this subpart will be construed as affecting an 
individual's Medicaid eligibility, including that of an individual whose 
Medicaid eligibility is attained through receipt of section 1915(c) 
waiver services.



Sec.  441.454  Use of cash.

    (a) States have the option of disbursing cash prospectively to 
participants, or their representatives, as applicable, self-directing 
their PAS.
    (b) States that choose to offer the cash option must ensure 
compliance with all applicable requirements of the Internal Revenue 
Service, including, but not limited to, retaining required forms and 
payment of FICA, FUTA and State unemployment taxes.
    (c) States must permit participants, or their representatives, as 
applicable, using the cash option to choose to use the financial 
management entity for some or all of the functions described in Sec.  
441.484(c).
    (d) States must make available a financial management entity to a 
participant, or the participant's representative, if applicable, who has 
demonstrated, after additional counseling, information, training, or 
assistance, that the participant cannot effectively manage the cash 
option described in paragraph (a) of this section.



Sec.  441.456  Voluntary disenrollment.

    (a) States must permit a participant to voluntarily disenroll from 
the self-directed PAS option at any time and return to a traditional 
service delivery system.
    (b) The State must specify in a section 1915(j) State plan amendment 
the safeguards that are in place to ensure continuity of services during 
the transition from self-directed PAS.



Sec.  441.458  Involuntary disenrollment.

    (a) States must specify the conditions under which a participant may 
be involuntarily disenrolled from the self-directed PAS option.
    (b) CMS must approve the State's conditions under which a 
participant may be involuntarily disenrolled.
    (c) The State must specify in the section 1915(j) State plan 
amendment the safeguards that are in place to ensure continuity of 
services during the transition from self-directed PAS.



Sec.  441.460  Participant living arrangements.

    (a) Self-directed PAS are not available to an individual who resides 
in a home or property that is owned, operated, or controlled by a PAS 
provider who is not related to the individual by blood or marriage.
    (b) States may specify additional restrictions on a participant's 
living arrangements if they have been approved by CMS.



Sec.  441.462  Statewideness, comparability and limitations on number served.

    A State may do the following:
    (a) Provide self-directed PAS without regard to the requirements of 
statewideness.

[[Page 314]]

    (b) Limit the population eligible to receive these services without 
regard to comparability of amount, duration, and scope of services.
    (c) Limit the number of persons served without regard to 
comparability of amount, duration, and scope of services.



Sec.  441.464  State assurances.

    A State must assure that the following requirements are met:
    (a) Necessary safeguards. Necessary safeguards have been taken to 
protect the health and welfare of individuals furnished services under 
the program and to assure the financial accountability for funds 
expended for self-directed services.
    (1) Safeguards must prevent the premature depletion of the 
participant directed budget as well as identify potential service 
delivery problems that might be associated with budget underutilization.
    (2) These safeguards may include the following:
    (i) Requiring a case manager, support broker or other person to 
monitor the participant's expenditures.
    (ii) Requiring the financial management entity to flag significant 
budget variances (over and under expenditures) and bring them to the 
attention of the participant, the participant's representative, if 
applicable, case manager, or support broker.
    (iii) Allocating the budget on a monthly or quarterly basis.
    (iv) Other appropriate safeguards as determined by the State.
    (3) Safeguards must be designed so that budget problems are 
identified on a timely basis so that corrective action may be taken, if 
necessary.
    (b) Evaluation of need. The State must perform an evaluation of the 
need for personal care under the State Plan or services under a section 
1915(c) waiver program for individuals who meet the following 
requirements:
    (1) Are entitled to medical assistance for personal care services 
under the State plan or receiving home and community based services 
under a section 1915(c) waiver program.
    (2) May require self-directed PAS.
    (3) May be eligible for self-directed PAS.
    (c) Notification of feasible alternatives. Individuals who are 
likely to require personal care under the State plan, or home and 
community-based services under a section 1915(c) waiver program are 
informed of the feasible alternatives, if available, under the State's 
self-directed PAS State plan option, at the choice of these individuals, 
to the provision of personal care services under the State plan, or PAS 
under a section 1915(c) home and community-based services waiver 
program. Information on feasible alternatives must be communicated to 
the individual in a manner and language understandable by the 
individual. Such information includes, but is not limited to, the 
following:
    (1) Information about self-direction opportunities that is 
sufficient to inform decision-making about the election of self-
direction and provided on a timely basis to an individual or the 
representative which minimally includes the following:
    (i) Elements of self-direction compared to non-self-directed PAS.
    (ii) Individual responsibilities and potential liabilities under the 
self-direction service delivery model.
    (iii) The choice to receive PAS through a waiver program 
administered under section 1915(c) of the Act, regardless of delivery 
system, if applicable.
    (iv) The option, if available, to receive and manage the cash amount 
of their individual budget allocation.
    (2) When and how this information is provided.
    (d) Support system. States must provide, or arrange for the 
provision of, a support system that meets the following conditions:
    (1) Appropriately assesses and counsels an individual, or the 
individual's representative, if applicable, before enrollment, including 
information about disenrollment.
    (2) Provides appropriate information, counseling, training, and 
assistance to ensure that a participant is able to manage the services 
and budgets. Such information must be communicated to the participant in 
a manner and language understandable by the participant. The support 
activities must include at least the following:

[[Page 315]]

    (i) Person-centered planning and how it is applied.
    (ii) Information about the services available for self-direction.
    (iii) Range and scope of individual choices and options.
    (iv) Process for changing the service plan and service budget.
    (v) Grievance process.
    (vi) Risks and responsibilities of self-direction.
    (vii) The ability to freely choose from available PAS providers.
    (viii) Individual rights.
    (ix) Reassessment and review schedules.
    (x) Defining goals, needs, and preferences.
    (xi) Identifying and accessing services, supports, and resources.
    (xii) Development of risk management agreements.
    (xiii) Development of an individualized backup plan.
    (xiv) Recognizing and reporting critical events.
    (xv) Information about an advocate or advocacy systems available in 
the State and how a participant, or a participant's representative, if 
applicable, can access the advocate or advocacy systems.
    (3) Offers additional information, counseling, training, or 
assistance, including financial management services under either of the 
following conditions:
    (i) At the request of the participant, or participant's 
representative, if applicable, for any reason.
    (ii) When the State has determined the participant, or participant's 
representative, if applicable, is not effectively managing the services 
identified in the service plan or budget.
    (4) The State may mandate the use of additional assistance, 
including the use of a financial management entity, or may initiate an 
involuntary disenrollment in accordance with Sec.  441.458, if, after 
additional information, counseling, training or assistance is provided 
to a participant (or participant's representative, if applicable), the 
participant (or participant's representative, if applicable) has 
continued to demonstrate an inability to effectively manage the services 
and budget.
    (e) Annual report. The State must provide to CMS an annual report on 
the number of individuals served and the total expenditures on their 
behalf in the aggregate.
    (f) Three-year evaluation. The State must provide to CMS an 
evaluation of the overall impact of the self-directed PAS option on the 
health and welfare of participating individuals compared to non-
participants every 3 years.



Sec.  441.466  Assessment of need.

    States must conduct an assessment of the participant's needs, 
strengths, and preferences in accordance with the following:
    (a) States may use one or more processes and techniques to obtain 
information about an individual, including health condition, personal 
goals and preferences for the provision of services, functional 
limitations, age, school, employment, household, and other factors that 
are relevant to the need for and authorization and provision of 
services.
    (b) Assessment information supports the determination that an 
individual requires PAS and also supports the development of the service 
plan and budget.



Sec.  441.468  Service plan elements.

    (a) The service plan must include at least the following:
    (1) The scope, amount, frequency, and duration of each service.
    (2) The type of provider to furnish each service.
    (3) Location of the service provision.
    (4) The identification of risks that may pose harm to the 
participant along with a written individualized backup plan for 
mitigating those risks.
    (b) A State must develop a service plan for each program participant 
using a person-centered and directed planning process to ensure the 
following:
    (1) The identification of each program participant's preferences, 
choices, and abilities, and strategies to address those preferences, 
choices, and abilities.
    (2) The option for the program participant, or participant's 
representative, if applicable, to exercise choice and

[[Page 316]]

control over services and supports discussed in the plan.
    (3) Assessment of, and planning for avoiding, risks that may pose 
harm to a participant.
    (c) All of the State's applicable policies and procedures associated 
with service plan development must be carried out and include, but are 
not limited to, the following:
    (1) Allow the participant, or participant's representative, if 
applicable, the opportunity to engage in, and direct, the process to the 
extent desired.
    (2) Allow the participant, or participant's representative, if 
applicable, the opportunity to involve family, friends, and 
professionals (as desired or required) in the development and 
implementation of the service plan.
    (3) Ensure the planning process is timely.
    (4) Ensure the participant's needs are assessed and that the 
services meet the participant's needs.
    (5) Ensure the responsibilities for service plan development are 
identified.
    (6) Ensure the qualifications of the individuals who are responsible 
for service plan development reflect the nature of the program's target 
population(s).
    (7) Ensure the State reviews the service plan annually, or whenever 
necessary due to a change in the participant's needs or health status.
    (8) Ensure that a participant may request revisions to a service 
plan, based on a change in needs or health status.
    (d) When an entity that is permitted to provide other State plan 
services is responsible for service plan development, the State must 
describe the safeguards that are in place to ensure that the service 
provider's role in the planning process is fully disclosed to the 
participant, or participant's representative, if applicable, and 
controls are in place to avoid any possible conflict of interest.
    (e) An approved self-directed service plan conveys authority to the 
participant, or participant's representative, if applicable, to perform, 
at a minimum, the following tasks:
    (1) Recruit and hire workers to provide self-directed services, 
including specifying worker qualifications.
    (2) Fire workers.
    (3) Supervise workers in the provision of self-directed services.
    (4) Manage workers in the provision of self-directed services, which 
includes the following functions:
    (i) Determining worker duties.
    (ii) Scheduling workers.
    (iii) Training workers in assigned tasks.
    (iv) Evaluating workers performance.
    (5) Determine the amount paid for a service, support, or item.
    (6) Review and approve provider invoices.



Sec.  441.470  Service budget elements.

    A service budget must be developed and approved by the State based 
on the assessment of need and service plan and must include the 
following:
    (a) The specific dollar amount a participant may utilize for 
services and supports.
    (b) How the participant is informed of the amount of the service 
budget before the service plan is finalized.
    (c) The procedures for how the participant, or participant's 
representative, if applicable, may adjust the budget, including the 
following:
    (1) How the participant, or participant's representative, if 
applicable, may freely make changes to the budget.
    (2) The circumstances, if any, that may require prior approval 
before a budget adjustment is made.
    (3) The circumstances, if any, that may require a change in the 
service plan.
    (d) The procedure(s) that governs how a person, at the election of 
the State, may reserve funds to purchase items that increase 
independence or substitute for human assistance, to the extent that 
expenditures would otherwise be made for the human assistance, including 
additional goods, supports, services or supplies.
    (e) The procedure(s) that governs how a person may use a 
discretionary amount, if applicable, to purchase items not otherwise 
delineated in the budget or reserved for permissible purchases.
    (f) How participants, or their representative, if applicable, are 
afforded

[[Page 317]]

the opportunity to request a fair hearing under Sec.  441.300 if a 
participant's, or participant's representative, if applicable, request 
for a budget adjustment is denied or the amount of the budget is 
reduced.



Sec.  441.472  Budget methodology.

    (a) The State shall set forth a budget methodology that ensures 
service authorization resides with the State and meets the following 
criteria:
    (1) The State's method of determining the budget allocation is 
objective and evidence based utilizing valid, reliable cost data.
    (2) The State's method is applied consistently to participants.
    (3) The State's method is open for public inspection.
    (4) The State's method includes a calculation of the expected cost 
of the self-directed PAS and supports, if those services and supports 
were not self-directed.
    (5) The State has a process in place that describes the following:
    (i) Any limits it places on self-directed services and supports, and 
the basis for the limits.
    (ii) Any adjustments that will be allowed and the basis for the 
adjustments.
    (b) The State must have procedures to safeguard participants when 
the budgeted service amount is insufficient to meet a participant's 
needs.
    (c) The State must have a method of notifying participants, or their 
representative, if applicable, of the amount of any limit that applies 
to a participant's self-directed PAS and supports.
    (d) The budget may not restrict access to other medically necessary 
care and services furnished under the plan and approved by the State but 
not included in the budget.
    (e) The State must have a procedure to adjust a budget when a 
reassessment indicates a change in a participant's medical condition, 
functional status or living situation.



Sec.  441.474  Quality assurance and improvement plan.

    (a) The State must provide a quality assurance and improvement plan 
that describes the State's system of how it will perform activities of 
discovery, remediation and quality improvement in order to learn of 
critical incidents or events that affect participants, correct 
shortcomings, and pursue opportunities for system improvement.
    (b) The quality assurance and improvement plan shall also describe 
the system performance measures, outcome measures, and satisfaction 
measures that the State must use to monitor and evaluate the self-
directed State plan option. Quality of care measures must be made 
available to CMS upon request and include indicators approved or 
prescribed by the Secretary.



Sec.  441.476  Risk management.

    (a) The State must specify the risk assessment methods it uses to 
identify potential risks to the participant.
    (b) The State must specify any tools or instruments it uses to 
mitigate identified risks.
    (c) The State must ensure that each service plan includes the risks 
that an individual is willing and able to assume, and the plan for how 
identified risks will be mitigated.
    (d) The State must ensure that the risk management plan is the 
result of discussion and negotiation among the persons designated by the 
State to develop the service plan, the participant, the participant's 
representative, if any, and others from whom the participant may seek 
guidance.



Sec.  441.478  Qualifications of providers of personal assistance.

    (a) States have the option to permit participants, or their 
representatives, if applicable, to hire any individual capable of 
providing the assigned tasks, including legally liable relatives, as 
paid providers of the PAS identified in the service plan and budget.
    (b) Participants, or their representatives, if applicable, retain 
the right to train their workers in the specific areas of personal 
assistance needed by the participant and to perform the needed 
assistance in a manner that comports with the participant's personal, 
cultural, and/or religious preferences. Participants, or their 
representatives, if applicable, also have

[[Page 318]]

the right to access other training provided by or through the State so 
that their PAS providers can meet any additional qualifications required 
or desired by participants, or participants' representatives, if 
applicable.
    (c) Participants, or their representatives, if applicable, retain 
the right to establish additional staff qualifications based on 
participants' needs and preferences.



Sec.  441.480  Use of a representative.

    (a) States may permit participants to appoint a representative to 
direct the provision of self-directed PAS on their behalf. The following 
types of representatives are permissible:
    (1) A minor child's parent or guardian.
    (2) An individual recognized under State law to act on behalf of an 
incapacitated adult.
    (3) A State-mandated representative, after approval by CMS of the 
State criteria, if the participant has demonstrated, after additional 
counseling, information, training or assistance, the inability to self-
direct PAS.
    (b) A person acting as a representative for a participant receiving 
self-directed PAS is prohibited from acting as a provider of self-
directed PAS to the participant.



Sec.  441.482  Permissible purchases.

    (a) Participants, or their representatives, if applicable, may, at 
the State's option, use their service budgets to pay for items that 
increase a participant's independence or substitute (such as a microwave 
oven or an accessibility ramp) for human assistance, to the extent that 
expenditures would otherwise be made for the human assistance.
    (b) The services, supports and items that are purchased with a 
service budget must be linked to an assessed participant need or goal 
established in the service plan.



Sec.  441.484  Financial management services.

    (a) States may choose to provide financial management services to 
participants, or their representatives, as applicable, self-directing 
PAS, with the exception of those participants utilizing the cash option 
who directly perform those functions, utilizing a financial management 
entity, through the following arrangements:
    (1) States may use a reporting or subagent through its fiscal 
intermediary in accordance with section 3504 of the IRS Code and Revenue 
Procedure 80-4 and Notice 2003-70; or
    (2) States may use a vendor organization that has the capabilities 
to perform the required tasks in accordance with Section 3504 of the IRS 
Code and Revenue Procedure 70-6. When private entities furnish financial 
management services, the procurement method must meet the requirements 
set forth in 45 CFR 74.40 through 74.48.
    (b) States must provide oversight of financial management services 
by performing the following functions:
    (1) Monitoring and assessing the performance of financial management 
entity, including assuring the integrity of financial transactions they 
perform.
    (2) Designating a State entity or entities responsible for this 
monitoring.
    (3) Determining how frequently financial management entity 
performance will be assessed.
    (c) A financial management entity must provide functions including, 
but not limited to, the following:
    (1) Collect and process timesheets of the participant's workers.
    (2) Process payroll, withholding, filing and payment of applicable 
Federal, State and local employment-related taxes and insurance.
    (3) Maintain a separate account for each participant's budget.
    (4) Track and report disbursements and balances of participant 
funds.
    (5) Process and pay invoices for goods and services approved in the 
service plan.
    (6) Provide to participants periodic reports of expenditures and the 
status of the approved service budget.
    (d) States not utilizing a financial management entity must perform 
the functions listed in paragraph (c) of this section on behalf of 
participants self-directing PAS, with the exception of those 
participants utilizing the cash option who directly perform those 
functions.
    (e) States will be reimbursed for the cost of financial management 
services, either provided directly or through a

[[Page 319]]

financial management entity, at the administrative rate of 50 percent.



PART 442_STANDARDS FOR PAYMENT TO NURSING FACILITIES AND INTERMEDIATE CARE FACILITIES FOR THE MENTALLY RETARDED--Table of Contents




                      Subpart A_General Provisions

Sec.
442.1 Basis and purpose.
442.2 Terms.

                      Subpart B_Provider Agreements

442.10 State plan requirement.
442.12 Provider agreement: General requirements.
442.13 Effective date of provider agreement.
442.14 Effect of change of ownership.
442.15 Duration of agreement for ICFs/MR.
442.16 Extension of agreement for ICFs/MR.
442.30 Agreement as evidence of certification.
442.40 Availability of FFP during appeals for ICFs/MR.
442.42 FFP under a retroactive provider agreement following appeal.

                   Subpart C_Certification of ICFs/MR

442.100 State plan requirements.
442.101 Obtaining certification.
442.105 Certification of ICFs/MR with deficiencies: General provisions.
442.109 Certification period for ICFs/MR: General provisions.
442.110 Certification period for ICFs/MR with standard-level 
          deficiencies.
442.117 Termination of certification for ICFs/MR whose deficiencies pose 
          immediate jeopardy.
442.118 Denial of payments for new admissions to an ICF/MR.
442.119 Duration of denial of payments and subsequent termination of an 
          ICF/MR.

Subparts D-F [Reserved]

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

    Source: 43 FR 45233, Sept. 29, 1978, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  442.1  Basis and purpose.

    (a) This part states requirements for provider agreements for 
facility certification relating to the provision of services furnished 
by nursing facilities and intermediate care facilities for the mentally 
retarded. This part is based on the following sections of the Act:

Section 1902(a)(4), administrative methods for proper and efficient 
operation of the State plan;
Section 1902(a)(27), provider agreements;
Section 1902(a)(28), nursing facility standards;
Section 1902(a)(33)(B), State survey agency functions; Section 1902(i), 
circumstances and procedures for denial of payment and termination of 
provider agreements in certain cases;
Section 1905(c), definition of nursing facility;
Section 1905(d), definition of intermediate care facility for the 
mentally retarded;
Section 1905 (f), definition of nursing facility services;
Section 1910, certification and approval of ICFs/MR and of RHCs;
Section 1913, hospital providers of nursing facility services;
Section 1919 (g) and (h), survey, certification and enforcement of 
nursing facilities; and
Section 1922, correction and reduction plans for intermediate care 
facilities for the mentally retarded.

    (b) Section 431.610 of this subchapter contains requirements for 
designating the State licensing agency to survey these facilities and 
for certain survey agency responsibilities.

[43 FR 45233, Sept. 29, 1978, as amended at 47 FR 31533, July 20, 1982; 
59 FR 56235, Nov. 10, 1994]



Sec.  442.2  Terms.

    In this part--
    Facility refers to a nursing facility, and an intermediate care 
facility for the mentally retarded or persons with related conditions 
(ICF/MR).
    Facility, and any specific type of facility referred to, may include 
a distinct part of a facility as specified in Sec.  440.40 or Sec.  
440.150 of this subchapter.
    Immediate jeopardy means a situation in which immediate corrective 
action is necessary because the provider's noncompliance with one or 
more requirements of participation or conditions of participation has 
caused, or is likely to cause, serious injury, harm, impairment, or 
death to an individual receiving care in a facility.
    New admission means the admission of a Medicaid recipient who has 
never

[[Page 320]]

been in the facility or, if previously admitted, had been discharged or 
had voluntarily left the facility. The term does not include the 
following:
    (a) Individuals who were in the facility before the effective date 
of denial of payment for new admissions, even if they become eligible 
for Medicaid after that date.
    (b) If the approved State plan includes payments for reserved beds, 
individuals who, after a temporary absence from the facility, are 
readmitted to beds reserved for them in accordance with Sec.  447.40(a) 
of this chapter.

[43 FR 45233, Sept. 29, 1978, as amended at 51 FR 24491, July 3, 1986; 
53 FR 1993, Jan. 25, 1988; 54 FR 5358, Feb. 2, 1989; 56 FR 48865, Sept. 
26, 1991; 59 FR 56235, Nov. 10, 1994]



                      Subpart B_Provider Agreements



Sec.  442.10  State plan requirement.

    A State plan must provide that requirements of this subpart are met.



Sec.  442.12  Provider agreement: General requirements.

    (a) Certification and recertification. Except as provided in 
paragraph (b) of this section, a Medicaid agency may not execute a 
provider agreement with a facility for nursing facility services nor 
make Medicaid payments to a facility for those services unless the 
Secretary or the State survey agency has certified the facility under 
this part to provide those services. (See Sec.  442.101 for 
certification by the Secretary or by the State survey agency).
    (b) Exception. The certification requirement of paragraph (a) of 
this section does not apply with respect to religious nonmedical 
institutions as defined in Sec.  440.170(b) of this chapter.
    (c) Conformance with certification condition. An agreement must be 
in accordance with the certification provisions set by the Secretary or 
the survey agency under subpart C of this part for ICFs/MR or subpart E 
of part 488 of this chapter for NFs.
    (d) Denial for good cause. (1) If the Medicaid agency has adequate 
documentation showing good cause, it may refuse to execute an agreement, 
or may cancel an agreement, with a certified facility.
    (2) A provider agreement is not a valid agreement for purposes of 
this part even though certified by the State survey agency, if the 
facility fails to meet the civil rights requirements set forth in 45 CFR 
parts 80, 84, and 90.

[45 FR 22936, Apr. 4, 1980, as amended at 56 FR 48865, Sept. 26, 1991; 
59 FR 56235, Nov. 10, 1994; 64 FR 67052, Nov. 30, 1999]



Sec.  442.13  Effective date of provider agreement.

    The effective date of a provider agreement with an NF or ICF/MR is 
determined in accordance with the rules set forth in Sec.  431.108.

[62 FR 43936, Aug. 18, 1997]



Sec.  442.14  Effect of change of ownership.

    (a) Assignment of agreement. When there is a change of ownership, 
the Medicaid agency must automatically assign the agreement to the new 
owner.
    (b) Conditions that apply to assigned agreements. An assigned 
agreement is subject to all applicable statutes and regulations and to 
the terms and conditions under which it was originally issued, 
including, but not limited to, the following:
    (1) Any existing plan of correction.
    (2) Any expiration date for ICFs/MR.
    (3) Compliance with applicable health and safety requirements.
    (4) Compliance with the ownership and financial interest disclosure 
requirements of Sec. Sec.  455.104 and 455.105 of this chapter.
    (5) Compliance with civil rights requirements set forth in 45 CFR 
parts 80, 84, and 90.
    (6) Compliance with any additional requirements imposed by the 
Medicaid agency.

[45 FR 22936, Apr. 4, 1980, as amended at 53 FR 20495, June 3, 1988; 59 
FR 56235, Nov. 10, 1994]



Sec.  442.15  Duration of agreement for ICFs/MR.

    (a) Except as specified under Sec.  442.16, the duration of an 
agreement may not exceed 12 months.

[[Page 321]]

    (b) The agreement must be for the same duration as the certification 
period set by the survey agency. However, if the Medicaid agency has 
adequate documentation showing good cause, it may make an agreement for 
less than this period.
    (c) FFP is available for services provided by a facility for up to 
30 days after its agreement expires or terminates under the conditions 
specified in Sec.  441.11 of this subchapter.

[43 FR 45233, Sept. 29, 1978, as amended at 47 FR 31532, July 20, 1982; 
59 FR 56235, Nov. 10, 1994]



Sec.  442.16  Extension of agreement for ICFs/MR.

    A Medicaid agency may extend a provider agreement for a single 
period of up to 2 months beyond the original expiration date specified 
in the agreement if it receives written notice from the survey agency, 
before the expiration date of the agreement, that extension will not 
jeopardize the patients' health and safety, and--
    (a) Is needed to prevent irreparable harm to the facility or 
hardship to the recipients in the facility; or
    (b) Is needed because it is impracticable to determine, before the 
expiration date, whether the facility meets certification requirements.

[43 FR 45233, Sept. 29, 1978, as amended at 52 FR 32551, Aug. 28, 1987; 
53 FR 20495, June 3, 1988; 59 FR 56235, Nov. 10, 1994]



Sec.  442.30  Agreement as evidence of certification.

    (a) Under Sec. Sec.  440.40(a) and 440.150 of this chapter, FFP is 
available in expenditures for NF and ICF/MR services only if the 
facility has been certified as meeting the requirements for Medicaid 
participation, as evidenced by a provider agreement executed under this 
part. An agreement is not valid evidence that a facility has met those 
requirements if CMS determines that--
    (1) The survey agency failed to apply the applicable requirements 
under subpart B of part 483 of this chapter for NFs or subpart I of part 
483 of this chapter, which set forth the conditions of participation for 
ICFs/MR.
    (2) The survey agency failed to follow the rules and procedures for 
certification set forth in subpart C of this part, subpart E of part 
488, and Sec.  431.610 of this subchapter;
    (3) The survey agency failed to perform any of the functions 
specified in Sec.  431.610(g) of this subchapter relating to evaluating 
and acting on information about the facility and inspecting the 
facility;
    (4) The agency failed to use the Federal standards, and the forms, 
methods and procedures prescribed by CMS as required under Sec.  
431.610(f)(1) or Sec.  488.318(b) of this chapter, for determining the 
qualifications of providers; or
    (5) The survey agency failed to adhere to the following principles 
in determining compliance:
    (i) The survey process is the means to assess compliance with 
Federal health, safety and quality standards;
    (ii) The survey process uses resident outcomes as the primary means 
to establish the compliance status of facilities. Specifically, 
surveyors will directly observe the actual provision of care and 
services to residents, and the effects of that care, to assess whether 
the care provided meets the needs of individual residents;
    (iii) Surveyors are professionals who use their judgment, in concert 
with Federal forms and procedures, to determine compliance;
    (iv) Federal procedures are used by all surveyors to ensure uniform 
and consistent application and interpretation of Federal requirements;
    (v) Federal forms are used by all surveyors to ensure proper 
recording of findings and to document the basis for the findings.
    (6) The survey agency failed to assess in a systematic manner a 
facility's actual provision of care and services to residents and 
effects of that care on residents.
    (7) Required elements of the NF survey process fails to include all 
of the following:
    (i) An entrance conference;
    (ii) A resident-centered tour of facility;
    (iii) An in-depth review of a sample of residents including 
observation, interview and record review;
    (iv) Observation of the preparation and administration of drugs for 
a sample of residents;

[[Page 322]]

    (v) Evaluation of a facility's meals, dining areas and eating 
assistance procedures;
    (vi) Formulation of a deficiency statement based on the 
incorporation of all appropriate findings onto the survey report form;
    (vii) An exit conference; and
    (viii) Follow-up surveys as appropriate.
    (8) The agreement's terms and conditions do not meet the 
requirements of this subpart.
    (b) The Administrator will make the determination under paragraph 
(a) of this section through onsite surveys, other Federal reviews, State 
certification records, or reports he may require from the Medicaid or 
survey agency.
    (c) If the Administrator disallows a State's claim for FFP because 
of a determination under paragraph (a) of this section, the State is 
entitled upon request to reconsideration of the disallowance under 45 
CFR part 16.

[43 FR 45233, Sept. 29, 1978, as amended at 51 FR 21558, June 13, 1986; 
53 FR 20495, June 3, 1988; 53 FR 23101, June 17, 1988; 56 FR 48865, 
Sept. 26, 1991; 59 FR 56235, Nov. 10, 1994]



Sec.  442.40  Availability of FFP during appeals for ICFs/MR.

    (a) Definitions. As used in this section--
    Effective date of expiration means the date of expiration originally 
specified in the provider agreement, or the later date specified if the 
agreement is extended under Sec.  442.16; and
    Effective date of termination means a date earlier than the 
expiration date, set by the Medicaid agency when continuing 
participation until the expiration date is not justified, because the 
facility no longer meets the requirements for participation.
    (b) Scope, applicability, and effective date--(1) Scope. This 
section sets forth the extent of FFP in State Medicaid payments to an 
ICF/MR after its provider agreement has been terminated or has expired 
and not been renewed.
    (2) Applicability. (i) This section and Sec.  442.42 apply only when 
the Medicaid agency, of its own volition, terminates or does not a renew 
a provider agreement, and only when the survey agency certifies that 
there is no jeopardy to recipient health and safety. When the survey 
agency certifies that there is jeopardy to recipient health and safety, 
or when it fails to certify that there is no jeopardy, FFP ends on the 
effective date of termination or expiration.
    (ii) When the State acts under instructions from CMS, FFP ends on 
the date specified by CMS (CMS instructs the State to terminate the 
Medicaid provider agreement when CMS in validating a State survey agency 
certification, determines that an ICF/MR does not meet the requirements 
for participation.)
    (3) Effective date. This section and Sec.  442.42 apply to 
terminations or expirations that are effective on or after September 28, 
1987. For terminations or nonrenewals that were effective before that 
date, FFP may continue for up to 120 days from September 28, 1987, or 12 
months from the effective date of termination or nonrenewal, whichever 
is earlier.
    (c) Basic rules. (1) Except as provided in paragraphs (d) and (e) of 
this section, FFP in payments to an ICF/MR ends on the effective date of 
termination of the facility's provider agreement, or if the agreement is 
not terminated, on the effective date of expiration.
    (2) If State law, or a Federal or State court order or injunction, 
requires the agency to extend the provider agreement or continue 
payments to a facility after the dates specified in paragraph (d) of 
this section, FFP is not available in those payments.
    (d) Exception: Continuation of FFP after termination or expiration 
of provider agreement--(1) Conditions for continuation. FFP is available 
after the effective date of termination or expiration only if--
    (i) The evidentiary hearing required under Sec.  431.153 of this 
chapter is provided by the State agency after the effective date of 
termination or expiration (or, if begun before termination or 
expiration, is not completed until after that date); and
    (ii) Termination or nonrenewal action is based on a survey agency 
certification that there is no jeopardy to recipients' health and 
safety.

[[Page 323]]

    (2) Extent of continuation. FFP is available only through the 
earlier of the following:
    (i) The date of issuance of an administrative hearing decision that 
upholds the agency's termination or nonrenewal action.
    (ii) The 120th day after the effective date of termination of the 
facility's provider agreement or, if the agreement is not terminated, 
the 120th day after the effective date of expiration. (If a hearing 
decision that upholds the facility is issued after the end of the 120-
day period, when FFP has already been discontinued, the rules of Sec.  
442.42 on retroactive agreements apply).
    (e) Applicability of Sec.  441.11. If FFP is continued during appeal 
under paragraph (d) of this section, the 30-day period provided by Sec.  
441.11 of this chapter would not begin to run until issuance of a 
hearing decision that upholds the agency's termination or nonrenewal 
action.

[52 FR 32551, Aug. 28, 1987, as amended at 56 FR 48865, Sept. 26, 1991; 
59 FR 56236, Nov. 10, 1994]



Sec.  442.42  FFP under a retroactive provider agreement following appeal.

    (a) Basic rule. Except as specified in paragraph (b) of this 
section, if an NF or ICF/MR prevails on appeal from termination or, in 
the case of an ICF/MR, nonrenewal of a provider agreement, and the State 
issues a retroactive agreement, FFP is available beginning with the 
retroactive effective date, which must be determined in accordance with 
Sec.  442.13.
    (b) Exception. This rule does not apply if CMS determines, under 
Sec.  442.30, that the agreement is not valid evidence that the facility 
meets the requirements for participation. This exclusion applies even if 
the State issues the new agreement as the result of an administrative 
hearing decision favorable to the facility or under a Federal or State 
court order.

[52 FR 32551, Aug. 28, 1987, as amended at 59 FR 56236, Nov. 10, 1994]



                   Subpart C_Certification of ICFs/MR



Sec.  442.100  State plan requirements.

    A State plan must provide that the requirements of this subpart and 
part 483 are met.

[53 FR 20495, June 3, 1988]



Sec.  442.101  Obtaining certification.

    (a) This section states the requirements for obtaining notice of an 
ICF/MR's certification before a Medicaid agency executes a provider 
agreement under Sec.  442.12.
    (b) The agency must obtain notice of certification from the 
Secretary for an ICF/MR located on an Indian reservation.
    (c) The agency must obtain notice of certification from the survey 
agency for all other ICFs/MR.
    (d) The notice must indicate that one of the following provisions 
pertains to the ICF/MR:
    (1) An ICF/MR meets the conditions of participation set forth in 
subpart I of part 483 of this chapter.
    (2) The ICF/MR has been granted a waiver or variance by CMS or the 
survey agency under subpart I of part 483 of this chapter.
    (3) An ICF/MR has been certified with standard-level deficiencies 
and
    (i) All conditions of participation are found met; and
    (ii) The facility submits an acceptable plan of correction covering 
the remaining deficiencies, subject to other limitations specified in 
Sec.  442.105.
    (e) The failure to meet one or more of the applicable conditions of 
participation is cause for termination or non-renewal of the ICF/MR 
provider agreement.

[56 FR 48866, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
59 FR 56236, Nov. 10, 1994]



Sec.  442.105  Certification of ICFs/MR with deficiencies: General provisions.

    If a survey agency finds a facility deficient in meeting the 
standards for ICFs/MR, as specified under subpart I of part 483 of this 
chapter, the agency may certify the facility for Medicaid purposes under 
the following conditions:

[[Page 324]]

    (a) The agency finds that the facility's deficiencies, individually 
or in combination, do not jeopardize the patient's health and safety, 
nor seriously limit the facility's capacity to give adequate care.
    (b) The agency finds acceptable the facility's written plan for 
correcting the deficiencies.
    (c) If a facility was previously certified with a deficiency and has 
a different deficiency at the time of the next survey, the agency 
documents that the facility--
    (1) Was unable to stay in compliance with the standard for ICFs/MR 
for reasons beyond its control, or despite intensive efforts to comply; 
and
    (2) Is making the best use of its resources to furnish adequate 
care.
    (d) If a facility has the same deficiency it had under the prior 
certification, the agency documents that the facility--
    (1) Did achieve compliance with the standard for ICFs/MR at some 
time during the prior certification period;
    (2) Made a good faith effort, as judged by the survey agency, to 
stay in compliance; and
    (3) Again became out of compliance for reasons beyond its control.

[56 FR 48866, Sept. 26, 1991, as amended at 57 FR 43924, Sept. 23, 1992; 
57 FR 54712, Nov. 20, 1992; 59 FR 56236, Nov. 10, 1994]



Sec.  442.109  Certification period for ICFs/MR: General provisions.

    (a) A survey agency may certify a facility that fully meets 
applicable requirements for up to 12 months.
    (b) The survey agency may notify the Medicaid agency that the term 
of a provider agreement may be extended up to 2 months after the 
expiration date of the agreement under the conditions specified in Sec.  
442.16.

[43 FR 45233, Sept. 29, 1978. Redesignated at 53 FR 1993, Jan. 25, 1988, 
and amended at 59 FR 56236, Nov. 10, 1994]



Sec.  442.110  Certification period for ICFs/MR with standard-level deficiencies.

    (a) Facilities with deficiencies may be certified under Sec.  
442.105 for the period specified in either paragraph (b) or (c) of this 
section.
    (b) The survey agency may certify a facility for a period that ends 
no later than 60 days after the last day specified in the plan for 
correcting deficiencies. The certification period must not exceed 12 
months, including the period allowed for corrections.
    (c) The survey agency may certify a facility for up to 12 months 
with a condition that the certification will be automatically canceled 
on a specified date within the certification period unless--
    (1) The survey agency finds that all deficiencies have been 
satisfactorily corrected; or
    (2) The survey agency finds and notifies the Medicaid agency that 
the facility has made substantial progress in correcting the 
deficiencies and has a new plan for correction that is acceptable.

The automatic cancellation date must be no later than 60 days after the 
last day specified in the plan for correction of deficiencies under 
Sec.  442.105.

[43 FR 45233, Sept. 29, 1978. Redesignated and amended at 53 FR 1993, 
Jan. 25, 1988; 59 FR 56236, Nov. 10, 1994]



Sec.  442.117  Termination of certification for ICFs/MR whose deficiencies pose immediate jeopardy.

    (a) A survey agency must terminate a facility's certification if it 
determines that--
    (1) The facility no longer meets conditions of participation for 
ICFs/MR as specified in subpart I of part 483 of this chapter.
    (2) The facility's deficiencies pose immediate jeopardy to 
residents' health and safety.
    (b) Subsequent to a certification of a facility's noncompliance, the 
Medicaid agency must, in terminating the provider agreement, follow the 
appeals process specified in part 431, subpart D of this chapter.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]



Sec.  442.118  Denial of payments for new admissions to an ICF/MR.

    (a) Basis for denial of payments. The Medicaid agency may deny 
payment for new admissions to an ICF/MR that

[[Page 325]]

no longer meets the applicable conditions of participation specified 
under subpart I of part 483 of this chapter.
    (b) Agency procedures. Before denying payments for new admissions, 
the Medicaid agency must comply with the following requirements:
    (1) Provide the facility up to 60 days to correct the cited 
deficiencies and comply with conditions of participation for ICFs/MR.
    (2) If at the end of the specified period the facility has not 
achieved compliance, give the facility notice of intent to deny payment 
for new admissions, and opportunity for an informal hearing.
    (3) If the facility requests a hearing, provide an informal hearing 
that includes--
    (i) The opportunity for the facility to present, before a State 
Medicaid official who was not involved in making the initial 
determination, evidence or documentation, in writing or in person, to 
refute the decision that the facility is out of compliance with the 
conditions of participation for ICFs/MR.
    (ii) A written decision setting forth the factual and legal bases 
pertinent to a resolution of the dispute.
    (4) If the decision of the informal hearing is to deny payments for 
new admissions, provide the facility and the public, at least 15 days 
before the effective date of the sanction, with a notice that includes 
the effective date and the reasons for the denial of payments.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]



Sec.  442.119  Duration of denial of payments and subsequent termination of an ICF/MR.

    (a) Period of denial. The denial of payments for new admissions will 
continue for 11 months after the month it was imposed unless, before the 
end of that period, the Medicaid agency finds that--
    (1) The facility has corrected the deficiencies or is making a good 
faith effort to achieve compliance with the conditions of participation 
for ICFs/MR; or
    (2) The deficiencies are such that it is necessary to terminate the 
facility's provider agreement.
    (b) Subsequent termination. The Medicaid agency must terminate a 
facility's provider agreement--
    (1) Upon the agency's finding that the facility has been unable to 
achieve compliance with the conditions of participation for ICFs/MR 
during the period that payments for new admissions have been denied;
    (2) Effective the day following the last day of the denial of 
payments period; and
    (3) In accordance with the procedures for appeal of terminations set 
forth in subpart D of part 431 of this chapter.

[51 FR 24491, July 3, 1986, as amended at 59 FR 56236, Nov. 10, 1994]

Subparts D-F [Reserved]



PART 447_PAYMENTS FOR SERVICES--Table of Contents




                 Subpart A_Payments: General Provisions

Sec.
447.1 Purpose.
447.10 Prohibition against reassignment of provider claims.
447.15 Acceptance of State payment as payment in full.
447.20 Provider restrictions: State plan requirements.
447.21 Reduction of payments to providers.
447.25 Direct payments to certain recipients for physicians' or 
          dentists' services.
447.30 Withholding the Federal share of payments to Medicaid providers 
          to recover Medicare overpayments.
447.31 Withholding Medicare payments to recover Medicaid overpayments.
447.40 Payments for reserving beds in institutions.
447.45 Timely claims payment.
447.46 Timely claims payment by MCOs.

                              Cost Sharing

447.50 Cost sharing: Basis and purpose.

         Enrollment Fee, Premium or Similar Cost Sharing Charge

447.51 Requirements and options.
447.52 Minimum and maximum income-related charges.

   Deductible, Coinsurance, Co-Payment or Similar Cost-Sharing Charge

447.53 Applicability; specification; multiple charges.
447.54 Maximum allowable charges.
447.55 Standard co-payment.
447.56 Income-related charges.

[[Page 326]]

447.57 Restrictions on payments to providers.
447.58 Payments to prepaid capitation organizations.

                     Federal Financial Participation

447.59 FFP: Conditions relating to cost-sharing.
447.60 Cost-sharing requirements for services furnished by MCOs.

        Alternative Premiums and Cost Sharing Under Section 1916A

447.62 Alternative premiums and cost sharing: Basis, purpose and scope.
447.64 Alternative premiums, enrollment fees, or similar fees: State 
          plan requirements.
447.66 General alternative premium protections.
447.68 Alternative copayments, coinsurance, deductibles, or similar cost 
          sharing charges: State plan requirements.
447.70 General alternative cost sharing protections.
447.71 Alternative premium and cost sharing exemptions and protections 
          for individuals with family incomes at or below 100 percent of 
          the FPL.
447.72 Alternative premium and cost sharing exemptions and protections 
          for individuals with family incomes above 100 percent but at 
          or below 150 percent of the FPL.
447.74 Alternative premium and cost sharing protections for individuals 
          with family incomes above 150 percent of the FPL.
447.76 Public schedule.
447.78 Aggregate limits on alternative premiums and cost sharing.
447.80 Enforceability of alternative premiums and cost sharing.
447.82 Restrictions on payments to providers.
447.88 Options for claiming FFP payment for section 1920A presumptive 
          eligibility medical assistance payments.

              Subpart B_Payment Methods: General Provisions

447.200 Basis and purpose.
447.201 State plan requirements.
447.202 Audits.
447.203 Documentation of payment rates.
447.204 Encouragement of provider participation.
447.205 Public notice of changes in Statewide methods and standards for 
          setting payment rates.
447.206 Cost limit for providers operated by units of government.
447.207 Retention of payments.

  Subpart C_Payment For Inpatient Hospital and Long-Term Care Facility 
                                Services

447.250 Basis and purpose.

                              Payment Rates

447.251 Definitions.
447.252 State plan requirements.
447.253 Other requirements.
447.255 Related information.
447.256 Procedures for CMS action on assurances and State plan 
          amendments.

                     Federal Financial Participation

447.257 FFP: Conditions relating to institutional reimbursement.

                              Upper Limits

447.271 Upper limits based on customary charges.
447.272 Inpatient services: Application of upper payment limits.

                           Swing-Bed Hospitals

447.280 Hospital providers of NF services (swing-bed hospitals).

Subpart D [Reserved]

        Subpart E_Payment Adjustments for Hospitals That Serve a 
             Disproportionate Number of Low-Income Patients

447.296 Limitations on aggregate payments for disproportionate share 
          hospitals for the period January 1, 1992 through September 30, 
          1992.
447.297 Limitations on aggregate payments for disproportionate share 
          hospitals beginning October 1, 1992.
447.298 State disproportionate share hospital allotments.
447.299 Reporting requirements.

 Subpart F_Payment Methods for Other Institutional and Noninstitutional 
                                Services

447.300 Basis and purpose.
447.302 State plan requirements.
447.304 Adherence to upper limits; FFP.

                 Outpatient Hospital and Clinic Services

447.321 Outpatient hospital and clinic services: Application of upper 
          payment limits.

                Other Inpatient and Outpatient Facilities

447.325 Other inpatient and outpatient facility services: Upper limits 
          of payment.
447.342 [Reserved]

                        Prepaid Capitation Plans

447.362 Upper limits of payment: Nonrisk contract.

[[Page 327]]

                      Rural Health Clinic Services

447.371 Services furnished by rural health clinics.

Subparts G-H [Reserved]

                       Subpart I_Payment for Drugs

447.500 Basis and purpose.
447.502 Definitions.
447.504 Determination of AMP.
447.505 Determination of best price.
447.506 Authorized generic drugs.
447.508 Exclusion from best price of certain sales at a nominal price.
447.510 Requirements for manufacturers.
447.512 Drugs: Aggregate upper limits of payment.
447.514 Upper limits for multiple source drugs.
447.516 Upper limits for drugs furnished as part of services.
447.518 State plan requirements, findings and assurances.
447.520 FFP: Conditions relating to physician-administered drugs.

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

    Source: 43 FR 45253, Sept. 29, 1978, unless otherwise noted.



                 Subpart A_Payments: General Provisions



Sec.  447.1  Purpose.

    This subpart prescribes State plan requirements, FFP limitations and 
procedures concerning payments made by State Medicaid agencies for 
Medicaid services.



Sec.  447.10  Prohibition against reassignment of provider claims.

    (a) Basis and purpose. This section implements section 1902(a)(32) 
of the Act which prohibits State payments for Medicaid services to 
anyone other than a provider or recipient, except in specified 
circumstances.
    (b) Definitions. For purposes of this section:
    Facility means an institution that furnishes health care services to 
inpatients.
    Factor means an individual or an organization, such as a collection 
agency or service bureau, that advances money to a provider for accounts 
receivable that the provider has assigned, sold or transferred to the 
individual organization for an added fee or a deduction of a portion of 
the accounts receivable. Factor does not include a business 
representative as described in paragraph (f) of this section.
    Organized health care delivery system means a public or private 
organization for delivering health services. It includes, but is not 
limited to, a clinic, a group practice prepaid capitation plan, and a 
health maintenance organization.
    (c) State plan requirements. A State plan must provide that the 
requirements of paragraphs (d) through (h) of this section are met.
    (d) Who may receive payment. Payment may be made only--
    (1) To the provider; or
    (2) To the recipient if he is a noncash recipient eligible to 
receive the payment under Sec.  447.25; or
    (3) In accordance with paragraphs (e), (f), and (g) of this section.
    (e) Reassignments. Payment may be made in accordance with a 
reassignment from the provider to a government agency or reassignment by 
a court order.
    (f) Business agents. Payment may be made to a business agent, such 
as a billing service or an accounting firm, that furnishes statements 
and receives payments in the name of the provider, if the agent's 
compensation for this service is--
    (1) Related to the cost of processing the billing;
    (2) Not related on a percentage or other basis to the amount that is 
billed or collected; and
    (3) Not dependent upon the collection of the payment.
    (g) Individual practitioners. Payment may be made to--
    (1) The employer of the practitioner, if the practitioner is 
required as a condition of employment to turn over his fees to the 
employer;
    (2) The facility in which the service is provided, if the 
practitioner has a contract under which the facility submits the claim; 
or
    (3) A foundation, plan, or similar organization operating an 
organized health care delivery system, if the practitioner has a 
contract under which the organization submits the claim.

[[Page 328]]

    (h) Prohibition of payment to factors. Payment for any service 
furnished to a recipient by a provider may not be made to or through a 
factor, either directly or by power of attorney.

[43 FR 45253, Sept. 29, 1978, as amended at 46 FR 42672, Aug. 24, 1981; 
61 FR 38398, July 24, 1996]



Sec.  447.15  Acceptance of State payment as payment in full.

    A State plan must provide that the Medicaid agency must limit 
participation in the Medicaid program to providers who accept, as 
payment in full, the amounts paid by the agency plus any deductible, 
coinsurance or copayment required by the plan to be paid by the 
individual. However, the provider may not deny services to any eligible 
individual on account of the individual's inability to pay the cost 
sharing amount imposed by the plan in accordance with Sec.  431.55(g) or 
Sec.  447.53. The previous sentence does not apply to an individual who 
is able to pay. An individual's inability to pay does not eliminate his 
or her liability for the cost sharing charge.

[50 FR 23013, May 30, 1985]



Sec.  447.20  Provider restrictions: State plan requirements.

    A State plan must provide for the following:
    (a) In the case of an individual who is eligible for medical 
assistance under the plan for service(s) for which a third party or 
parties is liable for payment, if the total amount of the established 
liability of the third party or parties for the service is--
    (1) Equal to or greater than the amount payable under the State plan 
(which includes, when applicable, cost-sharing payments provided for in 
Sec. Sec.  447.53 through 447.56), the provider furnishing the service 
to the individual may not seek to collect from the individual (or any 
financially responsible relative or representative of that individual) 
any payment amount for that service; or
    (2) Less than the amount payable under the State plan (including 
cost sharing payments set forth in Sec. Sec.  447.53 through 447.56), 
the provider furnishing the service to that individual may collect from 
the individual (or any financially responsible relative or 
representative of the individual) an amount which is the lesser of--
    (i) Any cost-sharing payment amount imposed upon the individual 
under Sec. Sec.  447.53 through 447.56; or
    (ii) An amount which represents the difference between the amount 
payable under the State plan (which includes, where applicable, cost-
sharing payments provided for in Sec. Sec.  447.53 through 447.56) and 
the total of the established third party liability for the services.
    (b) A provider may not refuse to furnish services covered under the 
plan to an individual who is eligible for medical assistance under the 
plan on account of a third party's potential liability for the 
service(s).

[55 FR 1433, Jan. 16, 1990]



Sec.  447.21  Reduction of payments to providers.

    If a provider seeks to collect from an individual (or any 
financially responsible relative or representative of that individual) 
an amount that exceeds an amount specified under Sec.  447.20(a)--
    (a) The Medicaid agency may provide for a reduction of any payment 
amount otherwise due to the provider in addition to any other sanction 
available to the agency; and
    (b) The reduction may be equal to up to three times the amount that 
the provider sought to collect in violation of Sec.  447.20(a).

[55 FR 1433, Jan. 16, 1990]



Sec.  447.25  Direct payments to certain recipients for physicians' or dentists' services.

    (a) Basis and purpose. This section implements section 1905(a) of 
the Act by prescribing requirements applicable to States making direct 
payments to certain recipients for physicians' or dentists' services.
    (b) State plan requirements. Except for groups specified in 
paragraph (c) of this section, a State may make direct payments to 
recipients for physicians' or dentists' services. If it does so, the 
State plan must--
    (1) Provide for direct payments; and
    (2) Specify the conditions under which payments are made.

[[Page 329]]

    (c) Federal financial participation. No FFP is available in 
expenditures for direct payment for physicians' or dentists' services to 
any recipient--
    (1) Who is receiving assistance under the State's approved plan 
under title I, IV-A, X, XIV or XVI (AABD) of the Act; or
    (2) To whom supplemental security benefits are being paid under 
title XVI of the Act; or
    (3) Who is receiving or eligible for a State supplementary payment 
or would be eligible if he were not in a medical institution, and who is 
eligible for Medicaid as a categorically needy recipient.
    (d) Federal requirements. (1) Direct payments to recipients under 
this section are an alternative to payments directly to providers and 
are subject to the same conditions; for example, the State's reasonable 
charge schedules are applicable.
    (2) Direct payments must be supported by providers' bills for 
services.



Sec.  447.30  Withholding the Federal share of payments to Medicaid providers to recover Medicare overpayments.

    (a) Basis and purpose. This section implements section 1914 of the 
Act, which provides for withholding the Federal share of Medicaid 
payments to a provider if the provider has not arranged to repay 
Medicare overpayments or has failed to provide information to determine 
the amount of the overpayments. The intent of the statute and 
regulations is to facilitate the recovery of Medicare overpayments. The 
provision enables recovery of overpayments when institutions have 
reduced participation in Medicare or when physicians and suppliers have 
submitted few or no claims under Medicare, thus not receiving enough in 
Medicare reimbursement to permit offset of the overpayment.
    (b) When withholding occurs. The Federal share of Medicaid payments 
may be withheld from any provider specified in paragraph (c) of this 
section to recover Medicare overpayments that CMS has been unable to 
collect if the provider participates in Medicaid and--
    (1) The provider has not made arrangements satisfactory to CMS to 
repay the Medicare overpayment; or
    (2) CMS has been unable to collect information from the provider to 
determine the existence or amount of Medicare overpayment.
    (c) The Federal share of Medicaid payments may be withheld with 
respect to the following providers:
    (1) An institutional provider that has or previously had in effect a 
Medicare provider agreement under section 1866 of the Act; and
    (2) A Medicaid provider who has previously accepted Medicare payment 
on the basis of an assignment under section 1842(b)(3)(B)(ii) of the 
Act; and during the 12 month period preceding the quarter in which the 
Federal share is to be withheld for a Medicare overpayment, submitted no 
claims under Medicare or submitted claims which total less than the 
amount of overpayment.
    (d) Order to reduce State payment. (1) CMS may, at its discretion, 
issue an order to the Medicaid agency of any State that is using the 
provider's services, to reduce its payment to the provider by the amount 
specified in paragraph (f) of this section.
    (2) The order to reduce payment to the provider will remain in 
effect until--
    (i) The Medicaid agency determines that the overpayment has been 
completely recovered; or
    (ii) CMS terminates the order.
    (3) CMS may withhold FFP from any State that does not comply with 
the order specified in paragraph (d)(1) of this section to reduce 
payment to the provider and claims FFP for the expenditure on its 
quarterly expenditure report.
    (e) Notice of withholding. (1) Before the Federal share of payments 
may be withheld under this section, CMS will notify the provider and the 
Medicaid agency of each State that CMS believes may use the overpaid 
provider's services under Medicaid.
    (2) The notice will include the instruction to reduce State 
payments, as provided under paragraph (d) of this section.
    (3) CMS will send the notice referred to in paragraph (e)(1) by 
certified mail, return receipt requested.
    (4) Each Medicaid agency must identify the amount of payment due the

[[Page 330]]

provider under Medicaid and give that information to CMS in the next 
quarterly expenditure report.
    (5) The Medicaid agency may appeal any disallowance of FFP resulting 
from the withholding decision to the Grant Appeals Board, in accordance 
with 45 CFR part 16.
    (f) Amount to be withheld. CMS may require the Medicaid agency to 
reduce the Federal share of its payment to the provider by the lesser of 
the following amounts.
    (1) The Federal matching share of payments to the provider, or
    (2) The total Medicare overpayment to the provider.
    (g) Effective date of withholding. Withholding of payment will 
become effective no less than 60 days after the day on which the agency 
receives notice of withholding.
    (h) Duration of withholding. No Federal funds are available in 
expenditures for services that are furnished by a provider specified in 
paragraph (c) of this section from the date on which the withholding 
becomes effective until the termination of withholding under paragraph 
(i) of this section.
    (i) Termination of withholding. (1) CMS will terminate the order to 
reduce State payment if it determines that any of the following has 
occurred:
    (i) The Medicare overpayment is completely recovered:
    (ii) The institution or person makes an agreement satisfactory to 
CMS to repay the overpayment; or
    (iii) CMS determines that there is no overpayment based on newly 
acquired evidence or a subsequent audit.
    (2) CMS will notify each State that previously received a notice 
ordering the withholding that the withholding has been terminated.
    (j) Procedures for restoring excess withholding. If an amount 
ultimately determined to be in excess of the Medicare overpayment is 
withheld, CMS will restore any excess funds withheld.
    (k) Recovery of funds from Medicaid agency. A provider is not 
entitled to recover from the Medicaid agency the amount of payment 
withheld by the agency in accordance with a CMS order issued under 
paragraph (d) of this section.

[50 FR 19688, May 10, 1985; 50 FR 23307, June 3, 1985]



Sec.  447.31  Withholding Medicare payments to recover Medicaid overpayments.

    (a) Basis and purpose. Section 1885 of the Act provides authority 
for CMS to withhold Medicare payments to a Medicaid provider in order to 
recover Medicaid overpayments to the provider. Section 405.377 of this 
chapter sets forth the Medicare rules implementing section 1885, and 
specifies under what circumstances withholding will occur and the 
providers that are subject to withholding. This section establishes the 
procedures that the Medicaid agency must follow when requesting that CMS 
withhold Medicare payments.
    (b) Agency notice to providers. (1) Before the agency requests 
recovery of a Medicaid overpayment through Medicare, the agency must 
send either or both of the following notices, in addition to that 
required under paragraph (b)(2) of this section, to the provider.
    (i) Notice that--
    (A) There has been an overpayment;
    (B) Repayment is required; and
    (C) The overpayment determination is subject to agency appeal 
procedures, but we may withhold Medicare payments while an appeal is in 
progress.
    (ii) Notice that--
    (A) Information is needed to determine the amount of overpayment if 
any; and
    (B) The provider has at least 30 days in which to supply the 
information to the agency.
    (2) Notice that, 30 days or later from the date of the notice, the 
agency intends to refer the case to CMS for withholding of Medicare 
payments.
    (3) The agency must send all notices to providers by certified mail, 
return receipt requested.
    (c) Documentation to be submitted to CMS. The agency must submit the 
following information or documentation to CMS (unless otherwise 
specified) with the request for withholding of Medicare payments.
    (1) A statement of the reason that withholding is requested.

[[Page 331]]

    (2) The amount of overpayment, type of overpayment, date the 
overpayment was determined, and the closing date of the pertinent cost 
reporting period (if applicable).
    (3) The quarter in which the overpayment was reported on the 
quarterly expenditure report (Form CMS 64).
    (4) As needed, and upon request from CMS, the names and addresses of 
the provider's officers and owners for each period that there is an 
outstanding overpayment.
    (5) A statement of assurance that the State agency has met the 
notice requirements under paragraph (b) of this section.
    (6) As needed, and upon request for CMS, copies of notices (under 
paragraph (b) of this section), and reports of contact or attempted 
contact with the provider concerning the overpayment, including any 
reduction or suspension of Medicaid payments made with respect to that 
overpayment.
    (7) A copy of the provider's agreement with the agency under Sec.  
431.107 of this chapter.
    (d) Notification to terminate withholding. (1) If an agency has 
requested withholding under this section, it must notify CMS if any of 
the following occurs:
    (i) The Medicaid provider makes an agreement satisfactory to the 
agency to repay the overpayment;
    (ii) The Medicaid overpayment is completely recovered; or
    (iii) The agency determines that there is no overpayment, based on 
newly acquired evidence or subsequent audit.
    (2) Upon receipt of notification from the State agency, CMS will 
terminate withholding.
    (e) Accounting for returned overpayment. The agency must treat as a 
recovered overpayment the amounts received from CMS to offset Medicaid 
overpayments.
    (f) Procedures for restoring excess withholding. The agency must 
establish procedures satisfactory to CMS to assure the return to the 
provider of amounts withheld under this section that are ultimately 
determined to be in excess of overpayments. Those procedures are subject 
to CMS review.

[50 FR 19689, May 10, 1985, as amended at 61 FR 63749, Dec. 2, 1996]



Sec.  447.40  Payments for reserving beds in institutions.

    (a) The Medicaid agency may make payments to reserve a bed during a 
recipient's temporary absence from an inpatient facility, if--
    (1) The State plan provides for such payments and specifies any 
limitations on the policy; and
    (2) Absences for purposes other than required hospitalization (which 
cannot be anticipated and planned) are included in the patient's plan of 
care.
    (b) An agency that pays for reserved beds in an inpatient facility 
may pay less for a reserved bed than an occupied bed if there is a cost 
differential between the two beds. (Section 1102 of the Act.)

[43 FR 45253, Sept. 29, 1978, as amended at 51 FR 24491, July 3, 1986]



Sec.  447.45  Timely claims payment.

    (a) Basis and purpose. This section implements section 1902(a)(37) 
of the Act by specifying--
    (1) State plan requirements for--
    (i) Timely processing of claims for payment;
    (ii) Prepayment and postpayment claims reviews; and
    (2) Conditions under which the Administrator may grant waivers of 
the time requirements.
    (b) Definitions. Claim means (1) a bill for services, (2) a line 
item of service, or (3) all services for one recipient within a bill.
    Clean claim means one that can be processed without obtaining 
additional information from the provider of the service or from a third 
party. It includes a claim with errors originating in a State's claims 
system. It does not include a claim from a provider who is under 
investigation for fraud or abuse, or a claim under review for medical 
necessity.
    A shared health facility means any arrangement in which--
    (1) Two or more health care practitioners practice their professions 
at a common physical location;

[[Page 332]]

    (2) The practitioners share common waiting areas, examining rooms, 
treatment rooms, or other space, the services of supporting staff, or 
equipment;
    (3) The practitioners have a person (who may himself be a 
practitioner)--
    (i) Who is in charge of, controls, manages, or supervises 
substantial aspects of the arrangement or operation for the delivery of 
health or medical services at the common physical location other than 
the direct furnishing of professional health care services by the 
practitioners to their patients; or
    (ii) Who makes available to the practitioners the services of 
supporting staff who are not employees of the practitioners; and
    (iii) Who is compensated in whole or in part, for the use of the 
common physical location or related support services, on a basis related 
to amounts charged or collected for the services rendered or ordered at 
the location or on any basis clearly unrelated to the value of the 
services provided by the person; and
    (4) At least one of the practitioners received payments on a fee-
for-service basis under titles V, XVIII, and XIX in an amount exceeding 
$5,000 for any one month during the preceding 12 months or in an 
aggregate amount exceeding $40,000 during the preceding 12 months.

The term does not include a provider of services (as specified in Sec.  
489.2(b) of this chapter), a health maintenance organization (as defined 
in section 1301(a) of the Public Health Service Act), a hospital 
cooperative shared services organization meeting the requirements of 
section 501(e) of the Internal Revenue Code of 1954, or any public 
entity.
    Third party is defined in Sec.  433.135 of this chapter.
    (c) State plan requirements. A State plan must (1) provide that the 
requirements of paragraphs (d), (e)(2), (f) and (g) of this section are 
met; and
    (2) Specify the definition of a claim, as provided in paragraph (b) 
of this section, to be used in meeting the requirements for timely 
claims payment. The definition may vary by type of service (e.g., 
physician service, hospital service).
    (d) Timely processing of claims. (1) The Medicaid agency must 
require providers to submit all claims no later than 12 months from the 
date of service.
    (2) The agency must pay 90 percent of all clean claims from 
practitioners, who are in individual or group practice or who practice 
in shared health facilities, within 30 days of the date of receipt.
    (3) The agency must pay 99 percent of all clean claims from 
practitioners, who are in individual or group practice or who practice 
in shared health facilities, within 90 days of the date of receipt.
    (4) The agency must pay all other claims within 12 months of the 
date of receipt, except in the following circumstances:
    (i) This time limitation does not apply to retroactive adjustments 
paid to providers who are reimbursed under a retrospective payment 
system, as defined in Sec.  447.272 of this part.
    (ii) If a claim for payment under Medicare has been filed in a 
timely manner, the agency may pay a Medicaid claim relating to the same 
services within 6 months after the agency or the provider receives 
notice of the disposition of the Medicare claim.
    (iii) The time limitation does not apply to claims from providers 
under investigation for fraud or abuse.
    (iv) The agency may make payments at any time in accordance with a 
court order, to carry out hearing decisions or agency corrective actions 
taken to resolve a dispute, or to extend the benefits of a hearing 
decision, corrective action, or court order to others in the same 
situation as those directly affected by it.
    (5) The date of receipt is the date the agency receives the claim, 
as indicated by its date stamp on the claim.
    (6) The date of payment is the date of the check or other form of 
payment.
    (e) Waivers. (1) The Administrator may waive the requirements of 
paragraphs (d) (2) and (3) of this section upon request by an agency if 
he finds that the agency has shown good faith in trying to meet them. In 
deciding whether the agency has shown good faith, the Administrator will 
consider whether the agency has received an unusually high volume of 
claims which are not clean claims, and whether the agency is making 
diligent efforts to

[[Page 333]]

implement an automated claims processing and information retrieval 
system.
    (2) The agency's request for a waiver must contain a written plan of 
correction specifying all steps it will take to meet the requirements of 
this section.
    (3) The Administrator will review each case and if he approves a 
waiver, will specify its expiration date, based on the State's 
capability and efforts to meet the requirements of this section.
    (f) Prepayment and postpayment claims review. (1) For all claims, 
the agency must conduct prepayment claims review consisting of--
    (i) Verification that the recipient was included in the eligibility 
file and that the provider was authorized to furnish the service at the 
time the service was furnished;
    (ii) Checks that the number of visits and services delivered are 
logically consistent with the recipient's characteristics and 
circumstances, such as type of illness, age, sex, service location;
    (iii) Verification that the claim does not duplicate or conflict 
with one reviewed previously or currently being reviewed;
    (iv) Verification that a payment does not exceed any reimbursement 
rates or limits in the State plan; and
    (v) Checks for third party liability within the requirements of 
Sec.  433.137 of this chapter.
    (2) The agency must conduct post-payment claims review that meets 
the requirements of parts 455 and 456 of this chapter, dealing with 
fraud and utilization control.
    (g) Reports. The agency must provide any reports and documentation 
on compliance with this section that the Administrator may require.

(Secs. 1102 and 1902(a)(37) of the Social Security Act (42 U.S.C. 1302, 
1396a(a)(37)))

[44 FR 30344, May 25, 1979, as amended at 55 FR 1434, Jan. 16, 1990]



Sec.  447.46  Timely claims payment by MCOs.

    (a) Basis and scope. This section implements section 1932(f) of the 
Act by specifying the rules and exceptions for prompt payment of claims 
by MCOs.
    (b) Definitions. ``Claim'' and ``clean claim'' have the meaning 
given those terms in Sec.  447.45.
    (c) Contract requirements--(1) Basic rule. A contract with an MCO 
must provide that the organization will meet the requirements of 
Sec. Sec.  447.45(d)(2) and (d)(3), and abide by the specifications of 
Sec. Sec.  447.45(d)(5) and (d)(6).
    (2) Exception. The MCO and its providers may, by mutual agreement, 
establish an alternative payment schedule.
    (3) Alternative schedule. Any alternative schedule must be 
stipulated in the contract.

[67 FR 41115, June 14, 2002]

                              Cost Sharing



Sec.  447.50  Cost sharing: Basis and purpose.

    (a) Section 1902(a)(14) of the Act permits States to require certain 
recipients to share some of the costs of Medicaid by imposing upon them 
such payments as enrollment fees, premiums, deductibles, coinsurance, 
co-payments, or similar cost sharing charges. For States that impose 
cost sharing payments, Sec. Sec.  447.51 through 447.59 prescribe State 
plan requirements and options for cost sharing, specify the standards 
and conditions under which States may impose cost sharing, set forth 
minimum amounts and the methods for determining maximum amounts, and 
prescribe conditions for FFP that relate to cost sharing requirements.

         enrollment fee, premium or similar cost sharing charge



Sec.  447.51  Requirements and options.

    (a) The plan must provide that the Medicaid agency does not impose 
any enrollment fee, premium, or similar charge upon categorically needy 
individuals, as defined in Sec. Sec.  435.4 and 436.3 of this 
subchapter, for any services available under the plan.
    (b) The plan may impose an enrollment fee, premium, or similar 
charge on medically needy individuals, as defined in Sec. Sec.  435.4 
and 436.3 of this subchapter, for any services available under the plan.

[[Page 334]]

    (c) For each charge imposed under paragraph (b) of this section, the 
plan must specify--
    (1) The amount of the charge;
    (2) The period of liability for the charge; and
    (3) The consequences for an individual who does not pay.
    (d) The plan must provide that any charge imposed under paragraph 
(b) of this section is related to total gross family income as set forth 
under Sec.  447.52.



Sec.  447.52  Minimum and maximum income-related charges.

    For the purpose of relating the amount of an enrollment fee, 
premium, or similar charge to total gross family income, as required 
under Sec.  447.51(d), the following rules apply:
    (a) Minimum charge. A charge of at least $1.00 per month is imposed 
on each--
    (1) One- or two-person family with monthly gross income of $150 or 
less;
    (2) Three- or four-person family with monthly gross income of $300 
or less; and
    (3) Five- or more-person family with monthly gross income of $350 or 
less.
    (b) Maximum charge. Any charge related to gross family income that 
is above the minimum listed in paragraph (a) of this section may not 
exceed the standards shown in the following table:

                         Maximum Monthly Charge
------------------------------------------------------------------------
                                                        Family size
                                                 -----------------------
         Gross family income (per month)                           5 or
                                                  1 or 2  3 or 4   more
------------------------------------------------------------------------
$150 or less....................................      $1      $1      $1
$151 or $200....................................       2       1       1
$201 to $250....................................       3       1       1
$251 to $300....................................       4       1       1
$301 to $350....................................       5       2       1
$351 to $400....................................       6       3       2
$401 to $450....................................       7       4       3
$451 to $500....................................       8       5       4
$501 to $550....................................       9       6       5
$551 to $600....................................      10       7       6
$601 to $650....................................      11       8       7
$651 to $700....................................      12       9       8
$701 to $750....................................      13      10       9
$751 to $800....................................      14      11      10
$801 to $850....................................      15      12      11
$851 to $900....................................      16      13      12
$901 to $950....................................      17      14      13
$951 to $1,000..................................      18      15      14
More than $1,000................................      19      16      15
------------------------------------------------------------------------

    (c) Income-related charges. The agency must impose an appropriately 
higher charge for each higher level of family income, within the maximum 
amounts specified in paragraph (b) of this section.

[43 FR 45253, Sept. 29, 1978, as amended at 45 FR 24889, Apr. 11, 1980]

   deductible, coinsurance, co-payment or similar cost-sharing charge



Sec.  447.53  Applicability; specification; multiple charges.

    (a) Basic requirements. Except as specified in paragraph (b) of this 
section, the plan may impose a nominal deductible, coinsurance, 
copayment, or similar charge upon categorically and medically needy 
individuals for any service under the plan.
    (b) Exclusions from cost sharing. The plan may not provide for 
impositions of a deductible, coinsurance, copayment, or similar charge 
upon categorically or medically needy individuals for the following:
    (1) Children. Services furnished to individuals under 18 years of 
age (and, at the option of the State, individuals under 21, 20, or 19 
years of age, or any reasonable category of individuals 18 years of age 
or over but under 21) are excluded from cost sharing.
    (2) Pregnant women. Services furnished to pregnant women if such 
services related to the pregnancy, or to any other medical condition 
which may complicate the pregnancy are excluded from cost sharing 
obligations. These services include routine prenatal care, labor and 
delivery, routine post-partum care, family planning services, 
complications of pregnancy or delivery likely to affect the pregnancy, 
such as hypertension, diabetes, urinary tract infection, and services 
furnished during the postpartum period for conditions or complications 
related to the pregnancy. The postpartum period is the immediate 
postpartum period which begins on the last day of pregnancy and extends 
through the end of the month in which the 60-day period following 
termination of pregnancy ends. States may further exclude from cost 
sharing all services furnished to pregnant women if they desire.
    (3) Institutionalized individuals. Services furnished to any 
individual who is an inpatient in a hospital, long-term

[[Page 335]]

care facility, or other medical institution if the individual is 
required (pursuant to Sec.  435.725, Sec.  435,733, Sec.  435.832, or 
Sec.  436.832), as a condition of receiving services in the institution, 
to spend all but a minimal amount of his income required for personal 
needs, for medical care costs are excluded from cost sharing.
    (4) Emergency services. Services provided in a hospital, clinic, 
office, or other facility that is equipped to furnish the required care, 
after the sudden onset of a medical condition manifesting itself by 
acute symptoms of sufficient severity (including severe pain) that the 
absence of immediate medical attention could reasonably be expected to 
result in--
    (i) Placing the patient's health in serious jeopardy;
    (ii) Serious impairment to bodily functions; or
    (iii) Serious dysfunction of any bodily organ or part.
    (5) Family planning. Family planning services and supplies furnished 
to individuals of child-bearing age are excluded from cost sharing.
    (c) Prohibition against multiple charges. For any service, the plan 
may not impose more than one type of charge referred to in paragraph (a) 
of this section.
    (d) State plan specifications. For each charge imposed under this 
section, the plan must specify--
    (1) The service for which the charge is made;
    (2) The amount of the charge;
    (3) The basis for determining the charge;
    (4) The basis for determining whether an individual is unable to pay 
the charge and the means by which such an individual will be identified 
to providers; and
    (5) The procedures for implementing and enforcing the exclusions 
from cost sharing found in paragraph (b) of this section.
    (e) No provider may deny services, to an individual who is eligible 
for the services, on account of the individual's inability to pay the 
cost sharing.

[43 FR 45253, Sept. 29, 1978, as amended at 47 FR 21051, May 17, 1982; 
48 FR 5736, Jan. 8, 1983; 50 FR 23013, May 30, 1985; 55 FR 48611, Nov. 
21, 1990; 55 FR 52130, Dec. 19, 1990; 67 FR 41116, June 14, 2002]



Sec.  447.54  Maximum allowable charges.

    (a) Non-institutional services. Except as specified in paragraph 
(b), for non-institutional services, the plan must provide that--
    (1) Any deductible it imposes does not exceed $2.00 per month per 
family for each period of Medicaid eligibility. For example, if Medicaid 
eligibility is certified for a 3-month period, the maximum deductible 
which may be imposed on a family for that period of eligibility is 
$6.00;
    (2) Any coinsurance rate it imposes does not exceed 5 percent of the 
payment the agency makes for the services; and
    (3) Any co-payments it imposes do not exceed the amounts shown in 
the following table:

------------------------------------------------------------------------
                                                                Maximum
                                                               copayment
               States payment for the service                 chargeable
                                                                  to
                                                               recipient
------------------------------------------------------------------------
$10 or less.................................................        $.50
$10.01 to $25...............................................        1.00
$25.01 to $50...............................................        2.00
$50.01 or more..............................................        3.00
------------------------------------------------------------------------

    (b) Waiver of the requirement that cost sharing amounts be nominal. 
Upon approval from CMS, the requirement that cost sharing charges must 
be nominal may be waived, in accordance with section 431.55(g) for 
nonemergency services furnished in a hospital emergency room.
    (c) Institutional services. For institutional services, the plan 
must provide that the maximum deductible, coinsurance or co-payment 
charge for each admission does not exceed 50 percent of the payment the 
agency makes for the first day of care in the institution.
    (d) Cumulative maximum. The plan may provide for a cumulative 
maximum amount for all deductible, coinsurance or co-payment charges 
that it

[[Page 336]]

imposes on any family during a specified period of time.

[48 FR 5736, Jan. 8, 1983]

    Effective Date Note: At 73 FR 71851, Nov. 25, 2008, Sec.  447.54 was 
amended by revising the section heading, (a) introductory text, (1) and 
(3), adding a new introductory text and (a)(4), effective March 27, 
2009. At 74 FR 4888, March 27, 2009, the effective date was delayed 
until Dec. 31, 2009. For the convenience of the user, the added and 
revised text is set forth as follows:



Sec.  447.54  Maximum allowable and nominal charges.

    Except as provided at Sec. Sec.  447.62 through 447.82 of this part, 
the following requirements must be met:
    (a) Non-institutional services. Except as specified in paragraph (b) 
of this section, for non-institutional services, the plan must provide 
that the following requirements are met:
    (1) For Federal FY 2009, any deductible it imposes does not exceed 
$2.30 per month per family for each period of Medicaid eligibility. For 
example, if Medicaid eligibility is certified for a 3-month period, the 
maximum deductible which may be imposed on a family is $6.90. 
Thereafter, any deductible should not exceed these amounts as updated 
each October 1 by the percentage increase in the medical care component 
of the CPI-U for the period of September to September ending in the 
preceding calendar year, and then rounded to the next higher 5-cent 
increment.

                                * * * * *

    (3)(i) For Federal FY 2009, any co-payments it imposes under a fee-
for-service delivery system do not exceed the amounts shown in the 
following table:

------------------------------------------------------------------------
                                                                Maximum
                State payment for the service                  copayment
------------------------------------------------------------------------
$10 or less..................................................      $0.60
$10.01 to $25................................................       1.15
$25.01 to $50................................................       2.30
$50.01 or more...............................................       3.40
------------------------------------------------------------------------

    (ii) Thereafter, any copayments should not exceed these amounts as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next higher 5-
cent increment.
    (4) For Federal FY 2009, any copayment for services provided by an 
MCO may not exceed the copayment permitted under paragraph (a)(3)(i) of 
this section for comparable services under a fee-for-service delivery 
system, except as provided in this paragraph. When there is no fee-for-
service delivery system, the copayment may not exceed $3.40 per visit or 
for individuals referenced in an approved State child health plan under 
title XXI pursuant to Sec.  457.70(c), $5.70 per visit. In succeeding 
years, any copayment should not exceed these amounts as updated each 
October 1 by the percentage increase in the medical care component of 
the CPI-U for the period of September to September ending in the 
preceding calendar year and then rounded to the next higher 5-cent 
increment.

                                * * * * *



Sec.  447.55  Standard co-payment.

    (a) The plan may provide for a standard, or fixed, co-payment amount 
for any service.
    (b) This standard copayment amount for any service may be determined 
by applying the maximum co-payment amounts specified in Sec.  447.55 (a) 
and (b) to the agency's average or typical payment for that service. For 
example, if the agency's typical payment for prescribed drugs is $4 to 
$5 per prescription, the agency might set a standard copayment of $0.50 
per prescription.

    Effective Date Note: At 73 FR 71851, Nov. 25, 2008, Sec.  447.55 was 
amended by revising paragraph (b), effective March 27, 2009. At 74 FR 
4888, March 27, 2009, the effective date was delayed until Dec. 31, 
2009. For the convenience of the user, the revised text is set forth as 
follows:



Sec.  447.55  Standard co-payment.

                                * * * * *

    (b) This standard copayment amount for any service may be determined 
by applying the maximum copayment amounts specified in Sec.  447.54(a) 
and (b) to the agency's average or typical payment for that service. For 
example, if the agency's typical payment for prescribed drugs is $4 to 
$5 per prescription, the agency might set a standard copayment of $.60 
per prescription. This standard copayment may be adjusted based on 
updated copayments as permitted under Sec.  447.54(a)(3).

                                * * * * *



Sec.  447.56  Income-related charges.

    Subject to the maximum allowable charges specified in Sec.  447.54 
(a) and (b), the plan may provide for income-related deductible, 
coinsurance or co-payment charges. For example, an agency may impose a 
higher charge on

[[Page 337]]

medically needy recipients than it imposes upon categorically needy 
recipients.



Sec.  447.57  Restrictions on payments to providers.

    (a) The plan must provide that the agency does not increase the 
payment it makes to any provider to offset uncollected amounts for 
deductibles, coinsurance, copayments or similar charges that the 
provider has waived or are uncollectable, except as permitted under 
paragraph (b) of this section.
    (b) For those providers that the agency reimburses under Medicare 
reasonable cost reimbursement principles, in accordance with subpart B 
of this part, an agency may increase its payment to offset uncollected 
deductible, coinsurance, copayment, or similar charges that are bad 
debts of providers.



Sec.  447.58  Payments to prepaid capitation organizations.

    If the agency contracts with a prepaid capitation organization that 
does not impose the agency's deductibles, coinsurance, co-payments or 
similar charges on its recipient members, the plan must provide that the 
agency calculates its payments to the organization as if those cost 
sharing charges were collected.

[48 FR 5736, Jan. 8, 1983, as amended at 67 FR 41116, June 14, 2002]

                     federal financial participation



Sec.  447.59  FFP: Conditions relating to cost sharing.

    No FFP in the State's expenditures for services is available for--
    (a) Any cost sharing amounts that recipients should have paid as 
enrollment fees, premiums, deductibles, coinsurance, copayments, or 
similar charges under Sec. Sec.  447.50 through 447.58 (except for 
amounts that the agency pays as bad debts of providers under Sec.  
447.57); and
    (b) Any amounts paid by the agency on behalf of ineligible 
individuals, whether or not the individual had paid any required premium 
or enrollment fee.



Sec.  447.60  Cost-sharing requirements for services furnished by MCOs.

    Contracts with MCOs must provide that any cost-sharing charges the 
MCO imposes on Medicaid enrollees are in accordance with the 
requirements set forth in Sec. Sec.  447.50 and 447.53 through 447.58 
for cost-sharing charges imposed by the State agency.

[67 FR 41116, June 14, 2002]

        Alternative Premiums and Cost Sharing Under Section 1916A

    Source: 73 FR 71851, Nov. 25, 2008, unless otherwise noted.

    Effective Date Note: At 73 FR 71851, Nov. 25, 2008, subject group 
``Alternative Premiums and Cost Sharing Under Section 1916A'' was added, 
effective March 27, 2009. At 74 FR 4888, March 27, 2009, the effective 
date was delayed until Dec. 31, 2009.



Sec.  447.62  Alternative premiums and cost sharing: Basis, purpose and scope.

    (a) Section 1916A of the Act sets forth options for alternative 
premiums and cost sharing, which are premiums and cost sharing that are 
not subject to the limitations under section 1916 of the Act as 
described in Sec. Sec.  447.51 through 447.56. For States that impose 
alternative premiums, Sec. Sec.  447.64 through 447.66, 447.72, 447.74, 
447.78, and 447.80 prescribe State plan requirements and options for 
alternative premiums and the standards and conditions under which States 
may impose them. For States that impose alternative cost sharing, 
Sec. Sec.  447.68 through 447.72, 447.74, 447.78, and 447.80 prescribe 
State plan requirements and options for alternative cost sharing and the 
standards and conditions under which States may impose alternative cost 
sharing. For other individuals, premiums and cost sharing must comply 
with the requirements described in Sec. Sec.  447.50 through 447.60.
    (b) Neither section 1916A of the Act nor the regulations referenced 
in paragraph (a) of this section affect the following:
    (1) The Secretary's authority to waive limitations on premiums and 
cost sharing under this subpart.

[[Page 338]]

    (2) Existing waivers with regard to the imposition of premiums and 
cost sharing.



Sec.  447.64  Alternative premiums, enrollment fees, or similar fees: State plan requirements.

    When a State imposes alternative premiums, enrollment fees, or 
similar fees on individuals, the State plan must describe the following:
    (a) The group or groups of individuals that may be subject to the 
premiums, enrollment fees, or similar charges.
    (b) The schedule of the premiums, enrollment fees, or similar fees 
imposed.
    (c) The methodology used to determine family income for purposes of 
the limitations related to family income level that are described below, 
including the period and periodicity of those determinations.
    (d) The methodology used to ensure compliance with the requirements 
of Sec.  447.78 that the aggregate amount of premiums and cost sharing 
imposed for all individuals in the family do not exceed 5 percent of the 
family income of the family involved.
    (e) The process for informing the recipients, applicants, providers, 
and the public of the schedule of premiums, enrollment fees, or similar 
fees for a group or groups of individuals in accordance with Sec.  
447.76.
    (f) The notice of, time frame for, and manner of required premium 
payments for a group or groups of individuals and the consequences for 
an individual who does not pay.



Sec.  447.66  General alternative premium protections.

    (a) States may not impose alternative premiums upon the following 
individuals:
    (1) Individuals under 18 years of age that are required to be 
provided medical assistance under section 1902(a)(10)(A)(i) of the Act, 
and including individuals with respect to whom child welfare services 
are made available under Part B of title IV of the Act on the basis of 
being a child in foster care and individuals with respect to whom 
adoption or foster care assistance is made available under Part E of 
that title, without regard to age.
    (2) Pregnant women.
    (3) Any terminally ill individual receiving hospice care, as defined 
in section 1905(o) of the Act.
    (4) Any individual who is an inpatient in a hospital, nursing 
facility, intermediate care facility, or other medical institution, if 
the individual is required, as a condition of receiving services in that 
institution under the State plan, to spend for costs of medical care all 
but a minimal amount of the individual's income required for personal 
needs.
    (5) Women who are receiving Medicaid on the basis of the breast or 
cervical cancer eligibility group under sections 
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act.
    (6) Disabled children who are receiving medical assistance by virtue 
of the application of sections 1902(a)(10)(A)(ii)(XIX) and 1902(cc) of 
the Act.
    (b) States may exempt additional classes of individuals from 
premiums.



Sec.  447.68  Alternative copayments, coinsurance, deductibles, or similar cost sharing charges: State plan requirements.

    When a State imposes alternative copayments, coinsurance, 
deductibles, or similar cost sharing charges on individuals, the State 
plan must describe the following:
    (a) The group or groups of individuals that may be subject to the 
cost sharing charge.
    (b) The methodology used to determine family income, for purposes of 
the limitations on cost sharing related to family income that are 
described below, including the period and periodicity of those 
determinations.
    (c) The item or service for which the charge is imposed.
    (d) The methods, such as the use of integrated automated systems, 
for tracking cost sharing charges, informing recipients and providers of 
their liability, and notifying recipients and providers when individual 
recipients have paid the maximum cost sharing charges permitted for the 
period of time.
    (e) The process for informing recipients, applicants, providers, and 
the public of the schedule of cost sharing charges for specific items 
and services

[[Page 339]]

for a group or groups of individuals in accordance with Sec.  447.76.
    (f) The methodology used to ensure that:
    (1) The aggregate amount of premiums and cost sharing imposed under 
section 1916 or section 1916A of the Act for individuals with family 
income above 100 percent of the FPL does not exceed 5 percent of the 
family income of the family involved.
    (2) The aggregate amount of cost sharing under sections 1916, 
1916A(c), and/or 1916A(e) of the Act for individuals with family income 
at or below 100 percent of the FPL does not exceed 5 percent of the 
family income of the family involved.
    (g) The notice of, time frame for, and manner of required cost 
sharing and the consequences for failure to pay.



Sec.  447.70  General alternative cost sharing protections.

    (a)(1) States may not impose alternative cost sharing for the 
following items or services. Except as indicated, these limits do not 
apply to alternative cost sharing for non-preferred prescription drugs 
within a class of such drugs or non-emergency use of the emergency room.
    (i) Services furnished to individuals under 18 years of age who are 
required to be provided Medicaid under section 1902(a)(10)(A)(i) of the 
Act, and including services furnished to individuals with respect to 
whom child welfare services are made available under Part B of title IV 
of the Act on the basis of being a child in foster care and individuals 
with respect to whom adoption or foster care assistance is made 
available under Part E of that title, without regard to age.
    (ii) Preventive services (for example, well baby and well child care 
and immunizations) provided to children under 18 years of age regardless 
of family income.
    (iii) Services furnished to pregnant women, if those services relate 
to pregnancy or to any other medical condition which may complicate the 
pregnancy.
    (iv) Services furnished to a terminally ill individual who is 
receiving hospice care (as defined in section 1905(o) of the Act).
    (v) Services furnished to any individual who is an inpatient in a 
hospital, nursing facility, intermediate care facility for the mentally 
retarded, or other medical institution, if the individual is required, 
as a condition of receiving services in that institution under the State 
plan, to spend for costs of medical care all but a minimal amount of the 
individual's income required for personal needs.
    (vi) Emergency services as defined at Sec.  447.53(b)(4), except 
charges for services furnished after the hospital has determined, based 
on the screening and any other services required under Sec.  489.24 of 
this chapter, that the individual does not have an emergency medical 
condition consistent with the requirements of paragraph (a)(2) of this 
section and Sec.  447.80(b)(1).
    (vii) Family planning services and supplies described in section 
1905(a)(4)(C) of the Act.
    (viii) Services furnished to women who are receiving medical 
assistance by virtue of the application of sections 
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act (breast or cervical 
cancer provisions).
    (ix) Services furnished to disabled children who are receiving 
medical assistance by virtue of the application of sections 
1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act.
    (x) Preferred drugs within a class for individuals for whom cost 
sharing may not otherwise be imposed as described in paragraphs 
(a)(1)(i) through (ix) of this section.
    (2) A State may impose nominal cost sharing as defined in Sec.  
447.54 for services furnished in a hospital emergency department, other 
than those required under Sec.  489.24 of this chapter, if the hospital 
has determined based on the screening required under Sec.  489.24 that 
the individual does not have an emergency medical condition, the 
requirements of Sec.  447.80(b)(1) are met, and no cost sharing is 
imposed to receive the care through an outpatient department or another 
alternative health care provider in the geographic area of the hospital 
emergency department involved.
    (b) In the case of a drug that is a preferred drug within a class, 
cost sharing may not exceed the levels permitted under section 1916 of 
the Act. Cost

[[Page 340]]

sharing can be imposed that exceeds section 1916 of the Act levels only 
for drugs that are not preferred drugs within a class in accordance with 
section 1916A(c) of the Act.
    (c) In the case of a drug that is not a preferred drug, the cost 
sharing is limited to the amount imposed for a preferred drug if the 
following conditions are met:
    (1) The prescribing physician determines that the preferred drug 
would be less effective or would have adverse effects for the individual 
or both.
    (2) State criteria for prior authorization, if any, are met.
    (d) States may exempt additional individuals, items, or services 
from cost sharing.



Sec.  447.71  Alternative premium and cost sharing exemptions and protections for individuals with family incomes at or below 100 percent of the FPL.

    (a) The State may not impose premiums under the State plan on 
individuals whose family income is at or below 100 percent of the FPL.
    (b) The State may not impose cost sharing under the State plan on 
individuals whose family income is at or below 100 percent of the FPL, 
with the following exceptions:
    (1) The State may impose cost sharing under the State plan on 
individuals whose family income is at or below 100 percent of the FPL 
under authority provided under section 1916 of the Act and consistent 
with the levels described in such section and Sec.  447.54.
    (2) The State may impose cost sharing for non-preferred drugs that 
does not exceed the nominal amount as defined in Sec.  447.54.
    (3) The State may impose cost sharing for non-emergency services 
furnished in a hospital emergency department that does not exceed the 
nominal amount as defined in Sec.  447.54 as long as no cost sharing is 
imposed to receive such care through an outpatient department or other 
alternative non-emergency services provider in the geographic area of 
the hospital emergency department involved.
    (c) Aggregate cost sharing of the family under sections 1916, 
1916A(c), and/or 1916A(e) of the Act may not exceed the maximum 
permitted under Sec.  447.78(b).



Sec.  447.72  Alternative premium and cost sharing exemptions and protections for individuals with family incomes above 100 percent but at or below 150 percent 
          of the FPL.

    (a) The State may not impose premiums under the State plan on 
individuals whose family income exceeds 100 percent, but does not exceed 
150 percent, of the FPL.
    (b) Cost sharing may not exceed 10 percent of the payment the agency 
makes for the item or service, with the following exceptions:
    (1) Cost sharing for non-preferred drugs cannot exceed the nominal 
amount as defined in Sec.  447.54.
    (2) Cost sharing for non-emergency services furnished in the 
hospital emergency department cannot exceed twice the nominal amount as 
defined in Sec.  447.54. A hospital must meet the requirements described 
at Sec.  447.80 before the cost sharing can be imposed.
    (3) In the case of States that do not have fee-for-service payment 
rates, any copayment that the State imposes for services provided by an 
MCO may not exceed $3.40 per visit for Federal FY 2009 or for 
individuals referenced in an approved State child health plan under 
title XXI of the Act pursuant to Sec.  457.70(c), $5.70 per visit for 
Federal FY 2009. Thereafter, any copayment may not exceed this amount as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next highest 5-
cent increment.
    (c) Aggregate cost sharing of the family may not exceed the maximum 
permitted under Sec.  447.78(a).



Sec.  447.74  Alternative premium and cost sharing protections for individuals with family incomes above 150 percent of the FPL.

    (a) States may impose premiums consistent with the aggregate limits 
set forth in Sec.  447.78(a).
    (b) Cost sharing may not exceed 20 percent of the payment the agency 
makes for the item (including a non-preferred drug) or service, with the 
following exception: In the case of States

[[Page 341]]

that do not have fee-for-service payment rates, any copayment that the 
State imposes for services provided by an MCO may not exceed $3.40 per 
visit for Federal FY 2009 or for individuals referenced in an approved 
State child health plan under title XXI of the Act pursuant to Sec.  
457.70(c), $5.70 for Federal FY 2009. Thereafter, any copayment may not 
exceed this amount as updated each October 1 by the percentage increase 
in the medical care component of the CPI-U for the period of September 
to September ending in the preceding calendar year and then rounded to 
the next highest 5-cent increment.
    (c) Aggregate premiums and cost sharing of the family may not exceed 
the maximum permitted under Sec.  447.78(a).



Sec.  447.76  Public schedule.

    (a) The State must make available to the groups in paragraph (b) of 
this section a public schedule that contains the following information:
    (1) Current premiums, enrollment fees, or similar fees.
    (2) Current cost sharing charges.
    (3) The aggregate limit on premiums and cost sharing or just cost 
sharing.
    (4) Mechanisms for making payments for required premiums and 
charges.
    (5) The consequences for an applicant or recipient who does not pay 
a premium or charge.
    (6) A list of hospitals charging alternative cost sharing for non-
emergency use of the emergency department.
    (7) Either a list of preferred drugs or a method to obtain such a 
list upon request.
    (b) The State must make the public schedule available to the 
following:
    (1) Recipients, at the time of their enrollment and reenrollment 
after a redetermination of eligibility, and when premiums, cost sharing 
charges, and the aggregate limits are revised.
    (2) Applicants, at the time of application.
    (3) All participating providers.
    (4) The general public.



Sec.  447.78  Aggregate limits on alternative premiums and cost sharing.

    (a) If a State imposes alternative premiums or cost sharing, the 
total aggregate amount of premiums and cost sharing under section 1916, 
1916A(a), 1916A(c) or 1916A(e) of the Act for individuals with family 
income above 100 percent of the FPL may not exceed 5 percent of the 
family's income for the monthly or quarterly period, as specified by the 
State in the State plan.
    (b) The total aggregate amount of cost sharing under sections 1916, 
1916A(c), and/or 1916A(e) of the Act for individuals with family income 
at or below 100 percent of the FPL may not exceed 5 percent of the 
family's income for the monthly or quarterly period, as specified in the 
State plan.
    (c) Family income shall be determined in a manner and for that 
period as specified by the State in the State plan including the use of 
such disregards as the State may provide.
    (1) States may use gross income or any other methodology.
    (2) States may use a different methodology for determining the 
aggregate limits than they do for determining income eligibility.



Sec.  447.80  Enforceability of alternative premiums and cost sharing.

    (a) With respect to alternative premiums, a State may do the 
following:
    (1) Require a group or groups of individuals to prepay.
    (2) Terminate an individual from medical assistance on the basis of 
failure to pay for 60 days or more.
    (3) Waive payment of a premium in any case where it determines that 
requiring the payment would create an undue hardship.
    (b) With respect to alternative cost sharing, a State may permit a 
provider, including a pharmacy to require an individual, as a condition 
for receiving the item or service, to pay the cost sharing charge, 
except as specified in paragraphs (b)(1) through (3) of this section.
    (1) A provider, including a pharmacy and a hospital, may not require 
an individual whose family income is at or below 100 percent of the FPL 
to pay the cost sharing charge as a condition of receiving the service.
    (2) A hospital that has determined after an appropriate medical 
screening pursuant to Sec.  489.24, that an individual does not have an 
emergency medical condition, before imposing cost sharing

[[Page 342]]

on an individual, must provide the name and location of an available and 
accessible alternate non-emergency services provider as defined in 
section 1916A(e)(4)(B) of the Act, the fact that the alternate provider 
can provide the services with the imposition of a lesser cost sharing 
amount or no cost sharing, and a referral to coordinate scheduling of 
treatment by this provider before requiring payment of cost sharing.
    (3) The provider is not prohibited by this authority from choosing 
to reduce or waive cost sharing on a case-by-case basis.



Sec.  447.82  Restrictions on payments to providers.

    The plan must provide that the agency reduces the payment it makes 
to any provider by the amount of a recipient's cost sharing obligation, 
regardless of whether the provider successfully collects the cost 
sharing.

        Alternative Premiums and Cost Sharing Under Section 1916A



Sec.  447.88  Options for claiming FFP payment for section 1920A presumptive eligibility medical assistance payments.

    (a) The FMAP rate for medical assistance payments made available to 
a child during a presumptive eligibility period under section 1920A of 
the Act is the regular FMAP under title XIX, based on the category of 
medical assistance; that is, the enhanced FMAP is not available for 
section 1920A presumptive eligibility expenditures.
    (b) States have the following 3 options for identifying Medicaid 
section 1920A presumptive eligibility expenditures and the application 
of payments for those expenditures:
    (1) A State may identify Medicaid section 1920A presumptive 
eligibility expenditures in the quarter expended with no further 
adjustment based on the results of a subsequent actual eligibility 
determination (if any).
    (2) A State may identify Medicaid section 1920A presumptive 
eligibility expenditures in the quarter expended but may adjust reported 
expenditures based on results of the actual eligibility determination 
(if any) to reflect the actual eligibility status of the individual, if 
other than presumptively eligible.
    (3) A State may elect to delay submission of claims for payments of 
section 1920A presumptive eligibility expenditures until after the 
actual eligibility determination (if any) is made and, at that time 
identify such expenditures based on the actual eligibility status of 
individuals if other than presumptively eligible. At that time, the 
State would, as appropriate, recategorize the medical assistance 
expenditures made during the section 1920A presumptive eligibility 
period based on the results of the actual eligibility determination, and 
claim them appropriately.

[65 FR 33622, May 24, 2000]



              Subpart B_Payment Methods: General Provisions



Sec.  447.200  Basis and purpose.

    This subpart prescribes State plan requirements for setting payment 
rates to implement, in part, section 1902(a)(30) of the Act, which 
requires that payments for services be consistent with efficiency, 
economy, and quality of care.

[46 FR 48560, Oct. 1, 1981]



Sec.  447.201  State plan requirements.

    (a) A State plan must provide that the requirements in this subpart 
are met.
    (b) The plan must describe the policy and the methods to be used in 
setting payment rates for each type of service included in the State's 
Medicaid program.



Sec.  447.202  Audits.

    The Medicaid agency must assure appropriate audit of records if 
payment is based on costs of services or on a fee plus cost of 
materials.



Sec.  447.203  Documentation of payment rates.

    (a) The agency must maintain documentation of payment rates and make 
it available to HHS upon request.
    (b) The agency must record, in State manuals or other official 
files, the following information for increases in

[[Page 343]]

payment rates for individual practitioner services:
    (1) An estimate of the percentile of the range of customary charges 
to which the revised payment structure equates and a description of the 
methods used to make the estimate.
    (2) An estimate of the composite average percentage increase of the 
revised payment rates over the preceding rates.



Sec.  447.204  Encouragement of provider participation.

    The agency's payments must be sufficient to enlist enough providers 
so that services under the plan are available to recipients at least to 
the extent that those services are available to the general population.



Sec.  447.205  Public notice of changes in Statewide methods and standards for setting payment rates.

    (a) When notice is required. Except as specified in paragraph (b) of 
this section, the agency must provide public notice of any significant 
proposed change in its methods and standards for setting payment rates 
for services.
    (b) When notice is not required. Notice is not required if--
    (1) The change is being made to conform to Medicare methods or 
levels of reimbursement;
    (2) The change is required by court order; or
    (3) The change is based on changes in wholesalers' or manufacturers' 
prices of drugs or materials, if the agency's reimbursement system is 
based on material cost plus a professional fee.
    (c) Content of notice. The notice must--
    (1) Describe the proposed change in methods and standards;
    (2) Give an estimate of any expected increase or decrease in annual 
aggregate expenditures;
    (3) Explain why the agency is changing its methods and standards;
    (4) Identify a local agency in each county (such as the social 
services agency or health department) where copies of the proposed 
changes are available for public review;
    (5) Give an address where written comments may be sent and reviewed 
by the public; and
    (6) If there are public hearings, give the location, date and time 
for hearings or tell how this information may be obtained.
    (d) Publication of notice. The notice must--
    (1) Be published before the proposed effective date of the change; 
and
    (2) Appear as a public announcement in one of the following 
publications:
    (i) A State register similar to the Federal Register.
    (ii) The newspaper of widest circulation in each city with a 
population of 50,000 or more.
    (iii) The newspaper of widest circulation in the State, if there is 
no city with a population of 50,000 or more.

[46 FR 58680, Dec. 3, 1981; 47 FR 8567, Mar. 1, 1982, as amended at 48 
FR 56057, Dec. 19, 1983]



Sec.  447.206  Cost limit for providers operated by units of government.

    (a) Scope. This section applies to payments made to health care 
providers that are operated by units of government as defined in Sec.  
433.50(a)(1) of this chapter.
    (b) Exceptions. The limitation in paragraph (c) of this section does 
not apply to:
    (1) Indian Health Services facilities and tribal facilities that are 
funded through the Indian Self-Determination and Education Assistance 
Act (Pub. L. 93-638);
    (2) Managed Care Organizations (MCOs), Prepaid Inpatient
    Health Plans (PIHPs), and Prepaid Ambulatory Health Plans (PAHPs) 
which are organized and operating in accordance with the provisions of 
42 CFR 438;
    (3) Federally Qualified Health Centers (FQHCs) and Rural
    Health Clinics (RHCs) reimbursed in accordance with Section 1902(bb) 
of the Act; and
    (4) Disproportionate share hospital payments. The limitation in 
paragraph (c) of this section does not apply to payment adjustments made 
under section 1923 of the Act that are made under a State plan to 
hospitals found to serve a disproportionate number of low-income 
patients with special needs as provided in section 1902(a)(13)(A)(iv) of 
the Act. Disproportionate share hospital (DSH)

[[Page 344]]

payments are subject to the following limits:
    (i) The aggregate DSH limit using the Federal share of the DSH limit 
under section 1923(f) of the Act.
    (ii) The hospital-specific DSH limit in section 1923(g) of the Act.
    (iii) The aggregate DSH limit for institutions for mental disease 
(IMDs) under section 1923(h) of the Act.
    (a) General rules. (1) All health care providers that are operated 
by units of government are limited to reimbursement not in excess of the 
individual health care provider's cost of providing covered Medicaid 
services to eligible Medicaid recipients.
    (2) Reasonable methods of identifying and allocating costs to 
Medicaid will be determined by the Secretary in accordance with sections 
1902, 1903, and 1905 of the Act, as well as 45 CFR 92.22 and Medicare 
cost principles when applicable.
    (3) Institutional governmentally-operated health care providers 
(i.e., hospitals, nursing facilities, and ICFs/MR) are required to 
provide the State with data extracted from primary source documents as 
well as copies of the source documents. These source documents would 
include the health care provider's Medicare cost report (or Medicaid 
cost report for intermediate nursing facility care and ICFs/MR 
consistent with Medicare cost reporting principles, and audited 
financial statements that will be used in conjunction with information 
provided by the States' Medicaid Management Information System (MMIS).
    (4) Medicaid costs for non-institutional governmentally-operated 
health care providers must be supported by auditable documentation in a 
form approved by the Secretary that is consistent with Sec.  
433.51(b)(1) through (b)(4) of this chapter.
    (d) Use of certified public expenditures. This paragraph applies 
when States use a cost reimbursement methodology funded by certified 
public expenditures.
    (1) In accordance with paragraph (c) of this section, each provider 
must submit annually a cost report to the Medicaid agency that reflects 
the individual provider's cost of serving Medicaid recipients during the 
year.
    (2) States may utilize most recently filed cost reports to develop 
interim rates and may trend those interim rates by an applicable health 
care-related index. Interim reconciliations must be performed by 
reconciling the interim Medicaid payment rates to the filed cost report 
for the spending year in which interim payment rates were made.
    (3) Final reconciliation must be performed annually by reconciling 
any interim payments to the finalized cost report for the spending year 
in which any interim payment rates were made.
    (4) Non-institutional governmentally-operated health care providers 
must utilize a cost report, approved by the Secretary, beginning in 
their Medicaid State plan rate year 2009. Interim rates set by States 
for purposes of Medicaid payments funded by certified public 
expenditures in Medicaid State plan rate year 2009 must be calculated 
based on cost data from at least one quarter of their Medicaid State 
plan rate year 2008 documented in accordance with the cost report 
approved by the Secretary. Existing certified public expenditure 
methodologies can be used to make Medicaid payments during Medicaid 
State plan rate year 2008.
    (e) Payments not funded by certified public expenditures. This 
paragraph applies to payments made to providers operated by units of 
government that are not funded by certified public expenditures. In 
accordance with paragraph (c) of this section, each provider must submit 
annually a cost report to the Medicaid agency that reflects the 
individual provider's cost of serving Medicaid recipients during the 
year. The Medicaid agency must review the cost report to determine that 
costs on the report were properly allocated to Medicaid and verify that 
Medicaid payments to the provider during the year did not exceed the 
provider's cost.
    (f) Overpayments. If, under paragraph (d) or (e) of this section, it 
is determined that a governmentally-operated health care provider 
received an overpayment, amounts related to the overpayment will be 
properly credited to the Federal government, in accordance with part 
433, subpart F of this chapter.

[[Page 345]]

    (g) Compliance dates. Initial compliance dates have been separately 
established for institutional and non-institutional Medicaid providers 
operated by units of government. Following initial compliance dates, 
ongoing compliance will be consistent for all providers operated by 
units of government. A State must comply with the Medicaid cost limit 
described in paragraph (c) of this section in accordance with the 
timeframes and requirements in paragraphs (g)(1) through (g)(3) of this 
section.
    (1) Initial Compliance for Institutional Govermentally-Operated 
Health Care Providers. For each State, compliance with the Medicaid cost 
limit described in paragraph (c) of this section applicable to 
institutional governmentally-operated health care providers begins with 
the Medicaid State plan rate year 2008. A State's review of Medicaid 
payments made to institutional governmentally-operated health care 
providers to ensure compliance with the Medicaid cost limit during 
Medicaid State plan rate year 2008 must be completed no later than the 
last day of federal fiscal year 2010 (September 30, 2010). The State 
must submit to CMS a summary report of the findings of this review by 
the last day of calendar year of 2010 (December 31, 2010). For any cost 
reports that are not finalized, the State should use the ``as filed'' 
cost report and indicate such in the summary report to CMS. The State 
should then submit a corrected summary report to CMS within 30 days of 
the finalization of the cost report.
    (2) Initial Compliance for Non-Institutional Governmentally-Operated 
Health Care Providers. For each State, compliance with the cost limit 
described in paragraph (c) of this section applicable to non-
institutional governmentally-operated health care providers begins with 
the Medicaid State plan rate year 2009. A State's review of Medicaid 
payments made to non-institutional governmentally-operated health care 
providers to ensure compliance with the Medicaid cost limit during 
Medicaid State plan rate year 2009 must be completed no later than the 
last day of federal fiscal year 2011 (September 30, 2011). The State 
must submit to CMS a summary report of the findings of this review by 
the last day of calendar year of 2011 (December 31, 2011).
    (3) Ongoing Compliance for Institutional and Non-Institutional 
Governmentally-Operated Health Care Providers. Each subsequent State 
review of Medicaid payments made to governmentally-operated health care 
providers, after the Medicaid State plan rate years identified in 
paragraphs (g)(1) and (g)(2) of this section, must be performed annually 
and completed by the last day of the federal fiscal year ending two 
years from the Medicaid State plan rate year under review. Each State 
must submit a summary report to CMS demonstrating the results of the 
State's review of Medicaid payments to ensure compliance with the 
Medicaid cost limit applicable to governmentally-operated health care 
providers by the last day of the calendar year ending two years from the 
Medicaid State Plan rate year under review.
    (i) For any cost reports that are not finalized at the time the 
State performs the review of Medicaid payments to institutional 
governmentally-operated health care providers, the State should use the 
``as filed'' cost report and indicate such in the summary report to CMS. 
The State should then submit a corrected summary report to CMS within 30 
days of the finalization of the cost report.

[72 FR 29833, May 29, 2007]



Sec.  447.207  Retention of payments.

    (a) Payment methodologies must permit the provider to receive and 
retain the full amount of the total computable payment for services 
furnished under the approved State plan (or the approved provisions of a 
waiver or demonstration if applicable). The Secretary will determine 
compliance with this provision by examining any associated transactions 
that are related to the provider's total computable payment to ensure 
that the State's claimed expenditure, which serves as the basis for 
Federal Financial Participation, is equal to the State's net 
expenditure, and that the full amount of the non-Federal share of the 
payment has been satisfied.

[[Page 346]]

    (b) Exceptions. Provisions of paragraph (a) of this section 
specifically do not pertain to:
    (1) Use of Medicaid revenues to fund payments that are normal 
operating expenses of conducting business, such as payments related to 
taxes (including permissible health-care related taxes), fees, or 
business relationships with governments unrelated to Medicaid in which 
there is no connection to Medicaid payment.
    (2) Payments authorized by Sections 701(d) and 705 of the Benefits 
Improvement Act of 2000 (BIPA).

[72 FR 29834, May 29, 2007]



  Subpart C_Payment for Inpatient Hospital and Long-Term Care Facility 
                                Services

    Source: 46 FR 47971, Sept. 30, 1981, unless otherwise noted.



Sec.  447.250  Basis and purpose.

    (a) This subpart implements section 1902(a)(13)(A) of the Act, which 
requires that the State plan provide for payment for hospital and long-
term care facility services through the use of rates that the State 
finds, and makes assurances satisfactory to the Secretary, are 
reasonable and adequate to meet the costs that must be incurred by 
efficiently and economically operated facilities to provide services in 
conformity with State and Federal laws, regulations, and quality and 
safety standards.
    (b) Section 447.253(a)(2) implements section 1902(a)(30) of the Act, 
which requires that payments be consistent with efficiency, economy, and 
quality of care;
    (c) Sections 447.253 (c) and (d) implement sections 1902(a)(13)(B) 
and 1902(a)(13)(C) of the Act, which require a State Medicaid agency to 
make certain assurances to the Secretary regarding increases in payments 
resulting solely from changes in ownerships of hospitals, NFs, and ICFs/
MR.
    (d) Section 447.271 implements section 1903(i)(3) of the Act, which 
requires that payments for inpatient hospital services not exceed the 
hospital's customary charges.
    (e) Section 447.280 implements section 1913(b) of the Act, which 
concerns reimbursement for long-term care services furnished by swing-
bed hospitals.

[48 FR 56057, Dec. 19, 1983, as amended at 57 FR 43921, Sept. 23, 1992]

                              Payment Rates



Sec.  447.251  Definitions.

    For the purposes of this subpart--
    Long-term care facility services means intermediate care facility 
services for the mentally retarded (ICF/MR) and nursing facility (NF) 
services.
    Provider means an institution that furnishes inpatient hospital 
services or an institution that furnishes long-term care facility 
services.

[46 FR 47971, Sept. 30, 1981, as amended at 54 FR 5359, Feb. 2, 1989; 56 
FR 48867, Sept. 26, 1991]



Sec.  447.252  State plan requirements.

    (a) The plan must provide that the requirements of this subpart are 
met.
    (b) The plan must specify comprehensively the methods and standards 
used by the agency to set payment rates in a manner consistent with 
Sec.  430.10 of this chapter.
    (c) If the agency chooses to apply the cost limits established under 
Medicare (see Sec.  413.30 of this chapter) on an individual provider 
basis, the plan must specify this requirement.

(Approved by the Office of Management and Budget under control number 
0938-0193)

[48 FR 56058, Dec. 19, 1983, as amended at 51 FR 34833, Sept. 30, 1986]



Sec.  447.253  Other requirements.

    (a) State assurances. In order to receive CMS approval of a State 
plan change in payment methods and standards, the Medicaid agency must 
make assurances satisfactory to CMS that the requirements set forth in 
paragraphs (b) through (i) of this section are being met, must submit 
the related information required by Sec.  447.255 of this subpart, and 
must comply with all other requirements of this subpart.
    (b) Findings. Whenever the Medicaid agency makes a change in its 
methods and standards, but not less often than annually, the agency must 
make the following findings:

[[Page 347]]

    (1) Payment rates. (i) The Medicaid agency pays for inpatient 
hospital services and long-term care facility services through the use 
of rates that are reasonable and adequate to meet the costs that must be 
incurred by efficiently and economically operated providers to provide 
services in conformity with applicable State and Federal laws, 
regulations, and quality and safety standards.
    (ii) With respect to inpatient hospital services--
    (A) The methods and standards used to determine payment rates take 
into account the situation of hospitals which serve a disproportionate 
number of low income patients with special needs;
    (B) If a State elects in its State plan to cover inappropriate level 
of care services (that is, services furnished to hospital inpatients who 
require a lower covered level of care such as skilled nursing or 
intermediate care services) under conditions similar to those described 
in section 1861(v)(1)(G) of the Act, the methods and standards used to 
determine payment rates must specify that the payments for this type of 
care must be made at rates lower than those for inpatient hospital level 
of care services, reflecting the level of care actually received, in a 
manner consistent with section 1861(v)(1)(G) of the Act; and
    (C) The payment rates are adequate to assure that recipients have 
reasonable access, taking into account geographic location and 
reasonable travel time, to inpatient hospital services of adequate 
quality.
    (iii) With respect to nursing facility services--
    (A) Except for preadmission screening for individuals with mental 
illness and mental retardation under Sec.  483.20(f) of this Chapter, 
the methods and standards used to determine payment rates take into 
account the costs of complying with the requirements of part 483 subpart 
B of this chapter;
    (B) The methods and standards used to determine payment rates 
provide for an appropriate reduction to take into account the lower 
costs (if any) of the facility for nursing care under a waiver of the 
requirement in Sec.  483.30(c) of this Chapter to provide licensed 
nurses on a 24-hour basis;
    (C) The State establishes procedures under which the data and 
methodology used in establishing payment rates are made available to the 
public.
    (2) Upper payment limits. The agency's proposed payment rate will 
not exceed the upper payment limits as specified in Sec.  447.272.
    (c) Changes in ownership of hospitals. In determining payment when 
there has been a sale or transfer of the assets of a hospital, the 
State's methods and standards must provide that payment rates can 
reasonably be expected not to increase in the aggregate solely as a 
result of changes of ownership, more than the payments would increase 
under Medicare under Sec. Sec.  413.130, 413.134, 413.153, and 413.157 
of this chapter, insofar as these sections affect payments for 
depreciation, interest on capital indebtedness, return on equity capital 
(if applicable), acquisition costs for which payments were previously 
made to prior owners, and the recapture of depreciation.
    (d) Changes in ownership of NFs and ICFs/MR. In determining payment 
when there has been a sale or transfer of assets of an NF or ICF/MR, the 
State's methods and standards must provide the following depending upon 
the date of the transfer.
    (1) For transfers on or after July 18, 1984 but before October 1, 
1985, the State's methods and standards must provide that payment rates 
can reasonably be expected not to increase in the aggregate, solely as 
the result of a change in ownership, more than payments would increase 
under Medicare under Sec. Sec.  413.130, 413.134, 413.153 and 413.157 of 
this chapter, insofar as these sections affect payment for depreciation, 
interest on capital indebtedness, return on equity capital (if 
applicable), acquisition costs for which payments were previously made 
to prior owners, and the recapture of depreciation.
    (2) For transfers on or after October 1, 1985, the State's methods 
and standards must provide that the valuation of capital assets for 
purposes of determining payment rates for NFs and ICFs/MR is not to 
increase (as measured from the date of acquisition by the seller to the 
date of the change of

[[Page 348]]

ownership) solely as a result of a change of ownership, by more than the 
lesser of--
    (i) One-half of the percentage increase (as measured from the date 
of acquisition by the seller to the date of the change of ownership, or, 
if necessary, as extrapolated retrospectively by the Secretary) in the 
Dodge construction index applied in the aggregate with respect to those 
facilities that have undergone a change of ownership during the fiscal 
year; or
    (ii) One-half of the percentage increase (as measured from the date 
of acquisition by the seller to the date of the change of ownership) in 
the Consumer Price Index for All Urban Consumers (CPI-U) (United States 
city average) applied in the aggregate with respect to those facilities 
that have undergone a change of ownership during the fiscal year.
    (e) Provider appeals. The Medicaid agency must provide an appeals or 
exception procedure that allows individual providers an opportunity to 
submit additional evidence and receive prompt administrative review, 
with respect to such issues as the agency determines appropriate, of 
payment rates.
    (f) Uniform cost reporting. The Medicaid agency must provide for the 
filing of uniform cost reports by each participating provider.
    (g) Audit requirements. The Medicaid agency must provide for 
periodic audits of the financial and statistical records of 
participating providers.
    (h) Public notice. The Medicaid agency must provide that it has 
complied with the public notice requirements in Sec.  447.205 of this 
part when it is proposing significant changes to its methods or 
standards for setting payment rates for inpatient hospital or LTC 
facility services.
    (i) Rates paid. The Medicaid agency must pay for inpatient hospital 
and long term care services using rates determined in accordance with 
methods and standards specified in an approved State plan.

[48 FR 56057, Dec. 19, 1983, as amended at 52 FR 28147, July 28, 1987; 
54 FR 5359, Feb. 2, 1989; 57 FR 43921, Sept. 23, 1992]



Sec.  447.255  Related information.

    The Medicaid agency must submit, with the assurances described in 
Sec.  447.253(a), the following information:
    (a) The amount of the estimated average proposed payment rate for 
each type of provider (hospital, ICF/MR, or nursing facility), and the 
amount by which that estimated average rate increased or decreased 
relative to the average payment rate in effect for each type or provider 
for the immediately preceding rate period;
    (b) An estimate of the short-term and, to the extent feasible, long-
term effect the change in the estimated average rate will have on--
    (1) The availability of services on a Statewide and geographic area 
basis;
    (2) The type of care furnished;
    (3) The extent of provider participation; and
    (4) The degree to which costs are covered in hospitals that serve a 
disproportionate number of low income patients with special needs.

[48 FR 56058, Dec. 19, 1983, as amended at 54 FR 5359, Feb. 2, 1989; 56 
FR 48867, Sept. 26, 1991; 57 FR 43924, Sept. 23, 1992; 57 FR 46431, Oct. 
8, 1992]



Sec.  447.256  Procedures for CMS action on assurances and State plan amendments.

    (a) Criteria for approval. (1) CMS approval action on State plans 
and State plan amendments, is taken in accordance with subpart B of part 
430 of this chapter and sections 1116, 1902(b) and 1915(f) of the Act.
    (2) In the case of State plan and plan amendment changes in payment 
methods and standards, CMS bases its approval on the acceptability of 
the Medicaid agency's assurances that the requirements of Sec.  447.253 
have been met, and the State's compliance with the other requirements of 
this subpart.
    (b) Time limit. CMS will send a notice to the agency of its 
determination as to whether the assurances regarding a State plan 
amendment are acceptable within 90 days of the date CMS receives the 
assurances described in Sec.  447.253, and the related information 
described in Sec.  447.255 of this subpart. If CMS does not send a 
notice to the agency of its determination within this time limit and the 
provisions in paragraph (a) of

[[Page 349]]

this section are met, the assurances and/or the State plan amendment 
will be deemed accepted and approved.
    (c) Effective date. A State plan amendment that is approved will 
become effective not earlier than the first day of the calendar quarter 
in which an approvable amendment is submitted in accordance with Sec.  
430.20 of this chapter and 447.253.

[48 FR 56058, Dec. 19, 1983, as amended at 52 FR 28147, July 28, 1987]

                     Federal Financial Participation



Sec.  447.257  FFP: Conditions relating to institutional reimbursement.

    FFP is not available for a State's expenditures for hospital 
inpatient or long-term care facility services that are in excess of the 
amounts allowable under this subpart.

[52 FR 28147, July 28, 1987]

                              Upper Limits



Sec.  447.271  Upper limits based on customary charges.

    (a) The agency may not pay a provider more for inpatient hospital 
services under Medicaid than the provider's customary charges to the 
general public for the services.
    (b) [Reserved]

[72 FR 29834, May 29, 2007]



Sec.  447.272  Inpatient services: Application of upper payment limits.

    (a) Scope. This section applies to rates set by the agency to pay 
for inpatient services furnished by hospitals, nursing facilities, and 
ICFs/MR within one of the following categories:
    (1) State government operated facilities (that is, all facilities 
that are operated by the State) as defined at Sec.  433.50(a) of this 
chapter.
    (2) Non-State government operated facilities (that is, all 
governmentally operated facilities that are not operated by the State) 
as defined at Sec.  433.50(a) of this chapter.
    (3) Privately operated facilities, that is, all facilities that are 
not operated by a unit of government as defined at Sec.  433.50(a) of 
this chapter.
    (b) General rules. (1) For privately operated facilities, upper 
payment limit refers to a reasonable estimate of the amount that would 
be paid for the services furnished by the group of facilities under 
Medicare payment principles in subchapter B of this chapter.
    (2) For State government operated facilities and for non-State 
government operated facilities, upper payment limit refers to the 
individual health care provider's Medicaid cost as defined at Sec.  
447.206.
    (3) Except as provided in paragraph (c) of this section, aggregate 
Medicaid payments to the group of privately operated facilities 
described in paragraph (a) of this section may not exceed the upper 
payment limit described in paragraph (b)(1) of this section.
    (4) Except as provided in paragraph (c) of this section, Medicaid 
payments to State government operated facilities and non-State 
government operated facilities must not exceed the individual health 
care provider's Medicaid cost as documented in accordance with Sec.  
447.206.
    (c) Exceptions--(1) Indian Health Services and tribal facilities. 
The limitation in paragraph (b) of this section does not apply to Indian 
Health Services facilities and tribal facilities that are funded through 
the Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638).
    (2) Disproportionate share hospitals. The limitation in paragraph 
(b) of this section does not apply to payment adjustments made under 
section 1923 of the Act that are made under a State plan to hospitals 
found to serve a disproportionate number of low-income patients with 
special needs as provided in section 1902(a)(13)(A)(iv) of the Act. 
Disproportionate share hospital (DSH) payments are subject to the 
following limits:
    (i) The aggregate DSH limit using the Federal share of the DSH limit 
under section 1923(f) of the Act.
    (ii) The hospital-specific DSH limit in section 1923(g) of the Act.
    (iii) The aggregate DSH limit for institutions for mental disease 
(IMDs) under section 1923(h) of the Act.
    (3) The limitation in paragraph (b) of this section does not apply 
to payments authorized by Sections 701(d) and 705 of the Benefits 
Improvement Protection Act of 2000 (BIPA).

[[Page 350]]

    (d) Compliance dates. Except as permitted under paragraph (e) of 
this section, a State must comply with the upper payment limit described 
in paragraph (b) of this section by one of the following dates:
    (1) For State government operated and non-State government operated 
hospitals, nursing facilities and ICFs/MR `` Medicaid State plan rate 
year 2008.
    (2) For all other facilities--March 13, 2001.
    (e) Transition periods--(1) Definitions. For purposes of this 
paragraph, the following definitions apply:
    (i) Transition period refers to the period of time beginning March 
13, 2001 through the end of one of the schedules permitted under 
paragraph (e)(2)(ii) of this section.
    (ii) UPL stands for the upper payment limit described in paragraph 
(b)(1) of this section for the referenced year.
    (iii) X stands for the payments to a specific group of providers 
described in paragraphs (a)(2) and (a)(3) of this section in State FY 
2000 that exceeded the amount that would have been under the upper 
payment limit described in paragraph (b) of this section if that limit 
had been applied to that year.
    (2) General rules. (i) The amount that a State's payment exceeded 
the upper payment limit described in paragraph (b) of this section must 
not increase.
    (ii) A State with an approved State plan amendment payment provision 
effective on one of the following dates and that makes payments that 
exceed the upper payment limit described in paragraph (b) of this 
section to providers described in paragraphs (a)(2) and (a)(3) of this 
section may follow the respective transition schedule:
    (A) For State plan provisions that are effective after September 30, 
1999 and were approved before January 22, 2001, payments may exceed the 
upper payment limit in paragraph (b) of this section until September 30, 
2002.
    (B) For approved plan provisions that are effective after October 1, 
1992 and before October 1, 1999, payments during the transition period 
may not exceed the following--
    (1) For State FY 2003: State FY 2003 UPL + .75X.
    (2) For State FY 2004: State FY 2004 UPL + .50X.
    (3) For State FY 2005: State FY 2005 UPL + .25X.
    (4) For State FY 2006; State FY 2006 UPL.
    (C) For approved plan provisions that are effective on or before 
October 1, 1992, payments during the transition period may not exceed 
the following:
    (1) For State FY 2004: State FY 2004 UPL + .85X.
    (2) For State FY 2005: State FY 2005 UPL + .70X.
    (3) For State FY 2006: State FY 2006 UPL + .55X.
    (4) For State FY 2007: State FY 2007 UPL + .40X.
    (5) For State FY 2008: State FY 2008 UPL + .25X.
    (6) For the portion of State FY 2009 before October 1, 2008: State 
FY 2009 UPL + .10X.
    (7) Beginning October 1, 2008: UPL described in paragraph (b) of 
this section.
    (D) For State plan provisions that were effective after September 
30, 1999, submitted to CMS before March 13, 2001, and approved by CMS 
after January 21, 2001, payments may exceed the limit in paragraph (b) 
of this section until the later of November 5, 2001, or 1 year from the 
approved effective date of the State plan provision.
    (iii) When State FY 2003 begins after September 30, 2002, the 
reduction schedule in paragraphs (e)(2)(ii)(C)(1) through 
(e)(2)(ii)(C)(7) will begin on State FY 2003.
    (iv) If a State meets the criteria in paragraph (e)(2)(ii) of this 
section and its State plan amendment expires before the end of the 
applicable transition period, the State may continue making payments 
that exceed the UPL described in paragraph (b) of this section in 
accordance with the applicable transition schedule described in 
paragraph (e)(2)(ii) of this section.
    (v) A State with an approved State plan amendment payment provision 
that makes payments up to 150 percent of the UPL described in paragraph 
(b)(1) of this section to providers described in paragraph (a)(2) of 
this section does not qualify for a transition period.
    (f) Reporting requirements for payments during the transition 
periods. States that

[[Page 351]]

are eligible for a transition period described in paragraph (e) of this 
section, and that make payments that exceed the upper payment limit 
under paragraph (b)(1) of this section, must report annually the 
following information to CMS:
    (1) The total Medicaid payments made to each facility for services 
furnished during the entire State fiscal year.
    (2) A reasonable estimate of the amount that would be paid for the 
services furnished by the facility under Medicare payment principles.

[66 FR 3175, Jan. 12, 2001, as amended at 66 FR 46399, Sept. 5, 2001; 67 
FR 2610, Jan. 18, 2002; 72 FR 29834, May 29, 2007]

                           Swing-Bed Hospitals



Sec.  447.280  Hospital providers of NF services (swing-bed hospitals).

    (a) General rule. If the State plan provides for NF services 
furnished by a swing-bed hospital, as specified in Sec. Sec.  440.40(a) 
and 440.150(f) of this chapter, the methods and standards used to 
determine payment rates for routine NF services must--
    (1) Provide for payment at the average rate per patient day paid to 
NFs, as applicable, for routine services furnished during the previous 
calendar year; or
    (2) Meet the State plan and payment requirements described in this 
subpart, as applicable.
    (b) Application of the rule. The payment methodology used by a State 
to set payment rates for routine NF services must apply to all swing-bed 
hospitals in the State.

[59 FR 56237, Nov. 10, 1994]

Subpart D [Reserved]



        Subpart E_Payment Adjustments for Hospitals That Serve a 
             Disproportionate Number of Low-Income Patients

    Source: 57 FR 55143, Nov. 24, 1992, unless otherwise noted.



Sec.  447.296  Limitations on aggregate payments for disproportionate share hospitals for the period January 1, 1992 through September 30, 1992.

    (a) The provisions of this section 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.
    (b) For the period January 1, 1992 through September 30, 1992, FFP 
is available for aggregate payments to hospitals that serve a 
disproprotionate number of low-income patients with special needs only 
if the payments are made in accordance with sections 1902(a)(13)(A) and 
1923 of the Act, and with one of the following:
    (1) An approved State plan in effect as of September 30, 1991.
    (2) A State plan amendment submitted to CMS by September 30, 1991.
    (3) A State plan amendment, or modification thereof, submitted to 
CMS between October 1, 1991 and November 26, 1991, if the amendment, or 
modification thereof, was intended to limit the State's definition of 
disproportionate share hospitals to those hospitals with Medicaid 
inpatient utilization rates or low-income utilization rates (as defined 
in section 1923 (b) of the Act) at or above the statewide arithmetic 
mean.
    (4) A methodology for disproportionate share hospital payments that 
was established and in effect as of September 30, 1991, or in accordance 
with a State law enacted or State regulation adopted as of September 30, 
1991.
    (5) A State plan amendment submitted to CMS by September 30, 1992 
that increases aggregate disproportionate share hospitals payments in 
order to meet the minimum payment adjustments required by section 
1923(c)(1) of the Act. The minimum payment adjustment is the amount 
required by the Medicare methodology described in section 1923(c)(1) of 
the Act for those hospitals that satisfy the minimum Federal definition 
of a disproportionate share hospital in section 1923(b) of the Act.
    (6) A State plan amendment submitted to CMS by September 30, 1992 
that provides for a redistribution of

[[Page 352]]

disproportionate share hospital payments within the State without 
raising total payments compared to the previously approved State plan. 
CMS will approve the amendment only if the State submits written 
documentation that demonstrates to CMS that the aggregate payments that 
will be made after the redistribution are no greater than those payments 
made before the redistribution.
    (7) A State plan amendment submitted to CMS by September 30, 1992 
that provides for a reduction in disproportionate share hospital 
payments.



Sec.  447.297  Limitations on aggregate payments for disproportionate share hospitals beginning October 1, 1992.

    (a) Applicability. The provisions of this section 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.
    (b) National payment target. The national payment target for 
disproportionate share hospital (DSH) payments for any Federal fiscal 
year is equal to 12 percent of the total medical assistance expenditures 
that will be made during the Federal fiscal year under State plans, 
excluding administrative costs. A preliminary national expenditure 
target will be published by CMS prior to October 1 of each year. This 
preliminary national expenditure target will be superseded by a final 
national expenditure target published by April 1 of each Federal fiscal 
year, as specified in paragraph (d) of this section.
    (c) State disproportionate share hospital allotments. Prior to 
October 1 of each Federal fiscal year, CMS will publish in the Federal 
Register preliminary State DSH allotments for each State. These 
preliminary State DSH allotments will be determined using the most 
current applicable actual and estimated State expenditure information as 
reported to CMS and adjusted by CMS as may be necessary using the 
methodology described in Sec.  447.298. CMS will publish final State DSH 
allotments by April 1 of each Federal fiscal year, as described in 
paragraph (d) of this section.
    (d) Final national disproportionate share hospitals expenditure 
target and State disproportionate share hospitals allotments. (1) CMS 
will revise the preliminary national expenditure target and the 
preliminary State DSH allotments by April 1 of each Federal fiscal year. 
The final national DSH expenditure target and State DSH allotments will 
be based on the most current applicable actual and estimated expenditure 
information reported to CMS and adjusted by CMS as may be necessary 
immediately prior to the April 1 publication date. The final national 
expenditure target and State DSH allotments will not be recalculated for 
that Federal fiscal year based upon any subsequent actual or estimated 
expenditure information reported to CMS.
    (2) If CMS determines that at any time a State has exceeded its 
final DSH allotment for a Federal fiscal year, FFP attributable to the 
excess DSH expenditures will be disallowed.
    (3) If a State's actual DSH expenditures applicable to a Federal 
fiscal year are less than its final State DSH allotment for that Federal 
fiscal year, the State is permitted, to the extent allowed by its 
approved State plan, to make additional DSH expenditures applicable to 
that Federal fiscal year up to the amount of its final DSH allotment for 
that Federal fiscal year.
    (e) Publication of limits. (1) Before the beginning of each Federal 
fiscal year, CMS will publish in the Federal Register--
    (i) A preliminary national DSH expenditure target for the Federal 
fiscal year; and
    (ii) A preliminary DSH allotment for each State for the Federal 
fiscal year.
    (2) The final national DSH expenditure target and State DSH 
allotments will be published in the Federal Register by April 1 of each 
Federal fiscal year.

[57 FR 55143, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec.  447.298  State disproportionate share hospital allotments.

    (a) Calculation of State's base allotment for Federal fiscal year 
1993. (1) For Federal fiscal year 1993, CMS will calculate for each 
State a DSH allotment, using the State's ``base allotment.'' The

[[Page 353]]

State's base allotment is the greater of:
    (i) The total amount of the State's projected DSH payments for 
Federal fiscal year 1992 under the State plan applicable to Federal 
fiscal year 1992, calculated in accordance with paragraph (a)(2) of this 
section; or
    (ii) $1,000,000.
    (2) In calculating the State's DSH payments applicable to Federal 
fiscal year 1992, CMS will derive amounts from payments applicable to 
the period of October 1, 1991, through September 30, 1992, under State 
plans or plan amendments that meet the requirements specified in Sec.  
447.296(b). The calculation will not include--
    (i) DSH payment adjustments made by the State applicable to the 
period October 1, 1991 through December 31, 1991 under State plans or 
plan amendments that do not meet the criteria described in Sec.  
447.296; and
    (ii) Retroactive DSH payments made in 1992 that are not applicable 
to Federal fiscal year 1992.
    (3) CMS will calculate a percentage for each State by dividing the 
DSH base allotment by the total unadjusted medical assistance 
expenditures, excluding administrative costs, made during Federal fiscal 
year 1992. On the basis of this percentage, CMS will classify each State 
as a ``high-DSH'' or ``low-DSH'' State.
    (i) If the State's base allotment exceeded 12 percent of its total 
unadjusted medical assistance expenditures made under the State plan in 
Federal fiscal year 1992, CMS will classify the State as a ``high-DSH'' 
State.
    (ii) If the State's base allotment was 12 percent or less of its 
total unadjusted medical assistance expenditures made under the State 
plan in Federal fiscal year 1992, CMS will classify the State as a 
``low-DSH'' State.
    (b) State disproportionate share hospital allotments for Federal 
fiscal year 1993. (1) For Federal fiscal year 1993, CMS will calculate a 
DSH allotment for each low-DSH State that equals the State's base 
allotment described under paragraph (a) of this section, increased by 
State growth, as specified in paragraph (d) of this section.
    (2) For high-DSH States, the dollar amount of DSH payments in 
Federal fiscal year 1993 may not exceed the dollar amount of DSH 
payments applicable to Federal fiscal year 1992 (that is, the State base 
allotment).
    (c) State disproportionate share hospital allotment for Federal 
fiscal years 1994 and after. For Federal fiscal years 1994 and after--
    (1) For low-DSH States, CMS will calculate the DSH allotment for 
each Federal fiscal year by increasing the prior year's State DSHs 
allotment by--
    (i) State growth, as specified in paragraph (d) of this section; and
    (ii) A supplemental amount, if applicable, as described in paragraph 
(e) of this section.
    (2) For high-DSH States, the dollar amount of DSH payments 
applicable to any Federal fiscal year may not exceed the dollar amount 
of payments applicable to Federal fiscal year 1992 (that is, the State 
base allotment). This payment limitation will apply until the Federal 
fiscal year in which the State's DSH payments applicable to that Federal 
fiscal year, expressed as a percentage of the State's total unadjusted 
medical assistance expenditures in that Federal fiscal year, equal 12 
percent or less. When a high-DSH State's percentage equals 12 percent or 
less, the State will be reclassified as a low-DSH State.
    (d) State growth. (1) The State growth for a State in a Federal 
fiscal year is equal to the product of--
    (i) The growth factor that is CMS's projected percentage increase in 
the State's total unadjusted medical assistance expenditures (including 
administrative costs) relative to the corresponding amount in the 
previous year; and
    (ii) The State's prior year DSH allotment.
    (2) If the growth factor is zero or is negative, the State growth is 
zero.
    (3) If a low-DSH State experiences a level of negative growth to the 
extent that its previous Federal fiscal year's DSH allotment would be 
more than 12 percent of its current Federal fiscal year's total 
unadjusted medical assistance expenditures (excluding administrative 
costs), the low-DSH State's previous year's DSH allotment will be 
reduced to the extent necessary to maintain the individual low-DSH 
State's 12-

[[Page 354]]

percent limit and that amount will become the low-DSH State's DSH 
allotment for the current Federal fiscal year. In no Federal fiscal year 
will a low-DSH State's DSH allotment be allowed to exceed its individual 
State 12-percent limit.
    (e) Supplemental amount available for low-DSH States.
    (1) A supplemental amount is the State's share of a pool of money 
(referred to as a redistribution pool).
    (2) CMS will calculate the redistribution pool for the appropriate 
Federal fiscal year by subtracting from the projected national DSH 
expenditure target the following:
    (i) The total of the State DSH base allotments for all high-DSH 
States;
    (ii) The total of the previous year's State DSH allotments for all 
low-DSH States;
    (iii) The State growth amount for all low-DSH States; and
    (iv) The total amount of additional DSH payment adjustments made in 
order to meet the minimum payment adjustments required under section 
1923(c)(l) of the Act, which are made in accordance with Sec.  
447.296(b)(5).
    (3) CMS will determine the percent of the redistribution pool for 
each low-DSH State on the basis of each State's relative share of the 
total unadjusted medical assistance expenditures for the Federal fiscal 
year compared to the total unadjusted medical assistance expenditures 
for the Federal fiscal year projected to be made by all low-DSH States. 
The percent of the redistribution pool that each State will receive is 
equal to the State's total unadjusted medical assistance expenditures 
divided by the total unadjusted medical assistance expenditures for all 
low-DSH States.
    (4) CMS will not provide any low-DSH State a supplemental amount 
that would result in the State's total DSH allotment exceeding 12 
percent of its projected total unadjusted medical assistance 
expenditures. CMS will reallocate any supplemental amounts not allocated 
to States because of this 12-percent limitation to other low-DSH States 
in accordance with the percentage determined in paragraph (e)(3) of this 
section.
    (5) CMS will not reallocate to low-DSH States the difference between 
any State's actual DSH expenditures applicable to a Federal fiscal year 
and its State DSH allotment applicable to that Federal fiscal year. 
Thus, any unspent DSH allotment may not be reallocated.
    (f) Special provision. Any increases in a State's aggregate 
disproportionate payments, that are made to meet the minimum payment 
requirements specified in Sec.  447.296(b)(5), may exceed the State base 
allotment to the extent such increases are made to satisfy the minimum 
payment requirement. In such cases, CMS will adjust the State's base 
allotment in the subsequent Federal fiscal year to include the increased 
minimum payments.

[57 FR 55143, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]



Sec.  447.299  Reporting requirements.

    (a) Beginning with the first quarter of Federal fiscal year 1993, 
each State must submit to CMS the quarterly aggregate amount of its 
disproportionate share hospital payments made to each individual public 
and private provider or facility. States' reports must present a 
complete, accurate, and full disclosure of all of their DSH programs and 
expenditures.
    (b) Each State must report the aggregate information specified under 
paragraph (a) of this section on a quarterly basis in accordance with 
procedures established by CMS.
    (c) Beginning with each State's Medicaid State plan rate year 2005, 
for each Medicaid State plan rate year, the State must submit to CMS, at 
the same time as it submits the completed audit required under Sec.  
455.204, the following information for each DSH hospital to which the 
State made a DSH payment in order to permit verification of the 
appropriateness of such payments:
    (1) Hospital name. The name of the hospital that received a DSH 
payment from the State, identifying facilities that are institutes for 
mental disease (IMDs) and facilities that are located out-of-state.
    (2) Estimate of hospital-specific DSH limit. The State's estimate of 
eligible uncompensated care for the hospital receiving a DSH payment for 
the year

[[Page 355]]

under audit based on the State's methodology for determining such limit.
    (3) Medicaid inpatient utilization rate. The hospital's Medicaid 
inpatient utilization rate, as defined in Section 1923(b)(2) of the Act, 
if the State does not use alternative qualification criteria described 
in paragraph (c)(5) of this section.
    (4) Low income utilization rate. The hospital's low income 
utilization rate, as defined in Section 1923(b)(3) of the Act if the 
State does not use alternative qualification criteria described in 
paragraph (c)(5) of this section.
    (5) State defined DSH qualification criteria. If the State uses an 
alternate broader DSH qualification methodology as authorized in Section 
1923(b)(4) of the Act, the value of the statistic and the methodology 
used to determine that statistic.
    (6) IP/OP Medicaid fee-for-service (FFS) basic rate payments. The 
total annual amount paid to the hospital under the State plan, including 
Medicaid FFS rate adjustments, but not including DSH payments or 
supplemental/enhanced Medicaid payments, for inpatient and outpatient 
services furnished to Medicaid eligible individuals.
    (7) IP/OP Medicaid managed care organization payments. The total 
annual amount paid to the hospital by Medicaid managed care 
organizations for inpatient hospital and outpatient hospital services 
furnished to Medicaid eligible individuals.
    (8) Supplemental/enhanced Medicaid IP/OP payments. Indicate the 
total annual amount of supplemental/enhanced Medicaid payments made to 
the hospital under the State plan. These amounts do not include DSH 
payments, regular Medicaid FFS rate payments, and Medicaid managed care 
organization payments.
    (9) Total Medicaid IP/OP Payments. Provide the total sum of items 
identified in Sec.  447.299(c)(6), (7) and (8).
    (10) Total Cost of Care for Medicaid IP/OP Services. The total 
annual costs incurred by each hospital for furnishing inpatient hospital 
and outpatient hospital services to Medicaid eligible individuals.
    (11) Total Medicaid Uncompensated Care. The total amount of 
uncompensated care attributable to Medicaid inpatient and outpatient 
services. The amount should be the result of subtracting the amount 
identified in Sec.  447.299(c)(9) from the amount identified in Sec.  
447.299(c)(10). The uncompensated care costs of providing Medicaid 
physician services cannot be included in this amount.
    (12) Uninsured IP/OP revenue. Total annual payments received by the 
hospital by or on behalf of individuals with no source of third party 
coverage for inpatient and outpatient hospital services they receive. 
This amount does not include payments made by a State or units of local 
government, for services furnished to indigent patients.
    (13) Total Applicable Section 1011 Payments. Federal Section 1011 
payments for uncompensated inpatient and outpatient hospital services 
provided to Section 1011 eligible aliens with no source of third party 
coverage for the inpatient and outpatient hospital services they 
receive.
    (14) Total cost of IP/OP care for the uninsured. Indicate the total 
costs incurred for furnishing inpatient hospital and outpatient hospital 
services to individuals with no source of third party coverage for the 
hospital services they receive.
    (15) Total uninsured IP/OP uncompensated care costs. Total annual 
amount of uncompensated IP/OP care for furnishing inpatient hospital and 
outpatient hospital services to Medicaid eligible individuals and to 
individuals with no source of third party coverage for the hospital 
services they receive. The amount should be the result of subtracting 
paragraphs (c)(12) and (c)(13), from paragraph (c)(14) of this section. 
The uncompensated care costs of providing physician services to the 
uninsured cannot be included in this amount. The uninsured uncompensated 
amount also cannot include amounts associated with unpaid co-pays or 
deductibles for individuals with third party coverage for the inpatient 
and/or outpatient hospital services they receive or any other 
unreimbursed costs associated with inpatient and/or outpatient hospital 
services provided to individuals with those services in their third 
party coverage benefit package.

[[Page 356]]

Nor does uncompensated care costs include bad debt or payer discounts 
related to services furnished to individuals who have health insurance 
or other third party payer.
    (16) Total annual uncompensated care costs. The total annual 
uncompensated care cost equals the total cost of care for furnishing 
inpatient hospital and outpatient hospital services to Medicaid eligible 
individuals and to individuals with no source of third party coverage 
for the hospital services they receive less the sum of regular Medicaid 
FFS rate payments, Medicaid managed care organization payments, 
supplemental/enhanced Medicaid payments, uninsured revenues, and Section 
1011 payments for inpatient and outpatient hospital services. This 
should equal the sum of paragraphs (c)(9),(c)(12), and (c)(13) 
subtracted from the sum of paragraphs (c)(10) and (c)(14) of this 
section.
    (17) Disproportionate share hospital payments. Indicate total annual 
payment adjustments made to the hospital under Section 1923 of the Act.
    (18) States must report DSH payments made to all hospitals under the 
authority of the approved Medicaid State plan. This includes both in-
State and out-of-State hospitals. For out-of-State hospitals, States 
must report, at a minimum, the information identified in Sec.  
447.299(c)(1) through (c)(6), (c)(8), (c)(9) and (c)(17).
    (d) Each State must maintain, in readily reviewable form, supporting 
documentation that provides a detailed description of each DSH program, 
the legal basis of each DSH program, and the amount of DSH payments made 
to each individual public and private provider or facility each quarter. 
This information must be made available to Federal reviewers upon 
request.
    (e) 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 expenditures made to 
the disproportionate share hospitals 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.

[46 FR 47971, Sept. 30, 1981, as amended at 73 FR 77950, Dec. 19, 2008; 
74 FR 18657, Apr. 24, 2009]



 Subpart F_Payment Methods for Other Institutional and Noninstitutional 
                                Services

    Source: 43 FR 45253, Sept. 29, 1978, unless otherwise noted. 
Redesignated at 46 FR 47973, Sept. 30, 1981, and further redesignated at 
58 FR 6095, Jan. 26, 1993.



Sec.  447.300  Basis and purpose.

    In this subpart, Sec.  447.302 through Sec.  447.325 and Sec.  
447.361 implement section 1902(a)(30) of the Act, which requires that 
payments be consistent with efficiency, economy and quality of care. 
Section 447.371 implements section 1902(a)(15) of the Act, which 
requires that the State plan provide for payment for rural health clinic 
services in accordance with regulations prescribed by the Secretary.

[72 FR 39239, July 17, 2007]



Sec.  447.302  State plan requirements.

    A State plan must provide that the requirements of this subpart are 
met.

[46 FR 48560, Oct. 1, 1981]



Sec.  447.304  Adherence to upper limits; FFP.

    (a) The Medicaid agency must not pay more than the upper limits 
described in this subpart.
    (b) In the case of payments made under the plan for deductibles and 
coinsurance payable on an assigned Medicare claim for noninstitutional 
services, those payments may be made only up to the reasonable charge 
under Medicare.
    (c) FFP is not available for a State's expenditures for services 
that are in excess of the amounts allowable under this subpart.
    Note: The Secretary may waive any limitation on reimbursement 
imposed by subpart F of this part for experiments conducted under 
section 402 of Pub. L. 90-428, Incentives

[[Page 357]]

for Economy Experimentation, as amended by section 222(b) of Pub. L. 92-
603, and under section 222(a) of Pub. L. 92-603.

[46 FR 48560, Oct. 1, 1981; 46 FR 54744, Nov. 4, 1981, as amended at 66 
FR 3176, Jan. 12, 2001]

                 Outpatient Hospital and Clinic Services



Sec.  447.321  Outpatient hospital and clinic services: Application of upper payment limits.

    (a) Scope. This section applies to rates set by the agency to pay 
for outpatient services furnished by hospitals and clinics within one of 
the following categories:
    (1) State government operated facilities (that is, all facilities 
that are operated by the State) as defined at Sec.  433.50(a) of this 
chapter.
    (2) Non-State government operated facilities (that is, all 
governmentally operated facilities that are not operated by the State) 
as defined at Sec.  433.50(a) of this chapter.
    (3) Privately operated facilities that is, all facilities that are 
not operated by a unit of government as defined at Sec.  433.50(a) of 
this chapter.
    (b) General rules. (1) For privately operated facilities, upper 
payment limit refers to a reasonable estimate of the amount that would 
be paid for the services furnished by the group of facilities under 
Medicare payment principles in subchapter B of this chapter.
    (2) For State government operated facilities and for non-State 
government operated facilities, upper payment limit refers to the 
individual health care provider's Medicaid cost as defined at Sec.  
447.206.
    (3) Except as provided in paragraph (c) of this section, aggregate 
Medicaid payments to the group of privately operated facilities within 
one of the categories described in paragraph (a) of this section may not 
exceed the upper payment limit described in paragraph (b)(1) of this 
section.
    (4) Except as provided in paragraph (c) of this section, Medicaid 
payments to State government operated facilities and non-State 
government operated facilities must not exceed the individual health 
care provider's Medicaid cost as documented in accordance with Sec.  
447.206.
    (c) Exceptions--(1) Indian Health Services and tribal facilities. 
The limitation in paragraph (b) of this section does not apply to Indian 
Health Services facilities and tribal facilities that are funded through 
the Indian Self-Determination and Education Assistance Act (Pub. L. 93-
638).
    (2) Disproportionate share hospitals. The limitation in paragraph 
(b) of this section does not apply to payment adjustments made under 
section 1923 of the Act that are made under a State plan to hospitals 
found to serve a disproportionate number of low-income patients with 
special needs as provided in section 1902(a)(13)(A)(iv) of the Act. 
Disproportionate share hospital (DSH) payments are subject to the 
following limits:
    (i) The aggregate DSH limit using the Federal share of the DSH limit 
under section 1923(f) of the Act.
    (ii) The hospital-specific DSH limit in section 1923(g) of the Act.
    (iii) The aggregate DSH limit for institutions for mental disease 
(IMDs) under section 1923(h) of the Act.
    (3) The limitation in paragraph (b) of this section does not apply 
to payments authorized by Sections 701(d) and 705 of the Benefits 
Improvement Protection Act of 2000 (BIPA).
    (d) Compliance dates. Except as permitted under paragraph (e) of 
this section, a State must comply with the upper payment limit described 
in paragraph (b) of this section by one of the following dates:
    (1) For State government operated and non-State government operated 
hospitals--Medicaid State plan rate year 2008.
    (2) For State government operated and non-State government operated 
clinics--Medicaid State plan rate year 2009.
    (3) For all other facilities--March 13, 2001.
    (e) Transition periods--(1) Definitions. For purposes of this 
paragraph, the following definitions apply:
    (i) Transition period refers to the period of time beginning March 
13, 2001 through the end of one of the schedules permitted under 
paragraph (e)(2)(ii) of this section.
    (ii) UPL stands for the upper payment limit described in paragraph

[[Page 358]]

(b)(1) of this section for the referenced year.
    (iii) X stands for the payments to a specific group of providers 
described in paragraph (a) of this section in State FY 2000 that 
exceeded the amount that would have been under the upper payment limit 
described in paragraph (b) of this section if that limit had been 
applied to that year.
    (2) General rules. (i) The amount that a State's payment exceeded 
the upper payment limit described in paragraph (b) of this section must 
not increase.
    (ii) A State with an approved State plan amendment payment provision 
effective on one of the following dates and that makes payments that 
exceed the upper payment limit described in paragraph (b) of this 
section to providers described in paragraph (a) of this section may 
follow the respective transition schedule:
    (A) For State plan provisions that are effective after September 30, 
1999 and were approved before January 22, 2001, payments may exceed the 
upper payment limit in paragraph (b) of this section until September 30, 
2002.
    (B) For approved plan provisions that are effective after October 1, 
1992 and before October 1, 1999, payments during the transition period 
may not exceed the following--
    (1) For State FY 2003: State FY 2003 UPL + .75X.
    (2) For State FY 2004: State FY 2004 UPL + .50X.
    (3) For State FY 2005: State FY 2005 UPL + .25X.
    (4) For State FY 2006; State FY 2006 UPL.
    (C) For approved plan provisions that are effective on or before 
October 1, 1992, payments during the transition period may not exceed 
the following:
    (1) For State FY 2004: State FY 2004 UPL + .85X.
    (2) For State FY 2005: State FY 2005 UPL + .70X.
    (3) For State FY 2006: State FY 2006 UPL + .55X.
    (4) For State FY 2007: State FY 2007 UPL + .40X.
    (5) For State FY 2008: State FY 2008 UPL + .25X.
    (6) For the portion of State FY 2009 before October 1, 2008: State 
FY 2009 UPL + .10X.
    (7) Beginning October 1, 2008: UPL described in paragraph (b) of 
this section.
    (D) For State plan provisions that were effective after September 
30, 1999, submitted to CMS before March 13, 2001, and approved by CMS 
after January 21, 2001, payments may exceed the limit in paragraph (b) 
of this section until the later of November 5, 2001, or 1 year from the 
approved effective date of the State plan provision.
    (iii) When State FY 2003 begins after September 30, 2002, the 
reduction schedule in paragraphs (e)(2)(ii)(C)(1) through 
(e)(2)(ii)(C)(7) will begin on State FY 2003.
    (iv) If a State meets the criteria in paragraph (e)(2)(ii) of this 
section and its State plan amendment expires before the end of the 
applicable transition period, the State may continue making payments 
that exceed the UPL described in paragraph (b) of this section in 
accordance with the applicable transition schedule described in 
paragraph (e)(2)(ii) of this section.
    (v) A State with an approved State plan amendment payment provision 
that makes payments up to 150 percent of the UPL described in paragraph 
(b)(1) of this section to providers described in paragraph (a)(2) of 
this section does not qualify for a transition period.
    (f) Reporting requirements for payments during the transition 
periods. States that are eligible for a transition period described in 
paragraph (e) of this section, and that make payments that exceed the 
limit under paragraph (b)(1) of this section, must report annually the 
following information to CMS:
    (1) The total Medicaid payments made to each facility for services 
furnished during the entire State fiscal year.
    (2) A reasonable estimate of the amount that would be paid for the 
services furnished by the facility under Medicare payment principles.

[66 FR 3176, Jan. 12, 2001, as amended at 66 FR 46399, Sept. 5, 2001; 67 
FR 2611, Jan. 18, 2002; 72 FR 29835, May 29, 2007]

[[Page 359]]

                Other Inpatient and Outpatient Facilities



Sec.  447.325  Other inpatient and outpatient facility services: Upper limits of payment.

    The agency may pay the customary charges of the provider but must 
not pay more than the prevailing charges in the locality for comparable 
services under comparable circumstances.



Sec.  447.342  [Reserved]

                        Prepaid Capitation Plans



Sec.  447.362  Upper limits of payment: Nonrisk contract.

    Under a nonrisk contract, Medicaid payments to the contractor may 
not exceed--
    (a) What Medicaid would have paid, on a fee-for-service basis, for 
the services actually furnished to recipients: plus
    (b) The net savings of administrative costs the Medicaid agency 
achieves by contracting with the plan instead of purchasing the services 
on a fee-for-service basis.

[48 FR 54025, Nov. 30, 1983]

                      Rural Health Clinic Services



Sec.  447.371  Services furnished by rural health clinics.

    The agency must pay for rural health clinic services, as defined in 
Sec.  440.20(b) of this subchapter, and for other ambulatory services 
furnished by a rural health clinic, as defined in Sec.  440.20(c) of 
this subchapter, as follows:
    (a) For provider clinics, the agency must pay the reasonable cost of 
rural health clinic services and other ambulatory services on the basis 
of the cost reimbursement principles in part 413 of this chapter. For 
purposes of this section, a provider clinic is an integral part of a 
hospital, skilled nursing facility, or home health agency that is 
participating in Medicare and is licensed, governed, and supervised with 
other departments of the facility.
    (b) For clinics other than provider clinics that do not offer any 
ambulatory services other than rural health clinic services, the agency 
must pay for rural health clinic services at the reasonable cost rate 
per visit determined by a Medicare carrier under Sec. Sec.  405.2426 
through 405.2429 of this chapter.
    (c) For clinics other than provider clinics that do offer ambulatory 
services other than rural health clinic services, the agency must pay 
for the other ambulatory services by one of the following methods:
    (1) The agency may pay for other ambulatory services and rural 
health clinic services at a single rate per visit that is based on the 
cost of all services furnished by the clinic. The rate must be 
determined by a Medicare carrier under Sec. Sec.  405.2426 through 
405.2429 of this chapter.
    (2) The agency may pay for other ambulatory services at a rate set 
for each service by the agency. The rate must not exceed the upper 
limits in this subpart. The agency must pay for rural health clinic 
services at the Medicare reimbursement rate per visit, as specified in 
Sec.  405.2426 of this chapter.
    (3) The agency may pay for dental services at a rate per visit that 
is based on the cost of dental services furnished by the clinic. The 
rate must be determined by a Medicare carrier under Sec. Sec.  405.2426 
through 405.2429 of this chapter. The agency must pay for ambulatory 
services other than dental services under paragraph (c) (1) or (2) of 
this section.
    (d) For purposes of paragraph (c) (1) and (3) of this section, 
``visit'' means a face-to-face encounter between a clinic patient and 
any health professional whose services are reimbursed under the State 
plan. Encounters with more than one health professional, and multiple 
encounters with the same health professional, that take place on the 
same day and at a single location constitute a single visit, except when 
the patient, after the first encounter, suffers illness or injury 
requiring additional diagnosis or treatment.

[43 FR 45253, Sept. 29, 1978, as amended at 51 FR 34833, Sept. 30, 1986]

Subparts G-H [Reserved]



                       Subpart I_Payment for Drugs

    Source: 72 FR 39239, July 17, 2007, unless otherwise noted.

[[Page 360]]



Sec.  447.500  Basis and purpose.

    (a) Basis. This subpart--
    (1) Interprets those provisions of section 1927 of the Act that set 
forth requirements for drug manufacturers' calculating and reporting 
average manufacturer prices (AMPs) and that set upper payment limits for 
covered outpatient drugs.
    (2) Implements section 1903(i)(10) of the Act with regard to the 
denial of Federal financial participation (FFP) in expenditures for 
certain physician-administered drugs.
    (3) Implements section 1902(a)(54) of the Act with regard to a State 
plan that provides covered outpatient drugs.
    (b) Purpose. This subpart specifies certain requirements in the 
Deficit Reduction Act of 2005 and other requirements pertaining to 
Medicaid payment for drugs.



Sec.  447.502  Definitions.

    Bona fide service fees mean fees paid by a manufacturer to an 
entity; that represent fair market value for a bona fide, itemized 
service actually performed on behalf of the manufacturer that the 
manufacturer would otherwise perform (or contract for) in the absence of 
the service arrangement; and that are not passed on in whole or in part 
to a client or customer of an entity, whether or not the entity takes 
title to the drug.
    Brand name drug means a single source or innovator multiple source 
drug.
    Bundled sale means an arrangement regardless of physical packaging 
under which the rebate, discount, or other price concession is 
conditioned upon the purchase of the same drug, drugs of different types 
(that is, at the nine-digit National Drug Code (NDC) level) or another 
product or some other performance requirement (for example, the 
achievement of market share, inclusion or tier placement on a 
formulary), or where the resulting discounts or other price concessions 
are greater than those which would have been available had the bundled 
drugs been purchased separately or outside the bundled arrangement. For 
bundled sales, the discounts are allocated proportionally to the total 
dollar value of the units of all drug sold under the bundled 
arrangement. For bundled sales where multiple drugs are discounted, the 
aggregate value of all the discounts in the bundled arrangement shall be 
proportionally allocated across all the drugs in the bundle.
    Consumer Price Index--Urban (CPI-U) means the index of consumer 
prices developed and updated by the U.S. Department of Labor. It is the 
CPI for all urban consumers (U.S. average) for the month before the 
beginning of the calendar quarter for which the rebate is paid.
    Dispensing fee means the fee which--
    (1) Is incurred at the point of sale or service and pays for costs 
in excess of the ingredient cost of a covered outpatient drug each time 
a covered outpatient drug is dispensed;
    (2) Includes only pharmacy costs associated with ensuring that 
possession of the appropriate covered outpatient drug is transferred to 
a Medicaid recipient. Pharmacy costs include, but are not limited to, 
reasonable costs associated with a pharmacist's time in checking the 
computer for information about an individual's coverage, performing drug 
utilization review and preferred drug list review activities, 
measurement or mixing of the covered outpatient drug, filling the 
container, beneficiary counseling, physically providing the completed 
prescription to the Medicaid beneficiary, delivery, special packaging, 
and overhead associated with maintaining the facility and equipment 
necessary to operate the pharmacy; and
    (3) Does not include administrative costs incurred by the State in 
the operation of the covered outpatient drug benefit including systems 
costs for interfacing with pharmacies.
    Estimated acquisition cost (EAC) means the agency's best estimate of 
the price generally and currently paid by providers for a drug marketed 
or sold by a particular manufacturer or labeler in the package size of 
drug most frequently purchased by providers.
    Innovator multiple source drug means a multiple source drug that was 
originally marketed under an original new drug application (NDA) 
approved by the Food and Drug Administration (FDA), including an 
authorized generic

[[Page 361]]

drug. It includes a drug product marketed by any cross-licensed 
producers, labelers, or distributors operating under the NDA and a 
covered outpatient drug approved under a product license approval (PLA), 
establishment license approval (ELA) or antibiotic drug approval (ADA).
    Lagged price concession means any discount or rebate that is 
realized after the sale of the drug, but does not include customary 
prompt pay discounts.
    Manufacturer means any entity that possesses legal title to the NDC 
for a covered drug or biological product and--
    (1) Is engaged in the production, preparation, propagation, 
compounding, conversion, or processing of covered outpatient drug 
products, either directly or indirectly by extraction from substances of 
natural origin, or independently by means of chemical synthesis, or by a 
combination of extraction and chemical synthesis; or
    (2) Is engaged in the packaging, repackaging, labeling, relabeling, 
or distribution of covered outpatient drug products and is not a 
wholesale distributor of drugs or a retail pharmacy licensed under State 
law.
    (3) With respect to authorized generic products, the term 
``manufacturer'' will also include the original holder of the NDA.
    (4) With respect to drugs subject to private labeling arrangements, 
the term ``manufacturer'' will also include the entity that does not 
possess legal title to the NDC.
    Multiple source drug means, with respect to a rebate period, a 
covered outpatient drug for which there is at least one other drug 
product which--
    (1) Is rated as therapeutically equivalent. For the list of drug 
products rated as therapeutically equivalent, see the FDA's most recent 
publication of ``Approved Drug Products with Therapeutic Equivalence 
Evaluations'' which is available at http://www.fda.gov/cder/orange/
default.htm or can be viewed at the FDA's Freedom of Information Public 
Reading Room at 5600 Fishers Lane, rm. 12A-30, Rockville, MD 20857;
    (2) Is pharmaceutically equivalent and bioequivalent, as determined 
by the FDA; and
    (3) Is sold or marketed in the State during the rebate period as 
follows:
    (i) A drug product is considered sold or marketed in a State if it 
appears in a published national listing of average wholesale prices, 
selected by the Secretary, provided that the listed product is generally 
available to the public through retail pharmacies in that State.
    (ii) A covered outpatient drug is not subject to the FUL for a 
rebate period if it is not a multiple source drug in the State for that 
rebate period.
    National drug code (NDC) means the 11-digit numerical code 
maintained by the FDA that indicates the labeler, product, and package 
size, unless otherwise specified in this part as being without respect 
to package size (that is, the 9-digit numerical code).
    National rebate agreement means the rebate agreement developed by 
CMS and entered into by CMS on behalf of the Secretary or his designee 
and a manufacturer to implement section 1927 of the Act.
    Nominal price means a price that is less than ten percent of the AMP 
in the same quarter for which the AMP is computed.
    Noninnovator multiple source drug means (1) a multiple source drug 
that is not an innovator multiple source drug or a single source drug, 
(2) a multiple source drug that is marketed under an abbreviated NDA or 
an abbreviated antibiotic drug application, or (3) a drug that entered 
the market before 1962 that was not originally marketed under an 
original NDA.
    Rebate period means a calendar quarter.
    Single source drug means a covered outpatient drug that is produced 
or distributed under an original NDA approved by the FDA, including a 
drug product marketed by any cross-licensed producers or distributors 
operating under the NDA. It also includes a covered outpatient drug 
approved under a biological license application, PLA, ELA, or ADA.
    States means the 50 States and the District of Columbia.

[72 FR 39239, July 17, 2007, as amended at 73 FR 13788, Mar. 14, 2008; 
73 FR 58497, Oct. 7, 2008]

[[Page 362]]



Sec.  447.504  Determination of AMP.

    (a) AMP means, with respect to a covered outpatient drug of a 
manufacturer (including those sold under an NDA approved under section 
505(c) of the Federal Food, Drug, and Cosmetic Act (FFDCA)) for a 
calendar quarter, the average price paid to the manufacturer for the 
drug in the United States by wholesalers for drugs distributed to the 
retail pharmacy class of trade. AMP shall be determined without regard 
to customary prompt pay discounts extended to wholesalers. AMP shall be 
calculated to include all sales and associated discounts and other price 
concessions provided by the manufacturer for drugs distributed to the 
retail pharmacy class of trade unless the sale, discount, or other price 
concession is specifically excluded by statute or regulation or is 
provided to an entity specifically excluded by statute or regulation.
    (b) Average unit price means a manufacturer's quarterly sales 
included in AMP less all required adjustments divided by the total units 
sold and included in AMP by the manufacturer in a quarter.
    (c) Customary prompt pay discount means any discount off the 
purchase price of a drug routinely offered by the manufacturer to a 
wholesaler for prompt payment of purchased drugs within a specified 
timeframe and consistent with customary business practices for payment.
    (d) Net sales means quarterly gross sales revenue less cash 
discounts allowed, except customary prompt pay discounts extended to 
wholesalers, and all other price reductions (other than rebates under 
section 1927 of the Act or price reductions specifically excluded by 
statute or regulation) which reduce the amount received by the 
manufacturer.
    (e) Retail pharmacy class of trade means any independent pharmacy, 
chain pharmacy, mail order pharmacy, or other outlet that purchases 
drugs from a manufacturer, wholesaler, distributor, or other licensed 
entity and subsequently sells or provides the drugs to the general 
public.
    (f) Wholesaler means any entity (including those entities in the 
retail pharmacy class of trade) to which the manufacturer sells the 
covered outpatient drugs, but that does not relabel or repackage the 
covered outpatient drug.
    (g) Sales, rebates, discounts, or other price concessions included 
in AMP. Except with respect to those sales identified in paragraph (h) 
of this section, AMP for covered outpatient drugs shall include the 
following sales and associated rebates, discounts, or other price 
concessions--
    (1) Sales to wholesalers, except for those sales that can be 
identified with adequate documentation as being subsequently sold to any 
of the excluded entities as specified in paragraph (h) of this section;
    (2) Sales to other manufacturers who act as wholesalers and do not 
repackage/relabel under the purchaser's NDC, including private labeling 
agreements;
    (3) Direct and indirect sales to hospitals, where the drug is used 
in the outpatient pharmacy, except those sales that cannot be identified 
with adequate documentation as being used in the outpatient pharmacy for 
outpatient use (for example hospital outpatient department, clinic, or 
affiliated entity);
    (4) Sales at nominal prices to any entity except a covered entity 
described in section 340B(a)(4) of the Public Health Service Act (PHSA), 
an intermediate care facility for the mentally retarded (ICF/MR) 
providing services as set forth in Sec.  440.150 of this chapter, or a 
State-owned or operated nursing facility providing services as set forth 
in Sec.  440.155 of this chapter;
    (5) Sales to retail pharmacies including discounts or other price 
concessions that adjust prices either directly or indirectly on sales of 
drugs to the retail pharmacy class of trade;
    (6) Sales including discounts, rebates, or other price concessions 
provided to pharmacy benefit managers (PBMs) for their mail order 
pharmacy purchases;
    (7) Sales directly to patients;
    (8) Sales to outpatient facilities (for example, clinics, surgical 
centers, ambulatory care centers, dialysis centers, and mental health 
centers);
    (9) Sales to mail order pharmacies;
    (10) Sales to home infusion providers;
    (11) Sales to specialty pharmacies;

[[Page 363]]

    (12) Sales to home health care providers;
    (13) Sales to physicians;
    (14) Rebates, discounts, or other price concessions (other than 
rebates under section 1927 of the Act or as otherwise specified in the 
statute or regulations) associated with sales of drugs provided to the 
retail pharmacy class of trade; and
    (15) Sales of drugs reimbursed by third party payers including the 
Medicare Part D Program, a Medicare Advantage prescription drug plan 
(MA-PD), a Qualified Retiree Prescription Drug Plan under section 1860D-
22(a)(2) of the Act, State Children's Health Insurance Program (SCHIP), 
State pharmaceutical assistance programs (SPAPs), health maintenance 
organizations (HMOs) (including managed care organizations (MCOs)) that 
do not purchase or take possession of drugs, TRICARE Retail Pharmacy 
Program (TRRx), and Medicaid Programs that are associated with sales of 
drugs provided to the retail pharmacy class of trade (except for rebates 
under section 1927 of the Act or as otherwise specified in the statute 
or regulations).
    (h) Sales, rebates, discounts, or other price concessions excluded 
from AMP. AMP excludes--
    (1) Any prices on or after October 1, 1992, to the Indian Health 
Service (IHS), the Department of Veterans Affairs (DVA), a State home 
receiving funds under 38 U.S.C. 1741, the Department of Defense (DoD), 
the Public Health Service (PHS), or a covered entity described in 
section 1927(a)(5)(B) of the Act (including inpatient prices charged to 
hospitals described in section 340B(a)(4)(L) of the PHSA);
    (2) Any prices charged under the Federal Supply Schedule (FSS) of 
the General Services Administration (GSA);
    (3) Any depot prices (including TRICARE) and single award contract 
prices, as defined by the Secretary, of any agency of the Federal 
Government;
    (4) Direct and indirect sales to hospitals, where the drug is used 
in the inpatient setting or in the outpatient pharmacy for outpatient 
use where the sales cannot be identified with adequate documentation;
    (5) Sales to HMOs (including MCOs, and HMO/MCO-operated pharmacies) 
that purchase or take possession of drugs;
    (6) Sales to long-term care facilities, including nursing facility 
pharmacies, contract pharmacies for the nursing facility where these 
sales can be identified with adequate documentation, and other entities 
where the drugs are dispensed through a nursing facility pharmacy, such 
as assisted living facilities;
    (7) Sales to hospices (inpatient and outpatient);
    (8) Sales to veterinarians;
    (9) Sales to prisons;
    (10) Sales outside the 50 States and the District of Columbia;
    (11) Sales to State, county, and municipal entities;
    (12) Sales to patient assistance programs;
    (13) Sales to wholesalers where the drug is distributed to the non-
retail pharmacy class of trade;
    (14) Sales to wholesalers or distributors where the drug is 
relabeled under the wholesalers' or distributors' NDC number;
    (15) Manufacturer coupons redeemed by a consumer, agent, pharmacy or 
another entity acting on behalf of the manufacturer, but only to the 
extent that the full value of the coupon is passed on to the consumer 
and the pharmacy, agent, or other entity does not receive any price 
concession;
    (16) Manufacturer vouchers;
    (17) Manufacturer-sponsored drug discount card programs;
    (18) Free goods, not contingent upon any purchase requirement;
    (19) Bona fide service fees;
    (20) Customary prompt pay discounts extended to wholesalers;
    (21) Returned or replaced goods when accepted or replaced in good 
faith;
    (22) Discounts, rebates, or other price concessions to PBMs, except 
for their mail order pharmacy's purchases.
    (23) Associated rebates, discounts, or other price concessions to 
third party payers including the Medicare Part D Program, an MA-PD, 
Qualified Retiree Prescription Drug Plan under section 1860D-22(a)(2) of 
the Act, SCHIP, SPAPs, HMOs (including MCOs that do not take possession 
of drugs) the TRICARE Retail Pharmacy Program, and Medicaid Programs; 
and

[[Page 364]]

    (24) Rebates under the national rebate agreement or a CMS-authorized 
State supplemental rebate agreement paid to State Medicaid Agencies 
under section 1927 of the Act.
    (i) Further clarification of AMP calculation. (1) AMP includes cash 
discounts except customary prompt pay discounts extended to wholesalers, 
free goods that are contingent on any purchase requirement, volume 
discounts, chargebacks, incentives, administrative fees, service fees, 
distribution fees, (except bona fide service fees), and any other 
rebates, discounts or other price concessions, other than rebates under 
section 1927 of the Act, which reduce the price received by the 
manufacturer for drugs distributed to the retail pharmacy class of 
trade.
    (2) Quarterly AMP is calculated as a weighted average of monthly 
AMPs in the quarter.
    (3) The manufacturer must adjust the AMP for a rebate period if 
cumulative discounts, rebates, or other arrangements subsequently adjust 
the prices actually realized.



Sec.  447.505  Determination of best price.

    (a) Best price means, with respect to a single source drug or 
innovator multiple source drug of a manufacturer (including any drug 
sold under an NDA approved under section 505(c) of the FFDCA), the 
lowest price available from the manufacturer during the rebate period to 
any entity in the United States in any pricing structure (including 
capitated payments), in the same quarter for which the AMP is computed. 
Best price shall be calculated to include all sales and associated 
rebates, discounts and other price concessions provided by the 
manufacturer to any entity unless the sale, discount, or other price 
concession is specifically excluded by statute or regulation or is 
provided to an entity specifically excluded by statute or regulation 
from the rebate calculation.
    (b) For purposes of this section, provider means a hospital, HMO, 
including an MCO or entity that treats or provides coverage or services 
to individuals for illnesses or injuries or provides services or items 
in the provision of health care.
    (c) Prices included in best price. Except with respect to those 
prices identified in paragraph (d) of this section, best price for 
covered outpatient drugs includes the following prices and associated 
rebates, discounts, or other price concessions that adjust prices either 
directly or indirectly--
    (1) Prices to wholesalers;
    (2) Prices to any retailer, including rebates, discounts or other 
price concessions that adjust prices either directly or indirectly on 
sales of drugs;
    (3) Prices to providers (for example, hospitals, HMOs/MCOs, 
physicians, nursing facilities, and home health agencies);
    (4) Prices available to non-profit entities;
    (5) Prices available to governmental entities within the United 
States;
    (6) Prices of authorized generic drugs, sold by the primary 
manufacturer in accordance with Sec.  447.506(d) of this subpart;
    (7) Prices of sales directly to patients;
    (8) Prices available to mail order pharmacies;
    (9) Prices available to outpatient clinics;
    (10) Prices to other manufacturers who act as wholesalers and do not 
repackage/relabel under the purchaser's NDC, including private labeling 
agreements; and
    (11) Prices to entities that repackage/relabel under the purchaser's 
NDC, including private labeling agreements, if that entity also is an 
HMO or other non-excluded entity.
    (d) Prices excluded from best price. Best price excludes:
    (1) Any prices on or after October 1, 1992, charged to the IHS, the 
DVA, a State home receiving funds under 38 U.S.C. 1741, the DoD, the 
PHS, or a covered entity described in section 1927(a)(5)(B) of the Act 
(including inpatient prices charged to hospitals described in section 
340B(a)(4)(L) of the PHSA);
    (2) Any prices charged under the FSS of the GSA;
    (3) Any prices provided to a designated SPAP;

[[Page 365]]

    (4) Any depot prices and single award contract prices, as defined by 
the Secretary, of any agency of the Federal Government;
    (5) Any prices charged which are negotiated by a prescription drug 
plan under Part D of title XVIII, by any MA-PD plan under Part C of such 
title with respect to covered Part D drugs, or by a Qualified Retiree 
Prescription Drug Plan (as defined in section 1860D-22(a)(2) of the Act) 
with respect to such drugs on behalf of individuals entitled to benefits 
under Part A or enrolled under Part B of Medicare;
    (6) Rebates under the national rebate agreement or a CMS-authorized 
supplemental rebate agreement paid to State Medicaid Agencies under 
section 1927 of the Act;
    (7) Prices negotiated under a manufacturer-sponsored drug discount 
card program;
    (8) Manufacturer coupons redeemed by a consumer, agent, pharmacy or 
another entity acting on behalf of the manufacturer; but only to the 
extent that the full value of the coupon is passed on to the consumer 
and the pharmacy, agent, or other entity does not receive any price 
concession;
    (9) Goods provided free of charge under a manufacturer's patient 
assistance programs;
    (10) Free goods, not contingent upon any purchase requirement;
    (11) Nominal prices to certain entities as set forth in Sec.  
447.508 of this subpart;
    (12) Bona fide service fees; and
    (13) PBM rebates, discounts, or other price concessions except their 
mail order pharmacy's purchases or where such rebates, discounts, or 
other price concessions are designed to adjust prices at the retail or 
provider level.
    (e) Further clarification of best price. (1) Best price shall be net 
of cash discounts, free goods that are contingent on any purchase 
requirement, volume discounts, customary prompt pay discounts, 
chargebacks, returns, incentives, promotional fees, administrative fees, 
service fees (except bona fide service fees), distribution fees, and any 
other discounts or price reductions and rebates, other than rebates 
under section 1927 of the Act, which reduce the price available from the 
manufacturer.
    (2) Best price must be determined on a unit basis without regard to 
package size, special packaging, labeling or identifiers on the dosage 
form or product or package, and must not take into account prices that 
are nominal in amount as described in Sec.  447.508 of this subpart.
    (3) The manufacturer must adjust the best price for a rebate period 
if cumulative discounts, rebates, or other arrangements subsequently 
adjust the prices available from the manufacturer.



Sec.  447.506  Authorized generic drugs.

    (a) Authorized generic drug defined. For the purposes of this 
subpart, an authorized generic drug means any drug sold, licensed, or 
marketed under an NDA approved by the FDA under section 505(c) of the 
FFDCA; and marketed, sold, or distributed under a different labeler 
code, product code, trade name, trademark, or packaging (other than 
repackaging the listed drug for use in institutions) than the brand 
drug.
    (b) Inclusion of authorized generic drugs in AMP. A manufacturer 
holding title to the original NDA of the authorized generic drug must 
include the sales of this drug in its AMP only when such drugs are being 
sold by the manufacturer holding title to the original NDA directly to a 
wholesaler.
    (c) Inclusion of authorized generic drugs in best price. A 
manufacturer holding title to the original NDA must include best price 
of an authorized generic drug in its computation of best price for a 
single source or innovator multiple source drug during a rebate period 
to any manufacturer, wholesaler, retailer, provider, HMO, non-profit 
entity, or governmental entity in the United States, only when such 
drugs are being sold by the manufacturer holding title to the original 
NDA.



Sec.  447.508  Exclusion from best price of certain sales at a nominal price.

    (a) Exclusion from best price. Sales of covered outpatient drugs by 
a manufacturer at nominal prices are excluded from best price when 
purchased by the following entities:
    (1) A covered entity described in section 340B(a)(4) of the PHSA;

[[Page 366]]

    (2) An ICF/MR providing services as set forth in Sec.  440.150 of 
this chapter; or
    (3) A State-owned or operated nursing facility providing services as 
set forth in Sec.  440.155 of this chapter.
    (b) Nonapplication. This restriction shall not apply to sales by a 
manufacturer of covered outpatient drugs that are sold under a master 
agreement under 38, U.S.C. 8126.



Sec.  447.510  Requirements for manufacturers.

    (a) Quarterly reports. A manufacturer must report product and 
pricing information for covered outpatient drugs to CMS not later than 
30 days after the end of the rebate period. The quarterly pricing report 
must include:
    (1) AMP, calculated in accordance with Sec.  447.504 of this 
subpart;
    (2) Best price, calculated in accordance with Sec.  447.505 of this 
subpart;
    (3) Customary prompt pay discounts, which shall be reported as an 
aggregate dollar amount for each covered outpatient drug at the nine-
digit NDC level, provided to all wholesalers in the rebate period; and
    (4) Prices that fall within the nominal price exclusion, which shall 
be reported as an aggregate dollar amount and shall include all sales of 
single source and innovator multiple source drugs to the entities listed 
in Sec.  447.508(a) of this subpart for the rebate period.
    (b) Reporting revised quarterly AMP, best price, customary prompt 
pay discounts, or nominal prices. (1) A manufacturer must report to CMS 
revisions to AMP, best price, customary prompt pay discounts, or nominal 
prices for a period not to exceed 12 quarters from the quarter in which 
the data were due.
    (2) A manufacturer must report revisions to AMP, except when the 
revision would be solely as a result of data pertaining to lagged price 
concessions.
    (c) Base date AMP report. (1) A manufacturer may report a revised 
base date AMP to CMS within the first four full calendar quarters 
following [OFR: insert publication date of the final rule].
    (2) Recalculation of base date AMP. (i) A manufacturer's 
recalculation of the base date AMP must only reflect the revisions to 
AMP as provided for in Sec.  447.504 of this subpart.
    (ii) A manufacturer may choose to recalculate base date AMP on a 
product-by-product basis.
    (iii) A manufacturer must use actual and verifiable pricing records 
in recalculating base date AMP.
    (d) Monthly AMP--(1) Definition of Monthly AMP. Monthly AMP means 
the AMP that is calculated on a monthly basis. A manufacturer must 
submit a monthly AMP to CMS not later than 30 days after the last day of 
each prior month.
    (2) Calculation of monthly AMP. Monthly AMP should be calculated 
based on the methodology in section 447.504 of this subpart, except the 
period covered should be based on monthly, as opposed to quarterly, 
sales. The monthly AMP should be calculated based on the weighted 
average of prices for all the manufacturer's package sizes of each 
covered outpatient drug sold by the manufacturer during a month. It is 
calculated as net sales divided by number of units sold, excluding goods 
or any other items given away unless contingent on any purchase 
requirements. Monthly AMP should be calculated based on the best data 
available to the manufacturer at the time of submission. In calculating 
monthly AMP, a manufacturer must estimate the impact of its lagged price 
concessions using a 12-month rolling average to estimate the value of 
those discounts.
    (3) Timeframe for reporting revised monthly AMP. A manufacturer must 
report to CMS revisions to monthly AMP for a period not to exceed 36 
months from the month in which the data were due.
    (4) Exception. A manufacturer must report revisions to monthly AMP, 
except when the revision would be solely as a result of data pertaining 
to lagged price concessions.
    (5) Terminated products. A manufacturer must not report a monthly 
AMP for a terminated product beginning with the first month after the 
expiration date of the last lot sold.
    (e) Certification of pricing reports. Each report submitted under 
paragraphs (a) through (d) of this section must be certified by one of 
the following:

[[Page 367]]

    (1) The manufacturer's chief executive officer (CEO);
    (2) The manufacturer's chief financial officer (CFO);
    (3) An individual other than a CEO or CFO, who has authority 
equivalent to a CEO or a CFO; or
    (4) An individual with the directly delegated authority to perform 
the certification on behalf of an individual described in subsections 
(1) through (3).
    (f) Recordkeeping requirements. (1) A manufacturer must retain 
records (written or electronic) for ten years from the date the 
manufacturer reports data to CMS for that rebate period. The records 
must include these data and any other materials from which the 
calculations of the AMP, the best price, customary prompt pay discounts, 
and nominal prices are derived, including a record of any assumptions 
made in the calculations. The ten-year timeframe applies to a 
manufacturer's quarterly and monthly submissions of pricing data, as 
well as any revised pricing data subsequently submitted to CMS.
    (2) A manufacturer must retain records beyond the ten-year period if 
both of the following circumstances exist:
    (i) The records are the subject of an audit or of a government 
investigation related to pricing data that are used in AMP, best price, 
customary prompt pay discounts, or nominal prices of which the 
manufacturer is aware.
    (ii) The audit findings or investigation related to the AMP, best 
price, customary prompt pay discounts, or nominal price have not been 
resolved.
    (g) Data reporting format. All product and pricing data, whether 
submitted on a quarterly or monthly basis, must be submitted to CMS in 
an electronic format.



Sec.  447.512  Drugs: Aggregate upper limits of payment.

    (a) Multiple source drugs. Except for brand name drugs that are 
certified in accordance with paragraph (c) of this section, the agency 
payment for multiple source drugs must not exceed, in the aggregate, the 
amount that would result from the application of the specific limits 
established in accordance with Sec.  447.514 of this subpart. If a 
specific limit has not been established under Sec.  447.514 of this 
subpart, then the rule for ``other drugs'' set forth in paragraph (b) of 
this section applies.
    (b) Other drugs. The agency payments for brand name drugs certified 
in accordance with paragraph (c) of this section and drugs other than 
multiple source drugs for which a specific limit has been established 
under Sec.  447.514 of this subpart must not exceed, in the aggregate, 
payment levels that the agency has determined by applying the lower of 
the--
    (1) EAC plus reasonable dispensing fees established by the agency; 
or
    (2) Providers' usual and customary charges to the general public.
    (c) Certification of brand name drugs. (1) The upper limit for 
payment for multiple source drugs for which a specific limit has been 
established under Sec.  447.514 of this subpart does not apply if a 
physician certifies in his or her own handwriting (or by an electronic 
alternative means approved by the Secretary) that a specific brand is 
medically necessary for a particular recipient.
    (2) The agency must decide what certification form and procedure are 
used.
    (3) A checkoff box on a form is not acceptable but a notation like 
``brand necessary'' is allowable.
    (4) The agency may allow providers to keep the certification forms 
if the forms will be available for inspection by the agency or HHS.



Sec.  447.514  Upper limits for multiple source drugs.

    (a) Establishment and issuance of a listing. (1) CMS will establish 
and issue listings that identify and set upper limits for multiple 
source drugs that meet the following requirements:
    (i) The FDA has rated two or more drug products as therapeutically 
and pharmaceutically equivalent in its most current edition of 
``Approved Drug Products with Therapeutic Equivalence Evaluations'' 
(including supplements or in successor publications), regardless of 
whether all such formulations are rated as such and only such 
formulations shall be used when determining any such upper limit.

[[Page 368]]

    (ii) At least two suppliers meet the criteria in paragraph (a)(1)(i) 
of this section.
    (2) CMS publishes the list of multiple source drugs for which upper 
limits have been established and any revisions to the list in Medicaid 
Program issuances.
    (b) Specific upper limits. The agency's payments for multiple source 
drugs identified and listed periodically by CMS in Medicaid Program 
issuances must not exceed, in the aggregate, payment levels determined 
by applying for each drug entity a reasonable dispensing fee established 
by the State agency plus an amount established by CMS that is equal to 
250 percent of the AMP (as computed without regard to customary prompt 
pay discounts extended to wholesalers) for the least costly therapeutic 
equivalent.
    (c) Ensuring a drug is for sale nationally. To assure that a drug is 
for sale nationally, CMS will consider the following additional 
criteria:
    (1) The AMP of a terminated NDC will not be used to set the Federal 
upper limit (FUL) beginning with the first day of the month after the 
actual termination date reported by the manufacturer to CMS.
    (2) Except as set forth in paragraph (c)(3) of this section, the AMP 
of the lowest priced therapeutically and pharmaceutically equivalent 
drug that is not less than 40 percent of the next highest AMP will be 
used to establish the FUL.
    (3) When the FUL group includes only the brand name drug and the 
first new generic or authorized generic drug which has entered the 
market, the criteria in paragraph (c)(2) of this section will not apply.



Sec.  447.516  Upper limits for drugs furnished as part of services.

    The upper limits for payment for prescribed drugs in this subpart 
also apply to payment for drugs provided as part of skilled nursing 
facility services and intermediate care facility services and under 
prepaid capitation arrangements.



Sec.  447.518  State plan requirements, findings and assurances.

    (a) State plan. The State plan must describe comprehensively the 
agency's payment methodology for prescription drugs.
    (b) Findings and assurances. Upon proposing significant State plan 
changes in payments for prescription drugs, and at least annually for 
multiple source drugs and triennially for all other drugs, the agency 
must make the following findings and assurances:
    (1) Findings. The agency must make the following separate and 
distinct findings:
    (i) In the aggregate, its Medicaid expenditures for multiple source 
drugs, identified and listed in accordance with Sec.  447.514(a) of this 
subpart, are in accordance with the upper limits specified in Sec.  
447.514(b) of this subpart; and
    (ii) In the aggregate, its Medicaid expenditures for all other drugs 
are in accordance with Sec.  447.512 of this subpart.
    (2) Assurances. The agency must make assurances satisfactory to CMS 
that the requirements set forth in Sec.  Sec.  447.512 and 447.514 of 
this subpart concerning upper limits and in paragraph (b)(1) of this 
section concerning agency findings are met.
    (c) Recordkeeping. The agency must maintain and make available to 
CMS, upon request, data, mathematical or statistical computations, 
comparisons, and any other pertinent records to support its findings and 
assurances.



Sec.  447.520  FFP: Conditions relating to physician-administered drugs.

    (a) No FFP is available for physician-administered drugs for which a 
State has not required the submission of claims using codes that 
identify the drugs sufficiently for the State to bill a manufacturer for 
rebates.
    (1) As of January 1, 2006, a State must require providers to submit 
claims for single source, physician-administered drugs using Healthcare 
Common Procedure Coding System codes or NDC numbers in order to secure 
rebates.
    (2) As of January 1, 2008, a State must require providers to submit 
claims for the 20 multiple source physician-administered drugs 
identified by the Secretary as having the highest

[[Page 369]]

dollar value under the Medicaid Program using NDC numbers in order to 
secure rebates.
    (b) As of January 1, 2007, a State must require providers to submit 
claims for physician-administered single source drugs and the 20 
multiple source drugs identified by the Secretary using NDC numbers.
    (c) A State that requires additional time to comply with the 
requirements of this section may apply to the Secretary for an 
extension.



PART 455_PROGRAM INTEGRITY: MEDICAID--Table of Contents




Sec.
455.1 Basis and scope.
455.2 Definitions.
455.3 Other applicable regulations.

   Subpart A_Medicaid Agency Fraud Detection and Investigation Program

455.12 State plan requirement.
455.13 Methods for identification, investigation, and referral.
455.14 Preliminary investigation.
455.15 Full investigation.
455.16 Resolution of full investigation.
455.17 Reporting requirements.
455.18 Provider's statements on claims forms.
455.19 Provider's statement on check.
455.20 Recipient verification procedure.
455.21 Cooperation with State Medicaid fraud control units.
455.23 Withholding of payments in cases of fraud or willful 
          misrepresentation.

   Subpart B_Disclosure of Information by Providers and Fiscal Agents

455.100 Purpose.
455.101 Definitions.
455.102 Determination of ownership or control percentages.
455.103 State plan requirement.
455.104 Disclosure by providers and fiscal agents: Information on 
          ownership and control.
455.105 Disclosure by providers: Information related to business 
          transactions.
455.106 Disclosure by providers: Information on persons convicted of 
          crimes.

                  Subpart C_Medicaid Integrity Program

455.200 Basis and scope.
455.202 Limitation on contractor liability.
455.230 Eligibility requirements.
455.232 Medicaid integrity audit program contractor functions.
455.234 Awarding of a contract.
455.236 Renewal of a contract.
455.238 Conflict of interest.
455.240 Conflict of interest resolution.

 Subpart D_Independent Certified Audit of State Disproportionate Share 
                      Hospital Payment Adjustments

455.300 Purpose.
455.301 Definitions.
455.304 Condition for Federal financial participation (FFP).

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

    Source: 43 FR 45262, Sept. 29, 1978, unless otherwise noted.



Sec.  455.1  Basis and scope.

    This part sets forth requirements for a State fraud detection and 
investigation program, and for disclosure of information on ownership 
and control.
    (a) Under the authority of sections 1902(a)(4), 1903(i)(2), and 1909 
of the Social Security Act, Subpart A provides State plan requirements 
for the identification, investigation, and referral of suspected fraud 
and abuse cases. In addition, the subpart requires that the State--
    (1) Report fraud and abuse information to the Department; and
    (2) Have a method to verify whether services reimbursed by Medicaid 
were actually furnished to recipients.
    (b) Subpart B implements sections 1124, 1126, 1902(a)(36), 
1903(i)(2), and 1903(n) of the Act. It requires that providers and 
fiscal agents must agree to disclose ownership and control information 
to the Medicaid State agency.
    (c) Subpart C implements section 1936 of the Act. It establishes the 
Medicaid Integrity Program under which the Secretary will promote the 
integrity of the program by entering into contracts with eligible 
entities to carry out the activities of subpart C.

[51 FR 34787, Sept. 30, 1986, as amended at 72 FR 67655, Nov. 30, 2007]



Sec.  455.2  Definitions.

    As used in this part unless the context indicates otherwise--
    Abuse means provider practices that are inconsistent with sound 
fiscal, business, or medical practices, and result in an unnecessary 
cost to the Medicaid program, or in reimbursement for

[[Page 370]]

services that are not medically necessary or that fail to meet 
professionally recognized standards for health care. It also includes 
recipient practices that result in unnecessary cost to the Medicaid 
program.
    Conviction or Convicted means that a judgment of conviction has been 
entered by a Federal, State, or local court, regardless of whether an 
appeal from that judgment is pending.
    Exclusion means that items or services furnished by a specific 
provider who has defrauded or abused the Medicaid program will not be 
reimbursed under Medicaid.
    Fraud 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.
    Furnished refers to items and services provided directly by, or 
under the direct supervision of, or ordered by, a practitioner or other 
individual (either as an employee or in his or her own capacity), a 
provider, or other supplier of services. (For purposes of denial of 
reimbursement within this part, it does not refer to services ordered by 
one party but billed for and provided by or under the supervision of 
another.)
    Practitioner means a physician or other individual licensed under 
State law to practice his or her profession.
    Suspension means that items or services furnished by a specified 
provider who has been convicted of a program-related offense in a 
Federal, State, or local court will not be reimbursed under Medicaid.

[48 FR 3755, Jan. 27, 1983, as amended at 50 FR 37375, Sept. 13, 1985; 
51 FR 34788, Sept. 30, 1986]



Sec.  455.3  Other applicable regulations.

    Part 1002 of this title sets forth the following:
    (a) State plan requirements for excluding providers for fraud and 
abuse, and suspending practitioners convicted of program-related crimes.
    (b) The limitations on FFP for services furnished by excluded 
providers or suspended practitioners.
    (c) The requirements and procedures for reinstatement after 
exclusion or suspension.
    (d) Requirements for the establishment and operation of State 
Medicaid fraud control units and the rates of FFP for their fraud 
control activities.

[51 FR 34788, Sept. 30, 1986]



   Subpart A_Medicaid Agency Fraud Detection and Investigation Program



Sec.  455.12  State plan requirement.

    A State plan must meet the requirements of Sec. Sec.  455.13 through 
455.23.

[52 FR 48817, Dec. 28, 1987]



Sec.  455.13  Methods for identification, investigation, and referral.

    The Medicaid agency must have--
    (a) Methods and criteria for identifying suspected fraud cases;
    (b) Methods for investigating these cases that--
    (1) Do not infringe on the legal rights of persons involved; and
    (2) Afford due process of law; and
    (c) Procedures, developed in cooperation with State legal 
authorities, for referring suspected fraud cases to law enforcement 
officials.

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3755, Jan. 27, 1983]



Sec.  455.14  Preliminary investigation.

    If the agency receives a complaint of Medicaid fraud or abuse from 
any source or identifies any questionable practices, it must conduct a 
preliminary investigation to determine whether there is sufficient basis 
to warrant a full investigation.

[48 FR 3756, Jan. 27, 1983]



Sec.  455.15  Full investigation.

    If the findings of a preliminary investigation give the agency 
reason to believe that an incident of fraud or abuse has occurred in the 
Medicaid program, the agency must take the following action, as 
appropriate:
    (a) If a provider is suspected of fraud or abuse, the agency must--
    (1) In States with a State Medicaid fraud control unit certified 
under subpart C of part 1002 of this title, refer

[[Page 371]]

the case to the unit under the terms of its agreement with the unit 
entered into under Sec.  1002.309 of this title; or
    (2) In States with no certified Medicaid fraud control unit, or in 
cases where no referral to the State Medicaid fraud control unit is 
required under paragraph (a)(1) of this section, conduct a full 
investigation or refer the case to the appropriate law enforcement 
agency.
    (b) If there is reason to believe that a recipient has defrauded the 
Medicaid program, the agency must refer the case to an appropriate law 
enforcement agency.
    (c) If there is reason to believe that a recipient has abused the 
Medicaid program, the agency must conduct a full investigation of the 
abuse.

[48 FR 3756, Jan. 27, 1983, as amended at 51 FR 34788, Sept. 30, 1986]



Sec.  455.16  Resolution of full investigation.

    A full investigation must continue until--
    (a) Appropriate legal action is initiated;
    (b) The case is closed or dropped because of insufficient evidence 
to support the allegations of fraud or abuse; or
    (c) The matter is resolved between the agency and the provider or 
recipient. This resolution may include but is not limited to--
    (1) Sending a warning letter to the provider or recipient, giving 
notice that continuation of the activity in question will result in 
further action;
    (2) Suspending or terminating the provider from participation in the 
Medicaid program;
    (3) Seeking recovery of payments made to the provider; or
    (4) Imposing other sanctions provided under the State plan.

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3756, Jan. 27, 1983]



Sec.  455.17  Reporting requirements.

    The agency must report the following fraud or abuse information to 
the appropriate Department officials at intervals prescribed in 
instructions.
    (a) The number of complaints of fraud and abuse made to the agency 
that warrant preliminary investigation.
    (b) For each case of suspected provider fraud and abuse that 
warrants a full investigation--
    (1) The provider's name and number;
    (2) The source of the complaint;
    (3) The type of provider;
    (4) The nature of the complaint;
    (5) The approximate range of dollars involved; and
    (6) The legal and administrative disposition of the case, including 
actions taken by law enforcement officials to whom the case has been 
referred.

(Approved by the Office of Management and Budget under control number 
0938-0076)

[43 FR 45262, Sept. 29, 1978, as amended at 48 FR 3756, Jan. 27, 1983]



Sec.  455.18  Provider's statements on claims forms.

    (a) Except as provided in Sec.  455.19, the agency must provide that 
all provider claims forms be imprinted in boldface type with the 
following statements, or with alternate wording that is approved by the 
Regional CMS Administrator:
    (1) ``This is to certify that the foregoing information is true, 
accurate, and complete.''
    (2) ``I understand that payment of this claim will be from Federal 
and State funds, and that any falsification, or concealment of a 
material fact, may be prosecuted under Federal and State laws.''
    (b) The statements may be printed above the claimant's signature or, 
if they are printed on the reverse of the form, a reference to the 
statements must appear immediately preceding the claimant's signature.



Sec.  455.19  Provider's statement on check.

    As an alternative to the statements required in Sec.  455.18, the 
agency may print the following wording above the claimant's endorsement 
on the reverse of checks or warrants payable to each provider: ``I 
understand in endorsing or depositing this check that payment will be 
from Federal and State funds and that any falsification, or concealment 
of a material fact, may be prosecuted under Federal and State laws.''

[[Page 372]]



Sec.  455.20  Recipient verification procedure.

    (a) The agency must have a method for verifying with recipients 
whether services billed by providers were received.
    (b) In States receiving Federal matching funds for a mechanized 
claims processing and information retrieval system under part 433, 
subpart C, of this subchapter, the agency must provide prompt written 
notice as required by Sec.  433.116 (e) and (f).

[48 FR 3756, Jan. 27, 1983, as amended at 56 FR 8854, Mar. 1, 1991]



Sec.  455.21  Cooperation with State Medicaid fraud control units.

    In a State with a Medicaid fraud control unit established and 
certified under subpart C of this part,
    (a) The agency must--
    (1) Refer all cases of suspected provider fraud to the unit;
    (2) If the unit determines that it may be useful in carrying out the 
unit's responsibilities, promptly comply with a request from the unit 
for--
    (i) Access to, and free copies of, any records or information kept 
by the agency or its contractors;
    (ii) Computerized data stored by the agency or its contractors. 
These data must be supplied without charge and in the form requested by 
the unit; and
    (iii) Access to any information kept by providers to which the 
agency is authorized access by section 1902(a)(27) of the Act and Sec.  
431.107 of this subchapter. In using this information, the unit must 
protect the privacy rights of recipients; and
    (3) On referral from the unit, initiate any available administrative 
or judicial action to recover improper payments to a provider.
    (b) The agency need not comply with specific requirements under this 
subpart that are the same as the responsibilities placed on the unit 
under subpart D of this part.



Sec.  455.23  Withholding of payments in cases of fraud or willful misrepresentation.

    (a) Basis for withholding. The State Medicaid agency may withhold 
Medicaid payments, in whole or in part, to a provider upon receipt of 
reliable evidence that the circumstances giving rise to the need for a 
withholding of payments involve fraud or willful misrepresentation under 
the Medicaid program. The State Medicaid agency may withhold payments 
without first notifying the provider of its intention to withhold such 
payments. A provider may request, and must be granted, administrative 
review where State law so requires.
    (b) Notice of withholding. The State agency must send notice of its 
withholding of program payments within 5 days of taking such action. The 
notice must set forth the general allegations as to the nature of the 
withholding action, but need not disclose any specific information 
concerning its ongoing investigation. The notice must:
    (1) State that payments are being withheld in accordance with this 
provision;
    (2) State that the withholding is for a temporary period, as stated 
in paragraph (c) of this section, and cite the circumstances under which 
withholding will be terminated;
    (3) Specify, when appropriate, to which type or types of Medicaid 
claims withholding is effective; and
    (4) Inform the provider of the right to submit written evidence for 
consideration by the agency.
    (c) Duration of withholding. All withholding of payment actions 
under this section will be temporary and will not continue after:
    (1) The agency or the prosecuting authorities determine that there 
is insufficient evidence of fraud or willful misrepresentation by the 
provider; or
    (2) Legal proceedings related to the provider's alleged fraud or 
willful misrepresentation are completed.

[52 FR 48817, Dec. 28, 1987]



   Subpart B_Disclosure of Information by Providers and Fiscal Agents

    Source: 44 FR 41644, July 17, 1979, unless otherwise noted.



Sec.  455.100  Purpose.

    This subpart implements sections 1124, 1126, 1902(a)(38), 
1903(i)(2), and 1903(n) of the Social Security Act. It

[[Page 373]]

sets forth State plan requirements regarding--
    (a) Disclosure by providers and fiscal agents of ownership and 
control information; and
    (b) Disclosure of information on a provider's owners and other 
persons convicted of criminal offenses against Medicare, Medicaid, or 
the title XX services program.

The subpart also specifies conditions under which the Administrator will 
deny Federal financial participation for services furnished by providers 
or fiscal agents who fail to comply with the disclosure requirements.



Sec.  455.101  Definitions.

    Agent means any person who has been delegated the authority to 
obligate or act on behalf of a provider.
    Disclosing entity means a Medicaid provider (other than an 
individual practitioner or group of practitioners), or a fiscal agent.
    Other disclosing entity means any other Medicaid disclosing entity 
and any entity that does not participate in Medicaid, but is required to 
disclose certain ownership and control information because of 
participation in any of the programs established under title V, XVIII, 
or XX of the Act. This includes:
    (a) Any hospital, skilled nursing facility, home health agency, 
independent clinical laboratory, renal disease facility, rural health 
clinic, or health maintenance organization that participates in Medicare 
(title XVIII);
    (b) Any Medicare intermediary or carrier; and
    (c) Any entity (other than an individual practitioner or group of 
practitioners) that furnishes, or arranges for the furnishing of, 
health-related services for which it claims payment under any plan or 
program established under title V or title XX of the Act.
    Fiscal agent means a contractor that processes or pays vendor claims 
on behalf of the Medicaid agency.
    Group of practitioners means two or more health care practitioners 
who practice their profession at a common location (whether or not they 
share common facilities, common supporting staff, or common equipment).
    Indirect ownership interest means an ownership interest in an entity 
that has an ownership interest in the disclosing entity. This term 
includes an ownership interest in any entity that has an indirect 
ownership interest in the disclosing entity.
    Managing employee means a general manager, business manager, 
administrator, director, or other individual who exercises operational 
or managerial control over, or who directly or indirectly conducts the 
day-to-day operation of an institution, organization, or agency.
    Ownership interest means the possession of equity in the capital, 
the stock, or the profits of the disclosing entity.
    Person with an ownership or control interest means a person or 
corporation that--
    (a) Has an ownership interest totaling 5 percent or more in a 
disclosing entity;
    (b) Has an indirect ownership interest equal to 5 percent or more in 
a disclosing entity;
    (c) Has a combination of direct and indirect ownership interests 
equal to 5 percent or more in a disclosing entity;
    (d) Owns an interest of 5 percent or more in any mortgage, deed of 
trust, note, or other obligation secured by the disclosing entity if 
that interest equals at least 5 percent of the value of the property or 
assets of the disclosing entity;
    (e) Is an officer or director of a disclosing entity that is 
organized as a corporation; or
    (f) Is a partner in a disclosing entity that is organized as a 
partnership.
    Significant business transaction means any business transaction or 
series of transactions that, during any one fiscal year, exceed the 
lesser of $25,000 and 5 percent of a provider's total operating 
expenses.
    Subcontractor means--
    (a) An individual, agency, or organization to which a disclosing 
entity has contracted or delegated some of its management functions or 
responsibilities of providing medical care to its patients; or
    (b) An individual, agency, or organization with which a fiscal agent 
has entered into a contract, agreement, purchase order, or lease (or 
leases of real property) to obtain space, supplies,

[[Page 374]]

equipment, or services provided under the Medicaid agreeement.
    Supplier means an individual, agency, or organization from which a 
provider purchases goods and services used in carrying out its 
responsibilities under Medicaid (e.g., a commercial laundry, a 
manufacturer of hospital beds, or a pharmaceutical firm).
    Wholly owned supplier means a supplier whose total ownership 
interest is held by a provider or by a person, persons, or other entity 
with an ownership or control interest in a provider.

[44 FR 41644, July 17, 1979, as amended at 51 FR 34788, Sept. 30, 1986]



Sec.  455.102  Determination of ownership or control percentages.

    (a) Indirect ownership interest. The amount of indirect ownership 
interest is determined by multiplying the percentages of ownership in 
each entity. For example, if A owns 10 percent of the stock in a 
corporation which owns 80 percent of the stock of the disclosing entity, 
A's interest equates to an 8 percent indirect ownership interest in the 
disclosing entity and must be reported. Conversely, if B owns 80 percent 
of the stock of a corporation which owns 5 percent of the stock of the 
disclosing entity, B's interest equates to a 4 percent indirect 
ownership interest in the disclosing entity and need not be reported.
    (b) Person with an ownership or control interest. In order to 
determine percentage of ownership, mortgage, deed of trust, note, or 
other obligation, the percentage of interest owned in the obligation is 
multiplied by the percentage of the disclosing entity's assets used to 
secure the obligation. For example, if A owns 10 percent of a note 
secured by 60 percent of the provider's assets, A's interest in the 
provider's assets equates to 6 percent and must be reported. Conversely, 
if B owns 40 percent of a note secured by 10 percent of the provider's 
assets, B's interest in the provider's assets equates to 4 percent and 
need not be reported.



Sec.  455.103  State plan requirement.

    A State plan must provide that the requirements of Sec. Sec.  
455.104 through 455.106 are met.



Sec.  455.104  Disclosure by providers and fiscal agents: Information on ownership and control.

    (a) Information that must be disclosed. The Medicaid agency must 
require each disclosing entity to disclose the following information in 
accordance with paragraph (b) of this section:
    (1) The name and address of each person with an ownership or control 
interest in the disclosing entity or in any subcontractor in which the 
disclosing entity has direct or indirect ownership of 5 percent or more;
    (2) Whether any of the persons named, in compliance with paragraph 
(a)(1) of this section, is related to another as spouse, parent, child, 
or sibling.
    (3) The name of any other disclosing entity in which a person with 
an ownership or control interest in the disclosing entity also has an 
ownership or control interest. This requirement applies to the extent 
that the disclosing entity can obtain this information by requesting it 
in writing from the person. The disclosing entity must--
    (i) Keep copies of all these requests and the responses to them;
    (ii) Make them available to the Secretary or the Medicaid agency 
upon request; and
    (iii) Advise the Medicaid agency when there is no response to a 
request.
    (b) Time and manner of disclosure. (1) Any disclosing entity that is 
subject to periodic survey and certification of its compliance with 
Medicaid standards must supply the information specified in paragraph 
(a) of this section to the State survey agency at the time it is 
surveyed. The survey agency must promptly furnish the information to the 
Secretary and the Medicaid agency.
    (2) Any disclosing entity that is not subject to periodic survey and 
certification and has not supplied the information specified in 
paragraph (a) of this section to the Secretary within the prior 12-month 
period, must submit the information to the Medicaid agency before 
entering into a contract or agreement to participate in the program. The 
Medicaid agency must promptly furnish the information to the Secretary.
    (3) Updated information must be furnished to the Secretary or the 
State

[[Page 375]]

survey or Medicaid agency at intervals between recertification or 
contract renewals, within 35 days of a written request.
    (c) Provider agreements and fiscal agent contracts. A Medicaid 
agency shall not approve a provider agreement or a contract with a 
fiscal agent, and must terminate an existing agreement or contract, if 
the provider or fiscal agent fails to disclose ownership or control 
information as required by this section.
    (d) Denial of Federal financial participation (FFP). FFP is not 
available in payments made to a provider or fiscal agent that fails to 
disclose ownership or control information as required by this section.



Sec.  455.105  Disclosure by providers: Information related to business transactions.

    (a) Provider agreements. A Medicaid agency must enter into an 
agreement with each provider under which the provider agrees to furnish 
to it or to the Secretary on request, information related to business 
transactions in accordance with paragraph (b) of this section.
    (b) Information that must be submitted. A provider must submit, 
within 35 days of the date on a request by the Secretary or the Medicaid 
agency, full and complete information about--
    (1) The ownership of any subcontractor with whom the provider has 
had business transactions totaling more than $25,000 during the 12-month 
period ending on the date of the request; and
    (2) Any significant business transactions between the provider and 
any wholly owned supplier, or between the provider and any 
subcontractor, during the 5-year period ending on the date of the 
request.
    (c) Denial of Federal financial participation (FFP). (1) FFP is not 
available in expenditures for services furnished by providers who fail 
to comply with a request made by the Secretary or the Medicaid agency 
under paragraph (b) of this section or under Sec.  420.205 of this 
chapter (Medicare requirements for disclosure).
    (2) FFP will be denied in expenditures for services furnished during 
the period beginning on the day following the date the information was 
due to the Secretary or the Medicaid agency and ending on the day before 
the date on which the information was supplied.



Sec.  455.106  Disclosure by providers: Information on persons convicted of crimes.

    (a) Information that must be disclosed. Before the Medicaid agency 
enters into or renews a provider agreement, or at any time upon written 
request by the Medicaid agency, the provider must disclose to the 
Medicaid agency the identity of any person who:
    (1) Has ownership or control interest in the provider, or is an 
agent or managing employee of the provider; and
    (2) Has been convicted of a criminal offense related to that 
person's involvement in any program under Medicare, Medicaid, or the 
title XX services program since the inception of those programs.
    (b) Notification to Inspector General. (1) The Medicaid agency must 
notify the Inspector General of the Department of any disclosures made 
under paragraph (a) of this section within 20 working days from the date 
it receives the information.
    (2) The agency must also promptly notify the Inspector General of 
the Department of any action it takes on the provider's application for 
participation in the program.
    (c) Denial or termination of provider participation. (1) The 
Medicaid agency may refuse to enter into or renew an agreement with a 
provider if any person who has an ownership or control interest in the 
provider, or who is an agent or managing employee of the provider, has 
been convicted of a criminal offense related to that person's 
involvement in any program established under Medicare, Medicaid or the 
title XX Services Program.
    (2) The Medicaid agency may refuse to enter into or may terminate a 
provider agreement if it determines that the provider did not fully and 
accurately make any disclosure required under paragraph (a) of this 
section.

[[Page 376]]



                  Subpart C_Medicaid Integrity Program

    Source: 72 FR 67655, Nov. 30, 2007, unless otherwise noted.



Sec.  455.200  Basis and scope.

    (a) Statutory basis. This subpart implements section 1936 of the 
Social Security Act that establishes the Medicaid Integrity Program, 
under which the Secretary will promote the integrity of the program by 
entering into contracts with eligible entities to carry out the 
activities under this subpart C.
    (b) Scope. This subpart provides for the limitation on a 
contractor's liability to carry out a contract under the Medicaid 
Integrity Program and to carry out the Medicaid integrity audit program 
functions.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.202  Limitation on contractor liability.

    (a) A program contractor, a person, or an entity employed by, or 
having a fiduciary relationship with, or who furnishes professional 
services to a program contractor will not be held to have violated any 
criminal law and will not be held liable in any civil action, under any 
law of the United States or of any State (or political subdivision 
thereof), by reason of the performance of any duty, function, or 
activity required or authorized under this subpart or under a valid 
contract entered into under this subpart, provided due care was 
exercised in that performance and the contractor has a contract with CMS 
under this subpart.
    (b) CMS pays a contractor, a person, or an entity described in 
paragraph (a) of this section, or anyone who furnishes legal counsel or 
services to a contractor or person, a sum equal to the reasonable amount 
of the expenses, as determined by CMS, incurred in connection with the 
defense of a suit, action, or proceeding, if the following conditions 
are met:
    (1) The suit, action, or proceeding was brought against the 
contractor, person or entity by a third party and relates to the 
contractor's, person's or entity's performance of any duty, function, or 
activity under a contract entered into with CMS under this subpart.
    (2) The funds are available.
    (3) The expenses are otherwise allowable under the terms of the 
contract.



Sec.  455.230  Eligibility requirements.

    CMS may enter into a contract with an entity to perform the 
activities described at Sec.  455.232, if it meets the following 
conditions:
    (a) The entity has demonstrated capability to carry out the 
activities described below.
    (b) In carrying out such activities, the entity agrees to cooperate 
with the Inspector General of the Department of Health and Human 
Services, the Attorney General, and other law enforcement agencies, as 
appropriate, in the investigation and deterrence of fraud and abuse in 
relation to Title XIX of the Social Security Act and in other cases 
arising out of such activities.
    (c) Maintains an appropriate written code of conduct and compliance 
policies that include, without limitation, an enforced policy on 
employee conflicts of interest.
    (d) The entity complies with such conflict of interest standards as 
are generally applicable to Federal acquisition and procurement.
    (e) The entity meets such other requirements the Secretary may 
impose.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.232  Medicaid integrity audit program contractor functions.

    The contract between CMS and a Medicaid integrity audit program 
contractor specifies the functions the contractor will perform. The 
contract may include any or all of the following functions:
    (a) Review of the actions of individuals or entities furnishing 
items or services (whether on a fee-for-service, risk, or other basis) 
for which payment may be made under a State Plan approved under title 
XIX of the Act (or under any waiver of such plan approved under section 
1115 of the Act) to determine whether fraud, waste, or abuse has 
occurred, is likely to occur, or whether such actions have the potential 
for resulting in an expenditure of funds under title XIX in a manner

[[Page 377]]

which is not intended under the provisions of title XIX.
    (b) Auditing of claims for payment for items or services furnished, 
or administrative services rendered, under a State Plan under title XIX 
to ensure proper payments were made. This includes: cost reports, 
consulting contracts, and risk contracts under section 1903(m) of the 
Act.
    (c) Identifying if overpayments have been made to individuals or 
entities receiving Federal funds under title XIX.
    (d) Educating providers of service, managed care entities, 
beneficiaries, and other individuals with respect to payment integrity 
and quality of care.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.234  Awarding of a contract.

    (a) CMS awards and administers Medicaid integrity audit program 
contracts in accordance with acquisition regulations set forth at 48 CFR 
chapters 1 and 3, this subpart, and all other applicable laws and 
regulations. These competitive procedures and requirements for awarding 
Medicaid integrity audit program contracts are to be used as follows:
    (1) When entering into new contracts under this section.
    (2) At any other time considered appropriate by the Secretary.
    (b) An entity is eligible to be awarded a Medicaid integrity audit 
program contract only if meets the eligibility requirements established 
in Sec.  455.202, 48 CFR chapter 3, and all other applicable laws and 
requirements.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.236  Renewal of a contract.

    (a) CMS specifies the initial contract term in the Medicaid 
integrity audit program contract. CMS may, but is not required to, renew 
a Medicaid integrity audit program contract without regard to any 
provision of law requiring competition if the contractor has met or 
exceeded the performance requirements established in the current 
contract.
    (b) CMS may renew a Medicaid integrity audit program contract 
without competition if all of the following conditions are met:
    (1) The Medicaid integrity audit program contractor continues to 
meet the requirements established in this subpart.
    (2) The Medicaid integrity audit program contractor meets or exceeds 
the performance requirements established in its current contract.
    (3) It is in the best interest of the government.
    (c) If CMS does not renew a contract, the contract will end in 
accordance with its terms. The contractor will not have a right to a 
hearing or judicial review regarding CMS's renewal or non-renewal 
decision.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.238  Conflict of interest.

    (a) Offerors for Medicaid integrity audit program contracts, and 
Medicaid integrity audit program contractors, are subject to the 
following requirements:
    (1) The conflict of interest standards and requirements of the 
Federal Acquisition Regulation organizational conflict of interest 
guidance, found under 48 CFR subpart 9.5.
    (2) The standards and requirements that are contained in each 
individual contract awarded to perform activities described under 
section 1936 of the Act.
    (b) Post-award conflicts of interest: CMS considers that a post-
award conflict of interest has developed if, during the term of the 
contract, one of the following occurs:
    (1) The contractor or any of its employees, agents, or 
subcontractors received, solicited, or arranged to receive any fee, 
compensation, gift (defined at 5 CFR 2635.203(b)), payment of expenses, 
offer of employment, or any other thing of value from any entity that is 
reviewed, audited, investigated, or contacted during the normal course 
of performing activities under the Medicaid integrity audit program 
contract.
    (2) CMS determines that the contractor's activities are creating a 
conflict of interest.
    (c) If CMS determines that a conflict of interest exists during the 
term of the contract, among other actions, CMS may:
    (1) Not renew the contract for an additional term.
    (2) Modify the contract.

[[Page 378]]

    (3) Terminate the contract.

[73 FR 55771, Sept. 26, 2008]



Sec.  455.240  Conflict of interest resolution.

    (a) Review Board: CMS may establish a Conflicts of Interest Review 
Board to assist in resolving organizational conflicts of interest.
    (b) Resolution: Resolution of an organizational conflict of interest 
is a determination by the contracting officer that:
    (1) The conflict is mitigated.
    (2) The conflict precludes award of a contract to the offeror.
    (3) The conflict requires that CMS modify an existing contract.
    (4) The conflict requires that CMS terminate an existing contract.
    (5) It is in the best interest of the government to contract with 
the offeror or contractor even though the conflict of interest exists 
and a request for waiver is approved in accordance with 48 CFR 9.503.

[73 FR 55771, Sept. 26, 2008]



 Subpart D_Independent Certified Audit of State Disproportionate Share 
                      Hospital Payment Adjustments

    Source: 73 FR 77951, Dec. 19, 2008, unless otherwise noted.



Sec.  455.300  Purpose.

    This subpart implements Section 1923(j)(2) of the Act.



Sec.  455.301  Definitions.

    For the purposes of this subpart--
    Independent certified audit means an audit that is conducted by an 
auditor that operates independently from the Medicaid agency or subject 
hospitals and is eligible to perform the DSH audit. Certification means 
that the independent auditor engaged by the State reviews the criteria 
of the Federal audit regulation and completes the verification, 
calculations and report under the professional rules and generally 
accepted standards of audit practice. This certification would include a 
review of the State's audit protocol to ensure that the Federal 
regulation is satisfied, an opinion for each verification detailed in 
the regulation, and a determination of whether or not the State made DSH 
payments that exceeded any hospital's specific DSH limit in the Medicaid 
State plan rate year under audit. The certification should also identify 
any data issues or other caveats that the auditor identified as 
impacting the results of the audit.
    Medicaid State Plan Rate Year means the 12-month period defined by a 
State's approved Medicaid State plan in which the State estimates 
eligible uncompensated care costs and determines corresponding 
disproportionate share hospital payments as well as all other Medicaid 
payment rates. The period usually corresponds with the State's fiscal 
year or the Federal fiscal year but can correspond to any 12-month 
period defined by the State as the Medicaid State plan rate year.



Sec.  455.304  Condition for Federal financial participation (FFP).

    (a) General rule. (1) The State must submit an independent certified 
audit to CMS for each completed Medicaid State plan rate year, 
consistent with the requirements in this subpart, to receive Federal 
payments under Section 1903(a)(1) of the Act based on State expenditures 
for disproportionate share hospital (DSH) payments for Medicaid State 
plan rate years subsequent to the date the audit is due, except as 
provided in paragraph (e) of this section.
    (2) FFP is not available in expenditures for DSH payments that are 
found in the independent certified audit to exceed the hospital-specific 
eligible uncompensated care cost limit, except as provided in paragraph 
(e) of this section.
    (b) Timing. For Medicaid State plan rate years 2005 and 2006, a 
State must submit to CMS an independent certified audit report no later 
than the last day of calendar year 2009. Each subsequent audit beginning 
with Medicaid State plan rate year 2007 must be completed by the last 
day of the Federal fiscal year ending three years from the end of the 
Medicaid State plan rate year under audit. Completed audit reports must 
be submitted to CMS no later than 90 days after completion.

[[Page 379]]

Post-audit adjustments based on claims for the Medicaid State plan rate 
year paid subsequent to the audit date, if any, must be submitted in the 
quarter the claim was paid.
    (c) Documentation. In order to complete the independent certified 
audit, States must use the following data sources:
    (1) Approved Medicaid State plan for the Medicaid State plan rate 
year under audit.
    (2) Payment and utilization information from the State's Medicaid 
Management Information System.
    (3) The Medicare 2552-96 hospital cost report(s) applicable to the 
Medicaid State plan rate year under audit. If the Medicare 2552-96 is 
superseded by an alternate Medicare developed cost reporting tool during 
an audit year, that tool must be used for the Medicaid State plan rate 
year under audit.
    (4) Audited hospital financial statements and hospital accounting 
records.
    (d) Specific requirements. The independent certified audit report 
must verify the following:
    (1) Verification 1: Each hospital that qualifies for a DSH payment 
in the State is allowed to retain that payment so that the payment is 
available to offset its uncompensated care costs for furnishing 
inpatient hospital and outpatient hospital services during the Medicaid 
State plan rate year to Medicaid eligible individuals and individuals 
with no source of third party coverage for the services in order to 
reflect the total amount of claimed DSH expenditures.
    (2) Verification 2: DSH payments made to each qualifying hospital 
comply with the hospital-specific DSH payment limit. For each audited 
Medicaid State plan rate year, the DSH payments made in that audited 
Medicaid State plan rate year must be measured against the actual 
uncompensated care cost in that same audited Medicaid State plan rate 
year.
    (3) Verification 3: Only uncompensated care costs of furnishing 
inpatient and outpatient hospital services to Medicaid eligible 
individuals and individuals with no third party coverage for the 
inpatient and outpatient hospital services they received as described in 
Section 1923(g)(1)(A) of the Act are eligible for inclusion in the 
calculation of the hospital-specific disproportionate share limit 
payment limit, as described in Section 1923(g)(1)(A) of the Act.
    (4) Verification 4: For purposes of this hospital-specific limit 
calculation, any Medicaid payments (including regular Medicaid fee-for-
service rate payments, supplemental/enhanced Medicaid payments, and 
Medicaid managed care organization payments) made to a disproportionate 
share hospital for furnishing inpatient hospital and outpatient hospital 
services to Medicaid eligible individuals, which are in excess of the 
Medicaid incurred costs of such services, are applied against the 
uncompensated care costs of furnishing inpatient hospital and outpatient 
hospital services to individuals with no source of third party coverage 
for such services.
    (5) Verification 5: Any information and records of all of its 
inpatient and outpatient hospital service costs under the Medicaid 
program; claimed expenditures under the Medicaid program; uninsured 
inpatient and outpatient hospital service costs in determining payment 
adjustments under this Section; and any payments made on behalf of the 
uninsured from payment adjustments under this Section has been 
separately documented and retained by the State.
    (6) Verification 6: The information specified in paragraph (d)(5) of 
this Section includes a description of the methodology for calculating 
each hospital's payment limit under Section 1923(g)(1) of the Act. 
Included in the description of the methodology, the audit report must 
specify how the State defines incurred inpatient hospital and outpatient 
hospital costs for furnishing inpatient hospital and outpatient hospital 
services to Medicaid eligible individuals and individuals with no source 
of third party coverage for the inpatient hospital and outpatient 
hospital services they received.
    (e) Transition Provisions: To ensure a period for developing and 
refining reporting and auditing techniques, findings of State reports 
and audits for Medicaid State Plan years 2005-2010 will not be given 
weight except to the extent that the findings draw into question the 
reasonableness of State

[[Page 380]]

uncompensated care cost estimates used for calculations of prospective 
DSH payments for Medicaid State plan year 2011 and thereafter.



PART 456_UTILIZATION CONTROL--Table of Contents




                      Subpart A_General Provisions

Sec.
456.1 Basis and purpose of part.
456.2 State plan requirements.
456.3 Statewide surveillance and utilization control program.
456.4 Responsibility for monitoring the utilization control program.
456.5 Evaluation criteria.
456.6 Review by State medical agency of appropriateness and quality of 
          services.

          Subpart B_Utilization Control: All Medicaid Services

456.21 Scope.
456.22 Sample basis evaluation of services.
456.23 Post-payment review process.

                Subpart C_Utilization Control: Hospitals

456.50 Scope.
456.51 Definitions.

                     Certification of Need for Care

456.60 Certification and recertification of need for inpatient care.

                              Plan of Care

456.80 Individual written plan of care.

            Utilization Review (UR) Plan: General Requirement

456.100 Scope.
456.101 UR plan required for inpatient hospital services.

                  UR Plan: Administrative Requirements

456.105 UR committee required.
456.106 Organization and composition of UR committee; disqualification 
          from UR committee membership.

                   UR Plan: Informational Requirements

456.111 Recipient information required for UR.
456.112 Records and reports.
456.113 Confidentiality.

                  UR Plan: Review of Need for Admission

456.121 Admission review required.
456.122 Evaluation criteria for admission review.
456.123 Admission review process.
456.124 Notification of adverse decision.
456.125 Time limits for admission review.
456.126 Time limits for final decision and notification of adverse 
          decision.
456.127 Pre-admission review.
456.128 Initial continued stay review date.
456.129 Description of methods and criteria: Initial continued stay 
          review date; close professional scrutiny; length of stay 
          modification.

               UR Plan: Review of Need for Continued Stay

456.131 Continued stay review required.
456.132 Evaluation criteria for continued stay.
456.133 Subsequent continued stay review dates.
456.134 Description of methods and criteria: Subsequent continued stay 
          review dates; length of stay modification.
456.135 Continued stay review process.
456.136 Notification of adverse decision.
456.137 Time limits for final decision and notification of adverse 
          decision.

                UR Plan: Medical Care Evaluation Studies

456.141 Purpose and general description.
456.142 UR plan requirements for medical care evaluation studies.
456.143 Content of medical care evaluation studies.
456.144 Data sources for studies.
456.145 Number of studies required to be performed.

             Subpart D_Utilization Control: Mental Hospitals

456.150 Scope.
456.151 Definitions.

                     Certification of Need for Care

456.160 Certification and recertification of need for inpatient care.

    Medical, Psychiatric, and Social Evaluations and Admission Review

456.170 Medical, psychiatric, and social evaluations.
456.171 Medicaid agency review of need for admission.

                              Plan of Care

456.180 Individual written plan of care.
456.181 Reports of evaluations and plans of care.

            Utilization Review (UR) Plan: General Requirement

456.200 Scope.
456.201 UR plan required for inpatient mental hospital services.

                  UR Plan: Administrative Requirements

456.205 UR committee required.

[[Page 381]]

456.206 Organization and composition of UR committee; disqualification 
          from UR committee membership.

                   UR Plan: Informational Requirements

456.211 Recipient information required for UR.
456.212 Records and reports.
456.213 Confidentiality.

               UR Plan: Review of Need for Continued Stay

456.231 Continued stay review required.
456.232 Evaluation criteria for continued stay.
456.233 Initial continued stay review date.
456.234 Subsequent continued stay review dates.
456.235 Description of methods and criteria: Continued stay review 
          dates; length of stay modification.
456.236 Continued stay review process.
456.237 Notification of adverse decision.
456.238 Time limits for final decision and notification of adverse 
          decision.

                UR Plan: Medical Care Evaluation Studies

456.241 Purpose and general description.
456.242 UR plan requirements for medical care evaluation studies.
456.243 Content of medical care evaluation studies.
456.244 Data sources for studies.
456.245 Number of studies required to be performed.

Subpart E [Reserved]

       Subpart F_Utilization Control: Intermediate Care Facilities

456.350 Scope.
456.351 Definition.

                     Certification of Need for Care

456.360 Certification and recertification of need for inpatient care.

   Medical, Psychological, and Social Evaluations and Admission Review

456.370 Medical, psychological, and social evaluations.
456.371 Exploration of alternative services.
456.372 Medicaid agency review of need for admission.

                              Plan of Care

456.380 Individual written plan of care.
456.381 Reports of evaluations and plans of care.

            Utilization Review (UR) Plan: General Requirement

456.400 Scope.
456.401 State plan UR requirements and options; UR plan required for 
          intermediate care facility services.

                  UR Plan: Administrative Requirements

456.405 Description of UR review function: How and when.
456.406 Description of UR review function: Who performs UR; 
          disqualification from performing UR.
456.407 UR responsibilities of administrative staff.

                   UR Plan: Informational Requirements

456.411 Recipient informtion required for UR.
456.412 Records and reports.
456.413 Confidentiality.

               UR Plan: Review of Need for Continued Stay

456.431 Continued stay review required.
456.432 Evaluation criteria for continued stay.
456.433 Initial continued stay review date.
456.434 Subsequent continued stay review dates.
456.435 Description of methods and criteria: Continued stay review 
          dates.
456.436 Continued stay review process.
456.437 Notification of adverse decision.
456.438 Time limits for notification of adverse decision.

 Subpart G_Inpatient Psychiatric Services for Individuals Under Age 21: 
                 Admission and Plan of Care Requirements

456.480 Scope.
456.481 Admission certification and plan of care.
456.482 Medical, psychiatric, and social evaluations.

  Subpart H_Utilization Review Plans: FFP, Waivers, and Variances for 
                     Hospitals and Mental Hospitals

456.500 Purpose.
456.501 UR plans as a condition for FFP.

                     UR Plan: Waiver of Requirements

456.505 Applicability of waiver.
456.506 Waiver options for Medicaid agency.
456.507 Review and granting of waiver requests.
456.508 Withdrawal of waiver.

        UR Plan: Remote Facility Variances from Time Requirements

456.520 Definitions.
456.521 Conditions for granting variance requests.
456.522 Content of request for variance.
456.523 Revised UR plan.

[[Page 382]]

456.524 Notification of Administrator's action and duration of variance.
456.525 Request for renewal of variance.

   Subpart I_Inspections of Care in Intermediate Care Facilities and 
                    Institutions for Mental Diseases

456.600 Purpose.
456.601 Definitions.
456.602 Inspection team.
456.603 Financial interests and employment of team members.
456.604 Physician team member inspecting care of recipients.
456.605 Number and location of teams.
456.606 Frequency of inspections.
456.607 Notification before inspection.
456.608 Personal contact with and observation of recipients and review 
          of records.
456.609 Determinations by team.
456.610 Basis for determinations.
456.611 Reports on inspections.
456.612 Copies of reports.
456.613 Action on reports.
456.614 Inspections by utilization review committee.

   Subpart J_Penalty for Failure To Make a Satisfactory Showing of An 
           Effective Institutional Utilization Control Program

456.650 Basis, purpose, and scope.
456.651 Definitions.
456.652 Requirements for an effective utilization control program.
456.653 Acceptable reasons for not meeting requirements for annual on-
          site review.
456.654 Requirements for content of showings and procedures for 
          submittal.
456.655 Validation of showings.
456.656 Reductions in FFP.
456.657 Computation of reductions in FFP.

Subpart K_Drug Use Review (DUR) Program and Electronic Claims Management 
                    System for Outpatient Drug Claims

456.700 Scope.
456.702 Definitions.
456.703 Drug use review program.
456.705 Prospective drug review.
456.709 Retrospective drug use review.
456.711 Educational program.
456.712 Annual report.
456.714 DUR/surveillance and utilization review relationship.
456.716 DUR Board.
456.719 Funding for DUR program.
456.722 Electronic claims management system.
456.725 Funding of ECM system.

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

    Source: 43 FR 45266, Sept. 29, 1978, unless otherwise noted.



                      Subpart A_General Provisions



Sec.  456.1  Basis and purpose of part.

    (a) This part prescribes requirements concerning control of the 
utilization of Medicaid services including--
    (1) A statewide program of control of the utilization of all 
Medicaid services; and
    (2) Specific requirements for the control of the utilization of 
Medicaid services in institutions.
    (3) Specific requirements for an outpatient drug use review program.
    (b) The requirements in this part are based on the following 
sections of the Act. Table 1 shows the relationship between these 
sections of the Act and the requirements in this part.
    (1) Methods and procedures to safeguard against unnecessary 
utilization of care and services. Section 1902(a)(30) requires that the 
State plan provide methods and procedures to safeguard against 
unnecessary utilization of care and services.
    (2) Penalty for failure to have an effective program to control 
utilization of institutional services. Section 1903(g)(1) provides for a 
reduction in the amount of Federal Medicaid funds paid to a State for 
long-stay inpatient services if the State does not make a showing 
satisfactory to the Secretary that it has an effective program of 
control over utilization of those services. This penalty provision 
applies to inpatient services in hospitals, mental hospitals, and 
intermediate care facilities (ICF's). Specific requirements are:
    (i) Under section 1903(g)(1)(A), a physician must certify at 
admission, and a physician (or physician assistant or nurse practitioner 
under the supervision of a physician) must periodically recertify, the 
individual's need for inpatient care.
    (ii) Under section 1903(g)(1)(B), services must be furnished under a 
plan established and periodically evaluated by a physician.
    (iii) Under section 1903(g)(1)(C), the State must have in effect a 
continuous program of review of utilization of care and services under 
section 1902(a)(30) whereby each admission is reviewed or screened in 
accordance with criteria established by medical and other professional 
personnel.

[[Page 383]]

    (iv) Under section 1903(g)(1)(D), the State must have an effective 
program under sections 1902(a) (26) and (31) of review of care in 
intermediate care facilities and mental hospitals. This must include 
evaluation at least annually of the professional management of each 
case.
    (3) Medical review in mental hospitals. Section 1902(a)(26)(A) 
requires that the plan provide for a program of medical review that 
includes a medical evaluation of each individual's need for care in a 
mental hospital, a plan of care, and, where applicable, a plan of 
rehabilitation.
    (4) Independent professional review in intermediate care facilities. 
Section 1902(a)(31)(A) requires that the plan provide for a program of 
independent professional review that includes a medical evaluation of 
each individual's need for intermediate care and a written plan of 
service.
    (5) Inspection of care and services in institutions. Sections 
1902(a)(26) (B) and (C) and 1902(a)(31) (B) and (C) require that the 
plan provide for periodic inspections and reports, by a team of 
professional persons, of the care being provided to each recipient in 
institutions for mental diseases (IMD's), and ICF's participating in 
Medicaid.
    (6) Denial of FFP for failure to have specified utilization review 
procedures. Section 1903(i)(4) provides that FFP is not available in a 
State's expenditures for hospital or mental hospital services unless the 
institution has in effect a utilization review plan that meets Medicare 
requirements. However, the Secretary may waive this requirement if the 
Medicaid agency demonstrates to his satisfaction that it has utilization 
review procedures superior in effectiveness to the Medicare procedures.
    (7) State health agency guidance on quality and appropriateness of 
care and services. Section 1902(a)(33)(A) requires that the plan provide 
that the State health or other appropriate medical agency establish a 
plan for review, by professional health personnel, of the 
appropriateness and quality of Medicaid services to provide guidance to 
the Medicaid agency and the State licensing agency in administering the 
Medicaid program.
    (8) Drug use review program. Section 1927(g) of the Act provides 
that, for payment to be made under section 1903 of the Act for covered 
outpatient drugs, the State must have in operation, by not later than 
January 1, 1993, a drug use review (DUR) program. It also requires that 
each State provide, either directly or through a contract with a private 
organization, for the establishment of a DUR Board.

                                 Table 1
 [This table relates the regulations in this part to the sections of the
                      Act on which they are based.]
Subpart A--General........................  1902(a)(30)
                                            1902(a)(33)(A)
Subpart B--Utilization Control: All         1902(a)(30)
 Medicaid Services.
Subpart C--Utilization Control: Hospitals
  Certification of need for care..........  1903(g)(1)(A)
  Plan of care............................  1903(g)(1)(B)
  Utilization review plan (including        1902(a)(30)
   admission review).                       1903(g)(1)(C)
                                            1903(i)(4)
Subpart D--Utilization Control: Mental
 Hospitals
  Certification of need for care..........  1903(g)(1)(A)
  Medical evaluation and admission review.  1902(a)(26)(A)
                                            1903(g)(1)(C)
  Plan of care............................  1902(a)(26)(A)
                                            1903(g)(1)(B)
  Admission and plan of care requirements   1902(a)(26)(A)
   for individuals under 21.                1903(g)(1) (B), (C)
  Utilization review plan.................  1902(a)(30)
                                            1903(g)(1)(C)
                                            1903(i)(4)
Subpart F--Utilization Control:
 Intermediate Care Facilities
  Certification of need for care..........  1903(g)(1)(A)
  Medical evaluation and admission review.  1902(a)(31)(A)
                                            1903(g)(1)(C)
  Plan of care............................  1902(a)(31)(A)
                                            1903(g)(1)(B)
  Utilization review plan.................  1902(a)(30)
                                            1903(g)(1)(C)
                                            1903(i)(4)
Subpart G--Inpatient Psychiatric Services   1905 (a)(16) and (h)
 for Individuals Under Age 21: Admission
 and Plan of Care Requirements.
Subpart H--Utilization Review Plans: FFP,   ............................
 Waivers, and Variances for Hospitals and
 Mental Hospitals.
Subpart I--Inspections of Care in           ............................
 Intermediate Care Facilities and
 Institutions for Mental Diseases.
Subpart J--Penalty for Failure To Make a    1903(g)
 Satisfactory Showing of An Effective
 Institutional Utilization Control Program.
Subpart K--Drug Use Review (DUR) Program    1927(g) and (h)
 and Electronic Claims Management System
 for Outpatient Drug Claims.
------------------------------------------------------------------------


[43 FR 45266, Sept. 29, 1978, as amended at 46 FR 48561, Oct. 1, 1981; 
57 FR 49408, Nov. 2, 1992; 61 FR 38398, July 24, 1996]

[[Page 384]]



Sec.  456.2  State plan requirements.

    (a) A State plan must provide that the requirements of this part are 
met.
    (b) These requirements may be met by the agency by:
    (1) Assuming direct responsibility for assuring that the 
requirements of this part are met; or
    (2) Deeming of medical and utilization review requirements if the 
agency contracts with a QIO to perform that review, which in the case of 
inpatient acute care review will also serve as the initial determination 
for QIO medical necessity and appropriateness review for patients who 
are dually entitled to benefits under Medicare and Medicaid.
    (c) In accordance with Sec.  431.15 of this subchapter, FFP will be 
available for expenses incurred in meeting the requirements of this 
part.

[46 FR 48566, Oct. 1, 1981, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986]



Sec.  456.3  Statewide surveillance and utilization control program.

    The Medicaid agency must implement a statewide surveillance and 
utilization control program that--
    (a) Safeguards against unnecessary or inappropriate use of Medicaid 
services and against excess payments;
    (b) Assesses the quality of those services;
    (c) Provides for the control of the utilization of all services 
provided under the plan in accordance with subpart B of this part; and
    (d) Provides for the control of the utilization of inpatient 
services in accordance with subparts C through I of this part.



Sec.  456.4  Responsibility for monitoring the utilization control program.

    (a) The agency must--
    (1) Monitor the statewide utilization control program;
    (2) Take all necessary corrective action to ensure the effectiveness 
of the program;
    (3) Establish methods and procedures to implement this section;
    (4) Keep copies of these methods and procedures on file; and
    (5) Give copies of these methods and procedures to all staff 
involved in carrying out the utilization control program.



Sec.  456.5  Evaluation criteria.

    The agency must establish and use written criteria for evaluating 
the appropriateness and quality of Medicaid services. This section does 
not apply to services in hospitals and mental hospitals. For these 
facilities, see the following sections: Sec. Sec.  456.122 and 456.132 
of subpart C; and Sec.  456.232 of subpart D.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.6  Review by State medical agency of appropriateness and quality of services.

    (a) The Medicaid agency must have an agreement with the State health 
agency or other appropriate State medical agency, under which the health 
or medical agency is responsible for establishing a plan for the review 
by professional health personnel of the appropriateness and quality of 
Medicaid services.
    (b) The purpose of this review plan is to provide guidance to the 
Medicaid agency in the administration of the State plan and, where 
applicable, to the State licensing agency described in Sec.  431.610.



          Subpart B_Utilization Control: All Medicaid Services



Sec.  456.21  Scope.

    This subpart prescribes utilization control requirements applicable 
to all services provided under a State plan.



Sec.  456.22  Sample basis evaluation of services.

    To promote the most effective and appropriate use of available 
services and facilities the Medicaid agency must have procedures for the 
on-going evaluation, on a sample basis, of the need for and the quality 
and timeliness of Medicaid services.



Sec.  456.23  Post-payment review process.

    The agency must have a post-payment review process that--
    (a) Allows State personnel to develop and review--
    (1) Recipient utilization profiles;
    (2) Provider service profiles; and
    (3) Exceptions criteria; and

[[Page 385]]

    (b) Identifies exceptions so that the agency can correct 
misutilization practices of recipients and providers.



                Subpart C_Utilization Control: Hospitals



Sec.  456.50  Scope.

    This subpart prescribes requirements for control of utilization of 
inpatient hospital services, including requirements concerning--
    (a) Certification of need for care;
    (b) Plan of care; and
    (c) Utilization review plans.



Sec.  456.51  Definitions.

    As used in this subpart:
    Inpatient hospital services--
    (a) Include--
    (1) Services provided in an institution other than an institution 
for mental disease, as defined in Sec.  440.10;
    (2) [Reserved]
    (3) Services provided in specialty hospitals and
    (b) Exclude services provided in mental hospitals. Utilization 
control requirements for mental hospitals appear in subpart D.
    Medical care appraisal norms or norms means numerical or statistical 
measures of usually observed performance.
    Medical care criteria or criteria means predetermined elements 
against which aspects of the quality of a medical service may be 
compared. These criteria are developed by health professionals relying 
on their expertise and the professional health care literature.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 22041, June 17, 1986]

                     Certification of Need for Care



Sec.  456.60  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that inpatient services in a hospital are or were needed.
    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in a hospital, before the 
Medicaid agency authorizes payment.
    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec.  491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that inpatient services in a hospital are needed.
    (2) Recertifications must be made at least every 60 days after 
certification.

[46 FR 48561, Oct. 1, 1981]

                              Plan of Care



Sec.  456.80  Individual written plan of care.

    (a) Before admission to a hospital or before authorization for 
payment, a physician and other personnel involved in the care of the 
individual must establish a written plan of care for each applicant or 
recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Social services;
    (vi) Diet;
    (4) Plans for continuing care, as appropriate; and
    (5) Plans for discharge, as appropriate.
    (c) Orders and activities must be developed in accordance with 
physician's instructions.
    (d) Orders and activities must be reviewed and revised as 
appropriate by all personnel involved in the care of an individual.
    (e) A physician and other personnel involved in the recipient's case 
must review each plan of care at least every 60 days.

            Utilization Review (UR) Plan: General Requirement



Sec.  456.100  Scope.

    Sections 456.101 through 456.145 of this subpart prescribe 
requirements for a written utilization review (UR) plan for each 
hospital providing Medicaid services. Sections 456.105 and 456.106

[[Page 386]]

prescribe administrative requirements: Sec. Sec.  456.111 through 
456.113 prescribe informational requirements; Sec. Sec.  456.121 through 
456.129 prescribe requirements for admission review; Sec. Sec.  456.131 
through 456.137 prescribe requirements for continued stay review; and 
Sec. Sec.  456.141 through 456.145 prescribe requirements for medical 
care evaluation studies.



Sec.  456.101  UR plan required for inpatient hospital services.

    (a) A State plan must provide that each hospital furnishing 
inpatient services under the plan has in effect a written UR plan that 
provides for review of each recipient's need for the services that the 
hospital furnishes him.
    (b) Each written hospital UR plan must meet the requirements under 
Sec. Sec.  456.101 through 456.145.

                  UR Plan: Administrative Requirements



Sec.  456.105  UR committee required.

    The UR plan must--
    (a) Provide for a committee to perform UR required under this 
subpart;
    (b) Describe the organization, composition, and functions of this 
committee; and
    (c) Specify the frequency of meetings of the committee.



Sec.  456.106  Organization and composition of UR committee; disqualification from UR committee membership.

    (a) For the purpose of this subpart, ``UR committee'' includes any 
group organized under paragraphs (b) and (c) of this section.
    (b) The UR committee must be composed of two or more physicians, and 
assisted by other professional personnel.
    (c) The UR committee must be constituted as--
    (1) A committee of the hospital staff;
    (2) A group outside the hospital staff, established by the local 
medical or osteopathic society and at least some of the hospitals and 
SNFs in the locality;
    (3) A group capable of performing utilization review, established 
and organized in a manner approved by the Secretary.
    (d) The UR committee may not include any individual who--
    (1) Is directly responsible for the care of the patient whose care 
is being reviewed; or
    (2) Has a financial interest in any hospital.

                   UR Plan: Informational Requirements



Sec.  456.111  Recipient information required for UR.

    The UR plan must provide that each recipient's record includes 
information needed for the UR committee to perform UR required under 
this subpart. This information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (d) The plan of care required under Sec.  456.70.
    (e) Initial and subsequent continued stay review dates described 
under Sec. Sec.  456.128 and 456.133.
    (f) Date of operating room reservation, if applicable.
    (g) Justification of emergency admission, if applicable.
    (h) Reasons and plan for continued stay, if the attending physician 
believes continued stay is necessary.
    (i) Other supporting material that the committee believes 
appropriate to be included in the record.



Sec.  456.112  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the committee; and
    (b) The type and frequency of committee reports and arrangements for 
their distribution to appropriate individuals.



Sec.  456.113  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

[[Page 387]]

                UR Plan: Review of Need for Admission \1\
---------------------------------------------------------------------------

    \1\ The Department was enjoined in 1975 in the case of American 
Medical Assn. et al. v. Weinberger, 395 F. Supp. 515 (N.D. Ill., 1975), 
aff'd., 522 F2d 921 (7th cir., 1975) from implementing the admission 
review requirements contained in Sec. Sec.  456.121-456.127. This case 
was dismissed on the condition that these requirements be revised. They 
are presently being revised, and will not be in force until that 
revision is completed.
---------------------------------------------------------------------------



Sec.  456.121  Admission review required.

    The UR plan must provide for a review of each recipient's admission 
to the hospital to decide whether it is needed, in accordance with the 
requirements of Sec. Sec.  456.122 through 456.129.



Sec.  456.122  Evaluation criteria for admission review.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for admission; and
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec.  456.123  Admission review process.

    The UR plan must provide that--
    (a) Admission review is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup, or designee evaluates the admission 
against the criteria developed under Sec.  456.122 and applies close 
professional scrutiny to cases selected under Sec.  456.129(b);
    (c) If the committee, subgroup, or designee finds that the admission 
is needed, the committee assigns an initial continued stay review date 
in accordance with Sec.  456.128;
    (d) If the committee, subgroup, or designee finds that the admission 
does not meet the criteria, the committee or a subgroup that includes at 
least one physician reviews the case to decide the need for admission;
    (e) If the committee or subgroup making the review under paragraph 
(d) of this section finds that the admission is not needed, it notifies 
the recipient's attending physician and gives him an opportunity to 
present his views before it makes a final decision on the need for the 
continued stay;
    (f) If the attending physician does not present additional 
information or clarification of the need for the admission, the decision 
of the committee or subgroup is final; and
    (g) If the attending physician presents additional information or 
clarification, at least two physician members of the committee review 
the need for the admission. If they find that the admission is not 
needed, their decision if final.



Sec.  456.124  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for admission under Sec.  456.123 (e) through (g) 
is sent to--
    (a) The hospital administrator;
    (b) The attending physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.



Sec.  456.125  Time limits for admission review.

    Except as required under Sec.  456.127, the UR plan must provide 
that review of each recipient's admission to the hospital is conducted--
    (a) Within one working day after admission, for an individual who is 
receiving Medicaid at that time; or
    (b) Within one working day after the hospital is notified of the 
application for Medicaid, for an individual who applies while in the 
hospital.



Sec.  456.126  Time limits for final decision and notification of adverse decision.

    Except as required under Sec.  456.127, the UR plan must provide 
that the committee makes a final decision on a recipient's need for 
admission and gives notice of an adverse final decision--

[[Page 388]]

    (a) Within two working days after admission, for an individual who 
is receiving Medicaid at that time; or
    (b) Within two working days after the hospital is notified of the 
application for Medicaid, for an individual who applies while in the 
hospital.



Sec.  456.127  Pre-admission review.

    The UR plan must provide for review and final decision prior to 
admission for certain providers or categories of admissions that the UR 
committee designates under Sec.  456.142(b) (4)(iii) to receive pre-
admission review.



Sec.  456.128  Initial continued stay review date.

    The UR plan must provide that--
    (a) When a recipient is admitted to the hospital under the admission 
review requirements of this subpart, the committee assigns a specified 
date by which the need for his continued stay will be reviewed;
    (b) The committee bases its assignment of the initial continued stay 
review date on--
    (1) The methods and criteria required to be described under Sec.  
456.129;
    (2) The individual's condition; and
    (3) The individual's projected discharge date;
    (c)(1) The committee uses any available appropriate regional medical 
care appraisal norms, such as those developed by abstracting services or 
third party payors, to assign the initial continued stay review date;
    (2) These regional norms are based on current and statistically 
valid data on duration of stay in hospitals for patients whose 
characteristics, such as age and diagnosis, are similar to those of the 
individual whose case is being reviewed;
    (3) If the committee uses norms to assign the initial continued stay 
review date, the number of days between the individual's admission and 
the initial continued stay review date is no greater than the number of 
days reflected in the 50th percentile of the norms. However, the 
committee may assign a later review date if it documents that the later 
date is more appropriate; and
    (d) The committee ensures that the initial continued stay review 
date is recorded in the individual's record.



Sec.  456.129  Description of methods and criteria: Initial continued stay review date; close professional scrutiny; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign the initial continued stay review date under 
Sec.  456.128.
    (b) The methods that the committee uses to select categories of 
admission to receive close professional scrutiny under Sec.  456.123(b); 
and
    (c) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.

               UR Plan: Review of Need for Continued Stay



Sec.  456.131  Continued stay review required.

    The UR plan must provide for a review of each recipient's continued 
stay in the hospital to decide whether it is needed, in accordance with 
the requirements of Sec. Sec.  456.132 through 456.137.



Sec.  456.132  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for continued stay.
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec.  456.133  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The committee assigns subsequent continued stay review dates in 
accordance with Sec. Sec.  456.128 and 456.134(a);
    (b) The committee assigns a subsequent review date each time it 
decides under Sec.  456.135 that the continued stay is needed; and

[[Page 389]]

    (c) The committee ensures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec.  456.134  Description of methods and criteria: Subsequent continued stay review dates; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign subsequent continued stay review dates under 
Sec.  456.133; and
    (b) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.



Sec.  456.135  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup or designee reviews a recipient's 
continued stay on or before the expiration of each assigned continued 
stay review date;
    (c) For each continued stay of a recipient in the hospital, the 
committee, subgroup or designee reviews and evaluates the documentation 
described under Sec.  456.111 against the criteria developed under Sec.  
456.132 and applies close professional scrutiny to cases selected under 
Sec.  456.129(b);
    (d) If the committee, subgroup, or designee finds that a recipient's 
continued stay in the hospital is needed, the committee assigns a new 
continued stay review date in accordance with Sec.  456.133;
    (e) If the committee, subgroup, or designee finds that a continued 
stay case does not meet the criteria, the committee or a subgroup that 
includes at least one physician reviews the case to decide the need for 
continued stay;
    (f) If the committee or subgroup making the review under paragraph 
(e) of this section finds that a continued stay is not needed, it 
notifies the recipient's attending physician and gives him an 
opportunity to present his reviews before it makes a final decision on 
the need for the continued stay;
    (g) If the attending physician does not present additional 
information or clarification of the need for the continued stay, the 
decision of the committee or subgroup is final; and
    (h) If the attending physician presents additional information or 
clarification, at least two physician members of the committee review 
the need for the continued stay. If they find that the recipient no 
longer needs inpatient hospital services, their decision is final.



Sec.  456.136  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec.  456.135 (f) through 
(h) is sent to--
    (a) The hospital administrator;
    (b) The attending physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.



Sec.  456.137  Time limits for final decision and notification of adverse decision.

    The UR plan must provide that--
    (a) The committee makes a final decision on a recipient's need for 
continued stay and gives notice under Sec.  456.136 of an adverse final 
decision within 2 working days after the assigned continued stay review 
dates, except as required under paragraph (b) of this section.
    (b) If the committee makes an adverse final decision on a 
recipient's need for continued stay before the assigned review date, the 
committee gives notice under Sec.  456.136 within 2 working days after 
the date of the final decision.

                UR Plan: Medical Care Evaluation Studies



Sec.  456.141  Purpose and general description.

    (a) The purpose of medical care evaluation studies is to promote the 
most effective and efficient use of available health facilities and 
services consistent with patient needs and professionally recognized 
standards of health care.
    (b) Medical care evaluation studies--

[[Page 390]]

    (1) Emphasize identification and analysis of patterns of patient 
care; and
    (2) Suggest appropriate changes needed to maintain consistently high 
quality patient care and effective and efficient use of services.



Sec.  456.142  UR plan requirements for medical care evaluation studies.

    (a) The UR plan must describe the methods that the committee uses to 
select and conduct medical care evaluation studies under paragraph 
(b)(1) of this section.
    (b) The UR plan must provide that the UR committee--
    (1) Determines the methods to be used in selecting and conducting 
medical care evaluation studies in the hospital;
    (2) Documents for each study--
    (i) Its results; and
    (ii) How the results have been used to make changes to improve the 
quality of care and promote more effective and efficient use of 
facilities and services;
    (3) Analyzes its findings for each study; and
    (4) Takes action as needed to--
    (i) Correct or investigate further any deficiencies or problems in 
the review process for admissions or continued stay cases;
    (ii) Recommend more effective and efficient hospital care 
procedures; or
    (iii) Designate certain providers or categories of admissions for 
review prior to admission.



Sec.  456.143  Content of medical care evaluation studies.

    Each medical care evaluation study must--
    (a) Identify and analyze medical or administrative factors related 
to the hospital's patient care;
    (b) Include analysis of at least the following:
    (1) Admissions;
    (2) Durations of stay;
    (3) Ancillary services furnished, including drugs and biologicals;
    (4) Professional services performed in the hospital; and
    (c) If indicated, contain recommendations for changes beneficial to 
patients, staff, the hospital, and the community.



Sec.  456.144  Data sources for studies.

    Data that the committee uses to perform studies must be obtained 
from one or more of the following sources:
    (a) Medical records or other appropriate hospital data;
    (b) External organizations that compile statistics, design profiles, 
and produce other comparative data;
    (c) Cooperative endeavors with--
    (1) QIOs;
    (2) Fiscal agents;
    (3) Other service providers; or
    (4) Other appropriate agencies.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 43198, Dec. 1, 1986]



Sec.  456.145  Number of studies required to be performed.

    The hospital must, at least, have one study in progress at any time 
and complete one study each calendar year.



             Subpart D_Utilization Control: Mental Hospitals



Sec.  456.150  Scope.

    This subpart prescribes requirements for control of utilization of 
inpatient services in mental hospitals, including requirements 
concerning--
    (a) Certification of need for care;
    (b) Medical evaluation and admission review;
    (c) Plan of care; and
    (d) Utilization review plans.



Sec.  456.151  Definitions.

    As used in this subpart:
    Medical care appraisal norms or norms means numerical or statistical 
measures of usually observed performance.
    Medical care criteria or criteria means predetermined elements 
against which aspects of the quality of a medical service may be 
compared. These criteria are developed by health professionals relying 
on their expertise and the professional health care literature.

                     Certification of Need for Care



Sec.  456.160  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that inpatient services in a mental hospital are or were 
needed.

[[Page 391]]

    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in a mental hospital, before 
the Medicaid agency authorizes payment.
    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec.  491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that inpatient services in a mental hospital are needed.
    (2) Recertification must be made at least every 60 days after 
certification.

[46 FR 48561, Oct. 1, 1981]

    Medical, Psychiatric, and Social Evaluations and Admission Review



Sec.  456.170  Medical, psychiatric, and social evaluations.

    (a) Before admission to a mental hospital or before authorization 
for payment, the attending physician or staff physician must make a 
medical evaluation of each applicant's or recipient's need for care in 
the hospital; and appropriate professional personnel must make a 
psychiatric and social evaluation.
    (b) Each medical evaluation must include--
    (1) Diagnoses;
    (2) Summary of present medical findings;
    (3) Medical history;
    (4) Mental and physical functional capacity;
    (5) Prognoses; and
    (6) A recommendation by a physician concerning--
    (i) Admission to the mental hospital; or
    (ii) Continued care in the mental hospital for individuals who apply 
for Medicaid while in the mental hospital.



Sec.  456.171  Medicaid agency review of need for admission.

    Medical and other professional personnel of the Medicaid agency or 
its designees must evaluate each applicant's or recipient's need for 
admission by reviewing and assessing the evaluations required by Sec.  
456.170.

                              Plan of Care



Sec.  456.180  Individual written plan of care.

    (a) Before admission to a mental hospital or before authorization 
for payment, the attending physician or staff physician must establish a 
written plan of care for each applicant or recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Objectives;
    (4) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Therapies;
    (vi) Social services;
    (vii) Diet; and
    (viii) Special procedures recommended for the health and safety of 
the patient;
    (5) Plans for continuing care, including review and modification to 
the plan of care; and
    (6) Plans for discharge.
    (c) The attending or staff physician and other personnel involved in 
the recipient's care must review each plan of care at least every 90 
days.



Sec.  456.181  Reports of evaluations and plans of care.

    A written report of each evaluation and plan of care must be entered 
in the applicant's or recipient's record--
    (a) At the time of admission; or
    (b) If the individual is already in the facility, immediately upon 
completion of the evaluation or plan.

           Utilization Review (UR) Plan: General Requirements



Sec.  456.200  Scope.

    Sections 456.201 through 456.245 of this subpart prescribe 
requirements for a written utilization review (UR) plan for each mental 
hospital providing Medicaid services. Sections 456.205 and 456.206 
prescribe administrative requirements; Sec. Sec.  456.211 through 
456.213 prescribe informational requirements;

[[Page 392]]

Sec. Sec.  456.231 through 456.238 prescribe requirements for continued 
stay review; and Sec. Sec.  456.241 through 456.245 prescribe 
requirements for medical care evaluation studies.



Sec.  456.201  UR plan required for inpatient mental hospital services.

    (a) The State plan must provide that each mental hospital furnishing 
inpatient services under the plan has in effect a written UR plan that 
provides for review of each recipient's need for the services that the 
mental hospital furnishes him.
    (b) Each written mental hospital UR plan must meet the requirements 
under Sec. Sec.  456.201 through 456.245.

                  UR Plan: Administrative Requirements



Sec.  456.205  UR committee required.

    The UR plan must--
    (a) Provide for a committee to perform UR required under this 
subpart;
    (b) Describe the organization, composition, and functions of this 
committee; and
    (c) Specify the frequency of meetings of the committee.



Sec.  456.206  Organization and composition of UR committee; disqualification from UR committee membership.

    (a) For the purpose of this subpart, ``UR committee'' includes any 
group organized under paragraphs (b) and (c) of this section.
    (b) The UR committee must be composed of two or more physicians, one 
of whom is knowledgeable in the diagnosis and treatment of mental 
diseases, and assisted by other professional personnel.
    (c) The UR committee must be constituted as--
    (1) A committee of the mental hospital staff;
    (2) A group outside the mental hospital staff, established by the 
local medical or osteopathic society and at least some of the hospitals 
and SNFs in the locality; or
    (3) A group capable of performing utilization review, established 
and organized in a manner approved by the Secretary.
    (d) The UR committee may not include any individual who--
    (1) Is directly responsible for the care of patients whose care is 
being reviewed; or
    (2) Has a financial interest in any mental hospital.

                   UR Plan: Informational Requirements



Sec.  456.211  Recipient information required for UR.

    The UR plan must provide that each recipient's record includes 
information needed to perform UR required under this subpart. This 
information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (d) The plan of care required under Sec.  456.172.
    (e) Initial and subsequent continued stay review dates described 
under Sec. Sec.  456.233 and 456.234.
    (f) Reasons and plan for continued stay, if the attending physician 
believes continued stay is necessary.
    (g) Other supporting material that the committee believes 
appropriate to be included in the record.



Sec.  456.212  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the committee; and
    (b) The type and frequency of committee reports and arrangements for 
their distribution to appropriate individuals.



Sec.  456.213  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

               UR Plan: Review of Need for Continued Stay



Sec.  456.231  Continued stay review required.

    The UR plan must provide for a review of each recipient's continued 
stay

[[Page 393]]

in the mental hospital to decide whether it is needed, in accordance 
with the requirements of Sec. Sec.  456.232 through 456.238.



Sec.  456.232  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The committee develops written medical care criteria to assess 
the need for continued stay.
    (b) The committee develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec.  456.233  Initial continued stay review date.

    The UR plan must provide that--
    (a) When a recipient is admitted to the mental hospital under 
admission review requirements of this subpart, the committee assigns a 
specified date by which the need for his continued stay will be 
reviewed;
    (b) If an individual applies for Medicaid while in the mental 
hospital, the committee assigns the initial continued stay review date 
within 1 working day after the mental hospital is notified of the 
application for Medicaid;
    (c) The committee bases its assignment of the initial continued stay 
review date on--
    (1) The methods and criteria required to be described under Sec.  
456.235(a);
    (2) The individual's condition; and
    (3) The individual's projected discharge date;
    (d)(1) The committee uses any available appropriate regional medical 
care appraisal norms, such as those developed by abstracting services or 
third party payors, to assign the initial continued stay review date;
    (2) These norms are based on current and statistically valid data on 
duration of stay in mental hospitals for patients whose characteristics, 
such as age and diagnosis, are similar to those of the individual whose 
need for continued stay is being reviewed;
    (3) If the committee uses norms to assign the initial continued stay 
review date, the number of days between the individual's admission and 
the initial continued stay review date is no greater than the number of 
days reflected in the 50th percentile of the norms. However, the 
committee may assign a later review date if it documents that the later 
date is more appropriate;
    (e) The initial continued stay review date is not in any case later 
than 30 days after admission of the individual or notice to the mental 
hospital of his application for Medicaid; and
    (f) The committee insures that the initial continued stay review 
date is recorded in the individual's record.



Sec.  456.234  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The committee assigns subsequent continued stay review dates in 
accordance with Sec. Sec.  456.235(a) and 456.233;
    (b) The committee assigns a subsequent continued stay review date at 
least every 90 days each time it decides under Sec.  456.236 that the 
continued stay is needed; and
    (c) The committee insures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec.  456.235  Description of methods and criteria: Continued stay review dates; length of stay modification.

    The UR plan must describe--
    (a) The methods and criteria, including norms if used, that the 
committee uses to assign initial and subsequent continued stay review 
dates under Sec. Sec.  456.233 and 456.234 of this subpart; and
    (b) The methods that the committee uses to modify an approved length 
of stay when the recipient's condition or treatment schedule changes.



Sec.  456.236  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The UR committee;
    (2) A subgroup of the UR committee; or
    (3) A designee of the UR committee;
    (b) The committee, subgroup or designee reviews a recipient's 
continued

[[Page 394]]

stay on or before the expiration of each assigned continued stay review 
date;
    (c) For each continued stay of a recipient in the mental hospital, 
the committee, subgroup or designee reviews and evaluates the 
documentation described under Sec.  456.211 against the criteria 
developed under Sec.  456.232 and applies close professional scrutiny to 
cases described under Sec.  456.232(b).
    (d) If the committee, subgroup or designee finds that a recipient's 
continued stay in the mental hospital is needed, the committee assigns a 
new continued stay review date in accordance with Sec.  456.234;
    (e) If the committee, subgroup or designee finds that a continued 
stay case does not meet the criteria, the committee or a subgroup that 
includes at least one physician reviews the case to decide the need for 
continued stay;
    (f) If the committee or subgroup making the review under paragraph 
(e) of this section finds that a continued stay is not needed, it 
notifies the recipient's attending or staff physician and gives him an 
opportunity to present his views before it makes a final decision on the 
need for the continued stay;
    (g) If the attending or staff physician does not present additional 
information or clarification of the need for the continued stay, the 
decision of the committee or subgroup is final; and
    (h) If the attending or staff physician presents additional 
information or clarification, at least two physician members of the 
committee, one of whom is knowledgeable in the treatment of mental 
diseases, review the need for the continued stay. If they find that the 
recipient no longer needs inpatient mental hospital services, their 
decision is final.



Sec.  456.237  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec.  456.236 (f) through 
(h) is sent to--
    (a) The hospital administrator;
    (b) The attending or staff physician;
    (c) The Medicaid agency;
    (d) The recipient; and
    (e) If possible, the next of kin or sponsor.



Sec.  456.238  Time limits for final decision and notification of adverse decision.

    The UR plan must provide that--
    (a) The committee makes a final decision on a recipient's need for 
continued stay and gives notice under Sec.  456.237 of an adverse 
decision within 2 working days after the assigned continued stay review 
date, except as required under paragraph (b) of this section.
    (b) If the committee makes an adverse final decision on a 
recipient's need for continued stay before the assigned review date, the 
committee gives notice under Sec.  456.237 within 2 working days after 
the date of the final decision.

                UR Plan: Medical Care Evaluation Studies



Sec.  456.241  Purpose and general description.

    (a) The purpose of medical care evaluation studies is to promote the 
most effective and efficient use of available health facilities and 
services consistent with patient needs and professionally recognized 
standards of health care.
    (b) Medical care evaluation studies--
    (1) Emphasize identification and analysis of patterns of patient 
care; and
    (2) Suggest appropriate changes needed to maintain consistently high 
quality patient care and effective and efficient use of services.



Sec.  456.242  UR plan requirements for medical care evaluation studies.

    (a) The UR plan must describe the methods that the committee uses to 
select and conduct medical care evaluation studies under paragraph 
(b)(1) of this section.
    (b) The UR plan must provide that the UR committee--
    (1) Determines the methods to be used in selecting and conducting 
medical care evaluation studies in the mental hospital;
    (2) Documents for each study--
    (i) Its results; and
    (ii) How the results have been used to make changes to improve the 
quality of care and promote more effective and efficient use of 
facilities and services;

[[Page 395]]

    (3) Analyzes its findings for each study; and
    (4) Takes action as needed to--
    (i) Correct or investigate further any deficiencies or problems in 
the review process; or
    (ii) Recommend more effective and efficient hospital care 
procedures.



Sec.  456.243  Content of medical care evaluation studies.

    Each medical care evaluation study must--
    (a) Identify and analyze medical or administrative factors related 
to the mental hospital's patient care;
    (b) Include analysis of at least the following:
    (1) Admissions.
    (2) Durations of stay.
    (3) Ancillary services furnished, including drugs and biologicals.
    (4) Professional services performed in the hospital; and
    (c) If indicated, contain recommendations for change beneficial to 
patients, staff, the hospital, and the community.



Sec.  456.244  Data sources for studies.

    Data that the committee uses to perform studies must be obtained 
from one or more of the following sources:
    (a) Medical records or other appropriate hospital data.
    (b) External organizations that compile statistics, design profiles, 
and produce other comparative data.
    (c) Cooperative endeavors with--
    (1) QIOs;
    (2) Fiscal agents;
    (3) Other service providers; or
    (4) Other appropriate agencies.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 43198, Dec. 1, 1986]



Sec.  456.245  Number of studies required to be performed.

    The mental hospital must, at least, have one study in progress at 
any time and complete one study each calendar year.

Subpart E [Reserved]



       Subpart F_Utilization Control: Intermediate Care Facilities



Sec.  456.350  Scope.

    This subpart prescribes requirements for control of utilization of 
intermediate care facility (ICF) services including requirements 
concerning--
    (a) Certification of need for care;
    (b) Medical evaluation and admission review;
    (c) Plan of care; and
    (d) Utilization review plans.



Sec.  456.351  Definition.

    As used in this subpart:
    Intermediate care facility services means those items and services 
furnished in an intermediate care facility as defined in Sec. Sec.  
440.140 and 440.150 of this subchapter, but excludes those services if 
they are provided in religious nonmedical institutions as defined in 
Sec.  440.170(b) of this chapter.

[43 FR 45266, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]

                     Certification of Need for Care



Sec.  456.360  Certification and recertification of need for inpatient care.

    (a) Certification. (1) A physician must certify for each applicant 
or recipient that ICF services are or were needed.
    (2) The certification must be made at the time of admission or, if 
an individual applies for assistance while in an ICF, before the 
Medicaid agency authorizes payment.
    (b) Recertification. (1) A physician, or physician assistant or 
nurse practitioner (as defined in Sec.  491.2 of this chapter) acting 
within the scope of practice as defined by State law and under the 
supervision of a physician, must recertify for each applicant or 
recipient that ICF services are needed.
    (2) Recertification must be made at least--
    (i) Every 12 months after certification in an institution for the 
mentally retarded or persons with related conditions; and
    (ii) Every 60 days after certification in an ICF other than an 
institution for

[[Page 396]]

the mentally retarded or persons with related conditions.

[46 FR 48561, Oct. 1, 1981, as amended at 50 FR 33034, Aug. 16, 1985]

   Medical, Psychological, and Social Evaluations and Admission Review



Sec.  456.370  Medical, psychological, and social evaluations.

    (a) Before admission to an ICF or before authorization for payment, 
an interdisciplinary team of health professionals must make a 
comprehensive medical and social evaluation and, where appropriate, a 
psychological evaluation of each applicant's or recipient's need for 
care in the ICF.
    (b) In an institution for the mentally retarded or persons with 
related conditions, the team must also make a psychological evaluation 
of need for care. The psychological evaluation must be made before 
admission or authorization of payment, but not more than three months 
before admission.
    (c) Each evaluation must include--
    (1) Diagnoses;
    (2) Summary of present medical, social, and where appropriate, 
developmental findings;
    (3) Medical and social family history;
    (4) Mental and physical functional capacity;
    (5) Prognoses;
    (6) Kinds of services needed;
    (7) Evaluation by an agency worker of the resources available in the 
home, family and community; and
    (8) A recommendation concerning--
    (i) Admission to the ICF; or
    (ii) Continued care in the ICF for individuals who apply for 
Medicaid while in the ICF.



Sec.  456.371  Exploration of alternative services.

    If the comprehensive evaluation recommends ICF services for an 
applicant or recipient whose needs could be met by alternative services 
that are currently unavailable, the facility must enter this fact in the 
recipient's record and begin to look for alternative services.



Sec.  456.372  Medicaid agency review of need for admission.

    Medical and other professional personnel of the Medicaid agency or 
its designees must evaluate each applicant's or recipient's need for 
admission by reviewing and assessing the evaluations required by Sec.  
456.370.

                              Plan of Care



Sec.  456.380  Individual written plan of care.

    (a) Before admission to an ICF or before authorization for payment, 
a physician must establish a written plan of care for each applicant or 
recipient.
    (b) The plan of care must include--
    (1) Diagnoses, symptoms, complaints, and complications indicating 
the need for admission;
    (2) A description of the functional level of the individual;
    (3) Objectives;
    (4) Any orders for--
    (i) Medications;
    (ii) Treatments;
    (iii) Restorative and rehabilitative services;
    (iv) Activities;
    (v) Therapies;
    (vi) Social services;
    (vii) Diet; and
    (viii) Special procedures designed to meet the objectives of the 
plan of care;
    (5) Plans for continuing care, including review and modification of 
the plan of care; and
    (6) Plans for discharge.
    (c) The team must review each plan of care at least every 90 days.



Sec.  456.381  Reports of evaluations and plans of care.

    A written report of each evaluation and plan of care must be entered 
in the applicant's or recipient's record--
    (a) At the time of admission; or
    (b) If the individual is already in the ICF, immediately upon 
completion of the evaluation or plan.

            Utilization Review (UR) Plan: General Requirement



Sec.  456.400  Scope.

    Sections 456.401 through 456.438 of this subpart prescribe 
requirements for a written utilization review (UR) plan

[[Page 397]]

for each ICF providing Medicaid services. Sections 456.405 through 
456.407 prescribe administrative requirements; Sec. Sec.  456.411 
through 456.413 prescribe informational requirements; and Sec. Sec.  
456.431 through 456.438 prescribe requirements for continued stay 
review.



Sec.  456.401  State plan UR requirements and options; UR plan required for intermediate care facility services.

    (a) The State plan must provide that--
    (1) UR is performed for each ICF that furnishes inpatient services 
under the plan;
    (2) Each ICF has on file a written UR plan that provides for review 
of each recipient's need for the services that the ICF furnishes him; 
and
    (3) Each written ICF UR plan meets requirements under Sec. Sec.  
456.401 through 456.438.
    (b) The State plan must specify the method used to perform UR, which 
may be--
    (1) Review conducted by the facility;
    (2) Direct review in the facility by individuals--
    (i) Employed by the medical assistance unit of the Medicaid agency; 
or
    (ii) Under contract to the Medicaid agency; or
    (3) Any other method.

                  UR Plan: Administrative Requirements



Sec.  456.405  Description of UR review function: How and when.

    The UR plan must include a written description of--
    (a) How UR is performed in the ICF; and
    (b) When UR is performed.



Sec.  456.406  Description of UR review function: Who performs UR; disqualification from performing UR.

    (a) The UR plan must include a written description of who performs 
UR in the ICF.
    (b) UR must be performed using a method specified under Sec.  
456.401(b) by a group of professional personnel that includes--
    (1) At least one physician;
    (2) In an ICF that cares primarily for mental patients, at least one 
individual knowledgeable in the treatment of mental diseases; and
    (3) In an institution for the mentally retarded, a least one 
individual knowledgeable in the treatment of mental retardation.
    (c) The group performing UR may not include any individual who--
    (1) Is directly responsible for the care of the recipient whose care 
is being reviewed;
    (2) Is employed by the ICF; or
    (3) Has a financial interest in any ICF.



Sec.  456.407  UR responsibilities of administrative staff.

    The UR plan must describe--
    (a) The UR support responsibilities of the ICF's administrative 
staff; and
    (b) Procedures used by the staff for taking needed corrective 
action.

                   UR Plan: Informational Requirements



Sec.  456.411  Recipient information required for UR.

    The UR plan must provide that each recipient's record include 
information needed to perform UR required under this subpart. This 
information must include, at least, the following:
    (a) Identification of the recipient.
    (b) The name of the recipient's physician.
    (c) The name of the qualified mental retardation professional (as 
defined under Sec.  442.401 of this subchapter), if applicable.
    (d) Date of admission, and dates of application for and 
authorization of Medicaid benefits if application is made after 
admission.
    (e) The plan of care required under Sec.  456.372;
    (f) Initial and subsequent continued stay review dates described 
under Sec. Sec.  456.433 and 456.434.
    (g) Reasons and plan for continued stay, if the attending physician 
or qualified mental retardation professional believes continued stay is 
necessary.
    (h) Other supporting material that the UR group believes appropriate 
to be included in the record.

[[Page 398]]



Sec.  456.412  Records and reports.

    The UR plan must describe--
    (a) The types of records that are kept by the group performing UR; 
and
    (b) The type and frequency of reports made by the UR group, and 
arrangements for distribution of the reports to appropriate individuals.



Sec.  456.413  Confidentiality.

    The UR plan must provide that the identities of individual 
recipients in all UR records and reports are kept confidential.

               UR Plan: Review of Need for Continued Stay



Sec.  456.431  Continued stay review required.

    (a) The UR plan must provide for a review of each recipients 
continued stay in the ICF at least every 6 months to decide whether it 
is needed.
    (b) The UR plan requirement for continued stay review may be met 
by--
    (1) Reviews that are performed in accordance with the requirements 
of Sec. Sec.  456.432 through 456.437; or
    (2) Reviews that meet on-site inspection requirements under subpart 
I if--
    (i) The composition of the independent professional review team 
under subpart I meets the requirements of Sec.  456.406; and
    (ii) Reviews are conducted as frequently as required under 
Sec. Sec.  456.433 and 456.434.



Sec.  456.432  Evaluation criteria for continued stay.

    The UR plan must provide that--
    (a) The group performing UR develops written criteria to assess the 
need for continued stay.
    (b) The group develops more extensive written criteria for cases 
that its experience shows are--
    (1) Associated with high costs;
    (2) Associated with the frequent furnishing of excessive services; 
or
    (3) Attended by physicians whose patterns of care are frequently 
found to be questionable.



Sec.  456.433  Initial continued stay review date.

    The UR plan must provide that--
    (a) When a recipient is admitted to the ICF under admission review 
requirements of this subpart, the group performing UR assigns a 
specified date by which the need for his continued stay will be 
reviewed;
    (b) The group performing UR bases its assignment of the initial 
continued stay review date on the methods and criteria required to be 
described under Sec.  456.435(a);
    (c) The initial continued stay review date is--
    (1) Not later than 6 months after admission; or
    (2) Earlier than 6 months after admission, if indicated at the time 
of admission; and
    (d) The group performing UR insures that the initial continued stay 
review date is recorded in the recipient's record.



Sec.  456.434  Subsequent continued stay review dates.

    The UR plan must provide that--
    (a) The group performing UR assigns subsequent continued stay review 
dates in accordance with Sec.  456.435.
    (b) The group assigns a subsequent continued stay review date each 
time it decides under Sec.  456.436 that the continued stay is needed--
    (1) At least every 6 months; or
    (2) More frequently than every six months if indicated at the time 
of continued stay review; and
    (c) The group insures that each continued stay review date it 
assigns is recorded in the recipient's record.



Sec.  456.435  Description of methods and criteria: Continued stay review dates.

    The UR plan must describe the methods and criteria that the group 
performing UR uses to assign initial and subsequent continued stay 
review dates under Sec. Sec.  456.433 and 456.434.



Sec.  456.436  Continued stay review process.

    The UR plan must provide that--
    (a) Review of continued stay cases is conducted by--
    (1) The group performing UR; or
    (2) A designee of the UR group;

[[Page 399]]

    (b) The group or its designee reviews a recipient's continued stay 
on or before the expiration of each assigned continued stay review date.
    (c) For each continued stay of a recipient in the ICF, the group or 
its designee reviews and evaluates the documentation described under 
Sec.  456.411 against the criteria developed under Sec.  456.432 and 
applies close professional scrutiny to cases described under Sec.  
456.432(b);
    (d) If the group or its designee finds that a recipient's continued 
stay in the ICF is needed, the group assigns a new continued stay review 
date in accordance with Sec.  456.434;
    (e) If the group or its designee finds that a continued stay case 
does not meet the criteria, the group or a subgroup that includes at 
least one physician reviews the case to decide the need for continued 
stay;
    (f) If the group or subgroup making the review under paragraph (e) 
of this section finds that a continued stay is not needed, it notifies 
the recipient's attending physician or, in institutions for the mentally 
retarded, the recipient's qualified mental retardation professional, 
within 1 working day of its decision, and gives him 2 working days from 
the notification date to present his views before it makes a final 
decision on the need for the continued stay;
    (g) If the attending physician or qualified mental retardation 
professional does not present additional information or clarification of 
the need for the continued stay, the decision of the UR group is final;
    (h) If the attending physician or qualified mental retardation 
professional presents additional information or clarification, the need 
for continued stay is reviewed by--
    (1) The physician member(s) of the UR group, in cases involving a 
medical determination; or
    (2) The UR group, in cases not involving a medical determination; 
and
    (i) If the individuals performing the review under paragraph (h) of 
this section find that the recipient no longer needs ICF services, their 
decision is final.



Sec.  456.437  Notification of adverse decision.

    The UR plan must provide that written notice of any adverse final 
decision on the need for continued stay under Sec.  456.436 (g) through 
(i) is sent to--
    (a) The ICF administrator;
    (b) The attending physician;
    (c) The qualified mental retardation professional, if applicable;
    (d) The Medicaid agency;
    (e) The recipient; and
    (f) If possible, the next of kin or sponsor.



Sec.  456.438  Time limits for notification of adverse decision.

    The UR plan must provide that the group gives notice under Sec.  
456.437 of an adverse decision not later than 2 days after the date of 
the final decision.



 Subpart G_Inpatient Psychiatric Services for Individuals Under Age 21: 
                 Admission and Plan of Care Requirements



Sec.  456.480  Scope.

    This subpart concerns admission and plan of care requirements that 
apply to inpatient psychiatric services for individuals under age 21 in 
hospitals, mental hospitals, and intermediate care facilities.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.481  Admission certification and plan of care.

    If a facility provides inpatient psychiatric services to a recipient 
under age 21--
    (a) The admission certification by the review team required in Sec.  
441.152 satisfies the requirement for physician certification of need 
for care in Sec. Sec.  456.60, 456.160, and 456.360; and
    (b) The development and review of the plan of care required in Sec.  
441.154 satisfies the requirement for physician recertification of need 
for care in the sections cited in paragraph (a) and the requirement for 
establishment and periodic review of the plan of care in Sec. Sec.  
456.80, 456.180, and 456.380.

[[Page 400]]

    (c) The plan of care must be established by the team described in 
Sec.  441.156.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.482  Medical, psychiatric, and social evaluations.

    If a facility provides inpatient psychiatric services to a recipient 
under age 21, the medical, psychiatric, and social evaluations required 
by Sec. Sec.  456.170, and 456.370 must be made by the team described in 
Sec.  441.153.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



  Subpart H_Utilization Review Plans: FFP, Waivers, and Variances for 
                     Hospitals and Mental Hospitals



Sec.  456.500  Purpose.

    For hospitals and mental hospitals, this subpart--
    (a) Prescribes conditions for the availability of FFP relating to UR 
plans;
    (b) Prescribes conditions for granting a waiver of UR plan 
requirements; and
    (c) Prescribes conditions for granting a variance in UR plan 
requirements for remote facilities.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.501  UR plans as a condition for FFP.

    (a) Except when waived under Sec. Sec.  456.505 through 456.508, FFP 
is not available in expenditures for Medicaid services furnished by a 
hospital or mental hospital unless the facility has in effect a UR plan 
that meets the utilization review requirements for Medicare under 
section 1861(k) of the Act.
    (b) A facility that participates in Medicare and Medicaid must use 
the same UR standards and procedures and review committee for Medicaid 
as it uses for Medicare.
    (c) A facility that does not participate in Medicare must meet the 
UR plan requirements in subpart C or D of this part, which are 
equivalent to the Medicare UR plan requirements in Sec. Sec.  405.1137, 
482.30, and 482.60 of this chapter.

[43 FR 45266, Sept. 29, 1978, as amended at 51 FR 22042, June 17, 1986; 
61 FR 38399, July 24, 1996]

                     UR Plan: Waiver of Requirements



Sec.  456.505  Applicability of waiver.

    The Administrator may waive the UR plan requirements of subparts C 
or D of this part, except for provisions relating to disqualification of 
UR committee members under Sec.  456.106 of subpart C, and Sec.  456.206 
of subpart D, if the Medicaid agency--
    (a) Applies for a waiver; and
    (b) Demonstrates to the Administrator's satisfaction that it has in 
operation specific UR procedures that are superior in their 
effectiveness to the UR plan requirements under subpart C or D of this 
part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.506  Waiver options for Medicaid agency.

    (a) The agency may apply for a waiver at any time it has the 
procedures referred to under Sec.  456.505(b) in operation at least--
    (1) On a demonstration basis; or
    (2) In any part of the State.
    (b) Any hospital or mental hospital participating under the plan 
that is not covered by a waiver must continue to meet all the UR plan 
requirements under subpart C or D of this part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.507  Review and granting of waiver requests.

    (a) When the agency applies for a waiver, the Administrator will 
assess the agency's UR procedures and grant the waiver if he determines 
that the procedures meet criteria he establishes.
    (b) The Administrator will review and evaluate each waiver between 1 
and 2 years after he has granted it and between 1 and 2 years 
periodically thereafter.

[[Page 401]]



Sec.  456.508  Withdrawal of waiver.

    (a) The Administrator will withdraw a waiver if he determines that 
State procedures are no longer superior in their effectiveness to the 
procedures required for UR plans under subpart C or D of this part.
    (b) If a waiver is withdrawn by the Administrator, each hospital or 
mental hospital covered by the waiver must meet all the UR plan 
requirements under subpart C or D of this part.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]

        UR Plan: Remote Facility Variances from Time Requirements



Sec.  456.520  Definitions.

    As used in Sec. Sec.  456.521 through 456.525 of this subpart:
    Available physician or other professional personnel means an 
individual who--
    (a) Is professionally qualified;
    (b) Is not precluded from participating in UR under Sec.  456.107 of 
subpart C; or Sec.  456.207 of subpart D; and
    (c) Is not precluded from effective participation in UR because he 
requires more than approximately 1 hour to travel between the remote 
facility and his place of work.
    Remote facility means a facility located in an area that does not 
have enough available physicians or other professional personnel to 
perform UR as required under subparts C or D of this part, and for which 
the State requests a variance.
    Variance means permission granted by the Administrator to the 
Medicaid agency for a specific remote facility to use time periods 
different from those specified for the start and completion of reviews 
of all cases under the following sections: Sec. Sec.  456.125, 456.126, 
456.136, and 456.137 of subpart C; and Sec.  456.238 of subpart D.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.521  Conditions for granting variance requests.

    (a) Except as described under paragraph (b) of this section, the 
administrator may grant a variance for a specific remote facility if the 
agency submits concurrently--
    (1) A request for the variance that documents to his satisfaction 
that the facility is unable to meet the time requirements for which the 
variance is requested; and
    (2) A revised UR plan for the facility.
    (b) The Administrator will not grant a variance if the remote 
facility is operating under a UR plan waiver that the Secretary has 
granted or is considering under Sec. Sec.  456.505 through 456.508.



Sec.  456.522  Content of request for variance.

    The agency's request for a variance must include--
    (a) The name, location, and type of the remote facility;
    (b) The number of total patient admissions and the average daily 
patient census at the facility in the 6 months preceding the request;
    (c) The number of Medicare and Medicaid patient admissions and the 
average daily Medicare and Medicaid patient census at the facility in 
the 6 months preceding the request;
    (d) The name and location of each hospital, mental hospital, and ICF 
located within a 50-mile radius of the facility;
    (e) The distance and average travel time between the remote facility 
and each facility listed in paragraph (e) of this section;
    (f) Documentation by the facility of its attempts to obtain the 
services of available physicians or other professional personnel, or 
both;
    (g) The names of all physicians on the active staff, and the names 
of all other professional personnel on the staff whose availability is 
relevant to the request;
    (h) The practice locations of available physicians and the estimated 
number of available professional personnel whose availability is 
relevant to the request;
    (i) Documentation by the facility of its inability to perform UR 
within the time requirements for which the variance is requested and its 
good faith efforts to comply with the UR plan requirements of subpart C 
or D of this part;

[[Page 402]]

    (j) An assurance by the facility that it will continue its good 
faith efforts to meet the UR plan requirements of subpart C or D of this 
part; and
    (k) A statement of whether a planning or conditional PSRO exists in 
the area where the facility is located.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.523  Revised UR plan.

    (a) The revised UR plan for the remote facility must specify the 
methods and procedures that the facility will use if a variance is 
granted to insure that it--
    (1) Maintains effective and timely control over the utilization of 
services; and
    (2) Conducts reviews in a way that improves the quality of care 
provided to patients.
    (b) The revised UR plan for the remote facility is the basis for 
validation of UR under sec. 1903(g)(2) of the Act for the period when a 
variance is in effect.



Sec.  456.524  Notification of Administrator's action and duration of variance.

    (a) The Administrator--
    (1) Will notify the agency of the action he takes on its request for 
a variance; and
    (2) Will specify the period of time, not to exceed 1 year, for which 
the variance may be granted.
    (b) When it receives the Administrator's notification, the agency 
must promptly notify the remote facility of his action.



Sec.  456.525  Request for renewal of variance.

    (a) The agency must submit a request for renewal of a variance to 
the Administrator at least 30 days before the variance expires.
    (b) The renewal request must contain the information required under 
Sec.  456.522.
    (c) The renewal request must show, to the Administrator's 
satisfaction, that the remote facility continues to meet the 
requirements of Sec. Sec.  456.521 through 456.523.



   Subpart I_Inspections of Care in Intermediate Care Facilities and 
                    Institutions for Mental Diseases



Sec.  456.600  Purpose.

    This subpart prescribes requirements for periodic inspections of 
care and services intermediate care facilities (ICF's), and institutions 
for mental diseases (IMD's).

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.601  Definitions.

    For purposes of this subpart--
    Facility means an institution for mental diseases, or an 
intermediate care facility.
    Intermediate care facility includes institutions for the mentally 
retarded or persons with related conditions but excludes religious 
nonmedical institutions as defined in Sec.  440.170(b) of this chapter.
    Institution for mental diseases includes a mental hospital, a 
psychiatric facility, and an intermediate care facility that primarily 
cares for mental patients.
    Psychiatric facility includes a facility or program that provides 
inpatient psychiatric services for individuals under 21, as specified in 
Sec.  441.151 of this chapter, but does not include psychiatric wards in 
acute care hospitals.

[44 FR 56337, Oct. 1, 1979, as amended at 61 FR 38399, July 24, 1996; 64 
FR 67052, Nov. 30, 1999]



Sec.  456.602  Inspection team.

    (a) A team, as described in this section and Sec.  456.603 must 
periodically inspect the care and services provided to recipients in 
each facility.
    (b) Each team conducting periodic inspections must have a least one 
member who is at physician or registered nurse and other appropriate 
health and social service personnel.
    (c) For an IMD other than an ICF, each team must have a psychiatrist 
or physician knowledgeable about mental institutions and other 
appropriate mental health and social service personnel.
    (d) For an ICF that primarily cares for mental patients, each team 
must have at least one member who knows

[[Page 403]]

the problems and needs of mentally retarded individuals.
    (e) For an institution for the mentally retarded or persons with 
related conditions, each team must have at least one member who knows 
the problems and needs of mentally retarded individuals.
    (f) For ICFs primarily serving individuals 65 years of age or older, 
each team must have at least one member who knows the problems and needs 
of those individuals.
    (g) If there is no physician on the team, the Medicaid agency must 
insure that a physician is available to provide consultation to the 
team.
    (h) If a team has one or more physicians, it must be supervised by a 
physician.



Sec.  456.603  Financial interests and employment of team members.

    (a) Except as provided in paragraph (b) of this section--
    (1) [Reserved]
    (2) No member of a team that reviews care in an ICF may have a 
financial interest in or be employed by any ICF.
    (b) A member of a team that reviews care in an IMD or an institution 
for the mentally retarded or persons with related conditions--
    (1) May not have a financial interest in any institution of that 
same type but may have a financial interest in other facilities or 
institutions; and
    (2) May not review care in an institution where he is employed but 
may review care in any other facility or institution.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.604  Physician team member inspecting care of recipients.

    No physician member of a team may inspect the care of a recipient 
for whom he is the attending physician.



Sec.  456.605  Number and location of teams.

    There must be a sufficient number of teams so located within the 
State that onsite inspections can be made at appropriate intervals in 
each facility caring for recipients.



Sec.  456.606  Frequency of inspections.

    The team and the agency must determine, based on the quality of care 
and services being provided in a facility and the condition of 
recipients in the facility, at what intervals inspections will be made. 
However, the team must inspect the care and services provided to each 
recipient in the facility at least annually.



Sec.  456.607  Notification before inspection.

    No facility may be notified of the time of inspection more than 48 
hours before the scheduled arrival of the team.



Sec.  456.608  Personal contact with and observation of recipients and review of records.

    (a) For recipients under age 21 in psychiatric facilities and 
recipients in ICFs, other than those described in paragraph (b) of this 
section, the team's inspection must include--
    (1) Personal contact with and observation of each recipient; and
    (2) Review of each recipient's medical record.
    (b) For recipients age 65 or older in IMDs, the team's inspection 
must include--
    (1) Review of each recipient's medical record; and
    (2) If the record does not contain complete reports of periodic 
assessments required by Sec.  441.102 of this subchapter or, if such 
reports are inadequate, personal contact with and observation of each 
recipient

[43 FR 45266, Sept. 29, 1978, as amended at 44 FR 17940, Mar. 23, 1979; 
61 FR 38399, July 24, 1996]



Sec.  456.609  Determinations by team.

    The team must determine in its inspection whether--
    (a) The services available in the facility are adequate to--
    (1) Meet the health needs of each recipient, and the rehabilitative 
and social needs of each recipient in an ICF; and
    (2) Promote his maximum physical, mental, and psychosocial 
functioning.
    (b) It is necessary and desirable for the recipient to remain in the 
facility;

[[Page 404]]

    (c) It is feasible to meet the recipient's health needs and, in an 
ICF, the recipient's rehabilitative needs, through alternative 
institutional or noninstitutional services; and
    (d) Each recipient under age 21 in a psychiatric facility and each 
recipient in an institution for the mentally retarded or persons with 
related conditions is receiving active treatment as defined in Sec.  
441.154 of this subchapter.



Sec.  456.610  Basis for determinations.

    In making the determinations on adequacy of services and related 
matters under Sec.  456.609 for each recipient, the team may consider 
such items as whether--
    (a) The medical evaluation, any required social and psychological 
evaluations, and the plan of care are complete and current; the plan of 
care and, where required, the plan of rehabilitation are followed; and 
all ordered services, including dietary orders, are provided and 
properly recorded;
    (b) The attending physician reviews prescribed medications--
    (1) At least every 30 days in psychiatric facilities, and mental 
hospitals; and
    (2) At least quarterly in ICFs;
    (c) Tests or observations of each recipient indicated by his 
medication regimen are made at appropriate times and properly recorded;
    (d) Physician, nurse, and other professional progress notes are made 
as required and appear to be consistent with the observed condition of 
the recipient;
    (e) The recipient receives adequate services, based on such 
observations as--
    (1) Cleanliness;
    (2) Absence of bedsores;
    (3) Absence of signs of malnutrition or dehydration; and
    (4) Apparent maintenance of maximum physical, mental, and 
psychosocial funtion;
    (f) In an ICF, the recipient receives adequate rehabilitative 
services, as evidenced by--
    (1) A planned program of activities to prevent regression; and
    (2) Progress toward meeting objectives of the plan of care;
    (g) The recipient needs any service that is not furnished by the 
facility or through arrangements with others; and
    (h) The recipient needs continued placement in the facility or there 
is an appropriate plan to transfer the recipient to an alternate method 
of care.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.611  Reports on inspections.

    (a) The team must submit a report promptly to the agency on each 
inspection.
    (b) The report must contain the observations, conclusions, and 
recommendations of the team concerning--
    (1) The adequacy, appropriateness, and quality of all services 
provided in the facility or through other arrangements, including 
physician services to recipients; and
    (2) Specific findings about individual recipients in the facility.
    (c) The report must include the dates of the inspection and the 
names and qualifications of the members of the team.

[43 FR 45266, Sept. 29, 1978, as amended at 44 FR 56337, Oct. 1, 1979]



Sec.  456.612  Copies of reports.

    The agency must send a copy of each inspection report to--
    (a) The facility inspected;
    (b) The facility's utilization review committee;
    (c) The agency responsible for licensing, certification, or approval 
of the facility for purposes of Medicare and Medicaid; and
    (d) Other State agencies that use the information in the reports to 
perform their official function, including, if inspection reports 
concern IMD's, the appropriate State mental health authorities.



Sec.  456.613  Action on reports.

    The agency must take corrective action as needed based on the report 
and recommendations of the team submitted under this subpart.

[[Page 405]]



Sec.  456.614  Inspections by utilization review committee.

    A utilization review committee under subparts C through F of this 
part may conduct the periodic inspections required by this subpart if--
    (a) The committee is not based in the facility being reviewed; and
    (b) The composition of the committee meets the requirements of this 
subpart.



   Subpart J_Penalty for Failure To Make a Satisfactory Showing of an 
           Effective Institutional Utilization Control Program

    Authority: Secs. 1102 and 1903(g) of the Social Security Act (42 
U.S.C. 1302 and 1396 b(g)).

    Source: 44 FR 56338, Oct. 1, 1979, unless otherwise noted.



Sec.  456.650  Basis, purpose and scope.

    (a) Basis. Section 1903(g) of the Act requires that FFP for long-
stay inpatient services at a level of care be reduced, by a specified 
formula, for any quarter in which a State fails to make a satisfactory 
showing that it has an effective program of utilization control for that 
level of care.
    (b) Purpose. This subpart specifies--
    (1) What States must do to make a satisfactory showing;
    (2) How the Administrator will determine whether reductions will be 
imposed; and
    (3) How the required reductions will be implemented.
    (c) Scope. The reductions required by this subpart do not apply to--
    (1) Services provided under a contract with a health maintenance 
organization; or
    (2) Facilities in which a QIO is performing medical and utilization 
reviews under contract with the Medicaid agency in accordance with Sec.  
431.630 of this chapter.

[44 FR 56338, Oct. 1, 1979, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986]



Sec.  456.651  Definitions.

    For purposes of this subpart--
    Facility, with respect to inpatient psychiatric services for 
individuals under 21, includes a psychiatric program as specified in 
Sec.  441.151 of this chapter.
    Level of care means one of the following types of inpatient 
services: hospital, mental hospital, intermediate care facility, or 
psychiatric services for individuals under 21.
    Long-stay services means services provided to a recipient after a 
total of 60 days of inpatient stay (90 in the case of mental hospital 
services) during a 12-month period beginning July 1, not counting days 
of stay paid for wholly or in part by Medicare.

[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]



Sec.  456.652  Requirements for an effective utilization control program.

    (a) General requirements. In order to avoid a reduction in FFP, the 
Medicaid agency must make a satisfactory showing to the Administrator, 
in each quarter, that it has met the following requirements for each 
recipient:
    (1) Certification and recertification of the need for inpatient 
care, as specified in Sec. Sec.  456.60, 456.160, 456.360 and 456.481.
    (2) A plan of care established and periodically reviewed and 
evaluated by a physician, as specified in Sec. Sec.  456.80, 456.180, 
and 456.481.
    (3) A continuous program of utilization review under which the 
admission of each recipient is reviewed or screened in accordance with 
section 1903(g)(1)(C) of the Act; and
    (4) A regular program of reviews, including medical evaluations, and 
annual on-site reviews of the care of each recipient, as specified in 
Sec. Sec.  456.170, and 456.482 and subpart I of this part.
    (b) Annual on-site review requirements. (1) An agency meets the 
quarterly on-site review requirements of paragraph (a)(4) of this 
section for a quarter if it completes on-site reviews of each recipient 
in every facility in the State, and in every State-owned facility 
regardless of location, by the end of the quarter in which a review is 
required under paragraph (b)(2) of this section.
    (2) An on-site review is required in a facility by the end of a 
quarter if the facility entered the Medicaid program during the same 
calendar quarter 1 year earlier or has not been reviewed since the same 
calendar quarter 1 year

[[Page 406]]

earlier. If there is no Medicaid recipient in the facility on the day a 
review is scheduled, the review is not required until the next quarter 
in which there is a Medicaid recipient in the facility.
    (3) If a facility is not reviewed in the quarter in which it is 
required to be reviewed under paragraph (b)(2) of this section, it will 
continue to require a review in each subsequent quarter until the review 
is performed.
    (4) The requirement for an on-site review in a given quarter is not 
affected by the addition or deletion of a level of care in a facility's 
provider agreement.
    (c) Facilities without valid provider agreements. The requirements 
of paragraphs (a) and (b) of this section apply with respect to 
recipients for whose care the agency intends to claim FFP even if the 
recipients receive care in a facility whose provider agreement has 
expired or been terminated.

[44 FR 56338, Oct. 1, 1979, as amended at 46 FR 48561, Oct. 1, 1981; 61 
FR 38399, July 24, 1996]



Sec.  456.653  Acceptable reasons for not meeting requirements for annual on-site review.

    The Administrator will find an agency's showing satisfactory, even 
if it failed to meet the annual review requirements of Sec.  
456.652(a)(4), if--
    (a) The agency demonstrates that--
    (1) It completed reviews by the end of the quarter in at least 98 
percent of all facilities requiring review by the end of the quarter;
    (2) It completed reviews by the end of the quarter in all facilities 
with 200 or more certified Medicaid beds requiring review by the end of 
the quarter; and
    (3) With respect to all unreviewed facilities, the agency exercised 
good faith and due diligence by attempting to review those facilities 
and would have succeeded but for events beyond its control which it 
could not have reasonably anticipated; or
    (b) The agency demonstrates that it failed to meet the standard in 
paragraph (a) (1) and (2) of this section by the close of the quarter 
for technical reasons, but met the standard within 30 days after the 
close of the quarter. Technical reasons are circumstances within the 
agency's control.
    (c) Facilities that are reviewed under paragraph (b) of this 
section, after the quarter in which they were due for review, retain 
their original anniversary quarter due date for purposes of subsequent 
reviews.



Sec.  456.654  Requirements for content of showings and procedures for submittal.

    (a) An agency's showing for a quarter must--
    (1) Include a certification by the agency that the requirements of 
Sec.  456.652(a) (1) through (4) were met during the quarter for each 
level of care or, if applicable, a certification of the reasons the 
annual on-site review requirements of Sec.  456.652(a)(4) were not met 
in any facilities;
    (2) For all mental hospitals, intermediate care facilities, and 
facilities providing inpatient psychiatric services for individuals 
under 21, participating in Medicaid any time during the 12-month period 
ending on the last day of the quarter, list each facility by level of 
care, name, address and provider number;
    (3) For each facility entering or leaving the program during the 12-
month period ending on the last day of the quarter, list the beginning 
or ending dates of the provider agreement and supply a copy of the 
provider agreement;
    (4) If review has been contracted to a QIO under Sec.  431.630 of 
this chapter, list the date the QIO contracted for review.
    (5) List all dates of on-site reviews completed by review teams 
anytime during the 12-month period ending on the last day of the 
quarter;
    (6) For all facilities in which an on-site review was required but 
not conducted, list the facility by name, address and provider number;
    (7) For each on-site review in a mental hospital, intermediate care 
facility that primarily cares for mental patients, or inpatient 
psychiatric facility, list the name and qualifications of one team 
member who is a physician; and
    (8) For each on-site review in an intermediate care facility that 
does not primarily care for mental patients, list the name and 
qualifications of one team member who is either a physician or 
registered nurse.

[[Page 407]]

    (b) The quarterly showing must be in the form prescribed by the 
Administrator.
    (c) The quarterly showing must be postmarked or received within 30 
days after the close of the quarter for which it is made, unless the 
agency demonstrates good cause for later submittal and the showing is 
postmarked or received within 45 days after the close of the quarter. 
Good cause means unanticipated circumstances beyond the agency's 
control.

[44 FR 56338, Oct. 1, 1979, as amended at 50 FR 15327, Apr. 17, 1985; 51 
FR 43198, Dec. 1, 1986; 61 FR 38399, July 24, 1996]



Sec.  456.655  Validation of showings.

    (a) The Administrator will periodically validate showings submitted 
under Sec.  456.654. Validation procedures will include on-site sample 
surveys of institutions and surveys at the Medicaid agencies.
    (b) The Administrator will not find an agency's showing satisfactory 
if the information obtained through his validation procedures 
demonstrates, that any of the requirements of Sec.  456.652(a) (1) 
through (4) were not met during the quarter for which the showing was 
made.



Sec.  456.656  Reductions in FFP.

    (a) If the Administrator determines an agency's showing does not 
meet each of the requirements of this sub-part, he will give the agency 
30 days notice before making the required reduction.
    (b) If the Administrator determines that a showing for any quarter 
is unsatisfactory on its face, he will make the required reduction in 
the grant award based on the Quarterly Medicaid Statement of 
Expenditures for the Medical Assistance Program for that quarter. (This 
form CMS-64 is described in Sec.  430.30(c) of this chapter.)
    (c) If the Administrator finds a showing satisfactory on its face, 
but after validation determines the showing to be unsatisfactory, he 
will notify the agency of any required reduction in FFP no later than 
the first day of the fourth calendar quarter following the calendar 
quarter for which the showing was made. Any required reduction will be 
made by amending or adjusting the agency's grant award.
    (d) The agency may request reconsideration of a reduction in 
accordance with the procedures specified in 45 CFR part 16.



Sec.  456.657  Computation of reductions in FFP.

    (a) For each level of care specified in a provider agreement, and 
for each quarter for which a satisfactory showing is not made, the 
amount of the reduction in FFP is computed as follows:
    (1) For each level of care, the number of recipients who received 
services in facilities that did not meet the requirements of this 
subpart is divided by the total number of recipients who received 
services in facilities for which a showing was required under this 
subpart. If any of the requirements specified in Sec.  456.652(a)(1) 
through (4) were not met for any recipient in a facility, the reduction 
will be computed on the total number of recipients in that facility at 
the level of care in question.
    (2) The fraction obtained in paragraph (a)(1) of this section is 
multiplied by one-third.
    (3) The product obtained in paragraph (a)(2) of this section is 
multiplied by the Federal Medical Assistance Percentage (FMAP).
    (4) The product obtained in paragraph (a)(3) of this section is 
multiplied by the agency payments for longstay services furnished during 
the quarter at that level of care.
    (b) If any of the data required to compute the amount of the 
reduction in FFP are unavailable, the Administrator will substitute an 
estimate. If the agency determines the exact data to the satisfaction of 
the Administrator, the estimate may later be adjusted. If the number of 
recipients in individual facilities is not available, the fraction 
specified in paragraph (a)(1) of this section will be estimated, for 
each level of care, by dividing the number of facilities in which the 
requirements were not met by the total number of facilities for which a 
showing is required under this subpart.

[[Page 408]]



Subpart K_Drug Use Review (DUR) Program and Electronic Claims Management 
                    System for Outpatient Drug Claims

    Source: 57 FR 49408, Nov. 2, 1992, unless otherwise noted.



Sec.  456.700  Scope.

    This subpart prescribes requirements for--
    (a) An outpatient DUR program that includes prospective drug review, 
retrospective drug use review, and an educational program;
    (b) The establishment, composition, and functions of a State DUR 
Board; and
    (c) An optional point-of-sale electronic claims management system 
for processing claims for covered outpatient drugs.



Sec.  456.702  Definitions.

    For purposes of this subpart--
    Abuse is defined as in Sec.  455.2 of this chapter.
    Adverse medical result means a clinically significant undesirable 
effect, experienced by a patient, due to a course of drug therapy.
    Appropriate and medically necessary means drug prescribing and 
dispensing that is in conformity with the predetermined standards 
established in accordance with Sec.  456.703.
    Criteria is defined as in Sec.  466.1 of this chapter.
    Fraud is defined as in Sec.  455.2 of this chapter.
    Gross overuse means repetitive overutilization without therapeutic 
benefit.
    Inappropriate and medically unnecessary means drug prescribing and 
dispensing not in conformity with the definition of appropriate and 
medically necessary.
    Overutilization means use of a drug in a quantity, strength, or 
duration that is greater than necessary to achieve a desired therapeutic 
goal or that puts the recipient at risk of a clinically significant 
undesirable effect, or both.
    Predetermined standards means criteria and standards that have been 
established in accordance with the requirements of Sec.  456.703.
    Standards is defined as in Sec.  466.1 of this chapter.
    Underutilization means use of a drug by a recipient in insufficient 
quantity, strength, or duration to achieve a desired therapeutic goal or 
that puts the recipient at risk of a clinically significant undesired 
effect, or both.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]



Sec.  456.703  Drug use review program.

    (a) General. Except as provided in paragraphs (b) and (c) of this 
section, in order for FFP to be paid or made available under section 
1903 of the Act for covered outpatient drugs, the State must have in 
operation, by not later than January 1, 1993, a DUR program consisting 
of prospective drug review, retrospective drug use review, and an 
educational program that meets the requirements of this subpart. The 
goal of the State's DUR program must be to ensure appropriate drug 
therapy, while permitting sufficient professional prerogatives to allow 
for individualized drug therapy.
    (b) Exception for drugs dispensed to certain nursing facility 
residents. Prospective drug review and retrospective drug use review 
(including interventions and education) under the DUR program are not 
required for drugs dispensed to residents of nursing facilities that are 
in compliance with the drug regimen review procedures set forth in part 
483 of this chapter. This does not preclude the State agency from making 
such drugs subject to prospective DUR or retrospective DUR or both, 
provided the State agency makes the drugs subject to all the 
requirements of this subpart applicable to the respective review.
    (c) Exemption for certain covered outpatient drugs dispensed by 
hospitals and health maintenance organizations. (1) The State plan must 
provide that covered outpatient drugs dispensed by a hospital using drug 
formulary systems and billed to the plan at no more than the hospital's 
purchasing costs are not subject to the requirements of this subpart. 
Individual hospitals requesting this exemption must provide assurances 
to the State agency that they meet the requirements specified in section 
1927(j)(2) of the Act.

[[Page 409]]

    (2) The State plan must provide that covered outpatient drugs 
dispensed by health maintenance organizations are not subject to the 
requirements of this subpart.
    (d) Use of predetermined standards. A DUR program must assess drug 
use information against predetermined standards.
    (e) Source of predetermined standards. The predetermined standards 
must be--
    (1) Developed directly by the State or its contractor;
    (2) Obtained by the State through contracts with commercial vendors 
of DUR services;
    (3) Obtained by the State from independent organizations, such as 
the United States Pharmacopeial Convention, or entities receiving 
funding from the Public Health Service, CMS, or State agencies; or
    (4) Any combination of paragraphs (e)(1) through (e)(3) of this 
section.
    (f) Requirements for predetermined standards. The predetermined 
standards used in the DUR program must meet the following requirements:
    (1) The source materials for their development are consistent with 
peer-reviewed medical literature (that is, scientific, medical, and 
pharmaceutical publications in which original manuscripts are published 
only after having been critically reviewed by unbiased independent 
experts) and the following compendia:
    (i) American Hospital Formulary Service Drug Information;
    (ii) United States Pharmacopeia-Drug Information;
    (iii) American Medical Association Drug Evaluations.
    (2) Differences between source materials were resolved by physicians 
and pharmacists developing consensus solutions. The consensus process 
means the reliance, by the criteria developers, on the expertise of 
physicians and pharmacists to evaluate differences in criteria source 
materials and to come to agreement on how differences should be 
resolved.
    (3) They are non-proprietary and readily available to providers of 
services. Systems and algorithms using the predetermined standards may 
remain proprietary.
    (4) They are clinically-based and scientifically valid.
    (5) The review based on clinical criteria uses predetermined 
standards to determine the population at risk of a clinically 
significant adverse medical result and applies standards, appropriate to 
this population, across providers and patients to determine the provider 
outliers whose prescribing, dispensing, or consumption practices may not 
conform to accepted standards of care. Various statistical measures 
(including mean, range, or other measures at the discretion of the 
State) may be applied to these data. Standards may be considered in 
deciding if an in-depth review is needed to determine whether to 
intervene once the potential therapeutic problems have been identified 
through the use of clinical criteria.
    (6) They have been tested against claims data prior to adoption in 
order to validate the level of possibly significant therapeutic problems 
without undue levels of false positives.
    (7) The predetermined standards for prospective and retrospective 
DUR are compatible.
    (8) They are subjected to ongoing evaluation and modification either 
as a result of actions by their developer or as a result of 
recommendations by the DUR Board.
    (g) Access to predetermined standards. Upon their adoption, 
predetermined standards must be available to the public. Pharmacists and 
physicians must be informed of the existence of predetermined standards 
and of how they can obtain copies of them.
    (h) Confidentiality of patient related data. In implementing the DUR 
program, the agency must establish, in regulations or through other 
means, policies concerning confidentiality of patient related data that 
are consistent with applicable Federal confidentiality requirements at 
part 431, subpart F of this chapter; the State Pharmacy Practice Act; 
and the guidelines adopted by the State Board of Pharmacy or other 
relevant licensing bodies.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]

[[Page 410]]



Sec.  456.705  Prospective drug review.

    (a) General. Except as provided in Sec. Sec.  456.703 (b) and (c), 
the State plan must provide for a review of drug therapy before each 
prescription is filled or delivered to a recipient, and applicable State 
law (including State Board policy incorporated in the State law by 
reference) must establish standards for counseling of the recipient or 
the recipient's caregiver. The State must provide pharmacies with 
detailed information as to what they must do to comply with prospective 
DUR requirements, including guidelines on counseling, profiling, and 
documentation of prospective DUR activities by the pharmacists. The 
pharmacies, in turn, must provide this information to their pharmacists. 
This information is to be based on guidelines provided by this subpart 
and by other sources that the State may specify.
    (b) Point-of-sale or point-of-distribution review. Except as 
provided in Sec. Sec.  456.703 (b) and (c), the State plan must provide 
for point-of-sale or point-of-distribution review of drug therapy using 
predetermined standards before each prescription is filled or delivered 
to the recipient or the recipient's caregiver. The review must include 
screening to identify potential drug therapy problems of the following 
types:
    (1) Therapeutic duplication, that is, the prescribing and dispensing 
of two or more drugs from the same therapeutic class such that the 
combined daily dose puts the recipient at risk of an adverse medical 
result or incurs additional program costs without additional therapeutic 
benefit.
    (2) Drug-disease contraindication, that is, the potential for, or 
the occurrence of--
    (i) An undesirable alteration of the therapeutic effect of a given 
drug because of the presence, in the patient for whom it is prescribed, 
of a disease condition; or
    (ii) An adverse effect of the drug on the patient's disease 
condition.
    (3) Adverse drug-drug interaction, that is, the potential for, or 
occurrence of, a clinically significant adverse medical effect as a 
result of the recipient using two or more drugs together.
    (4) Incorrect drug dosage, that is, the dosage lies outside the 
daily dosage specified in predetermined standards as necessary to 
achieve therapeutic benefit. Dosage is the strength multiplied by the 
quantity dispensed divided by day's supply.
    (5) Incorrect duration of drug treatment, that is, the number of 
days of prescribed therapy exceeds or falls short of the recommendations 
contained in the predetermined standards.
    (6) Drug-allergy interactions, that is, the significant potential 
for, or the occurrence of, an allergic reaction as a result of drug 
therapy.
    (7) Clinical abuse/misuse, that is, the occurrence of situations 
referred to in the definitions of abuse, gross overuse, overutilization, 
and underutilization, as defined in Sec.  456.702, and incorrect dosage 
and incorrect duration, as defined in paragraphs (b)(4) and (b)(5) of 
this section, respectively.
    (c) Drug counseling. (1) As part of the prospective drug review 
program, standards for counseling by pharmacists of recipients or the 
recipients' caregivers must be established by State law or other method 
that is satisfactory to the State agency. A State agency's counseling 
standards must address special situations where the patient or the 
patient's representative, is not readily available to receive the offer 
to counsel or the actual counseling, for example, prescriptions 
delivered offsite or through the mail. The State agency, at a minimum, 
must also address the following issues in their counseling standards:
    (i) Whether the offer to counsel is required for new prescriptions 
only, or for both new and refill prescriptions;
    (ii) Whether pharmacists must make the offer to counsel or auxiliary 
personnel are authorized to make the offer;
    (iii) Whether only a patient's refusal of the offer to counsel must 
be documented, or whether documentation of all offers is required;
    (iv) Whether documentation of counseling is required; and
    (v) Whether counseling is required in situations where the patient's 
representative is not readily available to receive a counseling offer or 
the counseling itself.
    (2) The standards must meet the following requirements:

[[Page 411]]

    (i) They must require pharmacists to offer to counsel (in person, 
whenever practicable, or through access to a telephone service that is 
toll-free for long-distance calls) each recipient or recipient's 
caregiver who presents a prescription. A pharmacist whose primary 
patient population is accessible through a local measured or toll-free 
exchange need not be required to offer toll-free service. Mail order 
pharmacies are required to provide toll-free telephone service for long 
distance calls.
    (ii) They need not require a pharmacist to provide consultation when 
a Medicaid recipient or the recipient's caregiver refuses that 
consultation.
    (iii) They must specify what documentation by the pharmacy of 
refusal of the offer of counseling is required.
    (3) The standards must specify that the counseling include those 
matters listed in paragraphs (c)(3)(i) through (c)(3)(viii) of this 
section that, in the exercise of his or her professional judgement 
(consistent with State law regarding the provision of such information), 
the pharmacist considers significant as well as other matters the 
pharmacist considers significant.
    (i) The name and description of the medication;
    (ii) The dosage form, dosage, route of administration, and duration 
of drug therapy;
    (iii) Special directions and precautions for preparation, 
administration, and use by the patient;
    (iv) Common severe side or adverse effects or interactions and 
therapeutic contraindications that may be encountered, including their 
avoidance, and the action required if they occur;
    (v) Techniques for self-monitoring drug therapy;
    (vi) Proper storage;
    (vii) Prescription refill information; and
    (viii) Action to be taken in the event of a missed dose.
    (d) Profiling. The State agency must require that, in the case of 
Medicaid recipients, the pharmacist make a reasonable effort to obtain, 
record, and maintain patient profiles containing, at a minimum, the 
information listed in paragraphs (d)(1) through (d)(3) of this section.
    (1) Name, address, telephone number, date of birth (or age), and 
gender of the patient;
    (2) Individual history, if significant, including disease state or 
states, known allergies and drug reactions, and a comprehensive list of 
medications and relevant devices; and
    (3) Pharmacist's comments relevant to the individual's drug therapy.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48824, Sept. 23, 1994]



Sec.  456.709  Retrospective drug use review.

    (a) General. The State plan must provide for a retrospective DUR 
program for ongoing periodic examination (no less frequently than 
quarterly) of claims data and other records in order to identify 
patterns of fraud, abuse, gross overuse, or inappropriate or medically 
unnecessary care among physicians, pharmacists, and Medicaid recipients, 
or associated with specific drugs or groups of drugs. This examination 
must involve pattern analysis, using predetermined standards, of 
physician prescribing practices, drug use by individual patients and, 
where appropriate, dispensing practices of pharmacies. This program must 
be provided through the State's mechanized drug claims processing and 
information retrieval systems approved by CMS (that is, the Medicaid 
Management Information System (MMIS)) or an electronic drug claims 
processing system that is integrated with MMIS. States that do not have 
MMIS systems may use existing systems provided that the results of the 
examination of drug claims as described in this section are integrated 
within their existing system.
    (b) Use of predetermined standards. Retrospective DUR includes, but 
is not limited to, using predetermined standards to monitor for the 
following:
    (1) Therapeutic appropriateness, that is, drug prescribing and 
dispensing that is in conformity with the predetermined standards.
    (2) Overutilization and underutilization, as defined in Sec.  
456.702.
    (3) Appropriate use of generic products, that is, use of such 
products in conformity with State product selection laws.

[[Page 412]]

    (4) Therapeutic duplication as described in Sec.  456.705(b)(1).
    (5) Drug-disease contraindication as described in Sec.  
456.705(b)(2).
    (6) Drug-drug interaction as described in Sec.  456.705(b)(3).
    (7) Incorrect drug dosage as described in Sec.  456.705(b)(4).
    (8) Incorrect duration of drug treatment as described in Sec.  
456.705(b)(5).
    (9) Clinical abuse or misuse as described in Sec.  456.705(b)(7).



Sec.  456.711  Educational program.

    The State plan must provide for ongoing educational outreach 
programs that, using DUR Board data on common drug therapy problems, 
educate practitioners on common drug therapy problems with the aim of 
improving prescribing and dispensing practices. The program may be 
established directly by the DUR Board or through contracts with 
accredited health care educational institutions, State medical societies 
or State pharmacists associations/societies, or other organizations. The 
program must include the interventions listed in paragraphs (a) through 
(d) of this section. The DUR Board determines the content of education 
regarding common therapy problems and the circumstances in which each of 
the interventions is to be used.
    (a) Dissemination of information to physicians and pharmacists in 
the State concerning the duties and powers of the DUR Board and the 
basis for the standards required by Sec.  456.705(c) for use in 
assessing drug use.
    (b) Written, oral, or electronic reminders containing patient-
specific or drug-specific information (or both) and suggested changes in 
prescribing or dispensing practices. These reminders must be conveyed in 
a manner designed to ensure the privacy of patient-related information.
    (c) Face-to-face discussions, with follow up discussions when 
necessary, between health care professionals expert in appropriate drug 
therapy and selected prescribers and pharmacists who have been targeted 
for educational intervention on optimal prescribing, dispensing, or 
pharmacy care practices.
    (d) Intensified review or monitoring of selected prescribers or 
dispensers.



Sec.  456.712  Annual report.

    (a) DUR Board report. The State must require the DUR Board to 
prepare and submit an annual DUR report to the Medicaid agency that 
contains information specified by the State.
    (b) Medicaid agency report. The Medicaid agency must prepare and 
submit, on an annual basis, a report to the Secretary that incorporates 
the DUR Board's report and includes the following information:
    (1) A description of the nature and scope of the prospective drug 
review program.
    (2) A description of how pharmacies performing prospective DUR 
without computers are expected to comply with the statutory requirement 
for written criteria.
    (3) Detailed information on the specific criteria and standards in 
use. After the first annual report, information regarding only new or 
changed criteria must be provided and deleted criteria must be 
identified.
    (4) A description of the steps taken by the State to include in the 
prospective and retrospective DUR program drugs dispensed to residents 
of a nursing facility that is not in compliance with the drug regimen 
review procedures set forth in part 483 of this chapter. After the first 
annual report, only changes must be reported.
    (5) A description of the actions taken by the State Medicaid agency 
and the DUR Board to ensure compliance with the requirements for 
predetermined standards at Sec.  456.703(f) and with the access to the 
predetermined standards requirement at Sec.  456.703(g). After the first 
annual report, only changes must be reported.
    (6) A description of the nature and scope of the retrospective DUR 
program.
    (7) A summary of the educational interventions used and an 
assessment of the effect of these educational interventions on the 
quality of care.
    (8) A description of the steps taken by the State Agency to monitor 
compliance by pharmacies with the prospective DUR counseling 
requirements contained in Federal and State laws and regulations. After 
the first annual report, only changes must be reported.

[[Page 413]]

    (9) Clear statements of purpose that delineate the respective goals, 
objectives, and scopes of responsibility of the DUR and surveillance and 
utilization (SUR) functions. These statements must clarify the working 
relationships between DUR and SUR functions and other entities such as 
the Medicaid Fraud Control Unit and State Board of Pharmacy. The annual 
report also must include a statement delineating how functional 
separation will be maintained between the fraud and abuse activities and 
the educational activities. After the first annual report, only changes 
must be reported.
    (10) An estimate of the cost savings generated as a result of the 
DUR program. This report must identify costs of DUR and savings to the 
Medicaid drug program attributable to prospective and retrospective DUR.



Sec.  456.714  DUR/surveillance and utilization review relationship.

    (a) The retrospective DUR requirements in this subpart parallel a 
portion of the surveillance and utilization review (SUR) requirements in 
subpart A of this part and in part 455 of this chapter.
    (b) A State agency may direct DUR staffs to limit review activities 
to those that focus on what constitutes appropriate and medically 
necessary care to avoid duplication of activities relating to fraud and 
abuse under the SUR program.

[59 FR 48825, Sept. 23, 1994]



Sec.  456.716  DUR Board.

    (a) State DUR Board requirement and member qualifications. Each 
State must establish, either directly or through a contract with a 
private organization, a DUR Board. The DUR Board must include health 
care professionals who have recognized knowledge and expertise in at 
least one of the following:
    (1) Clinically appropriate prescribing of covered outpatient drugs.
    (2) Clinically appropriate dispensing and monitoring of covered 
outpatient drugs.
    (3) Drug use review, evaluation, and intervention.
    (4) Medical quality assurance.
    (b) Board composition. At least one-third but not more than 51 
percent of the DUR Board members must be physicians, and at least one-
third of the Board members must be pharmacists. These physicians and 
pharmacists must be actively practicing and licensed.
    (c) Medicaid agency/DUR Board relationship. The Medicaid agency is 
ultimately responsible for ensuring that the DUR program is operational 
and conforms with the requirements of this subpart. The agency has the 
authority to accept or reject the recommendations or decisions of the 
DUR Board.
    (d) DUR Board activities. The State agency must ensure that the 
operational tasks involved in carrying out the DUR Board activities set 
forth at section 1927(g)(3)(C) of the Act are assigned, limited only by 
the requirements of section 1927(g)(3)(C) of the Act, based on 
consideration of operational requirements and on where the necessary 
expertise resides. Except as limited by the requirements of section 
1927(g)(3)(C) of the Act, the State agency may alter the suggested 
working relationships set forth in this paragraph.
    (1) Application of predetermined standards: Board's activities. The 
DUR Board should perform the following activities:
    (i) Review and make recommendations on predetermined standards 
submitted to it by the Medicaid agency or the agency's contractor.
    (ii) Evaluate the use of the predetermined standards, including 
assessing the operational effect of the predetermined standards in use, 
and make recommendations to the Medicaid agency or the agency's 
contractor concerning modification or elimination of existing 
predetermined standards or the addition of new ones.
    (iii) Recommend guidelines governing written predetermined standards 
that pharmacies not using approved software must use in conducting 
prospective DUR.
    (2) Application of predetermined standards: Medicaid agency role. 
The Medicaid agency or its contractor should perform the following 
activities:
    (i) Submit predetermined standards to the DUR Board for its review 
and recommendations before the Medicaid agency applies them to drug 
claims data.

[[Page 414]]

    (ii) If prospective DUR is conducted using an electronic claims 
management (ECM) system, apply software approved by the Board.
    (iii) If prospective DUR is not conducted through an ECM system, as 
part of general compliance monitoring, ensure that Medicaid 
participating pharmacies conduct prospective drug review that screens 
for the potential drug therapy problems listed in section 1927(g)(2)(A) 
of the Act.
    (3) Retrospective DUR: Board's activities. The DUR Board should 
perform the following activities:
    (i) Review and make recommendations on predetermined standards 
submitted to it by the Medicaid agency or the agency's contractor.
    (ii) Make recommendations to the Medicaid agency or the agency's 
contractor concerning modification or elimination of existing 
predetermined standards or the addition of new ones.
    (4) Retrospective DUR: Medicaid agency role. The Medicaid agency or 
its contractor should apply the predetermined standards to drug claims 
data in order to generate reports that identify patterns of fraud, 
abuse, gross overuse, or inappropriate or medically unnecessary care.
    (5) Education program (including interventions): Board's activities. 
The DUR Board must perform the following activities:
    (i) Identify and develop educational topics if education of 
practitioners on common drug therapy problems is needed to improve 
prescribing or dispensing practices.
    (ii) Make recommendations as to which mix of the interventions set 
forth in Sec. Sec.  456.711 (a) through (d) would most effectively lead 
to improvement in the quality of drug therapy. The DUR board 
recommendations must be based upon an in-depth review of the results of 
the application of predetermined standards against claims data reports, 
must be appropriate based upon program experience, and must match the 
educational program with the drug therapy problems identified.
    (iii) Periodically re-evaluate and, if necessary, modify the 
interventions.
    (6) Education program (including interventions): Medicaid agency's 
role. The Medicaid agency or its contractor should perform the following 
activities.
    (i) Apply predetermined standards to drug claims data to generate 
reports that provide the basis for retrospective education and 
interventions and furnish those reports to the Board.
    (ii) Carry out the educational programs and interventions specified 
by the Board.
    (e) Funding for the Board. FFP is available for expenses associated 
with the operation of the DUR Board in carrying out its 
responsibilities, and payment is made under procedures established in 
part 433 of this chapter as follows:
    (1) If the requirements for skilled professional medical personnel 
at Sec.  432.50 of this chapter are met, at the rate of 75 percent.
    (2) If the requirements for skilled professional medical personnel 
at Sec.  432.50 of this chapter are not met, at the rate specified in 
Sec.  456.719.

[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48825, Sept. 23, 1994]



Sec.  456.719  Funding for DUR program.

    FFP is available for sums that the Secretary determines are 
attributable to the Statewide adoption of a DUR program as described in 
this subpart, and payment is made under procedures established in part 
433 of this chapter as follows:
    (a) For funds expended by the State during calendar years 1991 
through 1993, at the rate of 75 percent.
    (b) For funds expended by the State after December 31, 1993, at the 
rate of 50 percent.



Sec.  456.722  Electronic claims management system.

    (a) Point-of-sale system. Each Medicaid agency, at its option, may 
establish, as its principal (but not necessarily exclusive) means of 
processing claims for covered outpatient drugs, a point-of-sale 
electronic claims management (ECM) system to perform on-line, real-time 
(that is, immediate) eligibility verifications, claims data capture, 
adjudication of claims, and to assist pharmacists and other authorized 
persons (including dispensing physicians) in applying for and receiving 
payment. The State determines who

[[Page 415]]

must participate in an ECM system and who may decline to do so. If the 
State exercises this option and wishes to receive FFP for its ECM 
system, the system must meet the functional and additional procurement 
and system requirements in paragraphs (b) and (c) of this section.
    (b) Functional requirements. The ECM system developed by the State 
must include at least the on-line, real-time capabilities specified in 
paragraphs (b)(1) through (3) of this section. The real-time requirement 
for prescriptions filled for nursing facilities and prescriptions filled 
by mail order dispensers may be waived by the State to permit claims to 
be processed in the batch mode at the end of the day or other time 
mutually agreed to by the nursing facility or mail order dispenser and 
Medicaid agency.
    (1) Eligibility verification, including identification of the 
following:
    (i) Third-party payers.
    (ii) Recipients in managed care programs.
    (iii) Recipients and providers in restricted service programs (for 
example, lock-in and lock-out).
    (iv) Properly enrolled providers.
    (2) Claims data capture, including the following:
    (i) Transfer of claims information from the pharmacy to the Medicaid 
agency or the Medicaid agency's contractor.
    (ii) Identification of prescriber.
    (iii) Minimum data set (as defined in Part 11 of the State Medicaid 
Manual).
    (3) Claims adjudication, including the following:
    (i) Performing all edits and audits contained in the State's 
Medicaid Management Information System (MMIS) applicable to prescription 
drugs.
    (ii) Notifying the pharmacist (or other authorized person, such as 
the dispensing physician) about the claim status.
    (iii) Taking steps up to, but not including, payment of the claim.
    (c) Additional requirements. In order to receive FFP for its ECM 
system, the State must meet the following requirements:
    (1) The ECM system must be acquired through applicable competitive 
procurement process in the State and must be the most cost-effective 
telecommunications network and automatic data processing services and 
equipment. The procurement must meet the procurement requirements set 
forth in 45 CFR part 74, subpart P, and appendix G-O of OMB circular A-
102. The request for proposal (RFP) may be substituted for the advance 
planning and implementation documents otherwise required by part 433 of 
this chapter, 45 CFR 95.205, and 45 CFR part 307. A cost-benefit 
analysis must accompany the RFP. If in its advance planning document, a 
State establishes that a separate procurement is not cost-effective, 
modification of an existing fiscal agent contract will be acceptable. In 
this case, procurement of network services and equipment (but not 
software modifications) must be competitively procured.
    (2) States wishing to do prospective DUR as part of their ECM must 
do the following:
    (i) Submit a cost benefit analysis showing the cost-effectiveness of 
such a system. A State's decisions as to who must participate in the ECM 
system and who may decline to do so must be included in the cost-benefit 
analysis.
    (ii) Establish a central State-wide electronic repository for 
capturing, storing, and updating data for all prescriptions dispensed 
and for providing access to such data by all authorized participants.
    (iii) Design the system to assess data for a review of drug therapy 
before each prescription is filled or delivered to a Medicaid recipient. 
The type of review conducted must meet the requirements for prospective 
drug review set forth in Sec.  456.705.
    (3) ECM is considered a subsystem and must be fully integrated with 
the remainder of the State's MMIS. In addition, information about ECM 
claims must be part of the single comprehensive utilization and 
management reporting system used by the DUR program.



Sec.  456.725  Funding of ECM system.

    (a) For funds expended during calendar quarters in fiscal years 1991 
and 1992 and attributable to the design, development, and implementation 
of an on-line, real-time claims management

[[Page 416]]

system (that is, the most cost-effective telecommunications network and 
automatic data processing services and equipment) that meets the 
requirements of Sec.  456.722, FFP is available at a matching rate of 90 
percent. After fiscal year 1992, ECM subsystems are funded at the 
standard applicable MMIS enhanced rates, subject to the requirements of 
part 433, subpart A of this chapter.
    (b) FFP is available at a matching rate of 75 percent for funds 
expended for the following:
    (1) Telecommunications equipment and other equipment to directly 
access MMIS files.
    (2) Telecommunications equipment (such as modems and point of sale 
terminals) furnished to providers.
    (3) Operational costs including telecommunications network costs, 
provided that the ECM system includes eligibility verification systems, 
electronic claims capture, claims adjudication (except for payment), and 
a claims data process that is integrated into a single comprehensive 
utilization and information reporting system.

[[Page 417]]



    SUBCHAPTER D_STATE CHILDREN'S HEALTH INSURANCE PROGRAMS (SCHIPs)





PART 457_ALLOTMENTS AND GRANTS TO STATES--Table of Contents




Subpart A_Introduction; State Plans for Child Health Insurance Programs 
                         and Outreach Strategies

Sec.
457.1 Program description.
457.2 Basis and scope of subchapter D.
457.10 Definitions and use of terms.
457.30 Basis, scope, and applicability of subpart A.
457.40 State program administration.
457.50 State plan.
457.60 Amendments.
457.65 Effective date and duration of State plans and plan amendments.
457.70 Program options.
457.80 Current State child health insurance coverage and coordination.
457.90 Outreach.
457.110 Enrollment assistance and information requirements.
457.120 Public involvement in program development.
457.125 Provision of child health assistance to American Indian and 
          Alaska Native children.
457.130 Civil rights assurance.
457.135 Assurance of compliance with other provisions.
457.140 Budget.
457.150 CMS review of State plan material.
457.160 Notice and timing of CMS action on State plan material.
457.170 Withdrawal process.

  Subpart B_General Administration_Reviews and Audits; Withholding for 
  Failure to Comply; Deferral and Disallowance of Claims; Reduction of 
                        Federal Medical Payments

457.200 Program reviews.
457.202 Audits.
457.203 Administrative and judicial review of action on State plan 
          material.
457.204 Withholding of payment for failure to comply with Federal 
          requirements.
457.206 Administrative appeals under SCHIP.
457.208 Judicial review.
457.210 Deferral of claims for FFP.
457.212 Disallowance of claims for FFP.
457.216 Treatment of uncashed or canceled (voided) SCHIP checks.
457.218 Repayment of Federal funds by installments.
457.220 Funds from units of government as the State share of financial 
          participation.
457.222 FFP for equipment.
457.224 FFP: Conditions relating to cost sharing.
457.226 Fiscal policies and accountability.
457.228 Cost allocation.
457.230 FFP for State ADP expenditures.
457.232 Refunding of Federal share of SCHIP overpayments to providers 
          and referral of allegations of waste, fraud or abuse of the 
          Office of Inspector General.
457.236 Audit of records.
457.238 Documentation of payment rates.

Subpart C_State Plan Requirements: Eligibility, Screening, Applications, 
                             and Enrollment

457.300 Basis, scope, and applicability.
457.301 Definitions and use of terms.
457.305 State plan provisions.
457.310 Targeted low-income child.
457.320 Other eligibility standards.
457.340 Application for and enrollment in a separate child health 
          program.
457.350 Eligibility screening and facilitation of Medicaid enrollment.
457.353 Monitoring and evaluation of screening process.
457.355 Presumptive eligibility.
457.380 Eligibility verification.

        Subpart D_State Plan Requirements: Coverage and Benefits

457.401 Basis, scope, and applicability.
457.402 Definition of child health assistance.
457.410 Health benefits coverage options.
457.420 Benchmark health benefits coverage.
457.430 Benchmark-equivalent health benefits coverage.
457.431 Actuarial report for benchmark-equivalent coverage.
457.440 Existing comprehensive State-based coverage.
457.450 Secretary-approved coverage.
457.470 Prohibited coverage.
457.475 Limitations on coverage: Abortions.
457.480 Preexisting condition exclusions and relation to other laws.
457.490 Delivery and utilization control systems.
457.495 State assurance of access to care and procedures to assure 
          quality and appropriateness of care.

 Subpart E_State Plan Requirements: Enrollee Financial Responsibilities

457.500 Basis, scope, and applicability.

[[Page 418]]

457.505 General State plan requirements.
457.510 Premiums, enrollment fees, or similar fees: State plan 
          requirements.
457.515 Co-payments, coinsurance, deductibles, or similar cost-sharing 
          charges: State plan requirements.
457.520 Cost sharing for well-baby and well-child care services.
457.525 Public schedule.
457.530 General cost-sharing protection for lower income children.
457.535 Cost-sharing protection to ensure enrollment of American Indians 
          and Alaska Natives.
457.540 Cost-sharing charges for children in families with incomes at or 
          below 150 percent of the FPL.
457.555 Maximum allowable cost-sharing charges on targeted low-income 
          children in families with income from 101 to 150 percent of 
          the FPL.
457.560 Cumulative cost-sharing maximum.
457.570 Disenrollment protections.

                       Subpart F_Payment to States

457.600 Purpose and basis of this subpart.
457.602 Applicability.
457.606 Conditions for State allotments and Federal payments for a 
          fiscal year.
457.608 Process and calculation of State allotments for a fiscal year.
457.610 Period of availability for State allotments for a fiscal year.
457.614 General payment process.
457.616 Application and tracking of payments against the fiscal year 
          allotments.
457.618 Ten percent limit on certain State Children's Health Insurance 
          Program expenditures.
457.622 Rate of FFP for State expenditures.
457.626 Prevention of duplicate payments.
457.628 Other applicable Federal regulations.
457.630 Grants procedures.

         Subpart G_Strategic Planning, Reporting, and Evaluation

457.700 Basis, scope, and applicability.
457.710 State plan requirements: Strategic objectives and performance 
          goals.
457.720 State plan requirement: State assurance regarding data 
          collection, records, and reports.
457.740 State expenditures and statistical reports.
457.750 Annual report.

                   Subpart H_Substitution of Coverage

457.800 Basis, scope, and applicability.
457.805 State plan requirements: Procedures to address substitution 
          under group health plans.
457.810 Premium assistance programs: Required protections against 
          substitution.

                       Subpart I_Program Integrity

457.900 Basis, scope, and applicability.
457.902 Definitions.
457.910 State program administration.
457.915 Fraud detection and investigation.
457.925 Preliminary investigation.
457.930 Full investigation, resolution, and reporting requirements.
457.935 Sanctions and related penalties.
457.940 Procurement standards.
457.945 Certification for contracts and proposals.
457.950 Contract and payment requirements including certification of 
          payment-related information.
457.955 Conditions necessary to contract as a managed care entity (MCE).
457.960 Reporting changes in eligibility and redetermining eligibility.
457.965 Documentation.
457.980 Verification of enrollment and provider services received.
457.985 Integrity of professional advice to enrollees.

             Subpart J_Allowable Waivers: General Provisions

457.1000 Basis, scope, and applicability.
457.1003 CMS review of waiver requests.
457.1005 Cost-effective coverage through a community-based health 
          delivery system.
457.1010 Purchase of family coverage.
457.1015 Cost-effectiveness.

  Subpart K_State Plan Requirements: Applicant and Enrollee Protections

457.1100 Basis, scope and applicability.
457.1110 Privacy protections.
457.1120 State plan requirement: Description of review process.
457.1130 Program specific review process: Matters subject to review.
457.1140 Program specific review process: Core elements of review.
457.1150 Program specific review process: Impartial review.
457.1160 Program specific review process: Time frames.
457.1170 Program specific review process: Continuation of enrollment.
457.1180 Program specific review process: Notice.
457.1190 Application of review procedures when States offer premium 
          assistance for group health plans.

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

    Source: 65 FR 33622, May 24, 2000, unless otherwise noted.

[[Page 419]]



Subpart A_Introduction; State Plans for Child Health Insurance Programs 
                         and Outreach Strategies

    Source: 66 FR 2670, Jan. 11, 2001, unless otherwise noted.



Sec.  457.1  Program description.

    Title XXI of the Social Security Act, enacted in 1997 by the 
Balanced Budget Act, authorizes Federal grants to States for provision 
of child health assistance to uninsured, low-income children. The 
program is jointly financed by the Federal and State governments and 
administered by the States. Within broad Federal rules, each State 
decides eligible groups, types and ranges of services, payment levels 
for benefit coverage, and administrative and operating procedures.



Sec.  457.2  Basis and scope of subchapter D.

    (a) Basis. This subchapter implements title XXI of the Act, which 
authorizes Federal grants to States for the provision of child health 
assistance to uninsured, low-income children.
    (b) Scope. The regulations in subchapter D set forth State plan 
requirements, standards, procedures, and conditions for obtaining 
Federal financial participation (FFP) to enable States to provide health 
benefits coverage to targeted low-income children, as defined at Sec.  
457.310.



Sec.  457.10  Definitions and use of terms.

    For purposes of this part the following definitions apply:
    American Indian/Alaska Native (AI/AN) means--
    (1) A member of a Federally recognized Indian tribe, band, or group;
    (2) An Eskimo or Aleut or other Alaska Native enrolled by the 
Secretary of the Interior pursuant to the Alaska Native Claims 
Settlement Act, 43 U.S.C. 1601 et. seq.; or
    (3) A person who is considered by the Secretary of the Interior to 
be an Indian for any purpose.
    Applicant means a child who has filed an application (or who has an 
application filed on their behalf) for health benefits coverage through 
the State Children's Health Insurance Program. A child is an applicant 
until the child receives coverage through SCHIP.
    Child means an individual under the age of 19 including the period 
from conception to birth.
    Child health assistance means payment for part or all of the cost of 
health benefits coverage provided to targeted low-income children for 
the services listed at Sec.  457.402.
    Combination program means a program under which a State implements 
both a Medicaid expansion program and a separate child health program.
    Cost sharing means premium charges, enrollment fees, deductibles, 
coinsurance, copayments, or other similar fees that the enrollee has 
responsibility for paying.
    Creditable health coverage has the meaning given the term 
``creditable coverage'' at 45 CFR 146.113 and includes coverage that 
meets the requirements of Sec.  457.410 and is provided to a targeted 
low-income child.
    Emergency medical condition means a medical condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
such that a prudent layperson, with an average knowledge of health and 
medicine, could reasonably expect the absence of immediate medical 
attention to result in--
    (1) Serious jeopardy to the health of the individual or, in the case 
of a pregnant woman, the health of a woman or her unborn child;
    (2) Serious impairment of bodily function; or
    (3) Serious dysfunction of any bodily organ or part.
    Emergency services means health care services that are--
    (1) Furnished by any provider qualified to furnish such services; 
and (2) Needed to evaluate, treat, or stabilize an emergency medical 
condition.
    Enrollee means a child who receives health benefits coverage through 
SCHIP.
    Enrollment cap means a limit, established by the State in its State 
plan, on the total number of children permitted to enroll in a State's 
separate child health program.
    Family income means income as determined by the State for a family 
as defined by the State.

[[Page 420]]

    Federal fiscal year starts on the first day of October each year and 
ends on the last day of the following September.
    Fee-for-service entity has the meaning assigned in Sec.  457.902.
    Group health insurance coverage has the meaning assigned at 45 CFR 
144.103.
    Group health plan has the meaning assigned at 45 CFR 144.103.
    Health benefits coverage means an arrangement under which enrolled 
individuals are protected from some or all liability for the cost of 
specified health care services.
    Health care services means any of the services, devices, supplies, 
therapies, or other items listed in Sec.  457.402.
    Health insurance coverage has the meaning assigned at 45 CFR 
144.103.
    Health insurance issuer has the meaning assigned at 45 CFR 144.103.
    Health maintenance organization (HMO) plan has the meaning assigned 
at Sec.  457.420.
    Health services initiatives means activities that protect the public 
health, protect the health of individuals, improve or promote a State's 
capacity to deliver public health services, or strengthen the human and 
material resources necessary to accomplish public health goals relating 
to improving the health of children (including targeted low-income 
children and other low-income children).
    Joint application has the meaning assigned at Sec.  457.301.
    Low-income child means a child whose family income is at or below 
200 percent of the poverty line for the size of the family involved.
    Managed care entity (MCE) means an entity that enters into a 
contract to provide services in a managed care delivery system, 
including but not limited to managed care organizations, prepaid health 
plans, and primary care case managers.
    Medicaid applicable income level means, with respect to a child, the 
effective income level (expressed as a percentage of the poverty line) 
specified under the policies of the State plan under title XIX of the 
Act (including for these purposes, a section 1115 waiver authorized by 
the Secretary or under the authority of section 1902(r)(2) of the Act) 
as of March 31, 1997 for the child to be eligible for medical assistance 
under either section 1902(l)(2) or 1905(n)(2) of the Act.
    Medicaid expansion program means a program under which a State 
receives Federal funding to expand Medicaid eligibility to optional 
targeted low-income children.
    Optional targeted low-income child has the meaning assigned at Sec.  
435.4 (for States) and Sec.  436.3 (for Territories) of this chapter.
    Period of presumptive eligibility has the meaning assigned at Sec.  
457.301.
    Poverty line/Federal poverty level means the poverty guidelines 
updated annually in the Federal Register by the U.S. Department of 
Health and Human Services under authority of 42 U.S.C. 9902(2).
    Preexisting condition exclusion has the meaning assigned at 45 CFR 
144.103.
    Premium assistance program means a component of a separate child 
health program, approved under the State plan, under which a State pays 
part or all of the premiums for a SCHIP enrollee or enrollees' group 
health insurance coverage or coverage under a group health plan.
    Presumptive income standard has the meaning assigned at Sec.  
457.301.
    Public agency has the meaning assigned in Sec.  457.301.
    Qualified entity has the meaning assigned at Sec.  457.301.
    Separate child health program means a program under which a State 
receives Federal funding from its title XXI allotment to provide child 
health assistance through obtaining coverage that meets the requirements 
of section 2103 of the Act and Sec.  457.402.
    State means all States, the District of Columbia, Puerto Rico, the 
U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana 
Islands. The Territories are excluded from this definition for purposes 
of Sec.  457.740.
    State Children's Health Insurance Program (SCHIP) means a program 
established and administered by a State, jointly funded with the Federal 
government, to provide child health assistance to uninsured, low-income 
children through a separate child health program, a Medicaid expansion 
program, or a combination program.

[[Page 421]]

    State health benefits plan has the meaning assigned in Sec.  
457.301.
    State plan means the title XXI State child health plan.
    Targeted low-income child has the meaning assigned in Sec.  457.310.
    Uncovered or uninsured child means a child who does not have 
creditable health coverage.
    Well-baby and well-child care services means regular or preventive 
diagnostic and treatment services necessary to ensure the health of 
babies, children and adolescents as defined by the State. For purposes 
of cost sharing, the term has the meaning assigned at Sec.  457.520.

[66 FR 2670, Jan. 11, 2001, as amended at 67 FR 61974, Oct. 2, 2002]



Sec.  457.30  Basis, scope, and applicability of subpart A.

    (a) Statutory basis. This subpart implements the following sections 
of the Act:
    (1) Section 2101(b), which requires that the State submit a State 
plan.
    (2) Section 2102(a), which sets forth requirements regarding the 
contents of the State plan.
    (3) Section 2102(b), which relates to eligibility standards and 
methodologies.
    (4) Section 2102(c), which requires that the State plan include a 
description of the procedures to be used by the State to accomplish 
outreach and coordination with other health insurance programs.
    (5) Section 2106, which specifies the process for submission, 
approval, and amendment of State plans.
    (6) Section 2107(c), which requires that the State plan include a 
description of the process used to involve the public in the design and 
implementation of the plan.
    (7) Section 2107(d), which requires that the State plan include a 
description of the budget for the plan.
    (8) Section 2107(e), which provides that certain provisions of title 
XIX and title XI of the Act apply under title XXI in the same manner 
that they apply under title XIX.
    (b) Scope. This subpart sets forth provisions governing the 
administration of SCHIP, the general requirements for a State plan, and 
a description of the process for review of a State plan or plan 
amendment.
    (c) Applicability. This subpart applies to all States that request 
Federal financial participation to provide child health assistance under 
title XXI.



Sec.  457.40  State program administration.

    (a) Program operation. The State must implement its program in 
accordance with the approved State plan, any approved State plan 
amendments, the requirements of title XXI and title XIX (as 
appropriate), and the requirements in this chapter. CMS monitors the 
operation of the approved State plan and plan amendments to ensure 
compliance with the requirements of title XXI, title XIX (as 
appropriate) and this chapter.
    (b) State authority to submit State plan. A State plan or plan 
amendment must be signed by the State Governor, or signed by an 
individual who has been delegated authority by the Governor to submit 
it.
    (c) State program officials. The State must identify in the State 
plan or State plan amendment, by position or title, the State officials 
who are responsible for program administration and financial oversight.
    (d) State legislative authority. The State plan must include an 
assurance that the State will not claim expenditures for child health 
assistance prior to the time that the State has legislative authority to 
operate the State plan or plan amendment as approved by CMS.



Sec.  457.50  State plan.

    The State plan is a comprehensive written statement, submitted by 
the State to CMS for approval, that describes the purpose, nature, and 
scope of the State's SCHIP and gives an assurance that the program is 
administered in conformity with the specific requirements of title XXI, 
title XIX (as appropriate), and the regulations in this chapter. 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.

[[Page 422]]



Sec.  457.60  Amendments.

    A State may seek to amend its approved State plan in whole or in 
part at any time through the submission of an amendment to CMS. When the 
State plan amendment has a significant impact on the approved budget, 
the amendment must include an amended budget that describes the State's 
planned expenditures for a 1-year period. A State must amend its State 
plan whenever necessary to reflect--
    (a) Changes in Federal law, regulations, policy interpretations, or 
court decisions that affect provisions in the approved State plan;
    (b) Changes in State law, organization, policy, or operation of the 
program that affect the following program elements described in the 
State plan:
    (1) Eligibility standards, enrollment caps, and disenrollment 
policies as described in Sec.  457.305.
    (2) Procedures to prevent substitution of private coverage as 
described in Sec.  457.805, and in Sec.  457.810 for premium assistance 
programs.
    (3) The type of health benefits coverage offered, consistent with 
the options described in Sec.  457.410.
    (4) Addition or deletion of specific categories of benefits covered 
under the State plan.
    (5) Basic delivery system approach as described in Sec.  457.490.
    (6) Cost-sharing as described in Sec.  457.505.
    (7) Screen and enroll procedures, and other Medicaid coordination 
procedures as described in Sec.  457.350.
    (8) Review procedures as described in Sec.  457.1120.
    (9) Other comparable required program elements.
    (c) Changes in the source of the State share of funding, except for 
changes in the type of non-health care related revenues used to generate 
general revenue.

[66 FR 2670, Jan. 11, 2001, as amended at 66 FR 33822, June 25, 2001]



Sec.  457.65  Effective date and duration of State plans and plan amendments.

    (a) Effective date in general. Except as otherwise limited by this 
section--
    (1) A State plan or plan amendment takes effect on the day specified 
in the plan or plan amendment, but no earlier than October 1, 1997.
    (2) The effective date may be no earlier than the date on which the 
State begins to incur costs to implement its State plan or plan 
amendment.
    (3) A State plan amendment that takes effect prior to submission of 
the amendment to CMS may remain in effect only until the end of the 
State fiscal year in which the State makes it effective, or, if later, 
the end of the 90-day period following the date on which the State makes 
it effective, unless the State submits the amendment to CMS for approval 
before the end of that State fiscal year or that 90-day period.
    (b) Amendments relating to eligibility or benefits. A State plan 
amendment that eliminates or restricts eligibility or benefits may not 
be in effect for longer than a 60-day period, unless the amendment is 
submitted to CMS before the end of that 60-day period. The amendment may 
not take effect unless--
    (1) The State certifies that it has provided prior public notice of 
the proposed change in a form and manner provided under applicable State 
law; and
    (2) The public notice was published before the requested effective 
date of the change.
    (c) Amendments relating to cost sharing. A State plan amendment that 
implements cost-sharing charges, increases existing cost-sharing 
charges, or increases the cumulative cost-sharing maximum as set forth 
at Sec.  457.560 is considered an amendment that restricts benefits and 
must meet the requirements in paragraph (b) of this section.
    (d) Amendments relating to enrollment procedures. A State plan 
amendment that implements a required period of uninsurance, increases 
the length of existing required periods of uninsurance, or institutes or 
extends the use of waiting lists, enrollments caps or closed enrollment 
periods is considered an amendment that restricts eligibility and must 
meet the requirements in paragraph (b) of this section.
    (e) Amendments relating to the source of State funding. A State plan 
amendment that changes the source of the State share of funding can take 
effect

[[Page 423]]

no earlier than the date of submission of the amendment.
    (f) Continued approval. An approved State plan continues in effect 
unless--
    (1) The State adopts a new plan by obtaining approval under Sec.  
457.60 of an amendment to the State plan;
    (2) Withdraws its plan in accordance with Sec.  457.170(b); or
    (3) The Secretary finds substantial noncompliance of the plan with 
the requirements of the statute or regulations.



Sec.  457.70  Program options.

    (a) Health benefits coverage options. A State may elect to obtain 
health benefits coverage under its plan through--
    (1) A separate child health program;
    (2) A Medicaid expansion program; or
    (3) A combination program.
    (b) State plan requirement. A State must include in the State plan 
or plan amendment a description of the State's chosen program option.
    (c) Medicaid expansion program requirements. A State plan under 
title XXI for a State that elects to obtain health benefits coverage 
through its Medicaid plan must--
    (1) Meet the requirements of--
    (i) Subpart A;
    (ii) Subpart B (to the extent that the State claims administrative 
costs under title XXI);
    (iii) Subpart F (with respect to determination of the allotment for 
purposes of the enhanced matching rate, determination of the enhanced 
matching rate, and payment of any claims for administrative costs under 
title XXI only);
    (iv) Subpart G; and
    (v) Subpart J (if the State claims administrative costs under title 
XXI and seeks a waiver of limitations on such claims based on a 
community based health delivery system).
    (2) Be consistent with the State's Medicaid State plan, or an 
approvable amendment to that plan, as required under title XIX.
    (d) Separate child health program requirements. A State that elects 
to obtain health benefits coverage under its plan through a separate 
child health program must meet all the requirements of part 457.
    (e) Combination program requirements. A State that elects to obtain 
health benefits coverage through both a separate child health program 
and a Medicaid expansion program must meet the requirements of 
paragraphs (c) and (d) of this section.



Sec.  457.80  Current State child health insurance coverage and coordination.

    A State plan must include a description of--
    (a) The extent to which, and manner in which, children in the State, 
including targeted low-income children and other classes of children, by 
income level and other relevant factors, currently have creditable 
health coverage (as defined in Sec.  457.10) and, if sufficient 
information is available, whether the creditable health coverage they 
have is under public health insurance programs or health insurance 
programs that involve public-private partnerships;
    (b) Current State efforts to provide or obtain creditable health 
coverage for uncovered children, including the steps the State is taking 
to identify and enroll all uncovered children who are eligible to 
participate in public health insurance programs and health insurance 
programs that involve public-private partnerships; and
    (c) Procedures the State uses to accomplish coordination of SCHIP 
with other public and private health insurance programs, sources of 
health benefits coverage for children, and relevant child health 
programs, such as title V, that provide health care services for low-
income children. Such procedures include those designed to--
    (1) Increase the number of children with creditable health coverage;
    (2) Assist in the enrollment in SCHIP of children determined 
ineligible for Medicaid; and
    (3) Ensure that only eligible targeted low-income children are 
covered under SCHIP, such as those procedures required under Sec. Sec.  
457.350 and 457.353, as applicable.



Sec.  457.90  Outreach.

    (a) Procedures required. A State plan must include a description of 
procedures used to inform families of children likely to be eligible for 
child

[[Page 424]]

health assistance under the plan or under other public or private health 
coverage programs of the availability of the programs, and to assist 
them in enrolling their children in one of the programs.
    (b) Examples. Outreach strategies may include but are not limited to 
the following:
    (1) Education and awareness campaigns, including targeted mailings 
and information distribution through various organizations.
    (2) Enrollment simplification, such as simplified or joint 
application forms.
    (3) Application assistance, including opportunities to apply for 
child health assistance under the plan through community-based 
organizations and in combination with other benefits and services 
available to children.



Sec.  457.110  Enrollment assistance and information requirements.

    (a) Information disclosure. The State must make accurate, easily 
understood, linguistically appropriate information available to families 
of potential applicants, applicants and enrollees, and provide 
assistance to these families in making informed decisions about their 
health plans, professionals, and facilities.
    (b) Required information. The State must make available to potential 
applicants and provide applicants and enrollees the following 
information in a timely manner:
    (1) Types of benefits, and amount, duration and scope of benefits 
available under the program.
    (2) Cost-sharing requirements as described in Sec.  457.525.
    (3) Names and locations of current participating providers.
    (4) If an enrollment cap is in effect or the State is using a 
waiting list, a description of the procedures relating to the cap or 
waiting list, including the process for deciding which children will be 
given priority for enrollment, how children will be informed of their 
status on a waiting list and the circumstances under which enrollment 
will reopen.
    (5) Information on physician incentive plans as required by Sec.  
457.985.
    (6) Review processes available to applicants and enrollees as 
described in the State plan pursuant to Sec.  457.1120.



Sec.  457.120  Public involvement in program development.

    A State plan must include a description of the method the State uses 
to--
    (a) Involve the public in both the design and initial implementation 
of the program;
    (b) Ensure ongoing public involvement once the State plan has been 
implemented; and
    (c) Ensure interaction with Indian Tribes and organizations in the 
State on the development and implementation of the procedures required 
at Sec.  457.125.



Sec.  457.125  Provision of child health assistance to American Indian and Alaska Native children.

    (a) Enrollment. A State must include in its State plan a description 
of procedures used to ensure the provision of child health assistance to 
American Indian and Alaska Native children.
    (b) Exemption from cost sharing. The procedures required by 
paragraph (a) of this section must include an exemption from cost 
sharing for American Indian and Alaska Native children in accordance 
with Sec.  457.535.



Sec.  457.130  Civil rights assurance.

    The State plan must include an assurance that the State will comply 
with all applicable civil rights requirements, including title VI of the 
Civil Rights Act of 1964, title II of the Americans with Disabilities 
Act of 1990, section 504 of the Rehabilitation Act of 1973, the Age 
Discrimination Act of 1975, 45 CFR part 80, part 84, and part 91, and 28 
CFR part 35.



Sec.  457.135  Assurance of compliance with other provisions.

    The State plan must include an assurance that the State will comply, 
under title XXI, with the following provisions of titles XIX and XI of 
the Social Security Act:
    (a) Section 1902(a)(4)(C) (relating to conflict of interest 
standards).
    (b) Paragraphs (2), (16) and (17) of section 1903(i) (relating to 
limitations on payment).

[[Page 425]]

    (c) Section 1903(w) (relating to limitations on provider donations 
and taxes).
    (d) Section 1132 (relating to periods within which claims must be 
filed).



Sec.  457.140  Budget.

    The State plan, or plan amendment that has a significant impact on 
the approved budget, must include a budget that describes the State's 
planned expenditures for a 1-year period. The budget must describe--
    (a) Planned use of funds, including--
    (1) Projected amount to be spent on health services;
    (2) Projected amount to be spent on administrative costs, such as 
outreach, child health initiatives, and evaluation; and
    (3) Assumptions on which the budget is based, including cost per 
child and expected enrollment; and
    (b) Projected sources of non-Federal plan expenditures, including 
any requirements for cost sharing by enrollees.



Sec.  457.150  CMS review of State plan material.

    (a) Basis for action. CMS reviews each State plan and plan amendment 
to determine whether it meets or continues to meet the requirements for 
approval under relevant Federal statutes, regulations, and guidelines 
furnished by CMS to assist in the interpretation of these regulations.
    (b) Action on complete plan. CMS approves or disapproves the State 
plan or plan amendment only in its entirety.
    (c) Authority. The CMS Administrator exercises delegated authority 
to review and then to approve or disapprove the State plan or plan 
amendment, or to determine that previously approved material no longer 
meets the requirements for approval. The Administrator does not make a 
final determination of disapproval without first consulting the 
Secretary.
    (d) Initial submission. The Administrator designates an official to 
receive the initial submission of State plans.
    (e) Review process. (1) The Administrator designates an individual 
to coordinate CMS's review for each State that submits a State plan.
    (2) CMS notifies the State of the identity of the designated 
individual in the first correspondence relating to that plan, and at any 
time there is a change in the designated individual.
    (3) In the temporary absence of the designated individual during 
regular business hours, an alternate individual will act in place of the 
designated individual.



Sec.  457.160  Notice and timing of CMS action on State plan material.

    (a) Notice of final determination. The Administrator provides 
written notification to the State of the approval or disapproval of a 
State plan or plan amendment.
    (b) Timing. (1) A State plan or plan amendment will be considered 
approved unless CMS, within 90 calendar days after receipt of the State 
plan or plan amendment in the CMS central office, sends the State--
    (i) Written notice of disapproval; or
    (ii) Written notice of additional information it needs in order to 
make a final determination.
    (2) A State plan or plan amendment is considered received when the 
designated official or individual, as determined in Sec.  457.150(d) and 
(e), receives an electronic, fax or paper copy of the complete material.
    (3) If CMS requests additional information, the 90-day review period 
for CMS action on the State plan or plan amendment--
    (i) Stops on the day CMS sends a written request for additional 
information or the next business day if the request is sent on a Federal 
holiday or weekend; and
    (ii) Resumes on the next calendar day after the CMS designated 
individual receives an electronic, fax, or hard copy from the State of 
all the requested additional information, unless the information is 
received after 5 p.m. eastern standard time on a day prior to a non-
business day or any time on a non-business day, in which case the review 
period resumes on the following business day.
    (4) The 90-day review period cannot stop or end on a non-business 
day. If the 90th calendar day falls on a non-business day, CMS will 
consider the 90th day to be the next business day.

[[Page 426]]

    (5) CMS may send written notice of its need for additional 
information as many times as necessary to obtain the complete 
information necessary to review the State plan or plan amendment.



Sec.  457.170  Withdrawal process.

    (a) Withdrawal of proposed State plans or plan amendments. A State 
may withdraw a proposed State plan or plan amendment, or any portion of 
a proposed State plan or plan amendment, at any time during the review 
process by providing written notice to CMS of the withdrawal.
    (b) Withdrawal of approved State plans. A State may request 
withdrawal of an approved State plan by submitting a State plan 
amendment to CMS in accordance with Sec.  457.60.



  Subpart B_General Administration_Reviews and Audits; Withholding for 
  Failure to Comply; Deferral and Disallowance of Claims; Reduction of 
                        Federal Medical Payments



Sec.  457.200  Program reviews.

    (a) Review of State and local administration of the SCHIP plan. 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 of the SCHIP plan through analysis of the State's 
policies and procedures, on-site reviews of selected aspects of agency 
operation, and examination of samples of individual case records.
    (b) Action on review findings. If Federal or State reviews reveal 
serious problems with respect to compliance with any Federal or State 
plan requirement, the State must correct its practice accordingly.



Sec.  457.202  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 Appeals Board. (Specific rules are set forth in 
Sec.  457.212.)
    (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.



Sec.  457.203  Administrative and judicial review of action on State plan material.

    (a) Request for reconsideration. Any State dissatisfied with the 
Administrator's action on State plan material under Sec.  457.150 may, 
within 60 days after receipt of the notice of final determination 
provided under Sec.  457.160(a), request that the Administrator 
reconsider whether the State plan or plan amendment conforms with the 
requirements for approval.
    (b) Notice of hearing. Within 30 days after receipt of the request, 
the Administrator notifies the State of the time and place of a hearing 
to be held for the purpose of reconsideration.
    (c) Hearing procedures. The hearing procedures set forth in part 
430, subpart D of this chapter govern a hearing requested under this 
section.
    (d) Effect of hearing decision. CMS does not delay the denial of 
Federal funds, if required by the Administrator's original 
determination, pending a

[[Page 427]]

hearing decision. If the Administrator determines that his or her 
original decision was incorrect, CMS will pay the State a lump sum equal 
to any funds incorrectly denied.

[66 FR 2674, Jan. 11, 2001]



Sec.  457.204  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 State notice, a reasonable 
opportunity for correction, and an opportunity for a hearing, the 
Administrator finds--
    (1) That the plan is in substantial noncompliance with the 
requirements of title XXI of the Act; or
    (2) That the State is conducting its program in substantial 
noncompliance with either the State plan or the requirements of title 
XXI of the Act. (Hearings are generally not called until a reasonable 
effort has been made to resolve the issues through conferences and 
discussions. These efforts 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, reasonable opportunity for correction, and 
implementation of withholding. If the Administrator makes a finding of 
noncompliance under paragraph (a) of this section, the following steps 
apply:
    (1) Preliminary notice. The Administrator provides a preliminary 
notice to the State--
    (i) Of the findings of noncompliance;
    (ii) The proposed enforcement actions to withhold payments; and
    (iii) If enforcement action is proposed, that the State has a 
reasonable opportunity for correction, described in paragraph (d)(2) of 
this section, before the Administrator takes final action.
    (2) Opportunity for corrective action. If enforcement actions are 
proposed, the State must submit evidence of corrective action related to 
the findings of noncompliance to the Administrator within 30 days from 
the date of the preliminary notification. Corrective action is action to 
ensure that the plan is, and will be, administered consistent with 
applicable law and regulations, to ameliorate past deficiencies in plan 
administration, or to ensure that enrollees will be treated equitably.
    (3) Final notice. Taking into account any evidence submitted by the 
State under paragraph (d)(2) of this section, the Administrator makes a 
final determination related to the findings of noncompliance, and 
provides a final notice to the State--
    (i) Of the final determination on the findings of noncompliance;
    (ii) If enforcement action is appropriate--
    (A) No further payments will be made to the State (or that payments 
will be made only for those portions or aspects of the programs that are 
not affected by the noncompliance); and
    (B) 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.
    (4) Hearing. An opportunity for a hearing will be provided to the 
State prior to withholding under paragraph (d)(5) of this section.
    (5) Withholding. CMS withholds payments, in whole or in part, until 
the Administrator is satisfied regarding the State's compliance.

[65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001]



Sec.  457.206  Administrative appeals under SCHIP.

    Three distinct types of determinations are subject to Departmental 
reconsideration upon request by a State.
    (a) Compliance with Federal requirements. A determination that a 
State's plan or proposed plan amendments, or its practice under the plan 
do not meet

[[Page 428]]

(or continue to meet) Federal requirements are subject to the hearing 
provisions of 42 CFR part 430, subpart D of this chapter.
    (b) FFP in State SCHIP expenditures. Disallowances of FFP in State 
SCHIP expenditures (mandatory grants) are subject to Departmental 
reconsideration by the Departmental Appeals Board (the Board) in 
accordance with procedures set forth in 45 CFR part 16.
    (c) Discretionary grants disputes. Determinations listed in 45 CFR 
part 16, appendix A, pertaining to discretionary grants, such as grants 
for special demonstration projects under Section 1115 of the Act, that 
may be awarded to an SCHIP agency, are subject to reconsideration by the 
Departmental Grant Appeals Board.



Sec.  457.208  Judicial review.

    (a) Right to judicial review. Any State dissatisfied with the 
Administrator's final determination on approvability of plan material 
(Sec.  457.203) or compliance with Federal requirements (Sec.  457.204) 
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) After the clerk of the court files a copy of the petition with 
the Administrator, the Administrator files 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 certifies 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.

[65 FR 33622, May 24, 2000, as amended at 66 FR 2674, Jan. 11, 2001]



Sec.  457.210  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 Regional Administrator or the Administrator questions its 
allowability and needs additional information in order 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 
Regional Administrator 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 CMS regional office 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 CMS regional 
office, in readily reviewable form, all requested documents and 
materials except any that it identifies as not being available.
    (2) CMS regional office staff initiates review within 30 days after 
receipt of the documents and materials.
    (3) If the Regional Administrator 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

[[Page 429]]

Regional Administrator disallows the claim.
    (5) The Regional Administrator has 90 days, after all documentation 
is available in readily reviewable form, to determine the allowability 
of the claim.
    (6) If the Regional Administrator 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 Regional 
Administrator or the Administrator 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.



Sec.  457.212  Disallowance of claims for FFP.

    (a) Notice of disallowance and of right to reconsideration. When the 
Regional Administrator or the Administrator 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) that 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) of this section.
    (b) Reconsideration of FFP disallowance. (1) The Departmental 
Appeals Board reviews disallowances of FFP under title XXI.
    (2) A State may request reconsideration with a request to the Chair, 
Departmental Appeals Board, within 30 days after receipt of the 
disallowance letter, which must include--
    (i) A copy of the disallowance letter;
    (ii) A statement of the amount in dispute; and
    (iii) A brief statement of why the disallowance is wrong.
    (c) Reconsideration procedures. The reconsideration procedures are 
those set forth in 45 CFR part 16.
    (d) Implementation of decisions. If the reconsideration decision 
requires an adjustment of FFP, either upward or downward, a subsequent 
grant award promptly reflects the amount of increase or decrease.



Sec.  457.216  Treatment of uncashed or canceled (voided) SCHIP checks.

    (a) Purpose. This section provides rules to ensure that States 
refund the Federal portion of uncashed or canceled (voided) checks under 
title XXI.
    (b) Definitions. As used in this section--
    Canceled (voided) check means an SCHIP check issued by a State or 
fiscal agent that prior to its being cashed is canceled (voided) by the 
State or fiscal agent, thus preventing disbursement of funds.
    Fiscal agent means an entity that processes or pays vendor claims 
for the SCHIP agency.

[[Page 430]]

    Uncashed check means an SCHIP check issued by a State or fiscal 
agent that has not been cashed by the payee.
    Warrant means an order by which the SCHIP 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; that is, the date of the 
check, it is no longer 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 
agency must identify those checks that remain uncashed beyond a period 
of 180 days after issuance. The SCHIP 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 in accordance with 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 canceled (voided) checks--(1) General 
provisions. If the State has claimed and received FFP for the amount of 
a canceled (voided) check, it must refund the amount of FFP received.
    (2) Report of refund. At the end of each calendar quarter, the SCHIP 
agency must identify those checks that were canceled (voided). The State 
must refund all FFP that it received for canceled (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.



Sec.  457.218  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 the following conditions are met:
    (1) The amount to be repaid exceeds 2\1/2\ percent of the estimated 
or actual annual State share for the State SCHIP program; and
    (2) The State has given the Regional Administrator 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 2\1/2\ percent of the annual State share as 
follows:
    (1) If the State SCHIP program is ongoing, CMS uses the annual 
estimated State share of State SCHIP expenditures. This is the sum of 
the estimated State shares for four consecutive quarters, beginning with 
the quarter in which the first installment is to be paid, as shown on 
the State's latest CMS-21B form.
    (2) If the State SCHIP program has been terminated by Federal law or 
by the State, CMS uses the actual State share. The actual State share is 
that shown on the State's Quarterly Statement of Expenditures reports 
for the last four quarters before the program was terminated.
    (c) 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 number of quarters allowed for repayment 
is determined on the basis of the ratio of the repayment amount to the 
annual State share of State SCHIP expenditures. The higher the ratio of 
the total repayment amount is to the annual State share, the greater the 
number of quarters allowed, as follows:

------------------------------------------------------------------------
                                                             Number of
 Total repayment amount as percentage of State share of     quarters to
           annual expenditures for State SCHIP            make repayment
------------------------------------------------------------------------
2.5 pct. or less........................................               1

[[Page 431]]

 
Greater than 2.5, but not greater than 5................               2
Greater than 5, but not greater than 7.5................               3
Greater than 7.5, but not greater than 10...............               4
Greater than 10, but not greater than 15................               5
Greater than 15, but not greater than 20................               6
Greater than 20, but not greater than 25................               7
Greater than 25, but not greater than 30................               8
Greater than 30, but not greater than 47.5..............               9
Greater than 47.5, but not greater than 65..............              10
Greater than 65, but not greater than 82.5..............              11
Greater than 82.5, but not greater than 100.............              12
------------------------------------------------------------------------

    (3) Quarterly repayment amounts. The quarterly repayment amounts for 
each of the quarters in the repayment schedule may not be less than the 
following percentages of the estimated State share of the annual 
expenditures for SCHIP:

------------------------------------------------------------------------
                                                             Repayment
                                                            installment
                                                            may not be
           For each of the following quarters                less than
                                                               these
                                                            percentages
------------------------------------------------------------------------
1 to 4..................................................             2.5
5 to 8..................................................             5.0
9 to 12.................................................            17.5
------------------------------------------------------------------------

    (4) Extended schedule. The repayment schedule may be extended beyond 
12 quarterly installments if the total repayment amount exceeds 100 
percent of the estimated State share of annual expenditures. In these 
circumstances, the repayment schedule in paragraph (c)(2) of this 
section is followed for repayment of the amount equal to 100 percent of 
the annual State share. The remaining amount of the repayment is in 
quarterly amounts equal to not less than 17.5 percent of the estimated 
State share of annual expenditures.
    (5) Repayment process. Repayment is accomplished through adjustment 
in the quarterly grants over the period covered by the repayment 
schedule. 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.
    (6) Offsetting of retroactive claims. (i) The amount of a 
retroactive claim to be paid a State is offset against any amounts to 
be, or already being, repaid by the State in installments. Under this 
provision, the State may choose to:
    (A) Suspend payments until the retroactive claim due the State has, 
in fact, been offset; or
    (B) Continue payments until the reduced amount of its debt 
(remaining after the offset), has been paid in full. This second option 
would result in a shorter payment period.
    (ii) A retroactive claim for the purpose of this regulation is a 
claim applicable to any period ending 12 months or more before the 
beginning of the quarter in which CMS would pay that claim.

[65 FR 33622, May 24, 2000; 65 FR 38027, June 19, 2000; 65 FR 52042, 
Aug. 28, 2000]



Sec.  457.220  Funds from units of government as the State share of financial participation.

    (a) Funds from units of government 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 funds from units of government are appropriated directly to 
the State or local Medicaid agency, or are transferred from other units 
of government (including Indian tribes) to the State or local agency and 
are under its administrative control, or are certified by the 
contributing unit of government as representing expenditures eligible 
for FFP under this section. Certified public expenditures must be 
expenditures within the meaning of 45 CFR 95.13 that are supported by 
auditable documentation in a form approved by the Secretary that, at a 
minimum--
    (1) Identifies the relevant category of expenditures under the State 
plan;
    (2) Explains whether the contributing unit of government is within 
the scope of the exception to limitations on provider-related taxes and 
donations;
    (3) Demonstrates the actual expenditures incurred by the 
contributing unit of government in providing services to eligible 
individuals receiving medical assistance or in administration of the 
State plan; and
    (4) Is subject to periodic State audit and review.

[[Page 432]]

    (c) The funds from units of government are not Federal funds, or are 
Federal funds authorized by Federal law to be used to match other 
Federal funds.

[72 FR 29835, May 29, 2007]



Sec.  457.222  FFP for equipment.

    Claims for Federal financial participation in the cost of equipment 
under SCHIP are determined in accordance with subpart G of 45 CFR part 
95. Requirements concerning the management and disposition of equipment 
under SCHIP are also prescribed in subpart G of 45 CFR part 95.



Sec.  457.224  FFP: Conditions relating to cost sharing.

    (a) No FFP is available for the following amounts, even when related 
to services or benefit coverage which is or could be provided under a 
State SCHIP program--
    (1) Any cost sharing amounts that beneficiaries should have paid as 
enrollment fees, premiums, deductibles, coinsurance, copayments, or 
similar charges.
    (2) Any amounts paid by the agency for health benefits coverage or 
services furnished to individuals who would not be eligible for that 
coverage or those services under the approved State child health plan, 
whether or not the individual paid any required premium or enrollment 
fee.
    (b) The amount of expenditures under the State child health plan 
must be reduced by the amount of any premiums and other cost-sharing 
received by the State.



Sec.  457.226  Fiscal policies and accountability.

    A State plan must provide that the SCHIP 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.



Sec.  457.228  Cost allocation.

    A State plan must provide that the single or appropriate SCHIP 
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.



Sec.  457.230  FFP for State ADP expenditures.

    FFP is available for State ADP 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 regarding the availability 
of FFP for ADP expenditures are in 45 CFR part 74, 45 CFR part 95, 
subpart F, and part 11, State Medicaid Manual.



Sec.  457.232  Refunding of Federal Share of SCHIP overpayments to providers and referral of allegations of waste, fraud or abuse to the Office of Inspector 
          General.

    (a) Quarterly Federal payments to the States under title XXI (SCHIP) 
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) The Secretary will consider the pro rata Federal share of the 
net amount recovered by a State during any quarter to be an overpayment.
    (c) Allegations or indications of waste fraud and abuse with respect 
to the SCHIP program shall be referred promptly to the Office of 
Inspector General.



Sec.  457.236  Audits.

    The SCHIP agency must assure appropriate audit of records on costs 
of provider services.

[[Page 433]]



Sec.  457.238  Documentation of payment rates.

    The SCHIP agency must maintain documentation of payment rates and 
make it available to HHS upon request.



Subpart C_State Plan Requirements: Eligibility, Screening, Applications, 
                             and Enrollment

    Source: 66 FR 2675, Jan. 11, 2001, unless otherwise noted.



Sec.  457.300  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2102 of the Act, which relates to eligibility standards 
and methodologies, coordination with other health insurance programs, 
and outreach and enrollment efforts to identify and enroll children who 
are eligible to participate in other public health insurance programs;
    (2) Section 2105(c)(6)(B) of the Act, which relates to the 
prohibition against expenditures for child health assistance provided to 
children eligible for coverage under other Federal health care programs 
other than programs operated or financed by the Indian Health Service; 
and
    (3) Section 2110(b) of the Act, which provides a definition of 
targeted low-income child.
    (b) Scope. This subpart sets forth the requirements relating to 
eligibility standards and to screening, application and enrollment 
procedures.
    (c) Applicability. The requirements of this subpart apply to child 
health assistance provided under a separate child health program. 
Regulations relating to eligibility, screening, applications and 
enrollment that are applicable to a Medicaid expansion program are found 
at Sec.  431.636, Sec.  435.4, Sec.  435.229, Sec.  435.1102, Sec.  
436.3, Sec.  436.229, and Sec.  436.1102 of this chapter.



Sec.  457.301  Definitions and use of terms.

    As used in this subpart--
    Joint application means a form used to apply for the separate child 
health program that, when transmitted to the Medicaid agency following a 
screening that shows the child is potentially eligible for Medicaid, may 
also be used to apply for Medicaid.
    Period of presumptive eligibility means a period that begins on the 
date on which a qualified entity determines that a child is 
presumptively eligible and ends with the earlier of--
    (1) In the case of a child on whose behalf a separate child health 
program application has been filed, the day on which a decision is made 
on that application; or
    (2) In the case of a child on whose behalf an application for the 
separate child health program has not been filed, the last day of the 
month following the month in which the determination of presumptive 
eligibility was made.
    Presumptive income standard means the highest income eligibility 
standard established under the plan that is most likely to be used to 
establish eligibility of a child of the age involved.
    Public agency means a State, county, city or other type of municipal 
agency, including a public school district, transportation district, 
irrigation district, or any other type of public entity.
    Qualified entity means an entity that is determined by the State to 
be capable of making determinations of presumptive eligibility for 
children, and that--
    (1) Furnishes health care items and services covered under the 
approved plan and is eligible to receive payments under the approved 
plan;
    (2) Is authorized to determine eligibility of a child to participate 
in a Head Start program under the Head Start Act;
    (3) Is authorized to determine eligibility of a child to receive 
child care services for which financial assistance is provided under the 
Child Care and Development Block Grant Act of 1990;
    (4) Is authorized to determine eligibility of an infant or child to 
receive assistance under the special nutrition program for women, 
infants, and children (WIC) under section 17 of the Child Nutrition Act 
of 1966;
    (5) Is authorized to determine eligibility of a child for medical 
assistance

[[Page 434]]

under the Medicaid State plan, or eligibility of a child for child 
health assistance under the State Children's Health Insurance Program;
    (6) Is an elementary or secondary school, as defined in section 
14101 of the Elementary and Secondary Education Act of 1965 (20 U.S.C. 
8801);
    (7) Is an elementary or secondary school operated or supported by 
the Bureau of Indian Affairs;
    (8) Is a State or Tribal child support enforcement agency;
    (9) Is an organization that--
    (i) Provides emergency food and shelter under a grant under the 
Stewart B. McKinney Homeless Assistance Act;
    (ii) Is a State or Tribal office or entity involved in enrollment in 
the program under this title, Part A of title IV, or title XXI; or
    (iii) Determines eligibility for any assistance or benefits provided 
under any program of public or assisted housing that receives Federal 
funds, including the program under section 8 or any other section of the 
United States Housing Act of 1937 (42 U.S.C. 1437) or under the Native 
American Housing Assistance and Self Determination Act of 1996 (25 
U.S.C. 4101 et seq.); and
    (10) Any other entity the State so deems, as approved by the 
Secretary.
    State health benefits plan means a health insurance coverage plan 
that is offered or organized by the State government on behalf of State 
employees or other public agency employees within the State. The term 
does not include a plan in which the State provides no contribution 
toward the cost of coverage and in which no State employees participate, 
or a plan that provides coverage only for a specific type of care, such 
as dental or vision care.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec.  457.305  State plan provisions.

    The State plan must include a description of--
    (a) The standards, consistent with Sec. Sec.  457.310 and 457.320, 
used to determine the eligibility of children for coverage under the 
State plan.
    (b) The State's policies governing enrollment and disenrollment; 
processes for screening applicant children for and, if eligible, 
facilitating their enrollment in Medicaid; and processes for 
implementing waiting lists and enrollment caps (if any).



Sec.  457.310  Targeted low-income child.

    (a) Definition. A targeted low-income child is a child who meets the 
standards set forth below and the eligibility standards established by 
the State under Sec.  457.320.
    (b) Standards. A targeted low-income child must meet the following 
standards:
    (1) Financial need standard. A targeted low-income child:
    (i) Has a family income at or below 200 percent of the Federal 
poverty line for a family of the size involved;
    (ii) Resides in a State with no Medicaid applicable income level or;
    (iii) Resides in a State that has a Medicaid applicable income level 
and has family 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 policies of the State plan under 
title XIX on June 1, 1997.
    (2) No other coverage standard. A targeted low-income child must not 
be--
    (i) Found eligible or potentially eligible for Medicaid under 
policies of the State plan (determined through either the Medicaid 
application process or the screening process described at Sec.  
457.350); or
    (ii) Covered under a group health plan or under health insurance 
coverage, as defined in section 2791 of the Public Health Service Act, 
unless the plan or health insurance coverage program has been in 
operation since before July 1, 1997 and is administered by a State that 
receives no Federal funds for the program's operation. A child is not 
considered covered under a group health plan or health insurance 
coverage if the child does not have reasonable geographic access to care 
under that plan.
    (3) For purposes of this section, policies of the State plan under 
title XIX plan include policies under a Statewide demonstration project 
under section

[[Page 435]]

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.
    (c) Exclusions. Notwithstanding paragraph (a) of this section, the 
following groups are excluded from the definition of targeted low-income 
children:
    (1) Children eligible for certain State health benefits coverage. 
(i) A targeted low-income child may not be eligible for health benefits 
coverage under a State health benefits plan in the State on the basis of 
a family member's employment with a public agency, even if the family 
declines to accept the coverage.
    (ii) A child is considered eligible for health benefits coverage 
under a State health benefits plan if a more than nominal contribution 
to the cost of health benefits coverage under a State health benefits 
plan is available from the State or public agency with respect to the 
child or would have been available from those sources on November 8, 
1999. A contribution is considered more than nominal if the State or 
public agency makes a contribution toward the cost of an employee's 
dependent(s) that is $10 per family, per month, more than the State or 
public agency's contribution toward the cost of covering the employee 
only.
    (2) Residents of an institution. A child must not be--
    (i) An inmate of a public institution as defined at Sec.  435.1010 
of this chapter; or
    (ii) A patient in an institution for mental diseases, as defined at 
Sec.  435.1010 of this chapter, at the time of initial application or 
any redetermination of eligibility.

[66 FR 2675, Jan. 11, 2001, as amended at 71 FR 39229, July 12, 2006]



Sec.  457.320  Other eligibility standards.

    (a) Eligibility standards. To the extent consistent with title XXI 
of the Act and except as provided in paragraph (b) of this section, the 
State plan may adopt eligibility standards for one or more groups of 
children related to--
    (1) Geographic area(s) served by the plan;
    (2) Age (up to, but not including, age 19);
    (3) Income;
    (4) Resources;
    (5) Spenddowns;
    (6) Disposition of resources;
    (7) Residency, in accordance with paragraph (d) of this section;
    (8) Disability status, provided that such standards do not restrict 
eligibility;
    (9) Access to, or coverage under, other health coverage; and
    (10) Duration of eligibility, in accordance with paragraph (e) of 
this section.
    (b) Prohibited eligibility standards. In establishing eligibility 
standards and methodologies, a State may not--
    (1) Cover children with a higher family income without covering 
children with a lower family income within any defined group of covered 
targeted low-income children;
    (2) Deny eligibility based on a preexisting medical condition;
    (3) Discriminate on the basis of diagnosis;
    (4) Require any family member who is not requesting services to 
provide a social security number (including those family members whose 
income or resources might be used in making the child's eligibility 
determination);
    (5) Exclude American Indian or Alaska Native children based on 
eligibility for, or access to, medical care funded by the Indian Health 
Service;
    (6) Exclude individuals based on citizenship or nationality, to the 
extent that the children are U.S. citizens, U.S. nationals or qualified 
aliens, (as defined at section 431 of the Personal Responsibility and 
Work Opportunity Reconciliation Act (PRWORA) of 1996, as amended by the 
BBA of 1997, except to the extent that section 403 of PRWORA precludes 
them from receiving Federal means-tested public benefits); or
    (7) Violate any other Federal laws or regulations pertaining to 
eligibility for a separate child health program under title XXI.

[[Page 436]]

    (c) Self-declaration of citizenship. In establishing eligibility for 
coverage under a separate child health plan, a State may accept self-
declaration of citizenship (including nationals of the U.S.), provided 
that the State has implemented effective, fair, and nondiscriminatory 
procedures for ensuring the integrity of its application process.
    (d) Residency. The State may establish residency requirements, 
except that a State may not--
    (1) Impose a durational residency requirement;
    (2) Preclude the following individuals from declaring residence in a 
State--
    (i) A non-institutionalized child who is not a ward of the State, if 
the child is physically located in that State, including as a result of 
the parent's or caretaker's employment in that State;
    (ii) An institutionalized child who is not a ward of a State, if the 
State is the State of residence of the child's custodial parent's or 
caretaker at the time of placement;
    (iii) A child who is a ward of a State, regardless of the child's 
physical location; or
    (iv) A child whose custodial parent or caretaker is involved in work 
of a transient nature, if the State is the parent's or caretaker's home 
State.
    (e) Duration of eligibility. (1) The State may not impose a lifetime 
cap or other time limit on the eligibility of an individual applicant or 
enrollee, based on the length of time such applicant or enrollee has 
received benefits under the State's separate child health program.
    (2) Eligibility must be redetermined at least every 12 months.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec.  457.340  Application for and enrollment in a separate child health program.

    (a) Application assistance. A State must afford families an 
opportunity to apply for child health assistance without delay, provided 
that the State has not reached an approved enrollment cap, and offer 
assistance to families in understanding and completing applications and 
in obtaining any required documentation.
    (b) Use of social security number. A State may require a social 
security number for each individual requesting services consistent with 
the requirements at Sec.  435.910(b), (e), (f), and (g) of this chapter.
    (c) Notice of rights and responsibilities. A State must inform 
applicants at the time of application, in writing and orally if 
appropriate, about the application and eligibility requirements, the 
time frame for determining eligibility, and the right to review of 
eligibility determinations as described in Sec.  457.1130.
    (d) Timely determinations of eligibility. (1) The agency must 
promptly determine eligibility and issue a notice of decision within the 
time standards established, except in circumstances that are beyond the 
agency's control.
    (2) A State must establish time standards for determining 
eligibility. These standards may not exceed forty-five calendar days 
(excluding days during which the application has been suspended, 
pursuant to Sec.  457.350(f)(1)).
    (3) In applying the time standards, the State must define ``date of 
application'' and must count each calendar day from the date of 
application to the day the agency mails or otherwise provides notice of 
its eligibility decision.
    (e) Notice of decision concerning eligibility. A State must provide 
each applicant or enrollee a written notice of any decision on the 
application or other determination concerning eligibility.
    (1) If eligibility is approved, the notice must include information 
on the enrollee's rights and responsibilities under the program, 
including the opportunity for review of matters described in Sec.  
457.1130.
    (2) If eligibility is denied, suspended or terminated, the State 
must provide notice in accordance with Sec.  457.1180. In the case of a 
suspension or termination of eligibility, the State must provide 
sufficient notice to enable the child's parent or caretaker to take any 
appropriate actions that may be required to allow coverage to continue 
without interruption.
    (f) Effective date of eligibility. A State must specify a method for 
determining the effective date of eligibility for its separate child 
health program, which can be determined based on the date of

[[Page 437]]

application or through any other reasonable method.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec.  457.350  Eligibility screening and facilitation of Medicaid enrollment.

    (a) State plan requirement. The State plan must include a 
description of--
    (1) The screening procedures that the State will use, at intake and 
any follow-up eligibility determination, including any periodic 
redetermination, to ensure that only targeted low-income children are 
furnished child health assistance under the plan; and
    (2) The procedures that the State will use to ensure that the 
Medicaid application and enrollment process is initiated and that 
Medicaid enrollment is facilitated for children found, through the 
screening process, to be potentially eligible for Medicaid.
    (b) Screening objectives. (1) A State must use screening procedures 
to identify, at a minimum, any applicant or enrollee who is potentially 
eligible for Medicaid under one of the poverty-level-related groups 
described in section 1902(l) of the Act, section 1931 of the Act, or a 
Medicaid demonstration project approved under section 1115 of the Act, 
applying whichever standard and corresponding methodology generally 
results in a higher income eligibility level for the age group of the 
child being screened.
    (2) Screening procedures must also identify any applicant or 
enrollee who would be potentially eligible for Medicaid services based 
on the eligibility of his or her mother under one of the poverty level 
groups described in section 1902(l) of the Act, section 1931 of the Act, 
or a Medicaid demonstration project approved under section 1115 of the 
Act.
    (c) Income eligibility test. To identify the children described in 
paragraph (b) of this section, a State must either initially apply the 
gross income test described in paragraph (c)(1) of this section and then 
use an adjusted income test described in paragraph (c)(2) of this 
section for applicants whose gross income is above the appropriate 
Medicaid income standard, or use only the adjusted income test.
    (1) Initial gross income test. Under this test, a State initially 
screens for Medicaid eligibility by comparing gross family income to the 
appropriate Medicaid income standard.
    (2) Adjusted income test. Under this test, a State screens for 
Medicaid eligibility by comparing adjusted family income to the 
appropriate Medicaid income standard. The State must apply Medicaid 
standards and methodologies relating to income for the particular 
Medicaid eligibility group, including all income exclusions and 
disregards, except those that apply only in very limited circumstances.
    (d) Resource eligibility test. (1) If a State applies a resource 
test for children under the Medicaid eligibility group used for 
screening purposes as described in paragraph (b) of this section and a 
child has been determined potentially income eligible for Medicaid, the 
State must also screen for Medicaid eligibility by comparing family 
resources to the appropriate Medicaid resource standard.
    (2) In conducting the screening, the State must apply Medicaid 
standards and methodologies related to resources for the particular 
Medicaid eligibility group, including all resource exclusions and 
disregards, except those that apply only in very limited circumstances.
    (e) Children found potentially ineligible for Medicaid. If a State 
uses a screening procedure other than a full determination of Medicaid 
eligibility under all possible eligibility groups, and the screening 
process reveals that the child does not appear to be eligible for 
Medicaid, the State must provide the child's family with the following 
in writing:
    (1) A statement that based on a limited review, the child does not 
appear eligible for Medicaid, but Medicaid eligibility can only be 
determined based on a full review of a Medicaid application under all 
Medicaid eligibility groups;
    (2) Information about Medicaid eligibility and benefits; and
    (3) Information about how and where to apply for Medicaid under all 
eligibility groups.
    (4) The State will determine the written format and timing of the 
information regarding Medicaid eligibility,

[[Page 438]]

benefits, and the application process required under this paragraph (e).
    (f) Children found potentially eligible for Medicaid. If the 
screening process reveals that the child is potentially eligible for 
Medicaid, the State must establish procedures in coordination with the 
Medicaid agency that facilitate enrollment in Medicaid and avoid 
duplicative requests for information and documentation and must--
    (1) Except as provided in Sec.  457.355, find the child ineligible, 
provisionally ineligible, or suspend the child's application for the 
separate child health program unless and until a completed Medicaid 
application for that child is denied, or the child's circumstances 
change, and promptly transmit the separate child health application to 
the Medicaid agency as provided in paragraph (f)(3)(ii) of this section; 
and
    (2) If a State uses a joint application for its Medicaid and 
separate child health programs, promptly transmit the application, or 
the information obtained through the application, and all relevant 
documentation to the Medicaid agency; or
    (3) If a State does not use a joint application for its Medicaid and 
separate child health programs:
    (i) Promptly inform the child's parent or caretaker in writing and, 
if appropriate, orally that the child has been found likely to be 
eligible for Medicaid; provide the family with a Medicaid application 
and offer information about what, if any, further information, 
documentation, or other steps are needed to complete the Medicaid 
application process; and offer assistance in completing the application 
process;
    (ii) Promptly transmit the separate child health program 
application; or the information obtained through the application, and 
all other relevant information and documentation, including the results 
of the screening process, to the Medicaid agency for a final 
determination of Medicaid eligibility in accordance with the 
requirements of Sec. Sec.  431.636 and 457.1110 of this chapter; or
    (4) Establish other effective and efficient procedures, in 
coordination with the Medicaid agency, as described and approved in the 
State plan that ensure that children who are screened as potentially 
eligible for Medicaid are able to apply for Medicaid without delay and, 
if eligible, are enrolled in Medicaid in a timely manner; and
    (5) Determine or redetermine eligibility for the separate child 
health program, if--
    (i) The State is notified pursuant to Sec.  431.636 of this chapter 
that the child has been found ineligible for Medicaid, consistent with 
the time standards established pursuant to Sec.  457.340(c); or
    (ii) The State is notified prior to the final Medicaid eligibility 
determination that the child's circumstances have changed and another 
screening shows that the child is not likely to be eligible for 
Medicaid.
    (g) Informed application decisions. To enable a family to make an 
informed decision about applying for Medicaid or completing the Medicaid 
application process, a State must provide the child's family with 
information, in writing, about--
    (1) The State's Medicaid program, including the benefits covered, 
and restrictions on cost sharing; and
    (2) Eligibility rules that prohibit children who have been screened 
eligible for Medicaid from being enrolled in a separate child health 
program, other than provisional temporary enrollment while a final 
Medicaid eligibility determination is being made.
    (3) The State will determine the written format and timing of the 
information regarding Medicaid eligibility, benefits, and the 
application process required under this paragraph (g).
    (h) Waiting lists, enrollment caps and closed enrollment. The State 
must establish procedures to ensure that--
    (1) The procedures developed in accordance with this section have 
been followed for each child applying for a separate child health 
program before placing the child on a waiting list or otherwise 
deferring action on the child's application for the separate child 
health program; and
    (2) Families are informed that a child may be eligible for Medicaid 
if circumstances change while the child is on a waiting list for 
separate child health program.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001; 67 
FR 61974, Oct. 2, 2002]

[[Page 439]]



Sec.  457.353  Monitoring and evaluation of screening process.

    States must monitor and establish a mechanism to evaluate the screen 
and enroll process described at Sec.  457.350 to ensure that children 
who are screened potentially eligible for Medicaid are enrolled in 
Medicaid, if eligible, and that children who are found ineligible for 
Medicaid are enrolled in the separate child health program, if eligible.



Sec.  457.355  Presumptive eligibility.

    (a) General rule. Consistent with subpart D of this part, the State 
may pay costs of coverage under a separate child health program, during 
a period of presumptive eligibility for children applying for coverage 
under the separate child health program, pending the screening process 
and a final determination of eligibility (including applicants found 
through screening to be potentially eligible for Medicaid)
    (b) Expenditures for coverage during a period of presumptive 
eligibility. Expenditures for coverage during a period of presumptive 
eligibility implemented in accordance with Sec.  435.1102 of this 
chapter may be considered as expenditures for child health assistance 
under the plan.

[66 FR 2675, Jan. 11, 2001, as amended at 66 FR 33823, June 25, 2001]



Sec.  457.380  Eligibility verification.

    (a) The State must establish procedures to ensure the integrity of 
the eligibility determination process.
    (b) A State may establish reasonable eligibility verification 
mechanisms to promote enrollment of eligible children and may permit 
applicants and enrollees to demonstrate that they meet eligibility 
requirements through self-declaration or affirmation except that a State 
may permit self-declaration of citizenship only if the State has 
effective, fair and non-discriminatory procedures to ensure the 
integrity of the application process in accordance with Sec.  
457.320(c).



        Subpart D_State Plan Requirements: Coverage and Benefits

    Source: 66 FR 2678, Jan. 11, 2001, unless otherwise noted.



Sec.  457.401  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2102(a)(7) of the Act, which requires that States make 
assurances relating to, the quality and appropriateness of care, and 
access to covered services;
    (2) Section 2103 of the Act, which outlines coverage requirements 
for children's health insurance;
    (3) Section 2109 of the Act, which describes the relation of the 
SCHIP program to other laws;
    (4) Section 2110(a) of the Act, which describes child health 
assistance; and
    (5) Section 2110(c) of the Act, which contains definitions 
applicable to this subpart.
    (b) Scope. This subpart sets forth requirements for health benefits 
coverage and child health assistance under a separate child health plan.
    (c) Applicability. The requirements of this subpart apply to child 
health assistance provided under a separate child health program and do 
not apply to a Medicaid expansion program.



Sec.  457.402  Definition of child health assistance.

    For the purpose of this subpart, the term ``child health 
assistance'' means payment for part or all of the cost of health 
benefits coverage provided to targeted low-income children for the 
following services:
    (a) Inpatient hospital services.
    (b) Outpatient hospital services.
    (c) Physician services.
    (d) Surgical services.
    (e) Clinic services (including health center services) and other 
ambulatory health care services.
    (f) Prescription drugs and biologicals and the administration of 
these drugs and biologicals, only if these drugs and biologicals are not 
furnished for the purpose of causing, or assisting in causing, the 
death, suicide, euthanasia, or mercy killing of a person.

[[Page 440]]

    (g) Over-the-counter medications.
    (h) Laboratory and radiological services.
    (i) Prenatal care and pre-pregnancy family planning services and 
supplies.
    (j) Inpatient mental health services, other than services described 
in paragraph (r) of this section but including services furnished in a 
State-operated mental hospital and including residential or other 24-
hour therapeutically planned structured services.
    (k) Outpatient mental health services, other than services described 
in paragraph (s) of this section but including services furnished in a 
State-operated mental hospital and including community-based services.
    (l) Durable medical equipment and other medically-related or 
remedial devices (such as prosthetic devices, implants, eyeglasses, 
hearing aids, dental devices and adaptive devices).
    (m) Disposable medical supplies.
    (n) Home and community-based health care services and related 
supportive services (such as home health nursing services, personal 
care, assistance with activities of daily living, chore services, day 
care services, respite care services, training for family members and 
minor modification to the home.)
    (o) Nursing care services (such as nurse practitioner services, 
nurse midwife services, advanced practice nurse services, private duty 
nursing, pediatric nurse services and respiratory care services) in a 
home, school, or other setting.
    (p) Abortion only if necessary to save the life of the mother or if 
the pregnancy is the result of rape or incest.
    (q) Dental services.
    (r) Inpatient substance abuse treatment services and residential 
substance abuse treatment services.
    (s) Outpatient substance abuse treatment services.
    (t) Case management services.
    (u) Care coordination services.
    (v) Physical therapy, occupational therapy, and services for 
individuals with speech, hearing and language disorders.
    (w) Hospice care.
    (x) Any other medical, diagnostic, screening, preventive, 
restorative, remedial, therapeutic, or rehabilitative services (whether 
in a facility, home, school, or other setting) if recognized by State 
law and only if the service is--
    (1) Prescribed by or furnished by a physician or other licensed or 
registered practitioner within the scope of practice as defined by State 
law;
    (2) Performed under the general supervision or at the direction of a 
physician; or
    (3) Furnished by a health care facility that is operated by a State 
or local government or is licensed under State law and operating within 
the scope of the license.
    (y) Premiums for private health care insurance coverage.
    (z) Medical transportation.
    (aa) Enabling services (such as transportation, translation, and 
outreach services) only if designed to increase the accessibility of 
primary and preventive health care services for eligible low-income 
individuals.
    (bb) Any other health care services or items specified by the 
Secretary and not excluded under this subchapter.



Sec.  457.410  Health benefits coverage options.

    (a) Types of health benefits coverage. States may choose to obtain 
any of the following four types of health benefits coverage:
    (1) Benchmark coverage in accordance with Sec.  457.420.
    (2) Benchmark-equivalent coverage in accordance with Sec.  457.430.
    (3) Existing comprehensive State-based coverage in accordance with 
Sec.  457.440.
    (4) Secretary-approved coverage in accordance with Sec.  457.450.
    (b) Required coverage. Regardless of the type of health benefits 
coverage, described at paragraph (a) of this section, that the State 
chooses to obtain, the State must obtain coverage for--
    (1) Well-baby and well-child care services as defined by the State;
    (2) Age-appropriate immunizations in accordance with the 
recommendations of the Advisory Committee on Immunization Practices 
(ACIP); and
    (3) Emergency services as defined in Sec.  457.10.

[[Page 441]]



Sec.  457.420  Benchmark health benefits coverage.

    Benchmark coverage is health benefits coverage that is substantially 
equal to the health benefits coverage in one of the following benefit 
plans:
    (a) Federal Employees Health Benefit Plan (FEHBP). The standard Blue 
Cross/Blue Shield preferred provider option service benefit plan that is 
described in, and offered to Federal employees under, 5 U.S.C. 8903(1).
    (b) State employee plan. A health benefits plan that is offered and 
generally available to State employees in the State.
    (c) Health maintenance organization (HMO) plan. A health insurance 
coverage plan that is offered through an HMO (as defined in section 
2791(b)(3) of the Public Health Service Act) and has the largest insured 
commercial, non-Medicaid enrollment in the State.



Sec.  457.430  Benchmark-equivalent health benefits coverage.

    (a) Aggregate actuarial value. Benchmark-equivalent coverage is 
health benefits coverage that has an aggregate actuarial value 
determined in accordance with Sec.  457.431 that is at least actuarially 
equivalent to the coverage under one of the benchmark packages specified 
in Sec.  457.420.
    (b) Required coverage. In addition to the coverage required under 
Sec.  457.410(b), benchmark-equivalent health benefits coverage must 
include coverage for the following categories of services:
    (1) Inpatient and outpatient hospital services.
    (2) Physicians' surgical and medical services.
    (3) Laboratory and x-ray services.
    (c) Additional coverage. (1) In addition to the categories of 
services in paragraph (b) of this section, benchmark-equivalent coverage 
may include coverage for any additional services specified in Sec.  
457.402.
    (2) If the benchmark coverage package used by the State for purposes 
of comparison in establishing the aggregate actuarial value of the 
benchmark-equivalent coverage package includes coverage for prescription 
drugs, mental health services, vision services or hearing services, then 
the actuarial value of the coverage for each of these categories of 
service in the benchmark-equivalent coverage package must be at least 75 
percent of the value of the coverage for such a category or service in 
the benchmark plan used for comparison by the State.
    (3) If the benchmark coverage package does not cover one of the 
categories of services in paragraph (c)(2) of this section, then the 
benchmark-equivalent coverage package may, but is not required to, 
include coverage for that category of service.



Sec.  457.431  Actuarial report for benchmark-equivalent coverage.

    (a) To obtain approval for benchmark-equivalent health benefits 
coverage described under Sec.  457.430, the State must submit to CMS an 
actuarial report that contains an actuarial opinion that the health 
benefits coverage meets the actuarial requirements under Sec.  457.430. 
The report must also specify the benchmark coverage used for comparison.
    (b) The actuarial report must state that it was prepared--
    (1) By an individual who is a member of the American Academy of 
Actuaries;
    (2) Using generally accepted actuarial principles and methodologies 
of the American Academy of Actuaries;
    (3) Using a standardized set of utilization and price factors;
    (4) Using a standardized population that is representative of 
privately insured children of the age of those expected to be covered 
under the State plan;
    (5) Applying the same principles and factors in comparing the value 
of different coverage (or categories of services);
    (6) Without taking into account any differences in coverage based on 
the method of delivery or means of cost control or utilization used; and
    (7) Taking into account the ability of a State to reduce benefits by 
considering the increase in actuarial value of health benefits coverage 
offered under the State plan that results from the limitations on cost 
sharing (with the exception of premiums) under that coverage.
    (c) The actuary who prepares the opinion must select and specify the 
standardized set and population to be

[[Page 442]]

used under paragraphs (b)(3) and (b)(4) of this section.
    (d) The State must provide sufficient detail to explain the basis of 
the methodologies used to estimate the actuarial value or, if requested 
by CMS, to replicate the State's result.



Sec.  457.440  Existing comprehensive State-based coverage.

    (a) General requirements. Existing comprehensive State-based health 
benefits is coverage that--
    (1) Includes coverage of a range of benefits;
    (2) Is administered or overseen by the State and receives funds from 
the State;
    (3) Is offered in the State of New York, Florida or Pennsylvania; 
and
    (4) Was offered as of August 5, 1997.
    (b) Modifications. A State may modify an existing comprehensive 
State-based coverage program described in paragraph (a) of this section 
if--
    (1) The program continues to include a range of benefits;
    (2) The State submits an actuarial report demonstrating that the 
modification does not reduce the actuarial value of the coverage under 
the program below the lower of either--
    (i) The actuarial value of the coverage under the program as of 
August 5, 1997; or
    (ii) The actuarial value of a benchmark benefit package as described 
in Sec.  457.430 evaluated at the time the modification is requested.



Sec.  457.450  Secretary-approved coverage.

    Secretary-approved coverage is health benefits coverage that, in the 
determination of the Secretary, provides appropriate coverage for the 
population of targeted low-income children covered under the program. 
Secretary-approved coverage, for which no actuarial analysis is 
required, may include, but is not limited to the following:
    (a) Coverage that is the same as the coverage provided to children 
under the Medicaid State plan.
    (b) Comprehensive coverage for children offered by the State under a 
Medicaid demonstration project approved by the Secretary under section 
1115 of the Act.
    (c) Coverage that either includes the full Early and Periodic 
Screening, Diagnosis, and Treatment (EPSDT) benefit or that the State 
has extended to the entire Medicaid population in the State.
    (d) Coverage that includes benchmark health benefits coverage, as 
specified in Sec.  457.420, plus any additional coverage.
    (e) Coverage that is the same as the coverage provided under Sec.  
457.440.
    (f) Coverage, including coverage under a group health plan purchased 
by the State, that the State demonstrates to be substantially equivalent 
to or greater than coverage under a benchmark health benefits plan, as 
specified in Sec.  457.420, through use of a benefit-by-benefit 
comparison which demonstrates that coverage for each benefit meets or 
exceeds the corresponding coverage under the benchmark health benefits 
plan.

[66 FR 33823, June 25, 2001]



Sec.  457.470  Prohibited coverage.

    A State is not required to provide health benefits coverage under 
the plan for an item or service for which payment is prohibited under 
title XXI even if any benchmark health benefits plan includes coverage 
for that item or service.



Sec.  457.475  Limitations on coverage: Abortions.

    (a) General rule. FFP under title XXI is not available in 
expenditures for an abortion, or in expenditures for the purchase of 
health benefits coverage that includes coverage of abortion services 
unless the abortion services meet the conditions specified in paragraph 
(b) of this section.
    (b) Exceptions--(1) Life of mother. FFP is available in expenditures 
for abortion services when a physician has found that the abortion is 
necessary to save the life of the mother.
    (2) Rape or incest. FFP is available in expenditures for abortion 
services performed to terminate a pregnancy resulting from an act of 
rape or incest.
    (c) Partial Federal funding prohibited. (1) FFP is not available to 
a State for any amount expended under the title XXI plan to assist in 
the purchase, in

[[Page 443]]

whole or in part, of health benefits coverage that includes coverage of 
abortions other than those specified in paragraph (b) of this section.
    (2) If a State wishes to have managed care entities provide 
abortions in addition to those specified in paragraph (b) of this 
section, those abortions must be provided under a separate contract 
using non-Federal funds. A State may not set aside a portion of the 
capitated rate paid to a managed care entity to be paid with State-only 
funds, or append riders, attachments or addenda to existing contracts 
with managed care entities to separate the additional abortion services 
from the other services covered by the contract.
    (3) Nothing in this section affects the expenditure by a State, 
locality, or private person or entity of State, local, or private funds 
(other than those expended under the State plan) for any abortion 
services or for health benefits coverage that includes coverage of 
abortion services.



Sec.  457.480  Preexisting condition exclusions and relation to other laws.

    (a) Preexisting condition exclusions. (1) Except as permitted under 
paragraph (a)(2) of this section, the State may not permit the 
imposition of any pre-existing condition exclusion for covered services 
under the State plan.
    (2) If the State obtains health benefits coverage through payment or 
a contract for health benefits coverage under a group health plan or 
group health insurance coverage, the State may permit the imposition of 
a pre-existing condition exclusion but only to the extent that the 
exclusion is permitted under the applicable provisions of part 7 of 
subtitle B of title I of the Employee Retirement Income Security Act of 
1974 (ERISA) and title XXVII of the Public Health Service Act.
    (b) Relation of title XXI to other laws. (1) ERISA. Nothing in this 
title affects or modifies section 514 of ERISA with respect to a group 
health plan as defined by section 2791(a)(1) of the Public Health 
Service Act.
    (2) Health Insurance Portability and Accountability Act (HIPAA). 
Health benefits coverage provided under a State plan and coverage 
provided as a cost-effective alternative, as described in subpart J of 
this part, is creditable coverage for purposes of part 7 of subtitle B 
of title II of ERISA, title XXVII of the Public Health Service Act, and 
subtitle K of the Internal Revenue Code of 1986.
    (3) Mental Health Parity Act (MHPA). Health benefits coverage under 
a group health plan provided under a State plan must comply with the 
requirements of the MHPA of 1996 regarding parity in the application of 
annual and lifetime dollar limits to mental health benefits in 
accordance with 45 CFR 146.136.
    (4) Newborns and Mothers Health Protection Act (NMHPA). Health 
benefits coverage under a group health plan provided under a State plan 
must comply with the requirements of the NMHPA of 1996 regarding 
requirements for minimum hospital stays for mothers and newborns in 
accordance with 45 CFR 146.130 and 148.170.



Sec.  457.490  Delivery and utilization control systems.

    A State that elects to obtain health benefits coverage through a 
separate child health program must include in its State plan a 
description of the child health assistance provided under the plan for 
targeted low-income children, including a description of the proposed 
methods of delivery and utilization control systems. A State must--
    (a) Describe the methods of delivery of child health assistance 
including the choice of financing and the methods for assuring delivery 
of the insurance products and delivery of health care services covered 
by such products to the enrollees, including any variations; and
    (b) Describe utilization control systems designed to ensure that 
enrollees receiving health care services under the State plan receive 
only appropriate and medically necessary health care consistent with the 
benefit package described in the approved State plan.



Sec.  457.495  State assurance of access to care and procedures to assure quality and appropriateness of care.

    A State plan must include a description of the methods that a State 
uses for assuring the quality and appropriateness of care provided under 
the

[[Page 444]]

plan, including how the State will assure:
    (a) Access to well-baby care, well-child care, well-adolescent care 
and childhood and adolescent immunizations.
    (b) Access to covered services, including emergency services as 
defined at Sec.  457.10.
    (c) Appropriate and timely procedures to monitor and treat enrollees 
with chronic, complex, or serious medical conditions, including access 
to an adequate number of visits to specialists experienced in treating 
the specific medical condition and access to out-of-network providers 
when the network is not adequate for the enrollee's medical condition.
    (d) That decisions related to the prior authorization of health 
services are completed as follows:
    (1) In accordance with the medical needs of the patient, within 14 
days after receipt of a request for services. A possible extension of up 
to 14 days may be permitted if the enrollee requests the extension or if 
the physician or health plan determines that additional information is 
needed; or
    (2) In accordance with existing State law regarding prior 
authorization of health services.

[66 FR 2678, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



 Subpart E_State Plan Requirements: Enrollee Financial Responsibilities

    Source: 66 FR 2681, Jan. 11, 2001, unless otherwise noted.



Sec.  457.500  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements--
    (1) Section 2101(a) of the Act, which provides that the purpose of 
title XXI is to provide funds to States to enable them to initiate and 
expand the provision of child health assistance to uninsured, low-income 
children in an effective and efficient manner; and
    (2) Section 2103(e) of the Act, which sets forth provisions 
regarding State plan requirements and options for cost sharing.
    (b) Scope. This subpart consists of provisions relating to the 
imposition under a separate child health program of cost-sharing charges 
including enrollment fees, premiums, deductibles, coinsurance, 
copayments, and similar cost-sharing charges.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs.



Sec.  457.505  General State plan requirements.

    The State plan must include a description of--
    (a) The amount of premiums, deductibles, coinsurance, copayments, 
and other cost sharing imposed;
    (b) The methods, including the public schedule, the State uses to 
inform enrollees, applicants, providers and the general public of the 
cost-sharing charges, the cumulative cost-sharing maximum, and any 
changes to these amounts;
    (c) The disenrollment protections as required under Sec.  457.570;
    (d) In the case of coverage obtained through premium assistance for 
group health plans--
    (1) The procedures the State uses to ensure that eligible children 
are not charged copayments, coinsurance, deductibles or similar fees on 
well-baby and well-child care services described at Sec.  457.520, and 
that any cost sharing complies with the requirements of this subpart;
    (2) The procedures to ensure that American Indian and Alaska Native 
children are not charged premiums, copayments, coinsurance, deductibles, 
or similar fees in accordance with Sec.  457.535;
    (3) The procedures to ensure that eligible children are not charged 
cost sharing in excess of the cumulative cost-sharing maximum specified 
in Sec.  457.560.
    (e) Procedures that do not primarily rely on a refund given by the 
State for overpayment on behalf of an eligible child to ensure 
compliance with this subpart.

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]

[[Page 445]]



Sec.  457.510  Premiums, enrollment fees, or similar fees: State plan requirements.

    When a State imposes premiums, enrollment fees, or similar fees on 
enrollees, the State plan must describe--
    (a) The amount of the premium, enrollment fee or similar fee imposed 
on enrollees;
    (b) The time period for which the charge is imposed;
    (c) The group or groups that are subject to the premiums, enrollment 
fees, or similar charges;
    (d) The consequences for an enrollee or applicant who does not pay a 
charge, and the disenrollment protections adopted by the State in 
accordance with Sec.  457.570; and
    (e) The methodology used to ensure that total cost-sharing liability 
for a family does not exceed the cumulative cost-sharing maximum 
specified in Sec.  457.560.



Sec.  457.515  Co-payments, coinsurance, deductibles, or similar cost-sharing charges: State plan requirements.

    To impose copayments, coinsurance, deductibles or similar charges on 
enrollees, the State plan must describe--
    (a) The service for which the charge is imposed;
    (b) The amount of the charge;
    (c) The group or groups of enrollees that may be subject to the 
cost-sharing charge;
    (d) The consequences for an enrollee who does not pay a charge, and 
the disenrollment protections adopted by the State in accordance with 
Sec.  457.570;
    (e) The methodology used to ensure that total cost-sharing liability 
for a family does not exceed the cumulative cost-sharing maximum 
specified in Sec.  457.560; and
    (f) An assurance that enrollees will not be held liable for cost-
sharing amounts for emergency services that are provided at a facility 
that does not participate in the enrollee's managed care network beyond 
the copayment amounts specified in the State plan for emergency services 
as defined in Sec.  457.10.



Sec.  457.520  Cost sharing for well-baby and well-child care services.

    (a) A State may not impose copayments, deductibles, coinsurance or 
other cost sharing with respect to the well-baby and well-child care 
services covered under the State plan in either the managed care 
delivery setting or the fee-for-service delivery setting.
    (b) For the purposes of this subpart, at a minimum, any of the 
following services covered under the State plan will be considered well-
baby and well-child care services:
    (1) All healthy newborn physician visits, including routine 
screening, whether provided on an inpatient or outpatient basis.
    (2) Routine physical examinations as recommended and updated by the 
American Academy of Pediatrics (AAP) ``Guidelines for Health Supervision 
III'' and described in ``Bright Futures: Guidelines for Health 
Supervision of Infants, Children and Adolescents.''
    (3) Laboratory tests associated with the well-baby and well-child 
routine physical examinations as described in paragraph (b)(2) of this 
section.
    (4) Immunizations and related office visits as recommended and 
updated by the Advisory Committee on Immunization Practices (ACIP).
    (5) Routine preventive and diagnostic dental services (such as oral 
examinations, prophylaxis and topical fluoride applications, sealants, 
and x-rays) as described in the most recent guidelines issued by the 
American Academy of Pediatric Dentistry (AAPD).



Sec.  457.525  Public schedule.

    (a) The State must make available to the groups in paragraph (b) of 
this section a public schedule that contains the following information:
    (1) Current cost-sharing charges.
    (2) Enrollee groups subject to the charges.
    (3) Cumulative cost-sharing maximums.
    (4) Mechanisms for making payments for required charges.
    (5) The consequences for an applicant or an enrollee who does not 
pay a charge, including the disenrollment protections required by Sec.  
457.570.

[[Page 446]]

    (b) The State must make the public schedule available to the 
following groups:
    (1) Enrollees, at the time of enrollment and reenrollment after a 
redetermination of eligibility, and when cost-sharing charges and 
cumulative cost-sharing maximums are revised.
    (2) Applicants, at the time of application.
    (3) All participating providers.
    (4) The general public.



Sec.  457.530  General cost-sharing protection for lower income children.

    The State may vary premiums, deductibles, coinsurance, copayments or 
any other cost sharing based on family income only in a manner that does 
not favor children from families with higher income over children from 
families with lower income.



Sec.  457.535  Cost-sharing protection to ensure enrollment of American Indians and Alaska Natives.

    States may not impose premiums, deductibles, coinsurance, copayments 
or any other cost-sharing charges on children who are American Indians 
or Alaska Natives, as defined in Sec.  457.10.



Sec.  457.540  Cost-sharing charges for children in families with incomes at or below 150 percent of the FPL.

    The State may impose premiums, enrollment fees, deductibles, 
copayments, coinsurance, cost sharing and other similar charges for 
children whose family income is at or below 150 percent of the FPL as 
long as--
    (a) Aggregate monthly enrollment fees, premiums, or similar charges 
imposed on a family are less than or equal to the maximum amounts 
permitted under Sec.  447.52 of this chapter for a Medicaid eligible 
family of the same size and income;
    (b) Any copayments, coinsurance, deductibles or similar charges for 
children whose family income is at or below 100 percent of the FPL are 
equal to or less than the amounts permitted under Sec.  447.54 of this 
chapter;
    (c) For children whose family income is from 101 percent to 150 
percent of the FPL, any copayments, coinsurance, deductibles or similar 
charges are equal to or less than the maximum amounts permitted under 
Sec.  457.555;
    (d) The State does not impose more than one type of cost-sharing 
charge (deductible, copayment, or coinsurance) on a service;
    (e) The State only imposes one copayment based on the total cost of 
services furnished during one office visit; and
    (f) Aggregate annual cost sharing of all types, with respect to all 
targeted low-income children in a family, does not exceed the maximum 
permitted under Sec.  457.560(a).

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec.  457.555  Maximum allowable cost-sharing charges on targeted low-income children in families with income from 101 to 150 percent of the FPL.

    (a) Non-institutional services. For targeted low-income children 
whose family income is from 101 to 150 percent of the FPL, the State 
plan must provide that for non-institutional services, including 
emergency services--
    (1) Any copayment or similar charge the State imposes under a fee-
for-service delivery system does not exceed the following amounts:

------------------------------------------------------------------------
                                                               Maximum
                                                                amount
       Total cost of services provided during a visit         chargeable
                                                             to enrollee
------------------------------------------------------------------------
$15.00 or less.............................................        $1.00
$15.01 to $40..............................................         2.00
$40.01 to $80..............................................         3.00
$80.01 or more.............................................         5.00
------------------------------------------------------------------------

    (2) Any copayment that the State imposes for services provided by a 
managed care organization may not exceed $5.00 per visit;
    (3) Any coinsurance rate the State imposes may not exceed 5 percent 
of the payment the State directly or through contract makes for the 
service; and
    (4) Any deductible the State imposes may not exceed $3.00 per month, 
per family for each period of eligibility.
    (b) Institutional services. For targeted low-income children whose 
family income is from 101 to 150 percent of the FPL, the maximum 
deductible, coinsurance or copayment charge for each institutional 
admission may not exceed

[[Page 447]]

50 percent of the payment the State would make under the Medicaid fee-
for-service system for the first day of care in the institution.
    (c) Institutional emergency services. Any copayment that the State 
imposes on emergency services provided by an institution may not exceed 
$5.00.
    (d) Nonemergency use of the emergency room. For targeted low-income 
children whose family income is from 101 to 150 percent of the FPL, the 
State may charge up to twice the charge for non-institutional services, 
up to a maximum amount of $10.00, for services furnished in a hospital 
emergency room if those services are not emergency services as defined 
in Sec.  457.10.
    (e) Standard copayment amount. For targeted low-income children 
whose family income is from 101 to 150 percent of the FPL, a standard 
copayment amount for any service may be determined by applying the 
maximum copayment amounts specified in paragraphs (a), (b), and (c) of 
this section to the State's average or typical payment for that service.

    Effective Date Note: At 73 FR 71854, Nov. 25, 2008, Sec.  457.555 
was amended by revising (a) introductory text, and (1), (2), (4), (c) 
and (d), effective March 27, 2009. At 74 FR 4888, March 27, 2009, the 
effective date was delayed until Dec. 31, 2009. For the convenience of 
the user, the revised text is set forth as follows:



Sec.  457.555  Maximum allowable cost sharing charges on targeted low-
          income children in families with income from 101 to 150 
          percent of the FPL.

    (a) Non-institutional services. For targeted low-income children 
whose family income is from 101 to 150 percent of the FPL, the State 
plan must provide that for non-institutional services, including 
emergency services, the following requirements must be met:
    (1)(i) For Federal FY 2009, any co-payment or similar charge the 
State imposes under a fee-for-service delivery system may not exceed the 
following amounts:

------------------------------------------------------------------------
                                                                Maximum
                          Total cost                             amount
------------------------------------------------------------------------
$15 or less..................................................      $1.15
$15.01 to $40................................................       2.30
$40.01 to $80................................................       3.40
$80.01 or more...............................................       5.70
------------------------------------------------------------------------

    (ii) Thereafter, any copayments may not exceed these amounts as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next higher 5-
cent increment.
    (2) For Federal FY 2009, any co-payment that the State imposes for 
services provided by a managed care organization may not exceed $5.70 
per visit. Thereafter, any copayment may not exceed this amount as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next higher 5-
cent increment.

                                * * * * *

    (4) For Federal FY 2009, any deductible the State imposes may not 
exceed $3.40 per month, per family for each period of eligibility. 
Thereafter, any deductible may not exceed this amount as updated each 
October 1 by the percentage increase in the medical care component of 
the CPI-U for the period of September to September ending in the 
preceding calendar year and then rounded to the next higher 5-cent 
increment.

                                * * * * *

    (c) Institutional emergency services. For Federal FY 2009, any 
copayment that the State imposes on emergency services provided by an 
institution may not exceed $5.70. Thereafter, any copayment may not 
exceed this amount as updated each October 1 by the percentage increase 
in the medical care component of the CPI-U for the period of September 
to September ending in the preceding calendar year and then rounded to 
the next higher 5-cent increment.
    (d) Non-emergency use of the emergency room. For Federal FY 2009, 
for targeted low-income children whose family income is from 101 to 150 
percent of the FPL, the State may charge up to twice the charge for non-
institutional services, up to a maximum amount of $11.35 for services 
furnished in a hospital emergency room if those services are not 
emergency services as defined in Sec.  457.10. Thereafter, any charge 
may not exceed this amount as updated each October 1 by the percentage 
increase in the medical care component of the CPI-U for the period of 
September to September ending in the preceding calendar year and then 
rounded to the next higher 5-cent increment.

                                * * * * *



Sec.  457.560  Cumulative cost-sharing maximum.

    (a) A State may not impose premiums, enrollment fees, copayments, 
coinsurance, deductibles, or similar

[[Page 448]]

cost-sharing charges that, in the aggregate, exceed 5 percent of a 
family's total income for the length of a child's eligibility period in 
the State.
    (b) The State must inform the enrollee's family in writing and 
orally if appropriate of their individual cumulative cost-sharing 
maximum amount at the time of enrollment and reenrollment.

[66 FR 2681, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec.  457.570  Disenrollment protections.

    (a) The State must give enrollees reasonable notice of and an 
opportunity to pay past due premiums, copayments, coinsurance, 
deductibles or similar fees prior to disenrollment.
    (b) The disenrollment process must afford the enrollee an 
opportunity to show that the enrollee's family income has declined prior 
to disenrollment for non payment of cost-sharing charges, and in the 
event that such a showing indicates that the enrollee may have become 
eligible for Medicaid or for a lower level of cost sharing, the State 
must facilitate enrolling the child in Medicaid or adjust the child's 
cost-sharing category as appropriate.
    (c) The State must provide the enrollee with an opportunity for an 
impartial review to address disenrollment from the program in accordance 
with Sec.  457.1130(a)(3).



                      Subpart F_Payments to States



Sec.  457.600  Purpose and basis of this subpart.

    This subpart interprets and implements--
    (a) Section 2104 of the Act which specifies the total allotment 
amount available for allotment to each State for child health assistance 
for fiscal years 1998 through 2007, the formula for determining each 
State allotment for a fiscal year, including the Commonwealth and 
Territories, and the amounts of payments for expenditures that are 
applied to reduce the State allotments.
    (b) Section 2105 of the Act which specifies the provisions for 
making payment to States, the limitations and conditions on such 
payments, and the calculation of the enhanced Federal medical assistance 
percentage.



Sec.  457.602  Applicability.

    The provisions of this subpart apply to the 50 States and the 
District of Columbia, and the Commonwealths and Territories.



Sec.  457.606  Conditions for State allotments and Federal payments for a fiscal year.

    (a) Basic conditions. In order to receive a State allotment for a 
fiscal year, a State must have a State child health plan submitted in 
accordance with section 2106 of the Act, and
    (1) For fiscal years 1998 and 1999, the State child health plan must 
be approved before October 1, 1999;
    (2) For fiscal years after 1999, the State child health plan must be 
approved by the end of the fiscal year;
    (3) An allotment for a fiscal year is not available to a State prior 
to the beginning of the fiscal year; and
    (4) Federal payments out of an allotment are based on State 
expenditures which are allowable under the approved State child health 
plan.
    (b) Federal payments for States' Children's Health Insurance Program 
(SCHIP) expenditures under an approved State child health plan are--
    (1) Limited to the amount of available funds remaining in State 
allotments calculated in accordance with the allotment process and 
formula specified in Sec. Sec.  457.608 and 457.610, and payment process 
in Sec. Sec.  457.614 and 457.616.
    (2) Available based on a percentage of State SCHIP expenditures, at 
a rate equal to the enhanced Federal medical assistance percentage 
(FMAP) for each fiscal year, calculated in accordance with Sec.  
457.622.
    (3) Available through the grants process specified in Sec.  457.630.



Sec.  457.608  Process and calculation of State allotments for a fiscal year.

    (a) General--(1) State allotments for a fiscal year are determined 
by CMS for each State and the District of Columbia with an approved 
State child health plan, as described in paragraph (e) of

[[Page 449]]

this section, and for each Commonwealth and Territory, as described in 
paragraph (f) of this section.
    (2) In order to determine each State allotment, CMS determines the 
national total allotment amount for each fiscal year available to the 50 
States and the District of Columbia, as described in paragraph (c) of 
this section, and the total allotment amount available for each fiscal 
year for allotment to the Commonwealths and Territories, as described in 
paragraph (d) of this section.
    (3) The amount of allotments redistributed under section 2104(f) of 
the Act will not be applied or taken into account in determining the 
amounts of a fiscal year allotment for a State and the District of 
Columbia under this section.
    (b) Definition of Proportion. As used in this section, proportion 
means the amount of the allotment for a State or the District of 
Columbia for a fiscal year, divided by the national total allotment 
amount available for allotment to all States and the District of 
Columbia, as specified in paragraph (c) of this section, for that fiscal 
year.
    (c) National total allotment amount for the 50 States and the 
District of Columbia. (1) The national total allotment amount available 
for allotment to the 50 States and the District of Columbia is 
determined by subtracting the following amounts in the following order 
from the total appropriation specified in section 2104(a) of the Act for 
the fiscal year--
    (i) The total allotment amount available for allotment for each 
fiscal year to the Commonwealths and Territories, as determined in 
paragraph (d)(1) of this section;
    (ii) The total amount of the grant for the fiscal year for children 
with Type I Diabetes under Section 4921 of Public Law 105-33. This is 
$30,000,000 for each of the fiscal years 1998 through 2002; and
    (iii) The total amount of the grant for the fiscal year for diabetes 
programs for Indians under Section 4922 of Public Law 105-33. This is 
$30,000,000 for each of the fiscal years 1998 through 2002.
    (2) The following formula illustrates the calculation of the 
national total allotment amount available for allotment to the 50 States 
and the District of Columbia for a fiscal year:

ATA = S2104(a)-T2104(c)-
    D4921-D4922

ATA = National total allotment amount available for allotment 
to the 50 States and the District of Columbia for the fiscal year.
S2104(a) = Total appropriation for the fiscal year indicated 
in Section 2104(a) of the Act.
T2104(c) = Total allotment amount for a fiscal year available 
for allotment to the Commonwealths and Territories; as determined under 
paragraph (d)(1) of this section.
D4921 = Amount of total grant for children with Type I 
Diabetes under Section 4921 of Public Law 105-33. This is $30,000,000 
for each of the fiscal years 1998 through 2002.

    (d) Total allotment amount available to the Commonwealths and 
Territories--(1) General. The total allotment amount available to all 
the Commonwealths and Territories for a fiscal year is equal to .25 
percent of the total appropriation for the fiscal year indicated in 
section 2104(a) of the Act, plus the additional amount for the fiscal 
year specified in paragraph (d)(2) of this section.
    (2) Additional amounts for allotment to the Commonwealths and 
Territories. The following amounts are available for allotment to the 
Commonwealths and Territories for the indicated fiscal years in addition 
to the amount specified in paragraph (d)(1) of this section: For FY 
1999, $32 million; for each of FY 2000 and FY 2001, $34.2 million; for 
each fiscal year FY 2002 through 2004, $25.2 million; for each fiscal 
year FY 2005 and FY 2006, $32.4 million; and for FY 2007, $40 million. 
The additional amount for allotment for FY 1999 for the Commonwealths 
and Territories was provided under Public Law 105-277. The additional 
amounts for allotment for FY 2000 through FY 2007 were provided for the 
Commonwealths and Territories under section 702 of Public Law 106-113.
    (e) Determination of State allotments for a fiscal year--(1) 
General. The allotment for a State and the District of Columbia for a 
fiscal year is the product of:
    (i) The proportion for the State or the District of Columbia for the 
fiscal year, as defined in paragraph (b) of this

[[Page 450]]

section, and determined after application of the provisions of 
paragraphs (e)(2) and (3), related to the preadjusted proportion, and 
the floors, ceilings, and reconciliation process, respectively; and
    (ii)(A) The national total allotment amount available for allotment 
for the fiscal year, as specified in paragraph (c) of this section. The 
State and the District of Columbia's allotment for a fiscal year is 
determined in accordance with the following general formula:

SAi = Pi x ATA

SAi = Allotment for a State or District of Columbia for a 
fiscal year.
Pi = Proportion for a State or District of Columbia for a 
fiscal year.
ATA = Total amount available for allotment to the 50 States 
and the District of Columbia for the fiscal year.

    (B) There are two steps for determining the proportion for a State 
and the District of Columbia. The first step determines the preadjusted 
proportions, and is described under paragraph (e)(2) of this section. 
The first step applies in determining the proportion for all fiscal 
years. The second step applies floors and ceilings and, if necessary, 
applies a reconciliation to the preadjusted proportion. The second step 
is described in paragraph (e)(3) of this section. The second step 
applies in determining the proportion only for FY 2000 and subsequent 
fiscal years. For FY 1998 and FY 1999, the preadjusted proportion is the 
State or District of Columbia's proportion for the fiscal year.
    (2) Determination of the Preadjusted Proportions for a Fiscal Year. 
(i)The methodology for determining the State preadjusted proportion, 
referring to the determination of the proportion before the application 
of floors and ceilings and reconciliation for a fiscal year is in 
accordance with the following formula:

PPi = (Ci x SCFi)/ 
    [Sigma](Ci xx SCFi)

PPi = Preadjusted proportion for a State or District of 
Columbia for a fiscal year.
Ci = Number of children in a State (section 2104(b)(1)(A)(I) 
of the Act) for a fiscal year. This number is based on the number of 
low-income children for a State for a fiscal year and the number of low-
income children for a State for a fiscal year with no health insurance 
coverage for the fiscal year determined on the basis of the arithmetic 
average of the number of such children as reported and defined in the 3 
most recent March supplements to the Current Population Survey (CPS) of 
the Bureau of the Census, and for FY 2000 and subsequent fiscal years, 
officially available before the beginning of the calendar year in which 
the fiscal year begins. For FY 1998 and FY 1999, the availability of the 
CPS data obtained from the Bureau of the Census is as specified in 
paragraphs (e)(4) and (5) of this section, respectively. (section 
2104(b)(2)(B) of the Act).

    (ii) For each of the fiscal years 1998 and 1999, the number of 
children is equal to the number of low-income children in the State for 
the fiscal year with no health insurance coverage. For fiscal year 2000, 
the number of children is equal to the sum of 75 percent of the number 
of low-income children in the State for the fiscal year with no health 
insurance coverage and 25 percent of the number of low-income children 
in the State for the fiscal year. For fiscal years 2001 and thereafter, 
the number of children is equal to the sum of 50 percent of the number 
of low-income children in the State for the fiscal year with no health 
insurance coverage and 50 percent of the number of low-income children 
in the State for the fiscal year. (section 2104(b)(2)(A) of the Act).

SCFi = State cost factor for a State (section 
    2104(b)(1)(A)(ii) of the Act). For a fiscal year, this is equal to: 
    .15 + .85 x (Wi/WN) (section 2104(b)(3)(A) of 
    the Act).

Wi = The annual average wages per employee for a State for 
such year (section 2104(b)(3)(A)(ii)(I) of the Act).
WN = The annual average wages per employee for the 50 States 
and the District of Columbia (section 2104(b)(3)(A)(ii)(II) of the Act). 
The annual average wages per employee for a State or for all States and 
the District of Columbia for a fiscal year is equal to the average of 
such wages for employees in the health services industry (SIC 80), as 
reported by the Bureau of Labor Statistics of the Department of Labor 
for each of the most recent 3 years, and for FY 2000 and subsequent 
fiscal years, finally available before the beginning of the calendar 
year in which the fiscal year begins. For FY 1998 and FY 1999, the 
availability of the wage data obtained from the Bureau of Labor 
Statistics is as specified in paragraphs (e)(4) and (5), respectively. 
(section 2104(b)(3)(B) of the Act).

[[Page 451]]

[Sigma](Ci x SCFi) = The sum of the products of 
(Ci x SCFi) for each State (section 2104(b)(1)(B) 
of the Act).
ATA = Total amount available for allotment to the 50 States 
and the District of Columbia for the fiscal year as determined under 
paragraph (c) of this section.

    (3) Application of floors and ceilings and reconciliation in 
determining proportion. (i) Floors and ceilings in proportions. The 
preadjusted State proportions for a fiscal year are subject to the 
application of floors and ceilings in paragraphs (e)(3)(i)(A) and (B) of 
this section.
    (A) The proportion floors, or minimum proportions, that apply in 
determining a State's proportion for the fiscal year are:
    (1) $2,000,000 divided by the total of the amount available 
nationally;
    (2) 90 percent of the State's proportion for the previous fiscal 
year; and
    (3) 70 percent of the State's proportion for FY 1999.
    (B) The proportion ceiling, or maximum proportion, for a fiscal year 
that applies in determining the State's fiscal year proportion is 145 
percent of the State's proportion for FY 1999.
    (ii) Reconciliation of State proportions. If, after the application 
of the floors and ceilings in paragraph (e)(3)(i), the sum of the 
States' proportions is not equal to one, the Secretary will reconcile 
the States' proportions by applying either paragraph (e)(3)(i)(A) or (B) 
of this paragraph, as appropriate, such that the sum of the proportions 
after reconciliation equals one. If, after the application of the floors 
and ceilings in paragraph (e)(3)(i), the sum of the States' proportions 
is equal to one, no reconciliation is necessary, and the States' 
proportions will be the same as the preadjusted proportions determined 
under paragraph (e)(2) of this section.
    (A) If, after the application of the floors and ceilings under 
paragraphs (e)(3)(i)(A) and (B) of this section, the sum of the States' 
proportions is greater than one, the Secretary will establish a maximum 
percentage increase in States' proportions, such that when applied to 
the States' proportions, the sum of the proportions is exactly equal to 
one.
    (B) If, after the application of the floors and ceilings under 
paragraphs (e)(3)(i)(A) and (B), the sum of the proportions is less than 
one, the Secretary will increase States' proportions (as computed before 
the application of the floors under paragraph (e)(3)(i)(A)) in a pro 
rata manner (but not to exceed the 145 percent ceiling computed under 
paragraph (e)(3)(i)(B)), such that when applied to the States' 
proportions, the sum of the proportions is exactly equal to one.
    (4) Data used for calculating the FY 1998 SCHIP allotments. The FY 
1998 SCHIP allotments were calculated in accordance with the methodology 
described in paragraphs (e)(1) and (2) of this section, using the most 
recent official and final data that were available from the Bureau of 
the Census and the Bureau of Labor Statistics, respectively, prior to 
the September 1 before the beginning of FY 1998 (that is, through August 
31, 1997). In particular, through August 31, 1997, the only official 
data available on the numbers of children were data from the 3 March 
CPSs conducted in March 1994, 1995, and 1996 that reflected data for the 
3 calendar years 1993, 1994, and 1995.
    (5) Data used for calculating the FY 1999 SCHIP allotments. In 
accordance with section 101(f) of Public Law 105-277, the FY 1999 
allotments were calculated in accordance with the methodology described 
in paragraph (e)(2) of this section, using the same data as were used in 
calculating the FY 1998 SCHIP allotments.
    (f) Methodology for determining the Commonwealth and Territory 
allotments for a fiscal year. The total amount available for the 
Commonwealths and Territories for each fiscal year, as determined under 
paragraph (d) of this section, is allotted to each Territory and 
Commonwealth below which has an approved State child health plan. These 
allotments are in the proportion that the following percentages for each 
Commonwealth Territory bear to the sum of such percentages, as specified 
in section 2104(c)(2) of the Act:

Puerto Rico--91.6%
Guam--3.5%
Virgin Islands--2.6%
American Samoa--1.2%
Northern Mariana Islands--1.1%

    (g) Reserved State allotments for a fiscal year. (1) For FY 2000 and 
subsequent

[[Page 452]]

fiscal years, CMS determines and publishes the State reserved allotments 
for a fiscal year for each State, the District of Columbia, and 
Commonwealths and Territories in the Federal Register based on the most 
recent official and final data available before the beginning of the 
calendar year in which the fiscal year begins for the number of children 
and the State cost factor.
    (2) For FY 1998 and FY 1999, CMS determined and published the State 
reserved allotments using the available data described in paragraphs 
(e)(4) and (e)(5) of this section, respectively, on the basis of the 
statutory allotment formula as it existed prior to the enactment of 
Public Law 106-113.
    (3) If all States, the District of Columbia, and the Commonwealths 
and Territories have approved State child health plans in place prior to 
the beginning of the fiscal year, as appropriate, CMS may publish the 
allotments as final in the Federal Register, without the need for 
publication as reserved allotments.
    (h) Final allotments. (1) Final State allotments for FY 1998 and FY 
1999 for each State, the District of Columbia, and the Commonwealths and 
Territories are determined by CMS based only on those States, the 
District of Columbia, and the Commonwealths and Territories that have 
approved State child health plans by the end of fiscal year 1999, in 
accordance with the formula and methodology specified in paragraphs (a) 
through (g) of this section.
    (2) Final State allotments for a fiscal year after FY 1999 for each 
State, the District of Columbia, and the Commonwealths and Territories 
are determined by CMS based only on those States, the District of 
Columbia, and the Commonwealths and Territories that have approved State 
child health plans by the end of the fiscal year, in accordance with the 
formula and methodology specified in paragraphs (a) through (g) of this 
section.
    (3) CMS determines and publishes the States' final fiscal year 
allotments in the Federal Register based on the same data, with respect 
to the number of children and State cost factor, as were used in 
determining the reserved allotments for the fiscal year.



Sec.  457.610  Period of availability for State allotments for a fiscal year.

    The amount of a final allotment for a fiscal year, as determined 
under Sec.  457.608(h) and reduced to reflect certain Medicaid 
expenditures in accordance with Sec.  457.616, remains available until 
expended for Federal payments based on expenditures claimed during a 3-
year period of availability, beginning with the fiscal year of the final 
allotment and ending with the end of the second fiscal year following 
the fiscal year.



Sec.  457.614  General payment process.

    (a) A State may make claims for Federal payment based on 
expenditures incurred by the State prior to or during the period of 
availability related to that fiscal year.
    (b) In order to receive Federal financial participation (FFP) for a 
State's claims for payment for the State's expenditures, a State must--
    (1) Submit budget estimates of quarterly funding requirements for 
Medicaid and the State Children's Health Insurance Programs; and
    (2) Submit an expenditure report.
    (c) Based on the State's quarterly budget estimates, CMS--
    (1) Issues an advance grant to a State as described in Sec.  
457.630;
    (2) Tracks and applies Federal payments claimed quarterly by each 
State, the District of Columbia, and each Commonwealth and Territory to 
ensure that payments do not exceed the applicable allotments for the 
fiscal year; and
    (3) Track and apply relevant State, District of Columbia, 
Commonwealth and Territory expenditures reported each quarter against 
the 10 percent limit on expenditures other than child health assistance 
for standard benefit package, on a fiscal year basis as specified in 
Sec.  457.618.



Sec.  457.616  Application and tracking of payments against the fiscal year allotments.

    (a) Categories of payments applied to reduce the State allotments. 
In accordance with the principles described in

[[Page 453]]

paragraph (c) of this section, the following categories of payments are 
applied to reduce the State allotments for a fiscal year:
    (1) Payments made to the State for expenditures claimed during the 
fiscal year under its title XIX Medicaid program, to the extent the 
payments were made on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act for expenditures attributable to 
children described in section 1905(u)(2) of the Act.
    (2) Payments made to the State for expenditures claimed during the 
fiscal year under its title XIX Medicaid program, to the extent the 
payments were made on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act for expenditures attributable to 
children described in section 1905(u)(3) of the Act.
    (3) Payments made to a State under section 1903(a) of the Act for 
expenditures claimed by the State during a fiscal year that are 
attributable to the provision of medical assistance to a child during a 
presumptive eligibility period under section 1920A of the Act.
    (4) Payments made to a State under its title XXI State Children's 
Health Insurance Program with respect to section 2105(a) of the Act for 
expenditures claimed by the State during a fiscal year.
    (b) Application of principles. CMS applies the principles in 
paragraph (c) of this section to--
    (1) Coordinate the application of the payments made to a State for 
the State's expenditures claimed under the Medicaid and State Children's 
Health Insurance programs against the State allotment for a fiscal year;
    (2) Determine the order of these payments in that application; and
    (3) Determine the application of payments against multiple State 
Child Health Insurance Program fiscal year allotments.
    (c) Principles for applying Federal payments against the allotment. 
CMS--
    (1) Applies the payments attributable to Medicaid expenditures 
specified in paragraphs (a)(1) through (a)(3) of this section, against 
the State child health plan allotment for a fiscal year before State 
child health plan expenditures specified in paragraph (a)(4) of this 
section are applied.
    (2) Applies the payments attributable to Medicaid and State child 
health plan expenditures specified in paragraph (a) of this section 
against the applicable allotments for a fiscal year based on the quarter 
in which the expenditures are claimed by the State.
    (3) Applies payments against the State allotments for a fiscal year 
in a manner that is consistent for all States.
    (4) Applies payments attributable to Medicaid expenditures specified 
in paragraphs (a)(1) through (a)(3) of this section, in an order that 
maximizes Federal reimbursement for States. Expenditures for which the 
enhanced FMAP is available are applied before expenditures for which the 
regular FMAP is available.
    (5) Applies payments for expenditures against State Child Health 
Insurance Program fiscal year allotments in the least administratively 
burdensome, and most effective and efficient manner; payments are 
applied on a quarterly basis as they are claimed by the State, and are 
applied to reduce the earliest fiscal year State allotments before the 
payments are applied to reduce later fiscal year allotments.
    (6) Subject to paragraphs (c)(6)(i) and (ii) of this section, 
applies payments for expenditures for a fiscal year's allotment against 
a subsequent fiscal year's allotment; however, the subsequent fiscal 
year's allotment must be available at the time of application. For 
example, if the allotment for fiscal year 1998 has been fully expended, 
payments for expenditures claimed in fiscal year 1998 are carried over 
for application against the fiscal year 1999 allotment when it becomes 
available.
    (i) In accordance with Sec.  457.618, the amount of non-primary 
expenditures that are within the 10 percent limit for the fiscal year 
for which they are claimed may be applied against a fiscal year 
allotment or allotments available in a subsequent fiscal year.
    (ii) In accordance with Sec.  457.618, the amounts of non-primary 
expenditures that exceed the 10 percent limit for the fiscal year for 
which they are claimed may not be applied against a fiscal

[[Page 454]]

year allotment or allotments available in a subsequent fiscal year.
    (7) Carries over unexpended amounts of a State's allotment for a 
fiscal year for use in subsequent fiscal years through the end of the 3-
year period of availability. For example, if the amounts of the fiscal 
year 1998 allotment are not fully expended by the end of fiscal year 
1998, these amounts are carried over to fiscal year 1999 and are 
available to provide FFP for expenditures claimed by the State for that 
fiscal year.
    (d) Amount of Federal payment for expenditures claimed. The amount 
of the Federal payment for expenditures claimed by a State, District of 
Columbia, or the Commonwealths and Territories is determined by the 
enhanced FMAP applicable to the fiscal year in which the State paid the 
expenditure. For example, Federal payment for an expenditure paid by a 
State in fiscal year 1998 that was carried over to fiscal year 1999 (in 
accordance with paragraph (c)(6) of this section), because the State 
exceeded its fiscal year 1998 allotment, is available at the fiscal year 
1998 enhanced FMAP rate.



Sec.  457.618  Ten percent limit on certain State Children's Health Insurance Program expenditures.

    (a) Expenditures. (1) Primary expenditures are expenditures under a 
State plan for child health assistance to targeted low-income children 
in the form of a standard benefit package, and Medicaid expenditures 
claimed during the fiscal year to the extent Federal payments made for 
these expenditures on the basis of the enhanced FMAP described in 
sections 1905(b) and 2105(b) of the Act that are used to calculate the 
10 percent limit.
    (2) Non-primary expenditures are other expenditures under a State 
plan. Subject to the 10 percent limit described in paragraph (c) of this 
section, a State may receive Federal funds at the enhanced FMAP for 4 
categories of non-primary expenditures:
    (i) Administrative expenditures;
    (ii) Outreach;
    (iii) Health initiatives; and
    (iv) Certain other child health assistance.
    (b) Federal payment. Federal payment will not be available based on 
a State's non-primary expenditures for a fiscal year which exceed the 10 
percent limit of the total of expenditures under the plan, as specified 
in paragraph (c) of this section.
    (c) 10 Percent Limit. The 10 percent limit is--
    (1) Applied on an annual fiscal year basis;
    (2) Calculated based on the total computable expenditures claimed by 
the State on quarterly expenditure reports submitted for a fiscal year. 
Expenditures claimed on a quarterly report for a different fiscal year 
may not be used in the calculation; and
    (3) Calculated using the following formula:

    L10% = (a1+ u2+ u3)/9;

L10% = 10 Percent Limit for a fiscal year
a1 = Total computable amount of expenditures for the fiscal year under 
section 2105(a)(1) of the Act for which Federal payments are available 
at the enhanced FMAP described in Section 2105(b) of the Act;
u2 = Total computable expenditures for medical assistance for which 
Federal payments are made during the fiscal year based on the enhanced 
FMAP described in sections 1905(b) and 2105(b) of the Act for 
individuals described in section 1905(u)(2) of the Act; and
u3 = Total computable expenditures for medical assistance for which 
Federal payments are made during the fiscal year based on the enhanced 
FMAP described in sections 1905(b) and 2105(b) of the Act for 
individuals described in section 1905(u)(3) of the Act.

    (d) The expenditures under section 2105(a)(2) of the Act that are 
subject to the 10 percent limit are applied--
    (1) On an annual fiscal year basis; and
    (2) Against the 10 percent limit in the fiscal year for which the 
State submitted a quarterly expenditure report including the 
expenditures. Expenditures claimed on a quarterly report for one fiscal 
year may not be applied against the 10 percent limit for any other 
fiscal year.
    (e)(1) The 10 percent limit for a fiscal year, as calculated under 
paragraph (c)(3) of this section, may be no greater than 10 percent of 
the total computable amount (determined under paragraph

[[Page 455]]

(e)(2) of this section) of the State allotment or allotments available 
in that fiscal year. Therefore, the 10 percent limit is the lower of the 
amount calculated under paragraph (c)(3) of this section, and 10 percent 
of the total computable amount of the State allotment available in that 
fiscal year.
    (2) As used in paragraph (e)(1) of this section, the total 
computable amount of a State's allotment for a fiscal year is determined 
by dividing the State's allotment for the fiscal year by the State's 
enhanced FMAP for the year. For example, if a State allotment for a 
fiscal year is $65 million and the enhanced FMAP rate for the fiscal 
year is 65 percent, the total computable amount of the allotment for the 
fiscal year is $100 million ($65 million/.65). In this example, the 10 
percent limit may be no greater than a total computable amount of $10 
million (10 percent of $100 million).



Sec.  457.622  Rate of FFP for State expenditures.

    (a) Basis. Sections 1905(b), 2105(a) and 2105(b) of the Act provides 
for payments to States from the States' allotments for a fiscal year, as 
determined under Sec.  457.608, for part of the cost of expenditures for 
services and administration made under an approved State child health 
assistance plan. The rate of payment is generally the enhanced Federal 
medical assistance percentage described below.
    (b) Enhanced Federal medical assistance percentage (Enhanced FMAP)--
Computations. The enhanced FMAP is the lower of the following:
    (1) 70 percent of the regular FMAP determined under section 1905(b) 
of the Act, plus 30 percentage points; or
    (2) 85 percent.
    (c) Conditions for availability of enhanced FMAP based on a State's 
expenditures--The enhanced FMAP is available for payments based on a 
State's expenditures claimed under the State's title XXI program from 
the State's fiscal year allotment only under the following conditions:
    (1) The State has an approved title XXI State child health plan;
    (2) The expenditures are allowable under the State's approved title 
XXI State child health plan;
    (3) State allotment amounts are available in the fiscal year, that 
is, the State's allotment or allotments (as reduced in accordance with 
Sec.  457.616) remain available for a fiscal year and have not been 
fully expended.
    (4) Expenditures claimed against the 10 percent limit are within the 
State's 10 percent limit for the fiscal year.
    (5) For States that elect to extend eligibility to unborn children 
under the approved Child Health Plan, the State does not adopt 
eligibility standards and methodologies for purposes of determining a 
child's eligibility under the Medicaid State plan that were more 
restrictive than those applied under policies of the State plan in 
effect on June 1, 1997. This limitation applies also to more restrictive 
standards and methodologies for determining eligibility for services for 
a child based on the eligibility of a pregnant woman.
    (d) Categories of expenditures for which enhanced FMAP are 
available. Except as otherwise provided below, the enhanced FMAP is 
available with respect to the following States' expenditures:
    (1) Child health assistance under the plan for targeted low-income 
children in the form of providing health benefits coverage that meets 
the requirements of section 2103 of the Act; and
    (2) Subject to the 10 percent limit provisions under Sec.  
457.618(a)(2), the following expenditures:
    (i) Payment for other child health assistance for targeted low-
income children;
    (ii) Expenditures for health services initiatives under the State 
child health assistance plan for improving the health of children 
(including targeted low-income children);
    (iii) Expenditures for outreach activities; and
    (iv) Other reasonable costs incurred by the State to administer the 
State child health assistance plan.
    (e) SCHIP administrative expenditures and SCHIP related title XIX 
administrative expenditures--(1) General rule. Allowable title XXI 
administrative expenditures should support the operation of the State 
child health assistance plan. In general, FFP for administration under 
title XXI is not available for costs of activities related to the 
operation of other programs.

[[Page 456]]

    (2) Exception. FFP is available under title XXI, at the enhanced FFP 
rate, for Medicaid administrative expenditures attributable to the 
provision of medical assistance to children described in sections 
1905(u)(2) and 1905(u)(3), and during the presumptive eligibility period 
described in section 1920A of the Act, to the extent that the State does 
not claim those costs under the Medicaid program.
    (3) FFP is not available in expenditures for administrative 
activities for items or services included within the scope of another 
claimed expenditure.
    (4) FFP is available in expenditures for activities defined in 
sections 2102(c)(1) and 2105(a)(2)(C) of the Act as outreach to families 
of children likely to be eligible for child health assistance under the 
plan or under other public or private health coverage programs to inform 
these families of the availability of, and to assist them in enrolling 
their children in such a program.
    (5) FFP is available in administrative expenditures for activities 
specified in sections 2102(c)(2) of the Act as coordination of the 
administration of the State Children's Health Insurance Program with 
other public and private health insurance programs. FFP would not be 
available for the costs of administering the other public and private 
health insurance programs. Coordination activities must be distinguished 
from other administrative activities common among different programs.

[65 FR 33622, May 24, 2000, as amended at 67 FR 61974, Oct. 2, 2002]



Sec.  457.626  Prevention of duplicate payments.

    (a) General rule. No payment shall be made to a State for 
expenditures for child health assistance under its State child health 
plan to the extent that:
    (1) A non-governmental health insurer would have been obligated to 
pay for those services but for a provision of its insurance contract 
that has the effect of limiting or excluding those obligations based on 
the actual or potential eligibility of the individual for child health 
assistance under the State child health insurance plan.
    (2) Payment has been made or can reasonably be expected to be made 
promptly under any other Federally operated or financed health insurance 
or benefits program, other than a program operated or financed by the 
Indian Health Service.
    (3) Services are for an unborn child and are payable under Medicaid 
as a service to an eligible pregnant woman under that program.
    (b) Definitions. As used in paragraph (a) of this section--
    Non-governmental health insurer includes any health insurance 
issuer, group health plan, or health maintenance organization, as those 
terms are defined in 45 CFR 144.103, which is not part of, or wholly 
owned by, a governmental entity.
    Prompt payment can reasonably be expected when payment is required 
by applicable statute, or under an approved State plan.
    Programs operated or financed by the Indian Health Service means 
health programs operated by the Indian Health Service, or Indian tribe 
or tribal organization pursuant to a contract, grant, cooperative 
agreement or compact with the Indian Health Service under the authority 
of the Indian Self-Determination and Education Assistance Act (25 U.S.C. 
450, et seq.), or by an urban Indian organization in accordance with a 
grant or contract with the Indian Health Service under the authority of 
title V of the Indian Health Care Improvement Act (25 U.S.C. 1601, et 
seq.).

[65 FR 33622, May 24, 2000, as amended at 67 FR 61974, Oct. 2, 2002]



Sec.  457.628  Other applicable Federal regulations.

    Other regulations applicable to SCHIP programs include the 
following:
    (a) HHS regulations in Sec.  433.50 through Sec.  433.74 of this 
chapter (sources of non-Federal share and Health Care-Related Taxes and 
Provider-Related Donations) and Sec.  447.207 of this chapter (Retention 
of payments) apply to States' SCHIP programs in the same manner as they 
apply to States' Medicaid programs.
    (b) HHS Regulations in 45 CFR subtitle A:

Part 16--Procedures of the Departmental Appeals Board.

[[Page 457]]

Part 74--Administration of Grants (except as specifically excepted).
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).

[66 FR 2670, Jan. 11, 2001, as amended at 72 FR 29836, May 29, 2007]



Sec.  457.630  Grants procedures.

    (a) General provisions. Once CMS has approved a State child health 
plan, CMS makes quarterly grant awards to the State to cover the Federal 
share of expenditures for child health assistance, other child health 
assistance, special health initiatives, outreach and administration.
    (1) For fiscal year 1998, a State must submit a budget request in an 
appropriate format for the 4 quarters of the fiscal year. CMS bases the 
grant awards for the 4 quarters of fiscal year 1998 based on the State's 
budget requests for those quarters.
    (2) For fiscal years after 1998, a State must submit a budget 
request in an appropriate format for the first 3 quarters of the fiscal 
year. CMS bases the grant awards for the first 3 quarters of the fiscal 
year on the State's budget requests for those quarters.
    (3) For fiscal years after 1998, a State must also submit a budget 
request for the fourth quarter of the fiscal year. The amount of this 
quarter's grant award is based on the difference between a State's final 
allotment for the fiscal year, and the total of the grants for the first 
3 quarters that were already issued in order to ensure that the total of 
all grant awards for the fiscal year are equal to the State's final 
allotment for that fiscal year.
    (4) The amount of the quarterly grant is determined on the basis of 
information submitted by the State (in quarterly estimate and quarterly 
expenditure reports) and other pertinent information. This information 
must be submitted by the State through the Medicaid Budget and 
Expenditure System (MBES) for the Medicaid program, and through the 
Child Health Budget and Expenditure System (CBES) for the title XXI 
program.
    (b) Quarterly estimates. The State Children's Health Insurance 
Program agency must submit Form CMS-21B (State Children's Health 
Insurance Program Budget Report for State Children's Health Insurance 
Program State expenditures) to the CMS central office (with a copy to 
the CMS 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) and Form CMS-21 (Quarterly State Children's Health Insurance 
Program Statement of Expenditures for title XXI), to central office 
(with a copy to the regional office) not later than 30 days after the 
end of the quarter.
    (2) This report is the State's accounting of actual recorded 
expenditures. This disposition of Federal funds may not be reported on 
the basis of estimates.
    (d) Additional required information. A State must provide CMS with 
the following information regarding the administration of the title XXI 
program:
    (1) Name and address of the State Agency/organization administering 
the program;
    (2) The employer identification number (EIN); and
    (3) A State official contact name and telephone number.
    (e) 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 (e)(2) of this 
section, and computes the grant.
    (2) Content of award. The grant award computation form shows the 
estimate of expenditures for the ensuing quarter, and the amounts by 
which that estimate is increased or decreased because of an increase or 
overestimate

[[Page 458]]

for prior quarters, or for any of the following reasons:
    (i) Penalty reductions imposed by law.
    (ii) Deferrals or disallowances.
    (iii) Interest assessments.
    (iv) 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) Draw 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.)
    (f) General administrative requirements. With the following 
exceptions, the provisions of 45 CFR part 74, that establish uniform 
administrative requirements and cost principles, apply to all grants 
made to States under this subpart:
    (1) Subpart G--Matching and Cost Sharing; and
    (2) Subpart I--Financial Report Requirement.



         Subpart G_Strategic Planning, Reporting, and Evaluation

    Source: 66 FR 2683, Jan. 11, 2001, unless otherwise noted.



Sec.  457.700  Basis, scope, and applicability.

    (a) Statutory basis. This subpart implements--
    (1) Sections 2107(a), (b) and (d) of the Act, which set forth 
requirements for strategic planning, reports, and program budgets; and
    (2) Section 2108 of the Act, which sets forth provisions regarding 
annual reports and evaluation.
    (b) Scope. This subpart sets forth requirements for strategic 
planning, monitoring, reporting and evaluation under title XXI.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs and Medicaid expansion programs.



Sec.  457.710  State plan requirements: Strategic objectives and performance goals.

    (a) Plan description. A State plan must include a description of--
    (1) The strategic objectives as described in paragraph (b) of this 
section;
    (2) The performance goals as described in paragraph (c) of this 
section; and
    (3) The performance measurements, as described in paragraph (d) of 
this section, that the State has established for providing child health 
assistance to targeted low-income children under the plan and otherwise 
for maximizing health benefits coverage for other low-income children 
and children generally in the State.
    (b) Strategic objectives. The State plan must identify specific 
strategic objectives relating to increasing the extent of creditable 
health coverage among targeted low-income children and other low-income 
children.
    (c) Performance goals. The State plan must specify one or more 
performance goals for each strategic objective identified.
    (d) Performance measurements. The State plan must describe how 
performance under the plan is--
    (1) Measured through objective, independently verifiable means; and
    (2) Compared against performance goals.
    (e) Core elements. The State's strategic objectives, performance 
goals and performance measures must include a common core of national 
performance goals and measures consistent with the data collection, 
standard methodology, and verification requirements, as developed by the 
Secretary.



Sec.  457.720  State plan requirement: State assurance regarding data collection, records, and reports.

    A State plan must include an assurance that the State collects data, 
maintains records, and furnishes reports to the Secretary, at the times 
and in the standardized format the Secretary may require to enable the 
Secretary to monitor State program administration and compliance and to 
evaluate and compare the effectiveness of State plans under Title XXI of 
the Act. This includes collection of data

[[Page 459]]

and reporting as required under Sec.  431.970 of this chapter.

[71 FR 51084, Aug. 28, 2006]



Sec.  457.740  State expenditures and statistical reports.

    (a) Required quarterly reports. A State must submit reports to CMS 
that contain quarterly program expenditures and statistical data no 
later than 30 days after the end of each quarter of the Federal fiscal 
year. A State must collect required data beginning on the date of 
implementation of the approved State plan. Territories are exempt from 
the definition of ``State'' for purposes of the required quarterly 
reporting under this section. The quarterly reports must include data 
on--
    (1) Program expenditures;
    (2) The number of children enrolled in the title XIX Medicaid 
program, the separate child health program, and the Medicaid expansion 
program, as applicable, as of the last day of each quarter of the 
Federal fiscal year; and
    (3) The number of children under 19 years of age who are enrolled in 
the title XIX Medicaid program, the separate child health program, and 
in the Medicaid expansion program, as appropriate, by the following 
categories:
    (i) Age (under 1 year of age, 1 through 5 years of age, 6 through 12 
years of age, and 13 through 18 years of age).
    (ii) Gender, race, and ethnicity.
    (iii) Service delivery system (managed care, fee-for-service, and 
primary care case management).
    (iv) Family income as a percentage of the Federal poverty level as 
described in paragraph (b) of this section.
    (b) Reportable family income categories. (1) A State that does not 
impose cost sharing or a State that imposes cost sharing based on a 
fixed percentage of income must report by two family income categories:
    (i) At or below 150 percent of FPL.
    (ii) Over 150 percent of FPL.
    (2) A State that imposes a different level or percentage of cost 
sharing at different poverty levels must report by poverty level 
categories that match the poverty level categories used for purposes of 
cost sharing.
    (c) Required unduplicated counts. Thirty days after the end of the 
Federal fiscal year, the State must submit an unduplicated count for the 
Federal fiscal year of children who were enrolled in the Medicaid 
program, the separate child health program, and the Medicaid expansion 
program, as appropriate, by age, gender, race, ethnicity, service 
delivery system, and poverty level categories described in paragraphs 
(a) and (b) of this section.



Sec.  457.750  Annual report.

    (a) Report required for each Federal fiscal year. A State must 
report to CMS by January 1 following the end of each Federal fiscal 
year, on the results of the State's assessment of the operation of the 
State plan.
    (b) Contents of annual report. In the annual report required under 
paragraph (a) of this section, a State must--
    (1) Describe the State's progress in reducing the number of 
uncovered, low-income children and; in meeting other strategic 
objectives and performance goals identified in the State plan; and 
provide information related to a core set of national performance goals 
and measures as developed by the Secretary;
    (2) Report on the effectiveness of the State's policies for 
discouraging the substitution of public coverage for private coverage;
    (3) Identify successes and barriers in State plan design and 
implementation, and the approaches the State is considering to overcome 
these barriers;
    (4) Describe the State's progress in addressing any specific issues 
(such as outreach) that the State plan proposed to periodically monitor 
and assess;
    (5) Provide an updated budget for a 3-year period that describes 
those elements required in Sec.  457.140, including any changes in the 
sources of the non-Federal share of State plan expenditures;
    (6) Identify the total State expenditures for family coverage and 
total number of children and adults, respectively, covered by family 
coverage during the preceding Federal fiscal year;
    (7) Describe the State's current income standards and methodologies 
for its Medicaid expansion program, separate child health program, and 
title XIX Medicaid program, as appropriate.

[[Page 460]]

    (c) Methodology for estimate of number of uninsured, low-income 
children. (1) To report on the progress made in reducing the number of 
uninsured, low-income children as required in paragraph (b) of this 
section, a State must choose a methodology to establish an initial 
baseline estimate of the number of low-income children who are uninsured 
in the State.
    (i) A State may base the estimate on data from--
    (A) The March supplement to the Current Population Survey (CPS);
    (B) A State-specific survey;
    (C) A statistically adjusted CPS; or
    (D) Another appropriate source.
    (ii) If the State does not base the estimate on data from the March 
supplement to the CPS, the State must submit a description of the 
methodology used to develop the initial baseline estimate and the 
rationale for its use.
    (2) The State must provide an annual estimate of changes in the 
number of uninsured in the State using--
    (i) The same methodology used in establishing the initial baseline; 
or
    (ii) Another methodology based on new information that enables the 
State to establish a new baseline.
    (3) If a new methodology is used, the State must also provide annual 
estimates based on either the March supplement to the CPS or the 
methodology used to develop the initial baseline.

[66 FR 2683, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



                   Subpart H_Substitution of Coverage

    Source: 66 FR 2684, Jan. 11, 2001, unless otherwise noted.



Sec.  457.800  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements section 
2102(b)(3)(C) of the Act, which provides that the State plan must 
include a description of procedures the State uses to ensure that health 
benefits coverage provided under the State plan does not substitute for 
coverage under group health plans.
    (b) Scope. This subpart sets forth State plan requirements relating 
to substitution of coverage in general and specific requirements 
relating to substitution of coverage under premium assistance programs.
    (c) Applicability. The requirements of this subpart apply to 
separate child health programs.



Sec.  457.805  State plan requirement: Procedures to address substitution under group health plans.

    The State plan must include a description of reasonable procedures 
to ensure that health benefits coverage provided under the State plan 
does not substitute for coverage provided under group health plans as 
defined at Sec.  457.10.



Sec.  457.810  Premium assistance programs: Required protections against substitution.

    A State that operates a premium assistance program, as defined at 
Sec.  457.10, must provide the protections against substitution of SCHIP 
coverage for coverage under group health plans specified in this 
section. The State must describe these protections in the State plan; 
and report on results of monitoring of substitution in its annual 
reports.
    (a) Minimum period without coverage under a group health plan. For 
health benefits coverage provided through premium assistance for group 
health plans, the following rules apply:
    (1) An enrollee must not have had coverage under a group health plan 
for a period of at least 6 months prior to enrollment in a premium 
assistance program. A State may not require a minimum period without 
coverage under a group health plan that exceeds 12 months.
    (2) States may permit reasonable exceptions to the requirement for a 
minimum period without coverage under a group health plan for--
    (i) Involuntary loss of coverage under a group health plan, due to 
employer termination of coverage for all employees and dependents;
    (ii) Economic hardship;
    (iii) Change to employment that does not offer dependent coverage; 
or
    (iv) Other reasons proposed by the State and approved as part of the 
State plan.

[[Page 461]]

    (3) The requirement for a minimum period without coverage under a 
group health plan does not apply to a child who, within the previous 6 
months, has received coverage under a group health plan through Medicaid 
under section 1906 of the Act.
    (4) The Secretary may waive the 6-month waiting period requirement 
described in this section at her discretion.
    (b) Employer contribution. For health benefits coverage obtained 
through premium assistance for group health plans, the employee who is 
eligible for the coverage must apply for the full premium contribution 
available from the employer.
    (c) Cost effectiveness. In establishing cost effectiveness--
    (1) The State's cost for coverage for children under premium 
assistance programs must not be greater than the cost of other SCHIP 
coverage for these children; and
    (2) The State may base its demonstration of cost effectiveness on an 
assessment of the cost of coverage for children under premium assistance 
programs to the cost of other SCHIP coverage for these children, done on 
a case-by-case basis, or on the cost of premium assisted coverage in the 
aggregate.
    (d) State evaluation. The State must evaluate and report in the 
annual report (in accordance with Sec.  457.750(b)(2)) the amount of 
substitution that occurs as a result of premium assistance programs and 
the effect of those programs on access to coverage.



                       Subpart I_Program Integrity

    Source: 66 FR 2685, Jan. 11, 2001, unless otherwise noted.



Sec.  457.900  Basis, scope and applicability.

    (a) Statutory basis. This subpart implements--
    (1) Section 2101(a) of the Act, which provides that the purpose of 
title XXI is to provide funds to States to enable them to initiate and 
expand the provision of child health assistance to uninsured, low-income 
children in an effective and efficient manner; and
    (2) Section 2107(e) of the Act, which provides that certain title 
XIX and title XI provisions, including the following, apply to States 
under title XXI in the same manner as they apply to a State under title 
XIX:
    (i) Section 1902(a)(4)(C) of the Act, relating to conflict of 
interest standards.
    (ii) Paragraphs (2), (16), and (17), of section 1903(i) of the Act, 
relating to limitations on payment.
    (iii) Section 1903(w) of the Act, relating to limitations on 
provider taxes and donations.
    (iv) Section 1124 of the Act, relating to disclosure of ownership 
and related information.
    (v) Section 1126 of the Act, relating to disclosure of information 
about certain convicted individuals.
    (vi) Section 1128 of the Act, relating to exclusions.
    (vii) Section 1128A of the Act, relating to civil monetary 
penalties.
    (viii) Section 1128B(d) of the Act, relating to criminal penalties 
for certain additional charges.
    (ix) Section 1132 of the Act, relating to periods within which 
claims must be filed.
    (b) Scope. This subpart sets forth requirements, options, and 
standards for program integrity assurances that must be included in the 
approved State plan.
    (c) Applicability. This subpart applies to separate child health 
programs. Medicaid expansion programs are subject to the program 
integrity rules and requirements specified under title XIX.



Sec.  457.902  Definitions

    As used in this subpart--
    Actuarially sound principles means generally accepted actuarial 
principles and practices that are applied to determine aggregate 
utilization patterns, are appropriate for the population and services to 
be covered, and have been certified by actuaries who meet the 
qualification standards established by the Actuarial Standards Board.
    Fee-for-service entity means any individual or entity that furnishes 
services under the program on a fee-for-service basis, including health 
insurance services.

[[Page 462]]



Sec.  457.910  State program administration.

    The State's child health program must include--
    (a) Methods of administration that the Secretary finds necessary for 
the proper and efficient operation of the separate child health program; 
and
    (b) Safeguards necessary to ensure that--
    (1) Eligibility will be determined appropriately in accordance with 
subpart C of this part; and
    (2) Services will be provided in a manner consistent with 
administrative simplification and with the provisions of subpart D of 
this part.



Sec.  457.915  Fraud detection and investigation.

    (a) State program requirements. The State must establish procedures 
for ensuring program integrity and detecting fraudulent or abusive 
activity. These procedures must include the following:
    (1) Methods and criteria for identifying suspected fraud and abuse 
cases.
    (2) Methods for investigating fraud and abuse cases that--
    (i) Do not infringe on legal rights of persons involved; and
    (ii) Afford due process of law.
    (b) State program integrity unit. The State may establish an 
administrative agency responsible for monitoring and maintaining the 
integrity of the separate child health program.
    (c) Program coordination. The State must develop and implement 
procedures for referring suspected fraud and abuse cases to the State 
program integrity unit (if such a unit is established) and to 
appropriate law enforcement officials. Law enforcement officials include 
the--
    (1) U.S. Department of Health and Human Services Office of Inspector 
General (OIG);
    (2) U.S. Attorney's Office, Department of Justice (DOJ);
    (3) Federal Bureau of Investigation (FBI); and
    (4) State Attorney General's office.



Sec.  457.925  Preliminary investigation.

    If the State agency receives a complaint of fraud or abuse from any 
source or identifies questionable practices, the State agency must 
conduct a preliminary investigation or take otherwise appropriate action 
within a reasonable period of time to determine whether there is 
sufficient basis to warrant a full investigation.



Sec.  457.930  Full investigation, resolution, and reporting requirements.

    The State must establish and implement effective procedures for 
investigating and resolving suspected and apparent instances of fraud 
and abuse. Once the State determines that a full investigation is 
warranted, the State must implement procedures including, but not 
limited to the following:
    (a) Cooperate with and refer potential fraud and abuse cases to the 
State program integrity unit, if such a unit exists.
    (b) Conduct a full investigation.
    (c) Refer the fraud and abuse case to appropriate law enforcement 
officials.



Sec.  457.935  Sanctions and related penalties.

    (a) A State may not make payments for any item or service furnished, 
ordered, or prescribed under a separate child health program to any 
provider who has been excluded from participating in the Medicare and 
Medicaid programs.
    (b) The following provisions and their corresponding regulations 
apply to a State under title XXI, in the same manner as these provisions 
and regulations apply to a State under title XIX:
    (1) Part 455, subpart B of this chapter.
    (2) Section 1124 of the Act pertaining to disclosure of ownership 
and related information.
    (3) Section 1126 of the Act pertaining to disclosure by 
institutions, organizations, and agencies of owners and certain other 
individuals who have been convicted of certain offenses.
    (4) Section 1128 of the Act pertaining to exclusions.
    (5) Section 1128A of the Act pertaining to civil monetary penalties.
    (6) Section 1128B of the Act pertaining to criminal penalties for 
acts involving Federal health care programs.
    (7) Section 1128E of the Act pertaining to the reporting of final 
adverse actions on liability findings made

[[Page 463]]

against health care providers, suppliers, and practitioners under the 
health care fraud and abuse data collection program.



Sec.  457.940  Procurement standards.

    (a) A State must submit to CMS a written assurance that title XXI 
services will be provided in an effective and efficient manner. The 
State must submit the assurance--
    (1) With the initial State plan; or
    (2) For States with approved plans, with the first request to amend 
the approved plan.
    (b) A State must--
    (1) Provide for free and open competition, to the maximum extent 
practical, in the bidding of all procurement contracts for coverage or 
other services in accordance with the procurement requirements of 45 CFR 
74.43 or 45 CFR 92.36, as applicable; or
    (2) Use payment rates based on public or private payment rates for 
comparable services for comparable populations, consistent with 
principles of actuarial soundness as defined at Sec.  457.902.
    (c) A State may establish higher rates than permitted under 
paragraph (b) of this section if such rates are necessary to ensure 
sufficient provider participation, provider access, or to enroll 
providers who demonstrate exceptional efficiency or quality in the 
provision of services.
    (d) All contracts under this part must include provisions that 
define a sound and complete procurement contract, as required by 45 CFR 
part 74 or 45 CFR part 92, as applicable.
    (e) The State must provide to CMS, if requested, a description of 
the manner in which rates were developed in accordance with the 
requirements of paragraphs (b) or (c) of this section.

[66 FR 2685, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec.  457.945  Certification for contracts and proposals.

    Entities that contract with the State under a separate child health 
program must certify the accuracy, completeness, and truthfulness of 
information in contracts and proposals, including information on 
subcontractors, and other related documents, as specified by the State.



Sec.  457.950  Contract and payment requirements including certification of payment-related information.

    (a) Managed care entity (MCE). A State that makes payments to an MCE 
under a separate child health program, based on data submitted by the 
MCE, must ensure that its contract requires the MCE to provide--
    (1) Enrollment information and other information required by the 
State;
    (2) An attestation to the accuracy, completeness, and truthfulness 
of claims and payment data, under penalty of perjury;
    (3) Access for the State, CMS, and the HHS Office of the Inspector 
General to enrollee health claims data and payment data, in conformance 
with the appropriate privacy protections in the State; and
    (4) A guarantee that the MCE will not avoid costs for services 
covered in its contract by referring enrollees to publicly supported 
health care resources.
    (b) Fee-for-service entities. A State that makes payments to fee-
for-service entities under a separate child health program must--
    (1) Establish procedures to ensure that the entity certifies and 
attests that information on claim forms is truthful, accurate, and 
complete;
    (2) Ensure that fee-for-service entities understand that payment and 
satisfaction of the claims will be from Federal and State funds, and 
that any false claims may be prosecuted under applicable Federal or 
State laws; and
    (3) Require, as a condition of participation, that fee-for-service 
entities provide the State, CMS and/or the HHS Office of the Inspector 
General with access to enrollee health claims data, claims payment data 
and related records.



Sec.  457.955  Conditions necessary to contract as a managed care entity (MCE).

    (a) The State must assure that any entity seeking to contract as an 
MCE under a separate child health program has administrative and 
management

[[Page 464]]

arrangements or procedures designed to safeguard against fraud and 
abuse.
    (b) The State must ensure that the arrangements or procedures 
required in paragraph (a) of this section--
    (1) Enforce MCE compliance with all applicable Federal and State 
standards;
    (2) Prohibit MCEs from conducting any unsolicited personal contact 
with a potential enrollee by an employee or agent of a managed care 
entity for the purpose of influencing the individual to enroll with the 
entity; and
    (3) Include a mechanism for the MCE to report to the State, to CMS, 
or to the Office of Inspector General (OIG) as appropriate, information 
on violations of law by subcontractors or enrollees of an MCE and other 
individuals.
    (c) With respect to enrollees, the reporting requirement in 
paragraph (b)(3) of this section applies only to information on 
violations of law that pertain to enrollment in the plan, or the 
provision of, or payment for, health services.
    (d) The State may inspect, evaluate, and audit MCEs at any time, as 
necessary, in instances where the State determines that there is a 
reasonable possibility of fraudulent and abusive activity.



Sec.  457.960  Reporting changes in eligibility and redetermining eligibility.

    If the State requires reporting of changes in circumstances that may 
affect the enrollee's eligibility for child health assistance, the State 
must:
    (a) Establish procedures to ensure that enrollees make timely and 
accurate reports of any such change; and
    (b) Promptly redetermine eligibility when the State has information 
about these changes.



Sec.  457.965  Documentation.

    The State must include in each applicant's record facts to support 
the State's determination of the applicant's eligibility for SCHIP.



Sec.  457.980  Verification of enrollment and provider services received.

    The State must establish and maintain systems to identify, report, 
and verify the accuracy of claims for those enrolled children who meet 
requirements of section 2105(a) of the Act, where enhanced Federal 
medical assistance percentage computations apply.

[66 FR 2685, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]



Sec.  457.985  Integrity of professional advice to enrollees.

    The State must ensure through its contracts for coverage and 
services that its contractors comply with--
    (a) Section 422.206(a) of this chapter, which prohibits interference 
with health care professionals' advice to enrollees and requires that 
professionals provide information about treatment in an appropriate 
manner; and
    (b) Sections 422.208 and 422.210 of this chapter, which place 
limitations on physician incentive plans, and information disclosure 
requirements related to those physician incentive plans, respectively.



             Subpart J_Allowable Waivers: General Provisions

    Source: 66 FR 2686, Jan. 11, 2001, unless otherwise noted.



Sec.  457.1000  Basis, scope, and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2105(c)(2)(B) of the Act, which sets forth the 
requirements to permit a State to exceed the 10 percent cost limit on 
expenditures other than benefit expenditures; and
    (2) Section 2105(c)(3) of the Act, which permits the purchase of 
family coverage.
    (b) Scope. This subpart sets forth requirements for obtaining a 
waiver under title XXI.
    (c) Applicability. This subpart applies to separate child health 
programs; and applies to Medicaid expansion programs when the State 
claims administrative costs under title XXI and seeks a waiver of 
limitations on such claims for use of a community-based health delivery 
system. This subpart does not apply to demonstrations requested under 
section 1115 of the Act.

[66 FR 2686, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]

[[Page 465]]



Sec.  457.1003  CMS review of waiver requests.

    CMS will review the waiver requests under this subpart using the 
same time frames used for State plan amendments, as specified in Sec.  
457.160.



Sec.  457.1005  Cost-effective coverage through a community-based health delivery system.

    (a) Availability of waiver. The Secretary may waive the requirements 
of Sec.  457.618 (the 10 percent limit on expenditures not used for 
health benefits coverage for targeted low-income children, that meets 
the requirements of Sec.  457.410) in order to provide child health 
assistance to targeted low-income children under the State plan through 
a cost-effective, community-based health care delivery system, such as 
through contracts with health centers receiving funds under section 330 
of the Public Health Service Act or with hospitals such as those that 
receive disproportionate share payment adjustments under section 
1886(c)(5)(F) or section 1923 of the Act.
    (b) Requirements for obtaining a waiver. To obtain a waiver for 
cost-effective coverage through a community-based health delivery 
system, a State must demonstrate that--
    (1) The coverage meets all of the requirements of this part, 
including subpart D and subpart E.
    (2) The cost of such coverage, on an average per child basis, does 
not exceed the cost of coverage under the State plan.
    (c) Three-year approval period. An approved waiver remains in effect 
for no more than 3 years.
    (d) Application of cost savings. If the cost of coverage of a child 
under a community-based health delivery system is equal to or less than 
the cost of coverage of a child under the State plan, the State may use 
the difference in the cost of coverage for each child enrolled in a 
community-based health delivery system for--
    (1) Other child health assistance, health services initiatives, or 
outreach; or
    (2) Any reasonable costs necessary to administer the State's 
program.



Sec.  457.1010  Purchase of family coverage.

    A State may purchase family coverage that includes coverage for 
targeted low-income children if the State establishes that--
    (a) Purchase of family coverage is cost-effective under the 
standards described in Sec.  457.1015;
    (b) The State does not purchase the coverage if it would otherwise 
substitute for health insurance coverage that would be provided to 
targeted, low-income children but for the purchase of family coverage; 
and
    (c) The coverage for the family otherwise meets the requirements of 
this part.



Sec.  457.1015  Cost-effectiveness.

    (a) Definition. For purposes of this subpart, ``cost-effective'' 
means that the State's cost of purchasing family coverage that includes 
coverage for targeted low-income children is equal to or less than the 
State's cost of obtaining coverage under the State plan only for the 
eligible targeted low-income children involved.
    (b) Cost comparisons. A State may demonstrate cost-effectiveness by 
comparing the cost of coverage for the family to the cost of coverage 
only for the targeted low-income children under the health benefits 
package offered by the State under the State plan for which the child is 
eligible.
    (c) Individual or aggregate basis. (1) The State may base its 
demonstration of the cost-effectiveness of family coverage on an 
assessment of the cost of family coverage for individual families, done 
on a case-by-case basis, or on the cost of family coverage in the 
aggregate.
    (2) The State must assess cost-effectiveness in its initial request 
for a waiver and then annually.
    (3) For any State that chooses the aggregate cost method, if an 
annual assessment of the cost-effectiveness of family coverage in the 
aggregate reveals that it is not cost-effective, the State must assess 
cost-effectiveness on a case-by-case basis.
    (d) Reports on family coverage. A State with a waiver under this 
section must include in its annual report pursuant to Sec.  457.750, the 
cost of family coverage

[[Page 466]]

purchased under the waiver, and the number of children and adults, 
respectively, covered under family coverage pursuant to the waiver.



  Subpart K_State Plan Requirements: Applicant and Enrollee Protections

    Source: 66 FR 2687, Jan. 11, 2001, unless otherwise noted.



Sec.  457.1100  Basis, scope and applicability.

    (a) Statutory basis. This subpart interprets and implements--
    (1) Section 2101(a) of the Act, which states that the purpose of 
title XXI of the Act is to provide funds to States to enable them to 
initiate and expand the provision of child health assistance to 
uninsured, low-income children in an effective and efficient manner;
    (2) Section 2102(a)(7)(B) of the Act, which requires that the State 
plan include a description of the methods used to assure access to 
covered services, including emergency services;
    (3) Section 2102(b)(2) of the Act, which requires that the State 
plan include a description of methods of establishing and continuing 
eligibility and enrollment; and
    (4) Section 2103 of the Act, which outlines coverage requirements 
for a State that provides child health assistance through a separate 
child health program.
    (b) Scope. This subpart sets forth minimum standards for privacy 
protection and for procedures for review of matters relating to 
eligibility, enrollment, and health services.
    (c) Applicability. This subpart only applies to a separate child 
health program.



Sec.  457.1110  Privacy protections.

    The State must ensure that, for individual medical records and any 
other health and enrollment information maintained with respect to 
enrollees, that identifies particular enrollees (in any form), the State 
establishes and implements procedures to--
    (a) Abide by all applicable Federal and State laws regarding 
confidentiality and disclosure, including those laws addressing the 
confidentiality of information about minors and the privacy of minors, 
and privacy of individually identifiable health information;
    (b) Comply with subpart F of part 431 of this chapter;
    (c) Maintain the records and information in a timely and accurate 
manner;
    (d) Specify and make available to any enrollee requesting it--
    (1) The purposes for which information is maintained or used; and
    (2) To whom and for what purposes the information will be disclosed 
outside the State;
    (e) Except as provided by Federal and State law, ensure that each 
enrollee may request and receive a copy of records and information 
pertaining to the enrollee in a timely manner and that an enrollee may 
request that such records or information be supplemented or corrected.



Sec.  457.1120  State plan requirement: Description of review process.

    (a) The State must have one of the following review processes:
    (1) Program specific review. A process that meets the requirements 
of Sec. Sec.  457.1130, 457.1140, 457.1150, 457.1160, 457.1170, and 
457.1180; or
    (2) Statewide Standard Review. A process that complies with State 
review requirements currently in effect for all health insurance issuers 
(as defined in section 2791 of the Public Health Service Act) in the 
State.
    (b) The State plan must include a description of the State's review 
process.

[66 FR 33824, June 25, 2001]



Sec.  457.1130  Program specific review process: Matters subject to review.

    (a) Eligibility or enrollment matter. A State must ensure that an 
applicant or enrollee has an opportunity for review, consistent with 
Sec. Sec.  457.1140 and 457.1150, of a--
    (1) Denial of eligibility;
    (2) Failure to make a timely determination of eligibility; and
    (3) Suspension or termination of enrollment, including disenrollment 
for failure to pay cost sharing.
    (b) Health services matter. A State must ensure that an enrollee has 
an opportunity for external review of a--
    (1) Delay, denial, reduction, suspension, or termination of health 
services,

[[Page 467]]

in whole or in part, including a determination about the type or level 
of services; and
    (2) Failure to approve, furnish, or provide payment for health 
services in a timely manner.
    (c) Exception. A State is not required to provide an opportunity for 
review of a matter described in paragraph (a) or (b) of this section if 
the sole basis for the decision is a provision in the State plan or in 
Federal or State law requiring an automatic change in eligibility, 
enrollment, or a change in coverage under the health benefits package 
that affects all applicants or enrollees or a group of applicants or 
enrollees without regard to their individual circumstances.



Sec.  457.1140  Program specific review process: Core elements of review.

    In adopting the procedures for review of matters described in Sec.  
457.1130, a State must ensure that--
    (a) Reviews are conducted by an impartial person or entity in 
accordance with Sec.  457.1150;
    (b) Review decisions are timely in accordance with Sec.  457.1160;
    (c) Review decisions are written; and
    (d) Applicants and enrollees have an opportunity to--
    (1) Represent themselves or have representatives of their choosing 
in the review process;
    (2) Timely review their files and other applicable information 
relevant to the review of the decision;
    (3) Fully participate in the review process, whether the review is 
conducted in person or in writing, including by presenting supplemental 
information during the review process; and
    (4) Receive continued enrollment in accordance with Sec.  457.1170.



Sec.  457.1150  Program specific review process: Impartial review.

    (a) Eligibility or enrollment matter. The review of a matter 
described in Sec.  457.1130(a) must be conducted by a person or entity 
who has not been directly involved in the matter under review.
    (b) Health services matter. The State must ensure that an enrollee 
has an opportunity for an independent external review of a matter 
described in Sec.  457.1130(b). External review must be conducted by the 
State or a contractor other than the contractor responsible for the 
matter subject to external review.



Sec.  457.1160  Program specific review process: Time frames.

    (a) Eligibility or enrollment matter. A State must complete the 
review of a matter described in Sec.  457.1130(a) within a reasonable 
amount of time. In setting time frames, the State must consider the need 
for expedited review when there is an immediate need for health 
services.
    (b) Health services matter. The State must ensure that reviews are 
completed in accordance with the medical needs of the patient. If the 
medical needs of the patient do not dictate a shorter time frame, the 
review must be completed within the following time frames:
    (1) Standard timeframe. A State must ensure that external review, as 
described in Sec.  457.1150(b), is completed within 90 calendar days of 
the date an enrollee requests internal (if available) or external 
review. If both internal and external review are available to the 
enrollee, both types of review must be completed within the 90 calendar 
day period.
    (2) Expedited timeframe. A State must ensure that external review, 
as described in Sec.  457.1150(b), is completed within 72 hours of the 
time an enrollee requests external review, if the enrollee's physician 
or health plan determines that operating under the standard time frame 
could seriously jeopardize the enrollee's life or health or ability to 
attain, maintain or regain maximum function. If the enrollee has access 
to internal and external review, then each level of review may take no 
more than 72 hours. The State may extend the 72-hour time frame by up to 
14 calendar days, if the enrollee requests an extension.



Sec.  457.1170  Program specific review process: Continuation of enrollment.

    A State must ensure the opportunity for continuation of enrollment 
pending

[[Page 468]]

the completion of review of a suspension or termination of enrollment, 
including a decision to disenroll for failure to pay cost sharing.



Sec.  457.1180  Program specific review process: Notice.

    A State must provide enrollees and applicants timely written notice 
of any determinations required to be subject to review under Sec.  
457.1130 that includes the reasons for the determination, an explanation 
of applicable rights to review of that determination, the standard and 
expedited time frames for review, the manner in which a review can be 
requested, and the circumstances under which enrollment may continue 
pending review.



Sec.  457.1190  Application of review procedures when States offer premium assistance for group health plans.

    A State that has a premium assistance program through which it 
provides coverage under a group health plan that does not meet the 
requirements of a program specific review or a Statewide standard 
review, as described in Sec.  457.1120, must give applicants and 
enrollees the option to obtain health benefits coverage other than 
through that group health plan. The State must provide this option at 
initial enrollment and at each redetermination of eligibility.

[66 FR 2686, Jan. 11, 2001, as amended at 66 FR 33824, June 25, 2001]

[[Page 469]]



   SUBCHAPTER E_PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)





PART 460_PROGRAMS OF ALL-INCLUSIVE CARE FOR THE ELDERLY (PACE)--Table of Contents




                 Subpart A_Basis, Scope, and Definitions

Sec.
460.2 Basis.
460.4 Scope and purpose.
460.6 Definitions.

       Subpart B_PACE Organization Application and Waiver Process

460.10 Purpose.
460.12 Application requirements.
460.14 [Reserved]
460.16 [Reserved]
460.18 CMS evaluation of applications.
460.20 Notice of CMS determination.
460.22 Service area designation.
460.24 Limit on number of PACE program agreements.
460.26 Submission and evaluation of waiver requests.
460.28 Notice of CMS determination on waiver requests.

                    Subpart C_PACE Program Agreement

460.30 Program agreement requirement.
460.32 Content and terms of PACE program agreement.
460.34 Duration of PACE program agreement.

        Subpart D_Sanctions, Enforcement Actions, and Termination

460.40 Violations for which CMS may impose sanctions.
460.42 Suspension of enrollment or payment by CMS.
460.46 Civil money penalties.
460.48 Additional actions by CMS or the State.
460.50 Termination of PACE program agreement.
460.52 Transitional care during termination.
460.54 Termination procedures.

               Subpart E_PACE Administrative Requirements

460.60 PACE organizational structure.
460.62 Governing body.
460.64 Personnel qualifications.
460.66 Training.
460.68 Program integrity.
460.70 Contracted services.
460.71 Oversight of direct participant care.
460.72 Physical environment.
460.74 Infection control.
460.76 Transportation services.
460.78 Dietary services.
460.80 Fiscal soundness.
460.82 Marketing.

                         Subpart F_PACE Services

460.90 PACE benefits under Medicare and Medicaid.
460.92 Required services.
460.94 Required services for Medicare participants.
460.96 Excluded services.
460.98 Service delivery.
460.100 Emergency care.
460.102 Interdisciplinary team.
460.104 Participant assessment.
460.106 Plan of care.

                      Subpart G_Participant Rights

460.110 Bill of rights.
460.112 Specific rights to which a participant is entitled.
460.114 Restraints.
460.116 Explanation of rights.
460.118 Violation of rights.
460.120 Grievance process.
460.122 PACE organization's appeals process.
460.124 Additional appeal rights under Medicare or Medicaid.

        Subpart H_Quality Assessment and Performance Improvement

460.130 General rule.
460.132 Quality assessment and performance improvement plan.
460.134 Minimum requirements for quality assessment and performance 
          improvement program.
460.136 Internal quality assessment and performance improvement 
          activities.
460.138 Committees with community input.
460.140 Additional quality assessment activities.

           Subpart I_Participant Enrollment and Disenrollment

460.150 Eligibility to enroll in a PACE program.
460.152 Enrollment process.
460.154 Enrollment agreement.
460.156 Other enrollment procedures.
460.158 Effective date of enrollment.
460.160 Continuation of enrollment.
460.162 Voluntary disenrollment.
460.164 Involuntary disenrollment.

[[Page 470]]

460.166 Effective date of disenrollment.
460.168 Reinstatement in other Medicare and Medicaid programs.
460.170 Reinstatement in PACE.
460.172 Documentation of disenrollment.

                            Subpart J_Payment

460.180 Medicare payment to PACE organizations.
460.182 Medicaid payment.
460.184 Post-eligibility treatment of income.
460.186 PACE premiums.

                   Subpart K_Federal/State Monitoring

460.190 Monitoring during trial period.
460.192 Ongoing monitoring after trial period.
460.194 Corrective action.
460.196 Disclosure of review results.

      Subpart L_Data Collection, Record Maintenance, and Reporting

460.200 Maintenance of records and reporting of data.
460.202 Participant health outcomes data.
460.204 Financial recordkeeping and reporting requirements.
460.208 Financial statements.
460.210 Medical records.

    Authority: Secs. 1102, 1871, 1894(f), and 1934(f) of the Social 
Security Act (42 U.S.C. 1302, 1395, 1395eee(f), and 1396u-4(f)).

    Source: 64 FR 66279, Nov. 24, 1999, unless otherwise noted.

    Editorial Note: Nomenclature changes to part 460 appear at 67 FR 
61504, Oct. 1, 2002.



                 Subpart A_Basis, Scope, and Definitions



Sec.  460.2  Basis.

    This part implements sections 1894, 1905(a), and 1934 of the Act, 
which authorize the following:
    (a) Medicare payments to, and coverage of benefits under, PACE.
    (b) The establishment of PACE as a State option under Medicaid to 
provide for Medicaid payments to, and coverage of benefits under, PACE.



Sec.  460.4  Scope and purpose.

    (a) General. This part sets forth the following:
    (1) The requirements that an entity must meet to be approved as a 
PACE organization that operates a PACE program under Medicare and 
Medicaid.
    (2) How individuals may qualify to enroll in a PACE program.
    (3) How Medicare and Medicaid payments will be made for PACE 
services.
    (4) Provisions for Federal and State monitoring of PACE programs.
    (5) Procedures for sanctions and terminations.
    (b) Program purpose. PACE provides pre-paid, capitated, 
comprehensive health care services designed to meet the following 
objectives:
    (1) Enhance the quality of life and autonomy for frail, older 
adults.
    (2) Maximize dignity of, and respect for, older adults.
    (3) Enable frail, older adults to live in the community as long as 
medically and socially feasible.
    (4) Preserve and support the older adult's family unit.



Sec.  460.6  Definitions.

    As used in this part, unless the context indicates otherwise, the 
following definitions apply:
    Contract year means the term of a PACE program agreement, which is a 
calendar year, except that a PACE organization's initial contract year 
may be from 12 to 23 months, as determined by CMS.
    Medicare beneficiary means an individual who is entitled to Medicare 
Part A benefits or enrolled under Medicare Part B, or both.
    Medicaid participant means an individual determined eligible for 
Medicaid who is enrolled in a PACE program.
    Medicare participant means a Medicare beneficiary who is enrolled in 
a PACE program.
    PACE stands for programs of all-inclusive care for the elderly.
    PACE center is a facility which includes a primary care clinic, and 
areas for therapeutic recreation, restorative therapies, socialization, 
personal care, and dining, and which serves as the focal point for 
coordination and provision of most PACE services.
    PACE organization means an entity that has in effect a PACE program 
agreement to operate a PACE program under this part.
    PACE program means a program of all-inclusive care for the elderly 
that is

[[Page 471]]

operated by an approved PACE organization and that provides 
comprehensive healthcare services to PACE enrollees in accordance with a 
PACE program agreement.
    PACE program agreement means an agreement between a PACE 
organization, CMS, and the State administering agency for the operation 
of a PACE program.
    Participant means an individual who is enrolled in a PACE program.
    Services includes both items and services.
    State administering agency means the State agency responsible for 
administering the PACE program agreement.
    Trial period means the first 3 contract years in which a PACE 
organization operates under a PACE program agreement, including any 
contract year during which the entity operated under a PACE 
demonstration waiver program.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, Dec. 8, 2006]



       Subpart B_PACE Organization Application and Waiver Process



Sec.  460.10  Purpose.

    This subpart sets forth the application requirements for an entity 
that seeks approval from CMS as a PACE organization and the process by 
which a PACE organization may request waiver of certain regulatory 
requirements. The purpose of the waivers is to provide for reasonable 
flexibility in adapting the PACE model to the needs of particular 
organizations (such as those in rural areas).

[67 FR 61504, Oct. 1, 2002]



Sec.  460.12  Application requirements.

    (a) General. (1) An individual authorized to act for the entity must 
submit to CMS a complete application that describes how the entity meets 
all requirements in this part.
    (2) CMS accepts applications from entities that seek approval as 
PACE organizations beginning on February 22, 2000 except for the 
following:
    (i) Beginning on November 24, 1999, CMS accepts applications from 
entities that meet the requirements for priority consideration in 
processing of applications.
    (ii) Beginning on January 10, 2000, CMS accepts applications from 
entities that meet the requirements for special consideration in 
processing applications.
    (b) State assurance. An entity's application must be accompanied by 
an assurance from the State administering agency of the State in which 
the program is located indicating that the State--
    (1) Considers the entity to be qualified to be a PACE organization; 
and
    (2) Is willing to enter into a PACE program agreement with the 
entity.

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61505, Oct. 1, 2002; 71 
FR 71334, Dec. 8, 2006]



Sec.  460.14  [Reserved]



Sec.  460.16  [Reserved]



Sec.  460.18  CMS evaluation of applications.

    CMS evaluates an application for approval as a PACE organization on 
the basis of the following information:
    (a) Information contained in the application.
    (b) Information obtained through onsite visits conducted by CMS or 
the State administering agency.
    (c) Information obtained by the State administering agency.



Sec.  460.20  Notice of CMS determination.

    (a) Time limit for notification of determination. Within 90 days 
after an entity submits a complete application to CMS, CMS takes one of 
the following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of the 
basis for the denial and the process for requesting reconsideration of 
the denial.
    (3) Requests additional information needed to make a final 
determination.
    (b) Additional information requested. If CMS requests from an entity 
additional information needed to make a final determination, within 90 
days after CMS receives all requested information from the entity, CMS 
takes one of the following actions:
    (1) Approves the application.
    (2) Denies the application and notifies the entity in writing of the 
basis

[[Page 472]]

for the denial and the process for requesting reconsideration of the 
denial.
    (c) Deemed approval. An application is deemed approved if CMS fails 
to act on the application within 90 days after one of the following 
dates:
    (1) The date the application is submitted by the organization.
    (2) The date CMS receives all requested additional information.
    (d) Date of submission. For purposes of the 90-day time limit 
described in this section, the date that an application is submitted to 
CMS is the date on which the application is delivered to the address 
designated by CMS.



Sec.  460.22  Service area designation.

    (a) An entity must state in its application the service area it 
proposes for its program.
    (b) CMS, in consultation with the State administering agency, may 
exclude from designation an area that is already covered under another 
PACE program agreement to avoid unnecessary duplication of services and 
avoid impairing the financial and service viability of an existing 
program.



Sec.  460.24  Limit on number of PACE program agreements.

    (a) Numerical limit. Except as specified in paragraph (b) of this 
section, CMS does not permit the number of PACE organizations with which 
agreements are in effect under this part or under section 9412(b) of the 
Omnibus Budget Reconciliation Act of 1986, to exceed the following:
    (1) As of August 5, 1997--40.
    (2) As of each succeeding August 5, the numerical limit for the 
preceding year plus 20, without regard to the actual number of 
agreements in effect on a previous anniversary date. (For example, the 
limit is 60 on August 5, 1998 and 80 on August 5, 1999.)
    (b) Exception. The numerical limit does not apply to a private, for-
profit PACE organization that meets the following conditions:
    (1) Is operating under a demonstration project waiver under section 
1894(h) and 1934(h) of the Act.
    (2) Was operating under a waiver and subsequently qualifies for PACE 
organization status in accordance with sections 1894(a)(3)(B)(ii) and 
1934(a)(3)(B)(ii) of the Act.



Sec.  460.26  Submission and evaluation of waiver requests.

    (a)(1) A PACE organization must submit its waiver request through 
the State administering agency for initial review. The State 
administering agency forwards waiver requests to CMS along with any 
concerns or conditions regarding the waiver.
    (2) Entities submitting an application to become a PACE organization 
may submit a waiver request. The entity must submit its waiver request 
through the State administering agency for initial review. The State 
administering agency forwards the waiver requests to CMS along with any 
concerns or conditions regarding the waiver. The waiver request is 
submitted as a document separate from the application but may be 
submitted in conjunction with and at the same time as the application.
    (b) CMS evaluates a waiver request from a PACE organization on the 
basis of the following information:
    (1) The adequacy of the description and rationale for the waiver 
provided by the PACE organization or PACE applicant, including any 
additional information requested by CMS.
    (2) Information obtained by CMS and the State administering agency 
in on-site reviews and monitoring of the PACE organization.
    (c) Requirements related to the following principles may not be 
waived:
    (1) A focus on frail elderly qualifying individuals who require the 
level of care provided in a nursing facility.
    (2) The delivery of comprehensive, integrated acute and long-term 
care services.
    (3) An interdisciplinary team approach to care management and 
service delivery.
    (4) Capitated, integrated financing that allows the provider to pool 
payments received from public and private programs and individuals.
    (5) The assumption by the provider of full financial risk.

[67 FR 61505, Oct. 1, 2002; 67 FR 63966, Oct. 16, 2002; 71 FR 71334, 
Dec. 8, 2006]

[[Page 473]]



Sec.  460.28  Notice of CMS determination on waiver requests.

    (a) Time limit for notification of determination. Within 90 days 
after receipt of a waiver request, CMS takes one of the following 
actions:
    (1) Approves the request.
    (2) Denies the request and notifies the PACE organization or PACE 
applicant in writing of the basis of the denial.
    (b) Date of receipt. For purposes of the 90-day time limit described 
in this section, the date that a waiver request is received by CMS from 
the State administering agency is the date on which the request is 
delivered to the address designated by CMS.
    (c) Waiver approval. (1) A waiver request is deemed approved if CMS 
fails to act on the request within 90 days after the date the waiver 
request is received by CMS.
    (2) CMS may withdraw approval of a waiver for good cause.

[67 FR 61505, Oct. 1, 2002, as amended at 71 FR 71334, Dec. 8, 2006]



                    Subpart C_PACE Program Agreement



Sec.  460.30  Program agreement requirement.

    (a) A PACE organization must have an agreement with CMS and the 
State administering agency for the operation of a PACE program by the 
PACE organization under Medicare and Medicaid.
    (b) The agreement must be signed by an authorized official of CMS, 
the PACE organization and the State administering agency.
    (c) CMS may only sign program agreements with PACE organizations 
that are located in States with approved State plan amendments electing 
PACE as an optional benefit under their Medicaid State plan.

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61505, Oct. 1, 2002]



Sec.  460.32  Content and terms of PACE program agreement.

    (a) Required content. A PACE program agreement must include the 
following information:
    (1) A designation of the service area of the organization's program. 
The area may be identified by county, zip code, street boundaries, 
census tract, block, or tribal jurisdictional area, as applicable. CMS 
and the State administering agency must approve any change in the 
designated service area.
    (2) The organization's commitment to meet all applicable 
requirements under Federal, State, and local laws and regulations, 
including provisions of the Civil Rights Act, the Age Discrimination 
Act, and the Americans With Disabilities Act.
    (3) The effective date and term of the agreement.
    (4) A description of the organizational structure of the PACE 
organization and information on administrative contacts, including the 
following:
    (i) Name and phone number of the program director.
    (ii) Name of all governing body members.
    (iii) Name and phone number of a contact person for the governing 
body.
    (5) A participant bill of rights approved by CMS and an assurance 
that the rights and protections will be provided.
    (6) A description of the process for handling participant grievances 
and appeals.
    (7) A statement of the organization's policies on eligibility, 
enrollment, voluntary disenrollment, and involuntary disenrollment.
    (8) A description of services available to participants.
    (9) A description of the organization's quality assessment and 
performance improvement program.
    (10) A statement of the levels of performance required by CMS on 
standard quality measures.
    (11) A statement of the data and information required by CMS and the 
State administering agency to be collected on participant care.
    (12) The Medicaid capitation rate and the methodology used to 
calculate the Medicare capitation rate.
    (13) A description of procedures that the organization will follow 
if the PACE program agreement is terminated.
    (b) Optional content. (1) An agreement may provide additional 
requirements

[[Page 474]]

for individuals to qualify as PACE program eligible individuals, in 
accordance with Sec.  460.150(b)(4).
    (2) An agreement may contain any additional terms and conditions 
agreed to by the parties if the terms and conditions are consistent with 
sections 1894 and 1934 of the Act and regulations in this part.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, Dec. 8, 2006]



Sec.  460.34  Duration of PACE program agreement.

    An agreement is effective for a contract year, but may be extended 
for additional contract years in the absence of a notice by a party to 
terminate.



        Subpart D_Sanctions, Enforcement Actions, and Termination



Sec.  460.40  Violations for which CMS may impose sanctions.

    In addition to other remedies authorized by law, CMS may impose any 
of the sanctions specified in Sec. Sec.  460.42 and 460.46 if CMS 
determines that a PACE organization commits any of the following 
violations:
    (a) Fails substantially to provide to a participant medically 
necessary items and services that are covered PACE services, if the 
failure has adversely affected (or has substantial likelihood of 
adversely affecting) the participant.
    (b) Involuntarily disenrolls a participant in violation of Sec.  
460.164.
    (c) Discriminates in enrollment or disenrollment among Medicare 
beneficiaries or Medicaid recipients, or both, who are eligible to 
enroll in a PACE program, on the basis of an individual's health status 
or need for health care services.
    (d) Engages in any practice that would reasonably be expected to 
have the effect of denying or discouraging enrollment, except as 
permitted by Sec.  460.150, by Medicare beneficiaries or Medicaid 
recipients whose medical condition or history indicates a need for 
substantial future medical services.
    (e) Imposes charges on participants enrolled under Medicare or 
Medicaid for premiums in excess of the premiums permitted.
    (f) Misrepresents or falsifies information that is furnished--
    (1) To CMS or the State under this part; or
    (2) To an individual or any other entity under this part.
    (g) Prohibits or otherwise restricts a covered health care 
professional from advising a participant who is a patient of the 
professional about the participant's health status, medical care, or 
treatment for the participant's condition or disease, regardless of 
whether the PACE program provides benefits for that care or treatment, 
if the professional is acting within his or her lawful scope of 
practice.
    (h) Operates a physician incentive plan that does not meet the 
requirements of section 1876(i)(8) of the Act.
    (i) Employs or contracts with any individual who is excluded from 
participation in Medicare or Medicaid under section 1128 or section 
1128A of the Act (or with any entity that employs or contracts with that 
individual) for the provision of health care, utilization review, 
medical social work, or administrative services.



Sec.  460.42  Suspension of enrollment or payment by CMS.

    (a) Enrollment. If a PACE organization commits one or more 
violations specified in Sec.  460.40, CMS may suspend enrollment of 
Medicare beneficiaries after the date CMS notifies the organization of 
the violation.
    (b) Payment. If a PACE organization commits one or more violations 
specified in Sec.  460.40, for individuals enrolled after the date CMS 
notifies the PACE organization of the violation, CMS may take the 
following actions:
    (1) Suspend Medicare payment to the PACE organization.
    (2) Deny payment to the State for medical assistance for services 
furnished under the PACE program agreement.
    (c) Term of suspension. A suspension or denial of payment remains in 
effect until CMS is satisfied that the following conditions are met:
    (1) The PACE organization has corrected the cause of the violation.
    (2) The violation is not likely to recur.

[[Page 475]]



Sec.  460.46  Civil money penalties.

    (a) CMS may impose civil money penalties up to the following maximum 
amounts:
    (1) For each violation regarding enrollment or disenrollment 
specified in Sec.  460.40 (c) or (d), $100,000 plus $15,000 for each 
individual not enrolled as a result of the PACE organization's 
discrimination in enrollment or disenrollment or practice that would 
deny or discourage enrollment.
    (2) For each violation regarding excessive premiums specified in 
Sec.  460.40(e), $25,000 plus double the excess amount above the 
permitted premium charged a participant by the PACE organization. (The 
excess amount charged is deducted from the penalty and returned to the 
participant).
    (3) For each misrepresentation or falsification of information, 
specified in Sec.  460.40(f)(1), $100,000.
    (4) For any other violation specified in Sec.  460.40, $25,000.
    (b) The provisions of section 1128A of the Act (other than 
subsections (a) and (b)) apply to a civil money penalty under this 
section in the same manner as they apply to a civil money penalty or 
proceeding under section 1128A(a).



Sec.  460.48  Additional actions by CMS or the State.

    After consultation with the State administering agency, if CMS 
determines that the PACE organization is not in substantial compliance 
with requirements in this part, CMS or the State administering agency 
may take one or more of the following actions:
    (a) Condition the continuation of the PACE program agreement upon 
timely execution of a corrective action plan.
    (b) Withhold some or all payments under the PACE program agreement 
until the organization corrects the deficiency.
    (c) Terminate the PACE program agreement.



Sec.  460.50  Termination of PACE program agreement.

    (a) Termination of agreement by CMS or State. CMS or a State 
administering agency may terminate at any time a PACE program agreement 
for cause, including, but not limited to the circumstances in paragraphs 
(b) or (c) of this section.
    (b) Termination due to uncorrected deficiencies. CMS or the State 
administering agency may terminate a PACE program agreement if CMS or 
the State administering agency determines that both of the following 
circumstances exist:
    (1) Either--
    (i) There are significant deficiencies in the quality of care 
furnished to participants; or
    (ii) The PACE organization failed to comply substantially with 
conditions for a PACE program or PACE organization under this part, or 
with terms of its PACE program agreement.
    (2) Within 30 days of the date of the receipt of written notice of a 
determination made under paragraph (b)(1) of this section, the PACE 
organization failed to develop and successfully initiate a plan to 
correct the deficiencies, or failed to continue implementation of the 
plan of correction.
    (c) Termination due to health and safety risk. CMS or a State 
administering agency may terminate a PACE program agreement if CMS or 
the State administering agency determines that the PACE organization 
cannot ensure the health and safety of its participants. This 
determination may result from the identification of deficiencies that 
CMS or the State administering agency determines cannot be corrected.
    (d) Termination of agreement by PACE organization. A PACE 
organization may terminate an agreement after timely notice to CMS, the 
State administering agency, and participants, as follows:
    (1) To CMS and the State administering agency, 90 days before 
termination.
    (2) To participants, 60 days before termination.



Sec.  460.52  Transitional care during termination.

    (a) The PACE organization must develop a detailed written plan for 
phase-down in the event of termination, which describes how the 
organization plans to take the following actions:
    (1) Inform participants, the community, CMS and the State 
administering

[[Page 476]]

agency in writing about termination and transition procedures.
    (2) Assist participants to obtain reinstatement of conventional 
Medicare and Medicaid benefits.
    (3) Transition participants' care to other providers.
    (4) Terminate marketing and enrollment activities.
    (b) An entity whose PACE program agreement is in the process of 
being terminated must provide assistance to each participant in 
obtaining necessary transitional care through appropriate referrals and 
making the participant's medical records available to new providers.



Sec.  460.54  Termination procedures.

    (a) Except as provided in paragraph (b) of this section, if CMS 
terminates an agreement with a PACE organization, it furnishes the PACE 
organization with the following:
    (1) A reasonable opportunity to develop and implement a corrective 
action plan to correct the deficiencies that were the basis of CMS's 
determination that cause exists for termination.
    (2) Reasonable notice and opportunity for hearing (including the 
right to appeal an initial determination) before terminating the 
agreement.
    (b) CMS may terminate an agreement without invoking the procedures 
described in paragraph (a) of this section if CMS determines that a 
delay in termination, resulting from compliance with these procedures 
before termination, would pose an imminent and serious risk to the 
health of participants enrolled with the organization.



               Subpart E_PACE Administrative Requirements



Sec.  460.60  PACE organizational structure.

    (a) A PACE organization must be, or be a distinct part of, one of 
the following:
    (1) An entity of city, county, State, or Tribal government.
    (2) A private not-for-profit entity organized for charitable 
purposes under section 501(c)(3) of the Internal Revenue Code of 1986. 
The entity may be a corporation, a subsidiary of a larger corporation, 
or a department of a corporation.
    (b) Program director. The organization must employ, or contract with 
in accordance with Sec.  460.70, a program director who is responsible 
for oversight and administration of the entity.
    (c) Medical director. The organization must employ, or contract with 
in accordance with Sec.  460.70, a medical director who is responsible 
for the delivery of participant care, for clinical outcomes, and for the 
implementation, as well as oversight, of the quality assessment and 
performance improvement program.
    (d) Organizational chart. (1) The PACE organization must have a 
current organizational chart showing officials in the PACE organization 
and relationships to any other organizational entities.
    (2) The chart for a corporate entity must indicate the PACE 
organization's relationship to the corporate board and to any parent, 
affiliate, or subsidiary corporate entities.
    (3) A PACE organization planning a change in organizational 
structure must notify CMS and the State administering agency, in 
writing, at least 14 days before the change takes effect.

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61505, Oct. 1, 2002; 71 
FR 71334, Dec. 8, 2006]



Sec.  460.62  Governing body.

    (a) Governing body. A PACE organization must be operating under the 
control of an identifiable governing body (for example, a board of 
directors) or a designated person functioning as a governing body with 
full legal authority and responsibility for the following:
    (1) Governance and operation of the organization.
    (2) Development of policies consistent with the mission.
    (3) Management and provision of all services, including the 
management of contractors.
    (4) Establishment of personnel policies that address adequate notice 
of termination by employees or contractors with direct patient care 
responsibilities.
    (5) Fiscal operations.
    (6) Development of policies on participant health and safety, 
including a

[[Page 477]]

comprehensive, systemic operational plan to ensure the health and safety 
of participants.
    (7) Quality assessment and performance improvement program.
    (b) Participant advisory committee. (1) A PACE organization must 
establish a participant advisory committee to provide advice to the 
governing body on matters of concern to participants. Participants and 
representatives of participants must constitute a majority of the 
membership of this committee.
    (2) The participant advisory committee must provide the liaison to 
the governing body with meeting minutes that include participant issues.
    (c) Participant representation on the governing body. (1) A PACE 
organization must ensure participant representation on issues related to 
participant care. This shall be achieved by having a participant 
representative on the governing body.
    (2) The participant representative is a liaison of the participant 
advisory committee to the PACE organization governing body.
    (3) Duty of the participant representative. The participant 
representative must present issues from the participant advisory 
committee to the governing body.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, Dec. 8, 2006]



Sec.  460.64  Personnel qualifications for staff with direct participant contact.

    (a) General qualification requirements. Each member of the PACE 
organization's staff that has direct participant contact, (employee or 
contractor) must meet the following conditions:
    (1) Be legally authorized (for example, currently licensed, 
registered or certified if applicable) to practice in the State in which 
he or she performs the function or action;
    (2) Only act within the scope of his or her authority to practice;
    (3) Have 1 year of experience with a frail or elderly population;
    (4) Meet a standardized set of competencies for the specific 
position description established by the PACE organization and approved 
by CMS before working independently.
    (5) Be medically cleared for communicable diseases and have all 
immunizations up-to-date before engaging in direct participant contact.
    (b) Federally-defined qualifications for physician. In addition to 
the qualification specified in paragraph (a) of this section, a 
physician must meet the qualifications and conditions in Sec.  410.20 of 
this chapter.

[71 FR 71334, Dec. 8, 2006]



Sec.  460.66  Training.

    (a) The PACE organization must provide training to maintain and 
improve the skills and knowledge of each staff member with respect to 
the individual's specific duties that results in his or her continued 
ability to demonstrate the skills necessary for the performance of the 
position.
    (b) The PACE organization must develop a training program for each 
personal care attendant to establish the individual's competency in 
furnishing personal care services and specialized skills associated with 
specific care needs of individual participants.
    (c) Personal care attendants must exhibit competency before 
performing personal care services independently.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.68  Program integrity.

    (a) Persons with criminal convictions. A PACE organization must not 
employ individuals or contract with organizations or individuals--
    (1) Who have been excluded from participation in the Medicare or 
Medicaid programs;
    (2) Who have been convicted of criminal offenses related to their 
involvement in Medicaid, Medicare, other health insurance or health care 
programs, or social service programs under title XX of the Act; or
    (3) In any capacity where an individual's contact with participants 
would pose a potential risk because the individual has been convicted of 
physical, sexual, drug, or alcohol abuse.
    (b) Direct or indirect interest in contracts. The PACE organization 
shall identify members of its governing body or any immediate family 
member having a direct or indirect interest in any

[[Page 478]]

contract that supplies any administrative or care-related service or 
materials to the PACE organization.
    (1) PACE organizations must develop policies and procedures for 
handling any direct or indirect conflict of interest by a member of the 
governing body or by the member's immediate family.
    (2) In the event of a direct or indirect conflict of interest by a 
member of the PACE organization's governing body or his or her immediate 
family member, the board member must--
    (i) Fully disclose the exact nature of the conflict to the board of 
directors and have the disclosure documented; and
    (ii) Recuse himself or herself from discussing, negotiating, or 
voting on any issue or contract that could result in an inappropriate 
conflict.
    (c) Disclosure and recusal requirements. A PACE organization must 
have a formal process in place to gather information related to 
paragraphs (a) and (b) of this section and must be able to respond in 
writing to a request for information from CMS within a reasonable amount 
of time.

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61505, Oct. 1, 2002; 71 
FR 71335, Dec. 8, 2006]



Sec.  460.70  Contracted services.

    (a) General rule. The PACE organization must have a written contract 
with each outside organization, agency, or individual that furnishes 
administrative or care-related services not furnished directly by the 
PACE organization except for emergency services as described in Sec.  
460.100.
    (b) Contract requirements. A contract between a PACE organization 
and a contractor must meet the following requirements:
    (1) The PACE organization must contract only with an entity that 
meets all applicable Federal and State requirements, including, but not 
limited to, the following:
    (i) An institutional contractor, such as a hospital or skilled 
nursing facility, must meet Medicare or Medicaid participation 
requirements.
    (ii) A practitioner or supplier must meet Medicare or Medicaid 
requirements applicable to the services it furnishes.
    (iii) A contractor must comply with the requirements of this part 
with respect to service delivery, participant rights, and quality 
assessment and performance improvement activities.
    (2) A contractor must be accessible to participants, located either 
within or near the PACE organization's service area.
    (3) A PACE organization must designate an official liaison to 
coordinate activities between contractors and the organization.
    (c) List of contractors. A current list of contractors must be on 
file at the PACE center and a copy must be provided to anyone upon 
request.
    (d) Content of contract. Each contract must be in writing and 
include the following information:
    (1) Name of contractor.
    (2) Services furnished (including work schedule if appropriate).
    (3) Payment rate and method.
    (4) Terms of the contract, including beginning and ending dates, 
methods of extension, renegotiation, and termination.
    (5) Contractor agreement to do the following:
    (i) Furnish only those services authorized by the PACE 
interdisciplinary team.
    (ii) Accept payment from the PACE organization as payment in full, 
and not bill participants, CMS, the State administering agency, or 
private insurers.
    (iii) Hold harmless CMS, the State, and PACE participants if the 
PACE organization does not pay for services performed by the contractor 
in accordance with the contract.
    (iv) Not assign the contract or delegate duties under the contract 
unless it obtains prior written approval from the PACE organization.
    (v) Submit reports required by the PACE organization.
    (vi) Agree to perform all the duties related to its position as 
specified in this part.
    (vii) Participate in interdisciplinary team meeting as required.
    (viii) Agree to be accountable to the PACE organization.

[[Page 479]]

    (ix) Cooperate with the competency evaluation program and direct 
participant care requirements specified in Sec.  460.71.
    (e) Contracting with another entity to furnish PACE Center services. 
(1) A PACE organization may only contract for PACE Center services if it 
is fiscally sound as defined in Sec.  460.80(a) of this part and has 
demonstrated competence with the PACE model as evidenced by successful 
monitoring by CMS and the State administering agency.
    (2) The PACE organization retains responsibility for all 
participants and may only contract for the PACE Center services 
identified in Sec.  460.98(d).

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61505, Oct. 1, 2002; 71 
FR 71335, Dec. 8, 2006]



Sec.  460.71  Oversight of direct participant care.

    (a) The PACE organization must ensure that all employees and 
contracted staff furnishing care directly to participants demonstrate 
the skills necessary for performance of their position.
    (1) The PACE organization must provide each employee and all 
contracted staff with an orientation. The orientation must include at a 
minimum the organization's mission, philosophy, policies on participant 
rights, emergency plan, ethics, the PACE benefit, and any policies 
related to the job duties of specific staff.
    (2) The PACE organization must develop a competency evaluation 
program that identifies those skills, knowledge, and abilities that must 
be demonstrated by direct participant care staff (employees and 
contractors).
    (3) The competency program must be evidenced as completed before 
performing participant care and on an ongoing basis by qualified 
professionals.
    (4) The PACE organization must designate a staff member to oversee 
these activities for employees and work with the PACE contractor liaison 
to ensure compliance by contracted staff.
    (b) The PACE organization must develop a program to ensure that all 
staff furnishing direct participant care services meet the following 
requirements:
    (1) Comply with any State or Federal requirements for direct patient 
care staff in their respective settings.
    (2) Comply with the requirements of Sec.  460.68(a) regarding 
persons with criminal convictions.
    (3) Have verified current certifications or licenses for their 
respective positions.
    (4) Are free of communicable diseases and are up to date with 
immunizations before performing direct patient care.
    (5) Have been oriented to the PACE program.
    (6) Agree to abide by the philosophy, practices, and protocols of 
the PACE organization.

[67 FR 61505, Oct. 1, 2002, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.72  Physical environment.

    (a) Space and equipment--(1) Safe design. A PACE center must meet 
the following requirements:
    (i) Be designed, constructed, equipped, and maintained to provide 
for the physical safety of participants, personnel, and visitors.
    (ii) Ensure a safe, sanitary, functional, accessible, and 
comfortable environment for the delivery of services that protects the 
dignity and privacy of the participant.
    (2) Primary care clinic. The PACE center must include sufficient 
suitable space and equipment to provide primary medical care and 
suitable space for team meetings, treatment, therapeutic recreation, 
restorative therapies, socialization, personal care, and dining.
    (3) Equipment maintenance. (i) A PACE organization must establish, 
implement, and maintain a written plan to ensure that all equipment is 
maintained in accordance with the manufacturer's recommendations.
    (ii) A PACE organization must perform the manufacturer's recommended 
maintenance on all equipment as indicated in the organization's written 
plan.
    (b) Fire safety--(1) General rule. Except as otherwise provided in 
this section--
    (i) A PACE center must meet the applicable provisions of the 2000 
edition of the Life Safety Code (LSC) of the National Fire Protection 
Association

[[Page 480]]

that apply to the type of setting in which the center is located. The 
Director of the Office of the Federal Register has approved the NFPA 101 
[reg] 2000 edition of the Life Safety Code, issued January 
14, 2000, for incorporation by reference in accordance with 5 U.S.C. 
552(a) and 1 CFR part 51. A copy of the Code is available for inspection 
at the CMS Information Resource Center, 7500 Security Boulevard, 
Baltimore, MD or at the National Archives and Records Administration 
(NARA). For information on the availability of this material at NARA, 
call 202-741-6030, or go to: http://www.archives.gov/federal--register/
code--of--federal--regulations/ibr--locations.html. Copies may be 
obtained from the National Fire Protection Association, 1 Batterymarch 
Park, Quincy, MA 02269. If any changes in this edition of the Code are 
incorporated by reference, CMS will publish notice in the Federal 
Register to announce the changes.
    (ii) Chapter 19.3.6.3.2, exception number 2 of the adopted edition 
of the LSC does not apply to PACE centers.
    (2) Exceptions. (i) The Life Safety Code provisions do not apply in 
a State in which CMS determines that a fire and safety code imposed by 
State law adequately protects participants and staff.
    (ii) CMS may waive specific provisions of the Life Safety Code that, 
if rigidly applied, would result in unreasonable hardship on the Pace 
center, but only if the waiver does not adversely affect the health and 
safety of the participants and staff.
    (3) Beginning March 13, 2006, a PACE center must be in compliance 
with Chapter 9.2.9, Emergency Lighting.
    (4) Beginning March 13, 2006, Chapter 19.3.6.3.2, exception number 2 
does not apply to PACE centers.
    (5) Notwithstanding any provisions of the 2000 edition of the Life 
Safety Code to the contrary, a PACE center may install alcohol-based 
hand rub dispensers in its facility if--
    (i) Use of alcohol-based hand rub dispensers does not conflict with 
any State or local codes that prohibit or otherwise restrict the 
placement of alcohol-based hand rub dispensers in health care 
facilities;
    (ii) The dispensers are installed in a manner that minimizes leaks 
and spills that could lead to falls;
    (iii) The dispensers are installed in a manner that adequately 
protects against inappropriate access;
    (iv) The dispensers are installed in accordance with chapter 
18.3.2.7 or chapter 19.3.2.7 of the 2000 edition of the Life Safety 
Code, as amended by NFPA Temporary Interim Amendment 00-1(101), issued 
by the Standards Council of the National Fire Protection Association on 
April 15, 2004. The Director of the Office of the Federal Register has 
approved NFPA Temporary Interim Amendment 00-1(101) for incorporation by 
reference in accordance with 5 U.S.C. 552(a) and 1 CFR part 51. A copy 
of the amendment is available for inspection at the CMS Information 
Resource Center, 7500 Security Boulevard, Baltimore, MD and at the 
Office of the Federal Register, 800 North Capitol Street NW., Suite 700, 
Washington, DC. Copies may be obtained from the National Fire Protection 
Association, 1 Batterymarch Park, Quincy, MA 02269; and
    (v) The dispensers are maintained in accordance with dispenser 
manufacturer guidelines.
    (c) Emergency and disaster preparedness--(1) Procedures. The PACE 
organization must establish, implement, and maintain documented 
procedures to manage medical and nonmedical emergencies and disasters 
that are likely to threaten the health or safety of the participants, 
staff, or the public.
    (2) Emergencies defined. Emergencies include, but are not limited, 
to the following:
    (i) Fire.
    (ii) Equipment, water, or power failure.
    (iii) Care-related emergencies.
    (iv) Natural disasters likely to occur in the organization's 
geographic area. (An organization is not required to develop emergency 
plans for natural disasters that typically do not affect its geographic 
location.)
    (3) Emergency training. A PACE organization must provide appropriate 
training and periodic orientation to all staff (employees and 
contractors) and participants to ensure that staff demonstrate a 
knowledge of emergency

[[Page 481]]

procedures, including informing participants what to do, where to go, 
and whom to contact in case of an emergency.
    (4) Availability of emergency equipment. Emergency equipment, 
including easily portable oxygen, airways, suction, and emergency drugs, 
along with staff who know how to use the equipment, must be on the 
premises of every center at all times and be immediately available. The 
organization must have a documented plan to obtain emergency medical 
assistance from sources outside the center when needed.
    (5) Annual test of emergency and disaster plan. At least annually, a 
PACE organization must actually test, evaluate, and document the 
effectiveness of its emergency and disaster plans.

[64 FR 66279, Nov. 24, 1999, as amended at 68 FR 1386, Jan. 10, 2003; 69 
FR 49266, Aug. 11, 2004; 70 FR 15238, Mar. 25, 2005; 71 FR 55340, Sept. 
22, 2006; 71 FR 71335, Dec. 8, 2006]



Sec.  460.74  Infection control.

    (a) Standard procedures. The PACE organization must follow accepted 
policies and standard procedures with respect to infection control, 
including at least the standard precautions developed by the Centers for 
Disease Control and Prevention.
    (b) Infection control plan. The PACE organization must establish, 
implement, and maintain a documented infection control plan that meets 
the following requirements:
    (1) Ensures a safe and sanitary environment.
    (2) Prevents and controls the transmission of disease and infection.
    (c) Contents of infection control plan. The infection control plan 
must include, but is not limited to, the following:
    (1) Procedures to identify, investigate, control, and prevent 
infections in every Pace center and in each participant's place of 
residence.
    (2) Procedures to record any incidents of infection.
    (3) Procedures to analyze the incidents of infection to identify 
trends and develop corrective actions related to the reduction of future 
incidents.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, Dec. 8, 2006]



Sec.  460.76  Transportation services.

    (a) Safety, accessibility, and equipment. A PACE organization's 
transportation services must be safe, accessible, and equipped to meet 
the needs of the participant population.
    (b) Maintenance of vehicles. (1) If the PACE organization owns, 
rents, or leases transportation vehicles, it must maintain these 
vehicles in accordance with the manufacturer's recommendations.
    (2) If a contractor provides transportation services, the PACE 
organization must ensure that the vehicles are maintained in accordance 
with the manufacturer's recommendations.
    (c) Communication with PACE center. The PACE organization must 
ensure that transportation vehicles are equipped to communicate with the 
PACE center.
    (d) Training. The PACE organization must train all transportation 
personnel (employees and contractors) in the following:
    (1) Managing the special needs of participants.
    (2) Handling emergency situations.
    (e) Changes in care plan. As part of the interdisciplinary team 
process, PACE organization staff (employees and contractors) must 
communicate relevant changes in a participant's care plan to 
transportation personnel.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, Dec. 8, 2006]



Sec.  460.78  Dietary services.

    (a) Meal requirements. (1) Except as specified in paragraphs (a)(2) 
or (a)(3) of this section, the PACE organization must ensure, through 
the assessment and care planning process, that each participant receives 
nourishing, palatable, well-balanced meals that meet the participant's 
daily nutritional and special dietary needs. Each meal must meet the 
following requirements:
    (i) Be prepared by methods that conserve nutritive value, flavor, 
and appearance.
    (ii) Be prepared in a form designed to meet individual needs.
    (iii) Be prepared and served at the proper temperature.
    (2) The PACE organization must provide substitute foods or 
nutritional

[[Page 482]]

supplements that meet the daily nutritional and special dietary needs of 
any participant who has any of the following problems:
    (i) Refuses the food served.
    (ii) Cannot tolerate the food served.
    (iii) Does not eat adequately.
    (3) The PACE organization must provide nutrition support to meet the 
daily nutritional needs of a participant, if indicated by his or her 
medical condition or diagnosis. Nutrition support consists of tube 
feedings, total parenteral nutrition, or peripheral parenteral 
nutrition.
    (b) Sanitary conditions. The PACE organization must do the 
following:
    (1) Procure foods (including nutritional supplements and nutrition 
support items) from sources approved, or considered satisfactory, by 
Federal, State, Tribal, or local authorities with jurisdiction over the 
service area of the organization.
    (2) Store, prepare, distribute, and serve foods (including 
nutritional supplements and nutrition support items) under sanitary 
conditions.
    (3) Dispose of garbage and refuse properly.

[64 FR 66279, Nove. 24, 1999, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.80  Fiscal soundness.

    (a) Fiscally sound operation. A PACE organization must have a 
fiscally sound operation, as demonstrated by the following:
    (1) Total assets greater than total unsubordinated liabilities.
    (2) Sufficient cash flow and adequate liquidity to meet obligations 
as they become due.
    (3) A net operating surplus or a financial plan for maintaining 
solvency that is satisfactory to CMS and the State administering agency.
    (b) Insolvency plan. The organization must have a documented plan in 
the event of insolvency, approved by CMS and the State administering 
agency, which provides for the following:
    (1) Continuation of benefits for the duration of the period for 
which capitation payment has been made.
    (2) Continuation of benefits to participants who are confined in a 
hospital on the date of insolvency until their discharge.
    (3) Protection of participants from liability for payment of fees 
that are the legal obligation of the PACE organization.
    (c) Arrangements to cover expenses. (1) A PACE organization must 
demonstrate that it has arrangements to cover expenses in the amount of 
at least the sum of the following in the event it becomes insolvent:
    (i) One month's total capitation revenue to cover expenses the month 
before insolvency.
    (ii) One month's average payment to all contractors, based on the 
prior quarter's average payment, to cover expenses the month after the 
date it declares insolvency or ceases operations.
    (2) Arrangements to cover expenses may include, but are not limited 
to, the following:
    (i) Insolvency insurance or reinsurance.
    (ii) Hold harmless arrangement.
    (iii) Letters of credit, guarantees, net worth, restricted State 
reserves, or State law provisions.



Sec.  460.82  Marketing.

    (a) Information that a PACE organization must include in its 
marketing materials. (1) A PACE organization must inform the public 
about its program and give prospective participants the following 
written information:
    (i) An adequate description of the PACE organization's enrollment 
and disenrollment policies and requirements.
    (ii) PACE enrollment procedures.
    (iii) Description of benefits and services.
    (iv) Premiums.
    (v) Other information necessary for prospective participants to make 
an informed decision about enrollment.
    (2) Marketing information must be free of material inaccuracies, 
misleading information, or misrepresentations.
    (b) Approval of marketing information. (1) CMS must approve all 
marketing information before distribution by the PACE organization, 
including any revised or updated material.

[[Page 483]]

    (2) CMS reviews initial marketing information as part of an entity's 
application for approval as a PACE organization, and approval of the 
application includes approval of marketing information.
    (3) Once a PACE organization is under a PACE program agreement, any 
revisions to existing marketing information and new information are 
subject to the following:
    (i) Time period for approval. CMS approves or disapproves marketing 
information within 45 days after CMS receives the information from the 
organization.
    (ii) Deemed approval. Marketing information is deemed approved, and 
the organization can distribute it, if CMS and the State administering 
agency do not disapprove the marketing material within the 45-day review 
period.
    (c) Special language requirements. A PACE organization must furnish 
printed marketing materials to prospective and current participants as 
specified below:
    (1) In English and in any other principal languages of the 
community.
    (2) In Braille, if necessary.
    (d) Information on restriction of services. (1) Marketing materials 
must inform a potential participant that he or she must receive all 
needed health care, including primary care and specialist physician 
services (other than emergency services), from the PACE organization or 
from an entity authorized by the PACE organization.
    (2) All marketing materials must state clearly that PACE 
participants may be fully and personally liable for the costs of 
unauthorized or out-of-PACE program agreement services.
    (e) Prohibited marketing practices. A PACE organization must ensure 
that its employees or its agents do not use prohibited marketing 
practices which includes the following:
    (1) Discrimination of any kind, except that marketing may be 
directed to individuals eligible for PACE by reason of their age.
    (2) Activities that could mislead or confuse potential participants, 
or misrepresent the PACE organization, CMS, or the State administering 
agency.
    (3) Gifts or payments to induce enrollment.
    (4) Contracting outreach efforts to individuals or organizations 
whose sole responsibility involves direct contact with the elderly to 
solicit enrollment.
    (5) Unsolicited door-to-door marketing.
    (f) Marketing Plan. A PACE organization must establish, implement, 
and maintain a documented marketing plan with measurable enrollment 
objectives and a system for tracking its effectiveness.



                         Subpart F_PACE Services



Sec.  460.90  PACE benefits under Medicare and Medicaid.

    If a Medicare beneficiary or Medicaid recipient chooses to enroll in 
a PACE program, the following conditions apply:
    (a) Medicare and Medicaid benefit limitations and conditions 
relating to amount, duration, scope of services, deductibles, 
copayments, coinsurance, or other cost-sharing do not apply.
    (b) The participant, while enrolled in a PACE program, must receive 
Medicare and Medicaid benefits solely through the PACE organization.



Sec.  460.92  Required services.

    The PACE benefit package for all participants, regardless of the 
source of payment, must include the following:
    (a) All Medicare-covered items and services.
    (b) All Medicaid-covered items and services, as specified in the 
State's approved Medicaid plan.
    (c) Other services determined necessary by the interdisciplinary 
team to improve and maintain the participant's overall health status.

[71 FR 71335, Dec. 8, 2006]



Sec.  460.94  Required services for Medicare participants.

    (a) Except for Medicare requirements that are waived for the PACE 
program, as specified in paragraph (b) of this section, the PACE benefit 
package for Medicare participants must include the following services:
    (1) The scope of hospital insurance benefits described in part 409 
of this chapter.

[[Page 484]]

    (2) The scope of supplemental medical insurance benefits described 
in part 410 of this chapter.
    (b) Waivers of Medicare coverage requirements. The following 
Medicare requirements are waived for purposes of the PACE program and do 
not apply:
    (1) The provisions of subpart F of part 409 of this chapter that 
limit coverage of institutional services.
    (2) The provisions of subparts G and H of part 409 of this chapter, 
and parts 412 through 414 of this chapter that relate to payment for 
benefits.
    (3) The provisions of subparts D and E of part 409 of this chapter 
that limit coverage of extended care services or home health services.
    (4) The provisions of subpart D of part 409 of this chapter that 
impose a 3-day prior hospitalization requirement for coverage of 
extended care services.
    (5) Section 411.15(g) and Sec.  411.15(k) of this chapter that may 
prevent payment for PACE program services that are provided to PACE 
participants.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.96  Excluded services.

    The following services are excluded from coverage under PACE:
    (a) Any service that is not authorized by the interdisciplinary 
team, even if it is a required service, unless it is an emergency 
service.
    (b) In an inpatient facility, private room and private duty nursing 
services (unless medically necessary), and nonmedical items for personal 
convenience such as telephone charges and radio or television rental 
(unless specifically authorized by the interdisciplinary team as part of 
the participant's plan of care).
    (c) Cosmetic surgery, which does not include surgery that is 
required for improved functioning of a malformed part of the body 
resulting from an accidental injury or for reconstruction following 
mastectomy.
    (d) Experimental medical, surgical, or other health procedures.
    (e) Services furnished outside of the United States, except as 
follows:
    (1) In accordance with Sec.  424.122 and Sec.  424.124 of this 
chapter.
    (2) As permitted under the State's approved Medicaid plan.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.98  Service delivery.

    (a) Plan. A PACE organization must establish and implement a written 
plan to furnish care that meets the needs of each participant in all 
care settings 24 hours a day, every day of the year.
    (b) Provision of services. (1) The PACE organization must furnish 
comprehensive medical, health, and social services that integrate acute 
and long-term care.
    (2) These services must be furnished in at least the PACE center, 
the home, and inpatient facilities.
    (3) The PACE organization may not discriminate against any 
participant in the delivery of required PACE services based on race, 
ethnicity, national origin, religion, sex, age, sexual orientation, 
mental or physical disability, or source of payment.
    (c) Minimum services furnished at each PACE center. At a minimum, 
the following services must be furnished at each PACE center:
    (1) Primary care, including physician and nursing services.
    (2) Social services.
    (3) Restorative therapies, including physical therapy and 
occupational therapy.
    (4) Personal care and supportive services.
    (5) Nutritional counseling.
    (6) Recreational therapy.
    (7) Meals.
    (d)  Pace Center operation. (1) A PACE organization must operate at 
least one PACE center either in, or contiguous to, its defined service 
area with sufficient capacity to allow routine attendance by 
participants.
    (2) A PACE organization must ensure accessible and adequate services 
to meet the needs of its participants. If necessary, a PACE organization 
must increase the number of PACE centers, staff, or other PACE services.
    (3) If a PACE organization operates more than one center, each Pace 
center must offer the full range of services and have sufficient staff 
to meet the needs of participants.

[[Page 485]]

    (e) Center attendance. The frequency of a participant's attendance 
at a center is determined by the interdisciplinary team, based on the 
needs and preferences of each participant.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71334, 71335, Dec. 8, 
2006]



Sec.  460.100  Emergency care.

    (a) Written plan. A PACE organization must establish and maintain a 
written plan to handle emergency care. The plan must ensure that CMS, 
the State, and PACE participants are held harmless if the PACE 
organization does not pay for emergency services.
    (b) Emergency care. Emergency care is appropriate when services are 
needed immediately because of an injury or sudden illness and the time 
required to reach the PACE organization or one of its contract 
providers, would cause risk of permanent damage to the participant's 
health. Emergency services include inpatient and outpatient services 
that meet the following requirements:
    (1) Are furnished by a qualified emergency services provider, other 
than the PACE organization or one of its contract providers, either in 
or out of the PACE organization's service area.
    (2) Are needed to evaluate or stabilize an emergency medical 
condition.
    (c) An emergency medical condition means a condition manifesting 
itself by acute symptoms of sufficient severity (including severe pain) 
such that a prudent layperson, with an average knowledge of health and 
medicine, could reasonably expect the absence of immediate medical 
attention to result in the following:
    (1) Serious jeopardy to the health of the participant.
    (2) Serious impairment to bodily functions.
    (3) Serious dysfunction of any bodily organ or part.
    (d) Explanation to participant. The organization must ensure that 
the participant or caregiver, or both, understand when and how to get 
access to emergency services and that no prior authorization is needed.
    (e) On-call providers. The plan must provide for the following:
    (1) An on-call provider, available 24-hours per day to address 
participant questions about emergency services and respond to requests 
for authorization of urgently needed out-of-network services and post 
stabilization care services following emergency services.
    (2) Coverage of urgently needed out-of-network and post-
stabilization care services when either of the following conditions are 
met:
    (i) The services are preapproved by the PACE organization.
    (ii) The services are not preapproved by the PACE organization 
because the PACE organization did not respond to a request for approval 
within 1 hour after being contacted or cannot be contacted for approval.
    (3) Definitions. As used in this section, the following definitions 
apply:
    (i) Post stabilization care means services provided subsequent to an 
emergency that a treating physician views as medically necessary after 
an emergency medical condition has been stabilized. They are not 
emergency services, which POs are obligated to cover. Rather, they are 
non-emergency services that the PO should approve before they are 
provided outside the service area.
    (ii) Urgent care means the care provided to a PACE participant who 
is out of the PACE service area, and who believes their illness or 
injury is too severe to postpone treatment until they return to the 
service area, but their life or function is not in severe jeopardy.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71335, Dec. 8, 2006]



Sec.  460.102  Interdisciplinary team.

    (a) Basic requirement. A PACE organization must meet the following 
requirements:
    (1) Establish an interdisciplinary team at each Pace center to 
comprehensively assess and meet the individual needs of each 
participant.
    (2) Assign each participant to an interdisciplinary team functioning 
at the PACE center that the participant attends.
    (b) Composition of interdisciplinary team. The interdisciplinary 
team must be composed of at least the following members:
    (1) Primary care physician.
    (2) Registered nurse.
    (3) Master's-level social worker.

[[Page 486]]

    (4) Physical therapist.
    (5) Occupational therapist.
    (6) Recreational therapist or activity coordinator.
    (7) Dietitian.
    (8) PACE center manager.
    (9) Home care coordinator.
    (10) Personal care attendant or his or her representative.
    (11) Driver or his or her representative.
    (c) Primary care physician. (1) Primary medical care must be 
furnished to a participant by a PACE primary care physician.
    (2) Each primary care physician is responsible for the following:
    (i) Managing a participant's medical situations.
    (ii) Overseeing a participant's use of medical specialists and 
inpatient care.
    (d) Responsibilities of interdisciplinary team. (1) The 
interdisciplinary team is responsible for the initial assessment, 
periodic reassessments, plan of care, and coordination of 24 hour care 
delivery.
    (2) Each team member is responsible for the following:
    (i) Regularly informing the interdisciplinary team of the medical, 
functional, and psychosocial condition of each participant.
    (ii) Remaining alert to pertinent input from other team members, 
participants, and caregivers.
    (iii) Documenting changes of a participant's condition in the 
participant's medical record consistent with documentation polices 
established by the medical director.
    (3) The members of the interdisciplinary team must serve primarily 
PACE participants.
    (e) Exchange of information between team members. The PACE 
organization must establish, implement, and maintain documented internal 
procedures governing the exchange of information between team members, 
contractors, and participants and their caregivers consistent with the 
requirements for confidentiality in Sec.  460.200(e).

[64 FR 66279, Nov. 24, 1999, as amended at 67 FR 61506, Oct. 1, 2002; 71 
FR 71334, 71336, Dec. 8, 2006]



Sec.  460.104  Participant assessment.

    (a) Initial comprehensive assessment--(1) Basic requirement. The 
interdisciplinary team must conduct an initial comprehensive assessment 
on each participant. The assessment must be completed promptly following 
enrollment.
    (2) As part of the initial comprehensive assessment, each of the 
following members of the interdisciplinary team must evaluate the 
participant in person, at appropriate intervals, and develop a 
discipline-specific assessment of the participant's health and social 
status:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Master's-level social worker.
    (iv) Physical therapist.
    (v) Occupational therapist.
    (vi) Recreational therapist or activity coordinator.
    (vii) Dietitian.
    (viii) Home care coordinator.
    (3) At the recommendation of individual team members, other 
professional disciplines (for example, speech-language pathology, 
dentistry, or audiology) may be included in the comprehensive assessment 
process.
    (4) Comprehensive assessment criteria. The comprehensive assessment 
must include, but is not limited to, the following:
    (i) Physical and cognitive function and ability.
    (ii) Medication use.
    (iii) Participant and caregiver preferences for care.
    (iv) Socialization and availability of family support.
    (v) Current health status and treatment needs.
    (vi) Nutritional status.
    (vii) Home environment, including home access and egress.
    (viii) Participant behavior.
    (ix) Psychosocial status.
    (x) Medical and dental status.
    (xi) Participant language.
    (b) Development of plan of care. The interdisciplinary team must 
promptly consolidate discipline-specific assessments into a single plan 
of care for each participant through discussion in team meetings and 
consensus of the entire interdisciplinary team. In developing the plan 
of care, female participants must be informed that they are

[[Page 487]]

entitled to choose a qualified specialist for women's health services 
from the PACE organization's network to furnish routine or preventive 
women's health services.
    (c) Periodic reassessment--(1) Semiannual reassessment. On at least 
a semiannual basis, or more often if a participant's condition dictates, 
the following members of the interdisciplinary team must conduct an in-
person reassessment:
    (i) Primary care physician.
    (ii) Registered nurse.
    (iii) Master's-level social worker.
    (iv) Recreational therapist or activity coordinator.
    (v) Other team members actively involved in the development or 
implementation of the participant's plan of care, for example, home care 
coordinator, physical therapist, occupational therapist, or dietitian.
    (2) Annual reassessment. On at least an annual basis, the following 
members of the interdisciplinary team must conduct an in-person 
reassessment:
    (i) Physical therapist.
    (ii) Occupational therapist.
    (iii) Dietitian.
    (iv) Home care coordinator.
    (d) Unscheduled reassessments. In addition to annual and semiannual 
reassessments, unscheduled reassessments may be required based on the 
following:
    (1) A change in participant status. If the health or psychosocial 
status of a participant changes, the members of the interdisciplinary 
team, listed in paragraph (a)(2) of this section, must conduct an in-
person reassessment.
    (2) At the request of the participant or designated representative. 
If a participant (or his or her designated representative) believes that 
the participant needs to initiate, eliminate, or continue a particular 
service, the appropriate members of the interdisciplinary team, as 
identified by the interdisciplinary team, must conduct an in-person 
reassessment.
    (i) The PACE organization must have explicit procedures for timely 
resolution of requests by a participant or his or her designated 
representative to initiate, eliminate, or continue a particular service.
    (ii) Except as provided in paragraph (d)(2)(iii) of this section, 
the interdisciplinary team must notify the participant or designated 
representative of its decision to approve or deny the request from the 
participant or designated representative as expeditiously as the 
participant's condition requires, but no later than 72 hours after the 
date the interdisciplinary team receives the request for reassessment.
    (iii) The interdisciplinary team may extend the 72-hour timeframe 
for notifying the participant or designated representative of its 
decision to approve or deny the request by no more than 5 additional 
days for either of the following reasons:
    (A) The participant or designated representative requests the 
extension.
    (B) The team documents its need for additional information and how 
the delay is in the interest of the participant.
    (iv) The PACE organization must explain any denial of a request to 
the participant or the participant's designated representative orally 
and in writing. The PACE organization must provide the specific reasons 
for the denial in understandable language. The PACE organization is 
responsible for the following:
    (A) Informing the participant or designated representative of his or 
her right to appeal the decision as specified in Sec.  460.122.
    (B) Describing both the standard and expedited appeals processes, 
including the right to, and conditions for, obtaining expedited 
consideration of an appeal of a denial of services as specified in Sec.  
460.122.
    (C) Describing the right to, and conditions for, continuation of 
appealed services through the period of an appeal as specified in Sec.  
460.122(e).
    (v) If the interdisciplinary team fails to provide the participant 
with timely notice of the resolution of the request or does not furnish 
the services required by the revised plan of care, this failure 
constitutes an adverse decision, and the participant's request must be 
automatically processed by the PACE organization as an appeal in 
accordance with Sec.  460.122.

[[Page 488]]

    (e) Changes to plan of care. Team members who conduct a reassessment 
must meet the following requirements:
    (1) Reevaluate the participant's plan of care.
    (2) Discuss any changes in the plan with the interdisciplinary team.
    (3) Obtain approval of the revised plan from the interdisciplinary 
team and the participant (or designated representative).
    (4) Furnish any services included in the revised plan of care as a 
result of a reassessment to the participant as expeditiously as the 
participant's health condition requires.
    (f) Documentation. Interdisciplinary team members must document all 
assessment and reassessment information in the participant's medical 
record.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71336, Dec. 8, 2006]



Sec.  460.106  Plan of care.

    (a) Basic requirement. The interdisciplinary team must promptly 
develop a comprehensive plan of care for each participant.
    (b) Content of plan of care. The plan of care must meet the 
following requirements:
    (1) Specify the care needed to meet the participant's medical, 
physical, emotional, and social needs, as identified in the initial 
comprehensive assessment.
    (2) Identify measurable outcomes to be achieved.
    (c) Implementation of the plan of care. (1) The team must implement, 
coordinate, and monitor the plan of care whether the services are 
furnished by PACE employees or contractors.
    (2) The team must continuously monitor the participant's health and 
psychosocial status, as well as the effectiveness of the plan of care, 
through the provision of services, informal observation, input from 
participants or caregivers, and communications among members of the 
interdisciplinary team and other providers.
    (d) Evaluation of plan of care. On at least a semi-annual basis, the 
interdisciplinary team must reevaluate the plan of care, including 
defined outcomes, and make changes as necessary.
    (e) Participant and caregiver involvement in plan of care. The team 
must develop, review, and reevaluate the plan of care in collaboration 
with the participant or caregiver, or both, to ensure that there is 
agreement with the plan of care and that the participant's concerns are 
addressed.
    (f) Documentation. The team must document the plan of care, and any 
changes made to it, in the participant's medical record.



                      Subpart G_Participant Rights



Sec.  460.110  Bill of rights.

    (a) Written bill of rights. A PACE organization must have a written 
participant bill of rights designed to protect and promote the rights of 
each participant. Those rights include, at a minimum, the ones specified 
in Sec.  460.112.
    (b) Explanation of rights. The organization must inform a 
participant upon enrollment, in writing, of his or her rights and 
responsibilities, and all rules and regulations governing participation.
    (c) Protection of rights. The organization must protect and provide 
for the exercise of the participant's rights.



Sec.  460.112  Specific rights to which a participant is entitled.

    (a) Respect and nondiscrimination. Each participant has the right to 
considerate, respectful care from all PACE employees and contractors at 
all times and under all circumstances. Each participant has the right 
not to be discriminated against in the delivery of required PACE 
services based on race, ethnicity, national origin, religion, sex, age, 
sexual orientation, mental or physical disability, or source of payment. 
Specifically, each participant has the right to the following:
    (1) To receive comprehensive health care in a safe and clean 
environment and in an accessible manner.
    (2) To be treated with dignity and respect, be afforded privacy and 
confidentiality in all aspects of care, and be provided humane care.
    (3) Not to be required to perform services for the PACE 
organization.
    (4) To have reasonable access to a telephone.

[[Page 489]]

    (5) To be free from harm, including physical or mental abuse, 
neglect, corporal punishment, involuntary seclusion, excessive 
medication, and any physical or chemical restraint imposed for purposes 
of discipline or convenience and not required to treat the participant's 
medical symptoms.
    (6) To be encouraged and assisted to exercise rights as a 
participant, including the Medicare and Medicaid appeals processes as 
well as civil and other legal rights.
    (7) To be encouraged and assisted to recommend changes in policies 
and services to PACE staff.
    (b) Information disclosure. Each PACE participant has the right to 
receive accurate, easily understood information and to receive 
assistance in making informed health care decisions. Specifically, each 
participant has the following rights:
    (1) To be fully informed in writing of the services available from 
the PACE organization, including identification of all services that are 
delivered through contracts, rather than furnished directly by the PACE 
organization at the following times:
    (i) Before enrollment.
    (ii) At enrollment.
    (iii) At the time a participant's needs necessitate the disclosure 
and delivery of such information in order to allow the participant to 
make an informed choice.
    (2) To have the enrollment agreement, described in Sec.  460.154, 
fully explained in a manner understood by the participant.
    (3) To examine, or upon reasonable request, to be assisted to 
examine the results of the most recent review of the PACE organization 
conducted by CMS or the State administering agency and any plan of 
correction in effect.
    (c) Choice of providers. Each participant has the right to a choice 
of health care providers, within the PACE organization's network, that 
is sufficient to ensure access to appropriate high-quality health care. 
Specifically, each participant has the right to the following:
    (1) To choose his or her primary care physician and specialists from 
within the PACE network.
    (2) To request that a qualified specialist for women's health 
services furnish routine or preventive women's health services.
    (3) To disenroll from the program at any time.
    (d) Access to emergency services. Each participant has the right to 
access emergency health care services when and where the need arises 
without prior authorization by the PACE interdisciplinary team.
    (e) Participation in treatment decisions. Each participant has the 
right to participate fully in all decisions related to his or her 
treatment. A participant who is unable to participate fully in treatment 
decisions has the right to designate a representative. Specifically, 
each participant has the following rights:
    (1) To have all treatment options explained in a culturally 
competent manner and to make health care decisions, including the right 
to refuse treatment, and be informed of the consequences of the 
decisions.
    (2) To have the PACE organization explain advance directives and to 
establish them, if the participant so desires, in accordance with 
Sec. Sec.  489.100 and 489.102 of this chapter.
    (3) To be fully informed of his or her health and functional status 
by the interdisciplinary team.
    (4) To participate in the development and implementation of the plan 
of care.
    (5) To request a reassessment by the interdisciplinary team.
    (6) To be given reasonable advance notice, in writing, of any 
transfer to another treatment setting and the justification for the 
transfer (that is, due to medical reasons or for the participant's 
welfare, or that of other participants). The PACE organization must 
document the justification in the participant's medical record.
    (f) Confidentiality of health information. Each participant has the 
right to communicate with health care providers in confidence and to 
have the confidentiality of his or her individually identifiable health 
care information protected. Each participant also has the right to 
review and copy his or her own medical records and request amendments to 
those records. Specifically, each participant has the following rights:

[[Page 490]]

    (1) To be assured of confidential treatment of all information 
contained in the health record, including information contained in an 
automated data bank.
    (2) To be assured that his or her written consent will be obtained 
for the release of information to persons not otherwise authorized under 
law to receive it.
    (3) To provide written consent that limits the degree of information 
and the persons to whom information may be given.
    (g) Complaints and appeals. Each participant has the right to a fair 
and efficient process for resolving differences with the PACE 
organization, including a rigorous system for internal review by the 
organization and an independent system of external review. Specifically, 
each participant has the following rights:
    (1) To be encouraged and assisted to voice complaints to PACE staff 
and outside representatives of his or her choice, free of any restraint, 
interference, coercion, discrimination, or reprisal by the PACE staff.
    (2) To appeal any treatment decision of the PACE organization, its 
employees, or contractors through the process described in Sec.  
460.122.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71336, Dec. 8, 2006]



Sec.  460.114  Restraints.

    (a) The PACE organization must limit use of restraints to the least 
restrictive and most effective method available. The term restraint 
includes either a physical restraint or a chemical restraint.
    (1) A physical restraint is any manual method or physical or 
mechanical device, materials, or equipment attached or adjacent to the 
participant's body that he or she cannot easily remove that restricts 
freedom of movement or normal access to one's body.
    (2) A chemical restraint is a medication used to control behavior or 
to restrict the participant's freedom of movement and is not a standard 
treatment for the participant's medical or psychiatric condition.
    (b) If the interdisciplinary team determines that a restraint is 
needed to ensure the participant's physical safety or the safety of 
others, the use must meet the following conditions:
    (1) Be imposed for a defined, limited period of time, based upon the 
assessed needs of the participant.
    (2) Be imposed in accordance with safe and appropriate restraining 
techniques.
    (3) Be imposed only when other less restrictive measures have been 
found to be ineffective to protect the participant or others from harm.
    (4) Be removed or ended at the earliest possible time.
    (c) The condition of the restrained participant must be continually 
assessed, monitored, and reevaluated.



Sec.  460.116  Explanation of rights.

    (a) Written policies. A PACE organization must have written policies 
and implement procedures to ensure that the participant, his or her 
representative, if any, and staff understand these rights.
    (b) Explanation of rights. The PACE organization must fully explain 
the rights to the participant and his or her representative, if any, at 
the time of enrollment in a manner understood by the participant.
    (c) Display. The PACE organization must meet the following 
requirements:
    (1) Write the participant rights in English and in any other 
principal languages of the community.
    (2) Display the participant rights in a prominent place in the PACE 
center.



Sec.  460.118  Violation of rights.

    The PACE organization must have established documented procedures to 
respond to and rectify a violation of a participant's rights.



Sec.  460.120  Grievance process.

    For purposes of this part, a grievance is a complaint, either 
written or oral, expressing dissatisfaction with service delivery or the 
quality of care furnished.
    (a) Process to resolve grievances. A PACE organization must have a 
formal written process to evaluate and resolve medical and nonmedical 
grievances by participants, their family members, or representatives.
    (b) Notification to participants. Upon enrollment, and at least 
annually

[[Page 491]]

thereafter, the PACE organization must give a participant written 
information on the grievance process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
grievance process must include written procedures for the following:
    (1) How a participant files a grievance.
    (2) Documentation of a participant's grievance.
    (3) Response to, and resolution of, grievances in a timely manner.
    (4) Maintenance of confidentiality of a participant's grievance.
    (d) Continuing care during grievance process. The PACE organization 
must continue to furnish all required services to the participant during 
the grievance process.
    (e) Explaining the grievance process. The PACE organization must 
discuss with and provide to the participant in writing the specific 
steps, including timeframes for response, that will be taken to resolve 
the participant's grievance.
    (f) Analyzing grievance information. The PACE organization must 
maintain, aggregate, and analyze information on grievance proceedings. 
This information must be used in the PACE organization's internal 
quality assessment and performance improvement program.



Sec.  460.122  PACE organization's appeals process.

    For purposes of this section, an appeal is a participant's action 
taken with respect to the PACE organization's noncoverage of, or 
nonpayment for, a service including denials, reductions, or termination 
of services.
    (a) PACE organization's written appeals process. The PACE 
organization must have a formal written appeals process, with specified 
timeframes for response, to address noncoverage or nonpayment of a 
service.
    (b) Notification of participants. Upon enrollment, at least annually 
thereafter, and whenever the interdisciplinary team denies a request for 
services or payment, the PACE organization must give a participant 
written information on the appeals process.
    (c) Minimum requirements. At a minimum, the PACE organization's 
appeals process must include written procedures for the following:
    (1) Timely preparation and processing of a written denial of 
coverage or payment as provided in Sec.  460.104(c)(3).
    (2) How a participant files an appeal.
    (3) Documentation of a participant's appeal.
    (4) Appointment of an appropriately credentialed and impartial third 
party who was not involved in the original action and who does not have 
a stake in the outcome of the appeal to review the participant's appeal.
    (5) Responses to, and resolution of, appeals as expeditiously as the 
participant's health condition requires, but no later than 30 calendar 
days after the organization receives an appeal.
    (6) Maintenance of confidentiality of appeals.
    (d) Notification. A PACE organization must give all parties involved 
in the appeal the following:
    (1) Appropriate written notification.
    (2) A reasonable opportunity to present evidence related to the 
dispute, in person, as well as in writing.
    (e) Services furnished during appeals process. During the appeals 
process, the PACE organization must meet the following requirements:
    (1) For a Medicaid participant, continue to furnish the disputed 
services until issuance of the final determination if the following 
conditions are met:
    (i) The PACE organization is proposing to terminate or reduce 
services currently being furnished to the participant.
    (ii) The participant requests continuation with the understanding 
that he or she may be liable for the costs of the contested services if 
the determination is not made in his or her favor.
    (2) Continue to furnish to the participant all other required 
services, as specified in subpart F of this part.
    (f) Expedited appeals process. (1) A PACE organization must have an 
expedited appeals process for situations in which the participant 
believes that his or her life, health, or ability to regain or maintain 
maximum function could be seriously jeopardized, absent provision of the 
service in dispute.

[[Page 492]]

    (2) Except as provided in paragraph (f)(3) of this section, the PACE 
organization must respond to the appeal as expeditiously as the 
participant's health condition requires, but no later than 72 hours 
after it receives the appeal.
    (3) The PACE organization may extend the 72-hour timeframe by up to 
14 calendar days for either of the following reasons:
    (i) The participant requests the extension.
    (ii) The organization justifies to the State administering agency 
the need for additional information and how the delay is in the interest 
of the participant.
    (g) Determination in favor of participant. A PACE organization must 
furnish the disputed service as expeditiously as the participant's 
health condition requires if a determination is made in favor of the 
participant on appeal.
    (h) Determination adverse to participant. For a determination that 
is wholly or partially adverse to a participant, at the same time the 
decision is made, the PACE organization must notify the following:
    (1) CMS.
    (2) The State administering agency.
    (3) The participant.
    (i) Analyzing appeals information. A PACE organization must 
maintain, aggregate, and analyze information on appeal proceedings and 
use this information in the organization's internal quality assessment 
and performance improvement program.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71336, Dec. 8, 2006]



Sec.  460.124  Additional appeal rights under Medicare or Medicaid.

    A PACE organization must inform a participant in writing of his or 
her appeal rights under Medicare or Medicaid managed care, or both, 
assist the participant in choosing which to pursue if both are 
applicable, and forward the appeal to the appropriate external entity.



        Subpart H_Quality Assessment and Performance Improvement



Sec.  460.130  General rule.

    (a) A PACE organization must develop, implement, maintain, and 
evaluate an effective, data-driven quality assessment and performance 
improvement program.
    (b) The program must reflect the full range of services furnished by 
the PACE organization.
    (c) A PACE organization must take actions that result in 
improvements in its performance in all types of care.



Sec.  460.132  Quality assessment and performance improvement plan.

    (a) Basic rule. A PACE organization must have a written quality 
assessment and performance improvement plan.
    (b) Annual review. The PACE governing body must review the plan 
annually and revise it, if necessary.
    (c) Minimum plan requirements. At a minimum, the plan must specify 
how the PACE organization proposes to meet the following requirements:
    (1) Identify areas to improve or maintain the delivery of services 
and patient care.
    (2) Develop and implement plans of action to improve or maintain 
quality of care.
    (3) Document and disseminate to PACE staff and contractors the 
results from the quality assessment and performance improvement 
activities.



Sec.  460.134  Minimum requirements for quality assessment and performance improvement program.

    (a) Minimum program requirements. A PACE organization's quality 
assessment and performance improvement program must include, but is not 
limited to, the use of objective measures to demonstrate improved 
performance with regard to the following:
    (1) Utilization of PACE services, such as decreased inpatient 
hospitalizations and emergency room visits.
    (2) Caregiver and participant satisfaction.
    (3) Outcome measures that are derived from data collected during 
assessments, including data on the following:

[[Page 493]]

    (i) Physiological well being.
    (ii) Functional status.
    (iii) Cognitive ability.
    (iv) Social/behavioral functioning.
    (v) Quality of life of participants.
    (4) Effectiveness and safety of staff-provided and contracted 
services, including the following:
    (i) Competency of clinical staff.
    (ii) Promptness of service delivery.
    (iii) Achievement of treatment goals and measurable outcomes.
    (5) Nonclinical areas, such as grievances and appeals, 
transportation services, meals, life safety, and environmental issues.
    (b) Basis for outcome measures. Outcome measures must be based on 
current clinical practice guidelines and professional practice standards 
applicable to the care of PACE participants.
    (c) Minimum levels of performance. The PACE organization must meet 
or exceed minimum levels of performance, established by CMS and the 
State administering agency, on standardized quality measures, such as 
influenza immunization rates, which are specified in the PACE program 
agreement.
    (d) Accuracy of data. The PACE organization must ensure that all 
data used for outcome monitoring are accurate and complete.



Sec.  460.136  Internal quality assessment and performance improvement activities.

    (a) Quality assessment and performance improvement requirements. A 
PACE organization must do the following:
    (1) Use a set of outcome measures to identify areas of good or 
problematic performance.
    (2) Take actions targeted at maintaining or improving care based on 
outcome measures.
    (3) Incorporate actions resulting in performance improvement into 
standards of practice for the delivery of care and periodically track 
performance to ensure that any performance improvements are sustained 
over time.
    (4) Set priorities for performance improvement, considering 
prevalence and severity of identified problems, and give priority to 
improvement activities that affect clinical outcomes.
    (5) Immediately correct any identified problem that directly or 
potentially threatens the health and safety of a PACE participant.
    (b) Quality assessment and performance improvement coordinator. A 
PACE organization must designate an individual to coordinate and oversee 
implementation of quality assessment and performance improvement 
activities.
    (c) Involvement in quality assessment and performance improvement 
activities. (1) A PACE organization must ensure that all 
interdisciplinary team members, PACE staff, and contract providers are 
involved in the development and implementation of quality assessment and 
performance improvement activities and are aware of the results of these 
activities.
    (2) The quality improvement coordinator must encourage a PACE 
participant and his or her caregivers to be involved in quality 
assessment and performance improvement activities, including providing 
information about their satisfaction with services.



Sec.  460.138  Committees with community input.

    A PACE organization must establish one or more committees, with 
community input, to do the following:
    (a) Evaluate data collected pertaining to quality outcome measures.
    (b) Address the implementation of, and results from, the quality 
assessment and performance improvement plan.
    (c) Provide input related to ethical decisionmaking, including end-
of-life issues and implementation of the Patient Self-Determination Act.



Sec.  460.140  Additional quality assessment activities.

    A PACE organization must meet external quality assessment and 
reporting requirements, as specified by CMS or the State administering 
agency, in accordance with Sec.  460.202.



           Subpart I_Participant Enrollment and Disenrollment



Sec.  460.150  Eligibility to enroll in a PACE program.

    (a) General rule. To enroll in a PACE program, an individual must 
meet eligibility requirements specified in this section. To continue to 
be eligible for

[[Page 494]]

PACE, an individual must meet the annual recertification requirements 
specified in Sec.  460.160.
    (b) Basic eligibility requirements. To be eligible to enroll in 
PACE, an individual must meet the following requirements:
    (1) Be 55 years of age or older.
    (2) Be determined by the State administering agency to need the 
level of care required under the State Medicaid plan for coverage of 
nursing facility services, which indicates that the individual's health 
status is comparable to the health status of individuals who have 
participated in the PACE demonstration waiver programs.
    (3) Reside in the service area of the PACE organization.
    (4) Meet any additional program specific eligibility conditions 
imposed under the PACE program agreement. These additional conditions 
may not modify the requirements of paragraph (b)(1) through (b)(3) of 
this section.
    (c) Other eligibility requirements. (1) At the time of enrollment, 
an individual must be able to live in a community setting without 
jeopardizing his or her health or safety.
    (2) The criteria used to determine if an individual's health or 
safety would be jeopardized by living in a community setting must be 
specified in the program agreement.
    (d) Eligibility under Medicare and Medicaid. Eligibility to enroll 
in a PACE program is not restricted to an individual who is either a 
Medicare beneficiary or Medicaid recipient. A potential PACE enrollee 
may be, but is not required to be, any or all of the following:
    (1) Entitled to Medicare Part A.
    (2) Enrolled under Medicare Part B.
    (3) Eligible for Medicaid.



Sec.  460.152  Enrollment process.

    (a) Intake process. Intake is an intensive process during which PACE 
staff members make one or more visits to a potential participant's place 
of residence and the potential participant makes one or more visits to 
the PACE center. At a minimum, the intake process must include the 
following activities:
    (1) The PACE staff must explain to the potential participant and his 
or her representative or caregiver the following information:
    (i) The PACE program, using a copy of the enrollment agreement 
described in Sec.  460.154, specifically references the elements of the 
agreement including but not limited to Sec.  460.154(e), (i) through 
(m), and (r).
    (ii) The requirement that the PACE organization would be the 
participant's sole service provider and clarification that the PACE 
organization guarantees access to services, but not to a specific 
provider.
    (iii) A list of the employees of the PACE organization who furnish 
care and the most current list of contracted health care providers under 
Sec.  460.70(c).
    (iv) Monthly premiums, if any.
    (v) Any Medicaid spenddown obligations.
    (vi) Post-eligibility treatment of income.
    (2) The potential participant must sign a release to allow the PACE 
organization to obtain his or her medical and financial information and 
eligibility status for Medicare and Medicaid.
    (3) The State administering agency must assess the potential 
participant, including any individual who is not eligible for Medicaid, 
to ensure that he or she needs the level of care required under the 
State Medicaid plan for coverage of nursing facility services, which 
indicates that the individual's health status is comparable to the 
health status of individuals who have participated in the PACE 
demonstration waiver programs.
    (4) PACE staff must assess the potential participant to ensure that 
he or she can be cared for appropriately in a community setting and that 
he or she meets all requirements for PACE eligibility specified in this 
part.
    (b) Denial of Enrollment. If a prospective participant is denied 
enrollment because his or her health or safety would be jeopardized by 
living in a community setting, the PACE organization must meet the 
following requirements:
    (1) Notify the individual in writing of the reason for the denial.
    (2) Refer the individual to alternative services, as appropriate.

[[Page 495]]

    (3) Maintain supporting documentation of the reason for the denial.
    (4) Notify CMS and the State administering agency and make the 
documentation available for review.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71337, Dec. 8, 2006]



Sec.  460.154  Enrollment agreement.

    If the potential participant meets the eligibility requirements and 
wants to enroll, he or she must sign an enrollment agreement which 
contains, at a minimum, the following information:
    (a) Applicant's name, sex, and date of birth.
    (b) Medicare beneficiary status (Part A, Part B, or both) and 
number, if applicable.
    (c) Medicaid recipient status and number, if applicable.
    (d) Other health insurance information, if applicable.
    (e) Conditions for enrollment and disenrollment in PACE.
    (f) Description of participant premiums, if any, and procedures for 
payment of premiums.
    (g) Notification that a Medicaid participant and a participant who 
is eligible for both Medicare and Medicaid are not liable for any 
premiums, but may be liable for any applicable spenddown liability under 
Sec. Sec.  435.121 and 435.831 of this chapter and any amounts due under 
the post-eligibility treatment of income process under Sec.  460.184.
    (h) Notification that a Medicare participant may not enroll or 
disenroll at a Social Security office.
    (i) Notification that enrollment in PACE results in disenrollment 
from any other Medicare or Medicaid prepayment plan or optional benefit. 
Electing enrollment in any other Medicare or Medicaid prepayment plan or 
optional benefit, including the hospice benefit, after enrolling as a 
PACE participant is considered a voluntary disenrollment from PACE.
    (j) Information on the consequences of subsequent enrollment in 
other optional Medicare or Medicaid programs following disenrollment 
from PACE.
    (k) Description of PACE services available, including all Medicare 
and Medicaid covered services, and how services are obtained from the 
PACE organization.
    (l) Description of the procedures for obtaining emergency and 
urgently needed out-of-network services.
    (m) The participant bill of rights.
    (n) Information on the process for grievances and appeals and 
Medicare/Medicaid phone numbers for use in appeals.
    (o) Notification of a participant's obligation to inform the PACE 
organization of a move or lengthy absence from the organization's 
service area.
    (p) An acknowledgment by the applicant or representative that he or 
she understands the requirement that the PACE organization must be the 
applicant's sole service provider.
    (q) A statement that the PACE organization has an agreement with CMS 
and the State administering agency that is subject to renewal on a 
periodic basis and, if the agreement is not renewed, the program will be 
terminated.
    (r) The applicant's authorization for disclosure and exchange of 
personal information between CMS, its agents, the State administering 
agency, and the PACE organization.
    (s) The effective date of enrollment.
    (t) The signature of the applicant or his or her designated 
representative and the date.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71337, Dec. 8, 2006]



Sec.  460.156  Other enrollment procedures.

    (a) Items a PACE organization must give a participant upon 
enrollment. After the participant signs the enrollment agreement, the 
PACE organization must give the participant the following:
    (1) A copy of the enrollment agreement.
    (2) A PACE membership card.
    (3) Emergency information to be posted in his or her home 
identifying the individual as a PACE participant and explaining how to 
access emergency services.
    (4) Stickers for the participant's Medicare and Medicaid cards, as 
applicable, which indicate that he or she is a PACE participant and 
include the phone number of the PACE organization.

[[Page 496]]

    (b) Submittal of participant information to CMS and the State. The 
PACE organization must submit participant information to CMS and the 
State administering agency, in accordance with established procedures.
    (c) Changes in enrollment agreement information. If there are 
changes in the enrollment agreement information at any time during the 
participant's enrollment, the PACE organization must meet the following 
requirements:
    (1) Give an updated copy of the information to the participant.
    (2) Explain the changes to the participant and his or her 
representative or caregiver in a manner they understand.



Sec.  460.158  Effective date of enrollment.

    A participant's enrollment in the program is effective on the first 
day of the calendar month following the date the PACE organization 
receives the signed enrollment agreement.



Sec.  460.160  Continuation of enrollment.

    (a) Duration of enrollment. Enrollment continues until the 
participant's death, regardless of changes in health status, unless 
either of the following actions occur:
    (1) The participant voluntarily disenrolls.
    (2) The participant is involuntarily disenrolled, as described in 
Sec.  460.164.
    (b) Annual recertification requirement. At least annually, the State 
administering agency must reevaluate whether a participant needs the 
level of care required under the State Medicaid plan for coverage of 
nursing facility services.
    (1) Waiver of annual requirement. (i) The State administering agency 
may permanently waive the annual recertification requirement for a 
participant if it determines that there is no reasonable expectation of 
improvement or significant change in the participant's condition because 
of the severity of a chronic condition or the degree of impairment of 
functional capacity.
    (ii) The PACE organization must retain in the participant's medical 
record the documentation of the reason for waiving the annual 
recertification requirement.
    (2) Deemed continued eligibility. If the State administering agency 
determines that a PACE participant no longer meets the State Medicaid 
nursing facility level of care requirements, the participant may be 
deemed to continue to be eligible for the PACE program until the next 
annual reevaluation, if, in the absence of continued coverage under this 
program, the participant reasonably would be expected to meet the 
nursing facility level of care requirement within the next 6 months.
    (3) Continued eligibility criteria. (i) The State administering 
agency, must establish criteria to use in making the determination of 
``deemed continued eligibility.'' The State administering agency, in 
consultation with the PACE organization, makes a determination of deemed 
continued eligibility based on a review of the participant's medical 
record and plan of care. These criteria must be applied in reviewing the 
participant's medical record and plan of care.
    (ii) The criteria used to make the determination of continued 
eligibility must be specified in the program agreement.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71337, Dec. 8, 2006]



Sec.  460.162  Voluntary disenrollment.

    A PACE participant may voluntarily disenroll from the program 
without cause at any time.



Sec.  460.164  Involuntary disenrollment.

    (a) Reasons for involuntary disenrollment. A participant may be 
involuntarily disenrolled for any of the following reasons:
    (1) The participant fails to pay, or to make satisfactory 
arrangements to pay, any premium due the PACE organization after a 30-
day grace period.
    (2) The participant engages in disruptive or threatening behavior, 
as described in paragraph (b) of this section.
    (3) The participant moves out of the PACE program service area or is 
out of the service area for more than 30 consecutive days, unless the 
PACE organization agrees to a longer absence due to extenuating 
circumstances.
    (4) The participant is determined to no longer meet the State 
Medicaid nursing facility level of care requirements and is not deemed 
eligible.

[[Page 497]]

    (5) The PACE program agreement with CMS and the State administering 
agency is not renewed or is terminated.
    (6) The PACE organization is unable to offer health care services 
due to the loss of State licenses or contracts with outside providers.
    (b) Disruptive or threatening behavior. For purposes of this 
section, a participant who engages in disruptive or threatening behavior 
refers to a participant who exhibits either of the following:
    (1) A participant whose behavior jeopardizes his or her health or 
safety, or the safety of others; or
    (2) A participant with decision-making capacity who consistently 
refuses to comply with his or her individual plan of care or the terms 
of the PACE enrollment agreement.
    (c) Documentation of disruptive or threatening behavior. If a PACE 
organization proposes to disenroll a participant who is disruptive or 
threatening, the organization must document the following information in 
the participant's medical record:
    (1) The reasons for proposing to disenroll the participant.
    (2) All efforts to remedy the situation.
    (d) Noncompliant behavior. (1) A PACE organization may not disenroll 
a PACE participant on the grounds that the participant has engaged in 
noncompliant behavior if the behavior is related to a mental or physical 
condition of the participant, unless the participant's behavior 
jeopardizes his or her health or safety, or the safety of others.
    (2) For purposes of this section, noncompliant behavior includes 
repeated noncompliance with medical advice and repeated failure to keep 
appointments.
    (e) State administering agency review and final determination. 
Before an involuntary disenrollment is effective, the State 
administering agency must review it and determine in a timely manner 
that the PACE organization has adequately documented acceptable grounds 
for disenrollment.



Sec.  460.166  Effective date of disenrollment.

    (a) In disenrolling a participant, the PACE organization must take 
the following actions:
    (1) Use the most expedient process allowed under Medicare and 
Medicaid procedures, as set forth in the PACE program agreement.
    (2) Coordinate the disenrollment date between Medicare and Medicaid 
(for a participant who is eligible for both Medicare and Medicaid).
    (3) Give reasonable advance notice to the participant.
    (b) Until the date enrollment is terminated, the following 
requirements must be met:
    (1) PACE participants must continue to use PACE organization 
services and remain liable for any premiums.
    (2) The PACE organization must continue to furnish all needed 
services.



Sec.  460.168  Reinstatement in other Medicare and Medicaid programs.

    To facilitate a participant's reinstatement in other Medicare and 
Medicaid programs after disenrollment, the PACE organization must do the 
following:
    (a) Make appropriate referrals and ensure medical records are made 
available to new providers in a timely manner.
    (b) Work with CMS and the State administering agency to reinstate 
the participant in other Medicare and Medicaid programs for which the 
participant is eligible.



Sec.  460.170  Reinstatement in PACE.

    (a) A previously disenrolled participant may be reinstated in a PACE 
program.
    (b) If the reason for disenrollment is failure to pay the premium 
and the participant pays the premium before the effective date of 
disenrollment, the participant is reinstated in the PACE program with no 
break in coverage.



Sec.  460.172  Documentation of disenrollment.

    A PACE organization must meet the following requirements:
    (a) Have a procedure in place to document the reasons for all 
voluntary and involuntary disenrollments.

[[Page 498]]

    (b) Make documentation available for review by CMS and the State 
administering agency.
    (c) Use the information on voluntary disenrollments in the PACE 
organization's internal quality assessment and performance improvement 
program.



                            Subpart J_Payment



Sec.  460.180  Medicare payment to PACE organizations.

    (a) Principle of payment. Under a PACE program agreement, CMS makes 
a prospective monthly payment to the PACE organization of a capitation 
amount for each Medicare participant in a payment area based on the rate 
it pays to a Medicare Advantage organization.
    (b) Determination of rate. (1) The PACE program agreement specifies 
the methodology used to calculate the monthly capitation amount 
applicable to a PACE organization.
    (2) Except as specified in paragraph (b)(4) of this section, the 
monthly capitation amount is based on the Part A and Part B payment 
rates established for purposes of payment to Medicare Advantage 
organizations. As used in this section, ``Medicare Advantage rates'' 
means the Part A and Part B rates calculated by CMS for making payment 
to Medicare Advantage organizations under section 1853(c) of the Act.
    (3) CMS will adjust the monthly capitation payment amount derived 
under paragraph (b)(2) of this section based on a risk adjustment that 
reflects the individual's health status. CMS will ensure that payments 
take into account the comparative frailty of PACE enrollees relative to 
the general Medicare population.
    (4) For Medicare participants who require ESRD services, the monthly 
capitation amount is based on the Medicare Advantage ESRD risk 
adjustment model.
    (5) CMS may adjust the monthly capitation amount to take into 
account other factors CMS determines to be appropriate.
    (6) The monthly capitation payment is a fixed amount, regardless of 
changes in the participant's health status.
    (7) The monthly capitation payment amount is an all-inclusive 
payment for Medicare benefits provided to participants. A PACE 
organization must not seek any additional payment from Medicare. The 
only additional payment that a PACE organization may collect from, or on 
behalf of, a Medicare participant for PACE services is the following:
    (i) Any applicable premium amount specified in Sec.  460.186.
    (ii) Any charge permitted under paragraph (d) of this section when 
Medicare is not the primary payer.
    (iii) Any payment from the State, as specified in Sec.  460.182, for 
a participant who is eligible for both Medicare and Medicaid.
    (iv) Payment with respect to any applicable spenddown liability 
under Sec. Sec.  435.121 and 435.831 of this chapter and any amount due 
under the post-eligibility treatment of income process under Sec.  
460.184 for a participant who is eligible for both Medicare and 
Medicaid.
    (8) CMS computes the Medicare monthly capitation payment amount 
under a PACE program agreement so that the total payment level for all 
participants is less than the projected payment under Medicare for a 
comparable population not enrolled under a PACE program.
    (c) Adjustments to payments. If the actual number of Medicare 
participants differs from the estimated number of participants on which 
the amount of the prospective monthly payment was based, CMS adjusts 
subsequent monthly payments to account for the difference.
    (d) Application of Medicare secondary payer provisions--(1) Basic 
rule. CMS does not pay for services to the extent that Medicare is not 
the primary payer under part 411 of this chapter.
    (2) Responsibilities of the PACE organization. The PACE organization 
must do the following:
    (i) Identify payers that are primary to Medicare under part 411 of 
this chapter.
    (ii) Determine the amounts payable by those payers.
    (iii) Coordinate benefits to Medicare participants with the benefits 
of the primary payers.

[[Page 499]]

    (3) Charges to other entities. The PACE organization may charge 
other individuals or entities for PACE services covered under Medicare 
for which Medicare is not the primary payer, as specified in paragraphs 
(d)(4) and (5) of this section.
    (4) Charge to other insurers or the participant. If a Medicare 
participant receives from a PACE organization covered services that are 
also covered under State or Federal workers' compensation, any no-fault 
insurance, or any liability insurance policy or plan, including a self-
insured plan, the PACE organization may charge any of the following:
    (i) The insurance carrier, the employer, or any other entity that is 
liable for payment for the services under part 411 of this chapter.
    (ii) The Medicare participant, to the extent that he or she has been 
paid by the carrier, employer, or other entity.
    (5) Charge to group health plan (GHP) or large group health plan 
(LGHP). If Medicare is not the primary payer for services that a PACE 
organization furnished to a Medicare participant who is covered under a 
GHP or LGHP, the organization may charge the following:
    (i) GHP or LGHP for those services.
    (ii) Medicare participant to the extent that he or she has been paid 
by the GHP or LGHP for those services.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71337, Dec. 8, 2006]



Sec.  460.182  Medicaid payment.

    (a) Under a PACE program agreement, the State administering agency 
makes a prospective monthly payment to the PACE organization of a 
capitation amount for each Medicaid participant.
    (b) The monthly capitation payment amount is negotiated between the 
PACE organization and the State administering agency, and specified in 
the PACE program agreement. The amount represents the following:
    (1) Is less than the amount that would otherwise have been paid 
under the State plan if the participants were not enrolled under the 
PACE program.
    (2) Takes into account the comparative frailty of PACE participants.
    (3) Is a fixed amount regardless of changes in the participant's 
health status.
    (4) Can be renegotiated on an annual basis.
    (c) The PACE organization must accept the capitation payment amount 
as payment in full for Medicaid participants and may not bill, charge, 
collect, or receive any other form of payment from the State 
administering agency or from, or on behalf of, the participant, except 
as follows:
    (1) Payment with respect to any applicable spenddown liability under 
Sec. Sec.  435.121 and 435.831 of this chapter and any amounts due under 
the post-eligibility treatment of income process under Sec.  460.184.
    (2) Medicare payment received from CMS or from other payers, in 
accordance with Sec.  460.180(d).
    (d) State procedures for the enrollment and disenrollment of 
participants in the State's system, including procedures for any 
adjustment to account for the difference between the estimated number of 
participants on which the prospective monthly payment was based and the 
actual number of participants in that month, are included in the PACE 
program agreement.



Sec.  460.184  Post-eligibility treatment of income.

    (a) A State may provide for post-eligibility treatment of income for 
Medicaid participants in the same manner as a State treats post-
eligibility income for individuals receiving services under a waiver 
under section 1915(c) of the Act.
    (b) Post-eligibility treatment of income is applied as it is under a 
waiver of section 1915(c) of the Act, as specified in Sec. Sec.  435.726 
and 435.735 of this chapter, and section 1924 of the Act.



Sec.  460.186  PACE premiums.

    The amount that a PACE organization can charge a participant as a 
monthly premium depends on the participant's eligibility under Medicare 
and Medicaid, as follows:
    (a) Medicare Parts A and B. For a participant who is entitled to 
Medicare Part A, enrolled under Medicare Part B, but not eligible for 
Medicaid, the

[[Page 500]]

premium equals the Medicaid capitation amount.
    (b) Medicare Part A only. For a participant who is entitled to 
Medicare Part A, not enrolled under Medicare Part B, and not eligible 
for Medicaid, the premium equals the Medicaid capitation amount plus the 
Medicare Part B capitation rate.
    (c) Medicare Part B only. For a participant who is enrolled only 
under Medicare Part B and not eligible for Medicaid, the premium equals 
the Medicaid capitation amount plus the Medicare Part A capitation rate.
    (d) Medicaid, with or without Medicare. A PACE organization may not 
charge a premium to a participant who is eligible for both Medicare and 
Medicaid, or who is only eligible for Medicaid.



                   Subpart K_Federal/State Monitoring



Sec.  460.190  Monitoring during trial period.

    (a) Trial period review. During the trial period, CMS, in 
cooperation with the State administering agency, conducts comprehensive 
annual reviews of the operations of a PACE organization to ensure 
compliance with the requirements of this part.
    (b) Scope of review. The review includes the following:
    (1) An onsite visit to the PACE organization, which may include, but 
is not limited to, the following:
    (i) Review of participants' charts.
    (ii) Interviews with staff.
    (iii) Interviews with participants and caregivers.
    (iv) Interviews with contractors.
    (v) Observation of program operations, including marketing, 
participant services, enrollment and disenrollment procedures, 
grievances, and appeals.
    (2) A comprehensive assessment of an organization's fiscal 
soundness.
    (3) A comprehensive assessment of the organization's capacity to 
furnish all PACE services to all participants.
    (4) Any other elements that CMS or the State administering agency 
find necessary.



Sec.  460.192  Ongoing monitoring after trial period.

    (a) At the conclusion of the trial period, CMS, in cooperation with 
the State administering agency, continues to conduct reviews of a PACE 
organization, as appropriate, taking into account the quality of care 
furnished and the organization's compliance with all of the requirements 
of this part.
    (b) Reviews include an on-site visit at least every 2 years.



Sec.  460.194  Corrective action.

    (a) A PACE organization must take action to correct deficiencies 
identified during reviews.
    (b) CMS or the State administering agency monitors the effectiveness 
of corrective actions.
    (c) Failure to correct deficiencies may result in sanctions or 
termination, as specified in subpart D of this part.



Sec.  460.196  Disclosure of review results.

    (a) CMS and the State administering agency promptly report the 
results of reviews under Sec. Sec.  460.190 and 460.192 to the PACE 
organization, along with any recommendations for changes to the 
organization's program.
    (b) CMS and the State administering agency make the results of 
reviews available to the public upon request.
    (c) The PACE organization must post a notice of the availability of 
the results of the most recent review and any plans of correction or 
responses related to the most recent review.
    (d) The PACE organization must make the review results available for 
examination in a place readily accessible to participants.



      Subpart L_Data Collection, Record Maintenance, and Reporting



Sec.  460.200  Maintenance of records and reporting of data.

    (a) General rule. A PACE organization must collect data, maintain 
records, and submit reports as required by CMS and the State 
administering agency.
    (b) Access to data and records. A PACE organization must allow CMS 
and the State administering agency access to

[[Page 501]]

data and records including, but not limited to, the following:
    (1) Participant health outcomes data.
    (2) Financial books and records.
    (3) Medical records.
    (4) Personnel records.
    (c) Reporting. A PACE organization must submit to CMS and the State 
administering agency all reports that CMS and the State administering 
agency require to monitor the operation, cost, quality, and 
effectiveness of the program and establish payment rates.
    (d) Safeguarding data and records. A PACE organization must 
establish written policies and implement procedures to safeguard all 
data, books, and records against loss, destruction, unauthorized use, or 
inappropriate alteration.
    (e) Confidentiality of health information. A PACE organization must 
establish written policies and implement procedures to do the following:
    (1) Safeguard the privacy of any information that identifies a 
particular participant. Information from, or copies of, records may be 
released only to authorized individuals. Original medical records are 
released only in accordance with Federal or State laws, court orders, or 
subpoenas.
    (2) Maintain complete records and relevant information in an 
accurate and timely manner.
    (3) Grant each participant timely access, upon request, to review 
and copy his or her own medical records and to request amendments to 
those records.
    (4) Abide by all Federal and State laws regarding confidentiality 
and disclosure for mental health records, medical records, and other 
participant health information.
    (f) Retention of records. (1) A PACE organization must retain 
records for the longest of the following periods:
    (i) The period of time specified in State law.
    (ii) Six years from the last entry date.
    (iii) For medical records of disenrolled participants, 6 years after 
the date of disenrollment.
    (2) If litigation, a claim, a financial management review, or an 
audit arising from the operation of the PACE program is started before 
the expiration of the retention period, specified in paragraph (f)(1) of 
this section, the PACE organization must retain the records until the 
completion of the litigation, or resolution of the claims or audit 
findings.



Sec.  460.202  Participant health outcomes data.

    (a) A PACE organization must establish and maintain a health 
information system that collects, analyzes, integrates, and reports data 
necessary to measure the organization's performance, including outcomes 
of care furnished to participants.
    (b) A PACE organization must furnish data and information pertaining 
to its provision of participant care in the manner, and at the time 
intervals, specified by CMS and the State administering agency. The 
items collected are specified in the PACE program agreement.



Sec.  460.204  Financial recordkeeping and reporting requirements.

    (a) Accurate reports. A PACE organization must provide CMS and the 
State administering agency with accurate financial reports that are--
    (1) Prepared using an accrual basis of accounting; and
    (2) Verifiable by qualified auditors.
    (b) Accrual accounting. A PACE organization must maintain an accrual 
accounting recordkeeping system that does the following:
    (1) Accurately documents all financial transactions.
    (2) Provides an audit trail to source documents.
    (3) Generates financial statements.
    (c) Accepted reporting practices. Except as specified under Medicare 
principles of reimbursement, as defined in part 413 of this chapter, a 
PACE organization must follow standardized definitions, accounting, 
statistical, and reporting practices that are widely accepted in the 
health care industry.
    (d) Audit or inspection. A PACE organization must permit CMS and the 
State administering agency to audit or inspect any books and records of 
original entry that pertain to the following:
    (1) Any aspect of services furnished.
    (2) Reconciliation of participants' benefit liabilities.

[[Page 502]]

    (3) Determination of Medicare and Medicaid amounts payable.



Sec.  460.208  Financial statements.

    (a) General rule. (1) Not later than 180 days after the 
organization's fiscal year ends, a PACE organization must submit a 
certified financial statement that includes appropriate footnotes.
    (2) The financial statement must be certified by an independent 
certified public accountant.
    (b) Contents. At a minimum, the certified financial statement must 
consist of the following:
    (1) A certification statement.
    (2) A balance sheet.
    (3) A statement of revenues and expenses.
    (4) A source and use of funds statement.
    (c) Quarterly financial statement--(1) During trial period. A PACE 
organization must submit a quarterly financial statement throughout the 
trial period within 45 days after the last day of each quarter of the 
PACE organization's fiscal year.
    (2) After trial period. If CMS or the State administering agency 
determines that an organization's performance requires more frequent 
monitoring and oversight due to concerns about fiscal soundness, CMS or 
the State administering agency may require a PACE organization to submit 
monthly or quarterly financial statements, or both.



Sec.  460.210  Medical records.

    (a) Maintenance of medical records. (1) A PACE organization must 
maintain a single, comprehensive medical record for each participant, in 
accordance with accepted professional standards.
    (2) The medical record for each participant must meet the following 
requirements:
    (i) Be complete.
    (ii) Accurately documented.
    (iii) Readily accessible.
    (iv) Systematically organized.
    (v) Available to all staff.
    (vi) Maintained and housed at the PACE center where the participant 
receives services.
    (b) Content of medical records. At a minimum, the medical record 
must contain the following:
    (1) Appropriate identifying information.
    (2) Documentation of all services furnished, including the 
following:
    (i) A summary of emergency care and other inpatient or long-term 
care services.
    (ii) Services furnished by employees of the PACE center.
    (iii) Services furnished by contractors and their reports.
    (3) Interdisciplinary assessments, reassessments, plans of care, 
treatment, and progress notes that include the participant's response to 
treatment.
    (4) Laboratory, radiological and other test reports.
    (5) Medication records.
    (6) Hospital discharge summaries, if applicable.
    (7) Reports of contact with informal support (for example, 
caregiver, legal guardian, or next of kin).
    (8) Enrollment Agreement.
    (9) Physician orders.
    (10) Discharge summary and disenrollment justification, if 
applicable.
    (11) Advance directives, if applicable.
    (12) A signed release permitting disclosure of personal information.
    (c) Transfer of medical records. The organization must promptly 
transfer copies of medical record information between treatment 
facilities.
    (d) Authentication of medical records. (1) All entries must be 
legible, clear, complete, and appropriately authenticated and dated.
    (2) Authentication must include signatures or a secured computer 
entry by a unique identifier of the primary author who has reviewed and 
approved the entry.

[64 FR 66279, Nov. 24, 1999, as amended at 71 FR 71337, Dec. 8, 2006]

[[Page 503]]



             SUBCHAPTER F_QUALITY IMPROVEMENT ORGANIZATIONS





PART 475_QUALITY IMPROVEMENT ORGANIZATIONS--Table of Contents




                      Subpart A_General Provisions

Sec.
475.1 Definitions.

Subpart B [Reserved]

     Subpart C_Utilization and Quality Control Quality Improvement 
                              Organizations

475.100 Scope and applicability.
475.101 Eligibility requirements for QIO contracts.
475.102 Eligibility of physician-sponsored organizations.
475.103 Eligibility of physician-access organizations.
475.104 Requirements for demonstrating ability to perform review.
475.105 Prohibition against contracting with health care facilities.
475.106 Prohibition against contracting with payor organizations.
475.107 QIO contract award.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).



                      Subpart A_General Provisions



Sec.  475.1  Definitions.

    For purposes of this part:
    Five percent or more owner means a person (including, where 
appropriate, a corporation) who:
    (a) Has an ownership interest of 5 percent or more;
    (b) Has an indirect ownership interest equal to 5 percent or more;
    (c) Has a combination of direct and indirect ownership interests 
(the possession of equity in the capital, the stock, or the profits of 
an entity) equal to 5 percent or more; or
    (d) Is the owner of an interest of 5 percent or more in any 
obligation secured by an entity, if the interest equals at least 5 
percent of the value of the property or assets of the entity.
    Health care facility means an institution that directly provides or 
supplies health care services for which payment may be made in whole or 
in part under Title XVIII of the Act. A health care facility may be a 
hospital, skilled nursing facility, home health agency, free-standing 
ambulatory surgical center, or outpatient facility or any other entity 
which provides or supplies direct care to Medicare beneficiaries.
    Managing employee means a general manager, business manager, 
administrator, director or other individual who exercises operational or 
managerial control over the entity or organization, or who, directly or 
indirectly, conducts the day-to-day operations of the entity or 
organization.
    Payor organization means any organization, other than a self-insured 
employer, which makes payments directly or indirectly to health care 
practitioners or providers whose health care services are reviewed by 
the organization or would be reviewed by the organization if it entered 
into a QIO contract. ``Payor organization'' also means any organization 
which is affiliated with any entity which makes payments as described 
above, by virtue of the organization having two or more governing body 
members who are also either governing body members, officers, partners, 
5 percent or more owners or managing employees in a health maintenance 
organization or competitive medical plan.
    Physician means:
    (1) A doctor of medicine or osteopathy licensed under State law to 
practice medicine, surgery, or osteopathy in the State in which the QIO 
is located;
    (2) An intern, resident, or Federal Government employee authorized 
under State or Federal law to practice medicine, surgery, or osteopathy 
in the QIO area; and
    (3) An individual licensed to practice medicine in American Samoa, 
the Northern Mariana Islands, and the Trust Territory of the Pacific 
Islands.

[43 FR 32085, July 24, 1978, as amended at 49 FR 7206, Feb. 27, 1984. 
Redesignated at 50 FR 15327, Apr. 17, 1985, and amended at 50 FR 15328, 
Apr. 17, 1985; 51 FR 43197, Dec. 1, 1986. Redesignated at 64 FR 66279, 
Nov. 24, 1999]

Subpart B [Reserved]

[[Page 504]]



     Subpart C_Utilization and Quality Control Quality Improvement 
                              Organizations

    Source: 49 FR 7207, Feb. 27, 1984, unless otherwise noted. 
Redesignated at 50 FR 15327, Apr. 17, 1985, and further redesignated at 
64 FR 66279, Nov. 24, 1999.



Sec.  475.100  Scope and applicability.

    This subpart implements sections 1152 and 1153(b) of the Social 
Security Act as amended by the Peer Review Improvement Act of 1982 (Pub. 
L. 97-248). It defines the types of organizations eligible to become 
QIOs and establishes certain limitations and priorities regarding QIO 
contracting.



Sec.  475.101  Eligibility requirements for QIO contracts.

    In order to be eligible for a QIO contract an organization must--
    (a) Be either a physician-sponsored organization as described in 
Sec.  462.102; or a physician-access organization as described in Sec.  
462.103; and
    (b) Demonstrate its ability to perform review as set forth in Sec.  
462.104.



Sec.  475.102  Eligibility of physician-sponsored organizations.

    (a) In order to be eligible for designation as a physician-sponsored 
QIO, an organization must meet the following conditions:
    (1) Be composed of a substantial number of the licensed doctors of 
medicine and osteopathy practicing medicine or surgery in the review 
area and who are representative of the physicians practicing in the 
area.
    (2) Not be a health care facility, health care facility association, 
or health care facility affiliate, as specified in Sec.  462.105.
    (b) In order to meet the requirements of paragraph (a)(1) of this 
section, an organization must state and have documentation in its files 
showing that it is composed of at least 10 percent of the licensed 
doctors of medicine and osteopathy practicing medicine or surgery in the 
review area.
    (c) In order to meet the requirements or paragraph (a)(2) of this 
section, an organization must--
    (1) State and have documentation in its files demonstrating that it 
is composed of at least 20 percent of the licensed doctors of medicine 
and osteopathy practicing medicine or surgery in the review area; or
    (2) If the organization is not composed of at least 20 percent of 
the licensed doctors of medicine and osteopathy practicing medicine or 
surgery in the review area, then the organization must demonstrate in 
its contract proposal, through letters of support from physicians or 
physician organizations, or through other means, that it is 
representative of the area physicians.
    (d) Organizations that meet the requirements in paragraph (a) of 
this section will receive, during the contract evaluation process, a set 
number of bonus points.

[49 FR 7207, Feb. 27, 1984. Redesignated and amended at 50 FR 15327, 
15328, Apr. 17, 1985, and further redesignated at 64 FR 66279, Nov. 24, 
1999]



Sec.  475.103  Eligibility of physician-access organizations.

    (a) In order to be eligible for designation as a physician-access 
QIO, an organization must meet the following conditions:
    (1) Have available to it, by arrangement or otherwise, the services 
of a sufficient number of licensed doctors of medicine or osteopathy 
practicing medicine or surgery in the review area to assure adequate 
peer review of the services provided by the various medical specialties 
and subspecialties.
    (2) Not be a health care facility, health care facility association, 
or health care facility affiliate, as specified in Sec.  462.105.
    (b) An organization meets the requirements of paragraph (a)(1) of 
this section if it demonstrates--
    (1) That it has available to it at least one physician in every 
generally recognized specialty; and
    (2) The existence of an arrangement or arrangements with physicians 
under which the physicians would conduct review for the organization.

[50 FR 15328, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999]

[[Page 505]]



Sec.  475.104  Requirements for demonstrating ability to perform review.

    (a) A physician-sponsored or physician-access organization will be 
found capable of conducting review if CMS determines that the 
organization is able to set quantifiable performance objectives and 
perform the utilization and quality review functions established under 
section 1154 of the Social Security Act in an efficient and effective 
manner.
    (b) CMS will determine that the organization is capable of 
conducting utilization and quality review if--
    (1) The organization's proposed review system is adequate; and
    (2) The organization has available sufficient resources (including 
access to medical review skills) to implement that system; and
    (3) The organization's quantifiable objectives are acceptable.
    (c) CMS may consider prior similar review experience in making 
determinations under paragraph (b) of this section.
    (d) A State government that operates a Medicaid program will be 
considered incapable of performing utilization and quality review 
functions in an effective manner, unless the State demonstrates to the 
satisfaction of CMS that it will act with complete independence and 
objectivity.



Sec.  475.105  Prohibition against contracting with health care facilities.

    (a) Basic rule. Except as permitted under paragraph (b) of this 
section, the following are not eligible for QIO contracts:
    (1) A health care facility in the QIO area.
    (2) An association of health care facilities in the QIO area.
    (3) A health care facility affiliate; that is, an organization in 
which more than 20 percent of the members of the governing body are also 
either a governing body member, officer, partner, five percent or more 
owner, or managing employee in a health care facility or association of 
health care facilities in the QIO area.
    (b) Exceptions. Effective November 15, 1984, the prohibition stated 
in paragraph (a) of this section will not apply to a payor organization 
if CMS determines under Sec.  462.106 that there is no other eligible 
organization available.
    (c) Subcontracting. A QIO must not subcontract with a facility to 
conduct any review activities except for the review of the quality of 
care.

[50 FR 15328, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  475.106  Prohibition against contracting with payor organizations.

    Payor organizations are not eligible to become QIOs for the area in 
which they make payments until November 15, 1984. If no QIO contract for 
an area is awarded before November 15, 1984, a payor organization will 
be determined eligible by CMS, if an eligible organization that is not a 
payor organization is unavailable at that time. CMS may determine the 
unavailability of nonpayor organizations based on the lack of response 
to an appropriate Request for Proposal.

[50 FR 15328, Apr. 17, 1985]



Sec.  475.107  QIO contract award.

    CMS, in awarding QIO contracts, will take the following actions--
    (a) Identify from among all proposals submitted in response to an 
RFP for a given QIO area all proposals submitted by organizations that 
meet the requirements of Sec.  462.102 or Sec.  462.103;
    (b) Identify from among all proposals identified in paragraph (a) of 
this section all proposals that set forth minimally acceptable plans in 
accordance with the requirements of Sec.  462.104 and the RFPs;
    (c) Assign bonus points not to exceed 10% of the total points 
available to all physician-sponsored organizations identified in 
paragraph (b) of this section, consistent with statute; and
    (d) Subject to the limitations established by Sec. Sec.  462.105 and 
462.106, award the contract for the given QIO area to the selected 
organization for a period of two years.

[49 FR 7207, Feb. 27, 1984. Redesignated and amended at 50 FR 15327, 
15328, Apr. 17, 1985, and further redesignated at 64 FR 66279, Nov. 24, 
1999]

[[Page 506]]



PART 476_UTILIZATION AND QUALITY CONTROL REVIEW--Table of Contents




                      Subpart A_General Provisions

Sec.
476.1 Definitions.

Subpart B [Reserved]

  Subpart C_Review Responsibilities of Utilization and Quality Control 
                Quality Improvement Organizations (QIOs)

                           General Provisions

476.70 Statutory bases and applicability.
476.71 QIO review requirements.
476.72 Review of the quality of care of risk-basis health maintenance 
          organizations and competitive medical plans.
476.73 Notification of QIO designation and implementation of review.
476.74 General requirements for the assumption of review.
476.76 Cooperation with health care facilities.
476.78 Responsibilities of health care facilities.
476.80 Coordination with Medicare fiscal intermediaries and carriers.
476.82 Continuation of functions not assumed by QIOs.

                          QIO Review Functions

476.83 Initial denial determinations.
476.84 Changes as a result of DRG validation.
476.85 Conclusive effect of QIO initial denial determinations and 
          changes as a result of DRG validations.
476.86 Correlation of Title XI functions with Title XVIII functions.
476.88 Examination of the operations and records of health care 
          facilities and practitioners.
476.90 Lack of cooperation by a health care facility or practitioner.
476.93 Opportunity to discuss proposed initial denial determination and 
          changes as a result of a DRG validation.
476.94 Notice of QIO initial denial determination and changes as a 
          result of a DRG validation.
476.96 Review period and reopening of initial denial determinations and 
          changes as a result of DRG validations.
476.98 Reviewer qualifications and participation.
476.100 Use of norms and criteria.
476.102 Involvement of health care practitioners other than physicians.
476.104 Coordination of activities.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

    Source: 44 FR 32081, June 4, 1979, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.



                      Subpart A_General Provisions



Sec.  476.1  Definitions.

    As used in this part, unless the context indicates otherwise:
    Active staff privileges means: (a) That a physician is authorized on 
a regular, rather than infrequent or courtesy, basis: (1) to order the 
admission of patients to a facility; (2) to perform diagnostic services 
in a facility; or (3) to care for and treat patients in a facility; or 
(b) that a health care practitioner other than a physician is authorized 
on a regular, rather than infrequent or courtesy, basis to order the 
admission of patients to a facility.
    Admission review means a review and determination by a QIO of the 
medical necessity and appropriateness of a patient's admission to a 
specific facility.
    Continued stay review means QIO review that is performed after 
admission review and during a patient's hospitalization to determine the 
medical necessity and appropriateness of continuing the patient's stay 
at a hospital level of care.
    Criteria means predetermined elements of health care, developed by 
health professionals relying on professional expertise, prior 
experience, and the professional literature, with which aspects of the 
quality, medical necessity, and appropriateness of a health care service 
may be compared.
    Diagnosis related group (DRG) means a system for classifying 
inpatient hospital discharges. DRGs are used for purposes of determining 
payment to hospitals for inpatient hospital services under the Medicare 
prospective payment system.
    DRG validation means a part of the prospective payment system in 
which a QIO validates that DRG assignments are based on the correct 
diagnostic and procedural information.
    Elective, when applied to admission or to a health care service, 
means an admission or a service that can be delayed without substantial 
risk to the health of the individual.

[[Page 507]]

    Five percent or more owner means a person (including, where 
appropriate, a corporation) who:
    (a) Has an ownership interest of 5 percent or more;
    (b) Has an indirect ownership interest equal to 5 percent or more;
    (c) Has a combination of direct and indirect ownership interests 
(the possession of equity in the capital, the stock, or the profits of 
an entity) equal to five percent or more; or
    (d) Is the owner of an interest of five percent or more in any 
obligation secured by an entity, if the interest equals at least five 
percent of the value of the property or assets of the entity.
    Health care facility or facility means an organization involved in 
the delivery of health care services for which reimbursement may be made 
in whole or in part under Title XVIII of the Act.
    Health care practitioners other than physicians means those health 
professionals who do not hold a doctor of medicine or doctor of 
osteopathy degree, who meet all applicable State or Federal requirements 
for practice of their professions, and who are in active practice.
    Hospital means a health care institution or distinct part of a 
health care institution, as defined in Section 1861(e)-(g) of the Act, 
other than a religious nonmedical institution as defined in Sec.  
440.170(b) of this chapter.
    Initial denial determination means an initial negative decision by a 
QIO, regarding the medical necessity, quality, or appropriateness of 
health care services furnished, or proposed to be furnished, to a 
patient.
    Major clinical area means medicine, surgery, pediatrics, obstetrics 
and gynecology, or psychiatry.
    Major procedure means a diagnostic or therapeutic procedure which 
involves a surgical or anesthetic risk or requires highly trained 
personnel or special facilities or equipment.
    Non-facility organization means a corporate entity that (1) is not a 
health care facility; (2) is not a 5 percent or more owner of a 
facility; and (3) is not owned by one or more health care facilities or 
association of facilities in the QIO area.
    Norm means a pattern of performance in the delivery of health care 
services that is typical for a specified group.
    Norms means numerical or statistical measures of average observed 
performance in the delivery of health care services.
    Outliers means those cases that have either an extremely long length 
of stay or extraordinarily high costs when compared to most discharges 
classified in the same DRG.
    Peer review means review by health care practitioners of services 
ordered or furnished by other practitioners in the same professional 
field.
    Physician means a doctor of medicine or osteopathy or another 
individual who is authorized under State or Federal law to practice 
medicine and surgery, or osteopathy. This includes medical officers in 
American Samoa, the Northern Mariana Islands, and the Trust Territory of 
the Pacific Islands.
    Practitioner means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients.
    Preadmission certification means a favorable determination, 
transmitted to the hospital and the fiscal intermediary, approving the 
patient's admission for payment purposes.
    Preadmission review means review prior to a patient's admission to a 
hospital to determine, for payment purposes, the reasonableness, medical 
necessity and appropriateness of placement at an acute level of care.
    Preprocedure review means review of a surgical or other invasive 
procedure prior to the conduct of the procedure.
    QIO review means review performed in fulfillment of a contract with 
CMS, either by the QIO or its subcontractors.
    Profile means aggregated data in formats that display patterns of 
health care services over a defined period of time.
    Profile analysis means review and analysis of profiles to identify 
and consider patterns of health care services.
    Quality review study means an assessment conducted by or for a QIO 
of a patient care problem for the purpose of improving patient care 
through peer analysis, intervention, resolution of the problem and 
follow-up.

[[Page 508]]

    Regional norms, criteria, and standards means norms, criteria, and 
standards that apply to a geographic division which is larger than a QIO 
area.
    Retrospective review means review that is conducted after services 
are provided to a patient. The review is focused on determining the 
appropriateness, necessity, quality, and reasonableness of health care 
services provided.
    Review responsibility means (1) the responsibility of the QIO to 
perform review functions prescribed under Part B of Title XI of the Act 
and the Social Security Amendments of 1983 (Pub. L. No. 98-21) and the 
regulations of this part; (2) the responsibility to fulfill the terms 
and meet the objectives set forth in the negotiated contract between CMS 
and the QIO; and (3) the authority of a QIO to make conclusive initial 
denial determinations regarding the medical necessity and 
appropriateness of health care and changes as a result of DRG 
validations.
    Skilled nursing facility (SNF) means a health care institution or 
distinct part of an institution that (a) is primarily engaged in 
providing skilled nursing care or rehabilitative services to injured, 
disabled, or sick persons, and (b) has an agreement to participate in 
Medicare or Medicaid or both, and (c) is not a religious nonmedical 
institution as defined in Sec.  440.170(b) of this chapter
    Standards means professionally developed expressions of the range of 
acceptable variation from a norm or criterion.
    Subcontractor means a facility or a non-facility organization under 
contract with a QIO to perform QIO review functions.
    Working day means any one of at least five days of each week 
(excluding, at the option of each QIO, legal holidays) on which the 
necessary personnel are available to perform review.

[44 FR 32081, June 4, 1979, as amended at 45 FR 67545, Oct. 10, 1980; 46 
FR 48569, Oct. 1, 1981. Redesignated and amended at 50 FR 15328, 15329, 
Apr. 17, 1985; 51 FR 43197, Dec. 1, 1986. Redesignated at 64 FR 66279, 
Nov. 24, 1999, as amended at 64 FR 67052, Nov. 30, 1999]

Subpart B [Reserved]



  Subpart C_Review Responsibilities of Utilization and Quality Control 
                Quality Improvement Organizations (QIOs)

    Source: 50 FR 15330, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.

                           General Provisions



Sec.  476.70  Statutory bases and applicability.

    (a) Statutory basis. Sections 1154, 1866(a)(1)(F) and 1886(f)(2) of 
the Act require that a QIO review those services furnished by 
physicians, other health care professionals, providers and suppliers as 
specified in its contract with the Secretary. Section 1154(a)(4) of the 
Act requires QIOs, or, in certain circumstances, non-QIO entities, to 
perform quality of care reviews of services furnished under risk-basis 
contracts by health maintenance organizations (HMOs) and competitive 
medical plans (CMPs) that are covered under subpart C of part 417 of 
this chapter.
    (b) Applicability. The regulations in this subpart apply to review 
conducted by a QIO and its subcontractors. Section 466.72 of this part 
also applies, for purposes of quality of care reviews under section 
1154(a)(4) of the Act, to non-QIO entities that enter into contracts to 
perform reviews of services furnished under risk-basis contracts by HMOs 
and CMPs under subpart C of part 417 of this chapter.

[52 FR 37457, Oct. 7, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  476.71  QIO review requirements.

    (a) Scope of QIO review. In its review, the QIO must determine (in 
accordance with the terms of its contract)--
    (1) Whether the services are or were reasonable and medically 
necessary for the diagnosis and treatment of illness or injury or to 
improve functioning of a malformed body member, or (with respect to 
pneumococcal vaccine) for prevention of illness or (in the case of 
hospice care) for the palliation and management of terminal illness;
    (2) Whether the quality of the services meets professionally 
recognized standards of health care;

[[Page 509]]

    (3) Whether those services furnished or proposed to be furnished on 
an inpatient basis could, consistent with the provisions of appropriate 
medical care, be effectively furnished more economically on an 
outpatient basis or in an inpatient health care facility of a different 
type;
    (4) Through DRG validation, the validity of diagnostic and 
procedural information supplied by the hospital;
    (5) The completeness, adequacy and quality of hospital care 
provided;
    (6) The medical necessity, reasonableness and appropriateness of 
hospital admissions and discharges;
    (7) The medical necessity, reasonableness and appropriateness of 
inpatient hospital care for which additional payment is sought under the 
outlier provisions of Sec. Sec.  412.82 and 412.84 of this chapter; and
    (8) Whether a hospital has misrepresented admission or discharge 
information or has taken an action that results in--
    (i) The unnecessary admission of an individual entitled to benefits 
under part A;
    (ii) Unnecessary multiple admissions of an individual; or
    (iii) Other inappropriate medical or other practices with respect to 
beneficiaries or billing for services furnished to beneficiaries.
    (b) Payment determinations. On the basis of the review specified 
under paragraphs (a) (1), (3), (6), (7), and (8) of this section, the 
QIO must determine whether payment may be made for these services. A QIO 
may grant a period of not more than two days (grace days) for the 
purpose of arranging post discharge care when the provider did not know 
or could not reasonably be expected to have known that payment for the 
service(s) would not be made under the Medicare program as specified in 
Sec.  405.330(b).
    (c) Other duties and functions. (1) The QIO must review at least a 
random sample of hospital discharges each quarter and submit new 
diagnostic and procedural information to the Medicare fiscal 
intermediary or carrier if it determines that the information submitted 
by the hospital was incorrect.
    (2) As directed by CMS, the QIO must review changes in DRG and LTC-
DRG assignments made by the intermediary under the provisions of 
Sec. Sec.  412.60(d) and 412.513(c) of this chapter that result in the 
assignment of a higher-weighted DRG or a different LTC-DRG. The QIO's 
review must verify that the diagnostic and procedural information 
supplied by the hospital is substantiated by the information in the 
medical record.
    (d) Coordination of sanction activities. The QIO must carry out the 
responsibilities specified in subpart C of part 1004 of this title 
regarding imposition of sanctions on providers and practitioners who 
violate their statutory obligations under section 1156 of the Act.

[52 FR 37457, Oct. 7, 1987; 52 FR 47003, Dec. 11, 1987, as amended at 59 
FR 45402, Sept. 1, 1994. Redesignated at 64 FR 66279, Nov. 24, 1999; 67 
FR 56056, Aug. 30, 2002]



Sec.  476.72  Review of the quality of care of risk-basis health maintenance organizations and competitive medical plans.

    (a) (1) For purposes of a review under section 1154(a)(4) of the 
Act, a QIO must determine whether the quality of services (including 
both inpatient and outpatient services) provided by an HMO or CMP meets 
professionally recognized standards of health care, including whether 
appropriate health care services have not been provided or have been 
provided in inappropriate settings.
    (2) Paragraph (a)(1) of this section will not apply with respect to 
a contract year if another entity has been awarded a contract to perform 
those reviews under section 1154(a)(4)(C) of the Act.
    (b) For purposes of reviews under this section, non-QIO entities 
selected to perform these reviews under section 1154(a)(4)(C) of the Act 
are subject to the requirements of paragraph (a)(1) of this section 
and--
    (1) Part 476 of this chapter regarding acquisition, protection, and 
disclosure of peer review information; and
    (2) Part 1004 of Chapter V regarding a QIO's responsibilities, and 
sanctions on health care practitioners and providers.

[52 FR 37457, Oct. 7, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999]

[[Page 510]]



Sec.  476.73  Notification of QIO designation and implementation of review.

    (a) Notice of CMS's decision. CMS sends written notification of a 
QIO contract award to the State survey agency and Medicare fiscal 
intermediaries and carriers. The notification includes the effective 
dates of the QIO contract and specifies the area and types of health 
care facilities to be reviewed by the QIO. The QIO must make a similar 
notification when review responsibilities are subcontracted.
    (b) Notification to health care facilities and the public. As 
specified in its contract with CMS, the QIO must--
    (1) Provide, to each health care facility scheduled to come under 
review, a timely written notice that specifies the date and manner in 
which the QIO proposes to implement review, and the information to be 
furnished by the facility to each Medicare beneficiary upon admission as 
specified in Sec.  466.78(b)(3) of this part.
    (2) Publish, in at least one local newspaper of general circulation 
in the QIO area, a notice that states the date the QIO will assume 
review responsibilities and lists each area health care facility to be 
under review. The QIO must indicate that its plan for the review of 
health care services as approved in its contract with CMS is available 
for public inspection in the QIO's business office and give the address, 
telephone number and usual hours of business.

[50 FR 15330, Apr. 17, 1985. Redesignated at 52 FR 37457, Oct. 7, 1987, 
and further redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  476.74  General requirements for the assumption of review.

    (a) A QIO must assume review responsibility in accordance with the 
schedule, functions and negotiated objectives specified in its contract 
with CMS.
    (b) A QIO must notify the appropriate Medicare fiscal intermediary 
or carrier of its assumption of review in specific health care 
facilities no later than five working days after the day that review is 
assumed in the facility.
    (c) A QIO must maintain and make available for public inspection at 
its principal business office--
    (1) A copy of each agreement with Medicare fiscal intermediaries and 
carriers;
    (2) A copy of its currently approved review plan that includes the 
QIO's method for implementing review; and
    (3) Copies of all subcontracts for the conduct of review.
    (d) A QIO must not subcontract with a facility to conduct any review 
activities except for the review of the quality of care. The QIO may 
subcontract with a non-facility organization to conduct review in a 
facility.
    (e) If required by CMS, a QIO is responsible for compiling 
statistics based on the criteria contained in Sec.  405.332 of this 
chapter and making limitation of liability determinations on excluded 
coverage of certain services that are made under section 1879 of the 
Act. If required by CMS, QIOs must also notify a provider of these 
determinations. These determinations and further appeals are governed by 
the reconsideration and appeals procedures in part 405, subpart G of 
this chapter for Medicare Part A related determinations and part 405, 
subpart H of this chapter for Medicare Part B related determinations.
    (f) A QIO must make its responsibilities under its contract with 
CMS, primary to all other interests and activities that the QIO 
undertakes.



Sec.  476.76  Cooperation with health care facilities.

    Before implementation of review, a QIO must make a good faith effort 
to discuss the QIO's administrative and review procedures with each 
involved health care facility.



Sec.  476.78  Responsibilities of health care facilities.

    (a) Every hospital seeking payment for services furnished to 
Medicare beneficiaries must maintain a written agreement with a QIO 
operating in the area in which the hospital is located. These agreements 
must provide for the QIO review specified in Sec.  466.71.
    (b) Cooperation with QIOs. Health care providers that submit 
Medicare claims must cooperate in the assumption and conduct of QIO 
review. Providers must--

[[Page 511]]

    (1) Allocate adequate space to the QIO for its conduct of review at 
the times the QIO is conducting review.
    (2) Provide patient care data and other pertinent data to the QIO at 
the time the QIO is collecting review information that is required for 
the QIO to make its determinations. The provider must photocopy and 
deliver to the QIO all required information within 30 days of a request. 
QIOs pay providers paid under the prospective payment system for the 
costs of photocopying records requested by the QIO in accordance with 
the payment rate determined under the methodology described in paragraph 
(c) of this section and for first class postage for mailing the records 
to the QIO. When the QIO does postadmission, preprocedure review, the 
facility must provide the necessary information before the procedure is 
performed, unless it must be performed on an emergency basis.
    (3) Inform Medicare beneficiaries at the time of admission, in 
writing, that the care for which Medicare payment is sought will be 
subject to QIO review and indicate the potential outcomes of that 
review. Furnishing this information to the patient does not constitute 
notice, under Sec.  405.332(a) of this chapter, that can support a 
finding that the beneficiary knew the services were not covered.
    (4) When the facility has issued a written determination in 
accordance with Sec.  412.42(c)(3) of this chapter that a beneficiary no 
longer requries inpatient hospital care, it must submit a copy of its 
determination to the QIO within 3 working days.
    (5) Assure, in accordance with the provisions of its agreement with 
the QIO, that each case subject to preadmission review has been reviewed 
and approved by the QIO before admission to the hospital or a timely 
request has been made for QIO review.
    (6)(i) Agree to accept financial liability for any admission subject 
to preadmission review that was not reviewed by the QIO and is 
subsequently determined to be inappropriate or not medically necessary.
    (ii) The provisions of paragraph (b)(6)(i) of this section do not 
apply if a facility, in accordance with its agreement with a QIO, makes 
a timely request for preadmission review and the QIO does not review the 
case timely. Cases of this type are subject to retrospective prepayment 
review under paragraph (b)(7) of this section.
    (7) Agree that, if the hospital admits a case subject to 
preadmission review without certification, the case must receive 
retrospective prepayment review, according to the review priority 
established by the QIO.
    (c) Photocopying reimbursement methodology for prospective payment 
system providers. Providers subject to the prospective payment system 
are paid for the photocopying costs that are directly attributable to 
the providers' responsibility to the QIOs to provide photocopies of 
requested provider records. The payment is in addition to payment 
already provided for these costs under other provisions of the Social 
Security Act and is based on a fixed amount per page as determined by 
CMS as follows:
    (1) Step one. CMS adds the annual salary of a photocopy machine 
operator and the costs of fringe benefits as determined in accordance 
with the principles set forth in OMB Circular A-76.
    (2) Step two. CMS divides the amount determined in paragraph (c)(1) 
of this section by the number of pages that can be reasonably expected 
to be made annually by the photocopy machine operator to establish the 
labor cost per page.
    (3) CMS adds to the per-page labor cost determined in paragraph 
(c)(2) of this section the per-page costs of supplies.
    (4) CMS will periodically review the photocopy reimbursement rate to 
ensure that it still accurately reflects provider costs. CMS will 
publish any changes to the rate in a Federal Register notice.
    (d) Appeals. Reimbursement for the costs of photocopying and mailing 
records for QIO review is an additional payment to providers under the 
prospective payment system, as specified in Sec.  412.115, Sec.  
413.355, and Sec.  484.265 of this chapter. Thus, appeals concerning 
these costs are subject to the review

[[Page 512]]

process specified in part 405, subpart R of this chapter.

[50 FR 15330, Apr. 17, 1985, as amended at 57 FR 47787, Oct. 20, 1992; 
59 FR 45402, Sept. 1, 1994. Redesignated at 64 FR 66279, Nov. 24, 1999; 
68 FR 67960, Dec. 5, 2003]



Sec.  476.80  Coordination with Medicare fiscal intermediaries and carriers.

    (a) Procedures for agreements. The Medicare fiscal intermediary or 
carrier must have a written agreement with the QIO. The QIO must take 
the initiative with the fiscal intermediary or carrier in developing the 
agreement. The following steps must be taken in developing the 
agreement.
    (1) The QIO and the fiscal intermediary or carrier must negotiate in 
good faith in an effort to reach written agreement. If they cannot reach 
agreement, CMS will assist them in resolving matters in dispute.
    (2) The QIO must incorporate its administrative procedures into an 
agreement with the fiscal intermediary or carrier and obtain approval 
from CMS, before it makes conclusive determinations for the Medicare 
program, unless CMS finds that the fiscal intermediary or carrier has--
    (i) Refused to negotiate in good faith or in a timely manner, or
    (ii) Insisted on including in the agreement, provisions that are 
outside the scope of its authority under the Act.
    (b) Content of agreement. The agreement must include procedures 
for--
    (1) Informing the appropriate Medicare fiscal intermediaries and 
carriers of--
    (i) Changes as a result of DRG validations and revisions as a result 
of the review of these changes; and
    (ii) Initial denial determinations and revisions of these 
determinations as a result of reconsideration, or reopening all 
approvals and denials with respect to cases subject to preadmission 
review, and outlier claims in hospitals under a prospective payment 
system for health care services and items;
    (2) Exchanging data or information;
    (3) Modifying the procedures when additional review responsibility 
is authorized by CMS; and
    (4) Any other matters that are necessary for the coordination of 
functions.
    (c) Action by CMS. (1) Within the time specified in its contract, 
the QIO must submit to CMS for approval its agreement with the Medicare 
fiscal intermediaries and carriers, or if an agreement has not been 
established, the QIO's proposed administrative procedures, including any 
comments by the Medicare fiscal intermediaries and carriers.
    (2) If CMS approves the agreement or the administrative procedures 
(after a finding by CMS as specified in paragraph (a)(2) of this 
section), the QIO may begin to make determinations under its contract 
with CMS.
    (3) If CMS disapproves the agreement or procedures, it will--
    (i) Notify the QIO and the appropriate fiscal agents in writing, 
stating the reasons for disapproval; and
    (ii) Require the QIO and fiscal intermediary or carrier to revise 
its agreements or procedures.
    (d) Modification of agreements. Agreements or procedures may be 
modified, with CMS's approval--
    (1) Through a revised agreement with the fiscal intermediary or 
carrier, or
    (2) In the case of procedures, by the QIO, after providing 
opportunity for comment by the fiscal intermediary or carrier.
    (e) Role of the fiscal intermediary. (1) The fiscal intermediary 
will not pay any claims for those cases which are subject to 
preadmission review by the QIO, until it receives notice that the QIO 
has approved the admission after preadmission or retrospective review.
    (2) A QIO's determination that an admission is medically necessary 
is not a guarantee of payment by the fiscal intermediary. Medicare 
coverage requirements must also be applied.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  476.82  Continuation of functions not assumed by QIOs.

    Any of the duties and functions under Part B of Title XI of the Act 
for which a QIO has not assumed responsibility under its contract with 
CMS must be

[[Page 513]]

performed in the manner and to the extent otherwise provided for under 
the Act or in regulations.

                          QIO Review Functions



Sec.  476.83  Initial denial determinations.

    A determination by a QIO that the health care services furnished or 
proposed to be furnished to a patient are not medically necessary, are 
not reasonable, or are not at the appropriate level of care, is an 
initial denial determination and is appealable under part 473 of this 
chapter.



Sec.  476.84  Changes as a result of DRG validation.

    A provider or practitioner may obtain a review by a QIO under part 
473 of this chapter for changes in diagnostic and procedural coding that 
resulted in a change in DRG assignment as a result of QIO validation 
activities.



Sec.  476.85  Conclusive effect of QIO initial denial determinations and changes as a result of DRG validations.

    A QIO initial denial determination or change as a result of DRG 
validation is final and binding unless, in accordance with the 
procedures in part 473--
    (a) The initial denial determination is reconsidered and revised; or
    (b) The change as a result of DRG validation is reviewed and 
revised.



Sec.  476.86  Correlation of Title XI functions with Title XVIII functions.

    (a) Payment determinations. (1) QIO initial denial determinations 
under this part with regard to the reasonableness, medical necessity, 
and appropriateness of placement at an acute level of patient care as 
are also conclusive for payment purposes with regard to the following 
medical issues:
    (i) Whether inpatient care furnished in a psychiatric hospital meets 
the requirements of Sec.  424.14 of this chapter.
    (ii) Whether payment for inpatient hospital or SNF care beyond 20 
consecutive days is precluded under Sec.  489.50 of this chapter because 
of failure to perform review of long-stay cases.
    (iii) Whether the care furnished was custodial care or care not 
reasonable and necessary and, as such, excluded under Sec.  405.310(g) 
or Sec.  405.310(k) of this chapter.
    (iv) Whether the care was appropriately furnished in the inpatient 
or outpatient setting.
    (2) Reviews with respect to determinations listed in paragraph 
(a)(1) of this section must not be conducted, for purposes of payment, 
by Medicare fiscal intermediaries or carriers except as outlined in 
paragraph (c) of this section.
    (3) QIOs make determinations as to the appropriateness of the 
location in which procedures are performed. A procedure may be medically 
necessary but denied if the QIO determines that it could, consistent 
with the provision of appropriate medical care, be effectively provided 
more economically on an outpatient basis or in an inpatient health care 
facility of a different type.
    (4) QIO determinations as to whether the provider and the 
beneficiary knew or could reasonably be expected to have known that the 
services described in paragraph (a)(1) of this section were excluded are 
also conclusive for payment purposes.
    (b) Utilization review activities. QIO review activities to 
determine whether inpatient hospital or SNF care services are reasonable 
and medically necessary and are furnished at the appropriate level of 
care fulfill the utilization review requirements set forth in Sec. Sec.  
405.1035, 405.1042, and 405.1137 of this chapter.
    (c) Coverage. Nothing in paragraphs (a) (1) and (3) of this section 
will be construed as precluding CMS or a Medicare fiscal intermediary or 
carrier, in the proper exercise of its duties and functions, from 
reviewing claims to determine:
    (1) In the case of items or services not reviewed by a QIO, whether 
they meet coverage requirements of Title XVIII relating to medical 
necessity, reasonableness, or appropriateness of placement at an acute 
level of patient care. However, if a coverage determination pertains to 
medical necessity, reasonableness, or appropriateness of placement at an 
acute level of patient care, the fiscal intermediary or carrier

[[Page 514]]

must use a QIO to make a determination on those issues if a QIO is 
conducting review in the area and must abide by the QIO's determination.
    (2) Whether any claim meets coverage requirements of Title XVIII 
relating to issues other than medical necessity, reasonableness or 
appropriateness of placement at an acute level of patient care.
    (d) Payment. Medicare fiscal intermediaries and carriers are not 
precluded from making payment determinations with regard to coverage 
determinations made under paragraph (c) of this section.
    (e) Survey, compliance and assistance activities. QIO review and 
monitoring activities fulfill the requirements for compliance and 
assistance activities of State survey agencies under section 1864(a) 
with respect to sections 1861(e)(6), 1861(j)(8), 1861(j)(12), and 
1861(k) of the Act, and activities required of intermediaries and 
carriers under Sec. Sec.  421.100(d) and 421.200(f) of this chapter.
    (f) Appeals. The requirements and procedures for QIO review of 
changes as a result of DRG validation and the reconsideration, hearing 
and judicial review of QIO initial denial determinations are set forth 
in part 473 of this chapter.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985, as amended at 
53 FR 6648, Mar. 2, 1988. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  476.88  Examination of the operations and records of health care facilities and practitioners.

    (a) Authorization to examine records. A facility claiming Medicare 
payment must permit a QIO or its subcontractor to examine its operation 
and records (including information on charges) that are pertinent to 
health care services furnished to Medicare beneficiaries and are 
necessary for the QIO or its subcontractor to--
    (1) Perform review functions including, but not limited to--
    (i) DRG validation;
    (ii) Outlier review in facilities under a prospective payment 
system; and
    (iii) Implementation of corrective action and fraud and abuse 
prevention activities;
    (2) Evaluate cases that have been identified as deviating from the 
QIO norms and criteria, or standards; and
    (3) Evaluate the capability of the facility to perform quality 
review functions under a subcontract with the QIO.
    (b) Limitations on access to records. A QIO has access to the 
records of non-Medicare patients if--
    (1) The records relate to review performed under a non-Medicare QIO 
contract and if authorized by those patients in accordance with State 
law; or
    (2) The QIO needs the records to perform its quality review 
responsibilities under the Act and receives authorization from the 
facility or practitioner.
    (c) Conditions of examination. When examining a facility's operation 
or records the QIO must--
    (1) Examine only those operations and records (including information 
on charges) required to fulfill the purposes of paragraph (a) of this 
section;
    (2) Cooperate with agencies responsible for other examination 
functions under Federal or Federally assisted programs in order to 
minimize duplication of effort;
    (3) Conduct the examinations during reasonable hours; and
    (4) Maintain in its principal office written records of the results 
of the examination of the facility.



Sec.  476.90  Lack of cooperation by a health care facility or practitioner.

    (a) If a health care facility or practitioner refuses to allow a QIO 
to enter and perform the duties and functions required under its 
contract with CMS, the QIO may--
    (1) Determine that the health care facility or practitioner has 
failed to comply with the requirements of Sec.  474.30(c) of this 
chapter and report the matter to the HHS Inspector General; or
    (2) Issue initial denial determinations for those claims it is 
unable to review, make the determination that financial liability will 
be assigned to the health care facility, and report the matter to the 
HHS Inspector General.
    (b) If a QIO provides a facility with sufficient notice and a 
reasonable amount of time to respond to a request for information about 
a claim, and if

[[Page 515]]

the facility does not respond in a timely manner, the QIO will deny the 
claim.



Sec.  476.93  Opportunity to discuss proposed initial denial determination and changes as a result of a DRG validation.

    Before a QIO reaches an initial denial determination or makes a 
change as a result of a DRG validation, it must--
    (a) Promptly notify the provider or supplier and the patient's 
attending physician (or other attending health care practitioner) of the 
proposed determination or DRG change; and
    (b) Afford an opportunity for the provider or supplier and the 
physician (or other attending health care practitioner) to discuss the 
matter with the QIO physician advisor and to explain the nature of the 
patient's need for health care services, including all factors which 
preclude treatment of the patient as an outpatient or in an alternative 
level of inpatient care.



Sec.  476.94  Notice of QIO initial denial determination and changes as a result of a DRG validation.

    (a) Notice of initial denial determination--(1) Parties to be 
notified. A QIO must provide written notice of an initial denial 
determination to--
    (i) The patient, or if the patient is expected to be unable to 
comprehend the notice, the patient's next of kin, guardian or other 
representative or sponsor;
    (ii) The attending physician, or other attending health care 
practitioner;
    (iii) The facility; and
    (iv) The fiscal intermediary or carrier.
    (2) Timing of the notice. The notice must be delivered to 
beneficiaries in the facility or mailed to those no longer in the 
facility, within the following time periods--
    (i) For admission, on the first working day after the initial denial 
determination;
    (ii) For continued stay (e.g., outliers in facilities under a 
prospective payment system), by the first working day after the initial 
denial determination if the beneficiary is still in the facility, and 
within 3 working days if the beneficiary has been discharged;
    (iii) For preprocedure review, before the procedure is performed;
    (iv) For preadmission review, before admission;
    (v) If identification as a Medicare program patient has been 
delayed, within three working days of identification;
    (vi) For retrospective review, (excluding DRG validation and post 
procedure review), within 3 working days of the initial denial 
determination; and
    (vii) For post-procedure review, within 3 working days of the 
initial denial determination.
    (3) Preadmission review. In the case of preadmission review, the QIO 
must document that the patient and the facility received notice of the 
initial denial determination.
    (b) Notice of changes as a result of a DRG validation. The QIO must 
notify the provider and practitioner of changes to procedural and 
diagnostic information that result in a change of DRG assignment, within 
30 days of the QIO's decision.
    (c) Content of the notice. The notice must be understandable and 
written in plain English and must contain--
    (1) The reason for the initial denial determination or change as a 
result of the DRG validation;
    (2) For day outliers in hospitals, the date on which the stay or 
services in the facility will not be approved as being reasonable and 
medically necessary or appropriate to the patients' health care needs;
    (3) A statement informing each party or his or her representative of 
the right to request in accordance with the provisions of part 473, 
subpart B of this chapter--
    (i) Review of a change resulting from DRG validation; or
    (ii) Reconsideration of the initial denial determination;
    (4) The locations for filing a request for reconsideration or review 
and the time period within which a request must be filed;
    (5) A statement about who is liable for payment of the denied 
services under section 1879 of the Act; and
    (6) A statement concerning the duties and functions of the QIO under 
the Act.
    (d) Notice to payers. The QIO must provide prompt written notice of 
an initial denial determination or changes as a result of a DRG 
validation to the

[[Page 516]]

Medicare fiscal intermediary or carrier within the same time periods as 
the notices to the other parties.
    (e) Record of initial denial determination and changes as a result 
of a DRG validation. (1) The QIO must document and preserve a record of 
all initial denial determinations and changes as a result of DRG 
validations for six years from the date the services in question were 
provided.
    (2) The documentary record must include--
    (i) The detailed basis for the initial denial determination or 
changes as a result of a DRG validation; and
    (ii) A copy of the determination or change in DRG notices sent to 
all parties and identification of each party and the date on which the 
notice was mailed or delivered.



Sec.  476.96  Review period and reopening of initial denial determinations and changes as a result of DRG validations.

    (a) General timeframe. A QIO or its subcontractor--
    (1) Within one year of the date of the claim containing the service 
in question, may review and deny payment; and
    (2) Within one year of the date of its decision, may reopen an 
initial denial determination or a change as a result of a DRG 
validation.
    (b) Extended timeframes. (1) An initial denial determination or 
change as a result of a DRG validation may be made after one year but 
within four years of the date of the claim containing the service in 
question, if CMS approves.
    (2) A reopening of an initial denial determination or change as a 
result of a DRG validation may be made after one year but within four 
years of the date of the QIO's decision if--
    (i) Additional information is received on the patient's condition;
    (ii) Reviewer error occurred in interpretation or application of 
Medicare coverage policy or review criteria;
    (iii) There is an error apparent on the face of the evidence upon 
which the initial denial or DRG validation was based; or
    (iv) There is a clerical error in the statement of the initial 
denial determination or change as a result of a DRG validation.
    (c) Fraud and abuse. (1) A QIO or its subcontractor may review and 
deny payment anytime there is a finding that the claim for service 
involves fraud or a similar abusive practice that does not support a 
finding of fraud.
    (2) An initial denial determination or change as a result of a DRG 
validation may be reopened and revised anytime there is a finding that 
it was obtained through fraud or a similar abusive practice that does 
not support a finding of fraud.



Sec.  476.98  Reviewer qualifications and participation.

    (a) Peer review by physician. (1) Except as provided in paragraph 
(a)(2) of this section, each person who makes an initial denial 
determination about services furnished or proposed to be furnished by a 
licensed doctor of medicine or osteopathy or by a doctor of dentistry 
must be respectively another licensed doctor of medicine or osteopathy 
or of dentistry with active staff privileges in one or more hospitals in 
the QIO area.
    (2) If a QIO determines that peers are not available to make initial 
denial determinations, a doctor of medicine or osteopathy may make 
denial determinations for services ordered or performed by a doctor in 
any of the three specialties.
    (3) For purposes of paragraph (a)(1) of this section, individuals 
authorized to practice medicine in American Samoa, the Northern Mariana 
Islands, and the Trust Territory of the Pacific Islands as ``medical 
officers'' may make determinations on care ordered or furnished by their 
peers but not on care ordered or furnished by licensed doctors of 
medicine or osteopathy.
    (b) Peer review by health care practitioners other than physicians. 
Health care practitioners other than physicians may review services 
furnished by other practitioners in the same professional field.
    (c) DRG validation review. Decisions about procedural and diagnostic 
information must be made by physicians. Technical coding issues must be 
reviewed by individuals with training and experience in ICD-9-CM coding.
    (d) Persons excluded from review. (1) A person may not review health 
care

[[Page 517]]

services or make initial denial determinations or changes as a result of 
DRG validations if he or she, or a member of his or her family--
    (i) Participated in developing or executing the beneficiary's 
treatment plan;
    (ii) Is a member of the beneficiary's family; or
    (iii) Is a governing body member, officer, partner, 5 percent or 
more owner, or managing employee in the health care facility where the 
services were or are to be furnished.
    (2) A member of a reviewer's family is a spouse (other than a spouse 
who is legally separated under a decree of divorce or separate 
maintenance), child (including a legally adopted child), grandchild, 
parent, or grandparent.



Sec.  476.100  Use of norms and criteria.

    (a) Use of norms. As specified in its contract, a QIO must use 
national, or where appropriate, regional norms in conducting review to 
achieve QIO contract objectives. However, with regard to determining the 
number of procedures selected for preadmission review, a QIO must use 
national admission norms.
    (b) Use of criteria. In assessing the need for and appropriateness 
of an inpatient health care facility stay, a QIO must apply criteria to 
determine--
    (1) The necessity for facility admission and continued stay (in 
cases of day outliers in hospitals under prospective payment);
    (2) The necessity for surgery and other invasive diagnostic and 
therapeutic procedures; or
    (3) The appropriateness of providing services at a particular health 
care facility or at a particular level of care. The QIO must determine 
whether the beneficiary requires the level of care received or whether a 
lower and less costly level of care would be equally effective.
    (c) Establishment of criteria and standards. For the conduct of 
review a QIO must--
    (1) Establish written criteria based upon typical patterns of 
practice in the QIO area, or use national criteria where appropriate; 
and
    (2) Establish written criteria and standards to be used in 
conducting quality review studies.
    (d) Variant criteria and standards. A QIO may establish specific 
criteria and standards to be applied to certain locations and facilities 
in the QIO area if the QIO determines that--
    (1) The patterns of practice in those locations and facilities are 
substantially different from patterns in the remainder of the QIO area; 
and
    (2) There is a reasonable basis for the difference which makes the 
variation appropriate.



Sec.  476.102  Involvement of health care practitioners other than physicians.

    (a) Basic requirement. Except as provided in paragraph (b) of this 
section, a QIO must meet the following requirements:
    (1) Consult with the peers of the practitioners who furnish the 
services under review if the QIO reviews care and services delivered by 
health care practitioners other than physicians.
    (2) Assure that in determinations regarding medical necessity of 
services or the quality of the services they furnish, these 
practitioners are involved in--
    (i) Developing QIO criteria and standards;
    (ii) Selecting norms to be used; and
    (iii) Developing review mechanisms for care furnished by their 
peers.
    (3) Ensure that an initial denial determination or a change as a 
result of DRG validation of services provided by a health care 
practitioner other than a physician is made by a physician only after 
consultation with a peer of that practitioner. Initial denial 
determinations and changes as a result of DRG validations must be made 
only by a physician or dentist.
    (b) Exception. The requirements of paragraph (a) of this section do 
not apply if--
    (1) The QIO has been unable to obtain a roster of peer practitioners 
available to perform review; or
    (2) The practitioners are precluded from performing review because 
they participated in the treatment of the patient, the patient is a 
relative, or the practitioners have a financial interest

[[Page 518]]

in the health care facility as described in Sec.  466.98(d).
    (c) Peer involvement in quality review studies. Practitioners must 
be involved in the design of quality review studies, development of 
criteria, and actual conduct of studies involving their peers.
    (d) Consultation with practitioners other than physicians. To the 
extent practicable, a QIO must consult with nurses and other 
professional health care practitioners (other than physicians defined in 
1861(r) (1) and (2) of the Act) and with representatives of 
institutional and noninstitutional providers and suppliers with respect 
to the QIO's responsibility for review.

[50 FR 15330, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  476.104  Coordination of activities.

    In order to achieve efficient and economical review, a QIO must 
coordinate its activities (including information exchanges) with the 
activities of--
    (a) Medicare fiscal intermediaries and carriers;
    (b) Other QIOs; and
    (c) Other public or private review organizations as may be 
appropriate.



PART 478_RECONSIDERATIONS AND APPEALS--Table of Contents




Subpart A [Reserved]

     Subpart B_Utilization and Quality Control Quality Improvement 
             Organization (QIO) Reconsiderations and Appeals

Sec.
478.10 Scope.
478.12 Statutory basis.
478.14 Applicability.
478.15 QIO review of changes resulting from DRG validation.
478.16 Right to reconsideration.
478.18 Location for submitting requests for reconsideration.
478.20 Time limits for requesting reconsideration.
478.22 Good cause for late filing of a request for a reconsideration or 
          hearing.
478.24 Opportunity for a party to obtain and submit information.
478.26 Delegation of the reconsideration function.
478.28 Qualifications of a reconsideration reviewer.
478.30 Evidence to be considered by the reconsideration reviewer.
478.32 Time limits for issuance of the reconsidered determination.
478.34 Notice of a reconsidered determination.
478.36 Record of reconsideration.
478.38 Effect of a reconsidered determination.
478.40 Beneficiary's right to a hearing.
478.42 Submitting a request for a hearing.
478.44 Determining the amount in controversy for a hearing.
478.46 Departmental Appeals Board and judicial review.
478.48 Reopening and revision of a reconsidered determination or a 
          hearing decision.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

Subpart A [Reserved]



     Subpart B_Utilization and Quality Control Quality Improvement 
             Organization (QIO) Reconsiderations and Appeals

    Source: 50 FR 15372, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.



Sec.  478.10  Scope.

    This subpart establishes the requirements and procedures for--
    (a) Reconsiderations conducted by a Utilization and Quality Control 
Quality Improvement Organization (QIO) or its subcontractor of initial 
denial determinations concerning services furnished or proposed to be 
furnished under Medicare;
    (b) Hearings and judicial review of reconsidered determinations; and
    (c) QIO review of a change in diagnostic and procedural coding 
information.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  478.12  Statutory basis.

    (a) Under section 1154 of the Act, a QIO may make an initial 
determination that services furnished or proposed to be furnished are 
not reasonable, necessary, or delivered in the most appropriate setting.
    (b) Under section 1155 of the Act, the following rules apply:

[[Page 519]]

    (1) A Medicare beneficiary, a provider, or an attending practitioner 
who is dissatisfied with an initial denial determination under paragraph 
(a) of this section is entitled to a reconsideration by the QIO that 
made that determination.
    (2) The beneficiary is also entitled to the following:
    (i) A hearing by an administrative law judge if $200 or more is 
still in controversy after a reconsidered determination.
    (ii) Judicial review if $2000 or more is still in controversy after 
a final determination by the Department.
    (c) Under section 1866(a)(1)(F) of the Act, a hospital that is 
reimbursed by the Medicare program must maintain an agreement with a QIO 
under which the QIO reviews the validity of diagnostic information 
furnished by the hospital.

[50 FR 15372, Apr. 17, 1985, as amended at 60 FR 50442, Sept. 29, 1995. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  478.14  Applicability.

    (a) Basic provision. This subpart applies to reconsiderations and 
hearings of a QIO initial denial determination involving the following 
issues:
    (1) Reasonableness of services.
    (2) Medical necessity of services.
    (3) Appropriateness of the inpatient setting in which services were 
furnished or are proposed to be furnished.
    (b) Concurrent appeal. A reconsideration or hearing provided under 
this subpart fulfills the requirements of any other review, hearing, or 
appeal under the Act to which a party may be entitled with respect to 
the same issues.
    (c) Nonapplicability of rules to related determinations. (1) A QIO 
may not reconsider its decision whether to grant grace days.
    (2) Limitation of liability determinations on excluded coverage of 
certain services are made under section 1879 of the Act. Initial 
determinations under section 1879 and further appeals are governed by 
the reconsideration and appeal procedures in part 405, subpart G of this 
chapter for determinations under Medicare Part A, and part 405, subpart 
H of this chapter for determinations under Medicare Part B. References 
in those subparts to initial and reconsidered determinations made by an 
intermediary, carrier or CMS should be read to mean initial and 
reconsidered determinations made by a QIO.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  478.15  QIO review of changes resulting from DRG validation.

    (a) General rules. (1) A provider or practitioner dissatisfied with 
a change to the diagnostic or procedural coding information made by a 
QIO as a result of DRG validation under section 1866(a)(1)(F) of the Act 
is entitled to a review of that change if--
    (i) The change caused an assignment of a different DRG; and
    (ii) Resulted in a lower payment.
    (2) A beneficiary may obtain a review of a QIO DRG coding change 
only if that change results in noncoverage of a furnished service.
    (3) The individual who reviews changes in DRG procedural or 
diagnostic information must be a physician, and the individual who 
reviews changes in DRG coding must be qualified through training and 
experience with ICD-9-CM coding.
    (b) Procedures. Procedures described in Sec. Sec.  473.18 through 
473.36, and 473.48 (a) and (c) for a QIO reconsideration or reopening 
also apply to QIO review of a DRG coding change.
    (c) Finality of review. No additional review or appeal for matters 
governed by paragraph (a) of this section is available.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  478.16  Right to reconsideration.

    A beneficiary, provider or practitioner who is dissatisfied with a 
QIO initial denial determination on one of the issues specified in Sec.  
473.14(a) has a right to a reconsideration of that determination by the 
QIO that made the initial denial determination.



Sec.  478.18  Location for submitting requests for reconsideration.

    (a) Beneficiaries. Except as provided in paragraph (c) of this 
section concerning requests for expedited reconsideration, a beneficiary 
who wishes to

[[Page 520]]

obtain a reconsideration must submit a written request to one of the 
following:
    (1) The QIO or the QIO subcontractor that made the initial 
determination.
    (2) An SSA District Office.
    (3) A Railroad Retirement Board Office, if the beneficiary is a 
railroad retiree.
    (b) Others. A provider, physician or other practitioner that wishes 
to obtain reconsideration must submit a written request to the QIO or 
QIO subcontractor that made the initial determination.
    (c) Expedited reconsideration. A request for an expedited 
reconsideration of a preadmission denial determination must be submitted 
directly to the QIO.



Sec.  478.20  Time limits for requesting reconsideration.

    (a) Basic rules. (1) Except for a request for expedited 
reconsideration as provided in paragraph (c) of this section, or a late 
request with good cause under Sec.  473.22, a dissatisfied party must 
file a request for reconsideration within 60 days after receipt of the 
notice of an initial determination.
    (2) The date of receipt of the notice of the initial determination 
is presumed to be five days after the date on the notice, unless there 
is a reasonable showing to the contrary.
    (3) A request is considered filed on the date it is postmarked.
    (b) Late filing of request. A QIO will accept a request filed after 
60 days after receipt of the notice of the initial determination if the 
QIO finds under the criteria set forth in Sec.  473.22 that there was 
good cause for the party's failure to file a timely request.
    (c) Request for expedited reconsideration. A request for an 
expedited reconsideration under Sec.  473.18(c) must be submitted within 
three days after receipt of the notice of the initial denial 
determination.



Sec.  478.22  Good cause for late filing of a request for a reconsideration or hearing.

    (a) General Rule. In determining whether a party has good cause for 
not filing a request for reconsideration or hearing timely, the QIO or 
ALJ, respectively, must consider the following:
    (1) What circumstances kept the party from making the request on 
time.
    (2) Whether an action by the QIO misled the party.
    (3) Whether the party understood the requirements of the Act as 
affected by amendments to the Act, other legislation, or court 
decisions.
    (b) Examples. Examples of circumstances in which good cause may 
exist include, but are not limited to, the following:
    (1) A party was seriously ill and was prevented from requesting a 
reconsideration in person, through another person, or in writing.
    (2) There was a death or serious illness in a party's immediate 
family.
    (3) Important records were accidentally destroyed or damaged by fire 
or other cause.
    (4) A party made a diligent effort but could not find or obtain 
necessary relevent information within the appropriate time period.
    (5) A party requested additional information to further explain the 
determination within the time limit, and requested reconsideration 
within 60 days of receiving the explanation (or within 30 days for a 
Departmental Appeals Board hearing).
    (6) The QIO gave the party incorrect or incomplete information about 
when and how to request a reconsideration or hearing.
    (7) A party sent the request to another Government agency in good 
faith within the time limit, but the request did not reach an office 
authorized to receive the request until after the time period had 
expired.
    (8) Other unusual or unavoidable circumstances exist that--
    (i) Show that a party could not have known of the need to file 
timely; or
    (ii) Prevented a party from filing timely.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  478.24  Opportunity for a party to obtain and submit information.

    (a) Subject to the rules concerning disclosure of QIO information in 
section 1160 of the Act, at the request of a provider, practitioner or 
beneficiary,

[[Page 521]]

the QIO must provide an opportunity for examination of the material upon 
which the initial denial determination was based. The QIO may not 
furnish a provider, practitioner or beneficiary with--
    (1) A record of the QIO deliberation; or
    (2) The identity of the QIO review coordinators, physician advisors, 
or consultants who assisted in the initial denial determination without 
their consent.
    (b) The QIO may require the requester to pay a reasonable fee for 
the reproduction of the material requested.
    (c) The QIO must provide a party with an opportunity to submit new 
evidence before the reconsidered determination is made.



Sec.  478.26  Delegation of the reconsideration function.

    A QIO may delegate the authority to reconsider an initial 
determination to a nonfacility subcontractor, including the organization 
that made the initial determination as a QIO subcontractor.



Sec.  478.28  Qualifications of a reconsideration reviewer.

    A reconsideration reviewer must be someone who is--
    (a) Qualified under Sec.  466.98 of this chapter to make an initial 
determination.
    (b) Not the individual who made the initial denial determination.
    (c) A specialist in the type of services under review, except where 
meeting this requirement would compromise the effectiveness or 
efficiency of QIO review.



Sec.  478.30  Evidence to be considered by the reconsideration reviewer.

    A reconsidered determination must be based on--
    (a) The information that led to the initial determination;
    (b) New information found in the medical records; or
    (c) Additional evidence submitted by a party.



Sec.  478.32  Time limits for issuance of the reconsidered determination.

    (a) Beneficiaries. If a beneficiary files a timely request for 
reconsideration of an initial denial determination, the QIO must 
complete its reconsidered determination and send written notice to the 
beneficiary within the following time limits--
    (1) Within three working days after the QIO receives the request for 
reconsideration if--
    (i) The beneficiary is still an inpatient in a hospital for the stay 
in question when the QIO receives the request for reconsideration; or
    (ii) The initial determination relates to institutional services for 
which admission to the institution is sought, the initial determination 
was made before the patient was admitted to the institution; and a 
request was submitted timely for an expedited reconsideration.
    (2) Within 10 working days after the QIO receives the request for 
reconsideration if the beneficiary is still an inpatient in a SNF for 
the stay in question when the QIO receives the request for 
reconsideration.
    (3) Within 30 working days after the QIO receives the request for 
reconsideration if--
    (i) The initial determination concerns ambulatory or 
noninstitutional services;
    (ii) The beneficiary is no longer an inpatient in a hospital or SNF 
for the stay in question; or
    (iii) The beneficiary does not submit a request for expedited 
reconsideration timely.
    (b) Providers or practitioners. If the provider or practitioner 
files a request for reconsideration of an initial determination, the QIO 
must complete its reconsidered determination and send written notice to 
the provider or practitioner within 30 working days.



Sec.  478.34  Notice of a reconsidered determination.

    (a) Notice to parties. A written notice of a QIO reconsidered 
determination must contain the following;
    (1) The basis for the reconsidered determination.
    (2) A detailed rationale for the reconsidered determination.
    (3) A statement explaining the Medicare payment consequences of the 
reconsidered determination.

[[Page 522]]

    (4) A statement informing the parties of their appeal rights, 
including the information concerning what must be included in the 
request for hearing, the amount in controversy, locations for submitting 
a request for an administrative hearing and the time period for filing a 
request.
    (b) Notice to payers. (1) A QIO must provide written notice of its 
reconsidered determination to the appropriate Medicare intermediary or 
carrier within 30 days if the initial determination is modified or 
reversed.
    (2) This notice must contain adequate information to allow the 
intermediary or carrier to locate the claim file. This must include the 
name of the beneficiary, the Health Insurance Claim Number, the name of 
the provider, date of admission, and dates or services for which 
Medicare payment will not be made.



Sec.  478.36  Record of reconsideration.

    (a) QIO requirements. A QIO must maintain the record of its 
reconsideration until the later of the following:
    (1) Four years after the date on the notice of the QIO's 
reconsidered determination.
    (2) Completion of litigation and the passage of the time period for 
filing all appeals.
    (b) Contents of the record. The record of the reconsideration must 
include:
    (1) The initial determination.
    (2) The basis for the initial determination.
    (3) Documentation of the date of the receipt of the request for 
reconsideration.
    (4) The detailed basis for the reconsidered determination.
    (5) Evidence submitted by the parties.
    (6) A copy of the notice of the reconsidered determination that was 
provided to the parties.
    (7) Documentation of the delivery or mailing and, if appropriate, 
the receipt of the notice of the reconsidered determination by the 
parties.
    (c) Confidentiality. The record of a QIO reconsideration is subject 
to prohibitions against disclosure of information as specified in 
section 1160 of the Act.



Sec.  478.38  Effect of a reconsidered determination.

    A QIO reconsidered determination is binding upon all parties to the 
reconsideration unless--
    (a) A hearing is requested in accordance with Sec.  473.40 and a 
final decision rendered; or
    (b) The reconsidered determination is later reopened and revised in 
accordance with Sec.  473.48.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985, as amended at 
62 FR 25855, May 12, 1997; 62 FR 49938, Sept. 24, 1997. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  478.40  Beneficiary's right to a hearing.

    (a) Amount in controversy. If the amount in controversy is at least 
$200, a beneficiary (but not a provider or practitioner) who is 
dissatisfied with a QIO reconsidered determination may obtain a hearing 
by an administrative law judge (ALJ) of the Office of Hearings and 
Appeals of the SSA.
    (b) Subject matter. A beneficiary has a right to a hearing on the 
following issues:
    (1) Reasonableness of the services.
    (2) Medical necessity of the services.
    (3) Appropriateness of the setting in which the services were 
furnished.
    (c) Governing provisions. The provisions of subpart G, 
Reconsiderations and Appeals under the Hospital Insurance Program, of 
part 405 of this chapter apply to hearings and appeals under this 
subpart unless they are inconsistent with specific provisions in this 
subpart. References in subpart G to initial and reconsidered 
determinations made by an intermediary, carrier, or CMS should be read 
to mean initial and reconsidered determinations made by a QIO.

[50 FR 15372, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  478.42  Submitting a request for a hearing.

    (a) Where to submit the written request. A beneficiary who wants to 
obtain a hearing under Sec.  473.40 must submit a written request to one 
of the following:
    (1) The office of the QIO or QIO subcontractor that made the initial 
determination.

[[Page 523]]

    (2) A SSA District Office.
    (3) An office of the Office of Hearings and Appeals of SSA.
    (4) An office of the Railroad Retirement Board, in the case of a 
beneficiary who is a railroad retiree.
    (b) Time limit for submitting a request for a hearing. (1) The 
request for a hearing must be filed within 60 days of receipt of the 
notice of the QIO reconsidered determination, unless the time is 
extended for good cause as provided in Sec.  473.22.
    (2) The date of receipt of the notice of the reconsidered 
determination is presumed to be five days after the date on the notice, 
unless there is a reasonable showing to the contrary.
    (3) A request is considered filed on the date it is postmarked.



Sec.  478.44  Determining the amount in controversy for a hearing.

    (a) After an individual appellant has submitted a request for a 
hearing, the ALJ determines the amount in controversy in accordance with 
Sec.  405.740(a) of this chapter for Part A services or Sec.  405.817(a) 
of this chapter for Part B services. When two or more appellants submit 
a request for hearing, the ALJ determines the amount in controversy in 
accordance with Sec.  405.740(b) of this chapter for Part A services and 
Sec.  405.817(b) of this chapter for Part B services.
    (b) If the ALJ determines that the amount in controversy is less 
than $200, the ALJ, without holding a hearing, notifies the parties to 
the hearing that the parties have 15 calendar days to submit additional 
evidence to prove that the amount in controversy is at least $200.
    (c) At the end of the 15-day period, if the ALJ determines that the 
amount in controversy is less than $200, the ALJ, without holding a 
hearing, dismisses the request for a hearing without ruling on the 
substantive issues involved in the appeal and notifies the parties to 
the hearing and the QIO that the QIO reconsidered determination is 
conclusive for Medicare payment purposes.

[50 FR 15372, Apr. 17, 1985, as amended at 59 FR 12184, Mar. 16, 1994. 
Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  478.46  Departmental Appeals Board and judicial review.

    (a) The circumstances under which the DAB will review an ALJ hearing 
decision or dismissal are the same as those set forth at 20 CFR 404.970, 
(``Cases the Appeals Council will review'').
    (b) If $2,000 or more is in controversy, a party may obtain judicial 
review of an Departmental Appeals Board decision, or an ALJ hearing 
decision if a request for review by the Departmental Appeals Board was 
denied, by filing a civil action under the Federal Rules of Civil 
Procedure within 60 days after the date the party received notice of the 
Departmental Appeals Board decision or denial.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996; 
62 FR 25855, May 12, 1997. Redesignated at 64 FR 66279, Nov. 24, 1999]



Sec.  478.48  Reopening and revision of a reconsidered determination or a hearing decision.

    (a) QIO reopenings--(1) General rule. A QIO or QIO subcontractor 
that made a reconsidered determination, or conducted a review of a DRG 
change as described in Sec.  473.15, that is otherwise binding, may 
reopen and revise the reconsidered determination or review, either on 
its own motion or at the request of a party, within one year from the 
date of the reconsidered determination or review.
    (2) Extension of time limit. A QIO or QIO subcontractor may reopen 
and revise its reconsidered determination, or its review of a DRG change 
as described in Sec.  473.15, that is otherwise binding, after one year 
but within four years of the date of the determination or review if--
    (i) The QIO receives new material evidence;
    (ii) The QIO erred in interpretation or application of Medicare 
coverage policy;
    (iii) There is an error apparent on the face of the evidence upon 
which the reconsidered determination was based; or
    (iv) There is a clerical error in the statement of the reconsidered 
determination.
    (b) ALJ and Departmental Appeals Board Reopening--Applicable 
procedures.

[[Page 524]]

The ALJ or the Departmental Appeals Board, whichever made the decision, 
may reopen and revise the decision in accordance with the procedures set 
forth in Sec.  405.750(b) of this chapter, which concerns reopenings and 
revisions under subpart G of part 405 of this chapter.
    (c) Fraud or similar abusive practice. A reconsidered determination, 
a review of a DRG change, or a decision of an ALJ or the Departmental 
Appeals Board may be reopened and revised at any time, if the 
reconsidered determination, review, or decision was obtained through 
fraud or a similar abusive practice that does not support a formal 
finding of fraud.

[50 FR 15372, Apr. 17, 1985, as amended at 61 FR 32349, June 24, 1996; 
62 FR 25855, May 12, 1997. Redesignated at 64 FR 66279, Nov. 24, 1999]



PART 480_ACQUISITION, PROTECTION, AND DISCLOSURE OF QUALITY IMPROVEMENT ORGANIZATION REVIEW INFORMATION--Table of Contents




Subpart A [Reserved]

     Subpart B_Utilization and Quality Control Quality Improvement 
                          Organizations (QIOs)

                           General Provisions

Sec.
480.101 Scope and definitions.
480.102 Statutory bases for acquisition and maintenance of information.
480.103 Statutory bases for disclosure of information.
480.104 Procedures for disclosure by a QIO.
480.105 Notice of disclosures made by a QIO.
480.106 Exceptions to QIO notice requirements.
480.107 Limitations on redisclosure.
480.108 Penalties for unauthorized disclosure.
480.109 Applicability of other statutes and regulations.

                        QIO Access to Information

480.111 QIO access to records and information of institutions and 
          practitioners.
480.112 QIO access to records and information of intermediaries and 
          carriers.
480.113 QIO access to information collected for QIO purposes.
480.114 Limitations on data collection.

                          QIO Responsibilities

480.115 Requirements for maintaining confidentiality.
480.116 Notice to individuals and institutions under review.

                Disclosure of Nonconfidential Information

480.120 Information subject to disclosure.
480.121 Optional disclosure of nonconfidential information.

                 Disclosure of Confidential Information

480.130 Disclosure to the Department.
480.131 Access to medical records for the monitoring of QIOs.
480.132 Disclosure of information about patients.
480.133 Disclosure of information about practitioners, reviewers and 
          institutions.
480.134 Verification and amendment of QIO information.
480.135 Disclosure necessary to perform review responsibilities.
480.136 Disclosure to intermediaries and carriers.
480.137 Disclosure to Federal and State enforcement agencies responsible 
          for the investigation or identification of fraud or abuse of 
          the Medicare or Medicaid programs.
480.138 Disclosure for other specified purposes.
480.139 Disclosure of QIO deliberations and decisions.
480.140 Disclosure of quality review study information.
480.141 Disclosure of QIO interpretations on the quality of health care.
480.142 Disclosure of sanction reports.
480.143 QIO involvement in shared health data systems.

    Authority: Secs. 1102 and 1871 of the Social Security Act (42 U.S.C. 
1302 and 1395hh).

Subpart A [Reserved]



     Subpart B_Utilization and Quality Control Quality Improvement 
                          Organizations (QIOs)

    Source: 50 FR 15359, Apr. 17, 1985, unless otherwise noted. 
Redesignated at 64 FR 66279, Nov. 24, 1999.

                           General Provisions



Sec.  480.101  Scope and definitions.

    (a) Scope. This subpart sets forth the policies and procedures 
governing--

[[Page 525]]

    (1) Disclosure of information collected, acquired or generated by a 
Utilization and Quality Control Quality Improvement Organization (QIO) 
(or the review component of a QIO subcontractor) in performance of its 
responsibilities under the Act and these regulations; and
    (2) Acquisition and maintenance of information by a QIO to comply 
with its responsibilities under the Act.
    (b) Definitions. As used in this part:
    Abuse means any unlawful conduct relating to items or services for 
which payment is sought under Title XVIII of the Act.
    Aggregate statistical data means any utilization, admission, 
discharge or diagnostic related group (DRG) data arrayed on a 
geographic, institutional or other basis in which the volume and 
frequency of services are shown without identifying any individual.
    Confidential information means any of the following:
    (1) Information that explicitly or implicitly identifies an 
individual patient, practitioner or reviewer.
    (2) Sanction reports and recommendations.
    (3) Quality review studies which identify patients, practitioners or 
institutions.
    (4) QIO deliberations.
    Health care facility or facility means an organization involved in 
the delivery of health care services or items for which reimbursement 
may be made in whole or in part under Title XVIII of the Act.
    Implicitly identify(ies) means data so unique or numbers so small so 
that identification of an individual patient, practitioners or reviewer 
would be obvious.
    Non-facility organization means a corporate entity that: (1) Is not 
a health care facility; (2) is not a 5 percent or more owner of a 
facility; and (3) is not owned by one or more health care facilities in 
the QIO area.
    Patient representative means--(1) an individual designated by the 
patient, in writing, as authorized to request and receive QIO 
information that would otherwise be disclosable to that patient; or (2) 
an individual identified by the QIO in accordance with Sec.  
480.132(c)(3) when the beneficiary is mentally, physically or legally 
unable to designate a representative.
    Practitioner means an individual credentialed within a recognized 
health care discipline and involved in providing the services of that 
discipline to patients.
    QIO deliberations means discussions or communications (within a QIO 
or between a QIO and a QIO subcontractor) including, but not limited to, 
review notes, minutes of meetings and any other records of discussions 
and judgments involving review matters regarding QIO review 
responsibilities and appeals from QIO determinations, in which the 
opinions of, or judgment about, a particular individual or institution 
can be discerned.
    QIO information means any data or information collected, acquired or 
generated by a QIO in the exercise of its duties and functions under 
Title XI Part B or Title XVIII of the Act.
    QIO interpretations and generalizations on the quality of health 
care means an assessment of the quality of care furnished by an 
individual provider or group of providers based on the QIO's knowledge 
of the area gained from its medical review experience (e.g., quality 
review studies) and any other information obtained through the QIO's 
review activities.
    QIO review system means the QIO and those organizations and 
individuals who either assist the QIO or are directly responsible for 
providing medical care or for making determinations with respect to the 
medical necessity, appropriate level and quality of health care services 
that may be reimbursed under the Act. The system includes--
    (1) The QIO and its officers, members and employees;
    (2) QIO subcontractors;
    (3) Health care institutions and practitioners whose services are 
reviewed;
    (4) QIO reviewers and supporting staff; and
    (5) Data support organizations.
    Public information means information which has been disclosed to the 
public.
    Quality review study means an assessment, conducted by or for a QIO, 
of a patient care problem for the purpose of improving patient care 
through peer analysis, intervention, resolution of the problem and 
follow-up.

[[Page 526]]

    Quality review study information means all documentation related to 
the quality review study process.
    Reviewer means review coordinator, physician, or other person 
authorized to perform QIO review functions.
    Sanction report means a report filed pursuant to section 1156 of the 
Act and part 474 of this chapter documenting the QIO's determination 
that a practitioner or institution has failed to meet obligations 
imposed by section 1156 of the Act.
    Shared health data system means an agency or other entity authorized 
by Federal or State law that is used by the QIO review system to provide 
information or to conduct or arrange for the collection, processing, and 
dissemination of information on health care services.
    Subcontractor means a facility or a non-facility organization under 
contract with a QIO to perform QIO review functions.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999; 69 FR 49267, Aug. 11, 2004]



Sec.  480.102  Statutory bases for acquisition and maintenance of information.

    (a) Section 1154(a)(7)(C) of the Act requires QIOs to the extent 
necessary and appropriate to examine the pertinent records of any 
practitioner or provider of health care services for which payment may 
be made under Title XVIII of the Act.
    (b) Section 1154(a)(9) of the Act requires QIOs to collect and 
maintain information necessary to carry out their responsibilities under 
the Act.
    (c) Section 1156(a)(3) of the Act requires health care practitioners 
and providers to maintain evidence of the medical necessity and quality 
of health care services they provide to Medicare patients as required by 
QIOs.



Sec.  480.103  Statutory bases for disclosure of information.

    (a) Section 1154(a)(10) of the Act requires QIOs to exchange 
information with intermediaries and carriers with contracts under 
sections 1816 and 1842 of the Act, other QIOs, and other public or 
private review organizations as appropriate.
    (b) Section 1160 of the Act provides that QIO information must be 
held in confidence and not be disclosed except where--
    (1) Necessary to carry out the purpose of Title XI Part B of the 
Act;
    (2) Specifically permitted or required under this subpart;
    (3) Necessary, and in the manner prescribed under this subpart, to 
assist Federal and State agencies recognized by the Secretary as having 
responsibility for identifying and investigating cases or patterns of 
fraud or abuse;
    (4) Necessary, and in the manner prescribed under the subpart to 
assist Federal or State agencies recognized by the Secretary as having 
responsibility for identifying cases or patterns involving risks to the 
public health;
    (5) Necessary, and in the manner prescribed under this subpart, to 
assist appropriate State agencies having responsibility for licensing or 
certification of providers or practitioners; or
    (6) Necessary, and in the manner prescribed under this subpart to 
assist Federal or State health planning agencies by furnishing them 
aggregate statistical data on a geographical, institutional or other 
basis.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  480.104  Procedures for disclosure by a QIO.

    (a) Notice to accompany disclosure. (1) Any disclosure of 
information under the authority of this subpart is subject to the 
requirements in Sec.  480.105 relating to the providing of a notice of 
the disclosure.
    (2) Disclosure of confidential information made under the authority 
of this subpart, except as provided in Sec.  480.106, must be 
accompanied by a written statement informing the recipient that the 
information may not be redisclosed except as provided under Sec.  
480.107 that limits redisclosure.
    (b) QIO interpretations. A QIO may provide a statement of comment, 
analysis, or interpretation to guide the recipient in using information 
disclosed under this subpart.
    (c) Fees. A QIO may charge a fee to cover the cost of providing 
information authorized under this subpart. These

[[Page 527]]

fees may not exceed the amount necessary to recover the cost to the QIO 
for providing the information.
    (d) Format for disclosure of public information. A QIO is required 
to disclose public information (Sec.  480.120(a)(6)) only in the form in 
which it is acquired by the QIO or in the form in which it is maintained 
for QIO use.
    (e) Medicare provider number. A QIO must include the provider 
identification number assigned by the Medicare program on information 
that CMS requests.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.105  Notice of disclosures made by a QIO.

    (a) Notification of the disclosure of nonconfidential information. 
Except as permitted under Sec.  480.106, at least 30 calender days 
before disclosure of nonconfidential information, the QIO must notify an 
identified institution of its intent to disclose information about the 
institution (other than reports routinely submitted to CMS or Medicare 
fiscal intermediaries, or to or from QIO subcontractors, or to or from 
the institution) and provide the institution with a copy of the 
information. The institution may submit comments to the QIO that must be 
attached to the information disclosed if received before disclosure, or 
forwarded separately if received after disclosure.
    (b) Notification of the disclosure of confidential information. (1) 
A QIO must notify the practitioner who has treated a patient, of a 
request for disclosure to the patient or patient representative in 
accordance with the requirements and exceptions to the requirements for 
disclosure specified under Sec.  480.132.
    (2) A QIO must notify a practitioner or institution of the QIO's 
intent to disclose information on the practitioner or institution to an 
investigative or licensing agency (Sec. Sec.  480.137 and 480.138) 
except for cases specified in Sec.  480.106 involving fraud or abuse or 
imminent danger to individuals or the public health. The practitioner or 
institution must be notified and provided a copy of the information to 
be disclosed at least 30 calendar days before the QIO discloses the 
identifying information. The QIO must forward with the information any 
comments submitted by the practitioner or institution in response to the 
QIO notice if received before disclosure, or forwarded separately if 
received after disclosure.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.106  Exceptions to QIO notice requirements.

    (a) Imminent danger to individuals or public health. When the QIO 
determines that requested information is necessary to protect against an 
imminent danger to individuals or the public health, the notification 
required in Sec.  480.105 may be sent simultaneously with the 
disclosure.
    (b) Fraud or Abuse. The notification requirement in Sec.  480.105 
does not apply if--
    (1) The disclosure is made in an investigation of fraud or abuse by 
the Office of the Inspector General or the General Accounting Office; or
    (2) The disclosure is made in an investigation of fraud or abuse by 
any other Federal or State fraud or abuse agency and the investigative 
agency specifies in writing that the information is related to a 
potentially prosecutable criminal offense.
    (c) Other. The notification requirements in Sec.  480.105(a) and 
(b)(2) do not apply if:
    (1) The institution or practitioner has requested, in writing, that 
the QIO make the disclosure;
    (2) The institution or practitioner has provided, in writing, 
consent for the disclosure; or
    (3) The information is public information as defined in Sec.  
480.101(b) and specified under Sec.  480.120.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49266, 49267, Aug. 11, 2004]



Sec.  480.107  Limitations on redisclosure.

    Persons or organizations that obtain confidential QIO information 
must not further disclose the information to any other person or 
organization except--
    (a) As directed by the QIO to carry out a disclosure permitted or 
required under a particular provision of this part;

[[Page 528]]

    (b) As directed by CMS to carry out specific responsibilities of the 
Secretary under the Act;
    (c) As necessary for CMS to carry out its responsibilities for 
appeals under section 1155 of the Act or for CMS to process sanctions 
under section 1156 of the Act;
    (d) If the health care services furnished to an individual patient 
are reimbursed from more than one source, these sources of reimbursement 
may exchange confidential information as necessary for the payment of 
claims;
    (e) If the information is acquired by the QIO from another source 
and the receiver of the information is authorized under its own 
authorities to acquire the information directly from the source, the 
receiver may disclose the information in accordance with the source's 
redisclosure rules;
    (f) As necessary for the General Accounting Office to carry out its 
statutory responsibilities;
    (g) Information pertaining to a patient or practitioner may be 
disclosed by that individual provided it does not identify any other 
patient or practitioner;
    (h) An institution may disclose information pertaining to itself 
provided it does not identify an individual patient or practitioner;
    (i) Governmental fraud or abuse agencies and State licensing or 
certification agencies recognized by CMS may disclose information as 
necessary in a judicial, administrative or other formal legal proceeding 
resulting from an investigation conducted by the agency;
    (j) State and local public health officials to carry out their 
responsibilities, as necessary, to protect against a substantial risk to 
the public health; or
    (k) As necessary for the Office of the Inspector General to carry 
out its statutory responsibilities.

[50 FR 15359, Apr. 17, 1985; 50 FR 41886, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  480.108  Penalties for unauthorized disclosure.

    A person who discloses information not authorized under Title XI 
Part B of the Act or the regulations of this part will, upon conviction, 
be fined no more than $1,000, or be imprisoned for no more than six 
months, or both, and will pay the costs of prosecution.



Sec.  480.109  Applicability of other statutes and regulations.

    The provisions of 42 U.S.C. 290dd-3 and 290ee-3 governing 
confidentiality of alcohol and drug abuse patients' records, and the 
implementing regulations at 42 CFR part 2, are applicable to QIO 
information.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]

                        QIO Access to Information



Sec.  480.111  QIO access to records and information of institutions and practitioners.

    (a) A QIO is authorized to have access to and obtain records and 
information pertinent to the health care services furnished to Medicare 
patients, held by any institution or practitioner in the QIO area. The 
QIO may require the institution or practitioner to provide copies of 
such records or information to the QIO.
    (b) A QIO may obtain non-Medicare patient records relating to review 
performed under a non-Medicare QIO contract if authorized by those 
patients in accordance with State law.
    (c) In accordance with its quality review responsibilities under the 
Act, a QIO may have access to and obtain information from, the records 
of non-Medicare patients if authorized by the institution or 
practitioner.
    (d) A QIO may reimburse for requested information at the rate of 
$.10 per page for photocopying plus first class postage. The 
photocopying amount includes the cost of labor, supplies, equipment, and 
overhead.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 65 FR 83154, Dec. 29, 2000]



Sec.  480.112  QIO access to records and information of intermediaries and carriers.

    A QIO is authorized to have access to and require copies of Medicare 
records or information held by intermediaries or carriers if the QIO 
determines that

[[Page 529]]

the records or information are necessary to carry out QIO review 
responsibilities.



Sec.  480.113  QIO access to information collected for QIO purposes.

    (a) Institutions and other entities must disclose to the QIO 
information collected by them for QIO purposes.
    (b) Information collected or generated by institutions or 
practitioners to carry out quality review studies must be disclosed to 
the QIO.



Sec.  480.114  Limitation on data collection.

    A QIO or any agent, organization, or institution acting on its 
behalf, that is collecting information under authority of this part, 
must collect only that information which is necessary to accomplish the 
purposes of Title XI Part B of the Act in accordance with 44 U.S.C. 
Chapter 35, Coordination of Federal Reporting Services Information 
Policy.

                          QIO Responsibilities



Sec.  480.115  Requirements for maintaining confidentiality.

    (a) Responsibilities of QIO officers and employees. The QIO must 
provide reasonable physical security measures to prevent unauthorized 
access to QIO information and to ensure the integrity of the 
information, including those measures needed to secure computer files. 
Each QIO must instruct its officers and employees and health care 
institution employees participating in QIO activities of their 
responsibility to maintain the confidentiality of information and of the 
legal penalties that may be imposed for unauthorized disclosure of QIO 
information.
    (b) Responsible individuals within the QIO. The QIO must assign a 
single individual the responsibility for maintaining the system for 
assuring the confidentiality of information within the QIO review 
system. That individual must notify CMS of any violations of these 
regulations.
    (c) Training requirements. The QIO must train participants of the 
QIO review system in the proper handling of confidential information.
    (d) Authorized access. An individual participating in the QIO review 
system on a routine or ongoing basis must not have authorized access to 
confidential QIO information unless that individual--
    (1) Has completed a training program in the handling of QIO 
information in accordance with paragraph (c) of this section or has 
received comparable training from another source; and
    (2) Has signed a statement indicating that he or she is aware of the 
legal penalties for unauthorized disclosure.
    (e) Purging of personal identifiers. (1) The QIO must purge or 
arrange for purging computerized information, patient records and other 
noncomputerized files of all personal identifiers as soon as it is 
determined by CMS that those identifiers are no longer necessary.
    (2) The QIO must destroy or return to the facility from which it was 
collected confidential information generated from computerized 
information, patient records and other noncomputerized files when the 
QIO determines that the maintenance of hard copy is no longer necessary 
to serve the specific purpose for which it was obtained or generated.
    (f) Data system procedures. The QIO must assure that organizations 
and consultants providing data services to the QIO have established 
procedures for maintaining the confidentiality of QIO information in 
accordance with requirements defined by the QIO and consistent with 
procedures established under this part.



Sec.  480.116  Notice to individuals and institutions under review.

    The QIO must establish and implement procedures to provide patients, 
practitioners, and institutions under review with the following 
information--
    (a) The title and address of the person responsible for maintenance 
of QIO information;
    (b) The types of information that will be collected and maintained;
    (c) The general rules governing disclosure of QIO information; and
    (d) The procedures whereby patients, practitioners, and institutions 
may obtain access to information about themselves.

[[Page 530]]

                Disclosure of Nonconfidential Information



Sec.  480.120  Information subject to disclosure.

    Subject to the procedures for disclosure and notice of disclosure 
specified in Sec. Sec.  480.104 and 480.105, the QIO must disclose--
    (a) Nonconfidential information to any person upon request, 
including--
    (1) The norms, criteria, and standards it uses for initial screening 
of cases, and for other review activities;
    (2) Winning technical proposals for contracts from the Department, 
and winning technical proposals for subcontracts under those contracts 
(except for proprietary or business information);
    (3) Copies of documents describing administrative procedures, agreed 
to between the QIO and institutions or between a QIO and the Medicare 
intermediary or Medicare carrier;
    (4) Routine reports submitted by the QIO to CMS to the extent that 
they do not contain confidential information.
    (5) Summaries of the proceedings of QIO regular and other meetings 
of the governing body and general membership except for those portions 
of the summaries involving QIO deliberations, which are confidential 
information and subject to the provisions of Sec.  480.139;
    (6) Public information in its possession;
    (7) Aggregate statiscal information that does not implicitly or 
explicitly identify individual patients, practitioners or reviewers;
    (8) Quality review study information including summaries and 
conclusions from which the identification of patients, practitioners and 
institutions has been deleted; and
    (9) Information describing the characteristics of a quality review 
study, including a study design and methodology.
    (b) Aggregate statistical information that does not implicitly or 
explicitly identify individual patients, practitioners or reviewers, to 
Federal or State health planning agencies (including Health Systems 
Agencies and State Health Planning and Development Agencies) in carrying 
out their health care planning and related activities.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.121  Optional disclosure of nonconfidential information.

    A QIO may, on its own initiative, subject to the notification 
requirements in Sec.  480.105, furnish the information available under 
Sec.  480.120 to any person, agency, or organization.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]

                 Disclosure of Confidential Information



Sec.  480.130  Disclosure to the Department.

    Except as limited by Sec. Sec.  480.139(a) and 480.140 of this 
subpart, QIOs must disclose all information requested by the Department 
to it in the manner and form required.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.131  Access to medical records for the monitoring of QIOs.

    CMS or any person, organization or agency authorized by the 
Department or Federal statute to monitor a QIO will have access to 
medical records maintained by institutions or health care practitioners 
on Medicare patients. The monitor can require copies of the records.



Sec.  480.132  Disclosure of information about patients.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, a QIO must--
    (1) Disclose patient identified information in its possession to the 
identified patient or the patient's representative if--
    (i) The patient or the patient's representative requests the 
information in writing;
    (ii) The request by a patient's representative includes the 
designation, by the patient, of the representative; and

[[Page 531]]

    (iii) All other patient and practitioner identifiers have been 
removed.
    (2) Seek the advice of the attending practitioner that treated the 
patient regarding the appropriateness of direct disclosure to the 
patient 15 days before the QIO provides the requested information. If 
the attending practitioner states that the released information could 
harm the patient, the QIO must act in accordance with paragraph (c)(2) 
of this section. The QIO must make disclosure to the patient or 
patient's representative within 30 calendar days of receipt of the 
request.
    (b) Exceptions. (1) If the request is in connection with an initial 
denial determination under section 1154(a)(3) of the Act, the QIO--
    (i) Need not seek the advice of the practitioner that treated the 
patient regarding the appropriateness of direct disclosure to the 
patient; and
    (ii) Must provide only the information used to support that 
determination in accordance with the procedures for disclosure of 
information relating to determinations under Sec.  473.24.
    (2) A QIO must disclose information regarding QIO deliberations only 
as specified in Sec.  480.139(a).
    (3) A QIO must disclose quality review study information only as 
specified in Sec.  480.140.
    (c) Manner of disclosure. (1) The QIO must disclose the patient 
information directly to the patient unless knowledge of the information 
could harm the patient.
    (2) If knowledge of the information could harm the patient, the QIO 
must disclose the information to the patient's designated 
representative.
    (3) If the patient is mentally, physically or legally unable to 
designate a representative, the QIO must disclose the information to a 
person whom the QIO determines is responsible for the patient.

The QIO must first attempt to make that determination based on the 
medical record. If the responsible person is not named in the medical 
record, then the QIO may rely on the attending practitioner for the 
information. If the practitioner is unable to provide a name, then the 
QIO must make a determination based on other reliable information.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.133  Disclosure of information about practitioners, reviewers and institutions.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, the following provisions are required of 
the QIO.
    (1) Disclosure to the identified individual or institution. A QIO 
must disclose, to particular practitioners, reviewers and institutions, 
information about themselves, upon request, and may disclose it to them 
without a request.
    (2) Disclosure to others. (i) A QIO must disclose to an institution, 
upon request, information on a practitioner to the extent that the 
information displays practice or performance patterns of the 
practitioner in that institution.
    (ii) In accordance with section 1160 of the Act, a QIO must disclose 
information that displays practice or performance patterns of a 
practitioner or institution in accordance with the procedures for 
disclosures specified in Sec. Sec.  480.137 and 480.138 to--
    (A) Federal and State agencies that are responsible for the 
investigation of fraud and abuse of the Medicare or Medicaid programs, 
and
    (B) Federal and State agencies that are responsible for licensing 
and certification of practitioners and providers.
    (iii) A QIO may disclose to any person, agency, or organization 
information on a particular practitioner or reviewer at the written 
request of or with the written consent of that practitioner or reviewer. 
The recipient of the information has the same redisclosure rights and 
responsibilities as the requesting or consenting practitioner or 
reviewer as provided under this Subpart B.
    (b) Exceptions. (1) If the request is in connection with an initial 
denial determination or a change resulting from a diagnostic related 
group (DRG) coding validation under Part 466 of this subchapter, the QIO 
must provide only the

[[Page 532]]

information used to support that determination in accordance with the 
procedures for disclosure of information relating to determinations 
under Sec.  473.24.
    (2) A QIO must disclose information regarding QIO deliberations only 
as specified in Sec.  480.139(a).
    (3) A QIO must disclose quality review study information only as 
specified in Sec.  480.140.

[50 FR 15359, Apr. 17, 1885, as amended at 52 FR 37458, Oct. 7, 1987; 52 
FR 47004, Dec. 11, 1987. Redesignated at 64 FR 66279, Nov. 24, 1999, as 
amended at 69 FR 49266, 29267, Aug. 11, 2004]



Sec.  480.134  Verification and amendment of QIO information.

    (a) A QIO must verify the accuracy of its information concerning 
patients, practitioners, reviewers, and institutions and must permit the 
individual or institution to request an amendment of pertinent 
information that is in the possession of the QIO.
    (b) If the QIO agrees with the request for amendment, the QIO must 
correct the information in its possession. If the information being 
amended has already been disclosed, the QIO must forward the amended 
information to the requester where it may affect decisions about a 
particular provider, practitioner or case under review.
    (c) If the QIO disagrees with the request for amendment, a notation 
of the request, reasons for the request, and the reasons for refusal 
must be included with the information and attached to any disclosure of 
the information.

[50 FR 15358, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999]



Sec.  480.135  Disclosure necessary to perform review responsibilities.

    (a) Disclosure to conduct review. The QIO must disclose or arrange 
for disclosure of information to individuals and institutions within the 
QIO review system as necessary to fulfill their particular duties and 
functions under Title XI Part B of the Act.
    (b) Disclosure to consultants and subcontractors. The QIO must 
disclose to consultants or subcontractors the information they need to 
provide specified services to the QIO.
    (c) Disclosure to other QIO and medical review boards. The QIO must 
disclose--
    (1) To another QIO, information on patients and practitioners who 
are subject to review by the other QIO; and
    (2) To medical review boards established under section 1881 of the 
Act, confidential information on patients, practitioners and 
institutions receiving or furnishing end stage renal disease services.



Sec.  480.136  Disclosure to intermediaries and carriers.

    (a) Required disclosure. Except as specified in Sec. Sec.  
480.139(a) and 480.140 relating to disclosure of QIO deliberations and 
quality review study information, a QIO must disclose to intermediaries 
and carriers QIO information that relates to, or is necessary for, 
payment of claims for Medicare as follows:
    (1) Review determinations and claims forms for health care services, 
furnished in the manner and form agreed to by the QIO and the 
intermediary or carrier.
    (2) Upon request, copies of medical records acquired from 
practitioners or institutions for review purposes.
    (3) QIO information about a particular patient or practitioner if 
the QIO and the intermediary or carrier (or CMS if the QIO and the 
intermediary or carrier cannot agree) determine that the information is 
necessary for the administration of the Medicare program.
    (b) Optional disclosure. The QIO may disclose the information 
specified in paragraph (a) of this section to intermediaries and 
carriers without a request.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.137  Disclosure to Federal and State enforcement agencies responsible for the investigation or identification of fraud or abuse of the Medicare or 
          Medicaid programs.

    (a) Required disclosure. Except as specified in Sec. Sec.  
480.139(a) and 480.140 relating to disclosure of QIO deliberations and 
quality review study information, the QIO must disclose confidential 
information relevant to an investigation of fraud or abuse of the

[[Page 533]]

Medicare or medicaid programs, including QIO medical necessity 
determinations and other information that includes patterns of the 
practice or performance of a practitioner or institution, when a written 
request is received from a State or Federal enforcement agency 
responsible for the investigation or identification of fraud or abuse of 
the Medicare or Medicaid programs that--
    (1) Identifies the name and title of the individual initiating the 
request,
    (2) Identifies the physician or institution about which information 
is requested, and
    (3) States affirmatively that the institution or practitioner is 
currently under investigation for fraud or abuse of the Medicare or 
Medicaid programs and that the information is needed in furtherance of 
that investigation.
    (b) Optional disclosure. The QIO may provide the information 
specified in paragraph (a) of this section to Federal or State fraud and 
abuse enforcement agencies responsible for the investigation or 
identification of fraud or abuse of the Medicare or Medicaid programs, 
without a request.

[50 FR 15358, Apr. 17, 1985, as amended at 52 FR 37458, Oct. 7, 1987. 
Redesignated at 64 FR 66279, Nov. 24, 1999, as amended at 69 FR 49267, 
Aug. 11, 2004]



Sec.  480.138  Disclosure for other specified purposes.

    (a) General requirements for disclosure. Except as specified in 
paragraph (b) of this section, the following provisions are required of 
the QIO.
    (1) Disclosure to licensing and certification bodies. (i) A QIO must 
disclose confidential information upon request, to State or Federal 
licensing bodies responsible for the professional licensure of a 
practitioner or a particular institution. Confidential information, 
including QIO medical necessity determinations that display the practice 
or performance patterns of that practitioner, must be disclosed by the 
QIO but only to the extent that it is required by the agency to carry 
out a function within the jurisdiction of the agency under Federal or 
State law.
    (ii) A QIO may provide the information specified in paragraph 
(a)(1)(i) of this section to the State or Federal licensing body without 
request.
    (2) Disclosure to State and local public health officials. A QIO 
must disclose QIO information to State and local public health officials 
whenever the QIO determines that the disclosure of the information is 
necessary to protect against a substantial risk to the public health.
    (3) Disclosure to the courts. Patient identified records in the 
possession of a QIO are not subject to subpoena or discovery in a civil 
action, including an administrative, judicial or arbitration proceeding.
    (b) Exceptions. (1) The restriction set forth in paragraph (a)(3) of 
this section does not apply to HHS, including Inspector General, 
administrative subpoenas issued in the course of audits and 
investigations of Department programs, in the course of administrative 
hearings held under the Social Security Act or to disclosures to the 
General Accounting Office as necessary to carry out its statutory 
responsibilities.
    (2) A QIO must disclose information regarding QIO deliberations and 
quality review study information only as specified in Sec. Sec.  
480.139(a) and 480.140.

[50 FR 15359, Apr. 17, 1985; 50 FR 41887, Oct. 16, 1985. Redesignated at 
64 FR 66279, Nov. 24, 1999, as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.139  Disclosure of QIO deliberations and decisions.

    (a) QIO deliberations. (1) A QIO must not disclose its deliberations 
except to--
    (i) CMS, at the QIO office or at a subcontracted organization;
    (ii) CMS, to the extent that the deliberations are incorporated in 
sanction and appeals reports; or
    (iii) The Office of the Inspector General, and the General 
Accounting Office as necessary to carry out statutory responsibilities.
    (2) QIO deliberations are not disclosable, either in written form or 
through oral testimony, in connection with the administrative hearing or 
review of a beneficiary's claim.
    (b) Reasons for QIO decisions. (1) A QIO may disclose to those who 
have access to QIO information under other provisions of this subpart, 
the reasons

[[Page 534]]

for QIO decisions pertaining to that information provided that the 
opinions or judgements of a particular individual or practitioner cannot 
be identified.
    (2) A QIO must disclose, if requested in connection with the 
administrative hearing or review of a beneficiary's claim, the reasons 
for QIO decisions. The QIO must include the detailed facts, findings and 
conclusions supporting the QIO's determination. The QIO must insure that 
the opinions or judgements of a particular individual or practitioner 
cannot be identified through the materials that are disclosed.



Sec.  480.140  Disclosure of quality review study information.

    (a) A QIO must disclose, onsite, quality review study information 
with identifiers of patients, practitioners or institutions to--
    (1) Representatives of authorized licensure, accreditation or 
certification agencies as is required by the agencies in carrying out 
functions which are within the jurisdiction of such agencies under state 
law; to federal and state agencies responsible for identifying risks to 
the public health when there is substantial risk to the public health; 
CMS; or to Federal and State fraud and abuse enforcement agencies;
    (2) An institution or practitioner, if the information is limited to 
health care services furnished by the institution or practitioner; and
    (3) A medical review board established under section 1881 of the Act 
pertaining to end-stage renal disease facilities, if the information is 
limited to health care services subject to its review.
    (b) A QIO must disclose quality review study information with 
identifiers of patients, practitioners or institutions to the Office of 
the Inspector General and the General Accounting Office as necessary to 
carry out statutory responsibilities.
    (c) A QIO may disclose information offsite from a particular quality 
review study to any institution or practitioner involved in that study, 
provided the disclosed information is limited to that institution or 
practitioner.
    (d) A QIO may disclose quality review study information with 
identifiers of particular practitioners or institutions, or both, at the 
written request of, or with the written consent of, the identified 
practitioner(s) or institution(s).
    (1) The consent or request must specify the information that is to 
be disclosed and the intended recipient of the information.
    (2) The recipient of the information has the same redisclosure 
rights and responsibilities as the requesting or consenting practitioner 
or institution as provided under this Subpart B.
    (e) An institution or group of practitioners may redisclose quality 
review study information, if the information is limited to health care 
services they provided.
    (f) Quality review study information with patient identifiers is not 
subject to subpoena or discovery in a civil action, including an 
administrative, judicial or arbitration proceeding. This restriction 
does not apply to HHS, including Inspector General, administrative 
subpoenas issued in the course of audits and investigations of 
Department programs, in the course of administrative hearings held under 
the Social Security Act, or to disclosures to the General Accounting 
Office as necessary to carry out its statutory responsibilities.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49266, Aug. 11, 2004]



Sec.  480.141  Disclosure of QIO interpretations on the quality of health care.

    Subject to the procedures for disclosure and notice of disclosure 
specified in Sec. Sec.  480.104 and 480.105, a QIO may disclose to the 
public QIO interpretations and generalizations on the quality of health 
care that identify a particular institution.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.142  Disclosure of sanction reports.

    (a) The QIO must disclose sanction reports directly to the Office of 
the Inspector General and, if requested, to CMS.

[[Page 535]]

    (b) The QIO must upon request, and may without a request, disclose 
sanction reports to State and Federal agencies responsible for the 
identification, investigation or prosecution of cases of fraud or abuse 
in accordance with Sec.  480.137.
    (c) CMS will disclose sanction determinations in accordance with 
part 474 of this chapter.

[50 FR 15359, Apr. 17, 1985. Redesignated at 64 FR 66279, Nov. 24, 1999, 
as amended at 69 FR 49267, Aug. 11, 2004]



Sec.  480.143  QIO involvement in shared health data systems.

    (a) Information collected by a QIO. Except as prohibited in 
paragraph (b) of this section, information collected by a QIO may be 
processed and stored by a cooperative health statistics system 
established under the Public Health Service Act (42 U.S.C. 242k) or 
other State or Federally authorized shared data system.
    (b) QIO participation. A QIO may not participate in a cooperative 
health statistics system or other shared health data system if the 
disclosure rules of the system would prevent the QIO from complying with 
the rules of this part.
    (c) Disclosure of QIO information obtained by a shared health data 
system. QIO information must not be disclosed by the shared health data 
system unless--
    (1) The source from which the QIO acquired the information consents 
to or requests disclosure; or
    (2) The QIO requests the disclosure of the information to carry out 
a disclosure permitted under a provision of this part.

                           PART 481 [RESERVED]

[[Page 537]]



                              FINDING AIDS




  --------------------------------------------------------------------

  A list of CFR titles, subtitles, chapters, subchapters and parts and 
an alphabetical list of agencies publishing in the CFR are included in 
the CFR Index and Finding Aids volume to the Code of Federal Regulations 
which is published separately and revised annually.

  Table of CFR Titles and Chapters
  Alphabetical List of Agencies Appearing in the CFR
  Table of OMB Control Numbers
  List of CFR Sections Affected

[[Page 539]]



                    Table of CFR Titles and Chapters




                     (Revised as of October 1, 2009)

                      Title 1--General Provisions

         I  Administrative Committee of the Federal Register 
                (Parts 1--49)
        II  Office of the Federal Register (Parts 50--299)
        IV  Miscellaneous Agencies (Parts 400--500)

                    Title 2--Grants and Agreements

            Subtitle A--Office of Management and Budget Guidance 
                for Grants and Agreements
         I  Office of Management and Budget Governmentwide 
                Guidance for Grants and Agreements (Parts 100--
                199)
        II  Office of Management and Budget Circulars and Guidance 
                (200--299)
            Subtitle B--Federal Agency Regulations for Grants and 
                Agreements
       III  Department of Health and Human Services (Parts 300-- 
                399)
        VI  Department of State (Parts 600--699)
      VIII  Department of Veterans Affairs (Parts 800--899)
        IX  Department of Energy (Parts 900--999)
        XI  Department of Defense (Parts 1100--1199)
       XII  Department of Transportation (Parts 1200--1299)
      XIII  Department of Commerce (Parts 1300--1399)
       XIV  Department of the Interior (Parts 1400--1499)
        XV  Environmental Protection Agency (Parts 1500--1599)
     XVIII  National Aeronautics and Space Administration (Parts 
                1880--1899)
      XXII  Corporation for National and Community Service (Parts 
                2200--2299)
     XXIII  Social Security Administration (Parts 2300--2399)
      XXIV  Housing and Urban Development (Parts 2400--2499)
       XXV  National Science Foundation (Parts 2500--2599)
      XXVI  National Archives and Records Administration (Parts 
                2600--2699)
     XXVII  Small Business Administration (Parts 2700--2799)
    XXVIII  Department of Justice (Parts 2800--2899)
       XXX  Department of Homeland Security (Parts 3000--3099)
      XXXI  Institute of Museum and Library Services (Parts 3100--
                3199)
     XXXII  National Endowment for the Arts (Parts 3200--3299)
    XXXIII  National Endowment for the Humanities (Parts 3300--
                3399)

[[Page 540]]

      XXXV  Export-Import Bank of the United States (Parts 3500--
                3599)
    XXXVII  Peace Corps (Parts 3700--3799)

                        Title 3--The President

         I  Executive Office of the President (Parts 100--199)

                           Title 4--Accounts

         I  Government Accountability Office (Parts 1--99)
        II  Recovery Accountability and Transparency Board (Parts 
                200--299)

                   Title 5--Administrative Personnel

         I  Office of Personnel Management (Parts 1--1199)
        II  Merit Systems Protection Board (Parts 1200--1299)
       III  Office of Management and Budget (Parts 1300--1399)
         V  The International Organizations Employees Loyalty 
                Board (Parts 1500--1599)
        VI  Federal Retirement Thrift Investment Board (Parts 
                1600--1699)
      VIII  Office of Special Counsel (Parts 1800--1899)
        IX  Appalachian Regional Commission (Parts 1900--1999)
        XI  Armed Forces Retirement Home (Parts 2100--2199)
       XIV  Federal Labor Relations Authority, General Counsel of 
                the Federal Labor Relations Authority and Federal 
                Service Impasses Panel (Parts 2400--2499)
        XV  Office of Administration, Executive Office of the 
                President (Parts 2500--2599)
       XVI  Office of Government Ethics (Parts 2600--2699)
       XXI  Department of the Treasury (Parts 3100--3199)
      XXII  Federal Deposit Insurance Corporation (Parts 3200--
                3299)
     XXIII  Department of Energy (Parts 3300--3399)
      XXIV  Federal Energy Regulatory Commission (Parts 3400--
                3499)
       XXV  Department of the Interior (Parts 3500--3599)
      XXVI  Department of Defense (Parts 3600-- 3699)
    XXVIII  Department of Justice (Parts 3800--3899)
      XXIX  Federal Communications Commission (Parts 3900--3999)
       XXX  Farm Credit System Insurance Corporation (Parts 4000--
                4099)
      XXXI  Farm Credit Administration (Parts 4100--4199)
    XXXIII  Overseas Private Investment Corporation (Parts 4300--
                4399)
      XXXV  Office of Personnel Management (Parts 4500--4599)
        XL  Interstate Commerce Commission (Parts 5000--5099)
       XLI  Commodity Futures Trading Commission (Parts 5100--
                5199)
      XLII  Department of Labor (Parts 5200--5299)
     XLIII  National Science Foundation (Parts 5300--5399)

[[Page 541]]

       XLV  Department of Health and Human Services (Parts 5500--
                5599)
      XLVI  Postal Rate Commission (Parts 5600--5699)
     XLVII  Federal Trade Commission (Parts 5700--5799)
    XLVIII  Nuclear Regulatory Commission (Parts 5800--5899)
         L  Department of Transportation (Parts 6000--6099)
       LII  Export-Import Bank of the United States (Parts 6200--
                6299)
      LIII  Department of Education (Parts 6300--6399)
       LIV  Environmental Protection Agency (Parts 6400--6499)
        LV  National Endowment for the Arts (Parts 6500--6599)
       LVI  National Endowment for the Humanities (Parts 6600--
                6699)
      LVII  General Services Administration (Parts 6700--6799)
     LVIII  Board of Governors of the Federal Reserve System 
                (Parts 6800--6899)
       LIX  National Aeronautics and Space Administration (Parts 
                6900--6999)
        LX  United States Postal Service (Parts 7000--7099)
       LXI  National Labor Relations Board (Parts 7100--7199)
      LXII  Equal Employment Opportunity Commission (Parts 7200--
                7299)
     LXIII  Inter-American Foundation (Parts 7300--7399)
      LXIV  Merit Systems Protection Board (Parts 7400--7499)
       LXV  Department of Housing and Urban Development (Parts 
                7500--7599)
      LXVI  National Archives and Records Administration (Parts 
                7600--7699)
     LXVII  Institute of Museum and Library Services (Parts 7700--
                7799)
    LXVIII  Commission on Civil Rights (Parts 7800--7899)
      LXIX  Tennessee Valley Authority (Parts 7900--7999)
      LXXI  Consumer Product Safety Commission (Parts 8100--8199)
    LXXIII  Department of Agriculture (Parts 8300--8399)
     LXXIV  Federal Mine Safety and Health Review Commission 
                (Parts 8400--8499)
     LXXVI  Federal Retirement Thrift Investment Board (Parts 
                8600--8699)
    LXXVII  Office of Management and Budget (Parts 8700--8799)
     XCVII  Department of Homeland Security Human Resources 
                Management System (Department of Homeland 
                Security--Office of Personnel Management) (Parts 
                9700--9799)
      XCIX  Department of Defense Human Resources Management and 
                Labor Relations Systems (Department of Defense--
                Office of Personnel Management) (Parts 9900--9999)

                      Title 6--Domestic Security

         I  Department of Homeland Security, Office of the 
                Secretary (Parts 0--99)

[[Page 542]]

                         Title 7--Agriculture

            Subtitle A--Office of the Secretary of Agriculture 
                (Parts 0--26)
            Subtitle B--Regulations of the Department of 
                Agriculture
         I  Agricultural Marketing Service (Standards, 
                Inspections, Marketing Practices), Department of 
                Agriculture (Parts 27--209)
        II  Food and Nutrition Service, Department of Agriculture 
                (Parts 210--299)
       III  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 300--399)
        IV  Federal Crop Insurance Corporation, Department of 
                Agriculture (Parts 400--499)
         V  Agricultural Research Service, Department of 
                Agriculture (Parts 500--599)
        VI  Natural Resources Conservation Service, Department of 
                Agriculture (Parts 600--699)
       VII  Farm Service Agency, Department of Agriculture (Parts 
                700--799)
      VIII  Grain Inspection, Packers and Stockyards 
                Administration (Federal Grain Inspection Service), 
                Department of Agriculture (Parts 800--899)
        IX  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Fruits, Vegetables, Nuts), Department 
                of Agriculture (Parts 900--999)
         X  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Milk), Department of Agriculture 
                (Parts 1000--1199)
        XI  Agricultural Marketing Service (Marketing Agreements 
                and Orders; Miscellaneous Commodities), Department 
                of Agriculture (Parts 1200--1299)
       XIV  Commodity Credit Corporation, Department of 
                Agriculture (Parts 1400--1499)
        XV  Foreign Agricultural Service, Department of 
                Agriculture (Parts 1500--1599)
       XVI  Rural Telephone Bank, Department of Agriculture (Parts 
                1600--1699)
      XVII  Rural Utilities Service, Department of Agriculture 
                (Parts 1700--1799)
     XVIII  Rural Housing Service, Rural Business-Cooperative 
                Service, Rural Utilities Service, and Farm Service 
                Agency, Department of Agriculture (Parts 1800--
                2099)
        XX  Local Television Loan Guarantee Board (Parts 2200--
                2299)
      XXVI  Office of Inspector General, Department of Agriculture 
                (Parts 2600--2699)
     XXVII  Office of Information Resources Management, Department 
                of Agriculture (Parts 2700--2799)
    XXVIII  Office of Operations, Department of Agriculture (Parts 
                2800--2899)
      XXIX  Office of Energy Policy and New Uses, Department of 
                Agriculture (Parts 2900--2999)
       XXX  Office of the Chief Financial Officer, Department of 
                Agriculture (Parts 3000--3099)

[[Page 543]]

      XXXI  Office of Environmental Quality, Department of 
                Agriculture (Parts 3100--3199)
     XXXII  Office of Procurement and Property Management, 
                Department of Agriculture (Parts 3200--3299)
    XXXIII  Office of Transportation, Department of Agriculture 
                (Parts 3300--3399)
     XXXIV  Cooperative State Research, Education, and Extension 
                Service, Department of Agriculture (Parts 3400--
                3499)
      XXXV  Rural Housing Service, Department of Agriculture 
                (Parts 3500--3599)
     XXXVI  National Agricultural Statistics Service, Department 
                of Agriculture (Parts 3600--3699)
    XXXVII  Economic Research Service, Department of Agriculture 
                (Parts 3700--3799)
   XXXVIII  World Agricultural Outlook Board, Department of 
                Agriculture (Parts 3800--3899)
       XLI  [Reserved]
      XLII  Rural Business-Cooperative Service and Rural Utilities 
                Service, Department of Agriculture (Parts 4200--
                4299)
         L  Rural Business-Cooperative Service, Rurual Housing 
                Service, and Rural Utilities Service, Department 
                of Agriculture (Parts 5000--5099)

                    Title 8--Aliens and Nationality

         I  Department of Homeland Security (Immigration and 
                Naturalization) (Parts 1--499)
         V  Executive Office for Immigration Review, Department of 
                Justice (Parts 1000--1399)

                 Title 9--Animals and Animal Products

         I  Animal and Plant Health Inspection Service, Department 
                of Agriculture (Parts 1--199)
        II  Grain Inspection, Packers and Stockyards 
                Administration (Packers and Stockyards Programs), 
                Department of Agriculture (Parts 200--299)
       III  Food Safety and Inspection Service, Department of 
                Agriculture (Parts 300--599)

                           Title 10--Energy

         I  Nuclear Regulatory Commission (Parts 0--199)
        II  Department of Energy (Parts 200--699)
       III  Department of Energy (Parts 700--999)
         X  Department of Energy (General Provisions) (Parts 
                1000--1099)
      XIII  Nuclear Waste Technical Review Board (Parts 1303--
                1399)
      XVII  Defense Nuclear Facilities Safety Board (Parts 1700--
                1799)

[[Page 544]]

     XVIII  Northeast Interstate Low-Level Radioactive Waste 
                Commission (Parts 1800--1899)

                      Title 11--Federal Elections

         I  Federal Election Commission (Parts 1--9099)
        II  Election Assistance Commission (Parts9400--9499)

                      Title 12--Banks and Banking

         I  Comptroller of the Currency, Department of the 
                Treasury (Parts 1--199)
        II  Federal Reserve System (Parts 200--299)
       III  Federal Deposit Insurance Corporation (Parts 300--399)
        IV  Export-Import Bank of the United States (Parts 400--
                499)
         V  Office of Thrift Supervision, Department of the 
                Treasury (Parts 500--599)
        VI  Farm Credit Administration (Parts 600--699)
       VII  National Credit Union Administration (Parts 700--799)
      VIII  Federal Financing Bank (Parts 800--899)
        IX  Federal Housing Finance Board (Parts 900--999)
        XI  Federal Financial Institutions Examination Council 
                (Parts 1100--1199)
       XII  Federal Housing Finance Agency (Parts 1200--1299)
       XIV  Farm Credit System Insurance Corporation (Parts 1400--
                1499)
        XV  Department of the Treasury (Parts 1500--1599)
      XVII  Office of Federal Housing Enterprise Oversight, 
                Department of Housing and Urban Development (Parts 
                1700--1799)
     XVIII  Community Development Financial Institutions Fund, 
                Department of the Treasury (Parts 1800--1899)

               Title 13--Business Credit and Assistance

         I  Small Business Administration (Parts 1--199)
       III  Economic Development Administration, Department of 
                Commerce (Parts 300--399)
        IV  Emergency Steel Guarantee Loan Board (Parts 400--499)
         V  Emergency Oil and Gas Guaranteed Loan Board (Parts 
                500--599)

                    Title 14--Aeronautics and Space

         I  Federal Aviation Administration, Department of 
                Transportation (Parts 1--199)
        II  Office of the Secretary, Department of Transportation 
                (Aviation Proceedings) (Parts 200--399)
       III  Commercial Space Transportation, Federal Aviation 
                Administration, Department of Transportation 
                (Parts 400--499)

[[Page 545]]

         V  National Aeronautics and Space Administration (Parts 
                1200--1299)
        VI  Air Transportation System Stabilization (Parts 1300--
                1399)

                 Title 15--Commerce and Foreign Trade

            Subtitle A--Office of the Secretary of Commerce (Parts 
                0--29)
            Subtitle B--Regulations Relating to Commerce and 
                Foreign Trade
         I  Bureau of the Census, Department of Commerce (Parts 
                30--199)
        II  National Institute of Standards and Technology, 
                Department of Commerce (Parts 200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Foreign-Trade Zones Board, Department of Commerce 
                (Parts 400--499)
       VII  Bureau of Industry and Security, Department of 
                Commerce (Parts 700--799)
      VIII  Bureau of Economic Analysis, Department of Commerce 
                (Parts 800--899)
        IX  National Oceanic and Atmospheric Administration, 
                Department of Commerce (Parts 900--999)
        XI  Technology Administration, Department of Commerce 
                (Parts 1100--1199)
      XIII  East-West Foreign Trade Board (Parts 1300--1399)
       XIV  Minority Business Development Agency (Parts 1400--
                1499)
            Subtitle C--Regulations Relating to Foreign Trade 
                Agreements
        XX  Office of the United States Trade Representative 
                (Parts 2000--2099)
            Subtitle D--Regulations Relating to Telecommunications 
                and Information
     XXIII  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                2300--2399)

                    Title 16--Commercial Practices

         I  Federal Trade Commission (Parts 0--999)
        II  Consumer Product Safety Commission (Parts 1000--1799)

             Title 17--Commodity and Securities Exchanges

         I  Commodity Futures Trading Commission (Parts 1--199)
        II  Securities and Exchange Commission (Parts 200--399)
        IV  Department of the Treasury (Parts 400--499)

[[Page 546]]

          Title 18--Conservation of Power and Water Resources

         I  Federal Energy Regulatory Commission, Department of 
                Energy (Parts 1--399)
       III  Delaware River Basin Commission (Parts 400--499)
        VI  Water Resources Council (Parts 700--799)
      VIII  Susquehanna River Basin Commission (Parts 800--899)
      XIII  Tennessee Valley Authority (Parts 1300--1399)

                       Title 19--Customs Duties

         I  Bureau of Customs and Border Protection, Department of 
                Homeland Security; Department of the Treasury 
                (Parts 0--199)
        II  United States International Trade Commission (Parts 
                200--299)
       III  International Trade Administration, Department of 
                Commerce (Parts 300--399)
        IV  Bureau of Immigration and Customs Enforcement, 
                Department of Homeland Security (Parts 400--599)

                     Title 20--Employees' Benefits

         I  Office of Workers' Compensation Programs, Department 
                of Labor (Parts 1--199)
        II  Railroad Retirement Board (Parts 200--399)
       III  Social Security Administration (Parts 400--499)
        IV  Employees Compensation Appeals Board, Department of 
                Labor (Parts 500--599)
         V  Employment and Training Administration, Department of 
                Labor (Parts 600--699)
        VI  Employment Standards Administration, Department of 
                Labor (Parts 700--799)
       VII  Benefits Review Board, Department of Labor (Parts 
                800--899)
      VIII  Joint Board for the Enrollment of Actuaries (Parts 
                900--999)
        IX  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 1000--1099)

                       Title 21--Food and Drugs

         I  Food and Drug Administration, Department of Health and 
                Human Services (Parts 1--1299)
        II  Drug Enforcement Administration, Department of Justice 
                (Parts 1300--1399)
       III  Office of National Drug Control Policy (Parts 1400--
                1499)

                      Title 22--Foreign Relations

         I  Department of State (Parts 1--199)
        II  Agency for International Development (Parts 200--299)
       III  Peace Corps (Parts 300--399)

[[Page 547]]

        IV  International Joint Commission, United States and 
                Canada (Parts 400--499)
         V  Broadcasting Board of Governors (Parts 500--599)
       VII  Overseas Private Investment Corporation (Parts 700--
                799)
        IX  Foreign Service Grievance Board (Parts 900--999)
         X  Inter-American Foundation (Parts 1000--1099)
        XI  International Boundary and Water Commission, United 
                States and Mexico, United States Section (Parts 
                1100--1199)
       XII  United States International Development Cooperation 
                Agency (Parts 1200--1299)
      XIII  Millenium Challenge Corporation (Parts 1300--1399)
       XIV  Foreign Service Labor Relations Board; Federal Labor 
                Relations Authority; General Counsel of the 
                Federal Labor Relations Authority; and the Foreign 
                Service Impasse Disputes Panel (Parts 1400--1499)
        XV  African Development Foundation (Parts 1500--1599)
       XVI  Japan-United States Friendship Commission (Parts 
                1600--1699)
      XVII  United States Institute of Peace (Parts 1700--1799)

                          Title 23--Highways

         I  Federal Highway Administration, Department of 
                Transportation (Parts 1--999)
        II  National Highway Traffic Safety Administration and 
                Federal Highway Administration, Department of 
                Transportation (Parts 1200--1299)
       III  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 1300--1399)

                Title 24--Housing and Urban Development

            Subtitle A--Office of the Secretary, Department of 
                Housing and Urban Development (Parts 0--99)
            Subtitle B--Regulations Relating to Housing and Urban 
                Development
         I  Office of Assistant Secretary for Equal Opportunity, 
                Department of Housing and Urban Development (Parts 
                100--199)
        II  Office of Assistant Secretary for Housing-Federal 
                HousingCommissioner, Department of Housing and 
                Urban Development (Parts 200--299)
       III  Government National Mortgage Association, Department 
                of Housing and Urban Development (Parts 300--399)
        IV  Office of Housing and Office of Multifamily Housing 
                Assistance Restructuring, Department of Housing 
                and Urban Development (Parts 400--499)
         V  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 500--599)

[[Page 548]]

        VI  Office of Assistant Secretary for Community Planning 
                and Development, Department of Housing and Urban 
                Development (Parts 600--699) [Reserved]
       VII  Office of the Secretary, Department of Housing and 
                Urban Development (Housing Assistance Programs and 
                Public and Indian Housing Programs) (Parts 700--
                799)
      VIII  Office of the Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Section 8 Housing Assistance 
                Programs, Section 202 Direct Loan Program, Section 
                202 Supportive Housing for the Elderly Program and 
                Section 811 Supportive Housing for Persons With 
                Disabilities Program) (Parts 800--899)
        IX  Office of Assistant Secretary for Public and Indian 
                Housing, Department of Housing and Urban 
                Development (Parts 900--1699)
         X  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Interstate Land Sales 
                Registration Program) (Parts 1700--1799)
       XII  Office of Inspector General, Department of Housing and 
                Urban Development (Parts 2000--2099)
        XX  Office of Assistant Secretary for Housing--Federal 
                Housing Commissioner, Department of Housing and 
                Urban Development (Parts 3200--3899)
       XXV  Neighborhood Reinvestment Corporation (Parts 4100--
                4199)

                           Title 25--Indians

         I  Bureau of Indian Affairs, Department of the Interior 
                (Parts 1--299)
        II  Indian Arts and Crafts Board, Department of the 
                Interior (Parts 300--399)
       III  National Indian Gaming Commission, Department of the 
                Interior (Parts 500--599)
        IV  Office of Navajo and Hopi Indian Relocation (Parts 
                700--799)
         V  Bureau of Indian Affairs, Department of the Interior, 
                and Indian Health Service, Department of Health 
                and Human Services (Part 900)
        VI  Office of the Assistant Secretary-Indian Affairs, 
                Department of the Interior (Parts 1000--1199)
       VII  Office of the Special Trustee for American Indians, 
                Department of the Interior (Parts 1200--1299)

                      Title 26--Internal Revenue

         I  Internal Revenue Service, Department of the Treasury 
                (Parts 1--899)

           Title 27--Alcohol, Tobacco Products and Firearms

         I  Alcohol and Tobacco Tax and Trade Bureau, Department 
                of the Treasury (Parts 1--399)

[[Page 549]]

        II  Bureau of Alcohol, Tobacco, Firearms, and Explosives, 
                Department of Justice (Parts 400--699)

                   Title 28--Judicial Administration

         I  Department of Justice (Parts 0--299)
       III  Federal Prison Industries, Inc., Department of Justice 
                (Parts 300--399)
         V  Bureau of Prisons, Department of Justice (Parts 500--
                599)
        VI  Offices of Independent Counsel, Department of Justice 
                (Parts 600--699)
       VII  Office of Independent Counsel (Parts 700--799)
      VIII  Court Services and Offender Supervision Agency for the 
                District of Columbia (Parts 800--899)
        IX  National Crime Prevention and Privacy Compact Council 
                (Parts 900--999)
        XI  Department of Justice and Department of State (Parts 
                1100--1199)

                            Title 29--Labor

            Subtitle A--Office of the Secretary of Labor (Parts 
                0--99)
            Subtitle B--Regulations Relating to Labor
         I  National Labor Relations Board (Parts 100--199)
        II  Office of Labor-Management Standards, Department of 
                Labor (Parts 200--299)
       III  National Railroad Adjustment Board (Parts 300--399)
        IV  Office of Labor-Management Standards, Department of 
                Labor (Parts 400--499)
         V  Wage and Hour Division, Department of Labor (Parts 
                500--899)
        IX  Construction Industry Collective Bargaining Commission 
                (Parts 900--999)
         X  National Mediation Board (Parts 1200--1299)
       XII  Federal Mediation and Conciliation Service (Parts 
                1400--1499)
       XIV  Equal Employment Opportunity Commission (Parts 1600--
                1699)
      XVII  Occupational Safety and Health Administration, 
                Department of Labor (Parts 1900--1999)
        XX  Occupational Safety and Health Review Commission 
                (Parts 2200--2499)
       XXV  Employee Benefits Security Administration, Department 
                of Labor (Parts 2500--2599)
     XXVII  Federal Mine Safety and Health Review Commission 
                (Parts 2700--2799)
        XL  Pension Benefit Guaranty Corporation (Parts 4000--
                4999)

[[Page 550]]

                      Title 30--Mineral Resources

         I  Mine Safety and Health Administration, Department of 
                Labor (Parts 1--199)
        II  Minerals Management Service, Department of the 
                Interior (Parts 200--299)
       III  Board of Surface Mining and Reclamation Appeals, 
                Department of the Interior (Parts 300--399)
        IV  Geological Survey, Department of the Interior (Parts 
                400--499)
       VII  Office of Surface Mining Reclamation and Enforcement, 
                Department of the Interior (Parts 700--999)

                 Title 31--Money and Finance: Treasury

            Subtitle A--Office of the Secretary of the Treasury 
                (Parts 0--50)
            Subtitle B--Regulations Relating to Money and Finance
         I  Monetary Offices, Department of the Treasury (Parts 
                51--199)
        II  Fiscal Service, Department of the Treasury (Parts 
                200--399)
        IV  Secret Service, Department of the Treasury (Parts 
                400--499)
         V  Office of Foreign Assets Control, Department of the 
                Treasury (Parts 500--599)
        VI  Bureau of Engraving and Printing, Department of the 
                Treasury (Parts 600--699)
       VII  Federal Law Enforcement Training Center, Department of 
                the Treasury (Parts 700--799)
      VIII  Office of International Investment, Department of the 
                Treasury (Parts 800--899)
        IX  Federal Claims Collection Standards (Department of the 
                Treasury--Department of Justice) (Parts 900--999)

                      Title 32--National Defense

            Subtitle A--Department of Defense
         I  Office of the Secretary of Defense (Parts 1--399)
         V  Department of the Army (Parts 400--699)
        VI  Department of the Navy (Parts 700--799)
       VII  Department of the Air Force (Parts 800--1099)
            Subtitle B--Other Regulations Relating to National 
                Defense
       XII  Defense Logistics Agency (Parts 1200--1299)
       XVI  Selective Service System (Parts 1600--1699)
      XVII  Office of the Director of National Intelligence (Parts 
                1700--1799)
     XVIII  National Counterintelligence Center (Parts 1800--1899)
       XIX  Central Intelligence Agency (Parts 1900--1999)
        XX  Information Security Oversight Office, National 
                Archives and Records Administration (Parts 2000--
                2099)
       XXI  National Security Council (Parts 2100--2199)
      XXIV  Office of Science and Technology Policy (Parts 2400--
                2499)
     XXVII  Office for Micronesian Status Negotiations (Parts 
                2700--2799)

[[Page 551]]

    XXVIII  Office of the Vice President of the United States 
                (Parts 2800--2899)

               Title 33--Navigation and Navigable Waters

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Corps of Engineers, Department of the Army (Parts 
                200--399)
        IV  Saint Lawrence Seaway Development Corporation, 
                Department of Transportation (Parts 400--499)

                          Title 34--Education

            Subtitle A--Office of the Secretary, Department of 
                Education (Parts 1--99)
            Subtitle B--Regulations of the Offices of the 
                Department of Education
         I  Office for Civil Rights, Department of Education 
                (Parts 100--199)
        II  Office of Elementary and Secondary Education, 
                Department of Education (Parts 200--299)
       III  Office of Special Education and Rehabilitative 
                Services, Department of Education (Parts 300--399)
        IV  Office of Vocational and Adult Education, Department 
                of Education (Parts 400--499)
         V  Office of Bilingual Education and Minority Languages 
                Affairs, Department of Education (Parts 500--599)
        VI  Office of Postsecondary Education, Department of 
                Education (Parts 600--699)
       VII  Office of Educational Research and Improvmeent, 
                Department of Education [Reserved]
        XI  National Institute for Literacy (Parts 1100--1199)
            Subtitle C--Regulations Relating to Education
       XII  National Council on Disability (Parts 1200--1299)

                          Title 35 [Reserved]

             Title 36--Parks, Forests, and Public Property

         I  National Park Service, Department of the Interior 
                (Parts 1--199)
        II  Forest Service, Department of Agriculture (Parts 200--
                299)
       III  Corps of Engineers, Department of the Army (Parts 
                300--399)
        IV  American Battle Monuments Commission (Parts 400--499)
         V  Smithsonian Institution (Parts 500--599)
        VI  [Reserved]
       VII  Library of Congress (Parts 700--799)
      VIII  Advisory Council on Historic Preservation (Parts 800--
                899)
        IX  Pennsylvania Avenue Development Corporation (Parts 
                900--999)
         X  Presidio Trust (Parts 1000--1099)

[[Page 552]]

        XI  Architectural and Transportation Barriers Compliance 
                Board (Parts 1100--1199)
       XII  National Archives and Records Administration (Parts 
                1200--1299)
        XV  Oklahoma City National Memorial Trust (Parts 1500--
                1599)
       XVI  Morris K. Udall Scholarship and Excellence in National 
                Environmental Policy Foundation (Parts 1600--1699)

             Title 37--Patents, Trademarks, and Copyrights

         I  United States Patent and Trademark Office, Department 
                of Commerce (Parts 1--199)
        II  Copyright Office, Library of Congress (Parts 200--299)
       III  Copyright Royalty Board, Library of Congress (Parts 
                301--399)
        IV  Assistant Secretary for Technology Policy, Department 
                of Commerce (Parts 400--499)
         V  Under Secretary for Technology, Department of Commerce 
                (Parts 500--599)

           Title 38--Pensions, Bonuses, and Veterans' Relief

         I  Department of Veterans Affairs (Parts 0--99)

                       Title 39--Postal Service

         I  United States Postal Service (Parts 1--999)
       III  Postal Regulatory Commission (Parts 3000--3099)

                  Title 40--Protection of Environment

         I  Environmental Protection Agency (Parts 1--1099)
        IV  Environmental Protection Agency and Department of 
                Justice (Parts 1400--1499)
         V  Council on Environmental Quality (Parts 1500--1599)
        VI  Chemical Safety and Hazard Investigation Board (Parts 
                1600--1699)
       VII  Environmental Protection Agency and Department of 
                Defense; Uniform National Discharge Standards for 
                Vessels of the Armed Forces (Parts 1700--1799)

          Title 41--Public Contracts and Property Management

            Subtitle B--Other Provisions Relating to Public 
                Contracts
        50  Public Contracts, Department of Labor (Parts 50-1--50-
                999)
        51  Committee for Purchase From People Who Are Blind or 
                Severely Disabled (Parts 51-1--51-99)
        60  Office of Federal Contract Compliance Programs, Equal 
                Employment Opportunity, Department of Labor (Parts 
                60-1--60-999)
        61  Office of the Assistant Secretary for Veterans' 
                Employment and Training Service, Department of 
                Labor (Parts 61-1--61-999)

[[Page 553]]

            Chapters 62--100 [Reserved]
            Subtitle C--Federal Property Management Regulations 
                System
       101  Federal Property Management Regulations (Parts 101-1--
                101-99)
       102  Federal Management Regulation (Parts 102-1--102-299)
            Chapters 103--104 [Reserved]
       105  General Services Administration (Parts 105-1--105-999)
       109  Department of Energy Property Management Regulations 
                (Parts 109-1--109-99)
       114  Department of the Interior (Parts 114-1--114-99)
       115  Environmental Protection Agency (Parts 115-1--115-99)
       128  Department of Justice (Parts 128-1--128-99)
            Chapters 129--200 [Reserved]
            Subtitle D--Other Provisions Relating to Property 
                Management [Reserved]
            Subtitle E--Federal Information Resources Management 
                Regulations System [Reserved]
            Subtitle F--Federal Travel Regulation System
       300  General (Parts 300-1--300-99)
       301  Temporary Duty (TDY) Travel Allowances (Parts 301-1--
                301-99)
       302  Relocation Allowances (Parts 302-1--302-99)
       303  Payment of Expenses Connected with the Death of 
                Certain Employees (Part 303-1--303-99)
       304  Payment of Travel Expenses from a Non-Federal Source 
                (Parts 304-1--304-99)

                        Title 42--Public Health

         I  Public Health Service, Department of Health and Human 
                Services (Parts 1--199)
        IV  Centers for Medicare & Medicaid Services, Department 
                of Health and Human Services (Parts 400--499)
         V  Office of Inspector General-Health Care, Department of 
                Health and Human Services (Parts 1000--1999)

                   Title 43--Public Lands: Interior

            Subtitle A--Office of the Secretary of the Interior 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Lands
         I  Bureau of Reclamation, Department of the Interior 
                (Parts 200--499)
        II  Bureau of Land Management, Department of the Interior 
                (Parts 1000--9999)
       III  Utah Reclamation Mitigation and Conservation 
                Commission (Parts 10000--10010)

[[Page 554]]

             Title 44--Emergency Management and Assistance

         I  Federal Emergency Management Agency, Department of 
                Homeland Security (Parts 0--399)
        IV  Department of Commerce and Department of 
                Transportation (Parts 400--499)

                       Title 45--Public Welfare

            Subtitle A--Department of Health and Human Services 
                (Parts 1--199)
            Subtitle B--Regulations Relating to Public Welfare
        II  Office of Family Assistance (Assistance Programs), 
                Administration for Children and Families, 
                Department of Health and Human Services (Parts 
                200--299)
       III  Office of Child Support Enforcement (Child Support 
                Enforcement Program), Administration for Children 
                and Families, Department of Health and Human 
                Services (Parts 300--399)
        IV  Office of Refugee Resettlement, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 400--499)
         V  Foreign Claims Settlement Commission of the United 
                States, Department of Justice (Parts 500--599)
        VI  National Science Foundation (Parts 600--699)
       VII  Commission on Civil Rights (Parts 700--799)
      VIII  Office of Personnel Management (Parts 800--899) 
                [Reserved]
         X  Office of Community Services, Administration for 
                Children and Families, Department of Health and 
                Human Services (Parts 1000--1099)
        XI  National Foundation on the Arts and the Humanities 
                (Parts 1100--1199)
       XII  Corporation for National and Community Service (Parts 
                1200--1299)
      XIII  Office of Human Development Services, Department of 
                Health and Human Services (Parts 1300--1399)
       XVI  Legal Services Corporation (Parts 1600--1699)
      XVII  National Commission on Libraries and Information 
                Science (Parts 1700--1799)
     XVIII  Harry S. Truman Scholarship Foundation (Parts 1800--
                1899)
       XXI  Commission on Fine Arts (Parts 2100--2199)
     XXIII  Arctic Research Commission (Part 2301)
      XXIV  James Madison Memorial Fellowship Foundation (Parts 
                2400--2499)
       XXV  Corporation for National and Community Service (Parts 
                2500--2599)

                          Title 46--Shipping

         I  Coast Guard, Department of Homeland Security (Parts 
                1--199)
        II  Maritime Administration, Department of Transportation 
                (Parts 200--399)

[[Page 555]]

       III  Coast Guard (Great Lakes Pilotage), Department of 
                Homeland Security (Parts 400--499)
        IV  Federal Maritime Commission (Parts 500--599)

                      Title 47--Telecommunication

         I  Federal Communications Commission (Parts 0--199)
        II  Office of Science and Technology Policy and National 
                Security Council (Parts 200--299)
       III  National Telecommunications and Information 
                Administration, Department of Commerce (Parts 
                300--399)
        IV  National Telecommunications and Information 
                Administration, Department of Commerce, and 
                National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 400--499)

           Title 48--Federal Acquisition Regulations System

         1  Federal Acquisition Regulation (Parts 1--99)
         2  Defense Acquisition Regulations System, Department of 
                Defense (Parts 200--299)
         3  Department of Health and Human Services (Parts 300--
                399)
         4  Department of Agriculture (Parts 400--499)
         5  General Services Administration (Parts 500--599)
         6  Department of State (Parts 600--699)
         7  Agency for International Development (Parts 700--799)
         8  Department of Veterans Affairs (Parts 800--899)
         9  Department of Energy (Parts 900--999)
        10  Department of the Treasury (Parts 1000--1099)
        12  Department of Transportation (Parts 1200--1299)
        13  Department of Commerce (Parts 1300--1399)
        14  Department of the Interior (Parts 1400--1499)
        15  Environmental Protection Agency (Parts 1500--1599)
        16  Office of Personnel Management, Federal Employees 
                Health Benefits Acquisition Regulation (Parts 
                1600--1699)
        17  Office of Personnel Management (Parts 1700--1799)
        18  National Aeronautics and Space Administration (Parts 
                1800--1899)
        19  Broadcasting Board of Governors (Parts 1900--1999)
        20  Nuclear Regulatory Commission (Parts 2000--2099)
        21  Office of Personnel Management, Federal Employees 
                Group Life Insurance Federal Acquisition 
                Regulation (Parts 2100--2199)
        23  Social Security Administration (Parts 2300--2399)
        24  Department of Housing and Urban Development (Parts 
                2400--2499)
        25  National Science Foundation (Parts 2500--2599)
        28  Department of Justice (Parts 2800--2899)

[[Page 556]]

        29  Department of Labor (Parts 2900--2999)
        30  Department of Homeland Security, Homeland Security 
                Acquisition Regulation (HSAR) (Parts 3000--3099)
        34  Department of Education Acquisition Regulation (Parts 
                3400--3499)
        51  Department of the Army Acquisition Regulations (Parts 
                5100--5199)
        52  Department of the Navy Acquisition Regulations (Parts 
                5200--5299)
        53  Department of the Air Force Federal Acquisition 
                Regulation Supplement [Reserved]
        54  Defense Logistics Agency, Department of Defense (Parts 
                5400--5499)
        57  African Development Foundation (Parts 5700--5799)
        61  General Services Administration Board of Contract 
                Appeals (Parts 6100--6199)
        63  Department of Transportation Board of Contract Appeals 
                (Parts 6300--6399)
        99  Cost Accounting Standards Board, Office of Federal 
                Procurement Policy, Office of Management and 
                Budget (Parts 9900--9999)

                       Title 49--Transportation

            Subtitle A--Office of the Secretary of Transportation 
                (Parts 1--99)
            Subtitle B--Other Regulations Relating to 
                Transportation
         I  Pipeline and Hazardous Materials Safety 
                Administration, Department of Transportation 
                (Parts 100--199)
        II  Federal Railroad Administration, Department of 
                Transportation (Parts 200--299)
       III  Federal Motor Carrier Safety Administration, 
                Department of Transportation (Parts 300--399)
        IV  Coast Guard, Department of Homeland Security (Parts 
                400--499)
         V  National Highway Traffic Safety Administration, 
                Department of Transportation (Parts 500--599)
        VI  Federal Transit Administration, Department of 
                Transportation (Parts 600--699)
       VII  National Railroad Passenger Corporation (AMTRAK) 
                (Parts 700--799)
      VIII  National Transportation Safety Board (Parts 800--999)
         X  Surface Transportation Board, Department of 
                Transportation (Parts 1000--1399)
        XI  Research and Innovative Technology Administration, 
                Department of Transportation [Reserved]
       XII  Transportation Security Administration, Department of 
                Homeland Security (Parts 1500--1699)

[[Page 557]]

                   Title 50--Wildlife and Fisheries

         I  United States Fish and Wildlife Service, Department of 
                the Interior (Parts 1--199)
        II  National Marine Fisheries Service, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 200--299)
       III  International Fishing and Related Activities (Parts 
                300--399)
        IV  Joint Regulations (United States Fish and Wildlife 
                Service, Department of the Interior and National 
                Marine Fisheries Service, National Oceanic and 
                Atmospheric Administration, Department of 
                Commerce); Endangered Species Committee 
                Regulations (Parts 400--499)
         V  Marine Mammal Commission (Parts 500--599)
        VI  Fishery Conservation and Management, National Oceanic 
                and Atmospheric Administration, Department of 
                Commerce (Parts 600--699)

                      CFR Index and Finding Aids

            Subject/Agency Index
            List of Agency Prepared Indexes
            Parallel Tables of Statutory Authorities and Rules
            List of CFR Titles, Chapters, Subchapters, and Parts
            Alphabetical List of Agencies Appearing in the CFR

[[Page 559]]





           Alphabetical List of Agencies Appearing in the CFR




                     (Revised as of October 1, 2009)

                                                  CFR Title, Subtitle or 
                     Agency                               Chapter

Administrative Committee of the Federal Register  1, I
Advanced Research Projects Agency                 32, I
Advisory Council on Historic Preservation         36, VIII
African Development Foundation                    22, XV
  Federal Acquisition Regulation                  48, 57
Agency for International Development              22, II
  Federal Acquisition Regulation                  48, 7
Agricultural Marketing Service                    7, I, IX, X, XI
Agricultural Research Service                     7, V
Agriculture Department                            5, LXXIII
  Agricultural Marketing Service                  7, I, IX, X, XI
  Agricultural Research Service                   7, V
  Animal and Plant Health Inspection Service      7, III; 9, I
  Chief Financial Officer, Office of              7, XXX
  Commodity Credit Corporation                    7, XIV
  Cooperative State Research, Education, and      7, XXXIV
       Extension Service
  Economic Research Service                       7, XXXVII
  Energy, Office of                               2, IX; 7, XXIX
  Environmental Quality, Office of                7, XXXI
  Farm Service Agency                             7, VII, XVIII
  Federal Acquisition Regulation                  48, 4
  Federal Crop Insurance Corporation              7, IV
  Food and Nutrition Service                      7, II
  Food Safety and Inspection Service              9, III
  Foreign Agricultural Service                    7, XV
  Forest Service                                  36, II
  Grain Inspection, Packers and Stockyards        7, VIII; 9, II
       Administration
  Information Resources Management, Office of     7, XXVII
  Inspector General, Office of                    7, XXVI
  National Agricultural Library                   7, XLI
  National Agricultural Statistics Service        7, XXXVI
  Natural Resources Conservation Service          7, VI
  Operations, Office of                           7, XXVIII
  Procurement and Property Management, Office of  7, XXXII
  Rural Business-Cooperative Service              7, XVIII, XLII, L
  Rural Development Administration                7, XLII
  Rural Housing Service                           7, XVIII, XXXV, L
  Rural Telephone Bank                            7, XVI
  Rural Utilities Service                         7, XVII, XVIII, XLII, L
  Secretary of Agriculture, Office of             7, Subtitle A
  Transportation, Office of                       7, XXXIII
  World Agricultural Outlook Board                7, XXXVIII
Air Force Department                              32, VII
  Federal Acquisition Regulation Supplement       48, 53
Air Transportation Stabilization Board            14, VI
Alcohol and Tobacco Tax and Trade Bureau          27, I
Alcohol, Tobacco, Firearms, and Explosives,       27, II
     Bureau of
AMTRAK                                            49, VII
American Battle Monuments Commission              36, IV
American Indians, Office of the Special Trustee   25, VII
Animal and Plant Health Inspection Service        7, III; 9, I
Appalachian Regional Commission                   5, IX

[[Page 560]]

Architectural and Transportation Barriers         36, XI
     Compliance Board
Arctic Research Commission                        45, XXIII
Armed Forces Retirement Home                      5, XI
Army Department                                   32, V
  Engineers, Corps of                             33, II; 36, III
  Federal Acquisition Regulation                  48, 51
Benefits Review Board                             20, VII
Bilingual Education and Minority Languages        34, V
     Affairs, Office of
Blind or Severely Disabled, Committee for         41, 51
     Purchase From People Who Are
Broadcasting Board of Governors                   22, V
  Federal Acquisition Regulation                  48, 19
Census Bureau                                     15, I
Centers for Medicare & Medicaid Services          42, IV
Central Intelligence Agency                       32, XIX
Chief Financial Officer, Office of                7, XXX
Child Support Enforcement, Office of              45, III
Children and Families, Administration for         45, II, III, IV, X
Civil Rights, Commission on                       5, LXVIII; 45, VII
Civil Rights, Office for                          34, I
Coast Guard                                       33, I; 46, I; 49, IV
Coast Guard (Great Lakes Pilotage)                46, III
Commerce Department                               44, IV
  Census Bureau                                   15, I
  Economic Affairs, Under Secretary               37, V
  Economic Analysis, Bureau of                    15, VIII
  Economic Development Administration             13, III
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 13
  Fishery Conservation and Management             50, VI
  Foreign-Trade Zones Board                       15, IV
  Industry and Security, Bureau of                15, VII
  International Trade Administration              15, III; 19, III
  National Institute of Standards and Technology  15, II
  National Marine Fisheries Service               50, II, IV, VI
  National Oceanic and Atmospheric                15, IX; 50, II, III, IV, 
       Administration                             VI
  National Telecommunications and Information     15, XXIII; 47, III
       Administration
  National Weather Service                        15, IX
  Patent and Trademark Office, United States      37, I
  Productivity, Technology and Innovation,        37, IV
       Assistant Secretary for
  Secretary of Commerce, Office of                15, Subtitle A
  Technology, Under Secretary for                 37, V
  Technology Administration                       15, XI
  Technology Policy, Assistant Secretary for      37, IV
Commercial Space Transportation                   14, III
Commodity Credit Corporation                      7, XIV
Commodity Futures Trading Commission              5, XLI; 17, I
Community Planning and Development, Office of     24, V, VI
     Assistant Secretary for
Community Services, Office of                     45, X
Comptroller of the Currency                       12, I
Construction Industry Collective Bargaining       29, IX
     Commission
Consumer Product Safety Commission                5, LXXI; 16, II
Cooperative State Research, Education, and        7, XXXIV
     Extension Service
Copyright Office                                  37, II
Copyright Royalty Board                           37, III
Corporation for National and Community Service    2, XXII; 45, XII, XXV
Cost Accounting Standards Board                   48, 99
Council on Environmental Quality                  40, V
Court Services and Offender Supervision Agency    28, VIII
     for the District of Columbia
Customs and Border Protection Bureau              19, I
Defense Contract Audit Agency                     32, I
Defense Department                                5, XXVI; 32, Subtitle A; 
                                                  40, VII

[[Page 561]]

  Advanced Research Projects Agency               32, I
  Air Force Department                            32, VII
  Army Department                                 32, V; 33, II; 36, III, 
                                                  48, 51
  Defense Acquisition Regulations System          48, 2
  Defense Intelligence Agency                     32, I
  Defense Logistics Agency                        32, I, XII; 48, 54
  Engineers, Corps of                             33, II; 36, III
  Human Resources Management and Labor Relations  5, XCIX
       Systems
  National Imagery and Mapping Agency             32, I
  Navy Department                                 32, VI; 48, 52
  Secretary of Defense, Office of                 2, XI; 32, I
Defense Contract Audit Agency                     32, I
Defense Intelligence Agency                       32, I
Defense Logistics Agency                          32, XII; 48, 54
Defense Nuclear Facilities Safety Board           10, XVII
Delaware River Basin Commission                   18, III
District of Columbia, Court Services and          28, VIII
     Offender Supervision Agency for the
Drug Enforcement Administration                   21, II
East-West Foreign Trade Board                     15, XIII
Economic Affairs, Under Secretary                 37, V
Economic Analysis, Bureau of                      15, VIII
Economic Development Administration               13, III
Economic Research Service                         7, XXXVII
Education, Department of                          5, LIII
  Bilingual Education and Minority Languages      34, V
       Affairs, Office of
  Civil Rights, Office for                        34, I
  Educational Research and Improvement, Office    34, VII
       of
  Elementary and Secondary Education, Office of   34, II
  Federal Acquisition Regulation                  48, 34
  Postsecondary Education, Office of              34, VI
  Secretary of Education, Office of               34, Subtitle A
  Special Education and Rehabilitative Services,  34, III
       Office of
  Vocational and Adult Education, Office of       34, IV
Educational Research and Improvement, Office of   34, VII
Election Assistance Commission                    11, II
Elementary and Secondary Education, Office of     34, II
Emergency Oil and Gas Guaranteed Loan Board       13, V
Emergency Steel Guarantee Loan Board              13, IV
Employee Benefits Security Administration         29, XXV
Employees' Compensation Appeals Board             20, IV
Employees Loyalty Board                           5, V
Employment and Training Administration            20, V
Employment Standards Administration               20, VI
Endangered Species Committee                      50, IV
Energy, Department of                             5, XXIII; 10, II, III, X
  Federal Acquisition Regulation                  48, 9
  Federal Energy Regulatory Commission            5, XXIV; 18, I
  Property Management Regulations                 41, 109
Energy, Office of                                 7, XXIX
Engineers, Corps of                               33, II; 36, III
Engraving and Printing, Bureau of                 31, VI
Environmental Protection Agency                   2, XV; 5, LIV; 40, I, IV, 
                                                  VII
  Federal Acquisition Regulation                  48, 15
  Property Management Regulations                 41, 115
Environmental Quality, Office of                  7, XXXI
Equal Employment Opportunity Commission           5, LXII; 29, XIV
Equal Opportunity, Office of Assistant Secretary  24, I
     for
Executive Office of the President                 3, I
  Administration, Office of                       5, XV
  Environmental Quality, Council on               40, V
  Management and Budget, Office of                5, III, LXXVII; 14, VI; 
                                                  48, 99

[[Page 562]]

  National Drug Control Policy, Office of         21, III
  National Security Council                       32, XXI; 47, 2
  Presidential Documents                          3
  Science and Technology Policy, Office of        32, XXIV; 47, II
  Trade Representative, Office of the United      15, XX
       States
Export-Import Bank of the United States           2, XXXV; 5, LII; 12, IV
Family Assistance, Office of                      45, II
Farm Credit Administration                        5, XXXI; 12, VI
Farm Credit System Insurance Corporation          5, XXX; 12, XIV
Farm Service Agency                               7, VII, XVIII
Federal Acquisition Regulation                    48, 1
Federal Aviation Administration                   14, I
  Commercial Space Transportation                 14, III
Federal Claims Collection Standards               31, IX
Federal Communications Commission                 5, XXIX; 47, I
Federal Contract Compliance Programs, Office of   41, 60
Federal Crop Insurance Corporation                7, IV
Federal Deposit Insurance Corporation             5, XXII; 12, III
Federal Election Commission                       11, I
Federal Emergency Management Agency               44, I
Federal Employees Group Life Insurance Federal    48, 21
     Acquisition Regulation
Federal Employees Health Benefits Acquisition     48, 16
     Regulation
Federal Energy Regulatory Commission              5, XXIV; 18, I
Federal Financial Institutions Examination        12, XI
     Council
Federal Financing Bank                            12, VIII
Federal Highway Administration                    23, I, II
Federal Home Loan Mortgage Corporation            1, IV
Federal Housing Enterprise Oversight Office       12, XVII
Federal Housing Finance Agency                    12, XII
Federal Housing Finance Board                     12, IX
Federal Labor Relations Authority, and General    5, XIV; 22, XIV
     Counsel of the Federal Labor Relations 
     Authority
Federal Law Enforcement Training Center           31, VII
Federal Management Regulation                     41, 102
Federal Maritime Commission                       46, IV
Federal Mediation and Conciliation Service        29, XII
Federal Mine Safety and Health Review Commission  5, LXXIV; 29, XXVII
Federal Motor Carrier Safety Administration       49, III
Federal Prison Industries, Inc.                   28, III
Federal Procurement Policy Office                 48, 99
Federal Property Management Regulations           41, 101
Federal Railroad Administration                   49, II
Federal Register, Administrative Committee of     1, I
Federal Register, Office of                       1, II
Federal Reserve System                            12, II
  Board of Governors                              5, LVIII
Federal Retirement Thrift Investment Board        5, VI, LXXVI
Federal Service Impasses Panel                    5, XIV
Federal Trade Commission                          5, XLVII; 16, I
Federal Transit Administration                    49, VI
Federal Travel Regulation System                  41, Subtitle F
Fine Arts, Commission on                          45, XXI
Fiscal Service                                    31, II
Fish and Wildlife Service, United States          50, I, IV
Fishery Conservation and Management               50, VI
Food and Drug Administration                      21, I
Food and Nutrition Service                        7, II
Food Safety and Inspection Service                9, III
Foreign Agricultural Service                      7, XV
Foreign Assets Control, Office of                 31, V
Foreign Claims Settlement Commission of the       45, V
     United States
Foreign Service Grievance Board                   22, IX
Foreign Service Impasse Disputes Panel            22, XIV
Foreign Service Labor Relations Board             22, XIV
Foreign-Trade Zones Board                         15, IV
Forest Service                                    36, II

[[Page 563]]

General Services Administration                   5, LVII; 41, 105
  Contract Appeals, Board of                      48, 61
  Federal Acquisition Regulation                  48, 5
  Federal Management Regulation                   41, 102
  Federal Property Management Regulations         41, 101
  Federal Travel Regulation System                41, Subtitle F
  General                                         41, 300
  Payment From a Non-Federal Source for Travel    41, 304
       Expenses
  Payment of Expenses Connected With the Death    41, 303
       of Certain Employees
  Relocation Allowances                           41, 302
  Temporary Duty (TDY) Travel Allowances          41, 301
Geological Survey                                 30, IV
Government Accountability Office                  4, I
Government Ethics, Office of                      5, XVI
Government National Mortgage Association          24, III
Grain Inspection, Packers and Stockyards          7, VIII; 9, II
     Administration
Harry S. Truman Scholarship Foundation            45, XVIII
Health and Human Services, Department of          2, III; 5, XLV; 45, 
                                                  Subtitle A,
  Centers for Medicare & Medicaid Services        42, IV
  Child Support Enforcement, Office of            45, III
  Children and Families, Administration for       45, II, III, IV, X
  Community Services, Office of                   45, X
  Family Assistance, Office of                    45, II
  Federal Acquisition Regulation                  48, 3
  Food and Drug Administration                    21, I
  Human Development Services, Office of           45, XIII
  Indian Health Service                           25, V
  Inspector General (Health Care), Office of      42, V
  Public Health Service                           42, I
  Refugee Resettlement, Office of                 45, IV
Homeland Security, Department of                  2, XXX; 6, I
  Coast Guard                                     33, I; 46, I; 49, IV
  Coast Guard (Great Lakes Pilotage)              46, III
  Customs and Border Protection Bureau            19, I
  Federal Emergency Management Agency             44, I
  Human Resources Management and Labor Relations  5, XCVII
       Systems
  Immigration and Customs Enforcement Bureau      19, IV
  Immigration and Naturalization                  8, I
  Transportation Security Administration          49, XII
HOPE for Homeowners Program, Board of Directors   24, XXIV
     of
Housing and Urban Development, Department of      2, XXIV; 5, LXV; 24, 
                                                  Subtitle B
  Community Planning and Development, Office of   24, V, VI
       Assistant Secretary for
  Equal Opportunity, Office of Assistant          24, I
       Secretary for
  Federal Acquisition Regulation                  48, 24
  Federal Housing Enterprise Oversight, Office    12, XVII
       of
  Government National Mortgage Association        24, III
  Housing--Federal Housing Commissioner, Office   24, II, VIII, X, XX
       of Assistant Secretary for
  Housing, Office of, and Multifamily Housing     24, IV
       Assistance Restructuring, Office of
  Inspector General, Office of                    24, XII
  Public and Indian Housing, Office of Assistant  24, IX
       Secretary for
  Secretary, Office of                            24, Subtitle A, VII
Housing--Federal Housing Commissioner, Office of  24, II, VIII, X, XX
     Assistant Secretary for
Housing, Office of, and Multifamily Housing       24, IV
     Assistance Restructuring, Office of
Human Development Services, Office of             45, XIII
Immigration and Customs Enforcement Bureau        19, IV
Immigration and Naturalization                    8, I
Immigration Review, Executive Office for          8, V
Independent Counsel, Office of                    28, VII

[[Page 564]]

Indian Affairs, Bureau of                         25, I, V
Indian Affairs, Office of the Assistant           25, VI
     Secretary
Indian Arts and Crafts Board                      25, II
Indian Health Service                             25, V
Industry and Security, Bureau of                  15, VII
Information Resources Management, Office of       7, XXVII
Information Security Oversight Office, National   32, XX
     Archives and Records Administration
Inspector General
  Agriculture Department                          7, XXVI
  Health and Human Services Department            42, V
  Housing and Urban Development Department        24, XII
Institute of Peace, United States                 22, XVII
Inter-American Foundation                         5, LXIII; 22, X
Interior Department
  American Indians, Office of the Special         25, VII
       Trustee
  Endangered Species Committee                    50, IV
  Federal Acquisition Regulation                  48, 14
  Federal Property Management Regulations System  41, 114
  Fish and Wildlife Service, United States        50, I, IV
  Geological Survey                               30, IV
  Indian Affairs, Bureau of                       25, I, V
  Indian Affairs, Office of the Assistant         25, VI
       Secretary
  Indian Arts and Crafts Board                    25, II
  Land Management, Bureau of                      43, II
  Minerals Management Service                     30, II
  National Indian Gaming Commission               25, III
  National Park Service                           36, I
  Reclamation, Bureau of                          43, I
  Secretary of the Interior, Office of            2, XIV; 43, Subtitle A
  Surface Mining and Reclamation Appeals, Board   30, III
       of
  Surface Mining Reclamation and Enforcement,     30, VII
       Office of
Internal Revenue Service                          26, I
International Boundary and Water Commission,      22, XI
     United States and Mexico, United States 
     Section
International Development, United States Agency   22, II
     for
  Federal Acquisition Regulation                  48, 7
International Development Cooperation Agency,     22, XII
     United States
International Fishing and Related Activities      50, III
International Joint Commission, United States     22, IV
     and Canada
International Organizations Employees Loyalty     5, V
     Board
International Trade Administration                15, III; 19, III
International Trade Commission, United States     19, II
Interstate Commerce Commission                    5, XL
Investment Security, Office of                    31, VIII
James Madison Memorial Fellowship Foundation      45, XXIV
Japan-United States Friendship Commission         22, XVI
Joint Board for the Enrollment of Actuaries       20, VIII
Justice Department                                2, XXVII; 5, XXVIII; 28, 
                                                  I, XI; 40, IV
  Alcohol, Tobacco, Firearms, and Explosives,     27, II
       Bureau of
  Drug Enforcement Administration                 21, II
  Federal Acquisition Regulation                  48, 28
  Federal Claims Collection Standards             31, IX
  Federal Prison Industries, Inc.                 28, III
  Foreign Claims Settlement Commission of the     45, V
       United States
  Immigration Review, Executive Office for        8, V
  Offices of Independent Counsel                  28, VI
  Prisons, Bureau of                              28, V
  Property Management Regulations                 41, 128
Labor Department                                  5, XLII
  Benefits Review Board                           20, VII
  Employee Benefits Security Administration       29, XXV
  Employees' Compensation Appeals Board           20, IV
  Employment and Training Administration          20, V

[[Page 565]]

  Employment Standards Administration             20, VI
  Federal Acquisition Regulation                  48, 29
  Federal Contract Compliance Programs, Office    41, 60
       of
  Federal Procurement Regulations System          41, 50
  Labor-Management Standards, Office of           29, II, IV
  Mine Safety and Health Administration           30, I
  Occupational Safety and Health Administration   29, XVII
  Public Contracts                                41, 50
  Secretary of Labor, Office of                   29, Subtitle A
  Veterans' Employment and Training Service,      41, 61; 20, IX
       Office of the Assistant Secretary for
  Wage and Hour Division                          29, V
  Workers' Compensation Programs, Office of       20, I
Labor-Management Standards, Office of             29, II, IV
Land Management, Bureau of                        43, II
Legal Services Corporation                        45, XVI
Library of Congress                               36, VII
  Copyright Office                                37, II
  Copyright Royalty Board                         37, III
Local Television Loan Guarantee Board             7, XX
Management and Budget, Office of                  5, III, LXXVII; 14, VI; 
                                                  48, 99
Marine Mammal Commission                          50, V
Maritime Administration                           46, II
Merit Systems Protection Board                    5, II, LXIV
Micronesian Status Negotiations, Office for       32, XXVII
Millenium Challenge Corporation                   22, XIII
Mine Safety and Health Administration             30, I
Minerals Management Service                       30, II
Minority Business Development Agency              15, XIV
Miscellaneous Agencies                            1, IV
Monetary Offices                                  31, I
Morris K. Udall Scholarship and Excellence in     36, XVI
     National Environmental Policy Foundation
Museum and Library Services, Institute of         2, XXXI
National Aeronautics and Space Administration     2, XVIII; 5, LIX; 14, V
  Federal Acquisition Regulation                  48, 18
National Agricultural Library                     7, XLI
National Agricultural Statistics Service          7, XXXVI
National and Community Service, Corporation for   45, XII, XXV
National Archives and Records Administration      2, XXVI; 5, LXVI; 36, XII
  Information Security Oversight Office           32, XX
National Capital Planning Commission              1, IV
National Commission for Employment Policy         1, IV
National Commission on Libraries and Information  45, XVII
     Science
National Council on Disability                    34, XII
National Counterintelligence Center               32, XVIII
National Credit Union Administration              12, VII
National Crime Prevention and Privacy Compact     28, IX
     Council
National Drug Control Policy, Office of           21, III
National Endowment for the Arts                   2, XXXII
National Endowment for the Humanities             2, XXXIII
National Foundation on the Arts and the           45, XI
     Humanities
National Highway Traffic Safety Administration    23, II, III; 49, V
National Imagery and Mapping Agency               32, I
National Indian Gaming Commission                 25, III
National Institute for Literacy                   34, XI
National Institute of Standards and Technology    15, II
National Intelligence, Office of Director of      32, XVII
National Labor Relations Board                    5, LXI; 29, I
National Marine Fisheries Service                 50, II, IV, VI
National Mediation Board                          29, X
National Oceanic and Atmospheric Administration   15, IX; 50, II, III, IV, 
                                                  VI
National Park Service                             36, I
National Railroad Adjustment Board                29, III
National Railroad Passenger Corporation (AMTRAK)  49, VII

[[Page 566]]

National Science Foundation                       2, XXV; 5, XLIII; 45, VI
  Federal Acquisition Regulation                  48, 25
National Security Council                         32, XXI
National Security Council and Office of Science   47, II
     and Technology Policy
National Telecommunications and Information       15, XXIII; 47, III
     Administration
National Transportation Safety Board              49, VIII
Natural Resources Conservation Service            7, VI
Navajo and Hopi Indian Relocation, Office of      25, IV
Navy Department                                   32, VI
  Federal Acquisition Regulation                  48, 52
Neighborhood Reinvestment Corporation             24, XXV
Northeast Interstate Low-Level Radioactive Waste  10, XVIII
     Commission
Nuclear Regulatory Commission                     5, XLVIII; 10, I
  Federal Acquisition Regulation                  48, 20
Occupational Safety and Health Administration     29, XVII
Occupational Safety and Health Review Commission  29, XX
Offices of Independent Counsel                    28, VI
Oklahoma City National Memorial Trust             36, XV
Operations Office                                 7, XXVIII
Overseas Private Investment Corporation           5, XXXIII; 22, VII
Patent and Trademark Office, United States        37, I
Payment From a Non-Federal Source for Travel      41, 304
     Expenses
Payment of Expenses Connected With the Death of   41, 303
     Certain Employees
Peace Corps                                       22, III
Pennsylvania Avenue Development Corporation       36, IX
Pension Benefit Guaranty Corporation              29, XL
Personnel Management, Office of                   5, I, XXXV; 45, VIII
  Human Resources Management and Labor Relations  5, XCIX
       Systems, Department of Defense
  Human Resources Management and Labor Relations  5, XCVII
       Systems, Department of Homeland Security
  Federal Acquisition Regulation                  48, 17
  Federal Employees Group Life Insurance Federal  48, 21
       Acquisition Regulation
  Federal Employees Health Benefits Acquisition   48, 16
       Regulation
Pipeline and Hazardous Materials Safety           49, I
     Administration
Postal Regulatory Commission                      5, XLVI; 39, III
Postal Service, United States                     5, LX; 39, I
Postsecondary Education, Office of                34, VI
President's Commission on White House             1, IV
     Fellowships
Presidential Documents                            3
Presidio Trust                                    36, X
Prisons, Bureau of                                28, V
Procurement and Property Management, Office of    7, XXXII
Productivity, Technology and Innovation,          37, IV
     Assistant Secretary
Public Contracts, Department of Labor             41, 50
Public and Indian Housing, Office of Assistant    24, IX
     Secretary for
Public Health Service                             42, I
Railroad Retirement Board                         20, II
Reclamation, Bureau of                            43, I
Recovery Accountability and Transparency Board    4, II
Refugee Resettlement, Office of                   45, IV
Relocation Allowances                             41, 302
Research and Innovative Technology                49, XI
     Administration
Rural Business-Cooperative Service                7, XVIII, XLII, L
Rural Development Administration                  7, XLII
Rural Housing Service                             7, XVIII, XXXV, L
Rural Telephone Bank                              7, XVI
Rural Utilities Service                           7, XVII, XVIII, XLII, L
Saint Lawrence Seaway Development Corporation     33, IV
Science and Technology Policy, Office of          32, XXIV
Science and Technology Policy, Office of, and     47, II
   National Security Council
[[Page 567]]

Secret Service                                    31, IV
Securities and Exchange Commission                17, II
Selective Service System                          32, XVI
Small Business Administration                     2, XXVII; 13, I
Smithsonian Institution                           36, V
Social Security Administration                    2, XXIII; 20, III; 48, 23
Soldiers' and Airmen's Home, United States        5, XI
Special Counsel, Office of                        5, VIII
Special Education and Rehabilitative Services,    34, III
     Office of
State Department                                  2, VI; 22, I; 28, XI
  Federal Acquisition Regulation                  48, 6
Surface Mining and Reclamation Appeals, Board of  30, III
Surface Mining Reclamation and Enforcement,       30, VII
     Office of
Surface Transportation Board                      49, X
Susquehanna River Basin Commission                18, VIII
Technology Administration                         15, XI
Technology Policy, Assistant Secretary for        37, IV
Technology, Under Secretary for                   37, V
Tennessee Valley Authority                        5, LXIX; 18, XIII
Thrift Supervision Office, Department of the      12, V
     Treasury
Trade Representative, United States, Office of    15, XX
Transportation, Department of                     2, XII; 5, L
  Commercial Space Transportation                 14, III
  Contract Appeals, Board of                      48, 63
  Emergency Management and Assistance             44, IV
  Federal Acquisition Regulation                  48, 12
  Federal Aviation Administration                 14, I
  Federal Highway Administration                  23, I, II
  Federal Motor Carrier Safety Administration     49, III
  Federal Railroad Administration                 49, II
  Federal Transit Administration                  49, VI
  Maritime Administration                         46, II
  National Highway Traffic Safety Administration  23, II, III; 49, V
  Pipeline and Hazardous Materials Safety         49, I
       Administration
  Saint Lawrence Seaway Development Corporation   33, IV
  Secretary of Transportation, Office of          14, II; 49, Subtitle A
  Surface Transportation Board                    49, X
  Transportation Statistics Bureau                49, XI
Transportation, Office of                         7, XXXIII
Transportation Security Administration            49, XII
Transportation Statistics Bureau                  49, XI
Travel Allowances, Temporary Duty (TDY)           41, 301
Treasury Department                               5, XXI; 12, XV; 17, IV; 
                                                  31, IX
  Alcohol and Tobacco Tax and Trade Bureau        27, I
  Community Development Financial Institutions    12, XVIII
       Fund
  Comptroller of the Currency                     12, I
  Customs and Border Protection Bureau            19, I
  Engraving and Printing, Bureau of               31, VI
  Federal Acquisition Regulation                  48, 10
  Federal Claims Collection Standards             31, IX
  Federal Law Enforcement Training Center         31, VII
  Fiscal Service                                  31, II
  Foreign Assets Control, Office of               31, V
  Internal Revenue Service                        26, I
  Investment Security, Office of                  31, VIII
  Monetary Offices                                31, I
  Secret Service                                  31, IV
  Secretary of the Treasury, Office of            31, Subtitle A
  Thrift Supervision, Office of                   12, V
Truman, Harry S. Scholarship Foundation           45, XVIII
United States and Canada, International Joint     22, IV
     Commission
United States and Mexico, International Boundary  22, XI
     and Water Commission, United States Section
Utah Reclamation Mitigation and Conservation      43, III
     Commission
Veterans Affairs Department                       2, VIII; 38, I
  Federal Acquisition Regulation                  48, 8

[[Page 568]]

Veterans' Employment and Training Service,        41, 61; 20, IX
     Office of the Assistant Secretary for
Vice President of the United States, Office of    32, XXVIII
Vocational and Adult Education, Office of         34, IV
Wage and Hour Division                            29, V
Water Resources Council                           18, VI
Workers' Compensation Programs, Office of         20, I
World Agricultural Outlook Board                  7, XXXVIII

[[Page 569]]







                      Table of OMB Control Numbers



The OMB control numbers for chapter IV of title 42 appear in Sec.  
400.310. Sections 400.300 and 400.310 are reprinted below for the 
convenience of the user.

  Subpart C_OMB Control Numbers for Approved Collections of Information

    Source: 49 FR 4477, Feb. 7, 1984, unless therwise noted.

Sec.  400.300  Scope.

    This subpart collects and displays control numbers assigned by the 
Office of Management and Budget (OMB) to collections of information 
contained in CMS regulations, in accordance with OMB's regulations for 
controlling paperwork burdens on the public, 5 CFR part 1320. CMS 
intends that the subpart comply with the requirements of section 3507(f) 
of the Paperwork Reduction Act of 1980, 44 U.S.C. chapter 35 which 
requires that agencies shall not engage in a ``collection of 
information'' without obtaining a control number from OMB.

Sec.  400.310  Display of currently valid OMB control numbers.

------------------------------------------------------------------------
                                                             Current OMB
Sections in 42 CFR that contain collections of information  control Nos.
------------------------------------------------------------------------
403.510...................................................    0938--0641
405.509...................................................    0938--0666
405.512...................................................    0938--0008
405.2112, 405.2123, 405.2134, 405.2136-405.2140, 405.2171.    0938--0386
409.43....................................................    0938--0365
410.105...................................................    0938--0267
411.25, 411.32............................................    0938--0564
411.54....................................................    0938--0558
411.165...................................................    0938--0564
411.404, 411.406..........................................    0938--0465
411.408...................................................    0938--0566
412.42....................................................    0938--0666
412.92....................................................    0938--0477
412.105...................................................    0938--0456
412.230, 412.232, 412.234, 412.236, 412.254, 412.260,         0938--0573
 412.266, 412.278.........................................
415.60....................................................     0938-0301
415.162...................................................     0938-0301
416.43....................................................    0938--0506
416.47....................................................    0938--0266
                                                                     and
                                                              0938--0506
417.126...................................................    0938--0472
417.436, 417.801..........................................    0938--0610
418.22, 418.24, 418.28, 418.56, 418.58, 418.70, 418.74....    0938--0302
418.30, 418.82, 418.83, 418.96, 418.100...................    0938--0475
418.96, 418.100...........................................    0938--0302
421.117...................................................    0938--0542
424.3.....................................................    0938--0008
424.5, 424.7, 424.20......................................    0938--0454
424.22....................................................    0938--0489
424.32, 424.34............................................    0938--0008
431.17....................................................    0938--0467
431.50, 431.52, 431.55....................................    0938--0247
431.107...................................................    0938--0610
431.306...................................................    0938--0467
431.625...................................................    0938--0247
431.630...................................................    0938--0445
431.800...................................................    0938--0247
431.806, 431.830, 431.432, 431.834, 431.836...............    0938--0438
432.50....................................................    0938--0459
433.36, 433.37............................................    0938--0247
433.68, 433.74............................................    0938--0618
433.110, 433.112-433.114, 433.116, 433.117, 433.119-          0938--0247
 433.121, 433.123, 433.127, 433.130, 433.131, 433.135.....
433.138...................................................    0938--0502
                                                              0938--0553
                                                                     and
                                                              0938--0555
433.139...................................................    0938--0459
                                                              0938--0554
                                                                     and
                                                              0938--0555
434.27....................................................    0938--0572
434.28....................................................    0938--0610
435.1, 435.910, 435.919, 435.920, 435.940, 435.945,           0938--0247
 435.948, 435.952, 435.953, 435.955, 435.960, 435.965,
 435.1003, 441.11, 441.15, 441.20.........................
441.56, 441.58, 441.60, 441.61............................    0938--0354
441.302...................................................    0938--0449
441.303...................................................    0938--0272
                                                                     and
                                                              0938--0449
441.351, 441.352, 441.353, 441.356, 441.365...............    0938--0613
442.505...................................................    0938--0366
447.31....................................................    0938--0287
447.45, 447.50, 447.51, 447.52............................    0938--0247
447.53....................................................    0938--0429
447.55....................................................    0938--0247
447.253...................................................    0938--0366
                                                              0938--0523
                                                                     and
                                                              0938--0556
447.255...................................................    0938--0193
447.272, 447.299..........................................    0938--0618
447.302, 447.331, 447.332, 447.333........................    0938--0247
456.80....................................................    0938--0247
456.654...................................................    0938--0445
456.700, 456.705, 456.709, 456.711, 456.712...............    0938--0659
462.102, 462.103..........................................    0938--0526
466.70, 466.72, 466.74....................................    0938--0445

[[Page 570]]

 
466.78....................................................    0938--0445
                                                                     and
                                                              0938--0665
466.80, 466.94............................................    0938--0445
473.18, 473.34, 473.36, 473.42............................    0938--0443
476.104, 476.105, 476.116, 476.134........................    0938--0426
481.61....................................................    0938--0328
482.12, 482.21, 482.22, 482.27, 482.30, 482.41, 482.43,       0938--0328
 482.53, 482.56, 482.57, 482.60, 482.62...................
483.10....................................................    0938--0610
483.410, 483.420, 483.440, 483.460, 483.470...............    0938--0366
484.1, 484.2..............................................    0938--0365
484.10....................................................    0938--0365
                                                                     and
                                                              0938--0610
484.12, 484.14, 484.16, 484.18, 484.30, 484.32, 484.34,       0938--0365
 484.36, 484.48, 484.52...................................
485.56, 485.58, 485.60, 485.64, 485.66....................    0938--0267
                                                                     and
                                                              0938--0538
485.709, 485.711, 485.717, 485.719, 485.721, 487.723,         0938--0336
 485.725, 485.727.........................................
486.104, 486.106, 486.110.................................    0938--0338
486.155, 486.161, 486.163.................................    0938--0336
488.10....................................................    0938--0646
488.18....................................................    0938--0667
488.26....................................................    0938--0646
489.20....................................................    0938--0564
                                                                     and
                                                              0938--0667
489.24....................................................    0938--0334
                                                              0938--0663
                                                                     and
                                                              0938--0667
489.102...................................................    0938--0610
491.9, 491.10.............................................    0938--0334
493.35, 493.37, 493.39, 493.43, 493.45, 493.47, 493.49,
 493.51, 493.53,..........................................
493.55, 493.60, 493.61, 493.62, 493.63....................    0938--0612
493.614, 493.633, 494.634.................................    0938--0607
493.801-493.1285, 493.1425, 493.1701, 493.1703, 493.1705,     0938--0612
 493.1707, 493.1709, 493.1711, 493.1713, 493.1715,
 493.1717, 493.1719, 493.1721, 493.1775, 493.1776,
 493.1777, 493.1780, 493.2001.............................
494.52, 494.54, 494.56, 494.58, 494.64....................    0938--0608
498.22, 498.40, 498.58, 498.82............................    0938--0508
1004.40, 1004.50, 1004.60, 1004.70........................    0938--0444
------------------------------------------------------------------------


[60 FR 50445, Sept. 29, 1995, as amended at 60 FR 63188, Dec. 8, 1995]

[[Page 571]]



List of CFR Sections Affected



All changes in this volume of the Code of Federal Regulations that were 
made by documents published in the Federal Register since January 1, 
2001, are enumerated in the following list. Entries indicate the nature 
of the changes effected. Page numbers refer to Federal Register pages. 
The user should consult the entries for chapters and parts as well as 
sections for revisions.
For the period before January 1, 2001, see the ``List of CFR Sections 
Affected, 1949-1963, 1964-1972, 1973-1985, and 1986-2000'' published in 
11 separate volumes.

                                  2001

42 CFR
                                                                   66 FR
                                                                    Page
Chapter IV
430.5 Added.........................................................6402
    Regulation at 66 FR 6402 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6402 eff. date delayed to 8-16-02..........43090
431.51 (a) introductory text, (b)(1) introductory text and (2) 
        amended; (a)(4) and (5) revised; (a)(6) added...............6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6402 eff. date delayed to 8-16-02..........43090
431.55 (c)(1)(i) amended............................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.200 Revised.....................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.201 Amended.....................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.220 (a) introductory text revised; (a)(1), (2) and (3) 
        amended; (a)(5) added.......................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.244 (f) revised.................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
431.636 Added.......................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
431.865 (b) amended.................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
433 Authority citation revised......................................2666
433.10 (c)(4) added.................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
433.11 Added........................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
434.1 (a) revised...................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.2 Amended.......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.6 (a)(1) amended................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.20--434.38 (Subpart C) Removed..................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776

[[Page 572]]

    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.42 Removed......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.44 Removed......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.50--434.67 (Subpart E) Removed..................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.70 Revised......................................................6403
    Regulation at 66 FR 6403 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6403 eff. date delayed to 8-16-02..........43090
434.71 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.72 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.74 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.75 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
434.80 Removed......................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.4 Amended.......................................................2666
    Regulation at 66 FR 2666 eff. date delayed..............11547, 31178
435.212 Amended; heading and introductory text revised..............6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.229 Added.......................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.326 Revised.....................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.910 (h) added...................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1001 (a) revised................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1002 (c) added..................................................2667
    (a) amended.....................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
435.1007 (b) and (e) revised; (f) added.............................2321
    (a) amended.....................................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
    Regulation at 66 FR 2321 eff. date delayed.....................14343
435.1100--435.1102 (Subpart L) Added................................2667
    Regulation at 66 FR 2667 eff. date delayed..............11547, 31178
435.1101 Amended...................................................33822
436.3 Amended.......................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.229 Added.......................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.1001 (a) revised................................................2668
    Regulation at 66 FR 2668 eff. date delayed..............11547, 31178
436.1002 (c) added..................................................2669
    Regulation at 66 FR 2669 eff. date delayed..............11547, 31178
436.1100--436.1102 (Subpart L) Added................................2669
    Regulation at 66 FR 2669 eff. date delayed..............11547, 31178
436.1101 Amended...................................................33822
438 Added...........................................................6404
    Regulation at 66 FR 6404 eff. date delayed..............11546, 32776

[[Page 573]]

    Regulation at 66 FR 6404 eff. date delayed to 8-16-02..........43090
440.168 Added.......................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
441 Clarification..................................................28116
441.151 Revised; interim............................................7160
    Regulation at 66 FR 7160 eff. date delayed.....................15800
447.46 Added........................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.53 (b) introductory text amended; (b)(6) removed; (e) added.....6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.58 Amended......................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.60 Added........................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
447.272 Revised.....................................................3175
    (e)(2)(ii)(A) revised; (e)(2)(ii)(D) added; eff. 11-5-01.......46399
447.304 (c) and note revised........................................3176
447.321 Revised.....................................................3176
    (e)(2)(ii)(A) revised; (e)(2)(ii)(D) added; eff. 11-5-01.......46399
447.361 Removed.....................................................6426
    Regulation at 66 FR 6426 eff. date delayed..............11546, 32776
    Regulation at 66 FR 6426 eff. date delayed to 8-16-02..........43090
457.1--457.170 (Subpart A) Added....................................2670
    Regulation at 66 FR 2670 eff. date delayed..............11547, 31178
457.60 Regulation at 66 FR 2671 delayed; (b)(2) revised; (b)(7) 
        and (8) amended; interim...................................33822
457.203 Added.......................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.204 (d)(2) revised..............................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.208 (a) revised.................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.234 Removed.....................................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.300--457.380 (Subpart C) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.301 Regulation at 66 FR 2675 delayed; amended; interim.........33823
457.320 Regulation at 66 FR 2676 delayed; (b)(4) revised; interim 
                                                                   33823
457.340 Regulation at 66 FR 2676 delayed; (b) through (e) 
        redesignated as (c) through (f); new (b) added; interim....33823
457.350 Regulation at 66 FR 2677 delayed; (e)(4) and (g)(3) added; 
        (f)(5)(iii) removed........................................33823
457.355 Regulation at 66 FR 2678 delayed; introductory text and 
        (a) redesignated as (a) and (b); new (a) heading added; 
        new (b) revised; interim...................................33823
457.401--457.495 (Subpart D) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.450 Regulation at 66 FR 2680 delayed; revised; interim.........33823
457.495 Regulation at 66 FR 2680 delayed; (d) revised; interim.....33824
457.500--457.570 (Subpart E) Added..................................2674
    Regulation at 66 FR 2674 eff. date delayed..............11547, 31178
457.505 Regulation at 66 FR 2681 delayed; (d)(1), (3) and (e) 
        revised; interim...........................................33824
457.540 Regulation at 66 FR 2682 delayed; (f) amended; interim.....33824
457.560 Regulation at 66 FR 2682 delayed; (a) and (b) removed; 
        amended....................................................33824
457.624 Removed.....................................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.700--457.750 (Subpart G) Added..................................2683

[[Page 574]]

    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.750 Regulation at 66 FR 2684 delayed; (b)(7) removed; new 
        (b)(8) redesignated as new (b)(7); interim.................33824
457.800--457.810 (Subpart H) Added..................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.900--457.985 (Subpart I) Added..................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.940 Regulation at 66 FR 2685 delayed; (b)(1) and (d) amended; 
        interim....................................................33824
457.980 Regulation at 66 FR 2686 delayed; (a) and (b) designation 
        removed; interim...........................................33824
457.1000--457.1015 (Subpart J) Added................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.1000 Regulation at 66 FR 2686 delayed; (a)(1) and (2) amended; 
        interim....................................................33824
457.1005 Regulation at 66 FR 2687 delayed; heading amended; 
        interim....................................................33824
457.1010 Regulation at 66 FR 2687 delayed; heading amended; 
        interim....................................................33824
457.1100--457.1190 (Subpart K) Added................................2683
    Regulation at 66 FR 2683 eff. date delayed..............11547, 31178
457.1120 Regulation at 66 FR 2687 delayed; revised; interim........33824
457.1130 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1140 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1150 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1160 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1170 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1180 Regulation at 66 FR 2688 delayed; amended; interim........33824
457.1190 Regulation at 66 FR 2688 delayed; amended; interim........33824
480.111 Regulation at 65 FR 83154 confirmed........................14861

                                  2002

42 CFR
                                                                   67 FR
                                                                    Page
Chapter IV
430 Technical correction...........................................42609
430.5 Regulation at 66 FR 6402, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Added..........................................................41094
431 Technical correction...........................................42609
431.51 Regulation at 66 FR 6402, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a) introductory text, (b)(1) introductory text and (2) 
amended; (a)(4) and (5) revised; (a)(6) added......................41094
431.55 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (c)(1)(i) added................................................41094
431.200 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Revised........................................................41094
431.201 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Amended........................................................41095
431.220 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    (a) introductory text revised; (a)(1), (2) and (3) amended; 
(a)(5) and (6) added...............................................41095
    Corrected......................................................65505
431.244 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn
                                                                   40988
    (f) revised....................................................41095
434 Technical correction...........................................42609
434.1 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a) revised....................................................41095
434.2 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Amended........................................................41095
434.6 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (a)(1) amended.................................................41095
434.20--434.38 (Subpart C) Regulation at 66 FR 6403, 11546, 32276 
        and 43090 withdrawn........................................40988
    (Subpart C) Removed............................................41095

[[Page 575]]

434.42 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.44 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.50--434.67 (Subpart E) Regulation at 66 FR 6403, 11546, 32276 
        and 43090 withdrawn........................................40988
    Removed........................................................41095
434.70 Regulation at 66 FR 6403, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Revised........................................................41095
434.71 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.72 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   41095
    Removed........................................................41095
434.73 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.74 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.75 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
434.80 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Removed........................................................41095
435 Technical correction...........................................42609
435.212 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Amended........................................................41095
435.326 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Revised........................................................41095
435.1002 Regulation at 66 FR 6404, 11546, 32276 and 43090 
        withdrawn..................................................40988
    (a) amended....................................................41095
438 Regulation at 66 FR 6404, 11546, 32276 and 43090 withdrawn.....40988
    Added..........................................................41095
    Technical correction...........................................42609
438.8 Corrected....................................................65505
438.10 Corrected...................................................65505
438.52 Corrected...................................................65505
438.100 Corrected..................................................65505
438.102 Corrected..................................................65505
438.114 Corrected..................................................65505
438.116 Corrected..................................................65505
438.214 Corrected..................................................54532
438.703 Corrected..................................................65505
438.810 Corrected..................................................65505
440 Technical correction...........................................42609
440.168 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Added..........................................................41115
447 Technical correction...........................................42609
447.46 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Added..........................................................41115
447.53 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    (b) introductory text amended; (b)(6) removed; (e) added.......41116
447.58 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Amended........................................................41116
447.60 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn 
                                                                   40988
    Added..........................................................41116
447.272 (b), (d), (e)(1)(ii) and (f) revised; (c)(1) removed; 
        (c)(2), (3), (e)(2)(ii)(C)(8) and (iii) redesignated as 
        (c)(1), (2), (e)(2)(iii) and (iv); (e)(2)(v) added..........2610
    Regulation at 67 FR 2610 eff. date delayed to 4-15-02..........12479
447.321 (b) through (d), (e)(1)(ii) and (f) revised; 
        (e)(2)(ii)(C)(8) and (iii) redesignated as (e)(2)(iii) and 
        (iv); (e)(2)(v) added.......................................2611
    Regulation at 67 FR 2611 eff. date delayed to 4-15-02..........12479
447.361 Regulation at 66 FR 6426, 11546, 32276 and 43090 withdrawn
                                                                   40988
    Removed........................................................41116
457.10 Amended.....................................................61974
457.350 (b) text redesignated as (b)(1); (b)(2) added..............61974

[[Page 576]]

457.622 (c)(5) revised.............................................61974
457.626 (a)(3) added...............................................61974
460 Nomenclature change; eff. 10-31-02.............................61504
460.10--460.24 (Subpart B) Heading revised; eff. 10-31-02..........61504
460.10 Revised; eff. 10-31-02......................................61504
460.12 (a)(2) removed; eff. 10-31-02...............................61505
460.26 Added; eff. 10-31-02........................................61505
    Corrected......................................................63966
460.28 Added; eff. 10-31-02........................................61505
460.30 (b) revised; (c) added; eff. 10-31-02.......................61505
460.60 (b) and (c) revised; eff. 10-31-02..........................61505
460.68 (b) revised; (c) removed; eff. 10-31-02.....................61505
460.70 (b)(1)(i) and (e)(2) revised; (e)(5)(vi) through (ix) and 
        (f) added; eff. 10-31-02...................................61505
460.71 Added; eff. 10-31-02........................................61505
460.102 (d)(2)(iii) revised; (d)(3) amended; (f) and (g) removed; 
        eff. 10-31-02..............................................61506
476.71 (c)(2) revised..............................................56056

                                  2003

42 CFR
                                                                   68 FR
                                                                    Page
Chapter IV
433.15 (b)(10) added................................................3635
438.310--438.370 (Subpart E) Added..................................3635
440 Technical correction....................................55882, 58756
440.40 (a)(1)(ii)(A) revised.......................................46071
440.155 (c) introductory text revised..............................46071
447.500--447.550 (Subpart I) Added.................................51917
    Regulation at 68 FR 51912 eff. date corrected..................55527
460.72 (b)(1) revised; (b)(3) added.................................1386
476.78 (b) introductory text, (2), (c) introductory text and (d) 
        revised; (c)(4) added......................................67960

                                  2004

42 CFR
                                                                   69 FR
                                                                    Page
Title 42 Nomenclature change.......................................18803
Chapter IV
440.110 (c)(2) revised; (c)(3) added...............................30587
447.534 (h)(1) revised; interim......................................513
    (h)(1)(i) revised; (h)(2) and (ii) at end of the section 
removed............................................................68818
460 Application deadline...........................................69536
460.72 (b)(1) and (3) revised; (b)(4) added........................49266
480 Heading revised................................................49266
    Application deadline...........................................69536
480.101 (b) amended................................................49267
480.104 (a)(1), (2) and (d) amended................................49267
480.105 (a), (b)(1) and (2) amended................................49267
480.106 (c) added..................................................49266
    (a) and (b) amended............................................49267
480.120 Introductory text and (a)(5) amended.......................49267
480.121 Amended....................................................49267
480.130 Amended....................................................49267
480.132 (b)(2) and (3) amended.....................................49267
480.133 (a)(2)(iii) revised........................................49266
    (a)(2)(ii), (b)(2) and (3) amended.............................49267
480.136 (a) introductory text amended..............................49267
480.137 (a) introductory text amended..............................49267
480.138 (b)(2) amended.............................................49267
480.140 (d) and (e) redesignated as (e) and (f); new (d) added.....49266
480.141 Amended....................................................49267
480.142 (b) amended................................................49267

                                  2005

42 CFR
                                                                   70 FR
                                                                    Page
Chapter IV
431.950--431.1002 (Subpart Q) Added; interim.......................58276
433.10 (c)(5) added; interim.......................................50220
457.720 Revised; interim...........................................58276
460.72 (b)(5) added; interim.......................................15238

                                  2006

42 CFR
                                                                   71 FR
                                                                    Page
Chapter IV
431.950--431.1002 (Subpart Q) Revised; interim.....................51081
433.10 (c)(5) revised; interim.....................................25092
    Regulation at 71 FR 25092 confirmed............................60670
435.403 (b) amended; interim.......................................39222

[[Page 577]]

435.406 (a)(1) and (2) revised; (a)(3), (4), (b) and (d) removed; 
        (c) redesignated as new (b); interim.......................39222
435.407 Added; interim.............................................39222
435.408 Removed; interim...........................................39225
435.1002 (a) revised; interim......................................39225
435.1008 Redesignated as 435.1009; (a)(1) amended; new 435.1008 
        added; interim.............................................39225
435.1009 Redesignated as 435.1010; redesignated from 435.1008; 
        interim....................................................39225
435.1010 Redesignated as 435.1011; redesignated from 435.1009; 
        interim....................................................39225
435.1011 Redesignated as 435.1012; redesignated from 435.1010; 
        interim....................................................39225
435.1012 Redesignated from 435.1011; interim.......................39225
436.403 (b) amended; interim.......................................39225
436.406 (a)(1) and (2) revised; (a)(3), (4), (b) and (d) removed; 
        (c) redesignated as new (b); interim.......................39225
436.407 Added; interim.............................................39226
436.408 Removed; interim...........................................39229
436.1004 Redesignated as 436.1005; (a)(1) amended; new 436.1004 
        added; interim.............................................39229
436.1005 Redesignated as 436.1006 and amended; redesignated from 
        436.1004; interim..........................................39229
436.1006 Redesignated from 436.1005; interim.......................39229
440.2 (a) amended; interim.........................................39229
440.140 (b) amended; interim.......................................39229
440.180 (d)(2)(i) amended; interim.................................39229
440.185 (b) amended; interim.......................................39229
441.13 (c) amended.................................................31046
    (a)(1) amended; interim........................................39229
457.310 (c)(2)(i) and (ii) amended; interim........................39229
457.720 Revised; interim...........................................51084
460 (Subchapter E) Regulation at 64 FR 66279 confirmed.............71334
460 Regulation at 67 FR 61504 confirmed............................71334
460 Authority citation revised.....................................71334
460.6 Amended......................................................71334
460.10--460.24 (Subpart B) Regulation at 67 FR 61504 confirmed.....71334
460.10 Regulation at 67 FR 61504 confirmed.........................71334
460.12 Regulation at 67 FR 61505 confirmed; (a)(3) redesignated as 
        (a)(2); new (a)(2)(i) and (ii) amended.....................71334
460.14 Removed.....................................................71334
460.16 Removed.....................................................71334
460.26 Regulation at 67 FR 61505 confirmed; (a) redesignated as 
        (a)(1); (a)(2) added; (b) introductory text and (1) 
        revised....................................................71334
460.28 Regulation at 67 FR 61505 confirmed; (a)(2) revised.........71334
460.30 Regulation at 67 FR 61505 confirmed.........................71334
460.32 (a)(12) revised.............................................71334
460.60 Regulation at 67 FR 61505 confirmed; (d)(3) revised; (d)(4) 
        and (5) removed............................................71334
460.62 (b) and (c) revised.........................................71334
460.64 Revised.....................................................71334
460.66 (c) added...................................................71335
460.68 Regulation at 67 FR 61505 confirmed; (d) redesignated as 
        (c); (b) and new (c) heading revised.......................71335
460.70 Regulation at 67 FR 61505 confirmed.........................71334
    (d) removed; (e) and (f) redesignated as (d) and (e)...........71335
460.71 Regulation at 67 FR 61505 confirmed.........................71334
    (b)(4) revised.................................................71335
460.72 (b)(5)(iii) revised; (b)(5)(iv) amended; (b)(5)(v) added; 
        eff. 10-23-06..............................................55340
    (b)(1), (2)(ii) and (4) amended................................71334
    (a)(3) revised.................................................71335
460.74 (c)(1) amended..............................................71334
460.78 (a)(1) introductory text revised............................71335
460.92 Revised.....................................................71335
460.94 (b)(5) revised..............................................71335
460.96 (e)(1) revised..............................................71335
460.98 (d) heading, (3) and (e) heading amended....................71334
    (b)(3) revised.................................................71335
460.100 (d) revised; (e)(3) added..................................71335
460.102 Regulation at 67 FR 61506 confirmed; (a)(1) amended........71334
    (b)(3) revised.................................................71336
460.104 (c)(3), (d) and (e) redesignated as (d), (e) and (f); 
        (a)(2), (c)(1)(iii), (2) and new (d) revised...............71336

[[Page 578]]

460.112 (a) introductory text and (b)(1)(iii) revised..............71336
460.122 Introductory text and (f)(1) revised.......................71336
460.152 (a)(1)(vi) added...........................................71337
460.154 (h) and (t) revised........................................71337
460.160 (b)(3) revised.............................................71337
460.180 (a) and (b)(1) through (4) revised.........................71337
460.210 (b)(13) removed............................................71337
462--480 (Subchapter F) Regulation at 64 FR 66279 confirmed........71334
462 Regulation at 64 FR 66279 confirmed............................71334
466 Regulation at 64 FR 66279 confirmed............................71334
473 Regulation at 64 FR 66279 confirmed............................71334
475 Regulation at 64 FR 66279 confirmed............................71334
476 Regulation at 64 FR 66279 confirmed............................71334
478 Regulation at 64 FR 66279 confirmed............................71334
480 Regulation at 64 FR 66279 confirmed............................71334

                                  2007

42 CFR
                                                                   72 FR
                                                                    Page
Chapter IV
431.51 (c)(2) and (3) amended; (c)(4) added; interim...............68091
431.53 Revised.....................................................73650
431.54 (a) revised; (g) added; interim.............................68091
431.812 (b) revised................................................50513
431.970 (a)(1) revised.............................................50513
431.978 (d)(2) revised.............................................50513
433.20 Added.......................................................73650
433.50 (a)(1) revised..............................................29832
433.51 Revised.....................................................29833
435.117 Revised....................................................38690
435.403 Regulation at 71 FR 39222 confirmed........................38690
435.406 Regulation at 71 FR 39222 confirmed........................38690
    (a)(1)(iii), (2) and (b) revised; (a)(1)(v) added..............38691
435.407 Regulation at 71 FR 39222 confirmed........................38690
    (a)(5) and (e)(2) through (9) removed; (e)(10) and (g) through 
(j) redesignated as new (e)(2) and (h) through (k); introductory 
text, (b)(11), (12), new (e)(3) and (g) added; (a)(4) amended; 
(b)(1), (5), (c), (d) introductory text, (2), (3), (4), (5)(vi), 
(e)(1), (f) and new (i) revised....................................38691
435.408 Regulation at 71 FR 39225 confirmed........................38690
435.1002 Regulation at 71 FR 39225 confirmed.......................38690
435.1008 Regulation at 71 FR 39225 confirmed.......................38690
    Revised........................................................38694
435.1009 Regulation at 71 FR 39225 confirmed.......................38690
435.1010 Regulation at 71 FR 39225 confirmed.......................38690
435.1011 Regulation at 71 FR 39225 confirmed.......................38690
435.1012 Regulation at 71 FR 39225 confirmed.......................38690
436.124 Revised....................................................38694
436.403 Regulation at 71 FR 39225 confirmed........................38690
436.406 Regulation at 71 FR 39225 confirmed........................38690
    (a)(1)(iii), (2) and (b) revised; (a)(1)(v) added..............38694
436.407 Regulation at 71 FR 39226 confirmed........................38690
    (e)(2) through (9) removed; (e)(10) and (g) through (j) 
redesignated as new (e)(2) and (h) through (k); introductory text, 
(b)(11), (12), new (e)(3) and (g) added; (a)(4), (b)(1), (5), (c), 
(d) introductory text, (2), (3), (4), (5)(vi), (e)(1), (f) and new 
(i) revised........................................................38695
436.408 Regulation at 71 FR 39229 confirmed........................38690
436.1004 Regulation at 71 FR 39229 confirmed.......................38690
    Revised........................................................38697
436.1005 Regulation at 71 FR 39229 confirmed.......................38690
436.1006 Regulation at 71 FR 39229 confirmed.......................38690
440.2 Regulation at 71 FR 39229 confirmed..........................38690
440.140 Regulation at 71 FR 39229 confirmed........................38690
440.169 Added; interim.............................................68091

[[Page 579]]

440.170 (a)(1) revised.............................................73651
440.180 Regulation at 71 FR 39229 confirmed........................38690
440.185 Regulation at 71 FR 39229 confirmed........................38690
440.250 (r) added; interim.........................................68092
441.10 (m) added; interim..........................................68092
441.13 Regulation at 71 FR 39229 confirmed.........................38690
441.18 Added; interim..............................................68092
447.206 Added......................................................29833
447.207 Added......................................................29834
447.271 Revised....................................................29834
447.272 (a) through (d) revised....................................29834
447.300 Revised....................................................39239
447.301 Removed....................................................39239
447.321 (a) through (d) revised....................................29835
447.331 Removed....................................................39239
447.332 Removed....................................................39239
447.333 Removed....................................................39239
447.334 Removed....................................................39239
447.500--447.520 (Subpart I) Revised...............................39239
455.1 (c) added....................................................67655
455.200--455.202 (Subpart C) Added.................................67655
457.220 Revised....................................................29835
457.310 Regulation at 71 FR 39229 confirmed........................38690
457.628 (a) revised................................................29836

                                  2008

42 CFR
                                                                   73 FR
                                                                    Page
Chapter IV
433.10 (c)(5)(ii), (iii) introductory text, (D) and (v) revised; 
        (c)(5)(iii)(E) added; interim..............................70893
433.54 (c) revised..................................................9698
433.56 (a)(4) and (8) revised.......................................9698
433.57 (a) removed; (b) and (c) redesignated as new (a) and (b).....9698
433.58 Removed......................................................9698
433.60 Removed......................................................9698
433.66 Heading and (a) revised......................................9698
433.67 (a)(2) revised...............................................9698
433.68 Heading, (a), (f)(1), (2), (3) introductory text and (i) 
        revised; (f)(3)(ii) revised.................................9698
433.70 Heading revised; (a)(1) removed; (a)(2) designation removed
                                                                    9699
440.1 Amended......................................................77530
440.20 Heading and (a) revised.....................................66198
440.170 (a)(2) revised; (a)(4) added...............................77530
440.300--440.390 (Subpart C) Added.................................73724
441.450--441.484 (Subpart J) Added.................................57881
447.54 Heading, (a) introductory text, (1) and (3) revised; 
        introductory text and (a)(4) added (eff. date pending).....71851
447.55 (b) revised (eff. date pending).............................71851
447.60 Undesignated center heading and section added (eff. date 
        pending)...................................................71851
447.62 Added (eff. date pending)...................................71851
447.64 Added (eff. date pending)...................................71851
447.66 Added (eff. date pending)...................................71851
447.68 Added (eff. date pending)...................................71851
447.71 Added (eff. date pending)...................................71851
447.72 Added (eff. date pending)...................................71851
447.74 Added (eff. date pending)...................................71851
447.76 Added (eff. date pending)...................................71851
447.78 Added (eff. date pending)...................................71851
447.80 Added (eff. date pending)...................................71851
447.82 Added (eff. date pending)...................................71851
447.299 (c) and (d) redesignated as (d) and (e); new (c) added.....77950
447.502 Amended; interim...........................................13788
    Regulation at 73 FR 13788 confirmed; amended...................58497
455.200 Revised; eff. 10-27-08.....................................55771
455.230 Added; eff. 10-27-08.......................................55771
455.232 Added; eff. 10-27-08.......................................55771
455.234 Added; eff. 10-27-08.......................................55771
455.236 Added; eff. 10-27-08.......................................55771
455.238 Added; eff. 10-27-08.......................................55771
455.240 Added; eff. 10-27-08.......................................55771
455.300--455.304 (Subpart D) Added.................................77951
457.555 (a) introductory text, (1), (2), (4), (c) and (d) revised 
                                                                   71854

[[Page 580]]

                                  2009

  (Regulations published from January 1, 2009, through October 1, 2009)

42 CFR
                                                                   74 FR
                                                                    Page
Chapter IV
431.53 Revised.....................................................31195
433.20 Removed.....................................................31195
433.54 Regulation at 73 FR 9698 enforcement delayed to 6-30-10.....31196
433.68 Regulation at 73 FR 9698 enforcement delayed in part to 6-
        30-10......................................................31196
440.20 Heading and (a) revised.....................................31195
440.169 (c) removed................................................31196
440.170 (a)(1) revised.............................................31196
440.300--440.390 (Subpart C) Regulation at 73 FR 73724 eff. date 
        delayed.....................................................5808
Regulation at 73 FR 73724 eff. date delayed to 12-31-2009..........15221
441.18 (a)(5), (8)(vi) and (viii) removed; (c) revised.............31196
447.54 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.55 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.60 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.62 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.64 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.66 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.68 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.71 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.72 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.74 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.76 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.78 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.80 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.82 Regulation at 73 FR 71851 eff. date delayed to 3-27-09.......4888
    Regulation at 73 FR 71851 eff. date delayed to 12-31-09........13346
447.299 (c)(16) correctly revised..................................18657
457.555 Regulation at 73 FR 71854 eff. date delayed to 3-27-09......4888
    Regulation at 73 FR 71854 eff. date delayed to 12-31-09........13346


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