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Public Health
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2010-10-01
2010-10-01
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MEDICAL ASSISTANCE PROGRAMS
C

SUBCHAPTER C
Public Health
CENTERS FOR MEDICARE & MEDICAID SERVICES, DEPARTMENT OF HEALTH AND HUMAN SERVICES (CONTINUED)

SUBCHAPTER C—MEDICAL ASSISTANCE PROGRAMS
Pt. 430

PART 430—GRANTS TO STATES FOR MEDICAL ASSISTANCE PROGRAMS

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
§ 430.0
Program description.
Title XIX of the Social Security Act, enacted in 1965, authorizes Federal grants to States for medical assistance to low-income persons who are age 65 or over, blind, disabled, or members of families with dependent children or qualified pregnant women or children. The program is jointly financed by the Federal and State governments and administered by States. Within broad Federal rules, each State decides eligible groups, types and range of services, payment levels for services, and administrative and operating procedures. Payments for services are made directly by the State to the individuals or entities that furnish the services.
§ 430.1
Scope of subchapter C.
The regulations in subchapter C set forth State plan requirements, standards, procedures, and conditions for obtaining Federal financial participation (FFP). Each part (or subpart of section) in the subchapter describes the specific statutory basis for the regulation. However, where the basis is the Secretary's general authority to issue regulations for any program under the Act (section 1102 of the Act), or his general authority to prescribe State plan requirements needed for proper and efficient administration of the plan (section 1902(a)(4)), those statutory provisions are simply cited without further description.
§ 430.2
Other applicable Federal regulations.
Other regulations applicable to State Medicaid programs include the following:
(a) 5 CFR part 900, subpart F, Administration of the Standards for a Merit System of Personnel Administration.
(b) The following HHS Regulations in 45 CFR subtitle A:
Part 16—Procedures of the Departmental Appeals Board.
Part 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]
§ 430.3
Appeals under Medicaid.
Three distinct types of disputes may arise under Medicaid.
(a) Compliance with Federal requirements. Disputes that pertain to whether a State's plan or proposed plan amendments, or its practice under the plan meet or continue to meet Federal requirements are subject to the hearing provisions of subpart D of this part.
(b) FFP in Medicaid expenditures. Disputes that pertain to disallowances of FFP in Medicaid expenditures (mandatory grants) are heard by the Departmental Appeals Board (the Board) in accordance with procedures set forth in 45 CFR part 16.
(c) Discretionary grants disputes. Disputes pertaining to discretionary grants, such as grants for special demonstration projects under sections 1110 and 1115 of the Act, which may be awarded to a Medicaid agency, are also heard by the Board. 45 CFR part 16, appendix A, lists all the types of disputes that the Board hears.
[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]
§ 430.5
Definitions.
As used in this subchapter, unless the context indicates otherwise—
Contractor means any entity that contracts with the State agency, under the State plan, in return for a payment, to process claims, to provide or pay for medical services, or to enhance the State agency's capability for effective administration of the program.
Representative has the meaning given the term by each State consistent with its laws, regulations, and policies.
[67 FR 41094, June 14, 2002]

Subpart B—State Plans
§ 430.10
The State plan.
The State plan is a comprehensive written statement submitted by the agency describing the nature and scope of its Medicaid program and giving assurance that it will be administered in conformity with the specific requirements of title XIX, the regulations in this Chapter IV, and other applicable official issuances of the Department. The State plan contains all information necessary for CMS to determine whether the plan can be approved to serve as a basis for Federal financial participation (FFP) in the State program.
§ 430.12
Submittal of State plans and plan amendments.
(a) Format. A State plan for Medicaid consists of 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 of time to review State plan amendments, long-range program planning projections, and other periodic reports on the Medicaid program, excluding periodic statistical, budget and fiscal reports.
(iii) Any comments from the Governor must be submitted to CMS with the plan or plan amendment.
(2) Exceptions. (i) Submission is not required if the Governor's designee is the head of the Medicaid agency.
(ii) Governor's review is not required for preprinted plan amendments that are developed by CMS if they provide absolutely no options for the State.
(c) Plan amendments. (1) The plan must provide that it will be amended whenever necessary to reflect—
(i) Changes in Federal law, regulations, policy interpretations, or court decisions; or
(ii) Material changes in State law, organization, or policy, or in the State's operation of the Medicaid program. For changes related to advance directive requirements, amendments must be submitted as soon as possible, but no later than 60 days from the effective date of the change to State law concerning advance directives.
(2) Prompt submittal of amendments is necessary—
(i) So that CMS can determine whether the plan continues to meet the requirements for approval; and
(ii) To ensure the availability of FFP in accordance with § 430.20.
[53 FR 36571, Sept. 21, 1988, as amended at 60 FR 33293, June 27, 1995]
§ 430.14
Review of State plan material.
CMS regional staff reviews State plans and plan amendments, discusses any issues with the Medicaid agency, and consults with central office staff on questions regarding application of Federal policy.
§ 430.15
Basis and authority for action on State plan material.
(a) Basis for action. (1) Determinations as to whether State plans (including plan amendments and administrative practice under the plans) originally meet or continue to meet the requirements for approval are based on relevant Federal statutes and regulations.
(2) Guidelines are furnished to assist in the interpretation of the regulations.
(b) Approval authority. The Regional Administrator exercises delegated authority to approve the State plan and plan amendments on the basis of policy statements and precedents previously approved by the Administrator.
(c) Disapproval authority. (1) The Administrator retains authority for determining that proposed plan material is not approvable or that previously approved material no longer meets the requirements for approval.
(2) The Administrator does not make a final determination of disapproval without first consulting the Secretary.
§ 430.16
Timing and notice of action on State plan material.
(a) Timing. (1) A State plan or plan amendment will be considered approved unless CMS, within 90 days after receipt of the plan or plan amendment in the regional office, sends the State—
(i) Written notice of disapproval; or
(ii) Written notice of any additional information it needs in order to make a final determination.
(2) If CMS requests additional information, the 90-day period for CMS action on the plan or plan amendment begins on the day it receives that information.
(b) Notice of final determination. (1) The Regional Administrator or the Administrator notifies the Medicaid agency of the approval of a State plan or plan amendment.
(2) Only the Administrator gives notice of disapproval of a State plan or plan amendment.
§ 430.18
Administrative review of action on State plan material.
(a) Request for reconsideration. Any State dissatisfied with the Administrator's action on plan material under § 430.15 may, within 60 days after receipt of the notice provided under § 430.16(b), request that the Administrator reconsider the issue of whether the plan or plan amendment conforms to the requirements for approval.
(b) Notice and timing of hearing. (1) Within 30 days after receipt of the request, the Administrator notifies the State of the time and place of the hearing.
(2) The hearing takes place not less than 30 days nor more than 60 days after the date of the notice, unless the State and the Administrator agree in writing on an earlier or later date.
(c) Hearing procedures. The hearing procedures are set forth in subpart D of this part.
(d) Decision. A decision affirming, modifying, or reversing the Administrator's original determination is made in accordance with § 430.102.
(e) Effect of hearing decision. (1) Denial of Federal funds, if required by the Administrator's original determination, will not be delayed pending a hearing decision.
(2) However, if the Administrator determines that his or her original decision was incorrect, CMS pays the State a lump sum equal to any funds incorrectly denied.
§ 430.20
Effective dates of State plans and plan amendments.
For purposes of FFP, the following rules apply:
(a) New plans. The effective date of a new plan—
(1) May not be earlier than the first day of the quarter in which an approvable plan is submitted to the regional office; and
(2) With respect to expenditures for medical assistance, may not be earlier than the first day on which the plan is in operation on a statewide basis.
(b) Plan amendment. (1) For a plan amendment that provides additional services to individuals eligible under the approved plan, increases the payment amounts for services already included in the plan, or makes additional groups eligible for services provided under the approved plan, the effective date is determined in accordance with paragraph (a) of this section.
(2) For a plan amendment that changes the State's payment method and standards, the rules of § 447.256 of this chapter apply.
(3) For other plan amendments, the effective date may be a date requested by the State if CMS approves it.
[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8845, Mar. 1, 1991]
§ 430.25
Waivers of State plan requirements.
(a) Scope of section. This section describes the purpose and effect of waivers, identifies the requirements that may be waived and the other regulations that apply to waivers, and sets forth the procedures that CMS follows in reviewing and taking action on waiver requests.
(b) Purpose of waivers. Waivers are intended to provide the flexibility needed to enable States to try new or different approaches to the efficient and cost-effective delivery of health care services, or to adapt their programs to the special needs of particular areas or groups of 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/ 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 § 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 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
§ 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
§ 430.32
Program reviews.
(a) Review of State and local administration. In order to determine whether the State is complying with the Federal requirements and the provisions of its plan, CMS reviews State and local administration through analysis of the State's policies and procedures, on-site review of selected aspects of agency operation, and examination of samples of individual case records.
(b) Quality control program. The State itself is required to carry out a continuing quality control program as set forth in part 431, subpart P, of this chapter.
(c) Action on review findings. If Federal or State reviews reveal serious problems with respect to compliance with any Federal requirement, the State must correct its practice accordingly.
§ 430.33
Audits.
(a) Purpose. The Department's Office of Inspector General (OIG) periodically audits State operations in order to determine whether—
(1) The program is being operated in a cost-efficient manner; and
(2) Funds are being properly expended for the purposes for which they were appropriated under Federal and State law and regulations.
(b) Reports. (1) The OIG releases audit reports simultaneously to State officials and the Department's program officials.
(2) The reports set forth OIG opinion and recommendations regarding the practices it reviewed, and the allowability of the costs it audited.
(3) Cognizant officials of the Department make final determinations on all audit findings.
(c) Action on audit exceptions—(1) Concurrence or clearance. The State agency has the opportunity of concurring in the exceptions or submitting additional facts that support clearance of the exceptions.
(2) Appeal. Any exceptions that are not disposed of under paragraph (c)(1) of this section are included in a disallowance letter that constitutes the Department's final decision unless the State requests reconsideration by the Appeals Board. (Specific rules are set forth in § 430.42.)
(3) Adjustment. If the decision by the Board requires an adjustment of FFP, either upward or downward, a subsequent grant award promptly reflects the amount of increase or decrease.
[53 FR 36571, Sept. 21, 1988, as amended at 56 FR 8846, Mar. 1, 1991]
§ 430.35
Withholding of payment for failure to comply with Federal requirements.
(a) Basis for withholding. CMS withholds payments to the State, in whole or in part, only if, after giving the agency reasonable notice and opportunity for a hearing in accordance with subpart D of this part, the Administrator finds—
(1) That the plan no longer complies with the provisions of section 1902 of the Act; or
(2) That in the administration of the plan there is failure to comply substantially with any of those provisions.
(Hearings under subpart D are generally not called until a reasonable effort has been made to resolve the issues through conferences and discussions. These may be continued even if a date and place have been set for the hearing.)
(b) Noncompliance of the plan. A question of noncompliance of a State plan may arise from an unapprovable change in the approved State plan or the failure of the State to change its approved plan to conform to a new Federal requirement for approval of State plans.
(c) Noncompliance in practice. A question of noncompliance in practice may arise from the State's failure to actually comply with a Federal requirement, regardless of whether the plan itself complies with that requirement.
(d) Notice and implementation of withholding. If the Administrator makes a finding of noncompliance under paragraph (a) of this section, the following rules apply:
(1) The Administrator notifies the State:
(i) That no further payments will be made to the State (or that payments will be made only for those portions or aspects of the program that are not affected by the noncompliance); and
(ii) That the total or partial withholding will continue until the Administrator is satisfied that the State's plan and practice are, and will continue to be, in compliance with Federal requirements.
(2) CMS withholds payments, in whole or in part, until the Administrator is satisfied regarding the State's compliance.
§ 430.38
Judicial review.
(a) Right to judicial review. Any State dissatisfied with the Administrator's final determination on approvability of plan material (§ 430.18) or compliance with Federal requirements (§ 430.35) has a right to judicial review.
(b) Petition for review. (1) The State must file a petition for review with the U.S. Court of Appeals for the circuit in which the State is located, within 60 days after it is notified of the determination.
(2) The clerk of the court will file a copy of the petition with the Administrator and the Administrator will file in the court the record of the proceedings on which the determination was based.
(c) Court action. (1) The court is bound by the Administrator's findings of fact if they are supported by substantial evidence.
(2) The court has jurisdiction to affirm the Administrator's decision, to set it aside in whole or in part, or, for good cause, to remand the case for additional evidence.
(d) Response to remand. (1) If the court remands the case, the Administrator may make new or modified findings of fact and may modify his or her previous determination.
(2) The Administrator will certify to the court the transcript and record of the further proceedings.
(e) Review by the Supreme Court. The judgment of the appeals court is subject to review by the U.S. Supreme Court upon certiorari or certification, as provided in 28 U.S.C. 1254.
§ 430.40
Deferral of claims for FFP.
(a) Requirements for deferral. Payment of a claim or any portion of a claim for FFP is deferred only if—
(1) The 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.
§ 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]
§ 430.45
Reduction of Federal Medicaid payments.
(a) Methods of reduction. CMS may reduce Medicaid payments to a State as required under the Act by reducing—
(1) The Federal Medical Assistance Percentage;
(2) The amount of State expenditures subject to FFP;
(3) The rates of FFP; or
(4) The amount otherwise payable to the State.
(b) Right to reconsideration. A state that receives written final notice of a reduction under paragraph (a) of this section has a right to reconsideration. The provisions of § 430.42 (b) and (c) apply.
(c) Other applicable rules. Other rules regarding reduction of Medicaid payments are set forth in parts 433 and 447 of this chapter.
§ 430.48
Repayment of Federal funds by installments.
(a) Basic conditions. When Federal payments have been made for claims that are later found to be unallowable, the State may repay the Federal Funds by installments if the following conditions are met:
(1) The amount to be repaid exceeds 21/2 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 21/2 percent of the annual State share as follows:
(1) If the Medicaid program is ongoing, CMS uses the annual estimated State share of Medicaid expenditures. 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:
Total repayment amount as percentage of State share of annual expenditures for Medicaid | Number of quarters 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:
For each of the following quarters | Repayment installment may not be 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
§ 430.60
Scope.
(a) This subpart sets forth the rules for hearings to States that appeal a decision to disapprove State plan material (under § 430.18) or to withhold Federal funds (under § 430.35), because the State plan or State practice in the Medicaid program is not in compliance with Federal requirements.
(b) Nothing in this subpart is intended to preclude or limit negotiations between CMS and the State, whether before, during, or after the hearing to resolve the issues that are, or otherwise would be, considered at the hearing. Such negotiations and resolution of issues are not part of the hearing, and are not governed by the rules in this subpart except as expressly provided.
§ 430.62
Records to be public.
All pleadings, correspondence, exhibits, transcripts of testimony, exceptions, briefs, decisions, and other documents filed in the docket in any proceeding may be inspected and copied in the office of the CMS Docket Clerk. Inquiries may be made to the Docket Clerk, Hearing Staff, Bureau of Eligibility, Reimbursment and Coverage, 300 East High Rise, 6325 Security Boulevard, Baltimore, Maryland, 21207. Telephone: (301) 594-8261.
§ 430.63
Filing and service of papers.
(a) Filing. All papers in the proceedings are filed with the CMS Docket Clerk, in an original and two copies. Originals only of exhibits and transcripts of testimony need be filed.
(b) Service. All papers in the proceedings are served on all parties by personal delivery or by mail. Service on the party's designated attorney is considered service upon the party.
§ 430.64
Suspension of rules.
Upon notice to all parties, the Administrator or the presiding officer may modify or waive any rule in this subpart upon determination that no party will be unduly prejudiced and the ends of justice will thereby be served.
§ 430.66
Designation of presiding officer for hearing.
(a) The presiding officer at a hearing is the Administrator or his designee.
(b) The designation of the presiding officer is in writing. A copy of the designation is served on all parties.
§ 430.70
Notice of hearing or opportunity for hearing.
The Administrator mails the State a notice of hearing or opportunity for hearing that—
(a) Specifies the time and place for the hearing;
(b) Specifies the issues that will be considered;
(c) Identifies the presiding officer; and
(d) Is published in the Federal Register.
§ 430.72
Time and place of hearing.
(a) Time. The hearing is scheduled not less than 30 nor more than 60 days after the date of notice to the State. The scheduled date may be changed by written agreement between CMS and the State.
(b) Place. The hearing is conducted in the city in which the CMS regional office is located or in another place fixed by the presiding officer in light of the circumstances of the case, with due regard for the convenience and necessity of the parties or their representatives.
§ 430.74
Issues at hearing.
The list of issues specified in the notice of hearing may be augmented or reduced as provided in this section.
(a) Additional issues. (1) Before a hearing under § 430.35, the Administrator may send written notice to the State listing additional issues to be considered at the hearing. That notice is published in the Federal Register.
(2) If the notice of additional issues is furnished to the State less than 20 days before the scheduled hearing date, postponement is granted if requested by the State or any other party. The new date may be 20 days after the date of the notice, or a later date agreed to by the presiding officer.
(b) New or modified issues. If, as a result of negotiations between CMS and the State, the submittal of plan amendment, a change in the State program, or other actions by the State, any issue is resolved in whole or in part, but new or modified issues are presented, as specified by the presiding officer, the hearing proceeds on the new or modified issues.
(c) Issues removed from consideration—(1) Basis for removal. If at any time before, during, or after the hearing, the presiding officer finds that the State has come into compliance with Federal requirements on any issue or part of an issue, he or she removes the appropriate issue or part of an issue from consideration. If all issues are removed, the hearing is terminated.
(2) Notice to parties. Before removing any issue or part of an issue from consideration, the presiding officer provides all parties other than CMS and the State with—
(i) A statement of the intent to remove and the reasons for removal; and
(ii) A copy of the proposed State plan provision on which CMS and the State have agreed.
(3) Opportunity for written comment. The notified parties have 15 days to submit, for consideration by the presiding officer, and for the record, their views as to, or any information bearing upon, the merits of the proposed plan provision and the merits of the reasons for removing the issue from consideration.
(d) Remaining issues. The issues considered at the hearing are limited to those issues of which the State is notified as provided in § 430.70 and paragraph (a) of this section, and new or modified issues described in paragraph (b) of this section. They do not include issues or parts of issues removed in accordance with paragraph (c) of this section.
§ 430.76
Parties to the hearing.
(a) CMS and the State. CMS and the State are parties to the hearing.
(b) Other individuals—(1) Basis for participation. Other individuals or groups may be recognized as parties if the issues to be considered at the hearing have caused them injury and their interest is within the zone of interests to be protected by the governing Federal statute.
(2) Petition for participation. Any individual or group wishing to participate as a party must, within 15 days after notice of hearing is published in the Federal Register, file with the CMS Docket Clerk, a petition that concisely states—
(i) Petitioner's interest in the proceeding;
(ii) Who will appear for petitioner;
(iii) The issues on which petitioner wishes to participate; and
(iv) Whether petitioner intends to present witnesses.
The petitioner must also serve a copy of the petition on each party of record at that time.
(3) Comments on petition. Any party may, within 5 days of receipt of the copy of the petition, file comments on it.
(4) Action on petition. (i) The presiding officer promptly determines whether each petitioner has the requisite interest in the proceedings and approves or denies participation accordingly.
(ii) If petitions are made by more than one individual or group with common interests, the presiding officer may—
(A) Request all those petitioners to designate a single representative; or
(B) Recognize one or more of those petitioners to represent all of them.
(iii) The presiding officer gives each petitioner written notice of the decision and, if the decision is to deny, briefly states the grounds for denial.
(c) Amicus curiae (friend of the court)—(1) Petition for participation. Any person or organization that wishes to participate as amicus curiae must, before the hearing begins, file with the CMS Docket Clerk, a petition that concisely states—
(i) The petitioners' interest in the hearing;
(ii) Who will represent the petitioner; and
(iii) The issues on which the petitioner intends to present argument.
(2) Action on amicus curiae petition. The presiding officer may grant the petition if he or she finds that the petitioner has a legitimate interest in the proceedings, that such participation will not unduly delay the outcome and may contribute materially to the proper disposition of the issues.
(3) Nature of amicus participation. An amicus curiae is not a party to the hearing but may participate by—
(i) Submitting a written statement of position to the presiding officer before the beginning of the hearing;
(ii) Presenting a brief oral statement at the hearing, at the point in the proceedings specified by the presiding officer; and
(iii) Submitting a brief or written statement when the parties submit briefs.
The amicus curiae must serve copies of any briefs or written statements on all parties.
§ 430.80
Authority of the presiding officer.
(a) The presiding officer has the duty to conduct a fair hearing, to avoid delay, maintain order, and make a record of the proceedings. He or she has the authority necessary to accomplish those ends, including but not limited to authority to take the following actions:
(1) Change the date, time, and place of the hearing after due notice to the parties. This includes authority to postpone or adjourn the hearing in whole or in part. In a hearing on disapproval of a State plan, or State plan amendments, changes in the date of the hearing are subject to the time limits imposed by section 1116(a)(2) of the Act.
(2) Hold conferences to settle or simplify the issues, or to consider other matters that may aid in the expeditious disposition of the issues.
(3) Regulate participation of parties and amici curiae and require parties and amici curiae to state their position with respect to the various issues in the proceeding.
(4) Administer oaths and affirmations.
(5) Rule on motions and other procedural items, including issuance of protective orders or other relief to a party against whom discovery is sought.
(6) Regulate the course of the hearing and conduct of counsel.
(7) Examine witnesses.
(8) Receive, rule on, exclude or limit evidence or discovery.
(9) Fix the time for filing motions, petitions, briefs, or other items.
(10) If the presiding officer is the Administrator, make a final decision.
(11) If the presiding officer is a designee of the Administrator, certify the entire record including recommended findings and proposed decision to the Administrator.
(12) Take any action authorized by the rules in this subpart or in conformance with the provisions of 5 U.S.C. 551 through 559.
(b) The presiding officer does not have authority to compel by subpoena the production of witnesses, papers, or other evidence.
(c) If the presiding officer is a designee of the Administrator, his or her authority pertains to the issues of compliance by a State with Federal requirements, and does not extend to the question of whether, in case of any noncompliance, Federal payments will be denied in respect to the entire State plan or only for certain categories under, or parts of, the State plan affected by the noncompliance.
§ 430.83
Rights of parties.
All parties may:
(a) Appear by counsel or other authorized representative, in all hearing proceedings.
(b) Participate in any prehearing conference held by the presiding officer.
(c) Agree to stipulations as to facts which will be made a part of the record.
(d) Make opening statements at the hearing.
(e) Present relevant evidence on the issues at the hearing.
(f) Present witnesses who then must be available for cross-examination by all other parties.
(g) Present oral arguments at the hearing.
(h) Submit written briefs, proposed findings of fact, and proposed conclusions of law, after the hearing.
§ 430.86
Discovery.
CMS and any party named in the notice issued under § 430.70 has the right to conduct discovery (including depositions) against opposing parties. Rules 26-37 of the Federal Rules of Civil Procedures apply to such proceedings; there will be no fixed rule on priority of discovery. Upon written motion, the presiding officer promptly rules upon any objection to discovery action initiated under this section. The presiding officer also has the power to grant a protective order or relief to any party against whom discovery is sought and to restrict or control discovery so as to prevent undue delay in the conduct of the hearing. Upon the failure of any party to make discovery, the presiding officer may issue any order and impose any sanction (other than contempt orders) authorized by Rule 37 of the Federal Rules of Civil Procedure.
§ 430.88
Evidence.
(a) Evidentiary purpose. The hearing is directed to receiving factual evidence and expert opinion testimony related to the issues involved in the proceeding. Argument is not received in evidence. It must be presented in statements, memoranda, or briefs, as determined by the presiding officer. Brief opening statements, concerning the party's position and what he or she intends to prove, may be made at hearings.
(b) Testimony. Testimony is given orally under oath or affirmation by witnesses at the hearing. Witnesses are available at the hearing for cross-examination by all parties.
(c) Stipulations and exhibits. Two or more parties may agree to stipulations of fact. Those stipulations, and any exhibit proposed by any party, are exchanged before the hearing if the presiding officer so requires.
(d) Rules of evidence. (1) Technical rules of evidence do not apply to hearings conducted under this subpart. However, rules or principles designed to ensure production of the most credible evidence available and to subject testimony to test by cross-examination are applied by the presiding officer when reasonably necessary.
(2) A witness may be cross-examined on any matter material to the proceeding without regard to the scope of his or her direct examination.
(3) The presiding officer may exclude irrelevant, immaterial, or unduly repetitious evidence.
(4) All documents and other evidence offered or taken for the record are open to examination by the parties and an opportunity is given to refute facts and arguments advanced on either side of the issues.
§ 430.90
Exclusion from hearing for misconduct.
The presiding officer may immediately exclude from the hearing any person who—
(a) Uses disrespectful, disorderly, or contumacious language or engages in contemptuous behavior;
(b) Refuses to comply with directions; or
(c) Uses dilatory tactics.
§ 430.92
Unsponsored written material.
Letters expressing views or urging action and other unsponsored written material regarding matters in issue in a hearing are placed in the correspondence section of the docket of the proceeding. These data are not considered part of the evidence or record in the hearing.
§ 430.94
Official transcript.
(a) Filing. The official transcripts of testimony, together with any stipulations, briefs, or memoranda of law, are filed with CMS.
(b) Availability of transcripts. CMS designates an official reporter for each hearing. Transcripts of testimony in hearings may be obtained from the official reporter by the parties and the public at rates not in excess of the maximum rates fixed by the contract between CMS and the reporter.
(c) Correction of transcript. Upon notice to all parties, the presiding officer may authorize corrections that affect substantive matters in the transcript.
§ 430.96
Record for decision.
The transcript of testimony, exhibits, and all papers and requests filed in the proceedings, except the correspondence section of the docket, including rulings and any recommended or initial decision constitute the exclusive record for decision.
§ 430.100
Posthearing briefs.
The presiding officer fixes the time for filing posthearing briefs, which may contain proposed findings of fact and conclusions of law. The presiding officer may also permit reply briefs.
§ 430.102
Decisions following hearing.
(a) Administrator presides. If the presiding officer is the Administrator, he or she issues the hearing decision within 60 days after expiration of the period for submission of posthearing briefs.
(b) Administrator's designee presides. If the presiding officer is other than the Administrator, the procedure is as follows:
(1) Upon expiration of the period allowed for submission of posthearing briefs, the presiding officer certifies the entire record, including his or her recommended findings and proposed decision, to the Administrator. The Administrator serves a copy of the recommended findings and proposed decision upon all parties and amici, if any.
(2) Any party may, within 20 days, file with the Administrator exceptions to the recommended findings and proposed decision and a supporting brief or statement.
(3) The Administrator reviews the recommended decision and, within 60 days of its issuance, issues his or her own decision.
(c) Effect of Administrator's decision. The decision of the Administrator under this section is the final decision of the Secretary and constitutes “final agency action” within the meaning of 5 U.S.C. 704 and a “final determination” within the meaning of section 1116(a)(3) of the Act and § 430.38. The Administrator's decision is promptly served on all parties and amici.
§ 430.104
Decisions that affect FFP.
(a) Scope of decisions. If the Administrator concludes that withholding of FFP is necessary because a State is out of compliance with Federal requirements, in accordance with § 430.35, the decision also specifies—
(1) Whether no further payments will be made to the State or whether payments will be limited to parts of the program not affected by the noncompliance; and
(2) The effective date of the decision to withhold.
(b) Consultation. The Administrator may ask the parties for recommendations or briefs or may hold conferences of the parties on the question of further payments to the State.
(c) Effective date of decision. The effective date of a decision to withhold Federal funds will not be earlier than the date of the Administrator's decision and will not be later than the first day of the next calendar quarter. The provisions of this section may not be waived under § 430.64.
Pt. 431

PART 431—STATE ORGANIZATION AND GENERAL ADMINISTRATION
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.
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 Children's Health Insurance Program (CHIP).

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.

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 CHIP
431.950
Purpose.
431.954
Basis and scope.
431.958
Definitions and use of terms.
431.960
Types of payment errors.
431.970
Information submission requirements.
431.972
Claims sampling procedures.
431.974
Basic elements of Medicaid and CHIP 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 and appeal 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.

Editorial Note:
Nomenclature changes to part appear at 75 FR 48852, Aug. 11, 2010.
§ 431.1
Purpose.
This part establishes State plan requirements for the designation, organization, and general administrative activities of a State agency responsible for operating the State Medicaid program, directly or through supervision of local administering agencies.

Subpart A—Single State Agency
§ 431.10
Single State agency.
(a) Basis 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—
(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]
§ 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]
§ 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.
(g) Federal financial participation. FFP is available at 50 percent in expenditures for the committee's activities.
§ 431.15
Methods of administration.
A State plan must provide for methods of administration that are found by the Secretary to be necessary for the proper and efficient operation of the plan.
(Sec. 1902(a)(4) of the Act)
[44 FR 17931, Mar. 23, 1979]
§ 431.16
Reports.
A State plan must provide that the Medicaid agency will—
(a) Submit all reports required by the Secretary;
(b) Follow the Secretary's instructions with regard to the form and content of those reports; and
(c) Comply with any provisions that the Secretary finds necessary to verify and assure the correctness of the reports.
[44 FR 17931, Mar. 23, 1979]
§ 431.17
Maintenance of records.
(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes the kinds of records a Medicaid agency must maintain, the retention period, and the conditions under which microfilm copies may be substituted for original records.
(b) Content of records. A State plan must provide that the Medicaid agency will maintain or supervise the maintenance of the records necessary for the proper and efficient operation of the plan. The records must include—
(1) Individual records on each applicant and 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 §§ 435.940 through 435.960 of this subchapter; and
(2) Statistical, fiscal, and other records necessary for reporting and accountability as required by the Secretary.
(c) Retention of records. The plan must provide that the records required under paragraph (b) of this section will be retained for the periods required by the Secretary.
(d) Conditions for optional use of microfilm copies. The agency may substitute certified microfilm copies for the originals of substantiating documents required for Federal audit and review, if the conditions in paragraphs (d)(1) through (4) of this section are met.
(1) The agency must make a study of its record storage and must show that the use of microfilm is efficient and economical.
(2) The microfilm system must not hinder the agency's supervision and control of the Medicaid program.
(3) The microfilm system must—
(i) Enable the State to audit the propriety of expenditures for which FFP is claimed; and
(ii) Enable the HHS Audit Agency and CMS to properly discharge their respective responsibilities for reviewing the manner in which the Medicaid program is being administered.
(4) The agency must obtain approval from the CMS regional office indicating—
(i) The system meets the conditions of paragraphs (d)(2) and (3) of this section; and
(ii) The microfilming procedures are reliable and are supported by an adequate retrieval system.
[44 FR 17931, Mar. 23, 1979, as amended at 51 FR 7210, Feb. 28, 1986]
§ 431.18
Availability of agency program manuals.
(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes State plan requirements for facilitating access to Medicaid rules and policies by individuals outside the State Medicaid agency.
(b) State plan requirements. A State plan must provide that the Medicaid agency meets the requirements of paragraphs (c) through (g) of this section.
(c) Availability in agency offices. (1) The agency must maintain, in all its offices, copies of its current rules and policies that affect the public, including those that govern eligibility, provision of medical assistance, covered services, and 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]
§ 431.20
Advance directives.
(a) Basis and purpose. This section, based on section 1902(a) (57) and (58) of the Act, prescribes State plan requirements for the development and distribution of a written description of State law concerning advance directives.
(b) A State Plan must provide that the State, acting through a State agency, association, or other private nonprofit entity, develop a written description of the State law (whether statutory or as recognized by the courts of the State) concerning advance directives, as defined in § 489.100 of this chapter, to be distributed by Medicaid providers and health maintenance organizations (as specified in section 1903(m)(1)(A) of the Act) in accordance with the requirements under part 489, subpart I of this chapter. Revisions to the written descriptions as a result of changes in State law must be incorporated in such descriptions and distributed as soon as possible, but no later than 60 days from the effective date of the change in State law, to Medicaid providers and health maintenance organizations.
[57 FR 8202, Mar. 6, 1992, as amended at 60 FR 33293, June 27, 1995]

Subpart B—General Administrative Requirements

Source:
56 FR 8847, Mar. 1, 1991, unless otherwise noted.
§ 431.40
Basis and scope.
(a) This subpart sets forth State plan requirements and exceptions that pertain to the following administrative requirements and provisions of the Act:
(1) Statewideness—section 1902(a)(1);
(2) Proper and efficient administration—section 1902(a)(4);
(3) Comparability of services—section 1902(a)(10) (B)-(E);
(4) Payment for services furnished outside the State—section 1902(a)(16);
(5) Free choice of providers—section 1902(a)(23);
(6) Special waiver provisions applicable to American Samoa and the Northern Mariana Islands—section 1902(j); and
(7) Exceptions to, and waiver of, State plan requirements—sections 1915 (a)-(c) and 1916 (a)(3) and (b)(3).
(b) Other applicable regulations include the following:
(1) Section 430.25Waivers of State plan requirements.
(2) Section 440.250Limits on comparability of services.
§ 431.50
Statewide operation.
(a) Statutory basis. Section 1902(a)(1) of the Act requires a State plan to be in effect throughout the State, and section 1915 permits certain exceptions.
(b) State plan requirements. A State plan must provide that the following requirements are met:
(1) The plan will be in operation statewide through a system of local offices, under equitable standards for assistance and administration that are mandatory throughout the State.
(2) If administered by political subdivisions of the State, the plan will be mandatory on those subdivisions.
(3) The agency will ensure that the plan is continuously in operation in all local offices or agencies through—
(i) Methods for informing staff of State policies, standards, procedures, and instructions;
(ii) Systematic planned examination and evaluation of operations in local offices by regularly assigned State staff who make regular visits; and
(iii) Reports, controls, or other methods.
(c) Exceptions. (1) “Statewide operation” does not mean, for example, that every source of service must furnish the service State-wide. The requirement does not preclude the agency from contracting with a comprehensive health care organization (such as an HMO or a rural health clinic) that serves a specific area of the State, to furnish services to Medicaid 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 §§ 431.54 and 431.55.
[56 FR 8847, Mar. 1, 1991; 56 FR 23022, May 20, 1991]
§ 431.51
Free choice of providers.
(a) Statutory basis. This section is based on sections 1902(a)(23), 1902(e)(2), and 1915(a) and (b) and 1932(a)(3) of the Act.
(1) Section 1902(a)(23) of the Act provides that 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—
(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 § 431.54, or under a waiver as provided in § 431.55; or
(4) Limiting the providers who are available to furnish targeted case management services defined in § 440.169 of this chapter to target groups that consist solely of individuals with developmental disabilities or with chronic mental illness. This limitation may only be permitted so that the providers of case management services for eligible individuals with developmental disabilities or with chronic mental illness are capable of ensuring that those individuals receive needed services.
(d) Certification requirement—(1) Content of certification. If a State implements a project under one of the exceptions allowed under § 431.54 (d), (e) or (f), it must certify to CMS that the statutory safeguards and requirements for an exception under section 1915(a) of the Act are met.
(2) Timing of certification. (i) For an exception under § 431.54(d), the State may not institute the project until after it has submitted the certification and CMS has made the findings required under the Act, and so notified the State.
(ii) For exceptions under § 431.54 (e) or (f), the State must submit the certificate by the end of the quarter in which it implements the project.
[56 FR 8847, Mar. 1, 1991, as amended at 67 FR 41094, June 14, 2002; 72 FR 68091, Dec. 4, 2007]
§ 431.52
Payments for services furnished out of State.
(a) Statutory basis. Section 1902(a)(16) of the Act authorizes the Secretary to prescribe State plan requirements for furnishing Medicaid to State residents who are absent from the State.
(b) Payment for services. A State plan must provide that the State will pay for services furnished in another State to the same extent that it would pay for services furnished within its boundaries if the services are furnished to a 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.
§ 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]
§ 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 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 § 440.30 of this chapter) through a competitive bidding process or otherwise, if the State assures, in the certification required under § 431.51(d), and CMS finds, as follows:
(1) Adequate services or devices are available to 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 § 431.50(b) relating to the statewide operation of a State plan and § 440.240 of this chapter related to comparability of services do not apply with respect to targeted case management services defined in § 440.169 of this chapter.
[56 FR 8847, Mar. 1, 1991, as amended at 72 FR 68091, Dec. 4, 2007]
§ 431.55
Waiver of other Medicaid requirements.
(a) Statutory basis. Section 1915(b) of the Act authorizes the Secretary to waive most requirements of section 1902 of the Act to the extent he or she finds proposed improvements or specified practices in the provision of services under Medicaid to be cost effective, efficient, and consistent with the objectives of the Medicaid program. Sections 1915 (f) and (h) prescribe how such waivers are to be approved, continued, monitored, and terminated. Section 1902(p)(2) of the Act conditions FFP in payments to an entity under a section 1915(b)(1) waiver on the State's provision for exclusion of certain entities from participation.
(b) General requirements. (1) General requirements for submittal of waiver requests, and the procedures that CMS follows for review and action on those requests are set forth in § 430.25 of this chapter.
(2) In applying for a waiver to implement an approvable project under paragraph (c), (d), (e), or (f) of this section, a Medicaid agency must document in the waiver request and maintain data regarding:
(i) The cost-effectiveness of the project;
(ii) The effect of the project on the accessibility and quality of services;
(iii) The anticipated impact of the project on the State's Medicaid program and;
(iv) Assurances that the restrictions on free choice of providers do not apply to family planning services.
(3) No waiver under this section may be granted for a period longer than 2 years, unless the agency requests a continuation of the waiver.
(4) CMS monitors the implementation of waivers granted under this section to ensure that requirements for such waivers are being met.
(i) If monitoring demonstrates that the agency is not in compliance with the requirements for a waiver under this section, CMS gives the agency notice and opportunity for a hearing.
(ii) If, after a hearing, CMS finds an agency to be out of compliance with the requirements of a waiver, CMS terminates the waiver and gives the agency a specified date by which it must demonstrate that it meets the applicable requirements of section 1902 of the Act.
(5) The requirements of section 1902(s) of the Act, with regard to adjustments in payments for inpatient hospital services furnished to infants who have not attained age 1 and to children who have not attained age 6 and who receive these services in disproportionate share hospitals, may not be waived under a section 1915(b) waiver.
(c) Case-management system. (1) Waivers of appropriate requirements of section 1902 of the Act may be authorized for a State to implement a primary care case-management system or specialty physician services system.
(i) Under a primary care case-management system the agency assures that a specific person or persons or agency will be responsible for locating, coordinating, and monitoring all primary care or primary care and other medical care and rehabilitative services on behalf of a 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.
(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 § 447.45 of this chapter for health care practitioners participating in the Medicaid program.
(g) [Reserved]
(h) Waivers approved under section 1915(b)(1) of the Act—(1) Basic rules. (i) An agency must submit, as part of it's waiver request, assurance that the entities described in paragraph (h)(2) of this section will be excluded from participation under an approved waiver.
(ii) FFP is available in payments to an entity that furnishes services under a section 1915(b)(1) waiver only if the agency excludes from participation any entity described in paragraph (h)(2) of this section.
(2) Entities that must be excluded. The agency must exclude an entity that meets any of the following conditions:
(i) Could be excluded under section 1128(b)(8) of the Act as being controlled by a sanctioned individual.
(ii) Has a substantial contractual relationship (direct or indirect) with an individual convicted of certain crimes, as described in section 1128(b)(8)(B) of the Act.
(iii) Employs or contracts directly or indirectly with one of the following:
(A) Any individual or entity that, under section 1128 or section 1128A of the Act, is precluded from furnishing health care, utilization review, medical social services, or administrative services.
(B) Any entity described in paragraph (h)(2)(i) of this section.
(3) Definitions. As used in this section, substantial contractual relationship means any contractual relationship that provides for one or more of the following services:
(i) The administration, management, or provision of medical services.
(ii) The establishment of policies, or the provision of operational support, for the administration, management, or provision of medical services.
[56 FR 8847, Mar. 1, 1991, as amended at 59 FR 4599, Feb. 1, 1994; 59 FR 36084, July 15, 1994; 67 FR 41094, June 14, 2002]
§ 431.56
Special waiver provisions applicable to American Samoa and the Northern Mariana Islands.
(a) Statutory basis. Section 1902(j) of the Act provides for waiver of all but three of the title XIX requirements, in the case of American Samoa and the Northern Mariana Islands.
(b) Waiver provisions. American Samoa or the Northern Mariana Islands may request, and CMS may approve, a waiver of any of the title XIX requirements except the following:
(1) The Federal medical assistance percentage specified in section 1903 of the Act and § 433.10(b) of this chapter.
(2) The limit imposed by section 1108(c) of the Act on the amount of Federal funds payable to American Samoa or the Northern Mariana Islands for care and services that meet the section 1905(a) definition for Medicaid assistance.
(3) The requirement that payment be made only with respect to expenditure made by American Samoa or the Northern Mariana Islands for care and services that meet the section 1905(a) definition of medical assistance.
§ 431.57
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 § 447.54(a)(3) of this subchapter.
(c) Nonemergency services are services that do not meet the definition of emergency services at § 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 § 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
§ 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.
§ 431.107
Required provider agreement.
(a) Basis and purpose. This section sets forth State plan requirements, based on sections 1902(a)(4), 1902(a)(27), 1902(a)(57), and 1902(a)(58) of the Act, that relate to the keeping of records and the furnishing of information by all providers of services (including individual practitioners and groups of practitioners).
(b) Agreements. A State plan must provide for an agreement between the Medicaid agency and each provider or organization furnishing services under the plan in which the provider or organization agrees to:
(1) Keep any records necessary to disclose the extent of services the provider furnishes to 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 § 455.300 of this chapter), any information maintained under paragraph (b)(1) of this section and any information regarding payments claimed by the provider for furnishing services under the plan;
(3) Comply with the disclosure requirements specified in part 455, subpart B of this chapter; and
(4) Comply with the advance directives requirements for hospitals, nursing facilities, providers of home health care and personal care services, hospices, and HMOs specified in part 489, subpart I, and § 417.436(d) of this chapter.
(5)(i) Furnish to the State agency its National Provider Identifier (NPI) (if eligible for an NPI); and
(ii) Include its NPI on all claims submitted under the Medicaid program.
[44 FR 41644, July 17, 1979, as amended at 57 FR 8202, Mar. 6, 1992; 75 FR 24449, May 5, 2010]
§ 431.108
Effective date of provider agreements.
(a) Applicability—(1) General rule. Except as provided in paragraph (a)(2) of this section, this section applies to Medicaid provider agreements with entities that, as a basis for participation in Medicaid—
(i) Are subject to survey and certification by CMS or the State survey agency; or
(ii) Are deemed to meet Federal requirements on the basis of accreditation by an accrediting organization whose program has CMS approval at the time of accreditation survey and accreditation decision.
(2) Exception. A Medicaid provider agreement with a laboratory is effective only while the laboratory has in effect a valid CLIA certificate issued under part 493 of this chapter, and only for the specialty and subspecialty tests it is authorized to perform.
(b) All requirements are met on the date of survey. The agreement is effective on the date the onsite survey (including the Life Safety Code survey if applicable) is completed, if on that date the provider meets—
(1) All applicable Federal requirements as set forth in this chapter; and
(2) Any other requirements imposed by the State for participation in the Medicaid program. (If the provider has a time-limited agreement, the new agreement is effective on the day following expiration of the current agreement.)
(c) All requirements are not met on the date of survey. If on the date the survey is completed the provider fails to meet any of the requirements specified in paragraph (b) of this section, the following rules apply:
(1) An NF provider agreement is effective on the date on which—
(i) The NF is found to be in substantial compliance as defined in § 488.301 of this chapter; and
(ii) CMS or the State survey agency receives from the NF, if applicable, an approvable waiver request.
(2) For an agreement with any other provider, the effective date is the earlier of the following:
(i) The date on which the provider meets all requirements.
(ii) The date on which a provider is found to meet all conditions of participation but has lower level deficiencies, and CMS or the State survey agency receives from the provider an acceptable plan of correction for the lower level deficiencies, or an approvable waiver request, or both. (The date of receipt is the effective date of the agreement, regardless of when CMS approves the plan of correction or waiver request, or both.)
(d) Accredited provider requests participation in the Medicaid program—(1) General rule. If a provider is currently accredited by a national accrediting organization whose program had CMS approval at the time of accreditation survey and accreditation decision, and on the basis of accreditation, CMS has deemed the provider to meet Federal requirements, the effective date depends on whether the provider is subject to requirements in addition to those included in the accrediting organization's approved program.
(i) Provider subject to additional requirements. For a provider that is subject to additional requirements, Federal or State, or both, the effective date is the date on which the provider meets all requirements, including the additional requirements.
(ii) Provider not subject to additional requirements. For a provider that is not subject to additional requirements, the effective date is the date of the provider's initial request for participation if on that date the provider met all Federal requirements.
(2) Special rule: Retroactive effective date. If the provider meets the requirements of paragraphs (d)(1) and (d)(1)(i) or (d)(1)(ii) of this section, the effective date may be retroactive for up to one year, to encompass dates on which the provider furnished, to a Medicaid recipient, covered services for which it has not been paid.
[62 FR 43935, Aug. 18, 1997]
§ 431.110
Participation by Indian Health Service facilities.
(a) Basis. This section is based on section 1902(a)(4) of the Act, proper and efficient administration; 1902(a)(23), free choice of provider; and 1911, reimbursement of Indian Health Service facilities.
(b) State plan requirements. A State plan must provide that an Indian Health Service facility meeting State requirements for Medicaid participation must be accepted as a Medicaid provider on the same basis as any other qualified provider. However, when State licensure is normally required, the facility need not obtain a license but must meet all applicable standards for licensure. In determining whether a facility meets these standards, a Medicaid agency or State licensing authority may not take into account an absence of licensure of any staff member of the facility.
§ 431.115
Disclosure of survey information and provider or contractor evaluation.
(a) Basis and purpose. This section implements—
(1) Section 1902(a)(36) of the Act, which requires a State plan to provide that the State survey agency will make publicly available the findings from surveys of health care facilities, laboratories, agencies, clinics, or organizations; and
(2) Section 1106(d) of the Act, which places certain restrictions on the Medicaid agency's disclosure of contractor and provider evaluations.
(b) Definition of State survey agency. The State survey agency referred to in this section means the agency specified under section 1902(a)(9) of the Act as responsible for establishing and maintaining health standards for private or public institutions in which Medicaid recipients may receive services.
(c) State plan requirements. A State plan must provide that the requirements of this section and § 488.325 of this chapter are met.
(d) Disclosure procedure. The Medicaid agency must have a procedure for disclosing pertinent findings obtained from surveys made by the State survey agency to determine if a health care facility, laboratory, agency, clinic or health care organization meets the requirements for participation in the Medicaid program.
(e) Documents subject to disclosure. Documents subject to disclosure include—
(1) Survey reports, except for Joint Commission on the Accreditation of Hospitals reports prohibited from disclosure under § 422.426(b)(2) of this chapter;
(2) Official notifications of findings based on survey reports:
(3) Pertinent parts of written documents furnished by the health care provider to the survey agency that relate to the reports and findings; and
(4) Ownership and contract information as specified in § 455.104 of this subchapter.
(f) Availability for inspection and copy of statements listing deficiencies. The disclosure procedure must provide that the State survey agency will—
(1) Make statements of deficiencies based on the survey reports available for inspection and copying in both the public assistance office and the Social Security Administration district office serving the area where the provider is located; and
(2) Submit to the Regional Medicaid Director, through the Medicaid agency, a plan for making those findings available in other public assistance offices in standard metropolitian statistical areas where this information would be helpful to persons likely to use the health care provider's services.
(g) When documents must be made available. The disclosure procedure must provide that the State survey agency will—
(1) Retain in the survey agency office and make available upon request survey reports and current and accurate ownership information; and
(2) Make available survey reports, findings, and deficiency statements immediately upon determining that a health care provider is eligible to begin or continue participation in the Medicaid program, or within 90 days after completion of the survey, whichever occurs first.
(h) Evaluation reports on providers and contractors. (1) If the Secretary sends the following reports to the Medicaid agency, the agency must meet the requirements of paragraphs (h) (2) and (3) of this section in releasing them:
(i) Individual contractor performance reviews and other formal performance evaluations of carriers, intermediaries, and State agencies, including the reports of followup reviews;
(ii) Comparative performance evaluations of those contractors, including comparisons of either overall performance or of any particular aspect of contractor operations; and
(iii) Program validation survey reports and other formal performance evaluations of providers, including the reports of followup reviews.
(2) The agency must not make the reports public until—
(i) The contractor or provider has had a reasonable opportunity, not to exceed 30 days, to comment on them; and
(ii) Those comments have been incorporated in the report.
(3) The agency must ensure that the reports contain no identification of individual patients, individual health care practitioners or other individuals.
[43 FR 45188, Sept. 29, 1978, as amended at 44 FR 41644, July 17, 1979; 59 FR 56232, Nov. 10, 1994]
§ 431.120
State requirements with respect to nursing facilities.
(a) State plan requirements. A State plan must—
(1) Provide that the requirements of subpart D of part 483 of this chapter are met; and
(2) Specify the procedures and rules that the State follows in carrying out the specified requirements, including review and approval of State-operated programs.
(3) To an NF or ICF/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.
§ 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 the effective date of its provider agreement.
(b) Special rules. This subpart also sets forth the special rules that apply in particular circumstances, the limitations on the grounds for appeal, and the scope of review during a hearing.
[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997]
§ 431.152
State plan requirements.
The State plan must provide for appeals procedures that, as a minimum, satisfy the requirements of §§ 431.153 and 431.154.
[59 FR 56232, Nov. 10, 1994, as amended at 61 FR 32348, June 24, 1996]
§ 431.153
Evidentiary hearing.
(a) Right to hearing. Except as provided in paragraph (b) of this section, and subject to the provisions of paragraphs (c) through (j) of this section, the State must give the facility a full evidentiary hearing for any of the actions specified in § 431.151.
(b) Limit on grounds for appeal. The following are not subject to appeal:
(1) The choice of sanction or remedy.
(2) The State monitoring remedy.
(3) [Reserved]
(4) The level of noncompliance found by a State except when a favorable final administrative review decision would affect the range of civil money penalty amounts the State could collect.
(5) A State survey agency's decision as to when to conduct an initial survey of a prospective provider.
(c) Notice of deficiencies and impending remedies. The State must give the facility a written notice that includes:
(1) The basis for the decision; and
(2) A statement of the deficiencies on which the decision was based.
(d) Request for hearing. The facility or its legal representative or other authorized official must file written request for hearing within 60 days of receipt of the notice of adverse action.
(e) Special rules: Denial, termination or nonrenewal of provider agreement—(1) Appeal by an ICF/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 § 431.154.
(2) Appeal by an NF. If an NF requests a hearing on the denial or termination of its provider agreement, the request does not delay the adverse action and the hearing need not be completed before the effective date of the action.
(f) Special rules: Imposition of remedies. If a State imposes a civil money penalty or other remedies on an NF, the following rules apply:
(1) Basic rule. Except as provided in paragraph (f)(2) of this section (and notwithstanding any provision of State law), the State must impose all remedies timely on the NF, even if the NF requests a hearing.
(2) Exception. The State may not collect a civil money penalty until after the 60-day period for request of hearing has elapsed or, if the NF requests a hearing, until issuance of a final administrative decision that supports imposition of the penalty.
(g) Special rules: Dually participating facilities. If an NF is also participating or seeking to participate in Medicare as an SNF, and the basis for the State's denial or termination of participation in Medicaid is also a basis for denial or termination of participation in Medicare, the State must advise the facility that—
(1) The appeals procedures specified for Medicare facilities in part 498 of this chapter apply; and
(2) A final decision entered under the Medicare appeals procedures is binding for both programs.
(h) Special rules: Adverse action by CMS. If CMS finds that an NF is not in substantial compliance and either terminates the NF's Medicaid provider agreement or imposes alternative remedies on the NF (because CMS's findings and proposed remedies prevail over those of the State in accordance with § 488.452 of this chapter), the NF is entitled only to the appeals procedures set forth in part 498 of this chapter, instead of the procedures specified in this subpart.
(i) Required elements of hearing. The hearing must include at least the following:
(1) Opportunity for the facility—
(i) To appear before an impartial decision-maker to refute the finding of noncompliance on which the adverse action was based;
(ii) To be represented by counsel or other representative; and
(iii) To be heard directly or through its representative, to call witnesses, and to present documentary evidence.
(2) A written decision by the impartial decision-maker, setting forth the reasons for the decision and the evidence on which the decision is based.
(j) Limits on scope of review: Civil money penalty cases. In civil money penalty cases—
(1) The State's finding as to a NF's level of noncompliance must be upheld unless it is clearly erroneous; and
(2) The scope of review is as set forth in § 488.438(e) of this chapter.
[61 FR 32348, June 24, 1996, as amended at 62 FR 43935, Aug. 18, 1997; 64 FR 39937, July 23, 1999]
§ 431.154
Informal reconsideration for ICFs/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
§ 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]
§ 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.
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 § 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]
§ 431.202
State plan requirements.
A State plan must provide that the requirements of §§ 431.205 through 431.246 of this subpart are met.
§ 431.205
Provision of hearing system.
(a) The Medicaid agency must be responsible for maintaining a hearing system that meets the requirements of this subpart.
(b) The State's hearing system must provide for—
(1) A hearing before 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.
§ 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 § 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
§ 431.210
Content of notice.
A notice required under § 431.206 (c)(2), (c)(3), or (c)(4) of this subpart must contain—
(a) A statement of what action the 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]
§ 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 §§ 431.213 and 431.214 of this subpart.
§ 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 § 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 § 483.12(a)(5)(ii), which provides exceptions to the 30 days notice requirements of § 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]
§ 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
§ 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]
§ 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.
§ 431.222
Group hearings.
The agency—
(a) May respond to a series of individual requests for hearing by conducting a single group hearing;
(b) May consolidate hearings only in cases in which the sole issue involved is one of Federal or State law or policy;
(c) Must follow the policies of this subpart and its own policies governing hearings in all group hearings; and
(d) Must permit each person to present his own case or be represented by his authorized representative.
§ 431.223
Denial or dismissal of request for a hearing.
The agency may deny or dismiss a request for a hearing if—
(a) The applicant or recipient withdraws the request in writing; or
(b) The applicant or recipient fails to appear at a scheduled hearing without good cause.

Procedures
§ 431.230
Maintaining services.
(a) If the agency mails the 10-day or 5-day notice as required under § 431.211 or § 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]
§ 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 § 431.211 or § 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.
§ 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.
§ 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.
§ 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.
§ 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]
§ 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]
§ 431.243
Parties in cases involving an eligibility determination.
If the hearing involves an issue of eligibility and the Medicaid agency is not responsible for eligibility determinations, the agency that is responsible for determining eligibility must participate in the hearing.
§ 431.244
Hearing decisions.
(a) Hearing recommendations or decisions must be based exclusively on evidence introduced at the hearing.
(b) The record must consist only of—
(1) The transcript or recording of testimony and exhibits, or an official report containing the substance of what happened at the hearing;
(2) All papers and requests filed in the proceeding; and
(3) The recommendation or decision of the hearing officer.
(c) The applicant or 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.
(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 § 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 § 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]
§ 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.
§ 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
§ 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 § 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.
§ 431.300
Basis and purpose.
(a) Section 1902(a)(7) of the Act requires that a State plan must provide safeguards that restrict the use or disclosure of information concerning applicants and 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 § 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]
§ 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.
§ 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.
§ 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.
§ 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.
§ 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 § 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 § 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]
§ 431.306
Release of information.
(a) The agency must have criteria specifying the conditions for release and use of information about applicants and recipients.
(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 §§ 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 §§ 435.940 through 435.965 of this chapter, the agency must execute data exchange agreements with those agencies, as specified in § 435.945(f).
(h) Before requesting information from, or releasing information to, other agencies to identify legally liable third party resources under § 433.138(d) of this chapter, the agency must execute data exchanges agreements, as specified in § 433.138(h)(2) of this chapter.
[44 FR 17934, Mar. 29, 1979, as amended at 51 FR 7210, Feb. 28, 1986; 52 FR 5975, Feb. 27, 1987]
§ 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
§ 431.610
Relations with standard-setting and survey agencies.
(a) Basis and purpose. This section implements—
(1) Section 1902(a)(9) of the Act, concerning the designation of State authorities to be responsible for establishing and maintaining health and other standards for institutions participating in Medicaid; and
(2) Section 1902(a)(33) of the Act, concerning the designation of the State licensing agency to be responsible for determining whether institutions and agencies meet requirements for participation in the State's Medicaid program.
(3) Section 1919(g)(1)(A) of the Act, concerning responsibilities of the State for certifying the compliance of non-State operated NFs with requirements of participation in the State's Medicaid program.
(b) Designated agency responsible for health standards. A State plan must designate, as the State authority responsible for establishing and maintaining health standards for private or public institutions that provide services to Medicaid 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 § 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 § 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;
(2) Have qualified personnel perform on-site inspections periodically as appropriate based on the timeframes in the correction plan and—
(i) At least once during each certification period or more frequently if there is a compliance question; and
(ii) For non-State operated NFs, within the timeframes specified in § 488.308 of this chapter.
(3) Have qualified personnel perform on-site inspections—
(i) At least once during each certification period or more frequently if there is a compliance question; and
(ii) For intermediate care facilities with deficiencies as described in §§ 442.112 and 442.113 of this subchapter, within 6 months after initial correction plan approval and every 6 months thereafter as required under those sections.
(h) FFP for survey responsibilities. (1) FFP is available in expenditures that the survey agency makes to carry out its survey and certification responsibilities under the agreement specified in paragraph (f) of this section.
(2) FFP is not available in any expenditures that the survey agency makes that are attributable to the State's overall responsibilities under State law and regulations for establishing and maintaining standards.
[43 FR 45188, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980; 53 FR 20494, June 3, 1988; 57 FR 43923, Sept. 23, 1992; 59 FR 56233, Nov. 10, 1994; 62 FR 43936, Aug. 18, 1997; 64 FR 67052, Nov. 30, 1999]
§ 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;
(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.
§ 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]
§ 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 §§ 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 § 483.106(e) of this part;
(6) Ensuring that PASARR determinations made by the State mental 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 §§ 483.100 through 483.136 are met.
[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. 28, 1993]
§ 431.625
Coordination of Medicaid with Medicare part B.
(a) Basis and purpose. (1) Section 1843(a) of the Act requires the Secretary to have entered into an agreement with any State that requested that agreement before January 1, 1970, or during calendar year 1981, under which the State could enroll certain Medicare-eligible 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 §§ 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 §§ 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 § 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 payments who, under Part E of title IV of the Act are considered as receiving AFDC;
(v) Individuals required to be covered under § 435.120 of this chapter, that is, blind or disabled individuals who, under section 1619(b) of the Act, are considered to be receiving SSI;
(vi) Individuals who, in accordance with §§ 435.115 and 436.114 of this chapter are, for purposes of Medicaid eligibility, considered to be receiving AFDC. These are participants in a work supplementation program, or individuals denied AFDC because the payment would be less than $10;
(vii) Certain 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 §§ 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]
§ 431.630
Coordination of Medicaid with QIOs.
(a) The State plan may provide for the review of Medicaid services through a contract with a QIO designated under Part 462 of this chapter. Medicaid requirements for medical and utilization review are deemed to be met for those services or providers subject to review under the contract.
(b) The State plan must provide that the contract with the QIO—
(1) Meets the requirements of § 434.6(a) of this part;
(2) Includes a monitoring and evaluation plan by which the State ensures satisfactory performance by the QIO;
(3) Identifies the services and providers subject to QIO review;
(4) Ensures that the review activities performed by the QIO are not inconsistent with QIO review activities of Medicare services and includes a description of whether and to what extent QIO determinations will be considered conclusive for Medicaid payment purposes.
[50 FR 15327, Apr. 17, 1985]
§ 431.635
Coordination of Medicaid with Special Supplemental Food Program for Women, Infants, and Children (WIC).
(a) Basis. This section implements sections 1902(a)(11)(C) and 1902(a) (53) of the Act, which provide for coordination of Medicaid with the Special Supplemental Food Program for Women, Infants, and Children (WIC) under section 17 of the Child Nutrition Act of 1966.
(b) Definitions. As used in this section, the terms breastfeeding women, postpartum women, and pregnant women mean women as defined in section 17 of the Child Nutrition Act of 1966 (42 U.S.C. 1786(b)).
(c) State plan requirements. A State Plan must provide for—
(1) Coordinating operation of the Medicaid program with the State's operation of the Special Supplemental Food Program for Women, Infants, and Children;
(2) Providing timely written notice of the availability of WIC benefits to all individuals in the State who are determined to be eligible (including presumptively eligible) for Medicaid and who are:
(i) Pregnant women;
(ii) Postpartum women;
(iii) Breastfeeding women; and
(iv) Children under the age of 5.
(3) Referring individuals described under paragraphs (c)(2) (i) through (iv) of this section to the local agency responsible for administering the WIC program.
(d) Notification requirements. (1) The agency must give the written notice required under paragraph (c) of this section as soon as the agency identifies the individual (e.g., at the time of an eligibility determination for Medicaid) or immediately thereafter (e.g., at the time of notice of eligibility).
(2) The agency, no less frequently than annually, must also provide written notice of the availability of WIC benefits, including the location and telephone number of the local WIC agency or instructions for obtaining further information about the WIC program, to all Medicaid 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]
§ 431.636
Coordination of Medicaid with the Children's Health Insurance Program (CHIP).
(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 § 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 § 457.350(f) of this chapter;
(2) Eligibility is determined in a timely manner in accordance with § 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, as amended at 75 FR 48847, Aug. 11, 2010]

Subpart N—State Programs for Licensing Nursing Home Administrators
§ 431.700
Basis and purpose.
This subpart implements sections 1903(a)(29) and 1908 of the Act which require that the State plan include a State program for licensing nursing home administrators.
§ 431.701
Definitions.
Unless otherwise indicated, the following definitions apply for purposes of this subpart:
Agency means the State agency responsible for licensing individual practitioners under the State's healing arts licensing act.
Board means an appointed State board established to carry out a State program for licensing administrators of nursing homes, in a State that does not have a healing arts licensing act or an agency as defined in this section.
Licensed means certified by a State agency or board as meeting all of the requirements for a licensed nursing home administrator specified in this subpart.
Nursing home means any institution, facility, or distinct part of a hospital that is licensed or formally recognized as meeting nursing home standards established under State law, or that is determined under § 431.704 to be included under the requirements of this subpart. The term does not include—
(a) A religious nonmedical institution as defined in § 440.170(b) of this chapter; or
(b) A distinct part of a hospital, if the hospital meets the definition in § 440.10 or § 440.140 of this subchapter, and the distinct part is not licensed separately or formally approved as a nursing home by the State even though it is designated or certified as a skilled nursing facility.
Nursing home administrator means any person who is in charge of the general administration of a nursing home whether or not the person—
(a) Has an ownership interest in the home; or
(b) Shares his functions and duties with one or more other persons.
[43 FR 45188, Sept. 29, 1978, as amended at 64 FR 67052, Nov. 30, 1999]
§ 431.702
State plan requirement.
A State plan must provide that the State has a program for licensing administrators of nursing homes that meets the requirements of §§ 431.703 through 431.713 of this subpart.
§ 431.703
Licensing requirement.
The State licensing program must provide that only nursing homes supervised by an administrator licensed in accordance with the requirements of this subpart may operate in the State.
§ 431.704
Nursing homes designated by other terms.
If a State licensing law does not use the term “nursing home,” the CMS Administrator will determine the term or terms equivalent to “nursing home” for purposes of applying the requirements of this subpart. To obtain this determination, the Medicaid agency must submit to the Regional Medicaid Director copies of current State laws that define institutional health care facilities for licensing purposes.
§ 431.705
Licensing authority.
(a) The State licensing program must provide for licensing of nursing home administrators by—
(1) The agency designated under the healing arts act of the State; or
(2) A State licensing board.
(b) The State agency or board must perform the functions and duties specified in §§ 431.707 through 431.713 and the board must meet the membership requirements specified in § 431.706 of this subpart.
§ 431.706
Composition of licensing board.
(a) The board must be composed of persons representing professions and institutions concerned with the care and treatment of chronically ill or infirm elderly patients. However—
(1) A majority of the board members may not be representative of a single profession or category of institution; and
(2) Members not representative of institutions may not have a direct financial interest in any nursing home.
(b) For purposes of this section, nursing home administrators are considered representatives of institutions.
§ 431.707
Standards.
(a) The agency or board must develop, impose, and enforce standards that must be met by individuals in order to be licensed as a nursing home administrator.
(b) The standards must be designed to insure that nursing home administrators are—
(1) Of good character;
(2) Otherwise suitable; and
(3) Qualified to serve because of training or experience in institutional administration.
§ 431.708
Procedures for applying standards.
The agency or board must develop and apply appropriate procedures and techniques, including examinations and investigations, for determining if a person meets the licensing standards.
§ 431.709
Issuance and revocation of license.
Except as provided in § 431.714 of this subpart, the agency or board must—
(a) Issue licenses to persons who meet the agency's or board's standards; and
(b) Revoke or suspend a license if the agency or board determines that the person holding the license substantially fails to meet the standards.
§ 431.710
Provisional licenses.
To fill a position of nursing home administrator that unexpectedly becomes vacant, the agency or board may issue one provisional license, for a single period not to exceed 6 months. The license may be issued to a person who does not meet all of the licensing requirements established under § 431.707 but who—
(a) Is of good character and otherwise suitable; and
(b) Meets any other standards established for provisional licensure by the agency or board.
§ 431.711
Compliance with standards.
The agency or board must establish and carry out procedures to insure that licensed administrators comply with the standards in this subpart when they serve as nursing home administrators.
§ 431.712
Failure to comply with standards.
The agency or board must investigate and act on all complaints it receives of violations of standards.
§ 431.713
Continuing study and investigation.
The agency or board must conduct a continuing study of nursing homes and administrators within the State to improve—
(a) Licensing standards; and
(b) The procedures and methods for enforcing the standards.
§ 431.714
Waivers.
The agency or board may waive any standards developed under § 431.707 of this subpart for any person who has served in the capacity of a nursing home administrator during all of the 3 calendar years immediately preceding the calendar year in which the State first meets the requirements in this subpart.
§ 431.715
Federal financial participation.
No FFP is available in expenditures by the licensing board for establishing and maintaining standards for the licensing of nursing home administrators.
Subpart O [Reserved]

Subpart P—Quality Control

General Provisions

Source:
Sections 431.800 through 431.808 appear at 55 FR 22166, May 31, 1990, unless otherwise noted.
§ 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.
§ 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.
§ 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 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.
§ 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 §§ 431.810 through 431.822 of this subpart.
(b) Use of PERM data. A State plan must provide for operating a Medicaid eligibility quality control program that is in accordance with § 431.978 through § 431.988 of this part to meet the requirements of § 431.810 through § 431.822 of this subpart when a State is in their PERM year.
(c) Claims processing assessment system. Except in a State that has an approved Medicaid Management Information System (MMIS) under subpart C of part 433 of this subchapter, a State plan must provide for operating a Medicaid quality control claims processing assessment system that meets the requirements of §§ 431.830 through 431.836 of this subpart.
[55 FR 22166, May 31, 1990, as amended at 75 FR 48847, Aug. 11, 2010]
§ 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 §§ 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.
§ 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 §§ 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 § 431.812 and other instructions established by CMS.
(c) Sampling requirements. The agency must conduct MEQC sampling in accordance with the requirements specified in § 431.814 and other instructions established by CMS.
§ 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.
(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.
(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 § 431.978(a) and § 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.
(iv) Individuals whose eligibility was determined under a State's option under section 1902(e)(13) of the Act.
(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 § 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 § 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 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.
(f) Substitution of PERM data.
(1) A State in its Payment Error Rate Measurement (PERM) year may elect to substitute the random sample of selected cases, eligibility review findings, and payment review findings obtained through PERM reviews conducted in accordance with § 431.978 through § 431.988 of this part for data required in this section, if the only exclusions are those set forth in § 431.978(d)(1) of this part.
(2) PERM cases cited as undetermined may be dropped when calculating MEQC error rates if reasons for drops are acceptable reasons listed in the State Medicaid Manual.
[55 FR 22167, May 31, 1990, as amended at 72 FR 50513, Aug. 31, 2007; 75 FR 48847, Aug. 11, 2010]
§ 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
(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 all of the following:
(i) SSI beneficiaries whose eligibility determinations were made exclusively by the Social Security Administration under an agreement under section 1634 of the Act.
(ii) Individuals in foster care or receiving adoption assistance whose eligibility is determined under Title IV-E of the Act.
(iii) Individuals receiving Medicaid under programs that are 100 percent Federally-funded.
(iv) Individuals whose eligibility was determined under a State's option for Express Lane Eligibility under section 1902(e)(13) of the Act.
(d) Eligibility universe—negative cases. Unless the agency has an approved superior system under § 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 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.
[55 FR 22166, May 31, 1990, as amended at 75 FR 48847, Aug. 11, 2010]
§ 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 § 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 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.
§ 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.
§ 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.
§ 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 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.
§ 431.830
Basic elements of the Medicaid quality control (MQC) claims processing assessment system.
An agency must—
(a) Operate the MQC claims processing assessment system in accordance with the policies, sampling methodology, review procedures, reporting forms, requirements, and other instructions established by CMS.
(b) Identify deficiencies in the claims processing operations.
(c) Measure cost of deficiencies;
(d) Provide data to determine appropriate corrective action;
(e) Provide an assessment of the State's claims processing or that of its fiscal agent;
(f) Provide for a claim-by-claim review where justifiable by data; and
(g) Produce an audit trail that can be reviewed by CMS or an outside auditor.
§ 431.832
Reporting requirements for claims processing assessment systems.
(a) The agency must submit reports and data specified in paragraph (b) of this section to CMS, in the form and at the time specified by CMS.
(b) Except when CMS authorizes less stringent reporting, States must submit:
(1) A monthly report on claims processing reviews sampled and or claims processing reviews completed during the month;
(2) A summary report on findings for all reviews in the 6-month sample to be submitted by the end of the 3rd month following the scheduled completion of reviews for that 6 month period; and
(3) Other data and reports as required by CMS.
§ 431.834
Access to records: Claims processing assessment systems.
The agency, upon written request, must provide HHS staff with access to all records pertaining to its MQC claims processing assessment system reviews to which the State has access, including information available under part 435, subpart J, of this chapter.
§ 431.836
Corrective action under the MQC claims processing assessment system.
The agency must—
(a) Take action to correct those errors identified through the claims processing assessment system review and, if cost effective, to recover those funds erroneously spent;
(b) Take administrative action to prevent and reduce the incidence of those errors; and
(c) By August 31 of each year, submit to CMS a report of its error analysis and a corrective action plan on the reviews conducted since the cut-off-date of the previous corrective action plan.

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).
(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 § 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 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 § 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.
(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 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, 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 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 CHIP

Source:
71 FR 51081, Aug. 28, 2006, unless otherwise noted.
§ 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 Children's Health Insurance Program (CHIP).
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]
§ 431.954
Basis and scope.
(a) Basis. The statutory bases for this subpart are as follows:
(1) Sections 1102, 1902(a)(6), and 2107(b)(1) of the Act, which contain the Secretary's general rulemaking authority and obligate States to provide information, as the Secretary may require, to monitor program performance.
(2) The Improper Payments Information Act of 2002 (Pub. L. 107-300), which requires Federal agencies to review and identify annually those programs and activities that may be susceptible to significant erroneous payments, estimate the amount of improper payments, report such estimates to the Congress, and submit a report on actions the agency is taking to reduce erroneous payments.
(3) Section 1902(a)(27)(B) of the Act requires States to require providers to agree to furnish the State Medicaid agencies and the Secretary with information regarding payments claimed by Medicaid providers for furnishing Medicaid services.
(4) Section 601 of the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA) (Pub. L. 111-3) which requires that the new PERM regulations include the following: Clearly defined criteria for errors for both States and providers; Clearly defined processes for appealing error determinations; clearly defined responsibilities and deadlines for States in implementing any corrective action plans; requirements for State verification of an applicant's self-declaration or self-certification of eligibility for, and correct amount of, medical assistance under Medicaid or child health assistance under CHIP; and State-specific sample sizes for application of the PERM requirements.
(b) Scope. (1) This subpart requires States under the statutory provisions cited in paragraph (a) of this section to submit information as set forth in § 431.970 for, among other purposes, estimating improper payments in the fee-for-service (FFS) and managed care components of the Medicaid and CHIP programs and to determine whether eligibility was correctly determined. This subpart also requires providers to submit to the Secretary any medical records and other information necessary to disclose the extent of services provided to individuals receiving assistance, and to furnish information regarding any payments claimed by the provider for furnishing such services, as requested by the Secretary.
(2) All information must be furnished in accordance with section 1902(a)(7)(A) of the Act, regarding confidentiality.
(3) This subpart does not apply with respect to Puerto Rico, Guam, the Virgin Islands, the Northern Mariana Islands or American Samoa.
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]
§ 431.958
Definitions and use of terms.
Active case means a case containing information on a beneficiary who is enrolled in the Medicaid or CHIP program in the month that eligibility is reviewed.
Active fraud investigation means a beneficiary or a provider has been referred to the State Medicaid Fraud Control Unit or similar Federal or State investigative entity including a Federal oversight agency and the unit is currently actively pursuing an investigation to determine whether the beneficiary or the provider committed health care fraud. This definition applies to both the claims and eligibility review for PERM.
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 under this part, the entity that performs the Medicaid and CHIP eligibility reviews under PERM and excludes the State Medicaid or CHIP agency as defined in the regulation.
Annual sample size means the number of fee-for-service claims, managed care payments, or eligibility cases necessary to meet precision requirements in a given PERM cycle.
Application means an application form for Medicaid or CHIP benefits 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 CHIP program benefits.
Case means an individual beneficiary or family enrolled in Medicaid or CHIP or who has been denied enrollment or has been terminated from Medicaid or CHIP. The case as a sampling unit only applies to the eligibility component.
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.
Children's Health Insurance Program (CHIP) means the program authorized and funded under Title XXI of the Act.
Eligibility means meeting the State's categorical and financial criteria for receipt of benefits under the Medicaid or CHIP 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 CHIP beneficiary for which there is Medicaid or CHIP Federal financial participation. It may also mean a direct payment to a Medicaid or CHIP beneficiary in limited circumstances permitted by CMS regulation or policy.
Payment error rate means an annual estimate of improper payments made under Medicaid and CHIP equal to the sum of the overpayments and underpayments in the sample, that is, the absolute value of such payments, expressed as a percentage of total payments made in the sample.
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 CHIP.
Provider means any qualified provider recognized under Medicaid and CHIP statute and regulations.
Provider error includes, but is not limited to, medical review errors as described in § 431.960(c) of this subpart, as determined in accordance with documented State or Federal policies or both.
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 CHIP, as applicable, based on applications and redeterminations.
State error includes, but is not limited to, data processing errors and eligibility errors as described in § 431.960(b) and (d) of this subpart, as determined in accordance with documented State or Federal policies or both.
States means the 50 States and the District of Columbia.
Undetermined means a beneficiary case subject to a Medicaid or CHIP eligibility determination under this regulation about which a definitive determination of eligibility could not be made.
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48847, Aug. 11, 2010]
§ 431.960
Types of payment errors.
(a) General rule. State or provider errors identified for the Medicaid and CHIP improper payments measurement under the Improper Payments Information Act of 2002 must affect payment under applicable Federal policy or State policy or both.
(b) Data processing errors.
(1) A data processing error is an error resulting in an overpayment or underpayment that is determined from a review of the claim and other information available in the State's Medicaid Management Information System, related systems, or outside sources of provider verification.
(2) The difference in payment between what the State paid (as adjusted within improper payment measurement guidelines) and what the State should have paid, in accordance with the State's documented policies, is the dollar measure of the payment error.
(3) Data processing errors include, but are not limited to the following:
(i) Payment for duplicate items.
(ii) Payment for non-covered services.
(iii) Payment for fee-for-service claims for managed care services.
(iv) Payment for services that should have been paid by a third party but were inappropriately paid by Medicaid or CHIP.
(v) Pricing errors.
(vi) Logic edit errors.
(vii) Data entry errors.
(viii) Managed care rate cell errors.
(ix) Managed care payment errors.
(c) Medical review errors. (1) A medical review error is an error resulting in an overpayment or underpayment that is determined from a review of the provider's medical record or other documentation supporting the service(s) claimed, Code of Federal Regulations that are applicable to conditions of payment, the State's written policies, and a comparison between the documentation and written policies and the information presented on the claim.
(2) The difference in payment between what the State paid (as adjusted within improper payment measurement guidelines) and what the State should have paid, in accordance with 42 CFR 440 to 484.55 of the Code of Federal Regulations that are applicable to conditions of payment and the State's documented policies, is the dollar measure of the payment error.
(3) Medical review errors include, but are not limited to the following:
(i) Lack of documentation.
(ii) Insufficient documentation.
(iii) Procedure coding errors.
(iv) Diagnosis coding errors.
(v) Unbundling.
(vi) Number of unit errors.
(vii) Medically unnecessary services.
(viii) Policy violations.
(ix) Administrative errors.
(d) Eligibility errors.
(1) An eligibility error includes, but is not limited to, errors determined by applying Federal rules and the State's documented policies and procedures, resulting from services being provided to an individual who meets at least one of the following provisions:
(i) Was ineligible when authorized as eligible or when he or she received services.
(ii) Was eligible for the program but was ineligible for certain services he or she received.
(iii) Lacked or had insufficient documentation in his or her case record, in accordance with the State's documented policies and procedures, to make a definitive review decision of eligibility or ineligibility.
(iv) Overpaid the assigned liability due to the individual's liability being understated.
(v) Underpaid toward assigned liability due to the individual's liability being overstated.
(vi) Was ineligible for managed care but enrolled in managed care.
(vii) Was eligible for managed care but improperly enrolled in the incorrect managed care plan.
(2) The dollars paid in error due to the eligibility error is the measure of the payment error.
(3) A State eligibility error does not result from the State's verification of an applicant's self-declaration or self-certification of eligibility for, and the correct amount of, medical assistance or child health assistance, if the State process for verifying an applicant's self-declaration or self-certification satisfies the requirements in Federal law, guidance, or if applicable, Secretary approval.
(4) Negative case errors are errors, based on the State's documented policies and procedures, resulting from either of the following:
(i) Applications for Medicaid or CHIP that are improperly denied by the State.
(ii) Existing cases that are improperly terminated from Medicaid or CHIP by the State.
(5) No payment errors are associated with negative cases.
(e) Errors for purposes of determining the national error rates. The Medicaid and CHIP national error rates include but are not limited to the errors described in paragraphs (b) through (d) of this section, with the exception of negative case errors described in paragraph (d)(4) of this section.
(f) Errors for purposes of determining the State error rates. The Medicaid and CHIP State error rates include but are not limited to, the errors described in paragraphs (b) through (d)(1)(vii) of this section, with the exception of negative case errors as described in paragraph (d)(4) of this section.
(g) Error codes. CMS may define different types of errors within the above categories for analysis and reporting purposes. Only dollars in error will factor into a State's PERM error rate.
[75 FR 48848, Aug. 11, 2010]
§ 431.970
Information submission requirements.
(a) States must submit information to the Secretary for, among other purposes, estimating improper payments in Medicaid and CHIP, that include but are not limited to—
(1) Adjudicated fee-for-service (FFS) or managed care claims information or both, on a quarterly basis, from the review year;
(2) Upon request from CMS, provider contact information that has been verified by the State as current;
(3) All medical 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 CHIP 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 § 431.978 through § 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 CHIP.
(b) Providers must submit information to the Secretary for, among other purposes estimating improper payments in Medicaid and CHIP, which include but are not limited to, Medicaid and CHIP beneficiary medical records within 75 calendar days of the date the request is made by CMS. If CMS determines that the documentation is insufficient, providers must respond to the request for additional documentation within 14 calendar days of the date the request is made by CMS.
[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007; 75 FR 48848, Aug. 11, 2010]
§ 431.972
Claims sampling procedures.
(a) Claims universe.
(1) The PERM claims universe includes payments that were originally paid (paid claims) and for which payment was requested but denied (denied claims) during the FFY, and for which there is FFP (or would have been if the claim had not been denied) through Title XIX (Medicaid) or Title XXI (CHIP).
(2) The State must establish controls to ensure FFS and managed care universes are accurate and complete, including comparing the FFS and managed care universes to the Form CMS-64 and Form CMS-21 as appropriate.
(b) Sample size. CMS estimates a State's annual sample size for claims review at the beginning of the PERM cycle.
(1) Precision and confidence levels. The annual sample size should be estimated to achieve a State-level error rate within a 3 percent precision level at 95 percent confidence interval for the claims component of the PERM program, unless the precision requirement is waived by CMS on its own initiative.
(2) Base year sample size. The annual sample size in a State's first PERM cycle (the “base year”) is—
(i) Five hundred fee-for-service claims and 250 managed care payments drawn from the claims universe; or
(ii) If the claims universe of fee-for-service claims or managed care capitation payments from which the annual sample is drawn is less than 10,000, the State may request to reduce its sample size by the finite population correction factor for the relevant PERM cycle.
(3) Subsequent year sample size. In PERM cycles following the base year:
(i) CMS considers the error rate from the State's previous PERM cycle to determine the State's annual sample size for the current PERM cycle.
(ii) The maximum sample size is 1,000 fee-for-service or managed care payments, respectively.
(iii) If a State measured in the FY 2007 or FY 2008 cycle elects to reject its State-specific CHIP PERM rate determined during those cycles, information from those cycles will not be used to calculate its annual sample size in subsequent PERM cycles and the State's annual sample size in its base year is 500 fee-for-service and 250 managed care payments.
[75 FR 48849, Aug. 11, 2010]
§ 431.974
Basic elements of Medicaid and CHIP eligibility reviews.
(a) General requirements. (1) States selected in any given year for Medicaid and CHIP 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 CHIP 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 § 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 § 431.978.
(c) Review requirements. The State must conduct eligibility reviews in accordance with the requirements specified in § 431.980.
§ 431.978
Eligibility sampling plan and procedures.
(a) Plan approval. For each review year, the agency must—
(1) Submit its Medicaid or CHIP 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
(2) Have its sampling plan approved by CMS before the plan is implemented.
(b) Maintain current plan. The agency must do both of the following:
(1) Keep its plan current, for example, by making adjustments to the plan when necessary due to fluctuations in the universe.
(2) Review its plan each review year. If it is determined that the approved plan is—
(i) Unchanged from the previous review year, the agency must notify CMS that it is using the plan from the previous review year; or
(ii) Changed from the previous review year, the agency must submit a revised plan for CMS approval.
(c) Sample size.
(1) Precision and confidence levels. Annual sample size for eligibility reviews should be estimated to achieve within a 3 percent precision level at 95 percent confidence interval for the eligibility component of the program.
(2) Base year sample size. Annual sample size for each State's base year of PERM is—
(i) Five hundred four active cases and 204 negative cases drawn from the active and negative universes; or
(ii) If the active case universe or negative case universe of Medicaid or CHIP beneficiaries from which the annual sample is drawn is less than 10,000, the State may request to reduce its sample size by the finite population correction factor for the relevant PERM cycle.
(3) Subsequent year sample size. In PERM cycles following the base year the annual sample size may increase or decrease based on the State's prior results of the previous cycle PERM error rate information. The State may provide information to CMS in the eligibility sampling plan due to CMS by the August 1 prior to the start of the review year to support the calculation of a reduced annual sample size for the next PERM cycle.
(i) CMS considers the error rate from the State's previous PERM cycle to determine the State's annual sample size for the current PERM cycle.
(ii) The maximum sample size is 1,000 for the active cases and negative cases, respectively.
(iii) If the active case universe or negative case universe of Medicaid or CHIP beneficiaries from which the annual sample is drawn is less than 10,000, the State may request to reduce its sample size by the finite population correction factor for the relevant PERM cycle.
(iv) If a State measured in the FY 2007 or FY 2008 cycle elects to reject its PERM CHIP rate as determined during those cycles, information from those cycles is not used to calculate the State's sample size in subsequent PERM cycles and the State's sample size in its base year is 504 active cases and 204 negative cases.
(d) Sample selection. The sample must be stratified in accordance with § 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. (A) The Medicaid active universe consists of all active Medicaid cases funded through Title XIX for the sample month.
(B) The following types of cases are excluded from the Medicaid active universe:
(1) Cases for which the Social Security Administration, under section 1634 of the Act agreement with a State, determines Medicaid eligibility for Supplemental Security Income recipients.
(2) All foster care and adoption assistance cases under Title IV-E of the Act are excluded from the universe in all States.
(3) Cases under active fraud investigation.
(4) Cases in which eligibility was determined under section 1902(e)(13) of the Act for States' Express Lane Eligibility option.
(C) If the State cannot identify cases that meet the exclusion criteria specified in paragraph (d)(1)(i)(B) of this section before sample selection, the State must drop these cases from review if they are selected in the sample and are later determined to meet the exclusion criteria specified in paragraph (d)(1)(i)(B) of this section.
(ii) CHIP. (A) The CHIP active universe consists of all active case CHIP and Title XXI Medicaid expansion cases that are funded through Title XXI for the sample month.
(B) The following types of cases are excluded from the CHIP active universe:
(1) Cases under active fraud investigation.
(2) Cases in which eligibility was determined under section 2107(e)(1) of the Act for States' Express Lane Eligibility option.
(C) If the State cannot identify cases that meet the exclusion criteria specified in paragraph (d)(1)(ii)(B) of this section before sample selection, the State must drop these cases from review if it is later determined that the cases meet the exclusion criteria specified in paragraph (d)(1)(ii)(B) of this section.
(2) Eligibility universe—negative cases. The Medicaid and CHIP negative universe consists of all negative cases for the sample month. The negative case universe is not stratified.
(3) Stratifying the universe. States have the option to stratify the active case universe.
(i) Each month, the State may stratify the Medicaid and CHIP active case universe into three strata:
(A) Program applications completed by the beneficiaries in which the State took action in the sample month to approve such beneficiaries for Medicaid or CHIP based on the eligibility determination.
(B) Redeterminations of eligibility in which the State took action in the sample month to approve the beneficiaries for Medicaid or CHIP based on information obtained through a completed redetermination.
(C) All other cases.
(ii) States that do not stratify the universe will sample from the entire active case universe each month.
(4) Sample selection. Each month, an equal number of cases are selected for review from one of the following:
(i) Each stratum as described in paragraph (d)(3)(i) of this section.
(ii) The entire active case universe if opting not to stratify cases under paragraph (d)(2)(ii) of this section.
(iii) Otherwise provided for in the State's sampling plan approved by CMS.
[71 FR 51081, Aug. 28, 2006, as amended at 72 FR 50513, Aug. 31, 2007; 75 FR 48849, Aug. 11, 2010]
§ 431.980
Eligibility review procedures.
(a) Active case reviews. The agency must verify eligibility for all selected active cases for Medicaid and CHIP 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 CHIP for the review month to determine whether the cases were properly denied or terminated.
(c) Payment review. The agency must identify all Medicaid and CHIP payments made for services furnished, either in the first 30 days of eligibility or in the review month for applications under § 431.978(d)(3)(i) and redeterminations under § 431.978(d)(3)(ii) in accordance to State policy or from the sample month for all other cases under § 431.978(d)(3)(iii), to identify erroneous payments resulting from ineligibility for services or for the program.
(d) Eligibility review decision—(1) Active cases—Medicaid. Unless the State has selected to substitute MEQC data for PERM data under paragraph (f) of this section, the agency must complete all of the following:
(i) Review the cases specified at §§ 431.978(d)(3)(i)(A) and 431.978(d)(3)(i)(B) of this subpart in accordance with the State's categorical and financial eligibility criteria and documented policies and procedures as of the review month and identify payments made on behalf of such beneficiary or family for services received in the first 30 days of eligibility.
(ii) For cases specified in § 431.978(d)(3)(i)(C) of this subpart, review the last action as follows:
(A) If the last action was not more than 12 months prior to the sample month, review in accordance with the State's categorical and financial eligibility criteria and documented policies and procedures as of the last action and identify payments made on behalf of such beneficiary or family in the first 30 days of eligibility.
(B) 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 and documented policies and procedures as of the sample month and identify payments made on behalf of the beneficiary or family for services received in the sample month.
(iii) For cases in States that do not stratify the universe, as specified in § 431.978(d)(3)(ii) of this subpart, review the last action as follows:
(A) If the last action was no more than 12 months prior to the sample month, review in accordance with the State's categorical and financial eligibility criteria and documented policies and procedures as of the last action and identify payments made on behalf of such beneficiary or family for services received in the sample month.
(B) 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, and documented policies and procedures, as of the sample month and identify payments made on behalf of the beneficiary or family for services received in the sample month.
(C) Cases that are not stratified must have the last action identified as either falling under the criteria of § 431.978(d)(3)(i)(A) or § 431.978(d)(3)(i)(B) of this subpart after the sample is selected.
(iv) 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, outdated (older than 12 months) and likely to change, or otherwise as needed, to verify eligibility.
(v) For managed care cases, also verify residency and eligibility for and actual enrollment in the managed care plan during the month under review.
(vi) Elements of eligibility in which State policy allows for self-declaration or self-certification are considered to be verified with a self-declaration or self-certification statement. The self-declaration or self-certification must be—
(A) Present in the record;
(B) Not outdated (more than 12 months old);
(C) Originating from the last case action that was not more than 12 months prior to the sample month;
(D) In a valid, State-approved format; and
(E) Consistent with other facts in the case record.
(vii) If a self-declaration or self-certification statement does not meet the provisions of paragraphs (e)(1)(vi)(A) through (D) of this section, eligibility may be verified through a new self-declaration or self-certification statement or other third party sources.
(A) If eligibility or ineligibility cannot be verified, cite a case as undetermined.
(ix) As a result of paragraphs (e)(1)(i) through (e)(1)(vii) 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—CHIP. In addition to the procedures for active cases as set forth in paragraphs (e)(1)(i) through (e)(1)(vii) of this section, 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 § 457.350 of this chapter. Upon verification, the agency must—
(e) Negative cases—Medicaid and CHIP. 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
(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.
(f) Substitution of MEQC data. (1) A State in their PERM year may elect to substitute the random sample of selected cases, eligibility review findings, and payment review findings, as qualified by paragraphs (d)(2) and (d)(3) of this section, which are obtained through MEQC reviews conducted in accordance with section 1903(u) of the Act for data required in this section, as long as the State MEQC reviews meet the requirements of the MEQC Sampling Plan and Procedures at § 431.814 of this part, and if the only exclusions are those set forth in section 1902(e)(13) of the Act, § 431.814(c)(4), and § 431.978(d)(1) of this part.
(2) MEQC samples must also meet PERM confidence and precision requirements.
(3) MEQC cases that are dropped due to the acceptable reasons listed in the State Medicaid Manual are included in the PERM error rate calculation.
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48850, Aug. 11, 2010]
§ 431.988
Eligibility case review completion deadlines and submittal of reports.
(a)(1) States must complete and report to CMS the findings, including total number of cases in the eligibility universe, the error causes for all 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.
(2) 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 data for active cases.
(2) Case error data for negative cases.
(3) Identify the last action on a case, either application or redetermination for States that do not stratify the eligibility sample in accordance with § 431.978(d)(3)(i) of this subpart.
(4) The number and amounts of undetermined cases in the sample and the total amount of payments from all undetermined cases.
(5) The number of cases dropped from review due to active fraud investigations.
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48851, Aug. 11, 2010]
§ 431.992
Corrective action plan.
(a) The State agency must develop a separate corrective action plan for Medicaid and CHIP, which is not required to be approved by CMS, designed to reduce improper payments in each program based on its analysis of the error causes in the FFS, managed care, and eligibility components.
(b) In developing a corrective action plan, the State must take the following actions:
(1) Data analysis. States must conduct data analysis such as reviewing clusters of errors, general error causes, characteristics, and frequency of errors that are associated with improper payments.
(2) Program analysis. States must review the findings of the data analysis to determine the specific programmatic causes to which errors are attributed (for example, provider lack of understanding of the requirement to provide documentation) and to identify root error causes.
(3) Corrective action planning. States must determine the corrective actions to be implemented that address the root error causes.
(4) Implementation and monitoring.
(i) States must develop an implementation schedule for each corrective action initiative and implement those actions in accordance with the schedule.
(ii) The implementation schedule must identify all of the following:
(A) Major tasks.
(B) Key personnel responsible for each activity.
(C) A timeline for each action including target implementation dates, milestones, and monitoring.
(5) Evaluation. States must evaluate the effectiveness of the corrective action by assessing all of the following:
(i) Improvements in operations.
(ii) Efficiencies.
(iii) Number of errors.
(iv) Improper payments.
(c) The State agency must submit to CMS and implement the corrective action plan for the fiscal year it was reviewed no later than 90 calendar days after the date on which the State's Medicaid or CHIP error rates are posted on the CMS contractor's Web site.
(d) The State must submit to CMS a new corrective action plan for each subsequent error rate measurement that contains an update on the status of a previous corrective action plan. Items to address in the new corrective action plan include, but are not limited to the following:
(1) Effectiveness of implemented corrective actions, as assessed using objective data sources.
(2) Discontinued or ineffective actions, actions not implemented, and those actions, if any, that were substituted for such discontinued, ineffective, or abandoned actions.
(3) Findings on short-term corrective actions.
(4) The status of the long-term corrective actions.
[75 FR 48851, Aug. 11, 2010]
§ 431.998
Difference resolution and appeal 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 or CHIP within 20 business days after the disposition report of claims review findings is posted on the contractor's Web site. The State must complete all of the following:
(1) Have a factual basis for filing the difference.
(2) 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, filing the appeal within 10 business days from the date the contractor's finding as a result of the difference resolution is posted on the contractor's Web site. There is no minimum dollar threshold required to appeal a difference in findings.
(c) For eligibility error determinations made by the agency with personnel functionally and physically separate from the State Medicaid and CHIP agencies with personnel that are responsible for Medicaid and CHIP policy and operations, the State may appeal error determinations by filing an appeal request.
(1) Filing an appeal request. The State may—
(i) File its appeal request with the appropriate State agency or entity; or
(ii) If no appeals process is in place at the State level, differences in findings—
(A) Must be documented in writing and submitted directly to the agency responsible for the PERM eligibility review for its consideration;
(B) May be resolved through document exchange facilitated by CMS, whereby CMS will act as intermediary by receiving the written documentation supporting the State's appeal from the State agency and submitting that documentation to the agency responsible for the PERM eligibility review; or
(C) Any unresolved differences may be addressed by CMS between the final month of payment data submission and error rate calculation.
(2) After the filing of an appeals request. (i) Any changes in error findings must be reported to CMS by the deadline for submitting final eligibility review findings.
(ii) Any appeals of determinations based on interpretations of Federal policy may be referred to CMS.
(iii) CMS's eligibility error resolution decision is final.
(iv) If CMS's or the State-level appeal board's decision causes an erroneous payment finding to be made, if the final adjudicated claim is actually a payment error in accordance with documented State policies and procedures, any resulting recoveries are governed by § 431.1002 of this subchapter.
(d) 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.
[71 FR 51081, Aug. 28, 2006, as amended at 75 FR 48851, Aug. 11, 2010]
§ 431.1002
Recoveries.
(a) Medicaid. States must return to CMS the Federal share of overpayments based on medical and processing errors in accordance with section 1903(d)(2) of the Act and related regulations at part 433, subpart F of this chapter. Payments based on erroneous Medicaid eligibility determinations are addressed under section 1903(u) of the Act and related regulations at part 431, subpart P of this chapter.
(b) CHIP. Quarterly Federal payments to the States under Title XXI of the Act must be reduced in accordance with section 2105(e) of the Act and related regulations at part 457, subpart B of this chapter.
Pt. 432

PART 432—STATE PERSONNEL ADMINISTRATION

Subpart A—General Provisions
Sec.
432.1
Basis and purpose.
432.2
Definitions.
432.10
Standards of personnel administration.

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
§ 432.1
Basis and purpose.
This part prescribes regulations to implement section 1902(a)(4) of the Act, which relates to a merit system of State personnel administration and training and use of subprofessional staff and volunteers in State Medicaid programs, and section 1903(a), rates of FFP for Medicaid staffing and training costs. It also prescribes regulations, based on the general administrative authority in section 1902(a)(4), for State training programs for all staff.
§ 432.2
Definitions.
As used in this part—
Community service aides means subprofessional staff, employed in a variety of positions, whose duties are an integral part of the agency's responsibility for planning, administration, and for delivery of health services.
Directly supporting staff means secretarial, stenographic, and copying personnel and file and records clerks who provide clerical services that directly support the responsibilities of skilled professional medical personnel, who are directly supervised by the skilled professional medical personnel, and who are in an employer-employee relationship with the Medicaid agency.
Fringe benefits means the employer's share of premiums for workmen's compensation, employees' retirement, unemployment compensation, health insurance, and similar expenses.
Full-time training means training that requires employees to be relieved of all responsibility for performance of current agency work to participate in a training program.
Part-time training means training that allows employees to continue full-time in their agency jobs or requires only partial reduction of work activities to participate in the training activity.
Skilled professional medical personnel means physicians, dentists, nurses, and other specialized personnel who have professional education and training in the field of medical care or appropriate medical practice and who are in an employer-employee relationship with the Medicaid agency. It does not include other nonmedical health professionals such as public administrators, medical analysts, lobbyists, senior managers or administrators of public assistance programs or the Medicaid program.
Staff of other public agencies means skilled professional medical personnel and directly supporting staff who are employed in State or local agencies other than the Medicaid agency who perform duties that directly relate to the administration of the Medicaid program.
Subprofessional staff means persons performing tasks that demand little or no formal education; a high school diploma; or less than 4 years of college.
Supporting staff means secretarial, stenographic, clerical, and other subprofessional staff whose activities are directly necessary to the carrying out of the functions which are the responsibility of skilled professional medical personnel, as defined in this section.
Training program means a program of educational activities based on the agency's training needs and aimed at insuring that agency staff acquire the knowledge and skills necessary to perform their jobs.
Volunteer means a person who contributes personal service to the community through the agency's program but is not a replacement or substitute for paid staff.
[43 FR 45199, Sept. 29, 1978, as amended at 50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]
§ 432.10
Standards of personnel administration.
(a) State plan requirement. A State plan must provide that the requirements of paragraphs (c) through (h) of this section are met.
(b) Terms. In this section, “standards” refer to those specified in paragraph (c) of this section.
(c) Methods of personnel administration. Methods of personnel administration must be established and maintained, in the Medicaid agency and in local agencies administering the propgram, in conformity with:
(1) [Reserved]
(2) 5 CFR part 900, subpart F, Administration of the Standards for Merit System of Personnel Administration.
(d) Compliance of local jurisdictions. The Medicaid agency must have in effect methods to assure compliance with the standards by local jurisdictions included in the plan.
(e) Review and adequacy of State laws, regulations, and policies. The agency must—
(1) Assure that the U.S. Civil Service Commission has determined the adequacy of current State laws, regulations, and policy statements that effect methods of personnel administration in conformity with the standards, and
(2) Submit any changes in them to the Commission for review.
(f) Statements of acceptance by local agencies. If the Medicaid agency changes from a State-administered to a State-supervised, locally administered program, it must obtain statements of acceptance of the standards from the local agencies.
(g) Affirmative action plan. The Medicaid agency must have in effect an affirmative action plan for equal employment opportunity, that includes specific action steps and timetables to assure that opportunity, and meets all other requirements of 45 CFR 70.4. ^1
^1 Editorial Note: The regulations formerly contained in 45 CFR 70.4 were revised and reissued by the Office of Personnel Management at 5 CFR Part 900, (Subpart F).
(h) Submittal of requested materials. The Medicaid agency must submit to HHS, upon request, copies of the affirmative action plan and of the State and local materials that assure compliance with the standards.
[43 FR 45199, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]

Subpart B—Training Programs; Subprofessional and Volunteer Programs
§ 432.30
Training programs: General requirements.
(a) A State plan must provide for a program of training for Medicaid agency personnel. (See also §§ 432.31 and 432.32 for training programs for subprofessional staff and for volunteers.)
(b) The program must—
(1) Include initial inservice training for newly appointed staff, and continuing training opportunities to improve the operation of the program;
(2) Be related to job duties performed or to be performed by the persons trained; and
(3) Be consistent with the program objectives of the agency.
§ 432.31
Training and use of subprofessional staff.
(a) State plan requirement. A State plan must provide for the training and effective use of subprofessional staff as community service aides, in accordance with the requirements of this section.
(b) Recruitment and selection. The Medicaid agency must have methods of recruitment and selection that afford opportunity for full-time or part-time employment of persons of low income, including:
(1) Young, middle-aged, and older persons;
(2) Physically and mentally disabled; and
(3) 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:
(1) To enter employment at the subprofessional level; and
(2) To progress to positions of increasing responsibility and reward:
(i) In accordance with their abilities; and
(ii) Through work experience and pre-service and in-service training.
(f) Training, supervision and supportive services. The agency must have an organized training program, supervision, and supportive services for subprofessional staff.
(g) Progressive expansion. The agency must provide for annual increase in the number of subprofessional staff until:
(1) An appropriate ratio of subprofessional and professional staff has been achieved; and
(2) There is maximum use of subprofessional staff as community aides in the operation of the program.
§ 432.32
Training and use of volunteers.
(a) State plan requirement. A State plan must provide for the training and use of non-paid or partially paid volunteers in accordance with the requirements of this section.
(b) Functions of volunteers. The Medicaid agency must make use of volunteers in:
(1) Providing services to applicants and 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
§ 432.45
Applicability of provisions in subpart.
The rates of FFP specified in this subpart C do not apply to State personnel who conduct survey activities and certify facilities for participation in Medicaid, as provided for under section 1902(a)(33)(B) of the Act.
[50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]
§ 432.50
FFP: Staffing and training costs.
(a) Availability of FFP. FFP is available in expenditures for salary or other compensation, fringe benefits, travel, per diem, and training, at rates determined on the basis of the individual's position, as specified in paragraph (b) of this section.
(b) Rates of FFP. (1) For skilled professional medical personnel and directly supporting staff of the Medicaid agency or of other public agencies (as defined in § 432.2), the rate is 75 percent.
(2) For personnel engaged directly in the operation of mechanized claims processing and information retrieval systems, the rate is 75 percent.
(3) For personnel engaged in the design, development, or installation of mechanized claims processing and information retrieval systems, the rate is 50 percent for training and 90 percent for all other costs specified in paragraph (a) of this section.
(4) [Reserved]
(5) For personnel administering family planning services and supplies, the rate is 90 percent.
(6) For all other staff of the Medicaid agency or other public agencies providing services to the Medicaid agency, and for training and other expenses of volunteers, the rate is 50 percent.
(c) Application of rates. (1) FFP is prorated for staff time that is split among functions reimbursed at different rates.
(2) Rates of FFP in excess of 50 percent apply only to those portions of the individual's working time that are spent carrying out duties in the specified areas for which the higher rate is authorized.
(3) The allocation of personnel and staff costs must be based on either the actual percentages of time spent carrying out duties in the specified areas, or another methodology approved by CMS.
(d) Other limitations for FFP rate for skilled professional medical personnel and directly supporting staff—(1) Medicaid agency personnel and staff. The rate of 75 percent FFP is available for skilled professional medical personnel and directly supporting staff of the Medicaid agency if the following criteria, as applicable, are met:
(i) The expenditures are for activities that are directly related to the administration of the Medicaid program, and as such do not include expenditures for medical assistance;
(ii) The skilled professional medical personnel have professional education and training in the field of medical care or appropriate medical practice. “Professional education and training” means the completion of a 2-year or longer program leading to an academic degree or certificate in a medically related profession. This is demonstrated by possession of a medical license, certificate, or other document issued by a recognized National or State medical licensure or certifying organization or a degree in a medical field issued by a college or university certified by a professional medical organization. Experience in the administration, direction, or implementation of the Medicaid program is not considered the equivalent of professional training in a field of medical care.
(iii) The skilled professional medical personnel are in positions that have duties and responsibilities that require those professional medical knowledge and skills.
(iv) A State-documented employer-employee relationship exists between the Medicaid agency and the skilled professional medical personnel and directly supporting staff; and
(v) The directly supporting staff are secretarial, stenographic, and copying personnel and file and records clerks who provide clerical services that are directly necessary for the completion of the professional medical responsibilities and functions of the skilled professional medical staff. The skilled professional medical staff must directly supervise the supporting staff and the performance of the supporting staff's work.
(2) Staff of other public agencies. The rate of 75 percent FFP is available for staff of other public agencies if the requirements specified in paragraph (d)(1) of this section are met and the public agency has a written agreement with the Medicaid agency to verify that these requirements are met.
(e) Limitations on FFP rates for staff in mechanized claims processing and information retrieval systems. The special matching rates for persons working on mechanized claims processing and information retrieval systems (paragraphs (b)(2) and (3) of this section) are applicable only if the design, development and installation, or the operation, have been approved by the Administrator in accordance with part 433, subchapter C, of this chapter.
[43 FR 45199, Sept. 29, 1978, as amended at 46 FR 48566, Oct. 1, 1981; 50 FR 46663, Nov. 12, 1985]
§ 432.55
Reporting training and administrative costs.
(a) Scope. This section identifies activities and costs to be reported as training or administrative costs on quarterly estimate and expenditure reports to CMS.
(b) Activities and costs to be reported on training expenditures. (1) For fulltime training (with no assigned agency duties): Salaries, fringe benefits, dependency allowances, travel, tuition, books, and educational supplies.
(2) For part-time training: Travel, per diem, tuition, books and educational supplies.
(3) For State and local Medicaid agency staff development personnel (including supporting staff) assigned fulltime training functions: Salaries, fringe benefits, travel, and per diem. Costs for staff spending less than full time on training for the Medicaid program must be allocated between training and administration in accordance with § 433.34 of this subchapter.
(4) For experts engaged to develop or conduct special programs: Salary, fringe benefits, travel, and per diem.
(5) For agency training activities directly related to the program: Use of space, postage, teaching supplies, and purchase or development of teaching materials and equipment, for example, books and audiovisual aids.
(6) For field instruction in Medicaid: Instructors' salaries and fringe benefits, rental of space, travel, clerical assistance, teaching materials and equipment such as books and audiovisual aids.
(c) Activities and costs not to be reported as training expenditures. The following activities are to be reported as administrative costs:
(1) Salaries of supervisors (day-to-day supervision of staff is not a training activity); and
(2) Cost of employing students on a temporary basis, for instance, during summer vacation.
[43 FR 45199, Sept. 29, 1978, as amended at 44 FR 17935, Mar. 23, 1979]
Pt. 433

PART 433—STATE FISCAL ADMINISTRATION
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.

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.
§ 433.1
Purpose.
This part specifies the rates of FFP for services and administration, and prescribes requirements, prohibitions, and FFP conditions relating to State fiscal activities.

Subpart A—Federal Matching and General Administration Provisions
§ 433.8
[Reserved]
§ 433.10
Rates of FFP for program services.
(a) Basis. Sections 1903(a)(1), 1903(g), 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] × 45 percent
Federal share=100 percent minus the State share (with a minimum of 50 percent and a maximum of 83 percent)
The formula provides for squaring both the State and national average per capita incomes; this procedure magnifies any difference between the State's income and the national average. Consequently, Federal matching to lower income States is increased, and Federal matching to higher income States is decreased, within the statutory 50-83 percent limits. The FMAP for Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands, and American Samoa is set by statute at 50 percent and is subject to dollar limitations specified in section 1108 of the Act.
(c) Special provisions. (1) Under section 1903(a)(5) of the Act, the Federal share of State expenditures for family planning services is 90 percent.
(2) Under section 1905(b), the Federal share of State expenditures for services provided through Indian Health Service facilities is 100 percent.
(3) Under section 1903(g), the FMAP is reduced if the State does not have an effective program to control use of institutional services.
(4) Under section 1905(b) of the Social Security Act, the Federal share of State expenditures described in § 433.11(a) for services provided to children, is the enhanced FMAP rate determined in accordance with § 457.622(b) of this chapter, subject to the conditions explained in § 433.11(b).
(5)(i) Under section 1933(d) of the Act, the Federal share of State expenditures for Medicare Part B premiums described in section 1905(p)(3)(A)(ii) of the Act on behalf of Qualifying Individuals described in section 1902(a)(10)(E)(iv) of the Act, is 100 percent, to the extent that the assistance does not exceed the State's allocation under paragraph (c)(5)(ii) of this section. To the extent that the assistance exceeds that allocation, the Federal share is 0 percent.
(ii) Under section 1933(c)(2) of the Act and subject to paragraph (c)(5)(iii) of this section, the allocation to each State is equal to the total allocation specified in section 1933(g) of the Act multiplied by the Secretary's estimate of the ratio of the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act in the State to the total number of individuals described in section 1902(a)(10)(E)(iv) of the Act for all eligible States. In estimating that ratio, the Secretary will use data from the U.S. Census Bureau.
(iii) If, based on projected expenditures for a fiscal year, or for a shorter period for which funding is available under section 1933 of the Act, the Secretary determines that the expenditures described in paragraph (c)(5)(i) of this section for one or more States are projected to exceed the allocation made to the State, the Secretary may adjust each State's fiscal year allocation, as follows:
(A) The Secretary will compare each State's projected total expenditures for the expenses described in paragraph (c)(5)(i) of this section to the State's initial allocation determined under paragraph (c)(5)(ii) of this section, to determine the extent of each State's projected surplus or deficit.
(B) The surplus of each State with a projected surplus, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Surplus.
(C) The deficit of each State with a projected deficit, as determined in accordance with paragraph (c)(5)(iii)(A) of this section will be added together to arrive at the Total Projected Deficit.
(D) Each State with a projected deficit will receive an additional allocation equal to the amount of its projected deficit, or a prorated amount of such deficit, if the Total Projected Deficit is greater than the Total Projected Surplus. Except as described in paragraph (c)(5)(iii)(E) of this section, the amount to be reallocated from each State with a projected surplus will be equal to A × B, where A equals the Total Projected Deficit and B equals the amount of the State's projected surplus as a percentage of the Total Projected Surplus.
(E) If the Total Projected Deficit determined under paragraph (c)(5)(iii)(C) of this section is greater than the Total Projected Surplus determined under paragraph (c)(5)(iii)(B) of this section, each State with a projected deficit will receive an additional allocation amount equal to the amount of the Total Projected Surplus multiplied by the amount of the projected deficit for such State as a percentage of the Total Projected Deficit. The amount to be reallocated from each State with a projected surplus will be equal to the amount of the projected surplus.
(iv) CMS will notify States of any changes in allotments resulting from any reallocations.
(v) The provisions in paragraph (c)(5) of this section will be in effect through the end of the period for which funding authority is available under section 1933 of the Act.
(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]
§ 433.11
Enhanced FMAP rate for children.
(a) Subject to the conditions in paragraph (b) of this section, the enhanced FMAP determined in accordance with § 457.622 of this chapter will be used to determine the Federal share of State expenditures, except any expenditures pursuant to section 1923 of the Act for payments to disproportionate share hospitals for—
(1) Services provided to optional targeted low-income children described in § 435.4 or § 436.3 of this chapter; and
(2) Services provided to children born before October 1, 1983, with or without group health coverage or other health insurance coverage, who would be described in section 1902(l)(1)(D) of the Act (poverty-level-related children's groups) if—
(i) They had been born on or after that date; and
(ii) They would not qualify for medical assistance under the State plan in effect on March 31, 1997.
(b) Enhanced FMAP is not available if—
(1) A State adopts income and resource standards and methodologies for purposes of determining a child's eligibility under the Medicaid State plan that are more restrictive than those applied under policies of the State plan (as described in the definition of optional targeted low-income children at § 435.4 of this chapter) in effect on June 1, 1997; or
(2) No funds are available in the State's title XXI allotment, as determined under part 457, subpart F of this chapter for the quarter enhanced FMAP is claimed; or
(3) The State fails to maintain a valid method of identifying services provided on behalf of children listed in paragraph (a) of this section.
[66 FR 2666, Jan. 11, 2001]
§ 433.15
Rates of FFP for administration.
(a) Basis. Section 1903(a) (2) through (5) and (7) of the Act provide for payments to States, on the basis of specified percentages, for part of their expenditures for administration of an approved State plan.
(b) Activities and rates. (1) [Reserved]
(2) Administration of family planning services: 90 percent. (Section 1903 (a)(5); 42 CFR 432.50(b)(5).)
(3) Design, development, or installation of mechanized claims processing and information retrieval systems: 90 percent. (Section 1903(a)(3)(A)(i); 42 CFR part 433, subpart C, and § 432.50 (b)(3).)
(4) Operation of mechanized claims processing and information retrieval systems: 75 percent. (Section 1903(a) (3)(B); 42 CFR part 433, subpart C and § 432.50(b)(2).)
(5) Compensation and training of skilled professional medical personnel and staff directly supporting those personnel if the criteria specified in § 432.50 (c) and (d) are met: 75 percent. (Section 1903(a)(2); 42 CFR 432.50(b)(1).)
(6)(i) Funds expended for the performance of medical and utilization review by a QIO under a contract entered into under section 1902(d) of the Act: 75 percent (section 1903(a)(3)(C) of the Act).
(ii) If a State contracts for medical and utilization review with any individual or organization not designated under Part B of Title XI of the Act, funds expended for such review will be reimbursed as provided in paragraph (b)(7) of this section.
(7) All other activities the Secretary finds necessary for proper and efficient administration of the State plan: 50 percent. (Section 1903(a)(7).) (See also § 455.300 of this subchapter for FFP at 90 percent for State Medicaid fraud control units under section 1903(a)(6).)
(8) Nurse aide training and competency evaluation programs and competency evaluation programs described in 1919(e)(1) of the Act: for calendar quarters beginning on or after July 1, 1988 and before July 1, 1990: The lesser of 90% or the Federal medical assistance percentage plus 25 percentage points; for calendar quarters beginning on or after October 1, 1990: 50%. (Section 1903(a)(2)(B) of the Act.)
(9) Preadmission screening and annual resident review (PASARR) activities conducted by the State: 75 percent. (Sections 1903(a)(2)(C) and 1919(e)(7); 42 CFR part 483, subparts C and E.)
(10) Funds expended for the performance of external quality review or the related activities described in § 438.358 of this chapter when they are performed by an external quality review organization as defined in § 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]
§ 433.32
Fiscal policies and accountability.
A State plan must provide that the Medicaid agency and, where applicable, local agencies administering the plan will—
(a) Maintain an accounting system and supporting fiscal records to assure that claims for Federal funds are in accord with applicable Federal requirements;
(b) Retain records for 3 years from date of submission of a final expenditure report;
(c) Retain records beyond the 3-year period if audit findings have not been resolved; and
(d) Retain records for nonexpendable property acquired under a Federal grant for 3 years from the date of final disposition of that property.
[44 FR 17935, Mar. 23, 1979]
§ 433.34
Cost allocation.
A State plan under Title XIX of the Social Security Act must provide that the single or appropriate Agency will have an approved cost allocation plan on file with the Department in accordance with the requirements contained in subpart E of 45 CFR part 95. Subpart E also sets forth the effect on FFP if the requirements contained in that subpart are not met.
[47 FR 17490, Apr. 23, 1982]
§ 433.35
Equipment—Federal financial participation.
Claims for Federal financial participation in the cost of equipment under the Medicaid Program are determined in accordance with subpart G of 45 CFR part 95. Requirements concerning the management and disposition of equipment under the Medicaid Program are also prescribed in subpart G of 45 CFR part 95.
[47 FR 41564, Sept. 21, 1982]
§ 433.36
Liens and recoveries.
(a) Basis and purpose. This section implements sections 1902(a)(18) and 1917(a) and (b) of the Act, which describe the conditions under which an agency may impose a lien against a 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 satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution, as provided in paragraph (h)(2)(iii)(B) of this section.
(g) Lien provisions—(1) Incorrect payments. The agency may place a lien against an individual's property, both personal and real, before his or her death because of Medicaid claims paid or to be paid on behalf of that individual following a court judgement which determined that benefits were incorrectly paid for that individual.
(2) Correct payments. Except as provided in paragraph (g)(3) of this section, the agency may place a lien against the real property of an individual at any age before his or her death because of Medicaid claims paid or to be paid for that individual when—
(i) An individual is an inpatient of a medical institution and must, as a condition of receiving services in the institution under the State plan, apply his or her income to the cost of care as provided in §§ 435.725, 435.832 and 436.832; and
(ii) The agency determines that he or she cannot reasonably be expected to be discharged and return home. The agency must notify the individual of its intention to make that determination and provide an opportunity for a hearing in accordance with State established procedures before the determination is made. The notice to an individual must include an explanation of liens and the effect on an individual's ownership of property.
(3) Restrictions on placing liens. The agency may not place a lien on an individual's home under paragraph (g)(2) of this section if any of the following individuals is lawfully residing in the home:
(i) The spouse;
(ii) The individual's child who is under age 21 or blind or disabled as defined in the State plan; or
(iii) The individual's sibling (who has an equity interest in the home, and who was residing in the individual's home for at least one year immediately before the date the individual was admitted to the medical institution).
(4) Termination of lien. Any lien imposed on an individual's real property under paragraph (g)(2) of this section will dissolve when that individual is discharged from the medical institution and returns home.
(h) Adjustments and recoveries. (1) The agency may make an adjustment or recover funds for Medicaid claims correctly paid for an individual as follows:
(i) From the estate of any individual who was 65 years of age or older when he or she received Medicaid; and
(ii) From the estate or upon sale of the property subject to a lien when the individual is institutionalized as described in paragraph (g)(2) of this section.
(2) The agency may make an adjustment or recovery under paragraph (h)(1) of this section only:
(i) After the death of the individual's surviving spouse; and
(ii) When the individual has no surviving child under age 21 or blind or disabled as defined in the State plan; and
(iii) In the case of liens placed on an individual's home under paragraph (g)(2) of this section, when there is no—
(A) Sibling of the individual residing in the home, who has resided there for at least one year immediately before the date of the individual's admission to the institution, and has resided there on a continuous basis since that time; or
(B) Son or daughter of the individual residing in the home, who has resided there for at least two years immediately before the date of the individual's admission to the institution, has resided there on a continuous basis since that time, and can establish to the agency's satisfaction that he or she has been providing care which permitted the individual to reside at home rather than in an institution.
(i) Prohibition of reduction of money payments. No money payment under another program may be reduced as a means of recovering Medicaid claims incorrectly paid.
[43 FR 45201, Sept. 29, 1978, as amended at 47 FR 43647, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]
§ 433.37
Reporting provider payments to Internal Revenue Service.
(a) Basis and purpose. This section, based on section 1902(a)(4) of the Act, prescribes requirements concerning—
(1) Identification of providers; and
(2) Compliance with the information reporting requirements of the Internal Revenue Code.
(b) Identification of providers. A State plan must provide for the identification of providers by—
(1) Social security number if—
(i) The provider is in solo practice; or
(ii) The provider is not in solo practice but billing is by the individual practitioner; or
(2) Employer identification number for all other providers.
(c) Compliance with section 6041 of the Internal Revenue Code. The plan must provide that the Medicaid agency complies with the information reporting requirements of section 6041 of the Internal Revenue Code (26 U.S.C. 6041). Section 6041 requires the filing of annual information returns showing amounts paid to providers, who are identified by name, address, and social security number or employer identification number.
§ 433.38
Interest charge on disallowed claims for FFP.
(a) Basis and scope. This section is based on section 1903(d)(5) of the Act, which requires that the Secretary charge a State interest on the Federal share of claims that have been disallowed but have been retained by the State during the administrative appeals process under section 1116(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 § 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 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]
§ 433.40
Treatment of uncashed or cancelled (voided) Medicaid checks.
(a) Purpose. This section provides the rules to ensure that States refund the Federal portion of uncashed or cancelled (voided) checks under title XIX.
(b) Definitions. As used in this section—
Cancelled (voided) check means a Medicaid check issued by a State or fiscal agent which prior to its being cashed is cancelled (voided) by the State or fiscal agent, thus preventing disbursement of funds.
Check means a check or warrant that a State or local agency uses to make a payment.
Fiscal agent means an entity that processes or pays vendor claims for the Medicaid State agency.
Uncashed check means a Medicaid check issued by a State or fiscal agent which has not been cashed by the payee.
Warrant means an order by which the State agency or local agency without the authority to issue checks recognizes a claim. Presentation of a warrant by the payee to a State officer with authority to issue checks will result in release of funds due.
(c) Refund of Federal financial participation (FFP) for uncashed checks—(1) General provisions. If a check remains uncashed beyond a period of 180 days from the date it was issued; i.e., the date of the check, it will no longer be regarded as an allowable program expenditure. If the State has claimed and received FFP for the amount of the uncashed check, it must refund the amount of FFP received.
(2) Report of refund. At the end of each calendar quarter, the State must identify those checks which remain uncashed beyond a period of 180 days after issuance. The State agency must refund all FFP that it received for uncashed checks by adjusting the Quarterly Statement of Expenditures for that quarter. If an uncashed check is cashed after the refund is made, the State may file a claim. The claim will be considered to be an adjustment to the costs for the quarter in which the check was originally claimed. This claim will be paid if otherwise allowed by the Act and the regulations issued pursuant to the Act.
(3) If the State does not refund the appropriate amount as specified in paragraph (c)(2) of this section, the amount will be disallowed.
(d) Refund of FFP for cancelled (voided) checks—(1) General provision. If the State has claimed and received FFP for the amount of a cancelled (voided) check, it must refund the amount of FFP received.
(2) Report of refund. At the end of each calendar quarter, the State agency must identify those checks which were cancelled (voided). The State must refund all FFP that it received for cancelled (voided) checks by adjusting the Quarterly Statement of Expenditures for that quarter.
(3) If the State does not refund the appropriate amount as specified in paragraph (d)(2) of this section, the amount will be disallowed.
[51 FR 36227, Oct. 9, 1986]

Subpart B—General Administrative Requirements State Financial Participation

Source:
57 FR 55138, Nov. 24, 1992, unless otherwise noted.
§ 433.50
Basis, scope, and applicability.
(a) Basis. This subpart interprets and implements—(1) Section 1902(a)(2) 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 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]
§ 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]
§ 433.52
General definitions.
As used in this subpart—
Entity related to a health care provider means—
(1) An organization, association, corporation, or partnership formed by or on behalf of a health care provider;
(2) An individual with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act;
(3) An employee, spouse, parent, child, or sibling of the provider, or of a person with an ownership or control interest in the provider, as defined in section 1124(a)(3) of the Act; or
(4) A supplier of health care items or services or a supplier to providers of health care items or services.
Health care provider means the individual or entity that receives any payment or payments for health care items or services provided.
Provider-related donation means a donation or other voluntary payment (in cash or in kind) made directly or indirectly to a State or unit of local government by or on behalf of a health care provider, an entity related to such a health care provider, or an entity providing goods or services to the State for administration of the State's Medicaid plan.
(1) Donations made by a health care provider to an organization, which in turn donates money to the State, may be considered to be a donation made indirectly to the State by a health care provider.
(2) When an organization receives less than 25 percent of its revenues from providers and/or provider-related entities, its donations will not generally be presumed to be provider-related donations. Under these circumstances, a provider-related donation to an organization will not be considered a donation made indirectly to the State. However, if the donations from providers to an organization are subsequently determined to be indirect donations to the State or unit of local government for administration of the State's Medicaid program, then such donations will be considered to be health care related.
(3) When the organization receives more than 25 percent of its revenue from donations from providers or provider-related entities, the organization always will be considered as acting on behalf of health care providers if it makes a donation to the State. The amount of the organization's donation to the State, in a State fiscal year, that will be considered health care related, will be based on the percentage of donations the organization received from the providers during that period.
§ 433.53
State plan requirements.
A State plan must provide that—
(a) State (as distinguished from local) funds will be used both for medical assistance and administration;
(b) State funds will be used to pay at least 40 percent of the non-Federal share of total expenditures under the plan; and
(c) State and Federal funds will be apportioned among the political subdivisions of the State on a basis that assures that—
(1) Individuals in similar circumstances will be treated similarly throughout the State; and
(2) If there is local financial participation, lack of funds from local sources will not result in lowering the amount, duration, scope, or quality of services or level of administration under the plan in any part of the State.
[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, 1993]
§ 433.54
Bona fide donations.
(a) A bona fide donation means a provider-related donation, as defined in § 433.52, made to the State or unit of local government, that has no direct or indirect relationship, as described in paragraph (b) of this section, to Medicaid payments made to—
(1) The health care provider;
(2) Any related entity providing health care items and services; or
(3) Other providers furnishing the same class of items or services as the provider or entity.
(b) Provider-related donations will be determined to have no direct or indirect relationship to Medicaid payments if those donations are not returned to the individual provider, the provider class, or related entity under a hold harmless provision or practice, as described in paragraph (c) of this section.
(c) A hold harmless practice exists if any of the following applies:
(1) The State (or other unit of government) provides for a direct or indirect non-Medicaid payment to those providers or others making, or responsible for, the donation, and the payment amount is positively correlated to the donation. A positive correlation includes any positive relationship between these variables, even if not consistent over time.
(2) All or any portion of the Medicaid payment to the donor, provider class, or related entity, varies based only on the amount of the donation, including where Medicaid payment is conditional on receipt of the donation.
(3) The State (or other unit of government) receiving the donation provides for any direct or indirect payment, offset, or waiver such that the provision of that payment, offset, or waiver directly or indirectly guarantees to return any portion of the donation to the provider (or other parties responsible for the donation).
(d) CMS will presume provider-related donations to be bona fide if the voluntary payments, including, but not limited to, gifts, contributions, presentations or awards, made by or on behalf of individual health care providers to the State, county, or any other unit of local government does not exceed—
(1) $5,000 per year in the case of an individual provider donation; or
(2) $50,000 per year in the case of a donation from any health care organizational entity.
(e) To the extent that a donation presumed to be bona fide contains a hold harmless provision, as described in paragraph (c) of this section, it will not be considered a bona fide donation. When provider-related donations are not bona fide, CMS will deduct this amount from the State's medical assistance expenditures before calculating FFP. This offset will apply to all years the State received such donations and any subsequent fiscal year in which a similar donation is received.
[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]
§ 433.55
Health care-related taxes defined.
(a) A health care-related tax is a licensing fee, assessment, or other mandatory payment that is related to—
(1) Health care items or services;
(2) The provision of, or the authority to provide, the health care items or services; or
(3) The payment for the health care items or services.
(b) A tax will be considered to be related to health care items or services under paragraph (a)(1) of this section if at least 85 percent of the burden of the tax revenue falls on health care providers.
(c) A tax is considered to be health care related if the tax is not limited to health care items or services, but the treatment of individuals or entities providing or paying for those health care items or services is different than the tax treatment provided to other individuals or entities.
(d) A health care-related tax does not include payment of a criminal or civil fine or penalty, unless the fine or penalty was imposed instead of a tax.
(e) Health care insurance premiums and health maintenance organization premiums paid by an individual or group to ensure coverage or enrollment are not considered to be payments for health care items and services for purposes of determining whether a health care-related tax exists.
§ 433.56
Classes of health care services and providers defined.
(a) For purposes of this subpart, each of the following will be considered as a separate class of health care items or services:
(1) Inpatient hospital services;
(2) Outpatient hospital services;
(3) Nursing facility services (other than services of intermediate care facilities for 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]
§ 433.57
General rules regarding revenues from provider-related donations and health care-related taxes.
Effective January 1, 1992, CMS will deduct from a State's expenditures for medical assistance, before calculating FFP, funds from provider-related donations and revenues generated by health care-related taxes received by a State or unit of local government, in accordance with the requirements, conditions, and limitations of this subpart, if the donations and taxes are not—
(a) Permissible provider-related donations, as specified in § 433.66(b); or
(b) Health care-related taxes, as specified in § 433.68(b).
[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9698, Feb. 22, 2008]
§§ 433.58-433.60
[Reserved]
§ 433.66
Permissible provider-related donations.
(a) General rule. (1) Except as specified in paragraph (a)(2) of this section, a State may receive revenues from provider-related donations without a reduction in FFP, only in accordance with the requirements of this section.
(2) The provisions of this section relating to provider-related donations for outstationed eligibility workers are effective on October 1, 1992.
(b) Permissible donations. Subject to the limitations specified in § 433.67, a State may receive, without a reduction in FFP, provider-related donations that meet at least one of the following requirements:
(1) The donations must be bona fide donations, as defined in § 433.54; or
(2) The donations are made by a hospital, clinic, or similar entity (such as a Federally-qualified health center) for the direct costs of State or local agency personnel who are stationed at the facility to determine the eligibility (including eligibility redeterminations) of individuals for Medicaid or to provide outreach services to eligible (or potentially eligible) Medicaid individuals. Direct costs of outstationed eligibility workers refers to the costs of training, salaries and fringe benefits associated with each outstationed worker and similar allocated costs of State or local agency support staff, and a prorated cost of outreach activities applicable to the outstationed workers at these sites. The prorated costs of outreach activities will be calculated taking the percent of State outstationed eligibility workers at a facility to total outstationed eligibility workers in the State, and multiplying the percent by the total cost of outreach activities in the State. Costs for such items as State agency overhead and provider office space are not allowable for this purpose.
[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, 2008]
§ 433.67
Limitations on level of FFP for permissible provider-related donations.
(a)(1) Limitations on bona fide donations. There are no limitations on the amount of bona fide provider-related donations that a State may receive without a reduction in FFP, as long as the bona fide donations meet the requirements of § 433.66(b)(1).
(2) Limitations on donations for outstationed eligibility workers. Effective October 1, 1992, the maximum amount of provider-related donations for outstationed eligibility workers, as described in § 433.66(b)(2), that a State may receive without a reduction in FFP may not exceed 10 percent of a State's medical assistance administrative costs (both the Federal and State share), excluding the costs of family planning activities. The 10 percent limit for provider-related donations for outstationed eligibility workers is not included in the limit in effect through September 30, 1995, for health care-related taxes as described in § 433.70.
(b) Calculation of FFP. CMS will deduct from a State's quarterly medical assistance expenditures, before calculating FFP, any provider-related donations received in that quarter that do not meet the requirements of § 433.66(b)(1) and provider donations for outstationed eligibility workers in excess of the limits specified under paragraph (a)(2) of this section.
[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, 2008]
§ 433.68
Permissible health care-related taxes.
(a) General rule. A State may receive health care-related taxes, without a reduction in FFP, only in accordance with the requirements of this section.
(b) Permissible health care-related taxes. Subject to the limitations specified in § 433.70, a State may receive, without a reduction in FFP, health care-related taxes if all of the following are met:
(1) The taxes are broad based, as specified in paragraph (c) of this section;
(2) The taxes are uniformly imposed throughout a jurisdiction, as specified in paragraph (d) of this section; and
(3) The tax program does not violate the hold harmless provisions specified in paragraph (f) of this section.
(c) Broad based health care-related taxes. (1) A health care-related tax will be considered to be broad based if the tax is imposed on at least all health care items or services in the class or providers of such items or services furnished by all non-Federal, non-public providers in the State, and is imposed uniformly, as specified in paragraph (d) of this section.
(2) If a health care-related tax is imposed by a unit of local government, the tax must extend to all items or services or providers (or to all providers in a class) in the area over which the unit of government has jurisdiction.
(3) A State may request a waiver from CMS of the requirement that a tax program be broad based, in accordance with the procedures specified in § 433.72. Waivers from the uniform and broad-based requirements will automatically be granted in cases of variations in licensing and certification fees for providers if the amount of such fees is not more than $1,000 annually per provider and the total amount raised by the State from the fees is used in the administration of the licensing or certification program.
(d) Uniformly imposed health care-related taxes. A health care-related tax will be considered to be imposed uniformly even if it excludes Medicaid or Medicare payments (in whole or in part), or both; or, in the case of a health care-related tax based on revenues or receipts with respect to a class of items or services (or providers of items or services), if it excludes either Medicaid or Medicare revenues with respect to a class of items or services, or both. The exclusion of Medicaid revenues must be applied uniformly to all providers being taxed.
(1) A health care-related tax will be considered to be imposed uniformly if it meets any one of the following criteria:
(i) If the tax is a licensing fee or similar tax imposed on a class of health care services (or providers of those health care items or services), the tax is the same amount for every provider furnishing those items or services within the class.
(ii) If the tax is a licensing fee or similar tax imposed on a class of health care items or services (or providers of those items or services) on the basis of the number of beds (licensed or otherwise) of the provider, the amount of the tax is the same for each bed of each provider of those items or services in the class.
(iii) If the tax is imposed on provider revenue or receipts with respect to a class of items or services (or providers of those health care items or services), the tax is imposed at a uniform rate for all services (or providers of those items or services) in the class on all the gross revenues or receipts, or on net operating revenues relating to the provision of all items or services in the State, unit, or jurisdiction. Net operating revenue means gross charges of facilities less any deducted amounts for bad debts, charity care, and payer discounts.
(iv) The tax is imposed on items or services on a basis other than those specified in paragraphs (d)(1) (i) through (iii) of this section, e.g., an admission tax, and the State establishes to the satisfaction of the Secretary that the amount of the tax is the same for each provider of such items or services in the class.
(2) A tax imposed with respect to a class of health care items or services will not be considered to be imposed uniformly if it meets either one of the following two criteria:
(i) The tax provides for credits, exclusions, or deductions which have as its purpose, or results in, the return to providers of all, or a portion, of the tax paid, and it results, directly or indirectly, in a tax program in which—
(A) The net impact of the tax and payments is not generally redistributive, as specified in paragraph (e) of this section; and
(B) The amount of the tax is directly correlated to payments under the Medicaid program.
(ii) The tax holds taxpayers harmless for the cost of the tax, as described in paragraph (f) of this section.
(3) If a tax does not meet the criteria specified in paragraphs (d)(1)(i) through (iv) of this section, but the State establishes that the tax is imposed uniformly in accordance with the procedures for a waiver specified in § 433.72, the tax will be treated as a uniform tax.
(e) Generally redistributive. A tax will be considered to be generally redistributive if it meets the requirements of this paragraph. If the State desires waiver of only the broad-based tax requirement, it must demonstrate compliance with paragraph (e)(1) of this section. If the State desires waiver of the uniform tax requirement, whether or not the tax is broad-based, it must demonstrate compliance with paragraph (e)(2) of this section.
(1) Waiver of broad-based requirement only. This test is applied on a per class basis to a tax that is imposed on all revenues but excludes certain providers. For example, a tax that is imposed on all revenues (including Medicare and Medicaid) but excludes teaching hospitals would have to meet this test. This test cannot be used when a State excludes any or all Medicaid revenue from its tax in addition to the exclusion of providers, since the test compares the proportion of Medicaid revenue being taxed under the proposed tax with the proportion of Medicaid revenue being taxed under a broad-based tax.
(i) A State seeking waiver of the broad-based tax requirement only must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by:
(A) Calculating the proportion of the tax revenue applicable to Medicaid if the tax were broad based and applied to all providers or activities within the class (called P1);
(B) Calculating the proportion of the tax revenue applicable to Medicaid under the tax program for which the State seeks a waiver (called P2); and
(C) Calculating the value of P1/P2.
(ii) If the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 1, CMS will automatically approve the waiver request.
(iii) If a tax is enacted and in effect prior to August 13, 1993, and the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 0.90, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met:
(A) The value of P1/P2 is at least 0.90; and
(B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxed:
(1) Providers that furnish no services within the class in the State;
(2) Providers that do not charge for services within the class;
(3) Rural hospitals (defined as any hospital located outside of an urban area as defined in § 412.62(f)(1)(ii) of this chapter);
(4) Sole community hospitals as defined in § 412.92(a) of this chapter;
(5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act;
(6) Financially distressed hospitals if:
(i) A financially distressed hospital is defined by the State law;
(ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and
(iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax;
(7) Psychiatric hospitals; or
(8) Hospitals owned and operated by HMOs.
(iv) If a tax is enacted and in effect after August 13, 1993, and the State demonstrates to the Secretary's satisfaction that the value of P1/P2 is at least 0.95, CMS will review the waiver request. Such a waiver request will be approved only if the following two criteria are met:
(A) The value of P1/P2 is at least 0.95; and
(B) The tax complies with the provisions of § 433.68(e)(1)(iii)(B).
(2) Waiver of uniform tax requirement. This test is applied on a per class basis to all taxes that are not uniform. This includes those taxes that are neither broad based (as specified in § 433.68(c)) nor uniform (as specified in § 433.68(d)).
(i) A State seeking waiver of the uniform tax requirement (whether or not the tax is broad based) must demonstrate that its proposed tax plan meets the requirement that its plan is generally redistributive by:
(A) Calculating, using ordinary least squares, the slope (designated as (B) (that is. the value of the x coefficient) of two linear regressions, in which the dependent variable is each provider's percentage share of the total tax paid by all taxpayers during a 12-month period, and the independent variable is the taxpayer's “Medicaid Statistic”. The term “Medicaid Statistic” means the number of the provider's taxable units applicable to the Medicaid program during a 12-month period. If, for example, the State imposed a tax based on provider charges, the amount of a provider's Medicaid charges paid during a 12-month period would be its “Medicaid Statistic”. If the tax were based on provider inpatient days, the number of the provider's Medicaid days during a 12-month period would be its “Medicaid Statistic”. For the purpose of this test, it is not relevant that a tax program exempts Medicaid from the tax.
(B) Calculating the slope (designated as B1) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State's tax program, if it were broad based and uniform.
(C) Calculating the slope (designated as B2) of the linear regression, as described in paragraph (e)(2)(i) of this section, for the State's tax program, as proposed.
(ii) If the State demonstrates to the Secretary's satisfaction that the value of B1/B2 is at least 1, CMS will automatically approve the waiver request.
(iii) If the State demonstrates to the Secretary's satisfaction that the value of B1/B2 is at least 0.95, CMS will review the waiver request. Such a waiver will be approved only if the following two criteria are met:
(A) The value of B1/B2 is at least 0.95; and
(B) The tax excludes or provides credits or deductions only to one or more of the following providers of items and services within the class to be taxes:
(1) Providers that furnish no services within the class in the State;
(2) Providers that do not charge for services within the class;
(3) Rural hospitals (defined as any hospital located outside of an urban area as defined in § 412.62(f)(1)(ii) of this chapter;
(4) Sole community hospitals as defined in § 412.92(a) of this chapter;
(5) Physicians practicing primarily in medically underserved areas as defined in section 1302(7) of the Public Health Service Act;
(6) Financially distressed hospitals if:
(i) A financially distressed hospital is defined by the State law;
(ii) The State law specifies reasonable standards for determining financially distressed hospitals, and these standards are applied uniformly to all hospitals in the State; and
(iii) No more than 10 percent of nonpublic hospitals in the State are exempt from the tax;
(7) Psychiatric hospitals; or
(8) Providers or payers with tax rates that vary based exclusively on regions, but only if the regional variations are coterminous with preexisting political (and not special purpose) boundaries. Taxes within each regional boundary must meet the broad-based and uniformity requirements as specified in paragraphs (c) and (d) of this section.
(iv) A B1/B2 value of 0.70 will be applied to taxes that vary based exclusively on regional variations, and enacted and in effect prior to November 24, 1992, to permit such variations.
(f) Hold harmless. A taxpayer will be considered to be held harmless under a tax program if any of the following conditions applies:
(1) The State (or other unit of government) imposing the tax provides for a direct or indirect non-Medicaid payment to those providers or others paying the tax and the payment amount is positively correlated to either the tax amount or to the difference between the Medicaid payment and the tax amount. A positive correlation includes any positive relationship between these variables, even if not consistent over time.
(2) All or any portion of the Medicaid payment to the taxpayer varies based only on the tax amount, including where Medicaid payment is conditional on receipt of the tax amount.
(3) The State (or other unit of government) imposing the tax provides for any direct or indirect payment, offset, or waiver such that the provision of that payment, offset, or waiver directly or indirectly guarantees to hold taxpayers harmless for all or any portion of the tax amount.
(i)(A) An indirect guarantee will be determined to exist under a two prong “guarantee” test. If the health care-related tax or taxes on each health care class are applied at a rate that produces revenues less than or equal to 6 percent of the revenues received by the taxpayer, the tax or taxes are permissible under this test. The phrase “revenues received by the taxpayer” refers to the net patient revenue attributable to the assessed permissible class of health care items or services. However, for the period of January 1, 2008 through September 30, 2011, the applicable percentage of net patient service revenue is 5.5 percent. Compliance in State fiscal year 2008 will be evaluated from January 1, 2008 through the last day of State fiscal year 2008. Beginning with State fiscal year 2009 the 5.5 percent tax collection will be measured on an annual State fiscal year basis.
(B) When the tax or taxes produce revenues in excess of the applicable percentage of the revenue received by the taxpayer, CMS will consider an indirect hold harmless provision to exist if 75 percent or more of the taxpayers in the class receive 75 percent or more of their total tax costs back in enhanced Medicaid payments or other State payments. The second prong of the indirect hold harmless test is applied in the aggregate to all health care taxes applied to each class. If this standard is violated, the amount of tax revenue to be offset from medical assistance expenditures is the total amount of the taxpayers' revenues received by the State.
(ii) [Reserved]
[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43181, Aug. 13, 1993; 62 FR 53572, Oct. 15, 1997; 73 FR 9698, Feb. 22, 2008]
§ 433.70
Limitation on level of FFP for revenues from health care-related taxes.
(a) Limitations. Beginning October 1, 1995, there is no limitation on the amount of health care-related taxes that a State may receive without a reduction in FFP, as long as the health care-related taxes meet the requirements specified in § 433.68.
(b) Calculation of FFP. CMS will deduct from a State's medical assistance expenditures, before calculating FFP, revenues from health care-related taxes that do not meet the requirements of § 433.68 and any health care-related taxes in excess of the limits specified in paragraph (a)(1) of this section.
[57 FR 55138, Nov. 24, 1992, as amended at 73 FR 9699, Feb. 22, 2008]
§ 433.72
Waiver provisions applicable to health care-related taxes.
(a) Bases for requesting waiver. (1) A State may submit to CMS a request for a waiver if a health care-related tax does not meet any or all of the following:
(i) The tax does not meet the broad based criteria specified in § 433.68c); and/or
(ii) The tax is not imposed uniformly but meets the criteria specified in § 433.68(d)(2) or (d)(3).
(2) When a tax that meets the criteria specified in paragraph (a)(1) of this section is imposed on more than one class of health care items or services, a separate waiver must be obtained for each class of health care items and services subject to the tax.
(b) Waiver conditions. In order for CMS to approve a waiver request that would permit a State to receive tax revenue (within specified limitations) without a reduction in FFP, the State must demonstrate, to CMS's satisfaction, that its tax program meets all of the following requirements:
(1) The net impact of the tax and any payments made to the provider by the State under the Medicaid program is generally redistributive, as described in § 433.68(e);
(2) The amount of the tax is not directly correlated to Medicaid payments; and
(3) The tax program does not fall within the hold harmless provisions specified in § 433.68(f).
(c) Effective date. A waiver will be effective:
(1) The date of enactment of the tax for programs in existence prior to August 13, 1993 or;
(2) For tax programs commencing on or after August 13, 1993, on the first day in the quarter in which the waiver is received by CMS.
[57 FR 55138, Nov. 24, 1992, as amended at 58 FR 43182, Aug. 13, 1993]
§ 433.74
Reporting requirements.
(a) Beginning with the first quarter of Federal fiscal year 1993, each State must submit to CMS quarterly summary information on the source and use of all provider-related donations (including all bona fide and presumed-to-be bona fide donations) received by the State or unit of local government, and health care-related taxes collected. Each State must also provide any additional information requested by the Secretary related to any other donations made by, or any taxes imposed on, health care providers. States' reports must present a complete, accurate, and full disclosure of all of their donation and tax programs and expenditures.
(b) Each State must provide the summary information specified in paragraph (a) of this section on a quarterly basis in accordance with procedures established by CMS.
(c) Each State must maintain, in readily reviewable form, supporting documentation that provides a detailed description and legal basis for each donation and tax program being reported, as well as the source and use of all donations received and taxes collected. This information must be made available to Federal reviewers upon request.
(d) If a State fails to comply with the reporting requirements contained in this section, future grant awards will be reduced by the amount of FFP CMS estimates is attributable to the sums raised by tax and donation programs as to which the State has not reported properly, until such time as the State complies with the reporting requirements. Deferrals and/or disallowances of equivalent amounts may also be imposed with respect to quarters for which the State has failed to report properly. Unless otherwise prohibited by law, FFP for those expenditures will be released when the State complies with all reporting requirements.

Subpart C—Mechanized Claims Processing and Information Retrieval Systems
§ 433.110
Basis, purpose, and applicability.
(a) This subpart implements the following sections of the Act:
(1) Section 1903(a)(3) of the Act, which provides for FFP in State expenditures for the design, development, or installation of mechanized claims processing and information retrieval systems and for the operation of certain systems. Additional HHS regulations and CMS procedures for implementing these regulations are in 45 CFR part 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]
§ 433.111
Definitions.
For purposes of this section:
(a) The following terms are defined at 45 CFR part 95, subpart F § 95.605:
“Advance Planning Document”; “Design” or “System Design”; “Development”; “Enhancement”; “Hardware”; “Installation”; “Operation”; and, “Software”.
(b) “Mechanized claims processing and information retrieval system” 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 § 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]
§ 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]
§ 433.113
Reduction of FFP for failure to operate a system and obtain initial approval.
(a) Except as waived under § 433.130 or 433.131, FFP will be reduced as specified 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]
§ 433.114
Procedures for obtaining initial approval; notice of decision.
(a) To obtain initial approval, the Medicaid agency must inform CMS in writing that the system meets the conditions specified in § 433.116(c) through (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 § 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]
§ 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 § 433.112(b) (1) through (4) and (7) through (9), as periodically modified under § 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;
(iii) The date on which the service was furnished; and
(iv) The amount of the payment made under the plan for the service; and
(2) Must not specify confidential services (as defined by the State) and must not be sent if the only service furnished was confidential.
(g) The system must provide both patient and provider profiles for program management and utilization review purposes.
(h) If the State has a Medicaid fraud control unit certified under section 1903(q) of the Act and § 455.300 of this chapter, the Medicaid agency must have procedures to assure that information on probable fraud or abuse that is obtained from, or developed by, the system is made available to that unit. (See § 455.21 of this chapter for State plan requirements.)
[45 FR 14213, Mar. 5, 1980. Redesignated and amended at 50 FR 30847, July 30, 1985; 55 FR 4375, Feb. 7, 1990]
§ 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 § 433.112; and
(2) 75 percent in expenditures for operation of an approved replacement system in accordance with the provisions of § 433.116(b) through (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 § 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]
§ 433.119
Conditions for reapproval; notice of decision.
(a) CMS will review at least once every three years each system operation initially approved under § 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 § 433.112(b) (1), (3), (4), and (7) through (9).
(2) The system meets the conditions of § 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]
§ 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 § 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]
§ 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 § 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]
§ 433.122
Reapproval of a disapproved system.
When FFP has been reduced under § 433.120(a), and CMS determines upon subsequent review that the system meets all current performance standards, system requirements and other conditions of reapproval, the following provisions apply:
(a) CMS will resume FFP in expenditures for system operations at the 75 percent level beginning with the quarter following the review determination that the system again meets conditions of reapproval.
(b) CMS may retroactively waive a reduction of FFP in expenditures for system operations if CMS determines that the waiver could improve the administration of the State Medicaid plan. However, CMS cannot waive this reduction for any quarter before the fourth quarter immediately preceding the quarter in which CMS issues the determination (as part of the review process) stating that the system is reapproved.
[54 FR 41974, Oct. 13, 1989]
§ 433.123
Notification of changes in system requirements, performance standards or other conditions for approval or reapproval.
(a) Whenever CMS modifies system requirements or other conditions for approval under § 433.112 or § 433.116, CMS will—
(1) Publish a notice in the Federal Register making available the proposed changes for public comment;
(2) Respond in a subsequent Federal Register notice to comments received; and
(3) Issue the new or modified requirements or conditions in the State Medicaid Manual.
(b) For changes in system requirements or other conditions for approval, CMS will allow an appropriate period for Medicaid agencies to meet the requirement determining this period on the basis of the requirement's complexity and other relevant factors.
(c) Whenever CMS modifies performance standards and other conditions for reapproval under § 433.119, CMS will notify Medicaid agencies at least one calendar quarter before the review period to which the new or modified standards or conditions apply.
[57 FR 38782, Aug. 27, 1992]
§ 433.127
Termination of FFP for failure to provide access to claims processing and information retrieval systems.
CMS will terminate FFP at any time if the Medicaid agency fails to provide State and Federal representatives with full access to the system, including on-site inspection. CMS may request such access at any time to determine whether the conditions in this subpart are being met.
[43 FR 45201, Sept. 29, 1978. Redesignated and amended at 50 FR 30847 and 30848, July 30, 1985]
§ 433.130
Waiver of conditions of initial operation and approval.
(a) CMS will waive requirements for initial operation and approval of systems under § 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]
§ 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.
§ 433.135
Basis and purpose.
This subpart implements sections 1902(a)(25), 1902(a)(45), 1903(d)(2), 1903(o), 1903(p), and 1912 of the Act by setting forth State plan requirements concerning—
(a) The legal liability of third parties to pay for services provided under the plan;
(b) Assignment to the State of an individual's rights to third party payments; and
(c) Cooperative agreements between the Medicaid agency and other entities for obtaining third party payments.
[50 FR 46664, Nov. 12, 1985]
§ 433.136
Definitions.
For purposes of this subpart—
Private insurer means:
(1) Any commercial insurance company offering health or casualty insurance to individuals or groups (including both experience-rated insurance contracts and indemnity contracts);
(2) Any profit or nonprofit prepaid plan offering either medical services or full or partial payment for services included in the State plan; and
(3) Any organization administering health or casualty insurance plans for professional associations, unions, fraternal groups, employer-employee benefit plans, and any similar organization offering these payments or services, including self-insured and self-funded plans.
Third party means any individual, entity or program that is or may be liable to pay all or part of the expenditures for medical assistance furnished under a State plan.
Title IV-D agency means the organizational unit in the State that has the responsibility for administering or supervising the administration of a State plan for child support enforcement under title IV-D of the Act.
[49 FR 8984, Feb. 11, 1980, as amended at 50 FR 46664, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]
§ 433.137
State plan requirements.
(a) A State plan must provide that the requirements of §§ 433.138 and 433.139 are met for identifying third parties liable for payment of services under the plan and for payment of claims involving third parties.
(b) A State plan must provide that—
(1) The requirements of §§ 433.145 through 433.148 are met for assignment of rights to benefits, cooperation with the agency in obtaining medical support or payments, and cooperation in identifying and providing information to assist the State in pursuing any liable third parties; and
(2) The requirements of §§ 433.151 through 433.154 are met for cooperative agreements and incentive payments for third party collections.
(c) The requirements of paragraph (b)(1) of this section relating to assignment of rights to benefits and cooperation in obtaining medical support or payments and paragraph (b)(2) of this section are effective for medical assistance furnished on or after October 1, 1984. The requirements of paragraph (b)(1) of this section relating to cooperation in identifying and providing information to assist the State in pursuing liable third parties are effective for medical assistance furnished on or after July 1, 1986.
[50 FR 46665, Nov. 12, 1985, as amended at 55 FR 48606, Nov. 21, 1990; 55 FR 52130, Dec. 19, 1990; 60 FR 35502, July 10, 1995]
§ 433.138
Identifying liable third parties.
(a) Basic provisions. The agency must take reasonable measures to determine the legal liability of the third parties who are liable to pay for services furnished under the plan. At a minimum, such measures must include the requirements specified in paragraphs (b) through (k) of this section, unless waived under paragraph (l) of this section.
(b) Obtaining health insurance information: Initial application and redetermination processes for Medicaid eligibility. (1) If the Medicaid agency determines eligibility for Medicaid, it must, during the initial application and each redetermination process, obtain from the applicant or 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 § 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.
(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 § 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 § 433.139(b) through (f), the agency must take the following actions:
(1) Except as specified in paragraph (d)(2) of this section, as part of the data exchange requirements under § 435.945 of this chapter, from the State wage information collection agency (SWICA) defined in § 435.4 of this chapter and from the SSA wage and earnings files data as specified in § 435.948(a)(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 § 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 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 § 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 § 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 § 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 § 433.139 (b) through (f); and
(ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(1)(i) of this section.
(2) Health insurance information and workers' compensation data exchanges. With respect to information obtained under paragraphs (b) and (d)(4)(i) of this section—
(i) Within 60 days, the agency must followup on such information (if appropriate) in order to identify legally liable third party resources and incorporate such information into the eligibility case file and into its third party data base and third party recovery unit so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f); and
(ii) The State plan must describe the methods the agency uses for meeting the requirements of paragraph (g)(2)(i) of this section.
(3) State motor vehicle accident report file data exchanges. With respect to information obtained under paragraph (d)(4)(ii) of this section—
(i) The State plan must describe the methods the agency uses for following up on such information in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f);
(ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and
(iii) The State plan must specify timeframes for incorporation of the information.
(4) Diagnosis and trauma code edits. With respect to the paid claims identified under paragraph (e) of this section—
(i) The State plan must describe the methods the agency uses to follow up on such claims in order to identify legally liable third party resources so the agency may process claims under the third party liability payment procedures specified in § 433.139 (b) through (f) (Methods must include a procedure for periodically identifying those trauma codes that yield the highest third party collections and giving priority to following up on those codes.);
(ii) After followup, the agency must incorporate all information that identifies legally liable third party resources into the eligibility case file and into its third party data base and third party recovery unit; and
(iii) The State plan must specify the timeframes for incorporation of the information.
(h) Obtaining other information and data exchanges: Safeguarding information. (1) The agency must safeguard information obtained from and exchanged under this section with other agencies in accordance with the requirements set forth in part 431, subpart F of this chapter.
(2) Before requesting information from, or releasing information to other agencies to identify legally liable third party resources under paragraph (d) of this section the agency must execute data exchange agreements with those agencies. The agreements, at a minimum, must specify—
(i) The information to be exchanged;
(ii) The titles of all agency officials with the authority to request third party information;
(iii) The methods, including the formats to be used, and the timing for requesting and providing the information;
(iv) The safeguards limiting the use and disclosure of the information as required by Federal or State law or regulations; and
(v) The method the agency will use to reimburse reasonable costs of furnishing the information if payment is requested.
(i) Reimbursement. The agency must, upon request, reimburse an agency for the reasonable costs incurred in furnishing information under this section to the Medicaid agency.
(j) Reports. The agency must provide such reports with respect to the data exchanges and trauma code edits set forth in paragraphs (d)(1) through (d)(4) and paragraph (e) of this section, respectively, as the Secretary prescribes for the purpose of determining compliance under § 433.138 and evaluating the effectiveness of the third party liability identification system. However, if the State is not meeting the provisions of paragraph (e) of this section because it has been granted a waiver of those provisions under paragraph (l) of this section, it is not required to provide the reports required in this paragraph.
(k) Integration with the State mechanized claims processing and information retrieval system. Basic requirement—Development of an action plan. (1) If a State has a mechanized claims processing and information retrieval system approved by CMS under subpart C of this part, the agency must have an action plan for pursuing third party liability claims and the action plan must be integrated with the mechanized claims processing and information retrieval system.
(2) The action plan must describe the actions and methodologies the State will follow to—
(i) Identify third parties;
(ii) Determine the liability of third parties;
(iii) Avoid payment of third party claims as required in § 433.139;
(iv) Recover reimbursement from third parties after Medicaid claims payment as required in § 433.139; and,
(v) Record information and actions relating to the action plan.
(3) The action plan must be consistent with the conditions for reapproval set forth in § 433.119. The portion of the plan which is integrated with MMIS is monitored in accordance with those conditions and if the conditions are not met; it is subject to FFP reduction in accordance with procedures set forth in § 433.120. The State is not subject to any other penalty as a result of other monitoring, quality control, or auditing requirements for those items in the action plan.
(4) The agency must submit its action plan to the CMS Regional Office within 120 days from the date CMS issues implementing instructions for the State Medicaid Manual. If a State does not have an approved MMIS on the date of issuance of the State Medicaid Manual but subsequently implements an MMIS, the State must submit its action plan within 90 days from the date the system is operational. The CMS Regional Office approves or disapproves the action plan.
(l) Waiver of requirements. (1) The agency may request initial and continuing waiver of the requirements to determine third party liability found in paragraphs (c), (d)(4), (d)(5), (e), (f), (g)(1), (g)(2), (g)(3), and (g)(4) of this section if the State determines the activity to be not cost-effective. An activity would not be cost-effective if the cost of the required activity exceeds the third party liability recoupment and the required activity accomplishes, at the same or at a higher cost, the same objective as another activity that is being performed by the State.
(i) The agency must submit a request for waiver of the requirement in writing to the CMS regional office.
(ii) The request must contain adequate documentation to establish that to meet a requirement specified by the agency is not cost-effective. Examples of documentation are claims recovery data and a State analysis documenting a cost-effective alternative that accomplished the same task.
(iii) The agency must agree, if a waiver is granted, to notify CMS of any event that occurs that changes the conditions upon which the waiver was approved.
(2) CMS will review a State's request to have a requirement specified under paragraph (l)(1) of this section waived and will request additional information from the State, if necessary. CMS will notify the State of its approval or disapproval determination within 30 days of receipt of a properly documented request.
(3) CMS may rescind a waiver at any time that it determines that the agency no longer meets the criteria for approving the waiver. If the waiver is rescinded, the agency has 6 months from the date of the rescission notice to meet the requirement that had been waived.
[52 FR 5975, Feb. 27, 1987, as amended at 54 FR 8741, Mar. 2, 1989; 55 FR 1432, Jan. 16, 1990; 55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, 1995]
§ 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 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.
(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]
§ 433.140
FFP and repayment of Federal share.
(a) FFP is not available in Medicaid payments if—
(1) The agency failed to fulfill the requirements of §§ 433.138 and 433.139 with regard to establishing liability and seeking reimbursement from a third party;
(2) The agency received reimbursement from a liable third party; or
(3) A private insurer would have been obligated to pay for the service except that its insurance contract limits or excludes payments if the individual is eligible for Medicaid.
(b) FFP is available at the 50 percent rate for the agency's expenditures in carrying out the requirements of this subpart.
(c) If the State receives FFP in Medicaid payments for which it receives third party reimbursement, the State must pay the Federal government a portion of the reimbursement determined in accordance with the FMAP for the State. This payment may be reduced by the total amount needed to meet the incentive payment in § 433.153.

Assignment of Rights to Benefits
§ 433.145
Assignment of rights to benefits—State plan requirements.
(a) A State plan must provide that, as a condition of eligibility, each legally able applicant or 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 §§ 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]
§ 433.146
Rights assigned; assignment method.
(a) Except as specified in paragraph (b) of this section, the agency must require the individual to assign to the State—
(1) His own rights to any medical care support available under an order of a court or an administrative agency, and any third party payments for medical care; and
(2) The rights of any other individual eligible under the plan, for whom he can legally make an assignment.
(b) Assignment of rights to benefits may not include assignment of rights to Medicare benefits.
(c) If assignment of rights to benefits is automatic because of State law, the agency may substitute such an assignment for an individual executed assignment, as long as the agency informs the individual of the terms and consequences of the State law.
§ 433.147
Cooperation in establishing 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 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]
§ 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 § 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
§ 433.151
Cooperative agreements and incentive payments—State plan requirements.
For medical assistance furnished on or after October 1, 1984—
(a) A State plan must provide for entering into written cooperative agreements for enforcement of rights to and collection of third party benefits with at least one of the following entities: The State title IV-D agency, any appropriate agency of any State, and appropriate courts and law enforcement officials. The agreements must be in accordance with the provisions of § 433.152.
(b) A State plan must provide that the requirements for making incentive payments and for distributing third party collections specified in §§ 433.153 and 433.154 are met.
[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. 2, 1985]
§ 433.152
Requirements for cooperative agreements for third party collections.
(a) Except as specified in paragraph (b) of this section, the State agency may develop the specific terms of cooperative agreements with other agencies as it determines appropriate for individual circumstances.
(b) Agreements with title IV-D agencies must specify that 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]
§ 433.153
Incentive payments to States and political subdivisions.
(a) When payments are required. The agency must make an incentive payment to a political subdivision, a legal entity of the subdivision such as a prosecuting or district attorney or a friend of the court, or another State that enforces and collects medical support and payments for the agency.
(b) Amount and source of payment. The incentive payment must equal 15 percent of the amount collected, and must be made from the Federal share of that amount.
(c) Payment to two or more jurisdictions. If more than one State or political subdivision is involved in enforcing and collecting support and payments:
(1) The agency must pay all of the incentive payment to the political subdivision, legal entity of the subdivision, or another State that collected medical support and payments at the request of the agency.
(2) The political subdivision, legal entity or other State that receives the incentive payment must then divide the incentive payment equally with any other political subdivisions, legal entities, or other States that assisted in the collection, unless an alternative allocation is agreed upon by all jurisdictions involved.
§ 433.154
Distribution of collections.
The agency must distribute collections as follows—
(a) To itself, an amount equal to State Medicaid expenditures for the individual on whose right the collection was based.
(b) To the Federal Government, the Federal share of the State Medicaid expenditures, minus any incentive payment made in accordance with § 433.153.
(c) To the 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.
§ 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.
§ 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.
§ 433.304
Definitions.
As used in this subpart—
Abuse (in accordance with § 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 § 433.316.
Fraud (in accordance with § 455.2) means an intentional deception or misrepresentation made by a person with the knowledge that the deception could result in some unauthorized benefit to himself or some other person. It includes any act that constitutes fraud under applicable Federal or State law.
Overpayment means the amount paid by a Medicaid agency to a provider which is in excess of the amount that is allowable for services furnished under section 1902 of the Act and which is required to be refunded under section 1903 of the Act.
Provider (in accordance with § 400.203) means any individual or entity furnishing Medicaid services under a provider agreement with the Medicaid agency.
Recoupment means any formal action by the State or its fiscal agent to initiate recovery of an overpayment without advance official notice by reducing future payments to a provider.
Third party (in accordance with § 433.136) means an individual, entity, or program that is or may be liable to pay for all or part of the expenditures for medical assistance furnished under a State plan.
[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]
§ 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.
§ 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 § 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.
§ 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 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]
§ 433.318
Overpayments involving providers who are bankrupt or out of business.
(a) Basic rules. (1) The agency is not required to refund the Federal share of an overpayment made to a provider as required by § 433.312(a) to the extent that the State is unable to recover the overpayment because the provider has been determined bankrupt or out of business in accordance with the provisions of this section.
(2) The agency must notify the provider that an overpayment exists in any case involving a bankrupt or out-of-business provider and, if the debt has not been determined uncollectable, take reasonable actions to recover the overpayment during the 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 § 433.320.
[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, 1989]
§ 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 § 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 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 § 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 § 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.
§ 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.
Pt. 434

PART 434—CONTRACTS

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
§ 434.1
Basis and scope.
(a) Statutory basis. This part is based on section 1902(a)(4) of the Act, which requires that the State plan provide for methods of administration that the Secretary finds necessary for the proper and efficient operation of the plan.
(b) Scope. This part sets forth the requirements for contracts with certain organizations for furnishing Medicaid services or processing or paying Medicaid claims, or enchancing the agency's capability for effective administration of the program.
[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. 9, 1983, as amended at 67 FR 41095, June 14, 2002]
§ 434.2
Definitions.
As used in this part, unless the context indicates otherwise—
Fiscal agent means an entity that processes or pays vendor claims for the agency.
Health care projects grant center means an entity that—
(a) Is supported in whole or in part by Federal project grant financial assistance; and
(b) Provides or arranges for medical services to 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]
§ 434.4
State plan requirement.
If the State plan provides for contracts of the types covered by this part, the plan must also provide for meeting the applicable requirements of this part.
§ 434.6
General requirements for all contracts and subcontracts.
(a) Contracts. All contracts under this part must—
(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;
(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
§ 434.10
Contracts with fiscal agents.
Contracts with fiscal agents must—
(a) Meet the requirements of § 434.6;
(b) Include termination procedures that require the contractors to supply promptly all material necessary for continued operation of payment and related systems. This material includes—
(1) Computer programs;
(2) Data files;
(3) User and operation manuals, and other documentation;
(4) System and program documentation; and
(5) Training programs for Medicaid agency staff, their agents or designated representatives in the operation and maintenance of the system;
(c) Offer to the State one or both of the following options, if the fiscal agent or the fiscal agent's subcontractor has a proprietary right to material specified in paragraph (b) of this section:
(1) Purchasing the material; or
(2) Purchasing the use of the material through leasing or other means; and
(d) State that payment to providers will be made in accordance with part 447 of this chapter.
§ 434.12
Contracts with private nonmedical institutions.
Contracts with private nonmedical institutions must—
(a) Meet the requirements of § 434.6;
(b) Specify a capitation fee based on the cost of the services provided, in accordance with the reimbursement requirements prescribed in part 447 of this chapter; and
(c) Specify when the capitation fee must be paid.
§ 434.14
[Reserved]
Subpart C [Reserved]

Subpart D—Contracts With Health Insuring Organizations
§ 434.40
Contract requirements.
(a) Contracts with health insuring organizations that are not subject to the requirements in section 1903(m)(2)(A) must:
(1) Meet the general requirements for all contracts and subcontracts specified in § 434.6;
(2) Specify that the contractor assumes at least part of the underwriting risk and;
(i) If the contractor assumes the full underwriting risk, specify that payment of the capitation fees to the contractor during the contract period constitutes full payment by the agency for the cost of medical services provided under the contract;
(ii) If the contractor assumes less than the full underwriting risk, specify how the risk is apportioned between the agency and the contractor;
(3) Specify whether the contractor returns to the agency part of any savings remaining after the allowable costs are deducted from the capitations fees, and if savings are returned, the apportionment between agency and the contractor; and
(4) Specify the extent, if any, to which the contractor may obtain reinsurance of a portion of the underwriting risk.
(b) The contract must—
(1) Specify that the capitation fee will not exceed the limits set forth under part 447 of this chapter.
(2) Specify that, except as permitted under paragraph (b) of this section, the capitation fee paid on behalf of each 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.
§ 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]
§ 434.76
Costs under fiscal agent contracts.
Under each contract with a fiscal agent—
(a) The amount paid to the provider of medical services is a medical assistance cost; and
(b) The amount paid to the contractor for performing the agreed-upon functions is an administrative cost.
§ 434.78
Right to reconsideration of disallowance.
A Medicaid agency dissatisfied with a disallowance of FFP under this subpart may request and will be granted reconsideration in accordance with 45 CFR part 16.
Pt. 435

PART 435—ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA

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.
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 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.

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
§ 435.2
Purpose and applicability.
This part sets forth, for the 50 States, the District of Columbia, the Northern Mariana Islands, and American Samoa—
(a) The eligibility provisions that a State plan must contain;
(b) The mandatory and optional groups of individuals to whom Medicaid is provided under a State plan;
(c) The eligibility requirements and procedures that the Medicaid agency must use in determining and redetermining eligibility, and requirements it may not use;
(d) The availability of FFP for providing Medicaid and for administering the eligibility provisions of the plan; and
(e) Other requirements concerning eligibility determinations, such as use of an institutionalized individual's income for the cost of care.
[43 FR 45204, Sept. 29, 1978, as amended at 44 FR 17937, Mar. 23, 1979; 51 FR 41350, Nov. 14, 1986]
§ 435.3
Basis.
(a) This part implements the following sections of the Act and public laws that mandate eligibility requirements and standards:
402(a)(22)Eligibility of deemed 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 230Deemed eligibility of certain essential persons.
Pub. L. 93-66, section 231Deemed eligibility of certain persons in medical institutions.
Pub. L. 93-66, section 232Deemed eligibility of certain blind and disabled medically indigent persons.
Pub. L. 93-233, section 13(c)Deemed eligibility of certain individuals receiving mandatory State supplementary payments.
Pub. L. 94-566, section 503Deemed 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 9406Payment for emergency medical services provided to aliens.
Pub. L. 99-603, section 201Aliens 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 302Aliens 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 303Aliens 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:
1618Requirement 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]
§ 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, § 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 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 § 457.10 of this chapter); or
(iii) Resides in a State that has a Medicaid applicable income level (as defined at § 457.10 of this chapter) and has 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]
§ 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
§ 435.100
Scope.
This subpart prescribes requirements for coverage of categorically needy individuals.

Mandatory Coverage of Families and Children
§ 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.
§ 435.112
Families terminated from AFDC because of increased earnings or hours of employment.
(a) If a family loses AFDC solely because of increased income from employment or increased hours of employment, the agency must continue to provide Medicaid for 4 months to all members of the family if—
(1) The family received AFDC in any 3 or more months during the 6-month period immediately before the month in which it became ineligible for AFDC; and
(2) At least one member of the family is employed throughout the 4-month period, although this need not be the same member for the whole period.
(b) The 4 calendar month period begins on the date AFDC is terminated. If AFDC benefits are terminated retroactively, the 4 calendar month period also begins retroactively with the first month in which AFDC was erroneously paid.
[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]
§ 435.113
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]
§ 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.
§ 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 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 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
§ 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]
§ 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 § 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 § 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.
(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 § 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 § 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 § 435.916. At that time, the State must collect documentary evidence of citizenship and identity as required under § 435.406.
[72 FR 38690, July 13, 2007]

Mandatory Coverage of Qualified Family Members
§ 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 § 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
§ 435.120
Individuals receiving SSI.
Except as allowed under § 435.121, the agency must provide Medicaid to aged, blind, and disabled individuals or couples who are receiving or are deemed to be receiving SSI. This includes individuals who are—
(a) Receiving SSI pending a final determination of blindness or disability;
(b) Receiving SSI under an agreement with the Social Security Administration to dispose of resources that exceed the SSI dollar limits on resources; or
(c) Receiving benefits under section 1619(a) of the Act or in section 1619(b) status (blind individuals or those with disabling impairments whose income equals or exceeds a specific Supplemental Security Income limit). (Regulations at 20 CFR 416.260 through 416.269 contain requirements governing determinations of eligibility under this provision.) For purposes of this paragraph (c), this mandatory categorically needy group of individuals includes those qualified severely impaired individuals defined in section 1905(q) of the Act.
[55 FR 33705, Aug. 17, 1990]
§ 435.121
Individuals in States using more restrictive requirements for Medicaid than the SSI requirements.
(a) Basic eligibility group requirements. (1) If the agency does not provide Medicaid under § 435.120 to aged, blind, and disabled individuals who are SSI 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 § 435.601.
(3) The agency must not apply a more restrictive requirement under the provisions of paragraph (a)(2) of this section if:
(i) The requirement conflicts with the requirements of section 1924 of the Act, which governs the eligibility and post-eligibility treatment of income and resources of institutionalized individuals with community spouses;
(ii) The requirement conflicts with a more liberal requirement which the agency has elected to use under § 435.601; or
(iii) The more restrictive requirement conflicts with a more liberal requirement the State has elected to use under § 435.234(c) in determining eligibility for State supplementary payments.
(b) Mandatory coverage. If the agency chooses to apply more restrictive requirements than SSI to aged, blind, or disabled individuals, it must provide Medicaid to:
(1) Individuals who meet the requirements of section 1619(b)(3) of the Act even though they may not continue to meet the requirements of this section; and
(2) Qualified Medicare beneficiaries described in section 1905(p) of the Act and qualified working disabled individuals described in section 1905(s) of the Act without consideration of the more restrictive eligibility requirements specified in this section.
(3) Individuals who:
(i) Qualify for benefits under section 1619(a) or are in eligibility status under section 1619(b)(1) of the Act as determined by SSA; and
(ii) Were eligible for Medicaid under the more restrictive criteria in the State's approved Medicaid plan in the reference month—the month immediately preceding the first month in which they became eligible under section 1619(a) or (b)(1) of the Act. “Were eligible for Medicaid” means that individuals were issued Medicaid cards by the State for the reference month. Under this provision, the reference month for determining Medicaid eligibility for all individuals under section 1619 of the Act is the month immediately preceding the first month of the most recent period of eligibility under section 1619 of the Act.
(c) Group composition. The agency may apply more restrictive requirements only to the aged, to the blind, to the disabled, or to any combination of these groups. For example, the agency may apply more restrictive requirements to the aged and disabled under this provision and provide Medicaid to all blind individuals who are SSI 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 did not receive SSI. If the agency imposed an age limit for disabled individuals under its 1972 approved State plan but does not use that limit, it must apply the same nonfinancial requirement to individuals under age 18 that it applies to disabled individuals age 18 and older.
(e) Financial conditions. (1) The agency may apply more restrictive requirements that are financial conditions of eligibility.
(2) Any income eligibility standards that the agency applies must:
(i) Equal the income standard (or Federal Benefit Rate (FBR)) that would be used under SSI based on an individual's living arrangement; or
(ii) Be a more restrictive standard which is no more restrictive than that under the approved State's January 1, 1972 Medicaid plan.
(3) If the categorically needy income standard established under paragraph (e)(2) of this section is less than the optional categorically needy standard established under § 435.230, the agency must provide Medicaid to all aged, blind, and disabled individuals who have income equal to or below the higher standard.
(4) In a State that does not have a medically needy program that covers aged, blind, and disabled individuals, the agency must allow individuals to deduct from income incurred medical and remedial expenses (that is, spend down) to become eligible under this section. However, individuals with income above the categorically needy standards may only spend down to the standard selected by the State under paragraph (e)(2) of this section which applies to the individual's living arrangement.
(5) In a State that elects to provide medically needy coverage to aged, blind, and disabled individuals, the agency must allow individuals to deduct from income incurred medical and remedial care expenses (spend down) to become categorically needy when they are SSI recipients (including individuals deemed to be SSI recipients under §§ 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 § 435.601(b), the agency must deduct from income:
(i) SSI payments;
(ii) State supplementary payments that meet the conditions specified in §§ 435.232 and 435.234; and
(iii) Expenses incurred by the individual or financially responsible relatives for necessary medical and remedial services that are recognized under State law and are not subject to payment by a third party, unless the third party is a public program of a State or political subdivision of a State. These expenses include Medicare and other health insurance premiums, deductions and coinsurance charges, and copayments or deductibles imposed under § 447.51 or § 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]
§ 435.122
Individuals who are ineligible for SSI or optional State supplements because of requirements that do not apply under title XIX of the Act.
If an agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or optional State supplements, it must provide Medicaid to individuals who would be eligible for SSI or optional State supplements except for an eligibility requirement used in those programs that is specifically prohibited under title XIX.
[47 FR 43648, Oct. 1, 1982; 47 FR 49847, Nov. 3, 1982]
§ 435.130
Individuals receiving mandatory State supplements.
The agency must provide Medicaid to individuals receiving mandatory State supplements.
§ 435.131
Individuals eligible as essential spouses in December 1973.
(a) The agency must provide Medicaid to any person who was eligible for Medicaid in December 1973 as an essential spouse of an aged, blind, or disabled individual who was receiving cash assistance, if the conditions in paragraph (b) of this section are met. An “essential spouse” is defined in section 1905(a) of the Act as one who is living with the individual; whose needs were included in determining the amount of cash payment to the individual under OAA, AB, APTD, or AABD; and who is determined essential to the individual's well-being.
(b) The agency must continue Medicaid if—
(1) The aged, blind, or disabled individual continues to meet the December 1973 eligibility requirements of the applicable State cash assistance plan; and
(2) The essential spouse continues to meet the conditions that were in effect in December 1973 under the applicable cash assistance plan for having his needs included in computing the payment to the aged, blind, or disabled individual.
§ 435.132
Institutionalized individuals who were eligible in December 1973.
The agency must provide Medicaid to individuals who were eligible for Medicaid in December 1973, or any part of that month, as inpatients of medical institutions or residents of intermediate care facilities that were participating in the Medicaid program and who—
(a) For each consecutive month after December 1973—
(1) Continue to meet the requirements for Medicaid eligibility that were in effect under the State's plan in December 1973 for institutionalized individuals; and
(2) Remain institutionalized; and
(b) Are determined by the State or a professional standards review organization to continue to need institutional care.
§ 435.133
Blind and disabled individuals eligible in December 1973.
The agency must provide Medicaid to individuals who—
(a) Meet all current requirements for Medicaid eligibility except the criteria for blindness or disability;
(b) Were eligible for Medicaid in December 1973 as blind or disabled individuals, whether or not they were receiving cash assistance in December 1973; and
(c) For each consecutive month after December 1973, continue to meet the criteria for blindness or disability and the other conditions of eligibility used under the Medicaid plan in December 1973.
§ 435.134
Individuals who would be eligible except for the increase in OASDI benefits under Pub. L. 92-336 (July 1, 1972).
The agency must provide Medicaid to individuals who meet the following conditions:
(a) In August 1972, the individual was entitled to OASDI and—
(1) He was receiving OAA, AB, APTD, or AABD; or
(2) He would have been eligible for one of those programs except that he had not applied, and the Medicaid plan covered this optional group; or
(3) He would have been eligible for one of those programs if he were not in a medical institution or intermediate care facility, and the Medicaid plan covered this optional group.
(b) The individual would currently be eligible for SSI or a State supplement except that the increase in OASDI under Pub. L. 92-336 raised his income over the limit allowed under SSI. This includes an individual who—
(1) Meets all current SSI requirements except for the requirement to file an application; or
(2) Would meet all current SSI requirements if he were not in a medical institution or intermediate care facility, and the State's Medicaid plan covers this optional group.
[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24883, Apr. 11, 1980]
§ 435.135
Individuals who become ineligible for cash assistance as a result of OASDI cost-of-living increases received after April 1977.
(a) If an agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, it must provide Medicaid to individuals who—
(1) Are receiving OASDI;
(2) Were eligible for and receiving SSI or State supplements but became ineligible for those payments after April 1977; and
(3) Would still be eligible for SSI or State supplements if the amount of OASDI cost-of-living increases paid under section 215(i) of the Act, after the last month after April 1977 for which those individuals were both eligible for and received SSI or a State supplement and were entitled to OASDI, were deducted from current OASDI benefits.
(b) Cost-of-living increases include the increases received by the individual or his or her financially responsible spouse or other family member (e.g., a parent).
(c) If the agency adopts more restrictive eligibility requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or State supplements. If the individual incurs enough medical expenses to reduce his or her income to the financial eligibility standard for the categorically needy, the agency must cover that individual as categorically needy. In determining the amount of his or her income, the agency may deduct the cost-of-living increases paid under section 215(i) after the last month after April 1977 for which that individual was both eligible for and received SSI or a State supplement and was entitled to OASDI, up to the amount that made him or her ineligible for SSI.
[51 FR 12330, Apr. 10, 1986]
§ 435.136
State agency implementation requirements for one-time notice and annual review system.
An agency must—
(a) Provide a one-time notice of potential Medicaid eligibility under § 435.135 to all individuals who meet the requirements of § 435.135 (a) or (c) who were not receiving Medicaid as of March 9, 1984; and
(b) Establish an annual review system to identify individuals who meet the requirements of § 435.135 (a) or (c) and who lose categorically needy eligibility for Medicaid because of a loss of SSI. States without medically needy programs must send notices of potential eligibility for Medicaid to these individuals for 3 consecutive years following their identification through the annual review system.
[51 FR 12330, Apr. 10, 1986]
§ 435.137
Disabled widows and widowers who would be eligible for SSI except for the increase in disability benefits resulting from elimination of the reduction factor under Pub. L. 98-21.
(a) If the agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, the agency much provide Medicaid to disabled widows and widowers who—
(1) Became ineligible for SSI or a mandatory or optional State supplement as a result of the elimination of the additional reduction factor for disabled widows and widowers under age 60 required by section 134 of Pub. L. 98-21, and for purposes of title XIX, are deemed to be title XVI payment 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:
(1) They were entitled to monthly OASDI benefits under title II of the Act for December 1983:
(2) They were entitled to and received widow's or widower's disability benefits under section 202(e) or (f) of the Act for January 1984;
(3) They became ineligible for SSI or a mandatory or optional State supplement in the first month in which the increase under Pub. L. 98-21 was paid (and in which a retroactive payment for that increase for prior months was not made);
(4) They have been continously entitled to widow's or widower's disability benefits under section 202(e) or (f) from the first month that the increase under Pub. L. 98-21 was received; and
(5) They would be eligible for SSI benefits or a mandatory or optional State supplement if the amount of the increase under Pub. L. 98-21 and subsequent cost-of-living adjustments in widow's or widower's benefits under section 215(i) of the Act were deducted from their income.
(c) If the agency adopts more restrictive requirements than those under SSI, it must provide Medicaid to individuals specified in paragraph (a) of this section on the same basis as Medicaid is provided to individuals continuing to receive SSI or a mandatory or optional State supplement. The State must consider the individuals specified in paragraph (a) of this section to have no more income than the SSI Federal benefit rate if the individual was eligible for SSI in the month prior to the first month in which the increase under Public Law 98-21 was paid (and in which retroactive payments for that increase for prior months was not being made), and the individual would be eligible for SSI except for the amount of the increase under Public Law 98-21 and subsequent cost-of-living adjustments in his or her widow's or widower's benefits under section 215(i) of the Act. The State must consider individuals who qualify under paragraph (a) of this section on the basis of loss of a mandatory or optional State supplementary payment, rather than the loss of SSI, to have no more income than the relevant SSP rate. If the State's income eligibility level is lower than the SSP or SSI Federal benefit rates, individuals qualifying under paragraph (a) of this section who are deemed to have income at either the SSP rate or the SSI Federal benefit rate may further reduce their countable income by incurring medical expenses in the amount by which their income exceeds the State's income eligibility standard. When the individual has reduced his or her income by this amount, he or she will be eligible for Medicaid as categorically needy.
(d) The agency must notify each individual who may be eligible for Medicaid under this section of his or her potential eligibility, in accordance with instructions issued by the Secretary.
(e)(1) Except as provided in paragraph (e)(2) of this section, the provisions of this section apply only to those individuals who filed a written application for Medicaid on or before June 30, 1988, to obtain protected Medicaid coverage.
(2) Individuals who may be eligible under this section residing in States that use a more restrictive income standard than that of the SSI program, under section 1902(f) of the Act, have up to six months after the State sends notice pursuant to the District Court's order in Darling v. Bowen (685 F. Supp. 1125 (W.D.Mo. 1988) to file a written application to obtain protected Medicaid coverage.
[55 FR 48607, Nov. 21, 1990]
§ 435.138
Disabled widows and widowers aged 60 through 64 who would be eligible for SSI except for early receipt of social security benefits.
(a) If the agency provides Medicaid to aged, blind, or disabled individuals receiving SSI or State supplements, the agency must provide Medicaid to disabled widows and widowers who—
(1) Are at least age 60;
(2) Are not entitled to hospital insurance benefits under Medicare Part A; and
(3) Become ineligible for SSI or a State supplement because of mandatory application (under section 1611(e)(2)) for and receipt of widow's or widower's social security disability benefits under section 202(e) or (f) (or any other provision of section 202 if they are also eligible for benefits under subsections (e) or (f)) of the Act.
For purposes of title XIX, individuals who meet these requirements are deemed to be title XVI payment 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
§ 435.139
Coverage for certain aliens.
The agency must provide services necessary for the treatment of an emergency medical condition, as defined in § 440.255(c) of this chapter, to those aliens described in § 435.406(c) of this subpart.
[55 FR 36819, Sept. 7, 1990]

Mandatory Coverage of Adoption Assistance and Foster Care Children
§ 435.145
Children 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
§ 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 § 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
§ 435.200
Scope.
This subpart specifies options for coverage of individuals as categorically needy.
§ 435.201
Individuals included in optional groups.
(a) The agency may choose to cover as optional categorically needy any group or groups of the following individuals who are not receiving cash assistance and who meet the appropriate eligibility criteria for groups specified in the separate sections of this subpart:
(1) Aged individuals (65 years of age of older);
(2) Blind individuals (as defined in § 435.530);
(3) Disabled individuals (as defined in § 435.541);
(4) Individuals under age 21 (or, at State option, under age 20, 19, or 18) or reasonable classifications of these individuals;
(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 § 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 § 435.121 must apply the specific requirements of § 435.230 in establishing eligibility of these groups of individuals as optional categorically needy.
[58 FR 4927, Jan. 19, 1993]

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.
The agency may provide Medicaid to any group or groups of individuals specified in § 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]
§ 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 § 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 §§ 435.232 and 435.234 if they were not institutionalized.
[58 FR 4927, Jan. 19, 1993]
§ 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]
§ 435.217
Individuals receiving home and community-based services.
The agency may provide Medicaid to any group or groups of individuals in the community who meet the following requirements:
(a) The group would be eligible for Medicaid if institutionalized.
(b) In the absence of home and community-based services under a waiver granted under part 441—
(1) Subpart G of this subchapter, the group would otherwise require the level of care furnished in a hospital, NF, or an ICF/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
§ 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 § 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]
§ 435.221
[Reserved]
§ 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]
§ 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 § 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]
§ 435.225
Individuals under age 19 who would be eligible for Medicaid if they were in a medical institution.
(a) The agency may provide Medicaid to children 18 years of age or younger who qualify under section 1614(a) of the Act, who would be eligible for Medicaid if they were in a medical institution, and who are receiving, while living at home, medical care that would be provided in a medical institution.
(b) If the agency elects the option provided by paragraph (a) of this section, it must determine, in each case, that the following conditions are met:
(1) The child requires the level of care provided in a hospital, SNF, or ICF.
(2) It is appropriate to provide that level of care outside such an institution.
(3) The estimated Medicaid cost of care outside an institution is no higher than the estimated Medicaid cost of appropriate institutional care.
(c) The agency must specify in its State plan the method by which it determines the cost-effectiveness of caring for disabled children at home.
[55 FR 48608, Nov. 21, 1990]
§ 435.227
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]
§ 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 § 435.4; or
(b) Reasonable categories of these individuals.
[66 FR 2667, Jan. 11, 2001]

Options for Coverage of the Aged, Blind, and Disabled
§ 435.230
Aged, blind, and disabled individuals in States that use more restrictive requirements for Medicaid than SSI requirements: Optional coverage.
(a) Basic optional coverage rule. If the agency elects the option under § 435.121 to provide mandatory eligibility for aged, blind, and disabled SSI 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 § 435.121;
(2) Meet the resource requirements that the State has elected to apply under § 435.121; and
(3) Meet the income eligibility standards specified in paragraph (c) of this section.
(c) Criteria for income standards. The agency may provide Medicaid to the following individuals who meet the requirements of paragraphs (b)(1) and (b)(2) of this section:
(1) Individuals who are financially eligible for but not receiving SSI benefits and who, before deduction of incurred medical and remedial expenses, meet the State's more restrictive eligibility requirements described in § 435.121;
(2) Individuals who meet the income standards of the following eligibility groups:
(i) Individuals who would be eligible for cash assistance except for institutional status described in § 435.211;
(ii) Individuals who are enrolled in an HMO or other entity and who are deemed to continue to be Medicaid eligible for a period specified by the agency up to 6 months from the date of enrollment and who became ineligible during the specified enrollment period, as described in § 435.212;
(iii) Individuals receiving home and community-based waiver services described in § 435.217;
(iv) Individuals receiving only optional State supplements described in § 435.234;
(v) Institutionalized individuals with income below a special income level described in § 435.236;
(vi) Aged and disabled individuals who have income below 100 percent of the Federal poverty level described in section 1905(m) of the Act.
(3) Individuals who qualify for special status under §§ 435.135 and 435.138, and with respect to whom the State elects to disregard some or the maximum amount of title II payments permitted to be disregarded under those sections.
(d) Use of more liberal methods. The agency may elect to apply more liberal methods of counting income and resources that are approved for this eligibility group under the provisions of § 435.601.
[58 FR 4928, Jan. 19, 1993]
§ 435.232
Individuals receiving only optional State supplements.
(a) If the agency provides Medicaid to individuals receiving SSI under § 435.120, it may provide Medicaid, in one or more of the following classifications, to individuals who receive only an optional State supplement that meets the conditions specified in paragraph (b) of this section and who would be eligible for SSI except for the level of their income.
(1) All aged individuals.
(2) All blind individuals.
(3) All disabled individuals.
(4) Only aged individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(5) Only blind individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(6) Only disabled individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(7) Individuals receiving a federally administered optional State supplement that meets the conditions specified in this section.
(8) Individuals in additional classifications specified by the Secretary for federally administered supplementary payments under 20 CFR 416.2020(d).
(9) Reasonable groups of individuals, as specified by the State, receiving State-administered supplementary payments.
(b) Payments under the optional supplement program must be—
(1) Based on need and paid in cash on a regular basis;
(2) Equal to the difference between the individual's countable income and the income standard used to determine eligibility for supplement. Countable income is income remaining after deductions required under SSI or, at State option, more liberal deductions are made (see § 435.1006 for limitations on FFP in Medicaid expenditures for individuals receiving optional State supplements); and
(3) Available to all individuals in each classification in paragraph (a) of this section and available on a statewide basis. However, the plan may provide for variations in the income standard by political subdivision according to cost-of-living differences.
[43 FR 45204, Sept. 29, 1978. Redesignated and amended at 58 FR 4928, Jan. 19, 1993]
§ 435.234
Individuals receiving only optional State supplements in States using more restrictive eligibility requirements than SSI and certain States using SSI criteria.
(a) In States using more restrictive eligibility requirements than SSI or in States that use SSI criteria but do not have section 1616 or 1634 agreements with the Social Security Administration for eligibility determinations, the agency may provide Medicaid to individuals specified in paragraph (b) of this section who receive only a State supplement if the State supplement meets the conditions specified in paragraph (c) of this section.
(b) The agency may provide Medicaid to all individuals receiving only State supplements if, except for their income, the individuals meet the more restrictive eligibility requirements under § 435.121 or SSI criteria, or to one or more of the following classifications of individuals who meet these criteria:
(1) All aged individuals.
(2) All blind individuals.
(3) All disabled individuals.
(4) Only aged individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(5) Only blind individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(6) Only disabled individuals in domiciliary facilities or other group living arrangements as defined under SSI.
(7) Individuals receiving a Federally-administered optional State supplement that meets the conditions specified in this section.
(8) Individuals in additional classifications specified by the Secretary.
(9) Reasonable groups of individuals, as specified by the State, receiving State-administered supplementary payments.
(c) Payments under the optional supplement program must be:
(1) Based on need and paid in cash on a regular basis;
(2) Equal to the difference between the individual's countable income and the income standard used to determine eligibility for supplements. Countable income is income remaining after deductions are applied. The income deductions may be more restrictive than required under SSI (see § 435.1006 for limitations on FFP in Medicaid expenditures for individuals receiving optional State supplements); and
(3) Available to all individuals in each classification in paragraph (b) of this section and available on a statewide basis. However, the plan may provide for variations in the income standard by political subdivision according to cost-of-living differences.
[58 FR 4928, Jan. 19, 1993]
§ 435.236
Individuals in institutions who are eligible under a special income level.
(a) If the agency provides Medicaid under § 435.211 to individuals in institutions who would be eligible for AFDC, SSI, or State supplements except for their institutional status, it may also cover aged, blind, and disabled individuals in institutions who—
(1) Because of their income, would not be eligible for SSI or State supplements if they were not institutionalized; but
(2) Have income below a level specified in the plan under § 435.722. (See § 435.1005 for limitations on FFP in Medicaid expenditures for individuals specified in this section.)
(b) The agency may cover individuals under this section whether or not the State pays optional supplements.
[43 FR 45204, Sept. 29, 1978, as amended at 45 FR 24884, Apr. 11, 1980. Redesignated at 58 FR 4928, Jan. 19, 1993]

Subpart D—Optional Coverage of the Medically Needy
§ 435.300
Scope.
This subpart specifies the option for coverage of medically needy individuals.
§ 435.301
General rules.
(a) An agency may provide Medicaid to individuals specified in this subpart who:
(1) Either:
(i) Have income that meets the applicable standards in §§ 435.811 and 435.814; or
(ii) If their income is more than allowed under the standard, have incurred medical expenses at least equal to the difference between their income and the applicable income standard; and
(2) Have resources that meet the applicable standards in §§ 435.840 and 435.843.
(b) If the agency chooses this option, the following provisions apply:
(1) The agency must provide Medicaid to the following individuals who meet the requirements of paragraph (a) of this section:
(i) All pregnant women during the course of their pregnancy who, except for income and resources, would be eligible for Medicaid as mandatory or optional categorically needy under subparts B or C of this part;
(ii) All individuals under 18 years of age who, except for income and resources, would be eligible for Medicaid as mandatory categorically needy under subpart B of this part;
(iii) 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 § 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 § 440.210(c)(1) of this subchapter).
(2) The agency may provide Medicaid to any of the following groups of individuals;
(i) Individuals under age 21 (§ 435.308).
(ii) Specified relatives (§ 435.310).
(iii) Aged (§ 435.330.320 and 435.330).
(iv) Blind (§§ 435.322, 435.330 and 435.340).
(v) Disabled (§§ 435.324, 435.330, and 435.340).
(3) If the agency provides Medicaid to any individual in a group specified in paragraph (b)(2) of this section, the agency must provide Medicaid to all individuals eligible to be members of that group.
[46 FR 47986, Sept. 30, 1981, as amended at 52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987; 55 FR 48609, Nov. 21, 1990; 58 FR 4929, Jan. 19, 1993]
§ 435.308
Medically needy coverage of individuals under age 21.
(a) If the agency provides Medicaid to the medically needy, it may provide Medicaid to individuals under age 21 (or, at State option, under age 20, 19, or 18), as specified in paragraph (b) of this section:
(1) Who would not be covered under the mandatory medically needy group of individuals under 18 under § 435.301(b)(1)(ii); and
(2) Who meet the income and resource requirements of subpart I of this part.
(b) The agency may cover all individuals described in paragraph (a) of this section or reasonable classifications of those individuals. Examples of reasonable classifications are as follows:
(1) Individuals in foster homes or private institutions for whom a public agency is assuming a full or partial financial responsibility. If the agency covers these individuals, it may also provide Medicaid to individuals placed in foster homes or private institutions by private nonprofit agencies.
(2) Individuals in adoptions subsidized in full or in part by a public agency.
(3) Individuals in nursing facilities when nursing facility services are provided under the plan to individuals within the age group selected under this provision. When the agency covers such individuals, it may also provide Medicaid to individuals in intermediate care facilities for 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]
§ 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 § 435.510.
[58 FR 4929, Jan. 19, 1993]
§ 435.320
Medically needy coverage of the aged in States that cover individuals receiving SSI.
If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to individuals who—
(a) Are 65 years of age and older, as specified in § 435.520; and
(b) Meet the income and resource requirements of subpart I of this part.
[46 FR 47986, Sept. 30, 1981]
§ 435.322
Medically needy coverage of the blind in States that cover individuals receiving SSI.
If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to blind individuals who meet—
(a) The requirements for blindness, as specified in §§ 435.530 and 435.531; and
(b) The income and resource requirements of subpart I of this part.
[46 FR 47986, Sept. 30, 1981]
§ 435.324
Medically needy coverage of the disabled in States that cover individuals receiving SSI.
If the agency provides Medicaid to individuals receiving SSI and elects to cover the medically needy, it may provide Medicaid to disabled individuals who meet—
(a) The requirements for disability, as specified in §§ 435.540 and 435.541; and
(b) The income and resource requirements of Subpart I of this part.
[46 FR 47986, Sept. 30, 1981; 46 FR 54743, Nov. 11, 1981]
§ 435.326
Individuals who would be ineligible if they were not enrolled in an MCO or PCCM.
If the agency provides Medicaid to the categorically needy under § 435.212, it may provide it under the same rules to medically needy recipients who are enrolled in MCOs or PCCMs.
[67 FR 41095, June 14, 2002]
§ 435.330
Medically needy coverage of the aged, blind, and disabled in States using more restrictive eligibility requirements for Medicaid than those used under SSI.
(a) If an agency provides Medicaid as categorically needy only to those aged, blind, or disabled individuals who meet more restrictive requirements than used under SSI and elects to cover the medically needy, it may provide Medicaid as medically needy to those aged, blind, or disabled individuals who:
(1) Do not qualify for Medicaid as categorically needy under § 435.121 or § 435.230; and
(2) If applying as blind or disabled, meet the definition of blindness or disability established under § 435.121.
(b) Except as specified in paragraph (c) of this section, the agency must apply to individuals covered under the option of this section the same financial and nonfinancial requirements that are applied to individuals covered as categorically needy under §§ 435.121 and 435.230.
(c) In determining the financial eligibility of individuals who are considered as medically needy under this section, the agency must apply the financial eligibility requirements of subparts G and I of this part.
[58 FR 4929, Jan. 19, 1993]
§ 435.340
Protected medically needy coverage for blind and disabled individuals eligible in December 1973.
If an agency provides Medicaid to the medically needy, it must cover individuals who—
(a) Where eligible as medically needy under the Medicaid plan in December 1973 on the basis of the blindness or disability criteria of the AB, APTD, or AABD plan;
(b) For each consecutive month after December 1973, continue to meet—
(1) Those blindness or disability criteria; and
(2) The eligibility requirements for the medically needy under the December 1973 Medicaid plan; and
(c) Meet the current requirements for eligibility as medically needy under the Medicaid plan except for blindness or disability criteria.
[46 FR 47987, Sept. 30, 1981]
§ 435.350
Coverage for certain aliens.
If an agency provides Medicaid to the medically needy, it must provide the services necessary for the treatment of an emergency medical condition, as defined in § 440.255(c) of this chapter, to those aliens described in § 435.406(c) of this subpart.
[55 FR 36819, Sept. 7, 1990]

Subpart E—General Eligibility Requirements
§ 435.400
Scope.
This subpart prescribes general requirements for determining the eligibility of both categorically and medically needy individuals specified in subparts B, C, and D of this part.
§ 435.401
General rules.
(a) A Medicaid agency may not impose any eligibility requirement that is prohibited under Title XIX of the Act.
(b) The agency must base any optional group covered under subparts B and C of this part on reasonable classifications that do not result in arbitrary or inequitable treatment of individuals and groups and that are consistent with the objectives of Title XIX.
(c) The agency must not use requirements for determining eligibility for optional coverage groups that are—
(1) 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 § 435.230 or individuals in categories specified by the agency under § 435.121.
§ 435.402
[Reserved]
§ 435.403
State residence.
(a) Requirement. The agency must provide Medicaid to eligible residents of the State, including residents who are absent from the State. The conditions under which payment for services is provided to out-of-State residents are set forth in § 431.52 of this chapter.
(b) Definition. For purposes of this section—Institution has the same meaning as Institution and Medical institution, as defined in § 435.1010. For purposes of State placement, the term also includes foster care homes, licensed as set forth in 45 CFR 1355.20, and providing food, shelter and supportive services to one or more persons unrelated to the proprietor.
(c) Incapability of indicating intent. For purposes of this section, an individual is considered incapable of indicating intent if the individual—
(1) Has an I.Q. of 49 or less or has a mental age of 7 or less, based on tests acceptable to the 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.
(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—
(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]
§ 435.404
Applicant's choice of category.
The agency must allow an individual who would be eligible under more than one category to have his eligibility determined for the category he selects.
§ 435.406
Citizenship and 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 § 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 § 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]
§ 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 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 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.)
(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 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 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. 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 § 435.930 and § 435.911.)
[71 FR 39222, July 12, 2006, as amended at 72 FR 38691, July 13, 2007]

Subpart F—Categorical Requirements for Eligibility
§ 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
§ 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]

Age
§ 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]
§ 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 § 435.121, § 435.230, or § 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
§ 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 §§ 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 § 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.
§ 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 § 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
§ 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 §§ 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 § 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.
§ 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.
(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 § 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 § 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.
(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 § 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 § 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
§ 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]
§ 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 §§ 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 § 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 § 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 § 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
(vi) Aged, blind, and disabled individuals in States using more restrictive eligibility requirements than SSI under groups established under §§ 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 § 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]
§ 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 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 § 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 § 435.601(d).
(d) [Reserved]
[58 FR 4930, Jan. 19, 1993, as amended at 59 FR 43052, Aug. 22, 1994]
§ 435.604
[Reserved]
§ 435.606
[Reserved]
§ 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]
§ 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]
§ 435.622
Individuals in institutions who are eligible under a special income level.
(a) If an agency, under § 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 § 435.1005 for FFP limits on income standards established under this section.)
(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]
§ 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 §§ 435.121 and 435.230, under § 435.601. The methods used must be comparable for all individuals within each category of individuals under § 435.121 and each category of individuals within each optional categorically needy group included under § 435.230 and for each category of individuals under the medically needy option described under § 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 §§ 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 § 435.121 (e)(4) and (e)(5).
[58 FR 4932, Jan. 19, 1993]
§ 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 §§ 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
§ 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]
§ 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 § 435.110 or § 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 § 435.211.
(3) Aged, blind, and disabled individuals who are eligible for Medicaid, under § 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 § 435.230; or
(iii) The amount of the medically needy income standard for one person established under § 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 § 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
(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]
§ 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 § 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 § 435.230; or
(iii) The amount of the medically needy income standard for one person established under §§ 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;
(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 § 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]
§ 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 § 435.110 and individuals eligible under § 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 § 435.211.
(3) Aged, blind, and disabled individuals who are eligible for Medicaid, under § 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 § 435.121; or
(ii) The amount of the medically needy income standard for one person established under § 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 § 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]
§ 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 § 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.
(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 § 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 § 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
§ 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
§ 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 § 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 State's more restrictive criteria under § 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 § 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]
§ 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
§ 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 § 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 § 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 § 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 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 § 447.51 or § 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 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 §§ 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 §§ 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]
§ 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.
(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 § 435.230; or
(iii) The amount of the medically needy income standard for one person established under § 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 § 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.
(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
§ 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 § 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 § 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]
§ 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
§ 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 § 435.602.
(b) Deduct the amounts that would be deducted in determining resource eligibility for the medically needy group as provided for in § 435.601 or under the criteria of States using more restrictive criteria than SSI as provided for in § 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 § 435.840.
[58 FR 4933, Jan. 19, 1993]
§§ 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.
§ 435.900
Scope.
This subpart sets forth requirements for processing applications, determining eligibility, and furnishing Medicaid.

General Methods of Administration
§ 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]
§ 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]
§ 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]
§ 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 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 § 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 § 447.10 of this subchapter, and to all other State or Federal laws concerning conflicts of interest.
(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
§ 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]
§ 435.906
Opportunity to apply.
The agency must afford an individual wishing to do so the opportunity to apply for Medicaid without delay.
§ 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 § 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]
§ 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.
§ 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 § 435.230.
§ 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—
(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 §§ 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
§ 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]
§ 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 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]
§ 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.
§ 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
§ 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 § 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 § 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.
§ 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]
§ 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 § 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, alien status, or true identity, the agency must obtain verification of these factors in accordance with § 435.910.
[44 FR 17937, Mar. 23, 1979, as amended at 51 FR 7211, Feb. 28, 1986]

Furnishing Medicaid
§ 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.
§ 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 § 435.960, to exchange for the purpose of enabling any agency or program referenced in § 435.945(b) to verify income, eligibility of, and the amount of assistance for its applicants and recipients.
§ 435.945
General requirements.
(a) The agency must request and use information timely in accordance with §§ 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 § 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 § 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 §§ 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);
(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 § 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]
§ 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.
(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 §§ 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.
§ 435.952
Use of information.
(a) Except as provided under § 435.953, the agency must review and compare against the case file all information received under §§ 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 § 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 § 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.
(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 § 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]
§ 435.953
Identifying items of information to use.
(a) With respect to information received on recipients under §§ 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]
§ 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 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 §§ 431.200 through 431.246 of this chapter (see also § 435.912 and § 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 § 431.213 or § 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]
§ 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 § 435.945(b) and § 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]
§ 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 §§ 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 §§ 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 § 435.955 (a) and (c). (The provisions of these statutory and regulation sections require the agency to follow certain procedures before taking any adverse actions based on information from the Internal Revenue Service concerning unearned income.)

Subpart K—Federal Financial Participation
§ 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
§ 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]
§ 435.1002
FFP for services.
(a) Except for the limitations and conditions specified in §§ 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 §§ 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]
§ 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 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]
§ 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
§ 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 § 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]
§ 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]
§ 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 § 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 1331/3 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 1331/3 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 1331/3 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 § 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]
§ 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 § 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 § 435.407 that complies with the requirements of section 1903(x) of the Act.
[72 FR 38694, July 13, 2007]
§ 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 § 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 § 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 § 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]
§ 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 § 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. 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 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 §§ 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
§ 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 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]
§ 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.
§ 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
§ 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);
(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]
§ 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.
Pt. 436

PART 436—ELIGIBILITY IN GUAM, PUERTO RICO, AND THE VIRGIN ISLANDS

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.

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.
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
§ 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]
§ 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.
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 230Deemed eligibility of certain essential persons.
Pub. L. 93-66, section 231Deemed eligibility of certain persons in medical institutions.
Pub. L. 93-66, section 232Deemed 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 9406Payment for emergency medical services provided to aliens.
Pub. L. 99-603, section 201Aliens 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 302Aliens 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 303Aliens 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]
§ 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 who are not deprived of parental support or care but who are financially eligible under AFDC or medically needy rules (see optional coverage group, § 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 § 457.10 of this chapter); or,
(iii) Resides in a State that has a Medicaid applicable income level (as defined in § 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]
§ 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
§ 436.100
Scope.
This subpart prescribes requirements for coverage of categorically needy individuals.
§ 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.
(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.
§ 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]
§ 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.
§ 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 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]
§ 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 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]
§ 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]
§ 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]
§ 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 § 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]
§ 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 § 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 48610, Nov. 21, 1990]
§ 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 § 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 § 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 § 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 § 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 § 435.916. At that time, the State must collect documentary evidence of citizenship and identity as required under § 436.406.
[52 FR 43073, Nov. 9, 1987; 52 FR 48438, Dec. 22, 1987, as amended at 72 FR 38694, July 13, 2007]
§ 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 § 440.255(c) of this chapter to those aliens described in § 436.406(c) of this subpart.
[55 FR 36820, Sept. 7, 1990]

Subpart C—Options for Coverage as Categorically Needy
§ 436.200
Scope.
This subpart specifies options for coverage of individuals as categorically needy.
§ 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 § 436.530);
(3) Disabled individuals (as defined in § 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 § 436.510;
(6) Pregnant women; and
(7) Essential spouses specified under § 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
§ 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 § 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]
§ 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 § 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]
§ 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 § 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 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]
§ 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]
§ 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 § 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]
§ 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]
§ 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]
§ 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 § 436.3; or
(b) Reasonable categories of these individuals.
[66 FR 2668, Jan. 11, 2001]

Options for Coverage of the Aged, Blind, and Disabled
§ 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
§ 436.300
Scope.
This subpart specifies the option for coverage of medically needy individuals.
§ 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 § 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 §§ 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;
(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 § 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 § 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 (§ 436.308).
(ii) Specified relatives (§ 436.310).
(iii) Aged (§ 436.320).
(iv) Blind (§ 436.321).
(v) Disabled (§ 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]
§ 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 § 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]
§ 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 § 436.510.
[58 FR 4936, Jan. 19, 1993]
§ 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 § 436.520; and
(b) Meet the income and resource requirements of subpart I of this part.
[46 FR 47991, Sept. 30, 1981]
§ 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 §§ 436.530 and 436.531; and
(b) The income and resource requirements of subpart I of this part.
[46 FR 47991, Sept. 30, 1981]
§ 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 §§ 436.540 and 436.541; and
(b) The income and resource requirements of subpart I of this part.
[46 FR 47991, Sept. 30, 1981]
§ 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 § 440.255(c) of this chapter to those aliens described in § 436.406(c) of this subpart.
[55 FR 36820, Sept. 7, 1990]

Subpart E—General Eligibility Requirements
§ 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.
§ 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.
§ 436.402
[Reserved]
§ 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 § 431.52 of this chapter.
(b) Definition. For purposes of this section—Institution has the same meaning as Institution and Medical institution, as defined in § 435.1010 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.
(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 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]
§ 436.404
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.
§ 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 § 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 § 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]
§ 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. § 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 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 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 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, 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.
(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.
(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 § 435.930 and § 435.911 of this chapter.)
[71 FR 39226, July 12, 2006, as amended at 72 FR 38695, July 13, 2007]
§ 436.408
[Reserved]

Subpart F—Categorical Requirements for Medicaid Eligibility
§ 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.

Dependency
§ 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
§ 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]
§ 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
§ 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.
§ 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 § 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
§ 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.
§ 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 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 § 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
§ 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]
§ 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 § 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 § 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, 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 § 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]
§ 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 § 436.601(d).
(c) [Reserved]
[58 FR 4936, Jan. 19, 1993, as amended at 59 FR 43053, Aug. 22, 1994]
§ 436.604
[Reserved]
§ 436.606
[Reserved]
§ 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]
§ 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 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
§ 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
§ 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 § 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]
§ 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
§ 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 § 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 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 § 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 § 447.51 or § 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 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 § 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 § 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]
§ 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 § 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 § 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 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
§ 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 § 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]
§ 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
§ 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 § 436.602;
(b) Consider only resources available during the period for which income is computed under § 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 § 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 § 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.
§ 436.900
Scope.
This subpart sets forth requirements for processing applications, determining eligibility, and furnishing Medicaid.
§ 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 § 435.909.
§ 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)
§ 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
§ 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]
§ 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]
§ 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]
§ 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 § 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 § 436.407 of this chapter that complies with the requirements of section 1903(x) of the Act.
[72 FR 38697, July 13, 2007]
§ 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 § 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 § 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 § 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]
§ 436.1006
Definitions relating to institutional status.
For purposes of FFP, the definitions in § 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.
§ 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
§ 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 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]
§ 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.
Pt. 438

PART 438—MANAGED CARE

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.

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
§ 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.
§ 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.
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 § 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 § 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.
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.
§ 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 § 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;
(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 § 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 services cannot be included when determining the payment rates under § 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 §§ 422.208 and 422.210 of this chapter.
(2) In applying the provisions of §§ 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 § 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 § 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 § 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 § 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.
§ 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 § 438.6, except for requirements that pertain to HIOs.
(2) The information requirements in § 438.10.
(3) The provision against provider discrimination in § 438.12.
(4) The State responsibility provisions of subpart B of this part except § 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 § 438.6, except requirements for—
(i) HIOs.
(ii) Advance directives (unless the PAHP includes any of the providers listed in § 489.102) of this chapter.
(2) All applicable portions of the information requirements in § 438.10.
(3) The provision against provider discrimination in § 438.12.
(4) The State responsibility provisions of subpart B of this part except § 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 § 438.610.
[67 FR 41095, June 14, 2002, as amended at 67 FR 65505, Oct. 25, 2002]
§ 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
(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 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 § 438.100.
(iv) Information on grievance and fair hearing procedures, and for MCO and PIHP enrollees, the information specified in § 438.10(g)(1), and for PAHP enrollees, the information specified in § 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 § 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 § 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 § 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 §§ 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
(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 § 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 § 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 § 438.6(i)(2), to the extent that the PAHP includes any of the providers listed in § 489.102(a) of this chapter.
(3) Upon request, physician incentive plans as set forth in § 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 § 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 § 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]
§ 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 § 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
§ 438.50
State Plan requirements.
(a) General rule. A State plan that requires Medicaid recipients to enroll in 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 § 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 § 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.
§ 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 § 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 § 438.56(c).
[67 FR 41095, June 14, 2002; 67 FR 65505, Oct. 25, 2002]
§ 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 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 § 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 § 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.
(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.
§ 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 § 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).
§ 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 § 438.6(c)(5)(v), to make payments for graduate medical education.
§ 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.
§ 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
§ 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 § 438.10.
(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 § 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 § 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 §§ 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]
§ 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 § 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 § 438.10(f)(4) 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 § 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 § 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]
§ 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 § 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 § 431.12 of this chapter or an advisory committee with similar membership.
§ 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
(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.
§ 438.108
Cost sharing.
The contract must provide that any cost sharing imposed on Medicaid enrollees is in accordance with §§ 447.50 through 447.60 of this chapter.
§ 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.
(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 § 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]
§ 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
§ 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.
§ 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.
(2) Regular reports on the implementation and effectiveness of the strategy.
§ 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
§ 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.
(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 § 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.
§ 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 § 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.
§ 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 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 § 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 § 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 standing referral or an approved number of visits) as appropriate for the enrollee's condition and identified needs.
§ 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 § 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 § 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.
(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 § 438.6(h), and § 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
§ 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 § 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]
§ 438.218
Enrollee information.
The requirements that States must meet under § 438.10 constitute part of the State's quality strategy at § 438.204.
§ 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.
§ 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 § 438.56.
§ 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.
§ 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
§ 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.
§ 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—
(1) Measure and report to the State its performance, using standard measures required by the State including those that incorporate the requirements of § 438.204(c) and § 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 § 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.
§ 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.
§ 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;
(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.
§ 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 § 438.354, and performs external quality review, other EQR-related activities as set forth in § 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.
§ 438.350
State responsibilities.
Each State that contracts with MCOs or PIHPs must ensure that—
(a) Except as provided in § 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 § 438.358.
(d) For each EQR-related activity, the information must include the elements described in § 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 § 438.352; and
(f) The results of the reviews are made available as specified in § 438.364.
§ 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.
§ 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;
(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 § 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.
§ 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 § 438.358.
(b) Each EQRO must meet the competence requirements as specified in § 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 § 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.
§ 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 § 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 § 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 §§ 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 § 438.204(g).
(c) Optional activities. The EQR may also use information derived during the 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.
§ 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 § 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 § 438.204(g), (except with respect to standards under §§ 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 § 438.204(g) and the EQR-related activity under § 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 § 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 § 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 § 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 § 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 § 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.
§ 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 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 § 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.
§ 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 § 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 § 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 (b) of this section may not disclose the identity of any patient.
§ 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 § 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
§ 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 § 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 § 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.)
§ 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.
(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.
§ 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 § 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 §§ 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 § 438.210(d)(1).
(4) If the MCO or PIHP extends the timeframe in accordance with § 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 § 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 § 438.210(d).
§ 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 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.
§ 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.
§ 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 § 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.
§ 438.414
Information about the grievance system to providers and subcontractors.
The MCO or PIHP must provide the information specified at § 438.10(g)(1) about the grievance system to all providers and subcontractors at the time they enter into a contract.
§ 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.
§ 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 § 431.230(b) of this chapter.
§ 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 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
§ 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.
§ 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.
§ 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 § 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 § 438.606, for all documents specified by the State.
§ 438.606
Source, content, and timing of certification.
(a) Source of certification. For the data specified in § 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.
§ 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 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.
§ 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
§ 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 § 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 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 §§ 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 § 438.702, paragraphs (a)(3), (a)(4), and (a)(5) may be imposed.
§ 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 § 438.704.
(2) Appointment of temporary management for an MCO as provided in § 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 § 438.700, as well as additional areas of noncompliance. Nothing in this subpart prevents State agencies from exercising that authority.
§ 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 § 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 § 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 § 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.
§ 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 § 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 § 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 § 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.
§ 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.
§ 438.710
Due process: Notice of sanction and pre-termination hearing.
(a) Notice of sanction. Except as provided in § 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 § 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 § 438.10, on their options for receiving Medicaid services following the effective date of termination.
§ 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.
§ 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 § 438.700.
(b) The notice must—
(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.
§ 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).
§ 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 § 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 § 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 § 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.
(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
§ 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.
§ 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 § 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.
§ 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 § 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.
§ 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, 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]
§ 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.
Pt. 440

PART 440—SERVICES: GENERAL PROVISIONS

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 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 services.
440.365
Coverage of rural health clinic and federally qualified health center (FQHC) services.
440.370
Economy and efficiency.
440.375
Comparability.
440.380
Statewideness.
440.385
Delivery of benchmark and benchmark-equivalent coverage through managed care entities.
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
§ 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 §§ 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]
§ 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 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 § 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]
§ 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 § 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]
§ 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 § 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 §§ 405.2401 and 491.2 of this chapter) if the services are furnished in accordance with the requirements specified in § 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 §§ 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 § 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 § 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]
§ 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]
§ 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 §§ 409.31 through 409.35 of this chapter.
(ii) Provided by—
(A) A facility or distinct part (as defined in § 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
(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]
§ 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]
§ 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 § 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.
§ 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,
(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 § 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 § 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]
§ 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]
§ 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]
§ 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
(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]
§ 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 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]
§ 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.
§ 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.
§ 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 § 482.60(b), (c), and (e) of this chapter and—
(1) Meets the requirements for utilization review in § 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 § 440.40 and in subpart B of part 483 of this chapter that are provided in institutions for mental diseases, as defined in § 435.1010 of this chapter.
[59 FR 56234, Nov. 10, 1994, as a amended at 71 FR 39229, July 12, 2006]
§ 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 § 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]
§ 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 § 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 § 483.5(b) of this chapter) of a facility other than a nursing facility if the distinct part (as defined in § 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 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]
§ 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 that undergoes a State survey to determine whether the hospital meets the requirements for participation in Medicare as a psychiatric hospital as specified in § 482.60 of this chapter, or is accredited by a national organization whose psychiatric hospital accrediting program has been approved by CMS; or a hospital with an inpatient psychiatric program that undergoes a State survey to determine whether the hospital meets the requirements for participation in Medicare as a hospital, as specified in part 482 of this chapter, or is accredited by a national accrediting organization whose hospital accrediting program has been approved by CMS.
(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 § 441.151 of this subchapter.
[63 FR 64198, Nov. 19, 1998, as amended at 75 FR 50418, Aug. 16, 2010]
§ 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 § 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]
§ 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.
(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 § 441.22(c) of this subchapter.
[60 FR 19861, Apr. 21, 1995]
§ 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]
§ 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
(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]
§ 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 § 441.18 of this chapter.
(b) Targeted case management services means case management services furnished without regard to the requirements of § 431.50(b) of this chapter (related to statewide provision of services) and § 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]
§ 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 § 431.50 (statewide operation) and § 431.51 (freedom of choice of providers) of this chapter and § 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 § 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 § 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 § 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 § 412.62(f), and there is no other available Medicaid 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.
(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 § 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 §§ 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]
§ 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 § 441.302(a) of this chapter concerning health and welfare assurances.
(3) The services are subject to the limits on FFP described in § 441.310 of this chapter.
(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.
(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 § 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 § 440.140 or § 440.160.
[59 FR 37716, July 25, 1994, as amended at 65 FR 60107, Oct. 10, 2000; 71 FR 39229, July 12, 2006]
§ 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 § 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]
§ 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 § 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
§ 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;
(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]
§ 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 §§ 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 §§ 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 §§ 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 §§ 435.406(a) and 436.406(a) of this subchapter will only be provided the limited services specified in § 440.255.
[56 FR 24010, May 28, 1991, as amended at 60 FR 19862, Apr. 21, 1995]
§ 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 (§ 440.70) to any individual entitled to skilled nursing facility services.
(4) If the State plan includes services in an institution for mental diseases (§ 440.140 or § 440.160) or in an intermediate care facility for the mentally retarded (§ 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 §§ 440.10 through 440.50 and (to the extent nurse-midwives are authorized to practice under State law or regulation) § 440.165; or
(ii) The services contained in any seven of the sections in §§ 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 § 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 §§ 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 §§ 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 § 440.255.
[56 FR 24011, May 28, 1991, as amended at 58 FR 4938, Jan. 19, 1993]
§ 440.225
Optional services.
Any of the services defined in subpart A of this part that are not required under §§ 440.210 and 440.220 may be furnished under the State plan at the State's option.
[60 FR 19862, Apr. 21, 1995]
§ 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 §§ 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]
§ 440.240
Comparability of services for groups.
Except as limited in § 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]
§ 440.250
Limits on comparability of services.
(a) Skilled nursing facility services (§ 440.40(a)) may be limited to recipients age 21 or older.
(b) Early and periodic screening, diagnosis, and treatment (§ 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 (§ 440.140) must be limited to those age 65 or older.
(e) If covered under the plan, inpatient psychiatric services (§ 440.160) must be limited to recipients under age 22 as specified in § 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 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 (§ 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 § 431.54 may be limited as provided under that exception.
(j) If CMS has approved a waiver of Medicaid requirements under § 431.55, services may be limited as provided by the waiver.
(k) If the agency has been granted a waiver of the requirements of § 440.240 (Comparability of services) in order to provide for home or community-based services under §§ 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 §§ 435.406(a) and 436.406(a), and considered categorically needy or medically needy must be furnished only emergency services (as defined in § 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 § 440.255(c).
(o) If the agency makes respiratory care services available under § 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 § 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 § 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]
§ 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 one of the exempt groups described in §§ 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 §§ 435.406(c) and 436.406(c) of this subpart.
[55 FR 36823, Sept. 7, 1990; 56 FR 10807, Mar. 14, 1991]
§ 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.
§ 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.

Subpart C—Benchmark Benefit and Benchmark-Equivalent Coverage

Source:
75 FR 23101, April 30, 2010 unless otherwise noted.
§ 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 individuals, specified by the State under an approved State plan amendment, through enrollment in coverage that provides benchmark or benchmark-equivalent health care benefit coverage.
§ 440.305
Scope.
(a) General. This subpart sets out requirements for States that elect to provide medical assistance to certain Medicaid eligible individuals within one or more groups of individuals specified by the State, through enrollment of the individuals in coverage, identified as “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 could 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 § 440.315. States allowing individuals to voluntarily enroll must be in compliance with the rules specified at § 440.320.
(d) Prior to submitting to the Centers for Medicare and Medicaid Services for approval a State plan amendment to establish a benchmark or benchmark-equivalent benefit plan or an amendment to substantially modify an existing benchmark or benchmark-equivalent benefit plan, a State must have provided the public with advance notice of the amendment and reasonable opportunity to comment with respect to such amendment, and have included in the notice a description of the method for assuring compliance with § 440.345 of this subpart related to full access to EPSDT services, and the method for complying with the provisions of section 5006(e) of the American Recovery and Reinvestment Act of 2009.
§ 440.310
Applicability.
(a) Enrollment. The State may require “full benefit eligible” individuals not excluded in § 440.315 to enroll in benchmark or benchmark-equivalent coverage.
(b) Full benefit eligible. An individual 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.
§ 440.315
Exempt individuals.
Individuals within one (or more) of the following categories are exempt from mandatory enrollment in benchmark or benchmark-equivalent coverage.
(a) The individual 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 individual 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 individual is entitled to benefits under any part of Medicare.
(d) The individual is terminally ill and is receiving benefits for hospice care under title XIX.
(e) The individual 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 individual is medically frail or otherwise an individual with special medical needs. For these purposes, the State's definition of individuals who are medically frail or otherwise have special medical needs must at least include those individuals described in § 438.50(d)(3) of this chapter, children with serious emotional disturbances, individuals with disabling mental disorders, individuals with serious and complex medical conditions, and individuals with physical and/or mental disabilities that significantly impair their ability to perform one or more activities of daily living.
(g) The individual 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 individual is an individual with respect to whom child welfare services are 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 individual is a parent or caretaker relative whom the State is required to cover under section 1931 of the Act.
(j) The individual is a woman who is receiving medical assistance by virtue of the application of sections 1902(a)(10)(ii)(XVIII) and 1902(aa) of the Act.
(k) The individual qualifies for medical assistance on the basis of section 1902(a)(10)(A)(ii)(XII) of the Act.
(l) The individual is only covered by Medicaid for care and services necessary for the treatment of an emergency medical condition in accordance with section 1903(v) of the Act.
(m) The individual 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.
§ 440.320
State plan requirements: Optional enrollment for exempt individuals.
(a) General rule. A State plan that offers exempt individuals as defined in § 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 disenroll from 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 individual of the benefits available under the benchmark or benchmark-equivalent benefit package and the costs under such a package and provide a comparison of how they differ from the benefits and costs available under the standard full Medicaid program. The State must also inform exempt individuals that they may disenroll at any time and provide them with information about the process for disenrolling.
(3) The State must document in the exempt individual's eligibility file that the individual was informed in accordance with this section prior to enrollment, was given ample time to arrive at an informed choice, and voluntarily and affirmatively 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 above within 30 days after such determination.
(b) Disenrollment Process. (1) The State must act upon requests promptly for exempt individuals who choose to disenroll from benchmark or benchmark-equivalent coverage.
(2) The State must have a process in place to ensure that exempt individuals have access to all standard State plan services while disenrollment requests are being processed.
(3) The State must maintain data that tracks the total number of beneficiaries that have voluntarily enrolled in a benchmark plan and the total number of individuals that have disenrolled from the benchmark plan.
§ 440.325
State plan requirements: Coverage and benefits.
Subject to requirements in § 440.345 and § 440.365, States may elect to provide any of the following types of health benefits coverage:
(a) Benchmark coverage in accordance with § 440.330.
(b) Benchmark-equivalent coverage in accordance with § 440.335.
§ 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 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 elect 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.
§ 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 under § 440.340, that is at least actuarially equivalent to the coverage under one of the benchmark benefit packages described in § 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) Emergency services.
(6) Family planning services and supplies and other appropriate preventive 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.
§ 440.340
Actuarial report for benchmark-equivalent coverage.
(a) A State plan amendment that would provide for benchmark-equivalent health benefits coverage described in § 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 § 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.
(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 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 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.
§ 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 additional benefits provided by the State for any child under 21 years of age eligible under the State plan in a category under section 1902(a)(10)(A) of the Act.
(1) Sufficiency. Any additional EPSDT benefits not provided by the benchmark or benchmark-equivalent plan 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 additional benefits will be provided, how access to additional benefits will be coordinated and how beneficiaries and providers will be informed of these processes in order to ensure that these individuals have access to the full EPSDT benefit.
(b) [Reserved]
§ 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 additional 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 economy and efficiency requirements at § 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 individuals.
§ 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.
§ 440.360
State plan requirement for providing additional services.
In addition to the requirements of § 440.345 the State may elect to provide additional 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 services must be in categories that are within the scope of the benchmark coverage, or are described in section 1905(a) of the Act.
§ 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 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.
§ 440.370
Economy and efficiency.
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.
§ 440.375
Comparability.
States have the option to amend their State plan to provide benchmark or benchmark-equivalent coverage to individuals without regard to comparability.
§ 440.380
Statewideness.
States have the option to amend their State plan to provide benchmark or benchmark-equivalent coverage to individuals without regard to statewideness.
§ 440.385
Delivery of benchmark and benchmark-equivalent coverage through managed care entities.
In implementing benchmark or benchmark-equivalent benefit packages, States must comply with the managed care provisions at section 1932 of the Act and part 438 of this chapter, if benchmark and benchmark-equivalent benefits are provided through a managed care entity.
§ 440.390
Assurance of transportation.
If a benchmark or benchmark-equivalent plan does not include transportation to and from medically necessary covered Medicaid services, the State must nevertheless assure that emergency and non-emergency transportation is covered for beneficiaries enrolled in the benchmark or benchmark-equivalent plan, as required under § 431.53 of this chapter.
Pt. 441

PART 441—SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC SERVICES
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.
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.
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.
§ 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
§ 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 (§ 441.40).
(b) Section 1138(b) for organ procurement organization services (§ 441.13(c)).
(c) Sections 1902(a)(10)(A) and 1905(a)(21) for nurse practitioner services (§ 441.22).
(d) Sections 1902(a)(10)(D) and 1905(a)(7) for home health services (§ 441.15).
(e) Section 1903(i)(1) for organ transplant procedures (§ 441.35).
(f) Section 1903(i)(5) for certain prescribed drugs (§ 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 (§ 441.12).
(h) Section 1903(i)(18) for the requirement that each home health agency provide the Medicaid agency with a surety bond (§ 441.16).
(i) Section 1905(a)(4)(C) for family planning (§ 441.20).
(j) Sections 1905 (a)(12) and (e) for optometric services (§ 441.30).
(k) Section 1905(a)(17) for nurse-midwife services (§ 441.21).
(l) Section 1905(a) (following (a)(24)) for prohibition of FFP in expenditures for certain services (§ 441.13).
(m) Section 1905(a)(19) and 1915(g) of the Act for case management services as set forth in § 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]
§ 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.
(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]
§ 441.12
Inpatient hospital tests.
Except in an emergency situation (see § 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]
§ 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 § 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 § 483.440(a) of this chapter for residents of ICFs/MR and in § 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]
§ 441.15
Home health services.
With respect to the services defined in § 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 § 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]
§ 441.16
Home health agency requirements for surety bonds; Prohibition on FFP.
(a) Definitions. As used in this section, unless the context indicates otherwise—
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 § 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 § 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 § 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 $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.
(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 § 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 § 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 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]
§ 441.17
Laboratory services.
(a) The plan must provide for payment of laboratory services as defined in § 440.30 of this subchapter if provided by—
(1) An independent laboratory that meets the requirements for participation in the Medicare program found in § 405.1316 of this chapter;
(2) A hospital-based laboratory that meets the requirements for participation in the Medicare program found in § 482.27 of this chapter;
(3) A rural health clinic, as defined in § 491.9 of this chapter; or
(4) A skilled nursing facility—based clinical laboratory, as defined in § 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 § 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.]
§ 441.18
Case management services.
(a) If a State plan provides for case management services (including targeted case management services), as defined in § 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 § 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.
(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 § 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 § 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 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]
§ 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.
§ 441.21
Nurse-midwife services.
If a State plan, under § 440.210 or 440.220 of this subchapter, provides for nurse-midwife services, as defined in § 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]
§ 441.22
Nurse practitioner services.
With respect to nurse practitioner services that meet the definition of § 440.166(a) and the requirements of either § 440.166(b) or § 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]
§ 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]
§ 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 §§ 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.
§ 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]
§ 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 § 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.
§ 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.
§ 441.55
State plan requirements.
A State plan must provide that the Medicaid agency meets the requirements of §§ 441.56-441.62, with respect to EPSDT services, as defined in § 440.40(b) of this subchapter.
§ 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 § 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 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 §§ 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]
§ 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.
§ 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.
§ 441.59
Treatment of requests for EPSDT screening services.
(a) The agency must provide the screening services described in § 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.
§ 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 § 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 § 441.56 or direct referral to a dentist to provide dental services required under § 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 § 441.56.
(5) At the provider's option, provision of all or part of the transportation and scheduling assistance as required under § 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 § 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 § 441.62, or for dental service under § 441.56, the agency must provide for those services to the extent they are not provided for in the agreement.
§ 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 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.
§ 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 § 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.
§ 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 § 431.620 of this subchapter for regulations implementing section 1902(a)(20)(A), which prescribe interagency requirements related to these services.)
§ 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.
§ 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.
§ 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.
§ 441.105
Methods of administration.
The agency must have methods of administration to ensure that its responsibilities under this subpart are met.
§ 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
(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
§ 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 § 440.160 of this subchapter and authorized under section 1905 (a)(16) and (h) of the Act.
§ 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 that undergoes a State survey to determine whether the hospital meets the requirements for participation in Medicare as a psychiatric hospital as specified in § 482.60 of this chapter, or is accredited by a national organization whose psychiatric hospital accrediting program has been approved by CMS; or a hospital with an inpatient psychiatric program that undergoes a State survey to determine whether the hospital meets the requirements for participation in Medicare as a hospital, as specified in part 482 of this chapter, or is accredited by a national accrediting organization whose hospital accrediting program has been approved by CMS.
(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 § 441.152.
(b) Inpatient psychiatric services furnished in a psychiatric residential treatment facility as defined in § 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, as amended at 75 FR 50418, Aug. 16, 2010]
§ 441.152
Certification of need for services.
(a) A team specified in § 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 § 441.153 satisfies the utilization control requirement for physician certification in §§ 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]
§ 441.153
Team certifying need for services.
Certification under § 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 § 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 (§ 441.156) within 14 days after admission.
§ 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 § 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.
§ 441.155
Individual plan of care.
(a) “Individual plan of care” means a written plan developed for each recipient in accordance with §§ 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 § 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 § 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 §§ 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 §§ 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]
§ 441.156
Team developing individual plan of care.
(a) The individual plan of care under § 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 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.
§ 441.180
Maintenance of effort: General rule.
FFP is available only if the State maintains fiscal effort as prescribed under this subpart.
§ 441.181
Maintenance of effort: Explanation of terms and requirements.
(a) For purposes of § 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 § 441.182 and to ensure that all necessary adjustments have been made.
(d) Facilities that did not meet the requirements of §§ 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.
§ 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
§ 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]
§ 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]
§ 441.202
General rule.
FFP is not available in expenditures for an abortion unless the conditions specified in §§ 441.203 and 441.206 are met.
[52 FR 47935, Dec. 17, 1987]
§ 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.
§§ 441.204-441.205
[Reserved]
§ 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 § 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]
§ 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.
§ 441.208
Recordkeeping requirements.
Medicaid agencies must maintain copies of the certifications and documentation specified in § 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.
§ 441.250
Applicability.
This subpart applies to sterilizations and hysterectomies reimbursed under Medicaid.
§ 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.
§ 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.
§ 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 with all the requirements precribed in §§ 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.
§ 441.254
Mentally incompetent or institutionalized individuals.
FFP is not available for the sterilization of a mentally incompetent or institutionalized individual.
§ 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]
§ 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 § 441.255(d)(2), as applicable.
(b) With regard to the requirements of § 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]
§ 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 § 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 § 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.
§ 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.
(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.
§ 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.
Pt. 441, Subpt. F, App.

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).

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: ______
☐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.
§ 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 § 440.180 of this subchapter. This subpart describes what the Medicaid agency must do to obtain a waiver.
§ 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 § 441.302 and the supporting documentation required by § 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 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 § 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 § 440.150 of this chapter), if applicable.
(b) If the agency furnishes home and community-based services, as defined in § 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 § 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 § 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 § 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]
§ 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 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 § 440.10 of this subchapter, a NF as defined in section 1919(a) of the Act, or an ICF/MR as defined by § 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 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 § 440.140; or
(3) Age 21 and under and the State has not included the optional Medicaid benefit cited in § 440.160.
[50 FR 10026, Mar. 13, 1985, as amended at 59 FR 37717, July 25, 1994; 65 FR 60107, Oct. 10, 2000]
§ 441.303
Supporting documentation required.
The agency must furnish CMS with sufficient information to support the assurances required by § 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 § 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 § 440.10, 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 § 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 § 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 of § 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]
§ 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 § 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 § 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]
§ 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 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]
§ 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]
§ 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 § 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]
§ 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]
§ 441.310
Limits on Federal financial participation (FFP).
(a) FFP for home and community-based services listed in § 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 § 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, 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 §§ 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 § 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.
§ 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 § 440.181 of this subchapter. This subpart describes the procedures the Medicaid agency must follow to request a waiver.
§ 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 § 441.352 of this part and the supporting documentation required by § 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 § 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 § 440.181 of this subchapter to be furnished under the waiver, and any additional services to be furnished under the authority of § 440.181(b)(7). Descriptions of additional services must explain how each additional service included under § 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 § 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 § 440.181 of this subchapter, are furnished under a 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 §§ 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 § 441.354.

Effective Date Note:
At 57 FR 29156, June 30, 1992, § 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.
§ 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 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 § 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 § 440.181 of this chapter.

Effective Date Note:
At 57 FR 29156, June 30, 1992, § 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.
§ 441.353
Supporting documentation required.
The agency must furnish CMS with sufficient information to support the assurances required under § 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.
(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 § 435.217 of this subchapter).

Effective Date Note:
At 57 FR 29156, June 30, 1992, § 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.
§ 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 × (1+Y) + V × (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.
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—
(U×.07), or (Q/R)-1+(S/T)-1+(U×.02).
Z=The greater of—
(U×.07), or (W/X)-1+(S/T)-1++(U×.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.
§ 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 § 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 § 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 § 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 pro-rate the limit according to the number of days to which it applies.
§ 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 § 431.210 of this chapter.
(3) CMS continues to apply the APEL described in § 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 § 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 § 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 § 431.210 of this chapter.
(ii) CMS continues to apply the APEL in § 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, § 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.
§ 441.357
Hearing procedures for waiver denials.
The procedures specified in § 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.
§ 441.360
Limits on Federal financial participation (FFP).
FFP for home and community-based services listed in § 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 § 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.
§ 441.365
Periodic evaluation, assessment, and review.
(a) Purpose. This section prescribes requirements for periodic evaluation, assessment, and review of the care and 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 § 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.
(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 § 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, § 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.
§ 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.
§ 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 § 441.404.
§ 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.
§ 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;
(2) Must demonstrate an interface with the risk management provision at § 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 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.
§ 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.
§ 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 § 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.
§ 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.
§ 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.
§ 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.
§ 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.
(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.
§ 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:
(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 § 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.
§ 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.
§ 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 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.
§ 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 the opportunity to request a fair hearing under § 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.
§ 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.
§ 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.
§ 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.
§ 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 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.
§ 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.
§ 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.
§ 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 financial management entity, at the administrative rate of 50 percent.
Pt. 442

PART 442—STANDARDS FOR PAYMENT TO NURSING FACILITIES AND INTERMEDIATE CARE FACILITIES FOR THE MENTALLY RETARDED

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
§ 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]
§ 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 § 440.40 or § 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 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 § 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
§ 442.10
State plan requirement.
A State plan must provide that requirements of this subpart are met.
§ 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 § 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 § 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]
§ 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 § 431.108.
[62 FR 43936, Aug. 18, 1997]
§ 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 §§ 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]
§ 442.15
Duration of agreement for ICFs/MR.
(a) Except as specified under § 442.16, the duration of an agreement may not exceed 12 months.
(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 § 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]
§ 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]
§ 442.30
Agreement as evidence of certification.
(a) Under §§ 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 § 431.610 of this subchapter;
(3) The survey agency failed to perform any of the functions specified in § 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 § 431.610(f)(1) or § 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;
(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]
§ 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 § 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 § 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 § 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 § 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.
(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 § 442.42 on retroactive agreements apply).
(e) Applicability of § 441.11. If FFP is continued during appeal under paragraph (d) of this section, the 30-day period provided by § 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]
§ 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 § 442.13.
(b) Exception. This rule does not apply if CMS determines, under § 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
§ 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]
§ 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 § 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 § 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]
§ 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:
(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]
§ 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 § 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]
§ 442.110
Certification period for ICFs/MR with standard-level deficiencies.
(a) Facilities with deficiencies may be certified under § 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 § 442.105.
[43 FR 45233, Sept. 29, 1978. Redesignated and amended at 53 FR 1993, Jan. 25, 1988; 59 FR 56236, Nov. 10, 1994]
§ 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]
§ 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 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]
§ 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]
Pt. 447

PART 447—PAYMENTS FOR SERVICES

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 and nominal charges.
447.55
Standard co-payment.
447.56
Income-related charges.
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.

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
§ 447.1
Purpose.
This subpart prescribes State plan requirements, FFP limitations and procedures concerning payments made by State Medicaid agencies for Medicaid services.
§ 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 § 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.
(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]
§ 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 § 431.55(g) or § 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]
§ 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 §§ 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 §§ 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 §§ 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 §§ 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]
§ 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 § 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 § 447.20(a).
[55 FR 1433, Jan. 16, 1990]
§ 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.
(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.
§ 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 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]
§ 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.
(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 § 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]
§ 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]
§ 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;
(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 § 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 § 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 § 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 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 § 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]
§ 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 § 447.45.
(c) Contract requirements—(1) Basic rule. A contract with an MCO must provide that the organization will meet the requirements of §§ 447.45(d)(2) and (d)(3), and abide by the specifications of §§ 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
§ 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, §§ 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.
(b) Definitions. For the purposes of this subpart:
(1) Indian means any individual defined at 25 USC 1603(c), 1603(f), or 1679(b), or who has been determined eligible as an Indian, pursuant to § 136.12 of this part. This means the individual:
(i) Is a member of a Federally-recognized Indian tribe;
(ii) Resides in an urban center and meets one or more of the following four criteria:
(A) Is a member of a tribe, band, or other organized group of Indians, including those tribes, bands, or groups terminated since 1940 and those recognized now or in the future by the State in which they reside, or who is a descendant, in the first or second degree, of any such member;
(B) Is an Eskimo or Aleut or other Alaska Native;
(C) Is considered by the Secretary of the Interior to be an Indian for any purpose; or
(D) Is determined to be an Indian under regulations promulgated by the Secretary;
(iii) Is considered by the Secretary of the Interior to be an Indian for any purpose; or
(iv) Is considered by the Secretary of Health and Human Services to be an Indian for purposes of eligibility for Indian health care services, including as a California Indian, Eskimo, Aleut, or other Alaska Native.
(2) Indian health care provider means a health care program operated by the Indian Health Service (IHS) or by an Indian Tribe, Tribal Organization, or Urban Indian Organization (otherwise known as an I/T/U) as those terms are defined in section 4 of the Indian Health Care Improvement Act (25 U.S.C. 1603).
[43 FR 45253, Sept. 29, 1978, as amended at 75 FR 30261, May 28, 2010; 75 FR 38749, July 1, 2010]

enrollment fee, premium or similar cost sharing charge
§ 447.51
Requirements and options.
(a) The plan must provide that the Medicaid agency does not impose any enrollment fee, premium, or similar charge for any services available under the plan upon:
(1) Categorically needy individuals, as defined in § 435.4 and § 436.3 of this subchapter, except for the following populations in accordance with sections 1916(c), (d), (g), and (i) of the Act:
(i) A pregnant woman or an infant under one year of age described in subparagraph (A) or (B) of section 1902(l)(1) of the Act, who is receiving medical assistance on the basis of section 1902(a)(10)(A)(ii)(IX) of the Act and whose family income equals or exceeds 150 percent of the Federal poverty level (FPL) applicable to a family of the size involved;
(ii) A qualified disabled and working individual described in section 1905(s) of the Act whose income exceeds 150 percent of the FPL;
(iii) An individual provided medical assistance only under section 1902(a)(10)(A)(ii)(XV) or section 1902(a)(10)(A)(ii)(XVI) of the Act and the Ticket to Work and Work Incentives Improvement Act of 1999 (TWWIIA); and
(iv) A disabled child provided medical assistance under section 1902(a)(10)(A)(ii)(XIX) of the Act in accordance with the Family Opportunity Act; and
(2) An Indian who either is eligible to receive or has received an item or service furnished by an Indian health care provider or through referral under contract health services.
(b) The plan may impose an enrollment fee, premium, or similar charge on medically needy individuals, as defined in §§ 435.4 and 436.3 of this subchapter, for any services available under the plan.
(c) For each charge imposed under paragraph (a) or (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 § 447.52.
[43 FR 45253, Sept. 29, 1978, as amended at 75 FR 30261, May 28, 2010]
§ 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 § 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
Gross family income (per month) | Family size | 1 or 2 | 3 or 4 | 5 or 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
§ 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 care facility, or other medical institution if the individual is required (pursuant to § 435.725, § 435,733, § 435.832, or § 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 as defined at section 1932(b)(2) of the Act and § 438.114(a).
(5) Family planning. Family planning services and supplies furnished to individuals of child-bearing age are excluded from cost sharing.
(6) Indians. Items and services furnished to an Indian directly by an Indian health care provider or through referral under contract health services.
(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; 75 FR 30261, May 28, 2010]
§ 447.54
Maximum allowable and nominal charges.
Except as provided at §§ 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 6-month period, the maximum deductible which may be imposed on a family for that period of eligibility is $13.80. In succeeding years, any deductible 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) Any coinsurance rate it imposes does not exceed 5 percent of the payment the agency makes for the services; and
(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:
State payment for the service | Maximum 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 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.
(4) For Federal FY 2009, any copayment that the State imposes for services provided by a managed care organization (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. When there is no fee-for-service delivery system, the copayment may not exceed $3.40 per visit. In succeeding years, any copayment 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.
(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 sections 1916(a)(3) and 1916(b)(3) of the Act and § 431.57 of this chapter, for non-emergency services furnished in a hospital emergency department, if the State establishes to the satisfaction of the Secretary that alternative sources of nonemergency, outpatient services are actually available and accessible to Medicaid beneficiaries in a timely manner.
(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 imposes on any family during a specified period of time.
[48 FR 5736, Jan. 8, 1983, as amended at 73 FR 71851, Nov. 25, 2008; 75 FR 30262, May 28, 2010]
§ 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 copayment amounts specified in § 447.54(a) and (c) 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 § 447.54(a)(3).
[43 FR 45253, Sept. 29, 1978, as amended at 73 FR 71851, Nov. 25, 2008; 75 FR 30262, May 28, 2010]
§ 447.56
Income-related charges.
Subject to the maximum allowable charges specified in § 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 medically needy recipients than it imposes upon categorically needy recipients.
§ 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.
(c) Payment under Medicaid due to an Indian health care provider or a health care provider through referral under contract health services for directly furnishing an item or service to an Indian may not be reduced by the amount of any enrollment fee, premium, or similar charge, or any deductible, copayment, cost sharing, or similar charge that otherwise would be due from the Indian.
[43 FR 45253, Sept. 29, 1978, as amended at 75 FR 30262, May 28, 2010]
§ 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
§ 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 §§ 447.50 through 447.58 (except for amounts that the agency pays as bad debts of providers under § 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.
§ 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 §§ 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.
§ 447.62
Alternative premiums and cost sharing: Basis, purpose and scope.
(a) Section 1916A of the Act sets forth options for a State through a Medicaid State plan amendment to impose 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 §§ 447.51 through 447.56. For States that impose alternative premiums or cost sharing, § 447.64, § 447.66, § 447.68, § 447.70, § 447.71, § 447.72, § 447.74, § 447.76, § 447.78, § 447.80, and § 447.82 prescribe State plan requirements and options for alternative premiums and cost sharing for a group or groups of individuals (as specified by the State) for services or items (as specified by the State) and the standards and conditions under which States may impose them. The State may vary the premiums and cost sharing among groups of individuals or types of services or items, consistent with the limitations specified in this subpart and section 1916A(a)(1) of the Social Security Act. Otherwise, premiums and cost sharing must comply with the requirements described in § 447.50 through § 447.60.
(b) Waivers of the limitations described in this subpart on deductions, cost sharing, and similar charges may be granted only in accordance with the provisions of section 1916(f) of the Act.
[75 FR 30262, May 28, 2010]
§ 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 on premiums related to family income level that are described in § 447.78(c) of this chapter, including the period and periodicity of those determinations.
(d) The methodology used by the State to:
(1) Identify beneficiaries who are subject to premiums or cost sharing for specific items or services; and
(2) If the State adopts cost sharing rules that could place families at risk of reaching the total aggregate limit for premiums and cost sharing under Medicaid, defined at § 447.78, track beneficiaries' incurred premiums and cost sharing through a mechanism developed by the State that does not rely on beneficiaries, in order to inform beneficiaries and providers of beneficiaries' liability and notify beneficiaries and providers when individual beneficiaries have incurred family out-of-pocket expenses up to that limit and are no longer subject to further cost sharing for the remainder of the family's current monthly or quarterly cap period.
(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 § 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.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30262, May 28, 2010]
§ 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.
(7) An Indian who is eligible to receive or has received an item or service furnished by an Indian health care provider or through referral under contract health services.
(b) States may exempt additional classes of individuals from premiums.
(c) Nothing in this subsection shall be construed as restricting the application of any other limitations on the imposition of premiums that may apply to an individual receiving Medicaid who is an Indian.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30262, May 28, 2010]
§ 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 level that are described in § 447.78(c) of this chapter, including the period and periodicity of those determinations.
(c) The schedule of the copayments, coinsurance, deductibles, or similar cost sharing charges imposed for each item or service for which a charge is imposed.
(d) The methodology used by the State to identify beneficiaries who are subject to premiums or cost sharing for specific items or services and, if families are at risk of reaching the total aggregate limit for premiums and cost sharing under Medicaid defined at § 447.78, track beneficiaries' incurred premiums and cost sharing through a mechanism developed by the State that does not rely on beneficiaries, in order to inform beneficiaries and providers of beneficiaries' liability and notify beneficiaries and providers when individual beneficiaries have incurred family out-of-pocket expenses up to that limit and are no longer subject to further cost sharing for the remainder of the family's current monthly or quarterly cap period.
(e) The process for informing recipients, applicants, providers, and the public of the schedule of cost sharing charges for specific items and services for a group or groups of individuals in accordance with § 447.76.
(f) The methodology used to ensure that:
(1) The aggregate amount of premiums and cost sharing imposed under section 1916 and section 1916A of the Act for all individuals in the family enrolled in Medicaid with family income above 100 percent of the Federal poverty level (FPL) does not exceed 5 percent of the family's income of the family involved.
(2) The aggregate amount of cost sharing imposed under section 1916 and section 1916A of the Act for all individuals in the family enrolled in Medicaid with family income at or below 100 percent of the FPL does not exceed 5 percent of the family's 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.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30262, May 28, 2010]
§ 447.70
General alternative cost sharing protections.
(a) 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 prescription drugs identified by a State's Medicaid program as non-preferred within a class of such drugs or for non-emergency use of the emergency room.
(1) 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, including services furnished to individuals with respect to whom child welfare services are being 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) Preventive services, at a minimum the services specified at § 457.520, provided to children under 18 years of age regardless of family income, which reflect the well baby and well child care and immunizations in the Bright Futures guidelines issued by the American Academy of Pediatrics.
(3) Services furnished to pregnant women, if those services relate to the pregnancy or to any other medical condition which may complicate the pregnancy.
(4) Services furnished to a terminally ill individual who is receiving hospice care (as defined in section 1905(o) of the Act).
(5) 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.
(6) Emergency services as defined at section 1932(b)(2) of the Act and § 438.114(a), except charges for services furnished after the hospital has determined, based on the screening and any other services required under § 489.24 of this chapter, that the individual does not need emergency services consistent with the requirements of paragraph (b) of this section.
(7) Family planning services and supplies described in section 1905(a)(4)(C) of the Act, including contraceptives and other pharmaceuticals for which the State claims or could claim Federal match at the enhanced rate under section 1903(a)(5) of the Act for family planning services and supplies.
(8) 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).
(9) 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, in accordance with the Family Opportunity Act.
(10) Items and services furnished to an Indian directly by an Indian health care provider or through referral under contract health services.
(11) Preferred drugs within a class, or drugs not identified by the State's Medicaid program as a non-preferred drug within a class, for individuals for whom cost sharing may not otherwise be imposed as described in paragraphs (a)(1) through (10) of this section.
(b) For the exempt populations specified in paragraph (a) of this section, a State may impose nominal cost sharing as defined in § 447.54 of this chapter for services furnished in a hospital emergency department, other than those required under § 489.24, if the hospital has determined based on the medical screening required under § 489.24 that the individual does not need emergency services as defined at section 1932(b)(2) of the Act and § 438.114(a), the requirements of § 447.80(b)(1) are met, and the services are available in a timely manner without cost sharing through an outpatient department or another alternative non-emergency health care provider in the geographic area of the hospital emergency department involved.
(c) In the case of a drug that a State's Medicaid program either has identified as a preferred drug within a class or has not otherwise identified as a non-preferred drug within a class, cost sharing may not exceed the nominal levels permitted under section 1916 of the Act as specified in § 447.54 of this chapter. Cost sharing can be imposed that exceeds the nominal levels permitted under section 1916 of the Act for drugs that are identified by a State's Medicaid program as non-preferred drugs within a class in accordance with section 1916A(c) of the Act.
(d) In the case of a drug that is identified by a State's Medicaid program as a non-preferred drug within a class, the cost sharing is limited to the amount imposed for a preferred drug if the individual's prescribing physician determines that the preferred drug for treatment of the same condition either would be less effective for the individual or would have adverse effects for the individual or both.
(e) States may exempt additional individuals, items, or services from cost sharing.
[75 FR 30263, May 28, 2010]
§ 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 authority provided under section 1916 of the Act and consistent with the levels described in such section and § 447.54.
(2) The State may impose cost sharing for non-preferred drugs that does not exceed the nominal amount as defined in § 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 § 447.54 as long as the services are available in a timely manner without cost sharing through an outpatient department or other alternative non-emergency services health care provider in the geographic area of the hospital emergency department involved.
(c) Aggregate cost sharing under sections 1916 and 1916A of the Act for all individuals in the family enrolled in Medicaid may not exceed the maximum permitted under § 447.78(b).
(d) The State may not impose alternative premiums and cost sharing in accordance with section 1916A of the Act on individuals whose family income is at or below 100 percent of the FPL, but may impose cost sharing that does not exceed the nominal amount as defined at § 447.54 and section 1916 of the Act.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30264, May 28, 2010]
§ 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 be imposed under the State plan for individuals whose family income exceeds 100 percent, but does not exceed 150 percent, of the FPL if the cost sharing does 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 § 447.54.
(2) Cost sharing for non-emergency services furnished in the hospital emergency department cannot exceed twice the nominal amount as defined in § 447.54. A hospital must meet the requirements described at § 447.80(b)(2) 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 to a Medicaid beneficiary, including a child covered under a Medicaid expansion program for whom enhanced match is claimed under title XXI of the Act, may not exceed $3.40 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 under sections 1916 and 1916A of the Act for all individuals in the family enrolled in Medicaid may not exceed the maximum permitted under § 447.78(a).
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30264, May 28, 2010]
§ 447.74
Alternative premium and cost sharing protections for individuals with family incomes above 150 percent of the FPL.
(a) States may impose premiums under the State plan consistent with the aggregate limits set forth in § 447.78(a) on individuals whose family income exceeds 150 percent of the FPL.
(b) Cost sharing may be imposed under the State plan on individuals whose family income exceeds 150 percent of the FPL if the cost sharing does not exceed 20 percent of the payment the agency makes for the item or service (including a non-preferred drug but not including non-emergency services furnished in a hospital emergency department), with the following exception: 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 to a Medicaid beneficiary, including a child covered under a Medicaid expansion program for whom enhanced match is claimed under title XXI of the Act, may not exceed $3.40 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 premiums and cost sharing under sections 1916 and 1916A of the Act for all individuals in the family enrolled in Medicaid may not exceed the maximum permitted under § 447.78(a).
[75 FR 30264, May 28, 2010, as amended at 75 FR 38749, July 1, 2010]
§ 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) Beneficiaries, at the time of their enrollment and reenrollment after a redetermination of eligibility, and when premiums, cost sharing charges, or aggregate limits are revised.
(2) Applicants, at the time of application.
(3) All participating providers.
(4) The general public.
(c) Prior to submitting to the Centers for Medicare & Medicaid Services for approval a State plan amendment (SPA) to establish alternative premiums or cost sharing under section 1916A of the Act or an amendment to modify substantially an existing plan for alternative premiums or cost sharing, the State must provide the public with advance notice of the amendment and reasonable opportunity to comment with respect to such amendment in a form and manner provided under applicable State law, and must submit documentation with the SPA to demonstrate that this requirement was met.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30264, May 28, 2010]
§ 447.78
Aggregate limits on alternative premiums and cost sharing.
(a) The total aggregate amount of premiums and cost sharing imposed under sections 1916 and 1916A of the Act for all individuals in a family enrolled in Medicaid 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 imposed under sections 1916 and 1916A of the Act for all individuals in a family enrolled in Medicaid 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 by the State in the State plan.
(c) Family income shall be determined in a manner, for such period, and at such periodicity as specified by the State in the State plan, including the use of such disregards as the State may provide and the process for individuals to request a reassessment of the family's aggregate limit if the family's income is reduced or if eligibility is being terminated due to nonpayment of a premium.
(1) States may use gross income or any other methodology.
(2) States may use a different methodology for determining the family's income to which the 5 percent aggregate limit is applied than is used for determining income eligibility.
[75 FR 30264, May 28, 2010]
§ 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 the State determines that requiring the payment would create an undue hardship for the individual.
(b) With respect to alternative cost sharing, a State may amend its Medicaid State plan to permit a provider, including a pharmacy or hospital, 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 § 489.24 of this chapter, that an individual does not need emergency services as defined at section 1932(b)(2) of the Act and § 438.114(a), before providing treatment and imposing alternative cost sharing on an individual in accordance with § 447.72(b)(2) and § 447.74(b) of this chapter for non-emergency services as defined in section 1916A(e)(4)(A) of the Act, must provide:
(i) 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.
(ii) Information that the alternate provider can provide the services in a timely manner with the imposition of a lesser cost sharing amount or no cost sharing.
(iii) A referral to coordinate scheduling of treatment by this provider.
(3) The provider is not prohibited by this authority from choosing to reduce or waive cost sharing on a case-by-case basis.
(c) Nothing in paragraph (b)(2) of this section shall be construed to:
(1) Limit a hospital's obligations with respect to screening and stabilizing treatment of an emergency medical condition under section 1867 of the Act; or
(2) Modify any obligations under either State or Federal standards relating to the application of a prudent-layperson standard with respect to payment or coverage of emergency medical services by any managed care organization.
[73 FR 71851, Nov. 25, 2008, as amended at 75 FR 30265, May 28, 2010]
§ 447.82
Restrictions on payments to providers.
(a) The plan must provide that the State Medicaid agency reduces the payment it makes to a provider by the amount of a beneficiary's cost sharing obligation, regardless of whether the provider successfully collects the cost sharing.
(b) Payment that is due under Medicaid to an Indian health care provider or a health care provider through referral under contract health services for directly furnishing an item or service to an Indian may not be reduced by the amount of any enrollment fee, premium, or similar charge, or any deductible, copayment, cost sharing, or similar charge that otherwise would be due.
(c) The plan must describe how the State identifies for providers, ideally through the use of the automated systems, whether cost sharing for a specific item or service may be imposed on an individual beneficiary and whether the provider may require the beneficiary, as a condition for receiving the item or service, to pay the cost sharing charge.
[75 FR 30265, May 28, 2010]

Alternative Premiums and Cost Sharing Under Section 1916A
§ 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
§ 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]
§ 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.
§ 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.
§ 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 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.
§ 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.
§ 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]
§ 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 § 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) 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 § 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.
(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]
§ 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.
(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.
§ 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
§ 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]
§ 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 § 430.10 of this chapter.
(c) If the agency chooses to apply the cost limits established under Medicare (see § 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]
§ 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 § 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:
(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 § 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 § 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 § 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 §§ 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 §§ 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 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 § 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]
§ 447.255
Related information.
The Medicaid agency must submit, with the assurances described in § 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]
§ 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 § 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 § 447.253, and the related information described in § 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 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 § 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
§ 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
§ 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]
§ 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 § 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 § 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 § 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 § 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 § 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, 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 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
§ 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 §§ 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.
§ 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 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.
§ 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 § 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]
§ 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 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 § 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 § 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- 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 § 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 § 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]
§ 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 § 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 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 § 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 § 447.299(c)(9) from the amount identified in § 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. 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 § 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.
§ 447.300
Basis and purpose.
In this subpart, § 447.302 through § 447.325 and § 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]
§ 447.302
State plan requirements.
A State plan must provide that the requirements of this subpart are met.
[46 FR 48560, Oct. 1, 1981]
§ 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 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
§ 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 § 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 § 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 § 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 § 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 § 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 (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]

Other Inpatient and Outpatient Facilities
§ 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.
§ 447.342
[Reserved]

Prepaid Capitation Plans
§ 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
§ 447.371
Services furnished by rural health clinics.
The agency must pay for rural health clinic services, as defined in § 440.20(b) of this subchapter, and for other ambulatory services furnished by a rural health clinic, as defined in § 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 §§ 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 §§ 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 § 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 §§ 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.
§ 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.
§ 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 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]
§ 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 § 440.150 of this chapter, or a State-owned or operated nursing facility providing services as set forth in § 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;
(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, Children's Health Insurance Program (CHIP), 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, CHIP, SPAPs, HMOs (including MCOs that do not take possession of drugs) the TRICARE Retail Pharmacy Program, and Medicaid Programs; and
(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.
[72 FR 39239, July 17, 2007, as amended at 75 FR 48852, Aug. 11, 2010]
§ 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 § 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;
(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 § 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 § 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.
§ 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.
§ 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;
(2) An ICF/MR providing services as set forth in § 440.150 of this chapter; or
(3) A State-owned or operated nursing facility providing services as set forth in § 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.
§ 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 § 447.504 of this subpart;
(2) Best price, calculated in accordance with § 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 § 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 § 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:
(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.
§ 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 § 447.514 of this subpart. If a specific limit has not been established under § 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 § 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 § 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.
§ 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.
(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.
§ 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.
§ 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 § 447.514(a) of this subpart, are in accordance with the upper limits specified in § 447.514(b) of this subpart; and
(ii) In the aggregate, its Medicaid expenditures for all other drugs are in accordance with § 447.512 of this subpart.
(2) Assurances. The agency must make assurances satisfactory to CMS that the requirements set forth in § § 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.
§ 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 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.
Pt. 455

PART 455—PROGRAM INTEGRITY: MEDICAID
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.
§ 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]
§ 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 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]
§ 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
§ 455.12
State plan requirement.
A State plan must meet the requirements of §§ 455.13 through 455.23.
[52 FR 48817, Dec. 28, 1987]
§ 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]
§ 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]
§ 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 the case to the unit under the terms of its agreement with the unit entered into under § 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]
§ 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]
§ 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]
§ 455.18
Provider's statements on claims forms.
(a) Except as provided in § 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.
§ 455.19
Provider's statement on check.
As an alternative to the statements required in § 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.”
§ 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 § 433.116 (e) and (f).
[48 FR 3756, Jan. 27, 1983, as amended at 56 FR 8854, Mar. 1, 1991]
§ 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 § 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.
§ 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.
§ 455.100
Purpose.
This subpart implements sections 1124, 1126, 1902(a)(38), 1903(i)(2), and 1903(n) of the Social Security Act. It 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.
§ 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, 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]
§ 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.
§ 455.103
State plan requirement.
A State plan must provide that the requirements of §§ 455.104 through 455.106 are met.
§ 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 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.
§ 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 § 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.
§ 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.

Subpart C—Medicaid Integrity Program

Source:
72 FR 67655, Nov. 30, 2007, unless otherwise noted.
§ 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]
§ 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.
§ 455.230
Eligibility requirements.
CMS may enter into a contract with an entity to perform the activities described at § 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]
§ 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 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]
§ 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 § 455.202, 48 CFR chapter 3, and all other applicable laws and requirements.
[73 FR 55771, Sept. 26, 2008]
§ 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]
§ 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.
(3) Terminate the contract.
[73 FR 55771, Sept. 26, 2008]
§ 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.
§ 455.300
Purpose.
This subpart implements Section 1923(j)(2) of the Act.
§ 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.
§ 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. 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 uncompensated care cost estimates used for calculations of prospective DSH payments for Medicaid State plan year 2011 and thereafter.
Pt. 456

PART 456—UTILIZATION CONTROL

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.
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.
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
§ 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.
(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 Medicaid Services | 1902(a)(30)
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 admission review) | 1902(a)(30) 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 for individuals under 21 | 1902(a)(26)(A) 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 for Individuals Under Age 21: Admission and Plan of Care Requirements | 1905 (a)(16) and (h)
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 Satisfactory Showing of An Effective Institutional Utilization Control Program | 1903(g)
Subpart K—Drug Use Review (DUR) Program and Electronic Claims Management System for Outpatient Drug Claims | 1927(g) and (h)
[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]
§ 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 § 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]
§ 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.
§ 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.
§ 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: §§ 456.122 and 456.132 of subpart C; and § 456.232 of subpart D.
[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]
§ 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 § 431.610.

Subpart B—Utilization Control: All Medicaid Services
§ 456.21
Scope.
This subpart prescribes utilization control requirements applicable to all services provided under a State plan.
§ 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.
§ 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
(b) Identifies exceptions so that the agency can correct misutilization practices of recipients and providers.

Subpart C—Utilization Control: Hospitals
§ 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.
§ 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 § 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
§ 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 § 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
§ 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
§ 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 prescribe administrative requirements: §§ 456.111 through 456.113 prescribe informational requirements; §§ 456.121 through 456.129 prescribe requirements for admission review; §§ 456.131 through 456.137 prescribe requirements for continued stay review; and §§ 456.141 through 456.145 prescribe requirements for medical care evaluation studies.
§ 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 §§ 456.101 through 456.145.

UR Plan: Administrative Requirements
§ 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.
§ 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
§ 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 § 456.70.
(e) Initial and subsequent continued stay review dates described under §§ 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.
§ 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.
§ 456.113
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 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 §§ 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.
§ 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 §§ 456.122 through 456.129.
§ 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.
§ 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 § 456.122 and applies close professional scrutiny to cases selected under § 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 § 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.
§ 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 § 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.
§ 456.125
Time limits for admission review.
Except as required under § 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.
§ 456.126
Time limits for final decision and notification of adverse decision.
Except as required under § 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—
(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.
§ 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 § 456.142(b) (4)(iii) to receive pre-admission review.
§ 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 § 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.
§ 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 § 456.128.
(b) The methods that the committee uses to select categories of admission to receive close professional scrutiny under § 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
§ 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 §§ 456.132 through 456.137.
§ 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.
§ 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 §§ 456.128 and 456.134(a);
(b) The committee assigns a subsequent review date each time it decides under § 456.135 that the continued stay is needed; and
(c) The committee ensures that each continued stay review date it assigns is recorded in the recipient's record.
§ 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 § 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.
§ 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 § 456.111 against the criteria developed under § 456.132 and applies close professional scrutiny to cases selected under § 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 § 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.
§ 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 § 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.
§ 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 § 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 § 456.136 within 2 working days after the date of the final decision.

UR Plan: Medical Care Evaluation Studies
§ 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—
(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.
§ 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.
§ 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.
§ 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]
§ 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
§ 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.
§ 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
§ 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.
(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 § 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
§ 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.
§ 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 § 456.170.

Plan of Care
§ 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.
§ 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
§ 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; §§ 456.211 through 456.213 prescribe informational requirements; §§ 456.231 through 456.238 prescribe requirements for continued stay review; and §§ 456.241 through 456.245 prescribe requirements for medical care evaluation studies.
§ 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 §§ 456.201 through 456.245.

UR Plan: Administrative Requirements
§ 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.
§ 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
§ 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 § 456.172.
(e) Initial and subsequent continued stay review dates described under §§ 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.
§ 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.
§ 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
§ 456.231
Continued stay review required.
The UR plan must provide for a review of each recipient's continued stay in the mental hospital to decide whether it is needed, in accordance with the requirements of §§ 456.232 through 456.238.
§ 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.
§ 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 § 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.
§ 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 §§ 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 § 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.
§ 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 §§ 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.
§ 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 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 § 456.211 against the criteria developed under § 456.232 and applies close professional scrutiny to cases described under § 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 § 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.
§ 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 § 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.
§ 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 § 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 § 456.237 within 2 working days after the date of the final decision.

UR Plan: Medical Care Evaluation Studies
§ 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.
§ 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;
(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.
§ 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.
§ 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]
§ 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
§ 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.
§ 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 §§ 440.140 and 440.150 of this subchapter, but excludes those services if they are provided in religious nonmedical institutions as defined in § 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
§ 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 § 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 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
§ 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.
§ 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.
§ 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 § 456.370.

Plan of Care
§ 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.
§ 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
§ 456.400
Scope.
Sections 456.401 through 456.438 of this subpart prescribe requirements for a written utilization review (UR) plan for each ICF providing Medicaid services. Sections 456.405 through 456.407 prescribe administrative requirements; §§ 456.411 through 456.413 prescribe informational requirements; and §§ 456.431 through 456.438 prescribe requirements for continued stay review.
§ 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 §§ 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
§ 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.
§ 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 § 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.
§ 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
§ 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 § 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 § 456.372;
(f) Initial and subsequent continued stay review dates described under §§ 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.
§ 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.
§ 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
§ 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 §§ 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 § 456.406; and
(ii) Reviews are conducted as frequently as required under §§ 456.433 and 456.434.
§ 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.
§ 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 § 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.
§ 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 § 456.435.
(b) The group assigns a subsequent continued stay review date each time it decides under § 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.
§ 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 §§ 456.433 and 456.434.
§ 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;
(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 § 456.411 against the criteria developed under § 456.432 and applies close professional scrutiny to cases described under § 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 § 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.
§ 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 § 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.
§ 456.438
Time limits for notification of adverse decision.
The UR plan must provide that the group gives notice under § 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
§ 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]
§ 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 § 441.152 satisfies the requirement for physician certification of need for care in §§ 456.60, 456.160, and 456.360; and
(b) The development and review of the plan of care required in § 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 §§ 456.80, 456.180, and 456.380.
(c) The plan of care must be established by the team described in § 441.156.
[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]
§ 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 §§ 456.170, and 456.370 must be made by the team described in § 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
§ 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]
§ 456.501
UR plans as a condition for FFP.
(a) Except when waived under §§ 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 §§ 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
§ 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 § 456.106 of subpart C, and § 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]
§ 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 § 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]
§ 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.
§ 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
§ 456.520
Definitions.
As used in §§ 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 § 456.107 of subpart C; or § 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: §§ 456.125, 456.126, 456.136, and 456.137 of subpart C; and § 456.238 of subpart D.
[43 FR 45266, Sept. 29, 1978, as amended at 61 FR 38399, July 24, 1996]
§ 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 §§ 456.505 through 456.508.
§ 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;
(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]
§ 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.
§ 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.
§ 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 § 456.522.
(c) The renewal request must show, to the Administrator's satisfaction, that the remote facility continues to meet the requirements of §§ 456.521 through 456.523.

Subpart I—Inspections of Care in Intermediate Care Facilities and Institutions for Mental Diseases
§ 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]
§ 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 § 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 § 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]
§ 456.602
Inspection team.
(a) A team, as described in this section and § 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 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.
§ 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]
§ 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.
§ 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.
§ 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.
§ 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.
§ 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 § 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]
§ 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;
(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 § 441.154 of this subchapter.
§ 456.610
Basis for determinations.
In making the determinations on adequacy of services and related matters under § 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]
§ 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]
§ 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.
§ 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.
§ 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.
§ 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 § 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]
§ 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 § 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]
§ 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 §§ 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 §§ 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 §§ 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 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]
§ 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 § 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.
§ 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 § 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 § 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 § 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.
(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]
§ 456.655
Validation of showings.
(a) The Administrator will periodically validate showings submitted under § 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 § 456.652(a) (1) through (4) were not met during the quarter for which the showing was made.
§ 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 § 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.
§ 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 § 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.

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.
§ 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.
§ 456.702
Definitions.
For purposes of this subpart—
Abuse is defined as in § 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 § 456.703.
Criteria is defined as in § 466.1 of this chapter.
Fraud is defined as in § 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 § 456.703.
Standards is defined as in § 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]
§ 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.
(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]
§ 456.705
Prospective drug review.
(a) General. Except as provided in §§ 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 §§ 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 § 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:
(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]
§ 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 § 456.702.
(3) Appropriate use of generic products, that is, use of such products in conformity with State product selection laws.
(4) Therapeutic duplication as described in § 456.705(b)(1).
(5) Drug-disease contraindication as described in § 456.705(b)(2).
(6) Drug-drug interaction as described in § 456.705(b)(3).
(7) Incorrect drug dosage as described in § 456.705(b)(4).
(8) Incorrect duration of drug treatment as described in § 456.705(b)(5).
(9) Clinical abuse or misuse as described in § 456.705(b)(7).
§ 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 § 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.
§ 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 § 456.703(f) and with the access to the predetermined standards requirement at § 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.
(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.
§ 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]
§ 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.
(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 §§ 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 § 432.50 of this chapter are met, at the rate of 75 percent.
(2) If the requirements for skilled professional medical personnel at § 432.50 of this chapter are not met, at the rate specified in § 456.719.
[57 FR 49408, Nov. 2, 1992, as amended at 59 FR 48825, Sept. 23, 1994]
§ 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.
§ 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 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 § 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.
§ 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 system (that is, the most cost-effective telecommunications network and automatic data processing services and equipment) that meets the requirements of § 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.