[Federal Register Volume 64, Number 215 (Monday, November 8, 1999)]
[Proposed Rules]
[Pages 60882-60963]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28693]
[[Page 60881]]
_______________________________________________________________________
Part II
Department of Health and Human Services
_______________________________________________________________________
Health Care Financing Administration
_______________________________________________________________________
42 CFR Parts 431, 433, 435, and 457
State Child Health; Implementing Regulations for the State Children's
Health Insurance Program; Proposed Rule
Federal Register / Vol. 64, No. 215 / Monday, November 8, 1999 /
Proposed Rules
[[Page 60882]]
DEPARTMENT OF HEALTH AND HUMAN SERVICES
Health Care Financing Administration
42 CFR Parts 431, 433, 435, and 457;
[HCFA-2006-P]
RIN 0938-AI28
State Child Health; Implementing Regulations for the State
Children's Health Insurance Program
AGENCY: Health Care Financing Administration (HCFA), HHS.
ACTION: Proposed rule.
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SUMMARY: Section 4901 of the Balanced Budget Act of 1997 (BBA) amended
the Social Security Act by adding a new title XXI. Title XXI provides
funds to States to enable them to initiate and expand the provision of
child health assistance to uninsured, low-income children in an
effective and efficient manner. To be eligible for funds under this
program, States must submit a State plan, which must be approved by the
Secretary.
This proposed rule would implement provisions related to the State
Children's Health Insurance Program (CHIP)including State plan
requirements, coverage and benefits, eligibility, beneficiary financial
responsibility, strategic planning, substitution of coverage, program
integrity, and waivers. In addition, this proposed rule would implement
the provisions of sections 4911 and 4912 of the BBA, which amended
title XIX of the Act to expand State options for coverage of children
under the Medicaid program.
DATES: Written comments will be considered if we receive them at the
appropriate address, as provided below, no later than 5:00 p.m. on
January 7, 2000.
ADDRESSES: Mail written comments (one original and three copies) to the
following address: Health Care Financing Administration, Department of
Health and Human Services, Attention: HCFA-2006-P, P.O. Box 8010,
Baltimore, MD 21244-8010.
If you prefer, you may deliver your written comments (one original
and three copies) to one of the following addresses:
Room 443-G, Hubert H. Humphrey Building, 200 Independence Avenue, SW,
Washington, DC, or
Room C5-14-03, Central Building, 7500 Security Boulevard, Baltimore,
Maryland
If you wish to submit written comments on the information
collection requirements contained in this proposed rule, you may submit
written comments to the following:
Lori Schack, HCFA Medicaid Desk Officer, Office of Information and
Regulatory Affairs, Room 10235, New Executive Office Building,
Washington, DC 20503; and
Health Care Financing Administration, Office of Information Services,
Security and Standards Group, Division of HCFA Enterprise Standards,
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850.
ATTN: John Burke, HCFA-2006-P
FOR FURTHER INFORMATION CONTACT:
Regina Fletcher for general information, (410)786-3293;
Diona Kristian for subpart A, State plan, (410)786-3283;
Jeannine Witles for subpart C, Eligibility, (410)786-5664;
Cindy Ruff for subpart D, Benefits, (410)786-5916;
Christine Hinds for subpart E, Cost sharing, (410)786-4578;
Barbara Greenberg for subpart G, Strategic planning, (410)786-0435;
Anna Fallierias for subpart H, Substitution of coverage, (410)786-8281;
Jennifer Ryan for subpart I, Program integrity and beneficiary
protections, (410)786-1304;
Cindy Ruff for subpart J, Allowable waivers, (410)786-5916;
Judy Rhoades for section K of preamble, Expanded coverage of children
under Medicaid and Medicaid coordination, (410)786-4462;
Chris Hinds for section L of preamble, Medicaid disproportionate share
hospital expenditures, (410)786-4578;
Joan Mahanes for section M of preamble, Vaccines for Children program,
(410)786-4583
SUPPLEMENTARY INFORMATION:
Comments, Procedures, Availability of Copies, and Electronic Access
Because of staff and resource limitations, we cannot accept
comments by facsimile (FAX) transmission. In commenting, please refer
to file code HCFA-2006-P. Comments received timely will be available
for public inspection as they are received, generally beginning
approximately 3 weeks after publication of a document, in Room 443-G of
the Department's office at 200 Independence Avenue, SW., Washington,
DC, on Monday through Friday of each week from 8:30 to 5 p.m. (phone:
(202) 690-7890).
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I. Background
Section 4901 of the Balanced Budget Act of 1997 (BBA), Public Law
105-33, as amended by Public Law 105-100, added title XXI to the Social
Security Act (the Act). Title XXI authorizes a new State Children's
Health Insurance Program (CHIP) to assist State efforts to initiate and
expand the provision of child health assistance to uninsured, low-
income children. Under title XXI, States may provide child health
assistance primarily for obtaining health benefits coverage through (1)
obtaining coverage under a separate child health program that meets the
requirements specified under section 2103 of the Act; or (2) expanding
benefits under the State's Medicaid plan under title XIX of the Act; or
(3) a combination of both. To be eligible for funds under this program,
States must submit a State child health plan (State plan), which must
be approved by the Secretary.
This proposed rule would implement the following sections of title
XXI of the Act:
Section 2101 of the Act, which sets forth the purpose of
title XXI, the requirements of a State plan, State
[[Page 60883]]
entitlement to title XXI funds, and the effective date of the program.
Section 2102 of the Act, which sets forth the requirements
for a State plan, including eligibility standards and methodologies,
coordination, and outreach.
Section 2103 of the Act, which contains coverage
requirements for children's health insurance.
The following parts of section 2105 of the Act:
2105(c)(2)(B) relating to cost-effective community based health
delivery systems; 2105(c)(3) relating to family coverage; 2105(c)(5)
relating to cost sharing and 2105(c)(7) relating to limitations on
payment for abortion.
Section 2106 of the Act, which describes the process for
submission, approval and amendment of State child health plans and plan
amendments.
Section 2107 of the Act, which sets forth requirements
relating to strategic objectives, performance goals and program
administration.
Section 2108 of the Act, which requires States to submit
annual reports and evaluations of the effectiveness of the State's
title XXI plan.
Section 2109 of the Act, which provides that health
insurance coverage provided under a State child health program and
coverage provided as a cost effective alternative are treated as
``creditable coverage'' under section 2701(c) of the Public Health
Service Act (PHS).
Section 2110 of the Act, which includes title XXI
definitions.
This proposed rule would also implement the provisions of sections
4911 and 4912 of the BBA, which amended title XIX of the Act to provide
expanded coverage to children under the Medicaid program. Specifically,
section 4911 of the BBA set forth provisions for use of State child
health assistance funds for targeted and optional low-income children
eligible for enhanced Medicaid match for expanded eligibility under
Medicaid. Section 4912 of the BBA added a new section 1920A to the Act
creating a new optional group for presumptive eligibility for children.
Both title XXI and title XIX statutory provisions are discussed in
detail in section II of this preamble.
We note that on March 4, 1999, we published in the Federal Register
a proposed rule concerning financial program allotments and payments to
States under CHIP at 64 FR 10412. In that rule, we proposed to
implement sections 2104 and portions of 2105 of the Act, which relate
to allotments and payments to States under title XXI. For a detailed
discussion of title XXI and related title XIX financial provisions
including the allotment process, the payment process, financial
reporting requirements and the grant award process, refer to the March
4, 1999 proposed rule.
II. Provisions of the Proposed Rule
A. Overview
Title XXI authorizes grants to States that initiate or expand
health insurance programs for low-income, uninsured children. A
Children's Health Insurance Program (CHIP) under title XXI is jointly
financed by the Federal and State governments and is administered by
the States. Within broad Federal guidelines, each State determines the
design of its program, eligible groups, benefit packages, payment
levels for coverage and administrative and operating procedures. CHIP
provides a capped amount of funds to States on a matched basis for
fiscal years (FY) 1998 through 2007. At the Federal level, CHIP is
administered by the Department of Health and Human Services, through
the Center for Medicaid and State Operations (CMSO) of the Health Care
Financing Administration (HCFA).
Federal payments under title XXI to States are based on State
expenditures under approved plans that could be effective on or after
October 1, 1997. The short time frame between the enactment of the BBA
(August 5, 1997) and the availability of the funding for States
required the Department to begin reviewing CHIP plans submitted by
States and Territories at the same time as it was issuing guidance to
States on how to operate the CHIP programs. The Department worked
closely with States to disseminate as much information as possible, as
quickly as possible, so States could begin to implement their new
programs expeditiously.
The Department began issuing guidance to States within one month of
enactment of the BBA. We provided information on each State's allotment
through two Federal Register notices published on September 12, 1997
(62 FR 48098) and February 8, 1999 (64 FR 6102). We developed a model
application template to assist State's in applying for title XXI funds.
We provided over 100 answers to frequently asked questions. We issued
policy guidance through a series of 20 letters to State health
officials. All of this information is available on our website located
on the Internet at ``http://www.HCFA.gov.'' We have also provided
technical assistance to all States in development of CHIP applications.
CHIP programs operate in almost every State and Territory in the
country. As of April 27 1999, we have approved 52 CHIP plans and have
approved 15 amendments to these plans. Prior to the enactment of Public
Law 105-174, which gave States an additional year to secure their
fiscal year 1998 CHIP allotments, a number of States originally
submitted ``place-holder'' plans in order to secure their fiscal year
1998 allotments. Many of these States now indicate that they will
submit amendments to further expand their programs. Over half of the
approved CHIP plans already provide coverage to families with income
levels at or above 200 percent of the poverty line. We expect that most
of the States and Territories that have not yet expanded eligibility to
children in families with income at or below 200 percent of the Federal
poverty line will eventually do so.
States and Territories have used the guidance we have issued to
design and implement their programs. We intend to formalize this
guidance in two regulations--a financial regulation mentioned
previously (the proposed rule published March 4, 1999) and this
proposed programmatic regulation. This proposed regulation incorporates
much of the programmatic guidance that already has been issued to
States.
In addition, this proposed rule addresses beneficiary protections
necessary for the program to effectively function. These fundamental
protections are consistent with the Presidential directive known as the
Consumer Bill of Rights and Responsibilities. See subpart I for a
discussion of the rights which are addressed in this proposed rule.
This proposed regulation builds upon previously released guidance
and therefore, most of the regulation represents policies that have
been in operation for some time. As we continue to implement the
program, however, we have identified a number of areas in which we
further elaborate on previous guidance or propose new policies that
have not yet been made public. In an attempt to highlight the key
issues, a brief summary follows:
Subpart A--State Plan Requirements
The regulation would clarify several conditions under which States
must submit amendments to approved CHIP plans. For example, we propose
that States submit a plan amendment when the funding source of the
State share changes, prior to such change taking effect. The purpose of
this proposed requirement is to ensure that programs are operated using
only permissible sources of funding. In addition, amendments to impose
cost-sharing on
[[Page 60884]]
beneficiaries, increase existing cost-sharing charges, or increase the
cumulative cost sharing maximum will be considered the same as
amendments proposing a restriction in benefits. Therefore, States will
be required to follow rules regarding prior public notice and
retroactive effective dates.
Subpart C--Eligibility, Screening, Applications and Enrollment
Title XXI prohibits the participation of children of public agency
employees who are eligible to participate in a State health benefits
plan. The only case where such a child could be covered under CHIP is
the case where the employer provides no more than a nominal
contribution available for the child's health benefits coverage. We
propose to clarify that these children would not be considered to be
``eligible for health benefits coverage under a State health benefits
plan'' and could then be eligible for coverage through CHIP.
Subpart D--Coverage and Benefits
The proposed regulation provides some flexibility for States in
keeping the benefit package current. States using the benchmark benefit
package option are not required to submit an amendment each time the
benchmark package changes. States need only submit amendments when
proposing to make a change to the benefit package for the separate
child health program, and then they only need to compare their benefit
package to the most recent benchmark package.
The proposed regulation also clarifies policy regarding the
conditions under which abortion services are permitted under title XXI
and proposes that managed care entities providing this service must do
so under a separate contract.
Subpart E--Beneficiary Financial Responsibilities
The statute places a 5 percent cap on cost-sharing expenditures for
families with incomes greater than 150 percent of the Federal Poverty
Level (FPL) who are enrolled in separate child health programs. In an
attempt to preserve State flexibility, the proposed regulation gives
States the option to use either gross or net family income when
calculating the cost-sharing cap.
In addition, the regulation proposes to place a comparable limit of
2.5 percent on cost-sharing for families with incomes below 150 percent
of the poverty line, in order to ensure that those families with lower
incomes will not be forced to pay the same amount of cost-sharing as
those with higher incomes. In addition, States have the option to apply
cost-sharing imposed on adults in CHIP family coverage plans toward the
cumulative maximum cap.
The regulation proposes that States must have a process in place
that will protect beneficiaries by ensuring ``due process'' before
beneficiaries can be disenrolled from the program for failure to pay
cost-sharing. This preamble suggests that States may look for a pattern
of nonpayment, provide clear notice and opportunities for late payment,
and wait at least one billing cycle before taking action to disenroll.
Finally, title XXI includes provisions to ensure enrollment and
access to health care services for American Indian and Alaska Native
(AI/AN) children. The regulation incorporates our interpretation that
in light of the unique Federal relationship with tribal governments,
cost-sharing requirements for individuals who are members of a
Federally recognized tribe are not consistent with this statutory
requirement.
Subpart G--Strategic Planning, Reporting and Evaluation
The regulation includes provisions intended to ensure compliance
with both the statute, the elements of the State's title XXI plan and
the onsite review of State programs. In addition, monitoring will
enable tracking of CHIP data submissions, which will ultimately help
ensure enrollment in both the CHIP and Medicaid programs.
Subpart I--Program Integrity and Beneficiary Protections
This subpart is intended to underscore the importance of preserving
program integrity in the Children's Health Insurance Program. The
regulation proposes that States must have fraud and abuse protections
in place, but provides flexibility to States in developing program
integrity protections for separate child health programs. States are
encouraged to utilize systems already existing for Medicaid, but are
not required to do so.
In addition, the regulation proposes that States have additional
flexibility in setting procurement standards more broadly than
Medicaid. States may choose to base payment rates on public and/or
private rates for comparable services, and where appropriate, establish
higher rates in order to ensure sufficient provider participation.
Finally, this regulation includes various beneficiary protections
consistent with the President's directive regarding the Consumer Bill
of Rights and Responsibilities. Provisions are included throughout the
regulation to ensure that beneficiaries are given the opportunity to
participate in and make informed medical decisions, to have access to
needed services, and to be treated with dignity and respect.
Subpart J--Waivers
The proposed regulation discusses the circumstances under which
States may obtain a waiver in order to provide Title XXI coverage to
entire families. We propose that in order to qualify for such a waiver,
the State must meet several requirements, including a requirement that
the proposal be cost effective.
Under our proposal, the new provisions for the Children's Health
Insurance Program would be set forth in regulations at 42 CFR part 457,
subchapter D. We note that the following table of contents is for all
of part 457 and lists some subparts which have been reserved for
provisions set forth in the March 4, 1999 proposed financial
regulation.
The proposed table of contents for new part 457, subchapter D is as
follows:
Subchapter D--Children's Health Insurance Program (CHIP)
PART 457--ALLOTMENTS AND GRANTS TO STATES
Subpart A--Introduction; State Plans for Child Health Insurance
Programs and Outreach Strategies
Sec. 457.1 Program description.
Sec. 457.2 Basis and scope of subchapter D.
Sec. 457.10 Definitions and use of terms.
Sec. 457.30 Basis, scope, and applicability of subpart A.
Sec. 457.40 State program administration.
Sec. 457.50 State plan.
Sec. 457.60 Amendments.
Sec. 457.65 Duration of State plans and plan amendments.
Sec. 457.70 Program options.
Sec. 457.80 Current State child health insurance coverage and
coordination.
Sec. 457.90 Outreach.
Sec. 457.110 Enrollment assistance and information requirements.
Sec. 457.120 Public involvement in program development.
Sec. 457.125 Provision of child health assistance to American Indian
and Alaska Native children.
Sec. 457.130 Civil rights assurance.
Sec. 457.135 Assurance of compliance with other provisions.
Sec. 457.140 Budget.
Sec. 457.150 HCFA review of State plan material.
Sec. 457.160 Notice and timing of HCFA action on State plan material.
[[Page 60885]]
Sec. 457.170 Withdrawal process.
Sec. 457.190 Administrative and judicial review of action on State
plan material.
Subpart B--[Reserved]
Subpart C--State Plan Requirements: Eligibility, Screening,
Applications, and Enrollment
Sec. 457.300 Basis, scope, and applicability.
Sec. 457.301 Definitions and use of terms.
Sec. 457.305 State plan provisions.
Sec. 457.310 Targeted low-income child.
Sec. 457.320 Other eligibility standards.
Sec. 457.340 Application.
Sec. 457.350 Eligibility screening.
Sec. 457.360 Facilitating Medicaid enrollment.
Sec. 457.361 Application for and enrollment in CHIP.
Sec. 457.365 Grievances and appeals.
Subpart D--Coverage and Benefits: General Provisions
Sec. 457.401 Basis, scope, and applicability.
Sec. 457.402 Child health assistance and other definitions.
Sec. 457.410 Health benefits coverage options.
Sec. 457.420 Benchmark health benefits coverage.
Sec. 457.430 Benchmark-equivalent health benefits coverage.
Sec. 457.431 Actuarial report for benchmark-equivalent coverage.
Sec. 457.440 Existing comprehensive State-based coverage.
Sec. 457.450 Secretary-approved coverage.
Sec. 457.470 Prohibited coverage.
Sec. 457.475 Limitations on coverage: Abortions.
Sec. 457.480 Preexisting condition exclusions and relation to other
laws.
Sec. 457.490 Delivery and utilization control systems.
Sec. 457.495 Grievances and appeals.
Subpart E--State Plan Requirements: Beneficiary Financial
Responsibilities
Sec. 457.500 Basis, scope, and applicability.
Sec. 457.505 General State plan requirements.
Sec. 457.510 Premiums, enrollment fees, or similar fees: State plan
requirements.
Sec. 457.515 Co-payments, coinsurance, deductibles, or similar cost
sharing charges: State plan requirements.
Sec. 457.520 Cost sharing for well-baby and well-child care.
Sec. 457.525 Public schedule.
Sec. 457.530 General cost sharing protection for lower income
children.
Sec. 457.535 Cost sharing protection to ensure enrollment of American
Indians/Alaska Natives.
Sec. 457.540 Cost sharing charges for children in families at or below
150 percent of the Federal poverty line (FPL).
Sec. 457.545 Cost sharing for children in families above 150 percent
of the FPL.
Sec. 457.550 Restriction on the frequency of cost sharing charges on
targeted low-income children in families at or below 150 percent of the
FPL.
Sec. 457.555 Maximum allowable cost sharing charges on targeted low-
income children at or below 150 percent of the FPL.
Sec. 457.560 Cumulative cost sharing maximum.
Sec. 457.565 Grievances and appeals.
Sec. 457.570 Disenrollment protections.
Subpart F--[Reserved]
Subpart G--Strategic Planning, Reporting, and Evaluation
Sec. 457.700 Basis, scope, and applicability.
Sec. 457.710 State plan requirements: Strategic objectives and
performance goals.
Sec. 457.720 State plan requirement: State assurance regarding data
collection, records, and reports.
Sec. 457.730 State plan requirement: State annual reports and
evaluation.
Sec. 457.735 State plan requirement: State assurance of the quality
and appropriateness of care.
Sec. 457.740 State expenditures and statistical reports.
Sec. 457.750 Annual report.
Sec. 457.760 State evaluations.
Subpart H--Substitution of Coverage
Sec. 457.800 Basis, scope, and applicability.
Sec. 457.805 State plan requirements: Private coverage substitution.
Sec. 457.810 Premium assistance for employer-sponsored group health
plans: Required protections against substitution.
Subpart I--Program Integrity and Beneficiary Protections
Sec. 457.900 Basis, scope, and applicability.
Sec. 457.902 Definitions.
Sec. 457.910 State program administration.
Sec. 457.915 Fraud detection and investigation.
Sec. 457.920 Accessible means to report fraud and abuse.
Sec. 457.925 Preliminary investigation.
Sec. 457.930 Full investigation, resolution, and reporting
requirements.
Sec. 457.935 Sanctions and related penalties.
Sec. 457.940 Procurement standards.
Sec. 457.945 Certification for contracts and proposals.
Sec. 457.950 Contract and payment requirements including certification
of payment related information.
Sec. 457.955 Conditions necessary to contract as a managed care entity
(MCE).
Sec. 457.960 Reporting changes in eligibility and redetermining
eligibility.
Sec. 457.965 Documentation.
Sec. 457.970 Eligibility and income verification.
Sec. 457.975 Redetermination intervals in cases of suspected
enrollment fraud.
Sec. 457.980 Verification of enrollment and provider services
received.
Sec. 457.985 Enrollee rights to file grievances and appeals.
Sec. 457.990 Privacy protections.
Sec. 457.995 Consumer Bill of Rights and Responsibilities.
Subpart J--Allowable Waivers: General Provisions
Sec. 457.1000 Basis, scope, and applicability.
Sec. 457.1005 Waiver for cost-effective coverage through a community-
based health delivery system.
Sec. 457.1010 Waiver for purchase of family coverage.
Sec. 457.1015 Cost-effectiveness.
Editor's note: In the preamble we discuss new CHIP provisions (part
457) before we discuss relevant changes to the Medicaid regulations
(Medicaid coordination, section K of the preamble, and parts 431, 433,
and 435 of the regulations text). We believe this order is the most
logical presentation for the preamble. However, because regulations
text must be set forth in numerical order, proposed changes to the
Medicaid regulations precede the new regulations text for part 457.
B. Subpart A--Introduction; State Plans for Child Health Insurance
Programs and Outreach Strategies
1. Program Description (Sec. 457.1)
Proposed Sec. 457.1 states that title XXI of the Social Security
Act, enacted in 1997 by the BBA, authorizes Federal grants to States
for provision of child health assistance to uninsured, low-income
children. The program is jointly
[[Page 60886]]
financed by the Federal and State governments and administered by the
States. Within broad Federal rules, each State decides eligible groups,
types and ranges of services, payment levels for benefit coverage, and
administrative and operating procedures.
2. Basis and Scope of Subchapter D (Sec. 457.2)
This subchapter implements title XXI of the Act, which authorizes
Federal grants to States for the provision of child health assistance
to uninsured, low-income children.
The regulations in subchapter D would set forth State plan
requirements, standards, procedures, and conditions for obtaining
Federal financial participation (FFP) to enable States to provide
health benefit coverage to targeted low-income children, as defined in
Sec. 457.310.
3. Definitions and Use of Terms (Sec. 457.10)
This subpart includes the definitions relevant specifically to the
Children's Health Insurance Program under title XXI. We have defined in
this subpart key terms that are specified in the statute or frequently
used in this regulation. We note that those terms that are specific to
certain subparts of this regulation are defined at the opening of those
subparts, however, all the terms are listed here. For example, since
the definition of ``targeted low-income child'' is specifically
relevant in making eligibility determinations, the term is defined in
subpart C--Eligibility. Because of the unique Federal-State
relationship that is the basis for this program and because of our
commitment to State flexibility, we determined States should have the
discretion to define many terms.
In accordance with section 2110 of the Act, which sets forth
definitions for title XXI, we propose to adopt definitions for the
terms, ``creditable health coverage'', ``group health insurance
coverage'', ``group health plan'' and ``preexisting condition
exclusion'' from sections 2701(c) and 2791 of the Public Health Service
Act (PHS) (42 U.S.C. 300gg(c)) as specifically required under the
statute. These definitions are consistent with the definitions set
forth in regulations at 45 CFR 144.103 and 146.113. Section 2109(a)(1)
of title XXI provides that health insurance coverage provided under a
State child health plan and coverage provided as a cost-effective
alternative are treated as ``creditable coverage'' under section
2701(c) of the PHS Act. In addition, section 2103(f) of title XXI
provides that the State plan cannot impose a preexisting condition
exclusion; however, if the State plan provides for benefits through
payment for, or contract with, a group health plan or health insurance
coverage, the State plan can permit the imposition of a preexisting
condition exclusion insofar as it is permitted under HIPAA. (Creditable
coverage counts as credit for previous health coverage against the
application of a preexisting condition exclusion period when moving
from one group health plan to another, from a group health plan to an
individual policy, or from an individual policy to a group health
plan.)
We propose the following definitions:
American Indian/Alaska Native (AI/AN) means (1) A member
of a Federally recognized Indian tribe, band, or group or a descendant
in the first or second degree, of any such member; (2) an Eskimo or
Aleut or other Alaska Native enrolled by the Secretary of the Interior
pursuant to the Alaska Native Claims Settlement Act 43 U.S.C. 1601 et
seq; (3) a person who is considered by the Secretary of the Interior to
be an Indian for any purpose; (4) a person who is determined to be an
Indian under regulations promulgated by the Secretary.
Child means an individual under the age of 19.
Child health assistance has the meaning assigned in
Sec. 457.402 of these proposed regulations.
Children's Health Insurance Program (CHIP) means a program
established and administered by a State, but jointly funded with the
Federal government to provide child health assistance to uninsured,
low-income children through a separate child health program, a Medicaid
expansion program, or a combination of both.
Combination program means a program under which a State
provides child health assistance through both a Medicaid expansion
program and a separate child health program.
Contractor has the meaning assigned in Sec. 457.902.
Cost-effectiveness has the meaning assigned in
Sec. 457.1015 of these proposed regulations.
Creditable health coverage has the meaning given the term
``creditable coverage'' at 45 CFR 146.113. Under this definition, the
term means the coverage of an individual under any of the following:
--A group health plan (as defined in 45 CFR 144.103).
--Health insurance coverage (as defined in 45 CFR 144.103).
--Part A or part B of title XVIII of the Act (Medicare).
--Title XIX of the Act, other than coverage consisting solely of
benefits under section 1928 (the program for distribution of pediatric
vaccines).
--Chapter 55 of title 10, United States Code (medical and dental care
for members and certain former members of the uniformed services, and
for their dependents).
--A medical care program of the Indian Health Service or of a tribal
organization.
--A State health benefits risk pool (as defined in 45 CFR 146.113).
--A health plan offered under chapter 89 of title 5, United States Code
(Federal Employees Health Benefits Program).
--A public health plan. (For purposes of this section, a public health
plan means any plan established or maintained by a State, county, or
other political subdivisions of a State that provides health insurance
coverage to individuals who are enrolled in the plan.
--A health benefit plan under section 5(e) of the Peace Corps Act (22
U.S.C. 2504(e)).
The term ``creditable health coverage'' does not include coverage
consisting solely of coverage of excepted benefits including limited
excepted benefits and non-coordinated benefits. (See 45 CFR 146.145)
Emergency medical condition has the meaning assigned at
Sec. 457.402 of these proposed regulations.
Emergency services has the meaning assigned in
Sec. 457.402 of these proposed regulations.
Employment with a public agency has the meaning assigned
in Sec. 457.301 of these proposed regulations.
Family income means income as determined by the State for
a family as defined by the State.
Federal fiscal year starts on the first day of October
each year and ends on the last day of September.
Fee-for-service entity has the meaning assigned in
Sec. 457.902 of these proposed regulations.
Grievance has the meaning assigned in Sec. 457.902 of
these proposed regulations.
Group health insurance coverage means health insurance
coverage offered in connection with a group health plan as defined at
45 CFR 144.103.
Group health plan means an employee welfare benefit plan,
to the extent that the plan provides medical care as defined in section
2791(a)(2) of the PHS Act (including items and services paid for as
medical care) to employees or their dependents directly (as defined
under the terms of the plan), or through insurance, reimbursement, or
otherwise, as defined at 45 CFR 144.103.
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Health benefits coverage has the meaning assigned in
Sec. 457.402 of these proposed regulations.
Health maintenance organization (HMO) plan has the meaning
assigned in Sec. 457.420 of these proposed regulations.
Legal obligation has the meaning assigned in Sec. 457.555
of these proposed regulations.
Low-income child means a child whose family income is at
or below 200 percent of the poverty line for the size family involved.
Managed care entity (MCE) has the meaning assigned in
Sec. 457.902 of these proposed regulations.
Medicaid applicable income level means, with respect to a
child, the effective income level (expressed as a percentage of the
poverty line) that has been specified under the State plan under title
XIX (including for these purposes, a section 1115 waiver authorized by
the Secretary or under the authority of section 1902(r)(2)), as of
March 31, 1997, for the child to be eligible for medical assistance
under either section 1902(l)(2) or 1905(n)(2) of the Act.
Medicaid expansion program means a program where a State
receives Federal funding at the enhanced matching rate available for
expanding eligibility to targeted low-income children.
Post-stabilization services has the meaning assigned in
Sec. 457.402 of these proposed regulations.
Poverty line/Federal poverty level means the poverty
guidelines updated annually in the Federal Register by the U.S.
Department of Health and Human Services under authority of 42 U.S.C.
9902(2).
Preexisting condition exclusion has the meaning assigned
at 45 CFR 144.103, which provides that the term means a limitation or
exclusion of benefits relating to a condition based on the fact that
the condition was present before the first day of coverage, whether or
not any medical advice, diagnosis, care or treatment was recommended or
received before that day. A preexisting condition exclusion includes
any exclusion applicable to an individual as a result of information
that is obtained relating to an individual's health status before the
individual's first day of coverage, such as a condition identified as a
result of a pre-enrollment questionnaire or physical examination given
to the individual, or review of medical records relating to the pre-
enrollment period.
Premium assistance for employer-sponsored group health
plans means State payment of part or all of premiums for group health
plan or group health insurance coverage of an eligible child or
children.
Public agency has the meaning assigned in Sec. 457.301 of
these propose regulations.
Separate child health program means a program under which
a State receives Federal funding from its title XXI allotment under an
approved plan that obtains child health assistance through obtaining
coverage that meets the requirements of section 2103 of the Act.
State means all States, the District of Columbia, Puerto
Rico, the U.S. Virgin Islands, Guam, American Samoa and the Northern
Mariana Islands.
State health benefits plan has the meaning assigned in
Sec. 457.301 of these proposed regulations.
State plan means the approved or pending title XXI State
child health plan.
State program integrity unit has the meaning assigned in
Sec. 457.902 of these proposed regulations.
Targeted low-income child has the meaning assigned in
Sec. 457.310 of these proposed regulations.
Uncovered child means a child who does not have creditable
health coverage.
Well-baby and well-child care services means regular or
preventive diagnostic and treatment services necessary to ensure the
health of babies and children as defined by the State. For purposes of
cost sharing, the term has the meaning assigned at Sec. 457.520 of the
proposed regulations.
4. Basis, Scope, and Applicability of Subpart A (Sec. 457.30)
This subpart interprets sections 2101(a) and (b), 2102(a), 2102(c),
2106, 2107(c), (d) and (e) of title XXI of the Social Security Act and
sets forth the related State plan requirements for a State child health
assistance program. It includes the requirements related to
administration of the State program and the process for Federal review
of a State plan or plan amendment. This subpart applies to all States
that seek to provide health benefits coverage through CHIP.
5. State Program Administration (Sec. 457.40)
Consistent with section 2106(d)(1) of the Act, we would specify in
Sec. 457.40(a) that it is the State's responsibility to implement and
conduct its program in accordance with the approved State plan and plan
amendments, the requirements of title XXI and title XIX (as
appropriate), and the regulations in chapter IV.
To ensure that the State is operating its program accordingly, HCFA
will review the operation of the program through on-site review or
monitoring of State programs. At proposed Sec. 457.40(a), we would
provide that HCFA will monitor the operation of the approved State plan
and plan amendments to ensure compliance with title XXI, title XIX (as
appropriate) and the regulations in chapter IV. There are two general
goals for the proposed monitoring provisions. Specifically, monitoring
will assure State compliance with both statutory and regulatory
requirements under title XXI and with the specifications of the State
plan. In addition, monitoring will allow us to track the submission of
requested data related to CHIP, including enrollment and expenditure
data and other efforts related to ultimately ensuring enrollment of
eligible children into both CHIP and Medicaid. Expected outcomes of
CHIP monitoring include: (1) Identifying the need for corrective
action, enforcement and improvement within State title XXI programs;
(2) recognizing and sharing best practices that may lead to increased
enrollment; (3) identifying States' needs for technical assistance; and
(4) informing HCFA as we prepare for the Secretary's report to
Congress.
The ongoing review of State programs is an evolving process as
there is wide variation among implemented children's health insurance
programs. Many programs are just being implemented, while others have
been built upon programs in existence long before the passage of title
XXI. Because of both variation in program design and differences in
stages of program implementation, we have established a flexible review
process that is focused primarily on assuring compliance with Federal
law and regulations. In subsequent years Federal review of State
programs may also examine how well programs are achieving the overall
goals outlined in their State plans and plan amendments.
In the Federal review process, however, we will monitor to ensure
consistent implementation of the core set of key policy areas
specifically described in the title XXI statute. We expect our
monitoring effort to be an interactive and informative process for both
the Department and the States. As a result, we plan to work with the
States to identify any areas of need for technical assistance, to
identify best practices that will assist States in understanding what
works in specific situations and to ensure policies are implemented
consistently across States.
Although HCFA central and regional offices are in constant contact
with the States, after the first anniversary of the
[[Page 60888]]
implementation of each CHIP, a formal State review will be conducted by
a team led by HCFA regional staff with participation of HRSA regional
staff.
The review process may include site visits and phone interviews.
Regional staff will put its preliminary findings into a report and
share that report with the State to provide an opportunity for response
to any issues raised in the review process before they make
recommendations and send the report to HCFA central office. If
necessary, HCFA, with participation of HRSA regional staff, will work
with States to address areas in which they are not in compliance with
either the statute, applicable regulations, or a State's plan.
The review process and the implications of noncompliance are
specifically addressed in Sec. 457.200, which was set forth in the
March 4, 1999 proposed financial regulation.
To ensure involvement in and commitment to the program at the
highest level of State government, we are proposing in Sec. 457.40(b)
to require that the State plan and plan amendments be signed by the
State Governor or by an individual who has been delegated authority by
the Governor to submit it. This individual could be the Secretary of
Health, the CHIP Administrator, the Medicaid Director or any other
individual who has authority, delegated by the Governor, to submit the
State plan or plan amendment. In order to facilitate communication
between the appropriate State and HCFA staff, we are proposing in
Sec. 457.40(c) to require that the State include in the State plan or
plan amendment the names of the State officials who are responsible for
program administration and financial oversight.
An additional aspect of program administration for the State is the
passage of enabling legislation, which a State may need to implement a
State plan. When the passage of State enabling legislation is required
to implement a State plan, a State can submit its State plan
application before the passage of the legislation. States must indicate
in their application if such legislation is necessary and when it will
be in place. The State plan must include an assurance that the State
will not claim expenditures for child health assistance prior to the
time that the State has legislative authority to operate the State plan
or plan amendment as approved by HCFA. We are proposing this provision
so that we can approve State plans and plan amendments while a State's
legislative authority is pending. This provision is consistent with the
requirement that a State must implement and conduct its CHIP in
accordance with the approved State plan.
6. State Plan (Sec. 457.50)
The State plan is a comprehensive written statement submitted by
the State to HCFA for approval. The State plan describes the purpose,
nature, and scope of its CHIP and gives assurance that the program will
be administered in conformity with the specific requirements of title
XXI, title XIX (as appropriate), and the regulations in chapter IV. The
State plan contains all information necessary for HCFA to determine
whether the plan can be approved to serve as a basis for Federal
financial participation (FFP) in the State program.
An approved State plan is comprised of the initial plan submission,
responses to requests for additional information and subsequent
approved State plan amendments. The first item that forms part of the
approved State plan is the State's original application. The
information that must be included in the original submission varies
according to how the State chooses to provide health benefits coverage.
In addition, the State's written responses to requests from HCFA for
additional information, whether formal or informal, and any other
written correspondence from the State are considered part of the
approved State plan. The State's correspondence modifies the original
submission; that is, information received from a State supersedes any
contrary information that is included in the original plan or other
earlier submissions. Moreover, if there are several submissions from
the State that are inconsistent, the latest submission is the governing
document. Most often the information in the additional responses should
clarify or add to the language of the original submission. All
documents that are included in the approved State plan will be
referenced in the approval letter. Documents pertaining to all State
plan amendments are also components of the approved State plan.
7. Amendments word (Sec. 457.60)
Section 2106(b)(1) of the Act permits a State to amend its approved
State plan in whole or in part at any time through the submittal of a
plan amendment. We propose in Sec. 457.60(a) that the State plan must
be amended whenever necessary to reflect changes in Federal law,
regulations, policy interpretations or court decision; changes in State
law, organization, policy or operation of the program; and changes in
the source of the State share of funding.
Although the proposed language of Sec. 457.60(a) contains no
exceptions, we believe in practice only changes that are substantial
and noticeable would require amendments. Changes in program elements
that would not ordinarily be required to be included in the State plan
at all would thus not require an amendment. For example, a change in
the date for mailing enrollment material from June 1 to July 1 would
not be considered substantial or noticeable and a State plan amendment
would thus not be required. We are seeking comments on how to further
interpret and express in regulations the necessity for State plan
amendment submission.
We are proposing in Sec. 457.60(a)(3) to require an amendment if
the source of State share of funding changes. Furthermore, we are
proposing in Sec. 457.65(d) that such amendment must be submitted to
HCFA prior to such change taking effect. From the beginning of the
program, our policy has been to only approve State plans that can
assure, to our satisfaction, that the program has a permissible source
of funding. Pursuant to section 2107(e)(1)(C) of the Act, a State is
required as a condition for approval of its State plan to assure that
the State will comply with section 1903(w) of the Act, relating to
limitations on provider taxes and donations. Section 2107(d) of the Act
requires that the State plan include a description of the budget, which
is an advance plan for expenditures. Section 2107(d) also provides that
the budget be updated periodically as necessary. We believe that
proposed Sec. 457.60(a)(3) and Sec. 457.65(d) will ensure ongoing
compliance with our requirement for permissible sources of funding and
will avoid situations that require a disallowance for non-compliance.
If a State has indicated that general revenues are the source of
funding, then we would require a plan amendment for changes in the
State's tax structure that reflect or include a change to general
revenues based on taxes related to health care used to finance the
State's share of title XXI expenditures. We would not require a plan
amendment to reflect changes in the type of non-health care related
taxes used to generate general revenue.
We are proposing in Sec. 457.60(b) to require that a State
proposing to amend its plan include an amended 3-year budget if the
proposed amendment would result in different expenditures than those
described in the budget accompanying the approved State plan. Under
section 2107(d) of the Act, a State plan clearly must include the
budget for
[[Page 60889]]
the plan. If a plan amendment that affects the budget is approved
without a revision to the budget, then the current description of the
budget would no longer be accurate for the entire State plan. If the
proposed changes in the State plan amendment have no impact on the
budget, then an updated budget is not required.
8. Duration of State Plans and Plan Amendments (Sec. 457.65)
In Sec. 457.65, we propose that the State may choose any effective
date for its State plan or plan amendment, but no earlier than October
1, 1997. We believe that the intent of section 2106(a)(2)(B) of the Act
is to provide flexibility to States in choosing an effective date. We
considered requiring that a State must be providing health coverage to
targeted low-income children as of the date the State specified as its
effective date; however, such a requirement would preclude a State from
claiming FFP for administrative start-up costs that are eligible for
FFP. Therefore, in order to allow the State to claim program and
administrative expenditures that the State may incur prior to providing
coverage, we propose to define ``effective date'' as the date on which
the State begins to incur costs to implement its State plan or plan
amendment. This effective date may be prior to the date on which the
State begins to provide coverage to targeted low-income children.
A State may implement a State plan prior to approval of that plan
but this may put the State at some risk. If a State implements a plan
prior to approval and that plan is approved, the State can receive
Federal matching funds on a retroactive basis for expenses incurred for
programs operated in compliance with the approved plan and all
applicable statutory and regulatory requirements (other than expenses
incurred earlier than October 1, 1997).
Any State that implements an unapproved State plan risks the
possibility that the plan will not be approved as implemented. In the
event that the State plan is not approved as it was implemented, the
Federal government would not match the State's prior expenditures. HCFA
has no authority to pay claims for periods prior to the effective date
of the approved State plan for activities that are not consistent with
an approved plan, or for activities that do not meet the requirements
of title XXI. Section 2106 of the Act gives the Secretary authority to
disapprove an initial State plan submission that does not fully comply
with title XXI, and to approve an effective date for that State plan
submission. We believe this authority necessarily means that the
Secretary may deny an effective date that would include any time period
during which the operating program did not fully comply with title XXI.
Moreover, this authority permits the Secretary to deny claims for
Federal matching funds for such time periods. We base that conclusion
on the reasoning that there would be no approved State plan at the time
of any claimed expenditures during those time periods. Under section
2105(a), the Secretary is authorized to pay Federal matching funds to
States based on child health assistance and certain other expenditures
``under'' an approved State plan (up to the amount of the State's
allotment). Absent an approved State plan, no Federal matching funds
may be paid to a State. Although section 2106(c)(3) states that ``* * *
the Secretary shall provide a State with a reasonable opportunity for
correction before taking financial sanctions against the State on the
basis of such [a] disapproval,'' this provision does not require that
the Secretary accept claims in the absence of an approved State plan.
Any State that implements an unapproved State plan amendment also
risks the possibility that the plan amendment will not be approved as
implemented. The reasoning described above for State plans also applies
to State plan amendments that result in additional Federal financial
participation. For a State that implements an unapprovable State plan
amendment that results in expenditures that can be identified as beyond
the scope of the approved State plan, these expenditures could not be
used as a basis for Federal funding under section 2105(a)(1). An
example of this situation is the implementation of a State plan
amendment that adds a new population. For those populations, the
expenditures would simply be beyond the scope of the approved State
plan.
For unapproved State plan amendments that do not result in
expenditures that can be identified as beyond the scope of an approved
State plan, we believe a different analysis must be applied. The
implementation is a failure to conduct the State program in accordance
with the approved State plan, and would be subject to the compliance
remedies described in section 2106(d) of the Act. In this situation,
HCFA would only withhold Federal matching funds after following the
compliance procedures permitting the State a ``reasonable opportunity
for correction'' in accordance with section 2106(d)(2).
On March 4, 1999, we published a proposed rule addressing the
financial provisions for title XXI. We are proposing to clarify certain
provisions which were set forth in subpart B of that proposed rule.
Specifically, paragraph (d)(2) of Sec. 457.204, ``Withholding of
payment for failure to comply with Federal requirements,'' discusses
the opportunity for correction prior to a financial sanction for
failure to comply with a Federal requirement. As proposed,
Sec. 457.204(d)(2) provides that if enforcement actions are proposed,
the State must submit evidence of corrective action related to the
findings of noncompliance to the Administrator within 30 days from the
date of the preliminary notification. The proposed regulation would
implement section 2106(d)(2) of the Act, which requires that the
Secretary provide a State with a reasonable opportunity for correction
before taking financial sanctions against the State on the basis of an
enforcement action. We would revise the proposed regulatory text at
Sec. 457.204(d)(2) to address in more detail the possible scope of
corrective action that could be required. We would specify that such
corrective action can include actions to ensure that the plan is and
will be administered consistent with applicable law and regulations,
actions to address past deficiencies in plan administration, and
actions to ensure equitable treatment of beneficiaries. We recognize
that not every situation will require all of these different types of
corrective action. We are reserving to the Secretary the determination
of the appropriate scope of corrective action under the individual
circumstances presented. Such a determination necessarily will be made
in the final determination on the findings of noncompliance, and will
be reflected in the final notice described in proposed
Sec. 457.204(d)(3).
Certain special provisions govern the establishment of allotments
for FY 1998 and FY 1999 for States that receive approval for their
State plans during FY 1999. Under Public Law 105-277, effective October
21, 1998, if a State submits a State plan during FY 1999, and the plan
is approved by HCFA by the end of FY 1999 (that is, by September 30,
1999), then CHIP allotments may be obligated for the State for both FY
1998 and FY 1999. The effective date for the State plan would be the
date requested by the State, but no earlier than the beginning of FY
1998, (that is, October 1, 1997).
After FY 1999, a State's initial State plan must be approved by
HCFA by the end of a fiscal year in order to receive a State CHIP
allotment for that fiscal year. For example, if HCFA approves a
[[Page 60890]]
State's initial State plan during FY 2000, the State could only receive
a State allotment for FY 2000; the State could not receive an allotment
for FY 1998 or for FY 1999. Since the State did not have a State plan
approved by HCFA in FY 1998 or by the end of FY 1999, it could not
receive a State allotment for FY 1998 or FY 1999.
If a State submits a State plan that is first approved during FY
2000, a FY 2000 allotment would be obligated for that State, but there
would be no allotment for FY 1998 or FY 1999. However, the FY 2000
allotment is potentially available to provide Federal financial
participation (FFP) in the State's allowable FY 1998 and FY 1999
expenditures, such as administrative costs, assuming the State has
requested an effective date for its State plan in one of those fiscal
years. For example, a State plan could be approved November 1, 1999, at
which time the FY 2000 allotment would be obligated, and have an
effective date of September 1, 1999, when the State began incurring
administrative costs related to the State plan. These administrative
costs could then be claimed under the FY 2000 allotment. Thus, a State
may potentially have an effective date for its State plan in a fiscal
year and receive FFP in expenditures incurred in a fiscal year for
which it does not have a State CHIP allotment.
Medicaid rules regarding effective dates continue to apply to child
health assistance provided under a Medicaid expansion program. In
accordance with Sec. 430.20(b) of the Medicaid regulations, the
effective date of title XIX State plan amendments cannot be earlier
than the first day of the quarter in which an approvable title XIX
State plan amendment is submitted to HCFA. It is, therefore, important
for a State to submit a title XIX State plan amendment either prior to
or during the calendar quarter in which it wants the amendment to take
effect. As discussed in proposed Sec. 457.70, States must submit both a
Medicaid State plan amendment and a title XXI plan for the Medicaid
expansion. Medicaid State plan amendments will be reviewed using the
established process for title XIX. We will make every effort to
coordinate the approval of a Medicaid State plan amendment with the
approval of the title XXI State plan.
Section 2106(b)(3)(C) of the Act provides that any State plan
amendment that does not eliminate or restrict eligibility or benefits
can remain in effect only until the end of the State fiscal year in
which it becomes effective (or, if later, the end of the 90-day period
in which it becomes effective) unless the State plan amendment is
submitted to HCFA before the end of the period. We would implement this
provision at proposed Sec. 457.65(a)(2). Thus, if a State plan
amendment is implemented but is not submitted within the required time
frame, the State risks being found out of compliance with its State
plan, and loss of Federal participation in expenditures beyond the
scope of the approved plan or other financial sanctions, as discussed
below and in the proposed financial regulation (64 FR 10412).
In accordance with section 2106(b)(3)(B)(ii) of the Act, an
amendment that eliminates or restricts eligibility or benefits under
the plan may not be effective for longer than a 60-day period unless
the amendment is submitted to HCFA before the end of that 60-day
period. Section 2106(b)(3)(B)(i) requires that amendments that
eliminate or restrict eligibility or benefits under the plan may not
take effect unless the State certifies that it has provided prior
public notice of the proposed change in a form and manner provided
under applicable State law. The notice must be published prior to the
requested effective date of change. We propose to implement this
provision at Sec. 457.65(b). In the amendment request, the State should
describe the public notice process.
We are also proposing that State plan and State plan amendments
imposing new or increased cost sharing on beneficiaries would be
treated as a restriction on benefits and subject to the prior public
notice requirements set forth at Sec. 457.65 of these proposed
regulations. We view cost sharing as a restriction on benefits since a
beneficiary's financial responsibility for certain costs associated
with CHIP may be an impediment to the beneficiary's access to certain
covered services. Therefore, in accordance with section 2106(a)(3)(B)
of the Act, we are proposing that the State plan must comply with the
prior public notice requirements at Sec. 457.65 when the plan
implements cost sharing charges, increases the existing cost sharing
charges or increases the cumulative cost sharing maximum set forth at
proposed Sec. 457.555. We believe that prior public notice would give
interested parties the opportunity to react to the proposed changes. In
addition, our proposed notice requirements would allow States to take
into account the public's concerns regarding the potential impact of
cost sharing on beneficiary access to services and participation in
CHIP.
As discussed previously at proposed Sec. 457.65(d), we would
specify that a State plan amendment that requests approval of changes
in the source of the State share of funding must be submitted prior to
such change taking effect.
In accordance with section 2106(e) of the Act, at Sec. 457.65(e) we
propose that an approved State plan shall continue in effect unless and
until the State modifies its plan by obtaining approval of an amendment
to the State plan. The new plan will consist of the originally approved
State plan and any approved State plan amendments. The State plan shall
also continue in effect unless and until the Secretary finds
substantial non-compliance of the plan with the requirements of the
statute and regulations. An example of substantial non-compliance would
be the imposition of cost sharing that exceeds Federal limits.
9. Program options (Sec. 457.70)
Under section 2101(a) of the Act, a State may obtain health
benefits coverage for uninsured, low-income children in one of three
ways: (1) A State may provide coverage by expanding its Medicaid
program; (2) a State may develop a plan that meets the requirements of
section 2103 of the Act; or (3) a State may provide coverage through a
combination of a Medicaid expansion program and a separate child health
program. The following subparts apply to States that elect Medicaid
expansions:
Subpart A
Subpart B (if the State claims administrative costs under
title XXI).
Subpart C (with respect to the definition of a targeted
low-income child only).
Subpart F (with respect to determination of the allotment
for purposes of the enhanced matching rate, determination of the
enhanced matching rate, and payment of any claims for administrative
costs under title XXI).
Subpart G.
Subpart H (if the State elects the eligibility group for
optional targeted low-income children and elects to pay for employer-
sponsored insurance).
Subpart J (if the State claims administrative costs under
title XXI and seeks a waiver of limitations on such claims based on a
community based health delivery system). Subparts D, E, and I of part
457 do not apply to Medicaid expansion programs because Medicaid rules
govern benefits, cost-sharing, program integrity and other provisions
included in those subparts. We note that the provisions of subparts B
and F were set forth in the March 4, 1999 proposed rule.
A State that chooses to implement a separate child health program
must
[[Page 60891]]
comply with all the requirements in part 457. We would set forth the
program options at Sec. 457.70(a).
At Sec. 457.70(b), we propose that a State plan must include a
description of the State's chosen program option. In addition, at
proposed Sec. 457.70(c) we specify that States choosing a Medicaid
expansion program must submit an amendment to the State's Medicaid
State plan as appropriate. These States will be required to complete an
abbreviated State plan and, in most circumstances, a Medicaid State
plan amendment. If a State is expanding Medicaid within the scope of an
1115 demonstration project, then that demonstration project may need to
be modified by submission of a formal request for a change to the
demonstration project and not through a Medicaid State plan amendment.
If such a modification is needed, then the request for a change to the
demonstration project must be submitted in addition to the title XXI
State plan. The abbreviated State plan must include the State plan
requirements specified in this subpart and subpart G of this proposed
rule. A State that chooses to implement a separate child health program
must include in its State plan all of the State plan requirements
specified in part 457. A State selecting a combination program would
need to submit a title XXI State plan, as well as a Medicaid State plan
amendment.
States may choose one option and switch to a different option at
any time if a State plan amendment describing this change meets the
requirements of the statute and these regulations and is approved by
HCFA.
10. Current State Child Health Insurance Coverage and Coordination
(Sec. 457.80)
In accordance with sections 2102(a)(1) and (2) and 2102(c)(2) of
the Act, we propose to require that the State plan describe the State's
current approach to child health coverage and plans for coordination of
the program with other insurance programs in the State. We specify that
the State must provide a description of the following:
The extent to which, and manner in which, children in the
State, including targeted low-income children and other classes of
children, by income level and other relevant factors, currently have
creditable health coverage (as defined by Sec. 457.10) and, if
sufficient information is available, whether the creditable health
coverage they have is under public health insurance programs or health
insurance programs that involve public-private partnerships.
Current State efforts to provide or obtain creditable
health coverage for uncovered children, including the steps the State
is taking to identify and enroll all uncovered children who are
eligible to participate in public health insurance programs and health
insurance programs that involve public-private partnerships.
Procedures used by the State to accomplish coordination of
the program under title XXI with other public and private health
insurance programs, including procedures designed to increase the
number of children with creditable health coverage, and to ensure that
only eligible targeted low-income children are covered under title XXI.
The degree of creditable coverage a child has impacts whether a
preexisting condition exclusion applies and therefore, tracking this
information would be beneficial to the child.
The purpose of this section is to require the State to justify the
insurance expansion approach it has chosen to ensure that the State
does not use Federal funds to supplant existing programs and funding
but rather uses the funds for children who are uninsured. To the extent
possible, the income level categories by which the State reports the
current availability of creditable coverage should correspond to the
income level categories used for other purposes such as eligibility or
cost-sharing. The State may classify children by family income level,
age group, race and ethnicity, urban versus rural location and any
other categorization that the State finds useful in describing its
situation. If sufficient information is available, the State should
describe the extent to which the classes of children it sets forth are
insured through Medicaid, employer-based coverage, or other forms of
publicly supported insurance, such as State-only programs and public/
private partnerships. In addition, the State should describe the extent
to which children in the State are uninsured. The State plan should
clearly identify the sources of the data it uses in this section. We
recognize that States may not initially have data available for an in-
depth study of the insurance status of its children. However, the
information provided should be sufficient to illustrate that the State
has analyzed the problem, using available data sources. The demographic
information requested in this section can be used for State planning
and will be used strictly for informational purposes. These data will
not be used as a basis for the State's allotment. We also note that
these data are not necessarily the baseline data required to be
submitted as part of the annual report under subpart G.
In addition, at Sec. 457.80(b), we propose that the State must
provide an overview of current efforts made by the State through child
related programs (such as Medicaid, the Maternal and Child Health Block
Grant, title V, WIC, community and migrant health centers or special
State programs for child health care) to provide health care services
or obtain creditable health coverage for uncovered children by
identifying and enrolling all uncovered children.
Section 457.80(c) would require the State plan to include a
description of the coordination of the plan with other public and
private health insurance programs in accordance with sections
2102(a)(3) and 2102(c)(2) of the Act. This section of the State plan
should include an overview of how new enrollment outreach efforts will
be coordinated with and improve upon existing State efforts as
described in Sec. 457.80(a).
A State that implements a separate child health program should
describe how children who are determined to be eligible for Medicaid or
another State-only program will be referred to and enrolled into that
program, as required by proposed Sec. 457.350 and Sec. 457.360. Because
children identified as Medicaid eligible are required to be enrolled in
Medicaid, the State should describe how it will coordinate enrollment
in CHIP and Medicaid. The State plan should also describe how Medicaid
eligibility workers will refer non-Medicaid eligible children to the
separate child health program.
11. Outreach (Sec. 457.90)
In Sec. 457.90, we propose to require a State to implement an
outreach process to inform families of the availability of health
coverage programs and to assist families in enrolling their children
into a health coverage program pursuant to section 2102(c) of the Act.
A State plan must include a description of the procedures used for
outreach. According to the statute, a State has the option to decide
which methodologies and procedures it will use to inform families of
uninsured, potentially eligible children about enrollment for child
health assistance under the program. No single approach to reaching
these children is provided in the statute. While States are expected to
identify enrollment targets, they are encouraged to design and
implement outreach activities that will reach diverse groups of
children. We realize that the challenges States face in reaching out to
families and assuring access to services
[[Page 60892]]
are great and will require vigorous sustained efforts.
Outreach includes identifying, educating, and enrolling uninsured
children, while remaining sensitive to the cultural and linguistic
differences and special health care needs of diverse populations. There
is no one model for outreach and there are many examples of
successfully implemented, locally developed campaigns. Outreach is
intrinsically linked to eligibility and enrollment and calls for
activities that remove barriers that deter families from applying to
the program. At proposed Sec. 457.90(b), we set forth examples of
outreach strategies. The following two major types of outreach
procedures, when designed with the targeted populations in mind, serve
to encourage significant enrollment and reduction in the numbers of
uninsured children:
Education and awareness campaigns. A comprehensive
Statewide education and awareness campaign is needed to inform the
public about the importance of availability of CHIP and how to enroll
eligible children. Implementing this campaign in multiple venues
frequented by families, with culturally sensitive information, will
help to keep the message of health insurance in front of the target
audience. Families will benefit from educational programs designed to
inform them of the advantages of enrolling eligible children in health
insurance, including having a regular source of care, and obtaining
well-child check ups including immunization. All outreach efforts
should include information about how families can find out if their
children are eligible and how to get them enrolled.
Identifying families with uninsured children is the first step in
outreach. States must develop and sustain comprehensive education and
awareness campaigns to reach these children and families. Several data
sets are available to assist States in the identification of families
with uninsured children (for example, immunization registries, hospital
discharge databases, school lunch program participant lists and
hospital charity care databases). States should assure confidentiality
when using their own existing data to identify uninsured children.
Schools may also help in the education and awareness process as they
often know who the uninsured children are. School nurses and school
health centers, Parent Teacher Associations, and school health screens
and fairs offer excellent opportunities for outreach for this new
insurance program.
States often begin outreach campaigns by sending printed material
such as brochures, flyers, and program applications to families
considered to be potentially eligible for enrollment. States may choose
to target mailings to special audiences of potentially uninsured
children. Hispanic/Latinos, Tribal/Native Americans, adolescents,
African-Americans, Asians, migrant populations, rural and homeless, are
populations considered to have large numbers of uninsured children.
States have choices as to the breadth of distribution of program
materials, prepared specifically for the different targeted
subpopulations. Flyers, posters and brochures, developed in appropriate
languages, can be made available through many programs that are closely
identified with low-income families. Programs such as Head Start,
school lunch programs, Child Care Centers and WIC programs serve
thousands of low-income children. Welfare/food stamp offices are
frequented by low-income families who may be eligible for CHIP.
The provider community can also distribute program information.
States could include major providers such as clinics (especially for
newborns), hospitals, physicians (including OB/GYNs, pediatricians, and
family physicians), pharmacies, mobile health units, mental health/
addiction centers, and health trade associations.
Workers who live in the community, speak the language, and know its
cultural beliefs and practices can be effective in disseminating
information and answering basic questions. The diversity of the
uninsured population requires that States, in designing outreach
activities, be sensitive to the various cultural groups, their
perceptions, needs, and desires. To be effective, messages and
promotional materials should be developed with the assistance of people
toward whom the message is directed.
Employer-based outreach is another avenue for providing targeted
populations with basic information on children's insurance programs.
Working families may not know that their children are potentially
eligible for enrollment in either CHIP or Medicaid. Small businesses,
factories, city and State chambers of commerce and labor unions are
often eager to spread the word about insurance coverage to their
members or community groups with whom they are associated.
A broad array of private and public sector partnerships affords
States the opportunity to extend the CHIP message to many areas through
groups and organizations not traditionally involved in outreach.
Strategic partnerships with media, volunteer organizations, school
personnel, community volunteers, clergy, and agency caseworkers may
lend innovation to an outreach campaign. Churches and faith-based
communities, civic clubs, YMCA, 4-H Clubs, Boy Scouts and Girl Scouts
and senior citizen organizations are additional organizations committed
to providing voluntary assistance for community causes. Private and
public sector partnerships, enhanced by large numbers of volunteers,
strengthen dissemination of program information in conjunction with
State and local level campaigns.
Enrollment Simplification. A major key to successfully
reaching and enrolling uninsured children in CHIP and Medicaid is a
simple application and enrollment process. While it is important to
maintain program integrity (as described in subpart I of this proposed
rule), burdensome applications and enrollment processes have created
significant barriers to successful enrollment. Federal requirements for
application and enrollment in Medicaid and CHIP provide broad
flexibility to States in application and enrollment design. Several
actions currently undertaken by States to encourage enrollment include:
reducing and simplifying the application forms; providing mail-in
applications; creating joint CHIP/Medicaid applications; eliminating
the assets test; allowing self-declaration of income with follow-up
verification by the State; reducing verification and documentation
requirements that go beyond Federal regulation; implementing
presumptive eligibility and 12-month continuous eligibility; allowing
redeterminations by mail; and developing a follow-up process for
families not completing the application. These changes, made in
conjunction with other outreach activities undertaken by States, will
help produce significant increases in enrollment.
When a State selects a separate child health program, the State may
consider new ways of providing families with assistance in filling out
applications. We encourage these States to consider outstationing
eligibility workers at sites that are frequented by families with
children such as schools, child care centers, churches, Head Start
centers, WIC offices, Job Corps sites, GED programs, local Tribal
organizations, and Social Security Field Offices. However, States that
implement Medicaid expansions must follow all Medicaid rules relating
to application assistance and eligibility determination.
[[Page 60893]]
12. Enrollment Assistance and Information Requirements (Sec. 457.110)
Section 2102(c) of the Act requires that State plans include
procedures to inform families of the availability of child health
assistance. In accordance with this provision, we are proposing to
require that a State have procedures to ensure that targeted low-income
children are given information and assistance needed to access program
benefits. Specifically, we propose in Sec. 457.110, that the State plan
describe methods the State will use to make accurate, easily understood
information available to families of targeted low-income children and
provide assistance to them in making informed health care decisions
about their health plans, professionals, and facilities. In order to
assist families of targeted low-income children in making informed
decisions about their health care, we propose in Sec. 457.110(b) to
require that States have a mechanism in place to ensure that the type
of benefits and amount, duration and scope of benefits available under
CHIP and the names and locations of current participating providers are
made available to beneficiaries in a timely manner. This requirement is
consistent with the ``right to information'' disclosure provision of
the President's Consumer Bill of Rights and Responsibilities and is
further discussed in subpart I.
The proposed requirements set forth in this section apply to all
States that are providing child health assistance whether through a
Medicaid expansion or separate child health program under fee-for-
service or managed care delivery systems. Because Medicaid rules apply
to States that implement Medicaid expansion programs, a State that is
operating a Medicaid expansion program that uses managed care delivery
systems would also be required to comply with the requirements of
section 1932(a)(5) of the Act, enacted by section 4701(a)(5) of the
BBA, and the regulations that implement that statutory provision. The
Medicaid statute and regulations govern the kind of information that
must be made available to Medicaid enrollees and potential enrollees
and require that this information, and certain enrollment materials, be
in a format that can be easily understood by the individuals to whom it
is directed.
We propose to require that materials be made available to
applicants and beneficiaries in easily understood language and format.
The State should consider the special needs of those who, for example,
are visually impaired or have limited reading proficiency, and the
language barriers of those who may use the information. A State may
overcome language barriers by establishing a methodology for
determining the prevalent language or languages in a geographic area
and making information available in the languages that prevail
throughout the State or in limited geographic areas where appropriate.
A State may also overcome language barriers by making translation
services available to enrollees and potential enrollees. In any case,
the State should provide instructions to enrollees and potential
enrollees on how to obtain information in the appropriate language or
how to access translation services. While we encourage States to apply
these principles in outreach, this provision is specifically designed
to provide information to targeted low-income children once they have
enrolled in CHIP.
In addition to the benefit and provider information that a State
must make available, other basic information should be made available
to families of eligible targeted low-income children. This information
could include procedures for obtaining services, including
authorization requirements; the extent to which after-hours and
emergency coverage are provided; cost sharing, if any; the rights and
responsibilities of enrollees; complaint, grievance, and fair hearing
procedures; any appeal rights that the State chooses to make available
to providers; with respect to managed care organizations (MCOs) and
health care facilities, their licensure, certification, and
accreditation status; and, with respect to health professionals,
information that includes, but is not limited to, education and Board
certification and recertification.
A State that delivers services through a managed care delivery
system should consider making additional information available to
families of targeted low-income children. This additional information
may include any restrictions on the enrollee's freedom of choice among
network providers; policy on referrals for specialty care and for other
services not furnished by the enrollee's primary care provider; the
extent to which enrollees may obtain services from out-of-network
providers; and any benefits to which they may be entitled under the
program, but that are not covered under the MCO contract and specific
instructions on where and how to obtain those benefits.
13. Public Involvement in Program Development (Sec. 457.120)
States are required under section 2107(c) of the Act to include in
the State plan the process that the State used to accomplish public
involvement in the design and implementation of the plan and the method
to ensure ongoing public involvement. We would implement this provision
at Sec. 457.120. Beneficiaries, providers, and interested groups and
organizations can provide valuable input in developing a plan and
insight into the successes and challenges faced by a State during
implementation and throughout the operation of the program. Experience
with section 1115 demonstrations and other Medicaid programs
demonstrates the benefit of early consultation in identifying and
resolving issues. States should provide for participation from
organizations and groups such as hospitals, community health centers,
and other providers, beneficiaries, and advocacy groups. States may
ensure such involvement through a wide variety of approaches. For
instance, to encourage public involvement, States can--
Hold periodic public hearings to provide a forum for
comments when developing or implementing their plans;
Establish a child health commission or a consumer advisory
committee responsible for soliciting public opinion about the State
plan;
Publish notices in generally circulated newspapers
advertising State plan development meetings so the public can provide
input; or
Create a mechanism enabling the public to receive copies
of working proposals in order to provide comments to the State.
States may use methods other than those listed above. In fact,
States may use any process for public input that affords interested
parties the opportunity to learn about the State plan and allow for
public input in all phases of the program.
14. Provision of child health assistance to American Indian and Alaska
Native children (Sec. 457.125)
Section 2102(b)(3)(D) of the Act requires a State to include in its
plan a description of procedures to be used to ensure the provision of
child health assistance to American Indian or Alaska Native children.
We believe that a State cannot meet the requirement for ensuring the
provision of child health assistance to American Indian or Alaska
Native children without consultation with Tribes and Tribal
organizations. Therefore, we are requesting in
[[Page 60894]]
457.125(a) that the State officials responsible for CHIP consult with
Federally recognized Tribes and other Indian Tribes and organizations
in the State (such as regional Indian health boards, urban Indian
health organizations, non-Federally recognized Tribes, and units of the
Indian Health Service) on development and implementation of the
procedures used to ensure the provision of child health assistance to
American Indian or Alaska Native children. This request is consistent
with the February 24, 1998 letter to State Officials addressing
consultation with Tribes and Tribal organizations.
The Federal government and the governments of American Indians and
Alaska Natives (AI/AN or Indian people) have a ``government-to-
government'' relationship based on the U.S. Constitution, treaties,
Federal statutes, court decisions, and Executive Branch policies. This
special relationship also constitutes a trust relationship between
these governments. Certain benefits provided to Indian people through
Federally enacted programs flow from this trust relationship. These
benefits are not based upon race, but rather, are derived from the
government-to-government relationship. A vital component of this
relationship is consultation between the Federal and tribal
governments. Increasingly, this special relationship has emphasized
self-determination for Indian people and meaningful involvement by
Indian people in Federal decision making (consultation) where such
decisions affect Indian people, either because of their status as
Indian people or otherwise. In cases where the government-to-government
relationship does not exist, as with urban Indian centers, Inter-tribal
organizations, State recognized tribal groups, and other Indian
organizations, we nevertheless encourage States to engage in
consultation.
Consultation is an enhanced form of communication which emphasizes
trust, respect and shared responsibility. It is an open and free
exchange of information and opinion among parties which leads to mutual
understanding and comprehension. Consultation is integral to a
deliberative process that results in effective collaboration and
informed decision making. We encourage States, in addition to
consulting with Federally recognized Tribes, to consult with other
Indian Tribes and organizations before taking actions that affect these
governments or the Indian people residing within the State.
In consulting with tribes and tribal organizations regarding the
procedures to ensure provision of child health assistance, State might
want to consider the following:
Reimbursing facilities that serve Indian populations,
including tribal and urban programs, for CHIP covered services at
higher rates than other facilities to assure access to adequate
services.
Improving enrollment procedures for AI/AN children by
placing outstation eligibility workers in the IHS, tribal, and urban
facilities, by developing culturally appropriate education materials
for enrollment of AI/AN children and by using tribal and community
resources to increase eligibility outreach.
We encourage States to consult with Tribes and Indian organizations
throughout the process of developing and implementing their State
plans, outreach strategies, and other policies and procedures. These
are matters of great interest to Tribes and others in the Indian health
community and on which they have significant expertise and insight.
We propose in Sec. 457.125(b) that HCFA will not approve a State
plan that imposes cost sharing on AI/AN children. We believe that the
imposition of cost sharing on children in AI/AN families may impact the
State's ability to ensure coverage for this group as required under
section 2102(b)(3)(D) of the Act. Our rationale for exempting AI/AN
children from cost sharing is further discussed in the preamble for
proposed Sec. 457.535. This proposed provision would apply to states
that submit State plans for either a separate child health program or a
Medicaid expansion program, including Medicaid expansion programs under
a section 1115 demonstration project.
15. Civil Rights Assurance (Sec. 457.130)
In Sec. 457.130, we propose to require the State to provide an
assurance that the State plan will be conducted in compliance with all
civil rights requirements. This assurance is necessary for all programs
involving continuing Federal financial assistance in accordance with 45
CFR 80.4 and 84.5. These civil rights requirements include title VI of
the Civil Rights Act of 1964, title II of the Americans with
Disabilities Act of 1990, section 504 of the Rehabilitation Act of
1973, the Age Discrimination Act of 1975 and 45 CFR part 80, part 84
and part 91 and 28 CFR part 35.
16. Assurance of Compliance with Other Provisions (Sec. 457.135)
In accordance with section 2107(e) of the Act, we propose in
Sec. 457.135 to require that the State plan include an assurance that
the State will comply under title XXI with the following provisions of
titles XIX and XI of the Social Security Act:
Section 1902(a)(4)(C) (relating to conflict of interest
standards).
Paragraphs (2), (16) and (17) of section 1903(i) (relating
to limitations on payment).
Section 1903(w) (relating to limitations on provider
donations and taxes).
Section 1132 (relating to periods within which claims must
be filed).
We note that section 2107(e)(2)(A) of the Act provides that section
1115 the of Act, pertaining to research and demonstration waivers,
applies to title XXI. This provision grants the Secretary the same
section 1115 waiver authority in title XXI programs as in title XIX
programs. Title XXI provides a broad range of options to allow States
maximum flexibility in designing the program that best meets the needs
of their children. We have carefully considered the extent to which
waivers of both title XIX and title XXI provisions should be granted
under CHIP.
While the law permits the Secretary to use section 1115 authority
to waive provisions of title XXI in order to pursue research and
demonstration projects, we do not believe it would be reasonable to
exercise this authority before States have experience in operating
their new title XXI programs and can effectively design and monitor the
results of demonstration proposals. In addition, we do not yet have
sufficient experience in the operation of CHIP to review and evaluate
the merits of a proposal to waive title XXI provisions. Therefore, we
would consider a section 1115 demonstration proposal for waiver of
title XXI provisions only after a State has had at least one year of
CHIP experience and has conducted an evaluation of that experience. We
are inviting comments on the best approach to considering section 1115
waivers of title XXI provisions.
Because both the Federal government and the States have substantial
experience in administering title XIX, we believe that we are in a
position to consider and grant waivers of title XIX provisions even
when the demonstration project involves the CHIP-related enhanced
match. We would consider a request for section 1115 waivers of title
XIX provisions
[[Page 60895]]
applicable to Medicaid expansion programs without any additional
experience with the program. We would require, however, that proposals
be consistent with what would be allowable in a separate child health
program in order to be approvable. We have approved waiver requests for
three States. For example, we granted Missouri a waiver of title XIX
requirements to provide non-emergency medical transportation because
those services would not have been required under a title XXI benefit
package. We have granted waivers for Missouri, New Mexico, and
Wisconsin to waive title XIX cost sharing limitations to the extent
that cost sharing is consistent with limitations of title XXI.
States that submit section 1115 research and demonstration
proposals of Medicaid laws and requirements must meet the existing
section 1115 requirements, including requirements for research and
evaluation design. To the extent that title XIX funds could be utilized
to implement the demonstration, it would be necessary to negotiate
budget neutrality. A State that wishes to have a section 1115
demonstration proposal considered must submit a full section 1115
application in addition to a title XXI State plan or plan amendment
request that indicates that the State intends to implement title XXI
through an approved Medicaid demonstration project. The State plan or
plan amendment must describe the applicable Medicaid requirements that
will be waived if the section 1115 demonstration project is approved.
Although a 90-day review period applies to CHIP State plans, the
90-day review period does not apply to section 1115 demonstration
requests. Section 1115 does not impose any restrictions on review of
waiver applications. While the President has committed to treat
requests for waivers expeditiously, the complexity of waiver proposals
under Medicaid and CHIP means that a 90-day review period may not be
sufficient.
To the extent that a proposed title XXI State plan or plan
amendment depends upon section 1115 demonstration authority (waivers)
which will take longer than 90 days for HCFA to approve or otherwise
act on, HCFA may not be able to approve the proposed title XXI
submission within 90 days. In such a circumstance, HCFA will advise the
State that additional time will be required to review the waiver
request. In addition, HCFA will ask the State for additional
information on whether a final determination on the title XXI
submission is required before approval of the waiver request, and how
the State will implement the title XXI submission absent approved
waivers. If the State does not provide information about implementation
absent approved waivers, then the 90-day review period will not resume
and HCFA will not proceed to final determination of the title XXI
submission before acting on the related waiver request. If the State
responds with information on how the submission will be implemented and
implementation continues to rely upon waivers that have not yet been
granted, then the 90-day review period will resume and HCFA may be
required to disapprove the title XXI submission.
17. Budget (Sec. 457.140)
Section 2107(d) of the Act specifies that a State plan must include
a description of the budget, updated periodically as necessary,
including details on the planned use of funds and the source(s) of the
non-Federal share of plan expenditures, including any requirements for
cost-sharing by beneficiaries. We are proposing in Sec. 457.140(a) that
the State plan must include a budget that describes both planned use of
funds and sources of the non-Federal share of plan expenditures for a
3-year period. An amended budget included in a State plan amendment
must also include the required description for a 3-year period.
We are proposing that the planned use of funds include the
projected amount to be spent on health services, the projected amount
to be spent on administrative costs and assumptions on which the budget
is based. The amount spent on health services would be the cost of the
benefits provided to beneficiaries, such as payments to providers or
health plans. Administrative costs include the costs specified in
section 2105(a)(2) of the Act, examples of which are costs associated
with outreach, child health initiatives and evaluation. We propose that
assumptions on which the budget is based must include the cost per
child and expected enrollment. We realize that a State must base the
required information on projections. However, we believe it is
important to have this information to ensure the State has adequately
planned for its program. In particular, we want to ensure that the
State understands the limits placed on administrative expenditures and
that the plan is being developed in an ``effective and efficient''
manner.
Although section 2107(d) does not specifically require States to
submit a 3-year budget, it provides a sufficient authority for our
proposed requirement. We propose to require a 3-year budget for the
initial State plan because States have up to 3 years to spend each
annual allotment. A 3-year budget is useful to show if States are
planning to use their unused allotments in the succeeding 2 fiscal
years. In developing this policy, we also considered the budget
requirements for Medicaid programs. Section 1115 demonstration projects
require a 5-year budget and section 1915(b) waivers require a 2-year
budget.
In accordance with section 2107(d), we are requiring in
Sec. 457.140(b) that the budget in the State plan describe the
projected source of non-Federal plan expenditures, including any
requirements for cost sharing by beneficiaries. Under Sec. 457.224 of
the March 4, 1999 proposed regulation concerning program allotments and
payments to States (64 FR 10412), FFP would not be available for cost
sharing amounts such as enrollment fees, premiums, deductibles,
coinsurance, copayments, or similar charges as required by section
2105(c)(5). To ensure this result, the amount of expenditures under the
State plan must be reduced by the amount of any premiums and other
cost-sharing received by the State.
HCFA's approval of a State plan, including amendments, is
contingent on the State's use of permissible funding sources for the
non-Federal share of plan expenditures.
Furthermore, we reserve the right to disallow funds, to the extent
we find that the State is using impermissible funding for the non-
Federal share of plan expenditures under a previously approved plan.
Any revenues received by a State through contribution(s) from or the
imposition of tax(es) on health care providers or related entities,
regardless of whether or not the State uses the contribution for
Federal matching purposes, is subject to the statutory provisions of
1903(w) of the Act.
18. HCFA Review of State Plan Material (Sec. 457.150)
Section 2106 of the Act provides the Secretary of the Department of
Health and Human Services (DHHS) with the authority to approve and
disapprove State plans and plan amendments. The authority vested in the
Secretary under title XXI has been delegated to the Administrator of
HCFA with the limitation that no State plan or plan amendment will be
disapproved without consultation and discussion by the Administrator
with the Secretary.
Therefore, in Sec. 457.150, we propose to specify that HCFA
reviews, approves and disapproves all State plans and plan amendments.
The Center for Medicaid and State Operations within HCFA has
[[Page 60896]]
the primary responsibility for administering the Federal aspects of
title XXI. We will continue to work jointly with the Health Resources
and Services Administration (HRSA) to implement and monitor the new
program as a part of the Department's overall strategy to support
coordination with other Federal and State health programs in providing
outreach to uninsured children and promoting coordination of care and
other public health interventions. At this time, State plans and plan
amendments are reviewed by a team of DHHS staff, including HRSA staff,
who must concur on approval of the plan. Departmental concurrence is an
internal policy that is subject to change.
We base approval or disapproval of State plans on relevant Federal
statutes, including title XXI and title XIX, regulations, and
guidelines issued by HCFA. We published and will continue to publish
guidelines in the format of State Health Official letters and Questions
and Answers, which may be accessed through the website.
Section 2106 does not allow the Secretary to partially approve or
disapprove a State plan or plan amendment. Thus, at Sec. 457.150(b) we
propose that HCFA approves or disapproves the State plan or plan
amendment only in its entirety. For example, if a State submitted one
proposal to implement a combination program, we would not approve the
Medicaid expansion portion and disapprove the separate program portion.
The proposal would only be considered as a whole. If a State wants HCFA
to consider portions of a proposal separately, then the State must
expressly divide the proposal into distinct and separate proposed State
plan or State plan amendment submissions. For example, a State could
receive approval for a Medicaid expansion program described in the
State plan and then receive approval to turn the program into a
combination program as described in a plan amendment. As appropriate
and feasible, States may withdraw portions of a pending State plan or
plan amendment that may lead to delay in its approval or disapproval of
the program.
In Sec. 457.150(d), we propose to designate an official to receive
the initial submission of a State plan. By designating one official to
receive all initial State plans, we eliminate any confusion of where to
send the first submission. The identity of this individual is posted on
HCFA's website. If this designated official is unavailable, the review
period is started and counted as if the designated official was in the
office.
In Sec. 457.150(e), we propose to designate an individual to
coordinate HCFA's review for each State that submits a State plan. We
will notify the State of the identity of the designated individual in
the first correspondence from HCFA relating to the plan, such as a
formal request for additional information. We will also notify the
State at any time there is a change in the designated individual. If
the designated individual for a State is unavailable during regular
business hours, another HCFA employee will act in place of the
designated individual to ensure that the review period is counted as if
the designated individual was in the office. We believe that this
procedure will simplify administration of the program.
19. Notice and Timing of HCFA Action on State Plan Material
(Sec. 457.160)
In Sec. 457.160(a), we propose that HCFA will send written
notification of the approval or disapproval of a State plan or plan
amendment. While section 2106(c)(2) only requires that written
notification be sent for disapproval and requests for additional
information, we are proposing to require that written notification be
sent for approval as well. This rule is consistent with the Medicaid
approval process during which HCFA sends written notices of approval of
Medicaid State plan amendments and 1915 (b) and (c) waivers.
We will closely track the review period, which begins on the first
full day following receipt of the initial State plan by the designated
official or the State plan amendment by the designated individual. In
Sec. 457.160(b)(2), we propose that the State plan or plan amendment be
considered received on the day the designated official or individual,
as determined in Sec. 457.150 (d) and (e), receives an electronic, fax
or hard copy of the complete plan. The complete plan includes any
referenced documentation, such as attachments, benefits plans or
actuarial analyses. If the designated official or individual receives a
State plan without the referenced documentation, then the review period
begins not on the first full day following receipt of the initial,
incomplete plan, but rather on the first full day after the designated
individual receives the documentation. We strongly encourage States to
submit their State plans or plan amendments in electronic format (via
disk or e-mail) to facilitate its distribution to DHHS' reviewing
components. We request that the State submit the State plan and plan
amendments to both the HCFA central office and the appropriate regional
office at the same time. If the State submits the State plan or plan
amendment in hard copy, we request that the State submit twenty (20)
copies to the central office and three (3) copies to their regional
office. If the State submits the State plan or plan amendment
electronically, then the State should send three (3) hard copies to the
central office and one (1) hard copy to their regional office. We also
request that States include the name and telephone number of their
primary contact person for CHIP (if different from the information
required in Sec. 457.40(c)) in the State's transmittal letter to help
ensure an early and ongoing dialogue on the submission.
As required by section 2106(c)(2), a State plan or plan amendment
will be considered approved unless HCFA, within 90 days after receipt
of the State plan or plan amendment, sends the State written notice of
disapproval or written notice of any additional information it needs in
order to make a final determination. The Act does not specify calendar
days or business days. We propose to measure the 90-day review period
using calendar days. The 90-day review period would not expire until 12
a.m. eastern time on the 91st countable calendar day after receipt, as
calculated using the rules set forth in the proposed regulation and
discussed below (except that the 90-day period cannot stop or end on a
non-business day).
HCFA's formal request for additional information may include a
description of specific issues that need clarification, an outline of
additional information required, or a request for resolution of any
inconsistencies of the plan with title XXI provisions. We will make a
formal request for information only when the State may need a
significant amount of time to resolve issues or develop required
information. In order to ensure that additional information responding
to HCFA's formal requests will be sufficient to restart the approval
process, we encourage States to work with HCFA in developing any
responses.
In Sec. 457.160(b)(3), we propose that if HCFA provides written
notice requesting additional information, the 90-day review period is
stopped on the day HCFA sends the written request for additional
information. HCFA will not stop a review period on a weekend or a
Federal holiday. This written request will be considered sent on the
day that the letter is signed and dated except if the day is a weekend
or Federal holiday, in which case the review period will stop on the
next business day. We will
[[Page 60897]]
attempt to ensure that the State receives the letter on that same day,
through some means of electronic transmission, and will try to confirm
receipt by telephone contact during normal business hours. We propose
that the review period will resume on the next calendar day after the
complete additional information is received by the designated
individual, unless the State's response is received after 5 p.m.
eastern time on a day prior to a non-business day or any time on a non-
business day, in which case the review period will resume on the
following business day. For example, if the formal request for
information is sent on day 45, the review will begin again at day 46 on
the first full business day following receipt of the requested
information by the designated individual. If the formal request for
information is sent on day 45 and the State's response is received at 6
p.m. eastern time on a Friday, then day 46 will be the following Monday
(assuming it is not a holiday). We propose in Sec. 457.160(b)(4) that
the 90-day review period cannot stop or end on a non-business day. HCFA
will not stop a review period on a weekend or holiday. If the 90th day
of a review period is scheduled to be on a weekend or holiday, then the
90th day will be the following business day. Additionally, in
Sec. 457.160(b)(5), we propose that the 90-day review period may be
stopped as many times as necessary to obtain the necessary information
for making a final decision whether to approve the State plan or plan
amendment.
In developing our policy for the review period, we considered
applying the review periods associated with the review of title XIX
State plan amendments (SPA) and 1915 (b) and (c) waiver requests. In
the review of a SPA and 1915 (b) and (c) waiver request, the 90-day
clock begins on the day of receipt of the SPA or waiver request and
ends 90 days later and only business days are counted. The 90-day clock
can be stopped only once by a written request for additional
information. A new 90-day period begins on the day the requested
information is received.
We are not proposing to use the same review period policies under
title XXI, as we believe the proposed process will more effectively
implement title XXI objectives because it will be speedier and more
flexible. Rather than having a 90-day clock that restarts at the
beginning when additional information is requested and received, we
propose a clock that consists of only 90 calendar days and resumes on
the day additional information was requested, when that information is
received. The proposed time frame allows States ample opportunity to
comply with the requirements of this new program by allowing the review
period to be stopped as many times as necessary rather than only once.
We are proposing that the review period be started (or restarted) on
the first full day following receipt of the plan (or additional
information) in order to allow us the fullest amount of time for
review. Furthermore, our proposal to resume the review period on the
following business day if the response is received after 5 p.m. eastern
time on a day prior to a non-business day would allow us maximum review
time. This provision and the provision that the review period cannot
end on a non-business day safeguard against a plan becoming
automatically approved on a non-business day. While we are committed to
expedient review, we believe it would not be reasonable to count non-
business days on which we could not have reasonably taken action.
We permit and encourage informal discussion between the State and
HCFA during the review period. We may informally request additional
information through meetings or telephone contact, or in writing.
Because an informal request does not stop the 90-day approval time
frame, HCFA usually makes such a request only when HCFA has concerns
that the State could address in a timely manner through clarification
of information already contained in the plan. It is important that
States respond as quickly as possible to informal requests for
clarification because these requests do not stop the review period.
20. Withdrawal Process (Sec. 457.170)
In Sec. 457.170, we propose to allow a State to withdraw its State
plan during the review process by providing written notice to HCFA of
the withdrawal. This process is consistent with the process for
withdrawal of a Medicaid State plan amendment.
21. Administrative and Judicial Review of Action on State Plan Material
(Sec. 457.190)
A State dissatisfied with the Administrator's action on State plan
material has a right to administrative review. In Sec. 457.190(a), we
propose a procedure for administrative review under the authority of
section 2107(e)(2)(B) of the Act. Specifically, we would require that
any State dissatisfied with the Administrator's action on State plan
material under Sec. 457.150 may, within 60 days after receipt of the
notice of final determination provided under Sec. 457.160(a), request
that the Administrator reconsider whether the State plan or plan
amendment conforms with the requirements for approval. This procedure
is consistent with the procedure for administrative review in Medicaid.
Additionally, we propose that the procedures for hearings and judicial
review be the same procedures used in Medicaid which are set forth in
regulations at part 430, subpart D. We propose to use the same
procedures that are used in Medicaid because the infrastructure
supporting these procedures is already in place and well known. We
believe it is important for a State to be familiar with the process for
requesting reconsideration of a HCFA action in order for that State to
have full opportunity to dispute the action. In addition, we propose
that we will not delay the denial of Federal funds, if required by the
Administrator's original determination, pending a hearing decision. If
the Administrator determines that the original decision was incorrect,
we pay the State a lump sum equal to any funds incorrectly denied.
C. Subpart C--State Plan Requirements: Eligibility, Screening,
Applications, and Enrollment
1. Basis, Scope, and Applicability (Sec. 457.300)
This subpart interprets and implements section 2102(b) of the Act,
which relates to eligibility standards and methodologies; section
2105(c)(6)(B), which precludes payment for expenditures for child
health assistance provided to children eligible for coverage under
other Federal health care programs other than programs operated or
financed by the Indian Health Service; and section 2110(b), which
defines the term ``targeted low-income child.'' This subpart sets forth
the requirements relating to eligibility standards and to screening,
application and enrollment procedures. The requirements of this subpart
apply to a separate child health program and, with respect to the
definition of targeted low-income child only, a Medicaid expansion
program.
2. Definitions and Use of Terms (Sec. 457.301)
This section includes the definitions and terms used in this
subpart. Because of the unique Federal-State relationship that is the
basis for this program and in keeping with our commitment to State
flexibility, we determined that many terms should be left to the States
to define. For example, we did not define the terms ``family'' or
``income'' as there is a great deal of variation among States. States
have the option to count either
[[Page 60898]]
gross or net income when making eligibility determinations; and the
term family can be defined any number of ways, ranging from only the
individual child to including parents, grandparents or other non-
related guardians. States have discretion in making these
determinations.
The statutory phrase ``public agency in the State'' is not
restricted to State government agencies, but would include other public
agencies, such as local agencies in the State. Therefore, we propose to
define ``public agency'' as a State, county, city or other type of
municipal agency, including a public school district, transportation
district, irrigation district, or any other type of public entity. Such
an interpretation is consistent with the use of the term under
Sec. 433.51 of the Medicaid regulations, which includes State and local
governmental units, as well as Indian tribes, as public agencies. We
are proposing to define the term ``employment with a public agency'' as
employment either directly or with an entity under a contract with a
public agency. This term includes both direct and indirect employment
because we do not wish to influence or restrict the organizational
flexibility of State and local governmental units.
We would define the term ``State health benefits plan'' as a plan
that is offered or organized by the State government on behalf of State
employees or other public agency employees within the State. For
example, if a local government, such as a county or a city, has its own
insurance plan that is separate from the State employee plan, the
children of that entity's employees could be eligible for CHIP as long
as they are uninsured and meet all other eligibility requirements under
the plan. The term does not include a separately run county, city, or
other public agency plan or a plan that provides coverage only for a
specific type of care, such as dental or vision care. Our definition
parallels the definition in section 2791(d)(8) of the Public Health
Service Act, which refers to plans ``established or maintained for its
employees,'' except that we would limit the term to a plan under which
an actual benefit in the form of a more than nominal premium subsidy is
available for coverage of a dependent child. In the absence of a more
than nominal premium subsidy, we would not consider the plan to be a
``benefits plan'' with respect to the child, because no benefit would
be extended by the State for that child.
3. State Plan Provisions (Sec. 457.305)
In accordance with the requirements of section 2102(b)(1)(A) of the
Act, we propose to require that the State plan include a description of
the eligibility standards under the State plan.
4. Targeted Low-income Child (Sec. 457.310)
Section 2110(b) of the Act defines a targeted low-income child. In
accordance with this section, we have defined a targeted low-income
child as a child who meets the eligibility requirements established in
the State plan and certain other statutory conditions to be a targeted
low-income child. At Sec. 457.310(b), we set forth proposed standards
for targeted low-income children that relate to financial need,
eligibility for other coverage including coverage under a State health
benefits plan. In addition, we set forth exclusions from the category
of low-income children.
With regard to financial need, we propose that a child who resides
in a State with a Medicaid applicable income level, must have: (1)
Family income at or below 200 percent of the Federal poverty line; or
(2) family income that either exceeds the Medicaid applicable income
level but by not more than 50 percentage points or does not exceed the
Medicaid applicable income level determined as of June 1, 1997. Section
2110(b)(1)(B)(ii)(II) of the Act refers to the term Medicaid applicable
income level in the definition of targeted low-income child. As
specified in a technical amendment passed by Congress, the March 31,
1997 date from section 2110(b)(4), defining Medicaid applicable income
level, was replaced with the June 1, 1997 date in the text of this
proposed regulation.
With regard to other coverage, we propose that a targeted low-
income child must not be eligible for Medicaid (determined either
through the Medicaid application process or the screening process
discussed later in this preamble); or covered under a group health plan
or under health insurance coverage, unless the health insurance
coverage has been in operation since before July 1, 1997, and is
administered by a State that receives no Federal funds for the
program's operation. However, we would not consider a child to be
covered under a group health plan if the child did not have reasonable
access to care under that plan. For example, if a child is covered by a
health maintenance organization in another State through the employer
of an absent parent and cannot get treatment (other than emergency
care) in his State of residence, we would not consider the child to
have health insurance coverage for purposes of eligibility in the State
of residency.
Section 2110(b)(3) allows low-income children who have insurance
coverage under a State program operating since before July 1, 1997
without Federal funds to be considered targeted low-income children.
This rule applies to programs that are State-operated, that is,
administered by the State in some respect. Children in such programs
continuously operating since June 30, 1997 would not be precluded from
being considered as targeted low-income children, but would have to
meet other applicable eligibility requirements.
In the State plan review process, we have been asked whether
children in Blue Cross/Blue Shield (BC/BS) Caring Programs for Children
are eligible for a separate child health program. As of May 1997, there
were more than 20 Blue Cross/Blue Shield (BC/BS) Caring Programs for
Children. These programs are generally funded by contributions from the
community that are matched by BC/BS and no Federal funds have been used
to support these programs. Whether such children can be covered under a
separate child health program depends on whether the Caring Program is
State-operated. Assuming a particular Caring Program is not within the
pre-existing State program exception, children would nevertheless only
be ineligible to the extent that they were covered by the Caring
program. To the extent that the Caring program terminates, or alters
its eligibility criteria so that these children are no longer eligible,
the children previously covered under the Caring program could be
eligible for CHIP coverage as long as they meet the State's eligibility
requirements. We also note that to the extent that a Caring Program
does not meet the definition of ``health insurance coverage'' under
HIPAA, children covered by a Caring Program may be eligible for CHIP
coverage.
As defined in section 2110(b)(2)(B) of the Act, the definition of
targeted low-income child excludes a child who is a member of a family
that is eligible for health benefits coverage under a State health
benefits plan in a State on the basis of a family member's employment
with a public agency. This provision would exclude children based on
eligibility rather than actual coverage. Therefore a child who is
eligible and offered coverage could not be a targeted low-income child
even if the family declined to accept the coverage.
There may be circumstances in which a State may cover otherwise
eligible
[[Page 60899]]
children of public agency employees. The exclusion only extends to
children ``eligible for health benefits coverage under a State health
benefits plan''. We do not believe this condition is met in any
meaningful sense when only a nominal employee benefit is available for
health benefits coverage for the child. If the State or public agency
contribution for the cost of the child's health benefits coverage is
merely nominal, the child is not ``eligible for health benefits
coverage under a State health benefits plan''. We would find an
employee benefit available to the extent that a more than nominal State
or public agency contribution was available under any health coverage
option offered by the plan, regardless of the actual choice between
those options made by the employee. In other words, if the State offers
a cafeteria plan with multiple choices, we would look to whether a more
than nominal State or public agency contribution could be available
under any of the available choices, regardless of the actual choice
made by the employee. This means that some children of public agency
employees whose parents have access to State health benefits may be
eligible for CHIP, while others may not, depending on whether the
parent's public agency employer offers more than a nominal contribution
that is available for the cost of the coverage of any dependent in the
family.
In order to ensure that States do not change their contribution
levels to make children of public agency employees eligible for CHIP,
we are proposing to provide that the exception discussed above would
not apply if the State made available an employee benefit to pay for
part or all of dependent coverage on, the date this proposed rule is
published, November 8, 1999, whether or not the State later terminates
that employee benefit. This proposed limitation would ensure that CHIP
coverage does not displace current coverage and substitute Federal
dollars for existing private and public dollars already spent on
coverage. The proposed limitation is to ensure that our overall
interpretation of the public agency employee exclusion is consistent
with the overall purposes of the CHIP statute, and results in effective
and efficient use of CHIP resources.
We propose to find that a child is only ``eligible for health
benefits coverage under a State health plan'' when an employee benefit
is available to cover part or all of the cost of health benefits
coverage under the State plan. Of course, such a benefit would be
available if the child is the employee and directly entitled to State
or public agency contribution to the cost of employee care. In the more
likely instance that the child is a dependent of a State or public
agency employee, the exclusion would be triggered if a State or public
agency makes available a more than nominal contribution under the plan
that exceeds the minimum amount necessary for coverage of the employee
alone, and could be available to cover part or all of the cost of
dependent coverage. This applies regardless of whether the State offers
a defined benefit plan or a defined contribution applicable to a range
of optional benefits. In other words, if the family must pay the full
cost of coverage for dependents, with the exception of a nominal
amount, then effectively no benefit is available, and children in the
family could be eligible for a separate child health program. On the
other hand, if the State makes available a more than nominal
contribution for the cost of coverage beyond the amount needed to cover
the cost of the employee alone, then a benefit would be available for
dependent coverage, and children in the family would not be eligible.
We are proposing to consider any contribution over $10 towards the
cost of dependent coverage to be more than nominal. We considered an
interpretation that the exclusion would be triggered by any State or
public agency employer contribution over the minimum amount necessary
for coverage of the employee alone, but we believe that this
interpretation would be administratively difficult because of the
inability in some cases to accurately determine the overall cost of
such coverage, particularly on a prospective basis. Moreover, the
exclusion operates to prevent substitution of CHIP coverage for
existing State supported coverage, which is not an issue when the State
or public agency contribution is merely nominal and provides
insignificant financial support toward enrolling the child.
Section 2110(b)(2)(A) of the Act excludes from the definition of
targeted low-income child, a child who is an inmate of a public
institution or who is a patient in an institution for mental diseases
(IMD). We have proposed to use the Medicaid definition of IMD set forth
at Sec. 435.1009. This definition states, in part, that an IMD ``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.''
We propose to apply the IMD eligibility exclusion any time an
eligibility determination is made, either at the time of application or
during any periodic review of eligibility (for example, at the end of
an enrollment period). Therefore, a child who is an inpatient in an IMD
at the time of application, or during any eligibility determination,
would be ineligible for CHIP coverage. If a child is enrolled in CHIP
and subsequently requires inpatient services in an IMD, the IMD
services would be covered to the extent that CHIP coverage includes
coverage for such services. However, eligibility would end at the time
of redetermination if the child resides in an IMD at that time.
Some States have had questions regarding our policy on the
provision of services to eligible individuals residing in IMDs. Under
section 2110(b)(2)(A) of the Act, children who reside in IMDs are
specifically excluded from being eligible for CHIP as a targeted low-
income child. However, there may be situations where a child already
determined eligible for CHIP may require inpatient mental health
services and the State CHIP plan covers IMD services. This situation
raises the issue of whether the child is eligible for CHIP services
once he or she enters the IMD. In a question and answer released on
July 29, 1998, we noted that a child in an IMD may not be eligible for
CHIP but an eligible child who then enters an IMD may remain eligible
for CHIP services until such time as the child's eligibility is
redetermined. In developing this policy, we were attempting to allow
services to be provided to more individuals. However, it had been
suggested that our policy as stated in the July 29, 1998 question and
answer has the potential for allowing services to be delivered
inequitably among children with similar needs. For example, if one
child is receiving services in an IMD and is redetermined after 2
months, that child will no longer be eligible for CHIP at that time.
Another child may be receiving IMD services but may not be redetermined
for 12 months. The second child would receive more services than the
first although they are similarly situated. Moreover, the CHIP guidance
is not consistent with the Medicaid IMD policy. Under Medicaid,
children residing in IMDs remain eligible for Medicaid, but Federal
matching funds are not available for any services
[[Page 60900]]
provided to the individual unless the facility is qualified as an
inpatient psychiatric hospital for individuals under the age of 21.
We are currently reviewing the CHIP IMD policy and considering
various options. We are soliciting comments on an appropriate way to
address this issue. We note that inpatient mental health services may
be available under a State CHIP program in settings and facilities
other than IMDs.
We have proposed to use the Medicaid definition of inmate of a
public institution set forth at Sec. 435.1009. Accordingly, when
determining eligibility for CHIP, an individual is an inmate when
serving time for a criminal offense or confined involuntarily in State
or Federal prisons, jails, detention facilities, or other penal
facilities. A facility is a public institution when it is under the
responsibility of a governmental unit or when a governmental unit
exercises administrative control.
Under Medicaid, FFP is not available for medical care provided to
inmates of public institutions, except when the inmate becomes a
patient in a medical institution. We believe that the underlying basis
for this exception to the FFP exclusion in Medicaid is to recognize
that the term ``inmate'' includes only a person involuntarily residing
in a penal setting. When discharged from a penal setting, or
temporarily transferred to a medical institution (which does not
include institutions that are part of the State's penal system, since
such an institution is primarily a penal institution rather than a
medical institution) a person is no longer an ``inmate'' and is treated
as part of the general health care community. While the person is in
the medical institution, FFP is available for Medicaid covered
services.
We propose to allow this same exception when determining
eligibility for a separate child health program because we believe an
inmate residing in a penal institution who is subsequently discharged
or temporarily transferred to a medical institution for treatment is no
longer an ``inmate.'' Therefore, an inmate who becomes an inpatient in
a medical institution which is not part of the penal system (that is,
is admitted as an inpatient in a hospital, nursing facility, juvenile
psychiatric facility, or intermediate care facility), would then be
eligible for CHIP (subject to meeting other CHIP eligibility
requirements), and the State would receive FFP for medical care
provided to that child. If the child is taken out of the medical
institution and returned to a public institution, the child would again
be excluded from eligibility for CHIP.
4. Other Eligibility Standards (Sec. 457.320)
Section 2102(b) of the Act sets forth the parameters for other
eligibility standards and methodologies a State may use under a
separate child health program. With certain exceptions, the State may
establish different standards for different groups of children. Such
standards may include those related to geographic areas served by the
plan, age, income and resources (including any standards relating to
spenddowns and disposition of resources), residency, disability status
(so long as any standard relating to disability does not restrict
eligibility), access to other health coverage and duration of
eligibility. Under the statute, the State may not use eligibility
standards that discriminate on the basis of diagnosis, cover children
with higher family income without covering children with a lower family
income within any defined group of covered targeted low-income
children, or deny eligibility on the basis of a preexisting medical
condition.
Accordingly, with certain exceptions, States are free to choose the
standards that they will use to establish eligibility under a separate
child health program. A State can set the income limit or limits,
consistent with title XXI and these regulations, against which to
compare income to determine eligibility. With the exception of income
that cannot be counted because of a prohibition in another Federal
statute, a State can determine what constitutes income, what income is
counted, and what income is excluded or disregarded. A State can
calculate eligibility using either gross income or net income after
deductions and disregards. A State can also determine who is in a
child's family and therefore, whose income will be counted and under
what circumstances. However, as noted, certain other Federal statutes
prohibit counting certain payments in determining eligibility under
certain means tested programs including a separate child health
program. For example, relocation payments provided under the Uniform
Relocation Assistance and Real Property Acquisition Policies Act of
1970 and student financial assistance for attendance costs received
from a program funded in whole or in part under title IV of the Higher
Education Act of 1965, as amended, or under the Bureau of Indian
Affairs student assistance programs cannot be counted as income under a
separate child health program.
A State has the option to impose a resource test. However, very few
States have elected this option. Most States believe that a resource
test unnecessarily complicates the eligibility process and is a barrier
to enrollment. Most families who meet the income requirements for
eligibility do not have significant resources. If a State chooses to
impose a resource test, it may set the resource limits(s) that it will
use to establish eligibility and determine what constitutes a resource
and what resources, if any, will be excluded or disregarded.
The statute provides that in establishing eligibility, the
standards may include those related to a ``spenddown''. We would
interpret this language to allow a child who would be eligible except
for excess income and/or resources, to become eligible when the family
has either incurred or paid medical expenses in the amount of the
excess income and/or resources. We would allow the State to establish
the period of eligibility for children who become eligible for the
program by virtue of a spenddown. As it already exists under the
Medicaid program, we would also allow States to have a ``pay-in
spenddown'' policy. Under a ``pay-in spenddown,'' a State would
establish the amount of the excess income or resources that a family
had and allow the family to pay that amount directly to the State to
establish immediate eligibility without waiting until the family incurs
the medical expenses. In the event that the family did not incur
medical expenses sufficient to cover the pay-in spenddown amount for
the spenddown period, the State would need to have reasonable
procedures in place for the disposition of the unused pay-in spenddown
amount, such as refunding the unused amount or crediting it to a future
spenddown period. The State cannot use money collected for matching
purposes.
The statute provides that in establishing eligibility, the
standards may relate to ``disposition of resources.'' We interpret this
provision to allow a State to impose a period of ineligibility, or
other penalty, if the State finds that an individual, whose resources
are relevant to a child's eligibility for CHIP, disposed of resources
for less than fair market value in order to make the child eligible for
CHIP coverage.
The statute provides that the standards used may include those
related to geographic area. We interpret this language to allow a State
to provide coverage only to children living in certain areas or
jurisdictions within the State and to have different eligibility
criteria for different areas or
[[Page 60901]]
jurisdictions within the State. However, we recommend that States
strive to maximize coverage throughout the State.
Eligibility standards may also relate to disability status as long
as any standard relating to such status does not restrict eligibility.
We interpret this provision to allow a State to establish a group of
children who may be eligible because they meet State-established
disability criteria or have a particular disabling condition. The State
could establish different eligibility criteria for each such group, as
long as the criteria do not restrict eligibility for either group.
The statute provides that the standards may relate to age. We
interpret this provision to allow States to provide coverage only to
children of a certain age or ages or to have different eligibility
criteria for children of different ages. We have specified that the age
used cannot exceed age 18 because section 2110(c)(1) defines a child
for purposes of title XXI as an individual under the age of 19. This
means that a State cannot provide coverage to a child who has attained
age 19. We considered whether there was statutory authority to continue
coverage after a child's 19th birthday if the child was in a course of
treatment and decided that there is no statutory authority to do so. We
also considered whether a child who attains age 19 during what would
otherwise have been a period of guaranteed eligibility, explained
below, could remain eligible until the end of that period. We decided
that there is no authority for such continuous eligibility and
therefore eligibility must be terminated on the date that the child
attains age 19. If coverage for a given period has been pre-paid under
the State's usual and customary administrative procedures prior to the
date the child attains age 19, the coverage may continue until the end
of the pre-paid period even though the child is no longer eligible.
Eligibility standards may also include those related to residency.
We interpret this language to allow States to provide child health
assistance under a separate child health program only to residents of
the State. We would also allow a State to determine what constitutes
residency in the State. However, under the 1969 decision of the Supreme
Court in Shapiro v. Thompson (394 US 618), a State cannot impose a
durational residency requirement. Therefore, we propose to require that
an eligibility standard relating residency cannot exclude those who
have recently moved to the State. In addition, in establishing
residency requirements we urge States to be particularly attentive to
meeting the health needs of migrant targeted low-income children. We
encourage States to allow migrants to maintain residency in the State
in which they reside most often, if they choose, or to establish
residency in the State in which they are working. We also strongly
recommend that States establish written inter-State agreements setting
forth rules and procedures for resolving cases of disputed residency as
States do under Medicaid. (See Sec. 435.403 for Medicaid regulations
pertaining to residency.)
The eligibility standards also may relate to access to other health
coverage. See Subpart H of this proposed rule for a discussion of
substitution of coverage.
Furthermore, we want to ensure that the State periodically
disenrolls from the program enrollees that no longer meet the
eligibility standards under section 2102 and these regulations for any
reason including a change in age, income, and other health coverage.
For this reason, we would specify that the State agency may, at its own
discretion, establish a period for regular review of eligibility, not
to exceed 1 year. During the period between regular eligibility
reviews, a child need not have eligibility redetermined, and thus will
remain eligible throughout the period, unless the child reaches age 19
or (as discussed below) is found eligible for Medicaid. Note that,
States that implement CHIP through the Medicaid expansion option are
subject to the Medicaid regulations (42 CFR 435.916), under which a
State must also redetermine eligibility at least every 12 months. The
eligibility standard relating to duration of eligibility would not
allow States to impose a maximum length durational requirement or any
similar requirement. We solicit comments on this issue.
We are particularly concerned about the impact of age, income, and
benefits restrictions under a separate child health program on pregnant
teens and their children. We urge States to pay particular attention to
the interaction of a separate child health program and the Medicaid
program when it comes to the State's attention that a teen is pregnant.
Although States may provide pregnancy-related and delivery services
under a separate child health program, it is often to the pregnant teen
and newborn's advantage to be covered by Medicaid, if eligible. Under
Medicaid, once a pregnant teen is determined eligible, she remains
eligible without regard to changes in income until the end of the
postpartum period. Under a separate child health program, a pregnant
teen may lose eligibility due to an increase in income and at that
point, be unable to establish eligibility for Medicaid. She then might
be without coverage for the rest of her prenatal care and her delivery.
In addition, an infant born to a teen who is eligible for and receiving
Medicaid on the date of the infant's birth is deemed to have filed a
Medicaid application and been found eligible. The infant also remains
eligible for 1 year, without regard to changes in income, as long as
the infant continues to reside with the mother. An infant born to a
mother whose delivery was covered by a separate child health program
would not have this protection. To be eligible for separate child
health program, an application would have to be filed for the infant
and the infant would have to meet income eligibility standards.
In addition, we urge States to be particularly attentive to the
possibility that a pregnant teen who loses eligibility under a State
child health program because she attains age 19 might be eligible for
Medicaid as a pregnant teen although she was not eligible for Medicaid
otherwise. In some States, the income standard applied under Medicaid
to a pregnant teen is higher than the standard used for non-pregnant
teens of the same age, which means that pregnant teens with higher
incomes than other children of the same age may be Medicaid eligible.
A State must allow any child, including a pregnant teen, to apply
for Medicaid at any time and must take timely action on that
application. If the teen is determined to be eligible for Medicaid, the
teen is no longer eligible for CHIP. Any child who is covered under
CHIP at all times is entitled to apply for and receive Medicaid, if
eligible, regardless of the State's practice for determining and
reestablishing eligibility under the State program. When the State
determines that a child is Medicaid eligible, the child is no longer
eligible for CHIP. States that have opted to provide presumptive
eligibility for pregnant women under the Medicaid program must also
allow providers to find pregnant teens presumptively eligible for
Medicaid.
Finally, in some States, the benefits provided to pregnant teens
under Medicaid, particularly those related to prenatal care and
delivery, may be better and less expensive than those provided under
CHIP. We urge States to provide sufficient information to a pregnant
teen for her to make an informed choice about applying for Medicaid
during a period of guaranteed eligibility.
In keeping with section 2102(b)(1)(B)(i) and (ii), States may not
cover children with higher family income without covering children with
[[Page 60902]]
lower family income within any State-defined group of covered targeted
low-income children or deny eligibility based on a preexisting medical
condition.
We have proposed certain other restrictions on eligibility
standards. The first proposed restriction is that a State not require
that a social security number (SSN) of an applicant child or family
member be provided as a condition of eligibility. We wish to clarify
that, under section 1137 of the Act, a SSN must be supplied only by
applicants for and recipients of Medicaid benefits. In all other cases,
including non-applicant parents of children applying for Medicaid and
children applying for a separate child health program, States are
prohibited from making the provision of a SSN by another family member
a condition of the child's eligibility. This rule also applies to other
members of the household whose income might be used in making the
child's eligibility determination.
Some States use parents' SSNs as a means of verifying family income
in the process of making an eligibility determination. While the
statute does not permit States to require disclosure of the SSN for
applicants or non-applicants, voluntary disclosure by the parent may
facilitate the verification of income and contribute to a speedier and
more accurate determination of the child's eligibility. States may
advise parents and other household members of this as long as they do
so in a manner that does not coerce provision of the SSN or deter
application for benefits. Once more, we wish to clarify that States
have no legal basis for denying an application based upon the failure
to supply the SSN for verification purposes.
We also propose to specifically provide that the eligibility
standards used for a separate child health program cannot exclude
American Indian or Alaska Native children who are eligible to receive
medical care funded by the Indian Health Service (IHS). We believe this
provision is effectively required by the statutory mandate that State
child health plans contain procedures to ensure the provision of child
health assistance to targeted low-income children who are Indians, and
the statutory provision, discussed below, that CHIP payment may be made
primary to any IHS payment for CHIP-covered services.
Section 2105(c)(6)(B) of the Act specifically exempts programs
operated or financed by IHS from the restriction on payment to prevent
duplication between CHIP and other Federally operated or financed
health programs. In light of IHS policies, we read this provision to
require that a separate child health program must pay for services that
are covered under the plan and are provided by IHS and IHS-funded
Tribal health programs participating in the separate child health
program. IHS only pays for items and services not covered by any other
third-party coverage. The Indian Health Care Improvement Act grants IHS
and IHS-funded Tribal health programs authority to bill Medicaid and
all other third party insurance for services provided directly to the
Indian person. The IHS or Tribal program also may require health care
providers with whom they contract for other services for Indian
beneficiaries to bill Medicaid and other health insurance before
billing the IHS or Tribal program.
In addition, we would provide that the eligibility standards used
for a separate child health program cannot violate any other Federal
law. For example, under the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (PRWORA), as amended (8 U.S.C.
1601 et seq.), a State must cover those legal immigrant children who
meet the Federal definition of qualified alien and who are otherwise
eligible. We believe that the following qualified alien children who
are otherwise eligible must be covered:
All qualified alien children who were in the United States
before August 22, 1996.
Refugees, asylees, certain Cuban, Haitian and Amerasian
immigrants, and certain aliens whose deportation is being withheld.
Unmarried, dependent children of veterans and active duty
service members of the Armed Forces.
The following children who enter the United States on or
after August 22, 1996 and who are in continuous residence for 5 years
(Earliest eligibility for this group will be August 22, 2001.):
-- Alien lawfully admitted for permanent residence;
--Certain battered aliens or children of battered aliens;
--Certain parolees who have been paroled for at least 1 year;
We note that States implementing a separate child health program do not
have the option provided to them under Medicaid to deny Medicaid to
some qualified aliens.
In establishing eligibility for CHIP coverage, States must obtain
proof of citizenship, (including nationals of the U.S.) and verify
qualified alien status in accordance with section 432 of PRWORA, as
amended (8 U.S.C. 1642).
In addition to verifying qualified alien status, PRWORA requires
that Federal public benefit programs, such as Medicaid and CHIP, must
also obtain proof that an applicant who so claims is a citizen of the
United States. As required by law, on August 4, 1998, the Immigration
and Naturalization Service (INS) published a notice of proposed rule
making in the Federal Register that set forth proposed procedures for
providing proof of citizenship and qualified alien status.
For verification purposes, the INS proposed rules require the
applicant to declare in writing, under penalty of law, whether the
applicant is a national of the United States. (National means either a
US citizen or a person who, though not a citizen of the United States,
owes permanent allegiance to the United States). For unemancipated
minors under 18, the regulations provide for the declaration to be
executed by a parent, legal guardian, or other person legally qualified
to act on behalf of the applicant. The proposed rules set out what
constitutes primary or secondary evidence of US national status. In
lieu of evidence from the applicant, the proposals allow the option to
consult agency records, or to accept a third party declaration in the
case of an applicant who cannot produce evidence of US national status.
The regulations also permit reliance upon attestation as temporary
evidence of US nationality only until the applicant can provide the
required evidence.
While a letter to State Health Officials issued by HCFA on
September 10, 1998, advised States that they could accept self-
declarations of US citizenship without further proof, once the INS
regulation cited above becomes a final rule, it is very likely that
self-declaration will no longer be permitted. States that currently
permit self-declaration, as well as States that employ other procedures
not consistent with the INS final rule, will need to come into
compliance with the INS final rule within 2 years after the rule
becomes final.
Section 2102(b)(1)(A) specifies that a State may adopt eligibility
standards relating to duration of eligibility but does not prescribe a
particular duration. We propose at Sec. 457.320(a)(10) to allow the
State to establish the period between eligibility redeterminations as
long as the period does not exceed one year. During the period between
eligibility redeterminations, a child need not have eligibility
redetermined and thus will remain eligible throughout the period,
unless the child reaches age 19 or (as discussed above) is found
eligible for Medicaid. The State is required to reestablish eligibility
of a child, with
[[Page 60903]]
respect to circumstances that may change, at least once every twelve
months. This will allow States to provide continuous eligibility for
children under a separate child health program without regard to
changes in circumstances other than age or Medicaid eligibility, for a
guaranteed period of time in the same manner as the State provides
continuous eligibility under Medicaid (Section 1902(e)(12) of the Act).
We will consider all payments made during a guaranteed period of
eligibility after a final determination of initial eligibility to be
correct. We believe a longer period between eligibility
redeterminations would be inconsistent with the requirements and
objectives of title XXI, in particular the goal to extend coverage
primarily to targeted low-income children.
5. Application (Sec. 457.340)
We propose to require that the State must afford every individual
the opportunity to apply for child health assistance without delay.
Section 2101(a) of the Act requires States to provide child health
assistance to uninsured, low-income children in an effective and
efficient manner. The opportunity to apply without delay is necessary
for an effective and efficient program.
In addition, we propose that a State may use either a separate
application for CHIP or a joint application for CHIP and Medicaid. If a
State chooses to use a separate application, the State must ensure that
the screening procedures described in proposed Sec. 457.350 are
followed.
If a State chooses to use a joint application for CHIP and
Medicaid, the application does not necessarily need to be an
application for Medicaid under all possible Medicaid eligibility
groups. The application for Medicaid could be an application only for a
child-related Medicaid eligibility group that must be used for
screening purposes as explained in the discussion of Sec. 457.350.
However, if a State chooses to use this type of limited application,
the application must inform the individual that it is an application
only for one kind of children's health benefits under Medicaid and is
not a full Medicaid application, and that even if the child is not
found eligible for this kind of children's health benefits under
Medicaid, the child may be eligible for Medicaid on some other basis
and has a right to complete a full Medicaid application. The Medicaid
denial notice must also provide this information. For the same reasons
that we believe it would be overly burdensome and contrary to the
intent of title XXI to require that a State screen for eligibility
under all Medicaid eligibility groups, we believe that it would be
overly burdensome and against the intent of the program to require a
State using a joint application to use a form that allows a full
application for Medicaid under any eligibility group.
We encourage States to use a joint application for their CHIP and
Medicaid programs. A joint application is an actual Medicaid
application. It must be processed in the same manner as any other
application for Medicaid. All of the Medicaid rules pertaining to
application would apply to a joint application. Joint applications
would ensure that the proposed screen and enroll requirements set forth
at Sec. 457.350 are met. Joint applications also permit a family to
submit information once during the application process. On September
10, 1998, we released a model joint application form as an attachment
to a letter clarifying eligibility procedures. This information can be
found on the HCFA website.
If a State chooses to use separate applications for CHIP and
Medicaid, there is considerable flexibility, within certain limits, in
developing application forms and the eligibility intake process. For
example, States that implement a separate child health program have
flexibility to contract with independent entities to perform initial
Medicaid screening and to make preliminary eligibility determinations.
Title XXI does not prohibit this type of arrangement and the
requirement to provide child health assistance in an effective and
efficient manner allows this flexibility for a separate child health
program. In addition, the State may contract with an independent entity
for the purpose of eligibility screening if the State uses a joint
application because this function is being performed under title XXI
requirements and the funding comes from title XXI. However, if the
screening shows that the child is potentially eligible for Medicaid,
the evaluation of the application for Medicaid purposes and the
determination of Medicaid eligibility must be made by State or local
governmental merit personnel authorized by the State to perform these
functions and the cost must be paid by title XIX.
In addition, there are requirements under other laws that may apply
to the administration of eligibility under separate child health
programs. For example, there are requirements in the Personal
Responsibility and Work Opportunity Act of 1996, as amended, that apply
to separate CHIP programs which call for verification of citizenship or
national status, and of immigration status. Therefore, subject to the
provisions noted above, States may use State employees or non-public
employees to administer part or all of the eligibility determination
process, may take and process applications at locations they determine,
and establish application and enrollment procedures.
6. Eligibility Screening (Sec. 457.350)
Among our highest priorities is to ensure that CHIP actually
provides health assistance to the individuals for whom Congress
designed the program. That is, we want the State plan to ensure that
individuals applying for CHIP, but who are eligible for Medicaid or any
other form of health care assistance programs, are enrolled in those
other programs and not inappropriately enrolled in CHIP. Section
2102(b)(3) (A) and (B) of the Act require that a State plan include a
description of screening procedures used, at intake and any follow up
including any periodic redetermination, to ensure that only children
who meet the definition of a targeted low-income child receive child
health assistance under the plan, and that all children who are
eligible for Medicaid are enrolled in that program. In accordance with
the statutory provisions, we propose at Sec. 457.350(a) that a State
plan must include a description of these screening procedures.
We believe that in establishing CHIP, Congress intended to make
health insurance available to uninsured children at higher income
levels than the income levels of children eligible for Medicaid and to
identify the estimated 4 million children who are eligible for Medicaid
but are not enrolled in that program. We believe that section
2110(b)(1)(C) clearly provides that children who would be eligible for
Medicaid if they applied are not eligible for coverage under CHIP. The
statute at 2110(b)(3)(B) also clearly provides that States have a
responsibility to actually enroll children in Medicaid if they are
ineligible for the separate child health program because they are
Medicaid eligible. A simple referral to the Medicaid agency is not
enough to meet this requirement.
We considered a number of options in interpreting these ``screen
and enroll'' requirements. First we considered whether ``Medicaid
eligible'' meant that the child had actually applied for Medicaid and
been determined eligible. We decided that the intent of the provision
was to identify children who would be eligible for Medicaid if they
applied. We considered permitting any screening process that
represented a
[[Page 60904]]
reasonable attempt to identify Medicaid eligible children. We, however,
do not believe that this option meets the statutory requirement that
children who are eligible for Medicaid be identified and enrolled in
Medicaid. Nonetheless, while a ``reasonable attempt'' to identify all
Medicaid eligible children may not be enough, we are aware of the
complexity of Medicaid eligibility and the burden that would be placed
on both States and families if we required that children be screened
for Medicaid eligibility under every possible Medicaid eligibility
group.
We therefore propose only to require States to use screening
procedures that identify any child who is potentially eligible for
Medicaid under one of the poverty-level-related groups described in
section 1902(l) of the Act. However, States are not mandated to cover
children below the age of 19 who were born before October 1, 1983 under
the poverty-level-related Medicaid groups. Therefore, we also propose
to require, at a minimum, that a State use screening procedures that
identify any child who is ineligible for Medicaid under the poverty
level related groups solely because of age but is potentially eligible
under the highest categorical income standard used under the State's
title XIX State plan for children under age 19 born before October 1,
1983. In almost all circumstances, we expect the highest categorical
income standard used for such older children to be the standard used
for the optional categorically needy group of children eligible under
section 1902(a)(10)(A)(ii)(I). These children are sometimes referred to
as ``Ribicoff children''. Mandatory coverage of the older children in
poverty-level related groups are being phased in and by October 1,
2002, all children under age 19 will be included in the poverty-level-
related groups in all States.
During the screening process, we encourage States to identify any
pregnant child who is eligible for Medicaid as a poverty-level pregnant
woman described in section 1902(l)(1)(A) of the Act even though she is
not eligible for Medicaid as a child. As discussed above, Medicaid
eligibility standards may be more advantageous to a pregnant teen than
coverage under a separate child health program.
We have not proposed to require that a State screen for Medicaid
eligibility under all possible groups because we believe that this
would place an unreasonable administrative burden on States due to the
complexity of the eligibility requirements under some Medicaid groups,
particularly the group of low-income families with children described
in section 1931 of the Act and the medically needy groups described in
1902(a)(10)(C) of the Act. We believe that screening for eligibility
under these other Medicaid groups might deter families from applying
for the title XXI State program because they would have to provide all
the information necessary for these complicated Medicaid eligibility
determinations. We believe that simplification of the eligibility
process is essential to encouraging families to enroll their children.
The poverty-level-related Medicaid eligibility groups usually have the
highest standard under which a child is eligible for Medicaid, have no
resource requirements, and no requirements pertaining to the child's
living arrangement, so we believe that almost all children who are
Medicaid eligible will be identified through the proposed policy.
However, as noted above, the proposed policy will not identify
every Medicaid eligible child. Therefore, we also propose to require
that States choosing not to screen for Medicaid eligibility under all
possible groups provide certain written information to all families of
children who, through the screening process, appear unlikely to be
found eligible for Medicaid if a full Medicaid eligibility
determination were done. The following information must be provided to
the person applying for the child: (1) A statement that, on initial
review, the child does not appear to be eligible for Medicaid but that
a final full determination of Medicaid eligibility can only be made
based on a review of a full Medicaid application; (2) information about
Medicaid benefits (if such information has not already been provided);
and (3) information about how and where to apply for Medicaid.
As indicated in section 2102(b)(3)(B), Congress intended that
children eligible for Medicaid be enrolled in the Medicaid program. We
propose that if a child is found through a State screening process to
be potentially eligible for Medicaid but fails to complete the Medicaid
application process for any reason, the child cannot be enrolled in
CHIP. Enrollment in CHIP can occur only after an appropriate screen
shows that the child is ineligible for Medicaid.
States should make every effort to ensure that a decision by a
family not to apply for Medicaid or not to complete the application
process is an informed one. The screen and enroll procedures must
provide the family with full and complete information about Medicaid,
including the early preventive, screening, diagnostic and treatment
services, the prohibition against cost sharing and the difference
between Medicaid and CHIP. States should inform families that they do
not have a choice of programs because children may not be enrolled in
CHIP if they are Medicaid eligible. The process should ensure that the
family understands the consequences of not applying for Medicaid or
failing to complete the application process. We believe that these
policies are consistent with the Congressional intent to provide
coverage to children who are not and cannot be covered under Medicaid.
However, we are aware that there is great concern among a number of
States and others that children will go without health care because of
these screen and enroll policies. The concern centers around the
perceived stigma of Medicaid. Some States allege that families refuse
to apply for Medicaid, which is free, because they associate it with
``welfare''. It is noted that some families will not complete the
Medicaid application process because it may be more complicated than
the application process for CHIP, require more documentation, and may
be seen as more invasive into personal lives. We particularly solicit
comments on the extent of these problems and possible solutions. In the
meantime we encourage States to employ outreach efforts that work to
change the perception that Medicaid is ``welfare'' and to simplify the
Medicaid eligibility process.
7. Facilitating Medicaid Enrollment (Sec. 457.360)
Under section 2102(b)(3)(B) of the Act, States are required to
ensure that children found through the screening process described
above to be eligible for Medicaid apply for and are actually enrolled
in Medicaid. We would require that the State take reasonable action to
facilitate the Medicaid application process and to promote enrollment
of eligible children into Medicaid. Under 457.360(b), States must
establish a process whereby the State initiates the action to begin the
Medicaid enrollment process and several options for States are
provided. For example, States can forward the information received from
the Medicaid screen onto the Medicaid eligibility unit and then this
information could automatically trigger the beginning of the Medicaid
application process. We do not believe that a simple referral to the
Medicaid office meets this requirement. We also do not believe that it
is reasonable to make the application for and enrollment in Medicaid
dependent solely on actions by the applicant or the individual applying
on the applicant's behalf. We encourage States to develop procedures
which will
[[Page 60905]]
reduce or eliminate the need for applicants to provide information more
than once. We also encourage the use of outstationed Medicaid
eligibility workers who can take Medicaid applications at the same site
as the one used to apply for CHIP. At a minimum, we urge that Medicaid
and CHIP intake workers be well informed about the other program and
its application procedures.
We have also proposed to require that a State ensure that families
have an opportunity to make an informed decision of whether or not to
complete the Medicaid application process by providing full and
complete information, in writing, about: (1) The State's Medicaid
program, including the benefits covered, restrictions on cost-sharing;
and (2) the effect on eligibility for CHIP of neither applying for
Medicaid nor completing the Medicaid application process.
8. Application for and Enrollment in CHIP (Sec. 457.361)
We propose to require that States afford individuals a reasonable
opportunity to complete the application process and offer assistance in
understanding and completing applications and in obtaining any required
documentation. Furthermore, we have proposed to require that States
inform applicants, in writing and orally if appropriate, about the
eligibility requirements and their rights and responsibilities under
the program.
Although not specifically addressed in statute, a State may choose
to provide a period of presumptive eligibility during which services
are provided, although actual eligibility has not been established.
Unlike presumptive eligibility under Medicaid, which has rules
prescribed by statute, a State has the flexibility to establish the
rules for a program of presumptive eligibility under a separate child
health program. (See section 435.1101 for the proposed rules pertaining
to presumptive eligibility under Medicaid.) If a presumptively eligible
child is subsequently determined to have been eligible during a period
of presumptive eligibility, FFP will be provided at the enhanced FMAP
rate for services provided during the presumptive period. However, if a
child is not subsequently determined to have been eligible during the
period of presumptive eligibility because either the State determined
the child to be ineligible or the child's family did not complete the
application process, the costs of services provided during the
presumptive period will be considered administrative expenses. (For the
rules pertaining to payments to States see 457.600 of the March 4, 1999
proposed rule on allotment and payment issues.)
The State agency must establish time standards for determining
eligibility and inform the applicant of those standards. These
standards may not exceed forty-five calendar days. In applying the time
standards, the State must count each calendar day from the day of
application to the day the agency mails written notice of its decision
to the applicant.
The State agency must also determine eligibility within the State-
established standards except in unusual circumstances, for example,
when the agency cannot reach a decision because the applicant delays or
fails to take a required action, or when there is an administrative or
other emergency beyond the agency's control. The agency must not use
the time standards as a waiting period before determining eligibility;
or as a reason for denying eligibility (because it has not determined
eligibility within the time standards). The State must also make
eligibility effective as of the date specified in the State plan on
which eligibility becomes effective.
9. Grievances and Appeals (Sec. 457.365)
Finally, we propose to require that States send each applicant a
written notice of the decision on his application, and if eligibility
is terminated or denied, the specific reason for the action and an
explanation of his right to file a grievance or appeal within a
reasonable time. (See Sec. 457.985 in subpart I of these proposed
regulations for rules on appeals and grievances.)
D. Subpart D--Coverage and Benefits: General Provisions
1. Basis, Scope, and Applicability (Sec. 457.401)
At proposed Sec. 457.401 we would provide that this subpart
interprets and implements section 2102(a)(7) of the Act, which requires
that States make assurances relating to certain types of care; section
2103 of the Act, which outlines coverage requirements for children's
health insurance; section 2109 of the Act, which describes the relation
of the CHIP program to other laws; section 2110(a), which describes
child health assistance; and section 2110(c) of the Act, which contains
definitions applicable to this subpart. The requirements of this
subpart apply to child health assistance provided under a separate
child health program and do not apply to Medicaid expansion programs
even when funding is based on the enhanced Federal medical assistance
percentage.
2. Child Health Assistance and Other Definitions (Sec. 457.402)
Proposed Sec. 457.402 sets forth the definition of child health
assistance as specified in section 2110(a) of the Act. We considered
whether we should further define the services listed in this section or
add to the list. For example, we considered defining transportation as
including coverage for urgent care and not just primary and preventive
health care as included in the statute at section 2110(a)(27). We also
considered whether traditional healers or alternative therapies should
be specifically mentioned as providers and coverage options. However,
we have not included any additional services in the definition or
attempted to further define these services in order to give States the
flexibility to provide these services as intended under the statute.
Accordingly, we propose that the term ``child health assistance'' means
payment for part or all of the cost of health benefits coverage,
provided to targeted low-income children through any method described
in Sec. 457.410 for any of the following services as specified in the
statute:
Inpatient hospital services.
Outpatient hospital services.
Physician services and surgical services.
Clinic services (including health center services) and
other ambulatory health care services.
Prescription drugs and biologicals and the administration
of such drugs and biologicals, only if such drugs and biologicals are
not furnished for the purpose of causing, or assisting in causing, the
death, suicide, euthanasia, or mercy killing of a person.
Over-the-counter medications.
Laboratory and radiological services.
Prenatal care and prepregnancy family planning services
and supplies.
Inpatient mental health services, other than inpatient
substance abuse treatment services and residential substance abuse
treatment services, but including services furnished in a State-
operated mental hospital and including residential or other 24-hour
therapeutically planned structured services.
Outpatient mental health services, other than outpatient
substance abuse treatment services, but including services furnished in
a State-operated mental hospital and including community-based
services.
Durable medical equipment and other medically related or
remedial
[[Page 60906]]
devices (such as prosthetic devices, implants, eyeglasses, hearing
aids, dental devices and adaptive devices).
Disposable medical supplies.
Home and community-based health care services and related
supportive services (such as home health nursing services, personal
care, assistance with activities of daily living, chore services, day
care services, respite care services, training for family members and
minor modification to the home).
Nursing care services (such as nurse practitioner
services, nurse midwife services, advanced practice nurse services,
private duty nursing, pediatric nurse services and respiratory care
services) in a home, school, or other setting.
Abortion only if necessary to save the life of the mother
or if the pregnancy is the result of rape or incest.
Dental services.
Inpatient substance abuse treatment services and
residential substance abuse treatment services.
Outpatient substance abuse treatment services.
Case management services.
Care coordination services.
Physical therapy, occupational therapy, and services for
individuals with speech, hearing and language disorders. `` Hospice
care.
Any other medical, diagnostic, screening, preventive,
restorative, remedial, therapeutic, or rehabilitative services (whether
in a facility, home, school, or other setting) if recognized by State
law and only if the service is prescribed by or furnished by a
physician or other licensed or registered practitioner within the scope
of practice as defined by State law; performed under the general
supervision or at the direction of a physician; or furnished by a
health care facility that is operated by a State or local government or
is licensed under State law and operating within the scope of the
license.
Premiums for private health care insurance coverage.
Medical transportation.
Enabling services (such as transportation, translation,
and outreach services) only if designed to increase the accessibility
of primary and preventive health care services for eligible low-income
individuals.
Any other health care services or items specified by the
Secretary and not excluded under this subchapter.
We propose to define the terms ``emergency medical condition,''
``emergency services,'' and ``post-stabilization services'' to give
full meaning to the statutory requirement that States assure access to
emergency services, at section 2102(a)(7)(B), and consistent with the
President's directive to Federal agencies to address the Consumer Bill
of Rights and Responsibilities, which includes the right to access to
emergency services. For purposes of consistency, we used the
definitions found in the proposed regulations for Medicaid managed
care, published in the Federal Register on September 29, 1998 (63 FR
52022). Because access to emergency services may not be possible if a
delay is involved, we propose to require States to guarantee access to
emergency services without any requirement for prior authorization for
those services. In addition, we would expect that States and their
contractors would treat post-stabilization services in the same manner
as required for the Medicare and Medicaid programs, while recognizing
that not all such services would necessarily be covered by the State
for purposes of CHIP.
Specifically, we propose to define the term ``emergency medical
condition'' as a medical condition manifesting itself by acute symptoms
of sufficient severity (including severe pain) such that a prudent
layperson, with an average knowledge of health and medicine, could
reasonably expect the absence of immediate medical attention to result
in --
Serious jeopardy to the health of the individual or, in
the case of a pregnant woman, the health of a woman or her unborn
child;
Serious impairment of bodily function; or
Serious dysfunction of any bodily organ or part. We would
define the term ``emergency services'' as covered inpatient or
outpatient services that are furnished by a provider qualified to
furnish emergency services and needed to evaluate or stabilize an
emergency medical condition.
We would define ``post-stabilization services'' to mean medically
necessary non-emergency services furnished to an enrollee after he or
she is stabilized following an emergency medical condition.
We would define ``health benefits coverage'' as an arrangement
under which enrolled individuals are protected from some or all
liability for the cost of specified health care services. We note that
this term is included in the definitions at proposed Sec. 457.10.
3. Health Benefits Coverage Options (Sec. 457.410)
At proposed Sec. 457.410, we list the four options a State has in
obtaining health benefits coverage for eligible children. Specifically,
we propose that States may choose to provide benchmark coverage,
benchmark-equivalent coverage, existing comprehensive State-based
coverage, or Secretary approved coverage. These four options, specified
in section 2103(a) of the Act, are described in full at Secs. 457.420
through 457.450.
Based on the authority of section 2102(a)(7) of the Act, we also
propose at Sec. 457.410(b), to require that any health benefits
coverage obtained in accordance with proposed Sec. 457.410 must include
coverage for well-baby and well-child care, immunizations and emergency
services. We note that these services must be covered even if coverage
for these services is not generally included in the health benefits
coverage option selected by the State.
The statute does not define well-baby or well-child care. We have
defined well-baby and well-child care for purposes of cost sharing at
proposed Sec. 457.520(b), but we propose to allow States to define
well-baby and well-child care for coverage purposes. We encourage
States, however, to adopt the benefits and periodicity schedules
recommended by a medical or professional organization involved in child
health care when defining well-baby and well-child care coverage. Well
child care includes health care for adolescents and includes the cost
sharing prohibitions mentioned at proposed Sec. 457.520(b). We
recommend the schedules from the American Academy of Pediatrics, the
American Academy of Pediatric Dentistry, and Bright Futures: Guidelines
for Health Supervision of Infants, Children and Adolescents.
We propose to require all separate child health programs to follow
the recommendations of the Advisory Committee on Immunization Practices
(ACIP). The proposed requirements for immunizations under separate
child health programs are identical to those under the Medicaid
program. The Vaccines for Children (VFC) program, established under
section 1928 of the Act also requires providers to immunize eligible
children according to the recommendations of ACIP. We note that
children enrolled in separate child health programs will not meet the
VFC definition of Federally-vaccine eligible because they are not
``uninsured'' and therefore will not be eligible to receive free
vaccines as part of the VFC program. State Medicaid programs are
required to implement new recommendations of the ACIP within 90 days of
their publication. Separate child health programs must also cover newly
recommended vaccines within this timeframe. State contracts for CHIP
[[Page 60907]]
coverage should provide for coverage of newly recommended vaccines
within 90 days of publication of the ACIP recommendations.
We have only recommended that States use the periodicity schedules
recommended by certain medical or professional organizations while we
propose to require the use of the ACIP schedule for the provision of
immunizations. Under the Medicaid program, we do not require a specific
periodicity schedule for well-baby and well-child visits except that we
do require the ACIP schedule for immunizations. This is because the
Medicaid program has no Federal requirements for using a certain
periodicity schedule. We do not believe we can hold a State CHIP
program to a higher standard than a Medicaid program.
We also propose at Sec. 457.410(b) to require that any health
benefits coverage obtained in accordance with this section include
emergency services as defined in proposed Sec. 457.402(c). We note that
a State may offer different health benefit coverage to children with
special needs consistent with the eligibility standards set forth at
Sec. 457.320 as long as each benefit package meets the basic coverage
requirement. The State can define the health benefit coverage to
include supplemental services for children with special needs or
physical disabilities. Alternatively, a State may have more than one
benefit package that meets all the requirements of this subpart
including one designed for children with special needs or physical
disabilities, as long as the State complies with the Americans with
Disabilities Act in establishing eligibility standards. We also note
that if no different benefit packages are offered for children with
special needs, they are eligible for whatever child health assistance
is available in the State if they meet all other eligibility criteria.
If a State offers a limited package of services to address special
needs that is not part of the comprehensive coverage required under
this subpart, State expenditures for the limited package would be
subject to the 10 percent limitation on Federally-matchable
expenditures for items other than the comprehensive coverage package,
under section 2105(a)(2) of the Act.
4. Benchmark Health Benefits Coverage (Sec. 457.420)
Section 2103(b) of the Act sets forth the benchmark benefit
packages from which a State may choose. We propose to implement these
provisions at Sec. 457.420. We considered the possibility that the
health benefits coverage package available under a benchmark plan may
change from year to year and the possible need to require an annual
review to ensure that the plan continues to meet the requirements of
this subpart. However, we do not propose to require an annual review in
part because of the requirements of section 2106 of the Act,
implemented at Sec. 457.65 of these proposed regulations, which
provides that an approved CHIP plan shall continue in effect unless and
until the State amends the plan or the Secretary finds substantial
noncompliance of the plan. For example, we believe it would be unduly
burdensome to require States to review and alter their benchmark
benefit package on an annual basis. Therefore, if a State has elected
the State employee's health benefit package as its benchmark plan, and
the benefit package changes from one year to another, the State is not
required to submit a State plan amendment as long as it continues to
offer the benefits described in its approved State plan. However, when
a State chooses to increase, decrease, or substitute benefits available
under its State plan, an amendment must be submitted for approval. The
State would then decide whether to continue to use the benchmark plan
(including any benefit changes to the original package), provide a
benchmark-equivalent using an actuarial analysis, or use one of the
other health benefits package options. We will monitor compliance with
benchmark requirements as we will with all other requirements of the
program as discussed in proposed Sec. 457.150(e).
The statute provides that benchmark coverage must be ``equivalent''
to the benefits coverage in a reference benchmark benefit package. We
are proposing to interpret this term to mean ``substantially equal,''
differing only from the reference package as necessary to meet other
requirements of Title XXI. Clearly, the word ``equivalent'' cannot
reasonably be read to mean ``actuarially equivalent,'' since the
statute separately requires actuarial equivalence for benchmark-
equivalent coverage. Therefore, we are proposing to require that a
benchmark package offered under a separate child health plan can differ
from what is otherwise available in the State under the benchmark
package only to the extent that the CHIP package must differ to meet
the requirements of title XXI. For example, benchmark coverage offered
by a State under a separate child health program must include coverage
for immunizations even if the benchmark coverage after which the State
models the CHIP coverage does not include coverage for immunizations.
If the benchmark package chosen by the State does not meet the
requirements of title XXI, then the State must enlarge the benchmark
benefit package so that it meets the title XXI requirements. The
additional benefits should be coordinated to the greatest extent
possible with the other benchmark package providers and benefits.
According to the statute, we propose to define benchmark coverage
as health benefits coverage that is substantially equal to the health
benefits coverage in one of the following benefit packages:
The Federal Employee Health Benefits Program (FEHBP) Blue
Cross/Blue Shield Standard Option Service Benefit Plan with Preferred
Provider arrangements;
A health benefits plan that the State offers and makes
generally available to its own employees; or
A plan offered by a Health Maintenance Organization (HMO)
that has the largest insured commercial, non-Medicaid enrollment and is
offered by an HMO (as defined in section 2791(b)(3) of the Public
Health Service Act) in the State.
Each benchmark benefits package is discussed in detail below.
Federal Employee Health Benefits Plan Blue Cross/Blue Shield
Standard Option Service Benefit Plan with Preferred Provider
arrangements (FEHBP). The FEHBP is available to Federal employees in
all parts of the United States, under 5 U.S.C. 8903(1). Contract No. CS
1039 between the Blue Cross and Blue Shield Association and the U.S.
Office of Personnel Management contains a description of the benefits
offered under the plan. In addition, the Federal Employees Health
Benefits Plan publication RI-71-5 and the plan's home page on the
Internet (http://www.fepblue.org) include descriptions of the benefits.
State Employee Plan. We propose to allow a State to design a
separate child health program under which it offers coverage modeled
after the coverage by a health benefits plan that is offered and
generally available to its own employees.
Plan of a health maintenance organization with the largest
enrollment in the State. We propose to allow a State to choose as a
model for the coverage offered under its separate child health plan the
coverage offered by an HMO that has the largest insured commercial non-
Medicaid enrollment in the State. As defined in section 2791(b)(3) of
the Public Health Service Act, the term ``health maintenance
organization'' means--
[[Page 60908]]
A Federally qualified health maintenance organization as
defined in section 1301 of the Public Health Service Act and further
described in regulations at 42 CFR part 417, subparts A, B, and C;
An organization recognized under State law as a health
maintenance organization; or
A similar organization regulated under State law for
solvency in the same manner and to same extent as a health maintenance
organization as defined in State law.
If the health maintenance organization offers more than one
coverage plan, the benchmark plan under the separate child health
program must mirror the specific plan offered by the HMO that has the
largest commercial enrollment. For example, if an HMO offers different
benefit packages to Federal employees, postal employees and private
industry employees, respectively, the CHIP benchmark plan must mirror
the HMO plan with the largest enrollment. In calculating commercial
enrollment, neither Medicaid nor public agency enrollees will be
counted. However, Federal employees are considered to be commercial
enrollees.
5. Benchmark-Equivalent Health Benefits Coverage (Sec. 457.430)
Section 2103(a)(2) of the Act provides that a State may opt to
design a program under which it offers coverage with an aggregate
actuarial value that is at least equal to the value of one of the
benchmark benefit packages. In accordance with the statute, we propose
at Sec. 457.430 that the benchmark-equivalent coverage must have an
aggregate actuarial value, determined in accordance with proposed
Sec. 457.431, that is at least actuarially equivalent to coverage under
one of the benchmark packages outlined in Sec. 457.420.
In Sec. 457.430 we would set forth the coverage requirements for
States selecting the benchmark-equivalent coverage option. Under the
authority of section 2103(c)(1), we would specify that a benchmark
equivalent plan must include coverage for inpatient and outpatient
hospital services, physicians' surgical and medical services,
laboratory and x-ray services, immunizations, and well-baby and well-
child care, including age-appropriate immunizations provided in
accordance with the recommendations of ACIP. We considered proposing
minimum standards for basic sets of required services (for example, a
minimum of 14 inpatient hospital days). We concluded that it would be
unlikely that a State could provide greatly reduced benefits (such as
only 2 inpatient hospital days) and still meet the actuarial value
requirement. Therefore, we did not propose such minimum standards.
Under the authority of section 2110(a) of the Act (implemented at
proposed Sec. 457.402), a State may provide coverage for a wide range
of services. If the State provides coverage for prescription drugs,
mental health services, vision services, or hearing services the
coverage for these services must have an actuarial value that is equal
to at least 75 percent of the actuarial value of the coverage of that
category of service in the benchmark benefit package. In addition, we
propose that if the benchmark plan does not cover one of the above
additional categories of services, then the benchmark-equivalent
coverage package may, but is not required to, include coverage for that
category of service. A State may provide services listed in
Sec. 457.402 other than the services listed in Sec. 457.430(b) without
meeting the 75 percent actuarial value test.
6. Actuarial Report for Benchmark-Equivalent Coverage (Sec. 457.431)
In accordance with section 2103(c)(4) of the Act, at proposed
Sec. 457.431 we would require a State, as a condition of approval of
benchmark-equivalent coverage, to provide an actuarial report, with an
actuarial opinion that the benchmark-equivalent coverage meets the
actuarial requirements of Sec. 457.430.
States are free to pool their resources to obtain actuarial
services. The actuarial value of the benchmark coverage and the State-
designed benchmark-equivalent coverage, however, will vary from State
to State so the determination of actuarial value must be made for each
individual State.
We note that some States have suggested that to spare States some
of the expense of hiring actuaries, we should determine the actuarial
value for the FEHBP Blue Cross Blue Shield (BC/BS) preferred provider
option (PPO) because it is a national health insurance plan. We have
decided that it would not be feasible for HCFA to determine the
actuarial value of the FEHBP plan because the value of the coverage
under the plan will vary by State even though the benefit package
remains the same. If a State offers benchmark-equivalent coverage, it
must obtain an opinion from a member of the American Academy of
Actuaries to determine the value of the FEHBP because the actuarial
value of this plan will vary from State to State for several reasons,
including regional cost variations and differences in the target
population.
The actuarial opinion must meet all the provisions of the statute.
We propose that the report must explicitly state the following
information:
The actuary issuing the opinion is a member of the
American Academy of Actuaries (and meets Academy standards for issuing
such an opinion).
The actuary used generally accepted actuarial principles
and methodologies of the American Academy of Actuaries, standard
utilization and price factors, and a standardized population
representative of privately insured children of the age of those
expected to be covered under the State child health insurance plan.
The same principles and factors were used in analyzing
both the proposed benchmark-equivalent coverage and the benchmark
coverage, without taking into account differences in coverage based on
the method of delivery or means of cost control or utilization used.
States must assure that the assumptions used to estimate the State-
designed benchmark-equivalent package are the same as those used in the
actuarial analysis of the benchmark package. These same assumptions
must be used consistently throughout the actuarial analysis.
The report should also state if the analysis took into
account the State's ability to reduce benefits because of the increase
in actuarial value due to limitations on cost sharing in the State
child health insurance plan.
The report should specify which benchmark plan is being used for
comparison. It should also specify the value of the benchmark plan, the
value of the coverage under the plan being offered by the State and
that the plan meets the overall requirement of actuarial equivalence.
In addition, the value of coverage of the specific additional services
listed in the statute (prescription drugs, mental heath services,
vision services and hearing services) must also meet the 75 percent
requirement of substantial actuarial value for each of the additional
services included in the benchmark plan. The actuarial opinion should
also outline the major differences, if any, in coverage.
The opinion should provide sufficient detail regarding the
methodologies used to estimate the value so that HCFA's actuaries can
review the States' calculations and assumptions for accuracy and
completeness. Should discrepancies arise in the course of our review,
the actuaries can request States to provide detail sufficient to allow
the actuaries to replicate the results.
The opinion narrative should assure the reviewer that the actuary
has taken
[[Page 60909]]
into account all factors that affect the relative value of the plans
being compared. Adjustments made to data and the rationale for the
adjustments should be included. In this way, even if the specifics and
the derivation of the adjustments are not specified, we can feel
confident that allowances were made for all relevant considerations.
Our review of State plans that elect to adopt an actuarially
equivalent benchmark benefit plan may include review by our actuaries.
States must submit to HCFA all information necessary for our actuaries
to perform this review. We will review the actuarial report as part of
the overall plan approval process as described in subpart A of these
proposed regulations. When the actuarial report is not complete or
raises questions, we will contact the State to request clarification
and may request additional information from the State. If, even after
the complete information is received, we determine that the benefits do
not meet the requirements of title XXI, we may disapprove the State's
child health plan.
Several issues and questions have been raised with respect to the
actuarial determinations. While these issues have been addressed in the
five sets of questions and answers released by HCFA, and available on
the HCFA web site, www.hcfa.gov, we will address them here to ensure
that States have full knowledge of the issues involved.
We were asked if a State must determine actuarial equivalence of
coverage under a benchmark plan for an individual or for a family. The
statute does not specify whether the States that decide to use a
benchmark-equivalent plan must calculate actuarial equivalence to
family coverage or to individual coverage. Therefore, a State may make
either comparison. In addition, the coverage offered to families and
individuals under a benchmark plan rarely differs. Employees usually
have a choice of whether to cover themselves only or themselves and
additional family members. Therefore, the actuarial value of family
coverage and individual coverage should be essentially the same. We
also want to clarify that States should not take premiums into account
when determining the actuarial value of a health insurance plan. States
should take into account only benefits and cost sharing (such as
copayments, coinsurance and deductibles).
7. Existing Comprehensive State-Based Coverage (Sec. 457.440).
In accordance with section 2103(d) of the Act, at proposed
Sec. 457.440 we provide that existing comprehensive State-based health
benefits coverage must include coverage of a range of benefits, be
administered or overseen by the State and receive funds from the State,
be offered in the State of New York, Florida, or Pennsylvania, and have
been offered as of August 5, 1997. In essence, Congress deemed the
existing State-based health benefit packages of three States as meeting
the requirements of section 2103 of the Act. However, these States
still need to meet other requirements of title XXI, including
requirements relating to cost sharing such as copayments, deductibles
and premiums as specified in subpart E of this proposed rule.
We would also specify that the State (Florida, New York, or
Pennsylvania) may modify its existing, comprehensive, State-based
program under certain conditions. First, the program must continue to
offer a range of benefits. Second, the modification must not reduce the
actuarial value of the coverage available under the program below
either the actuarial value of the coverage as of August 5, 1997 or the
actuarial value of a benchmark benefit package. A State must submit an
actuarial report when it amends its existing State-based coverage.
Even though the benefits packages offered in Florida, New York, and
Pennsylvania were deemed to have met title XXI benefits requirements,
these States must still submit CHIP plans for approval by HCFA. Each
State plan must demonstrate that the State meets all the title XXI
requirements, including the cost sharing requirements specified in
subpart E of this proposed rule.
8. Secretary-approved coverage (Sec. 457.450)
In proposed Sec. 457.450 we discuss the option of providing health
benefits coverage under the Secretary-approved health benefits coverage
option. Section 2103(a)(4) of the Act defines Secretary-approved
coverage as any other health benefits coverage that provides
appropriate coverage for the population of targeted low-income children
to be covered by the program. A State must select this health benefit
coverage option when it submits its plan to HCFA for approval.
We propose that the following coverage be recognized as Secretary-
approved coverage under a separate child health program:
Coverage that is the same as the coverage provided under a
State's Medicaid benefit package as described in the existing Medicaid
State plan.
Comprehensive coverage offered under a Sec. 1115 waiver
that either includes coverage for the full EPSDT benefit or that the
State has extended to the entire Medicaid population in the State.
Coverage that includes benchmark coverage, as specified in
Sec. 457.420, plus additional coverage. Under this option, the State
must clearly demonstrate that it provides all the benchmark coverage.
Coverage, including coverage under an employer-sponsored
group health plan, purchased by the State that the State demonstrates
to be substantially equal to benchmark coverage, as specified in
Sec. 457.420, through use of a benefit-by-benefit comparison of the
coverage compared to a benchmark plan. Under this option, if there is
just one benefit that does not meet or exceed the benchmark, the State
must provide an actuarial analysis to determine actuarial equivalence.
At this point, it would no longer be Secretarial approved coverage and
would fall under benchmark equivalent health benefits coverage under
Sec. 457.430.
While these four options have been identified for permissible
Secretarial-approved coverage, we solicit comments on other specific
examples of coverage packages that States have developed that meet the
title XXI requirements.
We also propose that no actuarial analysis is required for
Secretary-approved coverage except for coverage that does not meet or
exceed benchmark coverage. States should be cognizant, however, that to
date we have not allowed a State to offer a health benefits package
that does not provide all of the coverage provided under a benchmark
plan without requiring the State to submit an actuarial analysis. We
have approved some State plans under which the States offer health
benefit packages that provide all the coverage of the benchmark package
plus additional coverage. In approving State child health plans, we
intend to ensure that children receive services that are cost
effective, comprehensive, and high-quality. If a State wants to reduce
any benchmark benefit, it must use the benchmark-equivalent coverage
option.
9. Prohibited Coverage (Sec. 457.470)
In accordance with section 2103(c)(5) of the Act, we propose at
Sec. 457.470 that a State is not required to provide health benefits
coverage under the plan for an item or service for which payment is
prohibited under title XXI even if any benchmark package includes
coverage for such item or service.
10. Limitations on Coverage: Abortions (Sec. 457.475)
This section would implement sections 2105(c)(1) and (c)(7) of the
Act, which set limitations on payment for
[[Page 60910]]
abortion services under the CHIP program. At Sec. 457.475, we propose
that FFP is not available in expenditures for an abortion, or in
expenditures for the purchase of health benefits coverage that includes
coverage of abortion services, unless the abortion is necessary to save
the life of the mother or the abortion is performed to terminate a
pregnancy resulting from an act of rape or incest.
Additionally, we propose that FFP is not available to a State for
any amount expended under its title XXI plan to assist in the purchase,
in whole or in part, of health benefits coverage that includes coverage
of abortions other than to save the life of the mother or resulting
from an act of rape or incest.
We also would provide that, if a State wishes to have managed care
entities provide abortions in addition to those specified above, those
abortions must be provided pursuant to a separate contract using non-
Federal funds. Under our proposal, a State may not set aside a portion
of the capitated rate to be paid with State-only funds, or to append
riders, attachments, or addenda to existing contracts to separate the
additional abortion services from the other services covered by the
contract. We believe that these requirements are necessary to enforce
the statutory prohibition against the purchase of health benefits
coverage that includes abortion services not explicitly permitted by
the statute. However, the proposed regulation also specifies that this
requirement should not be construed as restricting the ability of any
managed care provider to offer abortion coverage or the ability of a
State or locality to contract separately with a managed care provider
for additional abortion coverage using State or local funds.
11. Preexisting Condition Exclusions and Relation to Other Laws
(Sec. 457.480)
In proposed Sec. 457.480 we discuss the provisions of sections
2103(f), 2109 and 2110(c) of the Act. We propose to adopt the
definitions of ``creditable coverage,'' ``group health plan,'' ``group
health insurance coverage,'' ``health insurance coverage,'' and
``preexisting condition exclusion'' set forth in the HIPAA regulations
at 45 CFR 144.103 and 146.133. Definitions for these terms are set
forth at proposed Sec. 457.10.
In proposed Sec. 457.480(a) we implement section 2103(f)(1) of the
Act and provide that, subject to the exceptions in paragraph (b), a
State child health plan may not permit the imposition of any
preexisting condition exclusion for covered benefits under the plan.
Further, in paragraph (b), we would specify that if the State child
health plan provides for benefits through payment for, or a contract
with, a group health plan or group health insurance coverage, the plan
may only permit the imposition of a preexisting condition exclusion
insofar as it is permitted under HIPAA.
In paragraphs (c)(1) through (c)(4), we would set forth the
requirement of sections 2109 and 2103(f)(2) of the Act, which provides
that State plans must comply with the requirements of subpart 2 of part
A of title XXVII of the PHS Act and certain other provisions of law.
Specifically, we have included section 514 of ERISA, HIPAA, the Mental
Health Parity Act of 1996 (MHPA), regarding parity in the application
of annual and lifetime dollar limits to mental health benefits, and the
Newborns and Mothers Health Protection Act of 1996 (NMHPA), regarding
requirements for minimum hospital stays for mothers and newborns. See
regulations at 45 CFR 146.136 for a discussion of the MHPA and 45 CFR
146.130 and 148.170 for a discussion of the NMHPA.
12. Delivery and Utilization Control Systems (Sec. 457.490)
In accordance with section 2102(a)(4) of the Act, proposed
Sec. 457.490 requires that State plans include a description of the
type of child health assistance to be provided including the proposed
methods of delivery and proposed utilization control systems. In
describing the methods of delivery of the child health assistance using
title XXI funds, the State should address its choice of financing the
insurance products and the methods for assuring delivery of the
insurance product to children. These methods may include, but are not
necessarily limited to, contracts with managed health care plans
(including fully and partially capitated plans), contracts with
indemnity health insurance plans, and other arrangements for health
care delivery. The State should describe any variations based upon
geography, as well as the methods for establishing and defining the
delivery systems.
Utilization control systems are administrative mechanisms designed
to ensure that children use only health care that is appropriate,
medically necessary and approved by the State or its subcontractor.
Examples of utilization control systems include, but are not limited
to, requirements for referrals to specialty care, requirements that
clinicians use clinical practice guidelines, or demand management
systems (such as, use of an 800 number for after-hours and urgent
care). The State should describe its plan for review, coordination, and
implementation of utilization controls, addressing other procedures and
State developed standards for review, in order to assure that necessary
care is delivered in a cost-effective and efficient manner.
13. Grievances and Appeals (Sec. 457.495)
At proposed Sec. 457.495, we would require States to provide
enrollees in a separate child health program the right to file
grievances or appeals for reduction or denial of services in accordance
with proposed Sec. 457.985.
E. Subpart E--State Plan Requirements: Beneficiary Financial
Responsibilities
1. Basis, Scope, and Applicability (Sec. 457.500)
States that implement a separate child health program may impose
cost sharing charges on beneficiaries. A State that chooses to impose
cost sharing charges on beneficiaries must meet the requirements
described in section 2103(e) of the Act. These requirements apply to
all separate child health programs regardless of the type of coverage
(benchmark, benchmark equivalent, Secretary-approved or existing
comprehensive State-based coverage) provided through the program. These
requirements also apply when a State purchases family coverage for the
targeted low-income child under the waiver authority of section
2105(c)(3) of the Act and proposed Sec. 457.1010 and when a State
provides premium assistance for employer-sponsored group health plan
coverage under proposed Sec. 457.810.
Under section 2103(e)(1) of the Act, when a State determines it
will impose cost sharing, the State plan must include a description of
the amount of premiums, deductibles, coinsurance and other cost sharing
charges imposed. If the State chooses to vary cost sharing charges, the
State plan may only vary premiums, deductibles, coinsurance, and other
cost sharing based on family income of targeted low-income children in
a manner that does not favor children from families with higher income
over children from families with lower income. Also, the State must
make available a public schedule of any cost sharing charges imposed
under the State plan.
Section 2103(e)(2) specifies that a State may not impose cost
sharing charges on benefits for certain preventive services. Section
2103(e)(3) specifies the limitations on the amount of cost sharing
charges that may be imposed on a beneficiary, including a cumulative
cost sharing maximum on
[[Page 60911]]
cost sharing imposed on children in families with income above 150
percent of the FPL. Section 2103(e)(4) clarifies that CHIP cost sharing
rules will not apply to beneficiaries who are provided child health
assistance in the form of coverage under a Medicaid expansion program.
This subpart consists of provisions relating to the imposition
under a separate child health program of cost sharing charges including
enrollment fees, premiums, deductibles, coinsurance, copayments, and
similar cost sharing charges. This subpart does not apply to States
that provide child health assistance through a Medicaid expansion
program.
2. General State Plan Requirements (Sec. 457.505)
Section 2103(e)(1)(A) of the Act specifies that a State plan must
include a description of the amount (if any) of premiums, deductibles,
coinsurance, and other cost sharing imposed. Section 2103(e)(1)(A) also
specifies that any such charges be imposed pursuant to a public
schedule. In accordance with the statute, at Sec. 457.505, we propose
that the State plan must include a description of the amount of
premiums, deductibles, coinsurance, copayments, and other cost sharing
imposed. We further propose that the State plan include a description
of the methods, including the public schedule, the State uses to inform
beneficiaries, applicants, providers, and the general public of cost
sharing charges, the cumulative cost sharing maximum, and any changes
in these amounts. Under Sec. 457.525, the State may choose to include
the public schedule in pamphlets, separate mailings, or newspapers to
inform the public of beneficiary financial responsibilities under the
program.
We also propose that States that purchase family coverage under the
authority provided in section 2105(c)(3) and proposed Sec. 457.1010, or
provide premium assistance for employer-sponsored group health
insurance (as defined in proposed Sec. 457.10) have a process in place
to ensure that providers do not charge beneficiaries for copayments,
coinsurance, deductibles, or similar fees for well-baby and well-child
care services as defined in proposed Sec. 457.520 and do not charge AI/
AN children cost sharing as required in proposed Sec. 457.535. We would
also provide that a procedure that primarily relies on a refund given
by the State for a beneficiary's cost sharing payment of well-baby/well
child-care services is not an acceptable procedure. An acceptable
alternative approach would be one where a State requires that providers
bill the State directly for copayments that are not permissible, or
provides beneficiaries with identification that providers can use to
verify that these beneficiaries are not subject to cost sharing on
these services and therefore not charge cost sharing to such
beneficiaries. We also propose that in States that purchase family
coverage or provide premium assistance for employer-sponsored health
insurance that the State have a process to ensure that beneficiaries do
not pay cost sharing over the cumulative cost sharing maximums proposed
in Sec. 457.555. We emphasize that this process must not rely on a
refund for cost sharing in excess of the cumulative cost sharing
maximum.
3. Premiums, Enrollment Fees, or Similar Fees: State Plan Requirements
(Sec. 457.510)
Section 2103(e)(1)(A) of the Act requires that the State plan
include a description of the amount of premiums, deductibles,
coinsurance and other cost sharing imposed pursuant to a public
schedule. Section 457.510 proposes that when a State imposes premiums,
enrollment fees, or similar fees on CHIP beneficiaries, the State plan
must describe the amount of the premium, enrollment fee, or similar
fee, the period of liability for the charge, and the group or groups
that will be subject to the cost sharing charge.
We also propose that the State plan include a description of the
consequences for a beneficiary who does not pay required charges. For
example, some States disenroll a beneficiary for non-payment of certain
co-payment or premium charges. Under our proposed regulations, these
States would discuss this disenrollment policy in full, including the
State's policy on reenrollment of the child once payment of the charge
is made, and any ``grace period'' allowed after non-payment such as,
notification to beneficiary for failure to pay after one month or
cancellation after two months of non-payment. We would also require the
State to indicate any beneficiary groups that are exempt from the
disenrollment policy.
In addition, proposed Sec. 457.510 would require that the State
plan include a description of the methodology used to ensure that total
cost sharing liability for a beneficiary's families does not exceed the
cumulative cost sharing maximums as required by section 2103(e)(3)(B)
of the Act and specified in proposed Sec. 457.555. This description
must explain how the State calculates total income for each family, and
how the State will prevent charges over the cumulative costs sharing
maximums.
The State's methodology should include a refund for a beneficiary
who accidentally pays over his or her cumulative cost sharing maximum.
However, as stated earlier, we propose that a methodology that
primarily relies on a refund to the beneficiary for cost sharing
payments made over the cumulative cost sharing maximum will not be an
acceptable methodology.
Many States that impose cost sharing have established a ``shoe-
box'' policy. Under this policy, the beneficiary's family is
responsible for demonstrating with receipts that he or she has paid
cost sharing charges up to the cumulative maximum cost sharing charges
(5 percent of the family's total income). Concern has been raised that
the beneficiary's family should not have the primary responsibility for
ensuring that it does not make payments that exceed the cumulative cost
sharing maximum.
We asked George Washington University's Center for Health Policy
Research to conduct a study on the types of methods States and private
insurance companies use to track cost sharing amounts against a
beneficiary's out-of-pocket expenditure cap. The George Washington
study concluded that the risk that a beneficiary in a family with
income above 150 percent of the FPL will reach the cumulative cost
sharing maximum (5 percent of family income cap) is minimal since the
amounts of cost sharing States are currently imposing are relatively
low. The study also found that most of the States hold the beneficiary
responsible for demonstrating with receipts that he or she has paid
cost sharing charges up to the cumulative cost sharing maximum. George
Washington also noted that the private insurers typically rely on the
beneficiary when tracking out-of-pocket expenses.
The George Washington study also found that while the risk of
reaching the cumulative cost sharing maximum was relatively low for
children in families above 150 percent of the FPL, this risk increases
for a family that has a child with a chronic condition. The statute
does not require States to count the beneficiary's costs of paying for
services not covered under the plan towards the cumulative cost sharing
cap. The George Washington study found that since States are not
required to count non-covered services toward the cumulative cost
sharing maximum, a chronically ill child could be subject to the
financial burdens of cost sharing charges for services not covered
under the State plan, in addition to the payments for
[[Page 60912]]
services that are covered under the State plan. This policy could be
especially burdensome on children in States with benefit packages under
a separate child health program that do not cover a wide range of
services. Therefore, a family with a chronically ill child may be faced
with extraordinary expenses. Based on these findings, we believe a
statutory change will be needed to prevent the additional burden of
cost sharing on children with chronic conditions.
Until any such statutory change is enacted, we recommend that
States, when possible, develop a more formal tracking mechanism when
imposing cost sharing charges, especially when States impose cost
sharing charges on children with chronic conditions. We believe that a
tracking mechanism that does not rely on the beneficiary demonstrating
to the State that he or she has met the cumulative cost sharing maximum
would be preferable. An example of a formal tracking mechanism is when
a State issues a swipe card to a beneficiary at the time of enrollment
which is used to record the cost sharing amounts a provider collects.
Once the beneficiary reaches his or her cumulative cost sharing maximum
as indicated by the swipe card, the provider cannot collect additional
cost sharing amounts from the beneficiary. Another example of a formal
tracking mechanism is to issue a credit card to the beneficiary. The
beneficiary can use this card to pay his or her copayments to the
provider. The State will bill the beneficiary for the copayments and
reimburse the provider. A provider would be able to determine if the
beneficiary has reached his or her credit card maximum by calling the
State agency to obtain the credit limit available.
To address the needs of the chronically ill child, the George
Washington University study also suggests that States assign
chronically ill children to a case manager who will be responsible for
assuring that the beneficiary's cost sharing does not exceed the
cumulative cost sharing maximum. Also, while a State is not required to
count non-covered services costs towards the cumulative maximum, we
recommend that a State count these costs towards the cumulative cost
sharing maximum, when possible.
While we require that the State plan describe a method of ensuring
that beneficiaries do not exceed the cumulative cost sharing maximum,
the previous examples are only recommendations. We solicit comments on
tracking mechanisms States can use that do not place the burden of
tracking cost sharing charges on the beneficiary.
4. Copayments, Coinsurance, Deductibles, or Similar Cost Sharing
Charges: State Plan Requirements (Sec. 457.515)
In addition to proposed Sec. 457.510, proposed Sec. 457.515 is also
based on section 2103(e)(1)(A) of the Act, which requires that the
State child health plan include a description of the amount of
premiums, deductibles, coinsurance and other cost sharing imposed. We
propose that the State plan describe the following elements regarding
copayments, coinsurance, deductibles or similar fees: the amount of the
copayments, coinsurance, deductibles, or similar fees; the time period
for which the charge is imposed; the group of beneficiaries to whom the
charge applies; the consequences for a beneficiary who does not pay a
charge; and the service on which the charge is made. Also, as stated in
the discussion of Sec. 457.510, for State plan requirements for
imposing premiums, we propose that the State plan describe the
methodology used to ensure that total cost sharing liability for a
beneficiary's family does not exceed the cumulative cost sharing
maximums. This description must explain how the State calculates total
income for each family, and how the State will prevent charges over the
cumulative cost sharing maximums.
Finally, we propose that, in accordance with the prudent layperson
standard in the Consumer Bill of Rights and Responsibilities, States
must provide assurances that enrollees will not be held liable for
costs for emergency services above and beyond the copayment amount that
is specified in the State plan. We propose that States must work with
their managed care contractors to absorb any additional costs
associated with providing emergency room services at a facility that is
not a participating provider in the enrollee's managed care plan or
network. In addition, although no State has proposed to include such a
provision in a State child health plan, we considered options for
requiring States to assure that copayment amounts for emergency
services do not vary depending on the location (in or out of the
managed care network) at which those services were provided. In keeping
with the prudent layperson standard of assuring immediate access to
emergency care, we have elected to propose this prohibition on
differential copayments. However, we have also taken into consideration
the importance of consistency between HCFA's programs (Medicare,
Medicaid and CHIP) in this area. For example, we considered adopting
the policy outlined in the proposed Medicare+Choice regulation, which
limits cost sharing for emergency services obtained outside of the M+C
plan's provider network equal to the lesser of $50 or what the
organization may charge within the managed care network. We also
considered that it would be appropriate to lower this dollar limit to
accommodate the lower income population being served in this program.
We welcome comments on these issues.
5. Cost Sharing for Well-Baby and Well-Child Care (Sec. 457.520)
Under section 2103(e)(2) of the Act, the State plan may not impose
copayments, deductibles, coinsurance or other cost sharing with respect
to well-baby and well-child care services in either the managed care or
the fee-for-service delivery setting. We have set forth in the proposed
regulation services that constitute well-baby and well-child care for
purposes of cost sharing. We propose to define these well-baby and
well-child services to include the definition of well-baby and well-
child care used by the American Academy of Pediatrics (AAP) and
incorporated in the Federal Employees Health Benefits Program (FEHBP)
Blue Cross and Blue Shield benchmark plan.
We also propose to apply the prohibition on cost sharing to
services that fit the definition of routine preventive dental services
used by the American Academy of Pediatric Dentistry (AAPD) when a State
opts to cover these services under its program. We propose to prohibit
cost sharing for these services for two reasons. First, preventive
dental care can be viewed as the oral health equivalent of
immunizations in that it can prevent most cavities and subsequent tooth
loss, both of which are highly correlated to poverty and lack of access
to dental care. Second, we found that the prevailing practice among
State employee plans and large health maintenance organizations (HMOs)
is to pay 100 percent for any routine preventive and diagnostic dental
benefits offered.
Accordingly, we propose at Sec. 457.520 that when the State opts to
cover the following services, they must be considered well baby and
well child care services for the purposes of the prohibition of cost
sharing under section 2103(e)(2):
All healthy new born inpatient physician visits, including
routine screening (inpatient and outpatient).
Routine physical examinations.
Laboratory tests.
[[Page 60913]]
Immunizations, and related office visits as recommended in
the AAP's ``Guidelines for Health Supervision III'' (June 1997), and
described in ``Bright Futures: Guidelines for Health Supervision of
Infants, Children, and Adolescents'' (Green M., (ed.). 1994).
When covered under the State plan, at the State's option,
routine preventive and diagnostic dental services (for example, oral
examinations, prophylaxis and topical fluoride applications, sealants,
and x-rays) as described by the AAPD's current Reference Manual
(Pediatric Dentistry, Special Issue, 1997-1998, vol 19:7, page 71-2).
6. Public Schedule (Sec. 457.525)
Section 2103(e)(1)(A) of the Act requires that the State provide a
public schedule of all cost sharing charges. The statute does not
specify the standards a State must meet when making the cost sharing
schedule available to the public, and allows States a great amount of
flexibility in developing cost sharing policies. Therefore, we believe
that the more information the State includes in the public schedule
regarding its cost sharing policy, the more informed beneficiaries will
be about their financial responsibilities under their State's separate
child health program. We propose that the public schedule contain at
least the current CHIP cost sharing charges, the beneficiary groups on
which cost sharing will be imposed (for example, cost sharing imposed
only on children in families with income above 150 percent of the FPL),
the cumulative cost sharing maximum allowed under Sec. 457.555, and the
consequences for a beneficiary who fails to pay a cost sharing charge.
We also propose that the State must make the public schedule available
to beneficiaries at the time of enrollment and when the State revises
the cost sharing charges and/or cumulative cost sharing maximum,
applicants at the time of application, and the general public. To
ensure that providers impose appropriate cost sharing charges at the
time services are rendered, we also propose that the public schedule
must be made available to all CHIP participating providers.
7. General Cost Sharing Protection for Lower Income Children
(Sec. 457.530).
At proposed Sec. 457.530, we would implement section 2103(e)(1)(B)
of the Act, which specifies that the State plan may only vary premiums,
deductibles, coinsurance, and other cost sharing charges based on the
family income of targeted low-income children in a manner that does not
favor children from families with higher income over children from
families with lower income. This statutory provision and the
implementing regulations apply to all cost sharing imposed on children
regardless of family income level. A State would not be in compliance
with this provision if, for example, it imposed cost sharing charges on
families at 150 percent of the FPL that were more than the cost sharing
amounts imposed on children in families at 200 percent of the FPL.
8. Cost Sharing Protection To Ensure Enrollment of American Indians/
Alaska Natives (Sec. 457.535)
Section 2102(b)(3)(D) of the Act requires the State plan to include
a description of the procedures used to ensure the provision of child
health assistance to targeted low-income children in the State who are
American Indians. We are concerned that States that impose cost sharing
on children in American Indian/Alaska Native (AI/AN) families will
restrict access to essential CHIP services for this vulnerable
beneficiary group, and may impact the State's ability to ensure
coverage for this group as required under section 2102(b)(3)(D) of the
Act.
Title VI of the Civil Rights Act of 1964 prohibits programs
receiving Federal financial assistance from discriminating on the basis
of race, color or national origin. But title VI does not preclude the
Federal government from requiring States to recognize unique
obligations to AI/ANs under Federal law. Based upon the unique legal
status of Tribes under Federal law, the Federal government's trust and
responsibility toward AI/ANs as authorized by Congress, and the
requirements under section 2102(b)(3)(D) of the Act, HCFA must
affirmatively address barriers to AI/AN enrollment. Moreover, access to
health care funded by the Indian Health Service (IHS), which is
available without charge, creates a unique disincentive to AI/AN
enrollment in a CHIP program that imposes cost sharing. Thus, we
believe that in some States, targeted incentives for AI/AN enrollment,
including waiver of cost sharing, is consistent with title VI of the
Civil Rights Act of 1964 and warranted by the CHIP statute.
Therefore, we propose that States must exclude children from AI/AN
families from the imposition of premiums, deductibles, coinsurance,
copayments or any other cost sharing charges. For the purposes of this
section, we propose to use the definition of Indians referred to in
section 2102(b)(3)(D) of the Act, which defines Alaska Natives and
American Indians as Indians defined in section 4(c) of the Indian
Health Care Improvement Act, 25 U.S.C. 1603(c). We would also specify
in the regulation that the State only grant this exception to AI/AN
members of a Federally recognized tribe (as determined by the Bureau of
Indian Affairs).
We realize that when States impose cost sharing on their CHIP
beneficiaries States will need to identify AI/AN children of Federally
recognized tribes for the purpose of waiving this group from premiums
and other cost sharing. States will need to request from applicants
identification that verifies the AI/AN status of the child. For
example, the State may ask for Tribal membership identification or a
Certificate of Indian Blood (CIB) to verify the applicant's AI/AN
status. Eligibility enrollment staff should be trained to present, in a
culturally sensitive manner, the option to AI/AN beneficiaries of
either presenting their identification to the State or foregoing their
option to be exempt from cost sharing.
States should strive to inconspicuously identify AI/AN children
when waiving cost sharing that is typically collected by providers (for
example--deductibles, copayments, and coinsurance). For example, a
State that waives lower-income CHIP children from copayments in
addition to AI/AN children should provide both waived groups with
similar identification. The AI/AN child should not be separately
identified from other beneficiary groups whose copayments have been
waived. Another example of inconspicuously identifying AI/AN children
is by providing identification (via a special code or color on the CHIP
insurance card, or providing cost sharing amounts on the card) to those
who are subject to cost sharing.
We believe that most States and their providers will not realize a
negative financial impact by the mandatory waiver on AI/AN cost
sharing. However, we understand that those States with a significant
AI/AN population enrolled in their CHIP program may have to adjust
payment rates to providers or capitation payments to MCOs since these
entities can no longer collect cost sharing from AI/AN children. State
eligibility systems and billing systems will also need to be adjusted
to account for the mandatory waiver of cost sharing for the AI/AN
children.
9. Cost Sharing Charges for Children in Families at or Below 150
Percent of the Federal Poverty Line (FPL) (Sec. 457.540)
Section 2103(e)(3) of the Act sets forth the limitations on
premiums and other
[[Page 60914]]
cost sharing charges for children in families at or below 150 percent
of the FPL. In accordance with section 2103(e)(3)(A)(i) of the Act, we
propose that in the case of a targeted low-income child whose family
income is at or below 150 percent of the FPL, the State plan may not
impose any enrollment fee, premium, or similar charge that exceeds the
charges permitted under the Medicaid regulations at Sec. 447.52, which
implement section 1916(b)(1) of the Act. Section 447.52 specifies the
maximum monthly charges in the form of enrollment fees, premiums, and
similar charges, for Medicaid eligible families. We propose to apply
these Medicaid maximum monthly charges to the charges imposed on
children of families whose incomes are at or below 150 percent of the
FPL under CHIP. The Medicaid rules limit premiums to a specified
monthly amount per family according to a sliding income scale. For
example, the maximum monthly charge for a family with $1001 monthly
income is $19 for a family of 1 or 2 persons, $16 for a family of 3 or
4, and $15 for a family of 5 or more. The regulations prescribe lower
maximum monthly charges for families with lower income.
Section 2103(e)(3)(A)(ii) provides that copayments, coinsurance or
similar charges imposed on children in families with income at or below
150 percent of the FPL must be equal to or less than the amounts
considered nominal (as determined consistent with regulations referred
to in section 1916(a)(3) of the Act), with such appropriate adjustment
for inflation or other reasons as the Secretary determines to be
reasonable. The Medicaid regulations that set forth these nominal
amounts are located at Sec. 447.54. For children whose family income is
at or below 100 percent of the FPL, we propose that any copayments,
coinsurance, deductibles or similar charges remain equal to or less
than the amounts permitted under the Medicaid regulations at
Sec. 447.54. Because the statute gives the Secretary the authority to
adjust the limitations found in Sec. 447.54, for children whose family
income is 101 percent to 150 percent of the FPL we propose adjusted
nominal amounts for copayments, coinsurance, and deductibles to reflect
the CHIP beneficiary's ability to pay higher cost sharing. We also
propose that the frequency of cost sharing meet the requirements noted
in proposed Sec. 457.550. These restrictions are adopted from the
Medicaid rules at Sec. 447.53(c). The proposed restrictions are
discussed more fully in the discussion regarding Sec. 457.550 below.
We propose that the cost sharing imposed on children in families
with income at or below 150 percent of the FPL be limited to a
cumulative maximum. Specifically, we have proposed that total cost
sharing imposed on children in this population be limited to 2.5
percent of a family's income for a year (or 12 month eligibility
period). A more in-depth discussion on the cumulative cost sharing
maximum as proposed in Sec. 457.555, and our rationale for the 2.5
percent cumulative cost sharing maximum is discussed later in the
preamble to this proposed rule.
10. Cost Sharing for Children in Families Above 150 Percent of the FPL
(Sec. 457.545)
Section 2103(e)(3)(B) mandates that the total annual aggregate cost
sharing with respect to all targeted low-income children in a family
with income above 150 percent of the FPL not exceed 5 percent of such a
family's income for the year involved. The proposed regulation provides
that the plan may not impose total premiums, enrollment fees,
copayments, coinsurance, deductibles, or similar cost sharing charges
in excess of 5 percent of a family's income for a year (or 12 month
eligibility period).
11. Restriction on the Frequency of Cost Sharing Charges on Targeted
Low-Income Children in Families at or Below 150 Percent of the FPL
(Sec. 457.550)
Section 2103(e)(3)(A)(ii) of the Act specifies that the State plan
may not impose a deductible, cost sharing, or similar charge that
exceeds an amount that is nominal as determined consistent with
regulations referred to in section 1916(a)(3) of the Act, ``with such
appropriate adjustments for inflation or other reasons as the Secretary
determines to be reasonable''. In order to protect families at or below
150 percent of the FPL from excessive charges, we would adopt the
Medicaid rule at Sec. 447.53(c) that does not permit the plan to impose
more than one type of cost sharing charge (deductible, copayment, or
coinsurance) on a service. Under this rule, for example, a plan could
not impose a copayment for a service if there is a deductible for the
same service. We would also provide that a State may not impose more
than one cost sharing charge for multiple services provided during a
single office visit. For example, a beneficiary cannot be charged two
copayments for two sets of lab tests performed during one visit. In
addition, under our proposal a beneficiary cannot be charged two
copayments if the beneficiary was seen by two different physicians
during one visit.
We would also adopt the Medicaid rules at Sec. 447.55 regarding
standard copayments. Specifically, we would provide that States can
establish a standard copayment for any service. We propose to expand
upon the Medicaid rules and allow States to provide a standard
copayment amount for any visit. Similar to the provisions at
Sec. 447.55 that allow a standard copayment to be based upon the
average or typical payment of the service, our provision would allow a
State to impose a standard copayment per visit based upon the average
cost of a visit up to the copayment limits specified at proposed
Sec. 457.555(a).
12. Maximum Allowable Cost Sharing Charges on Targeted Low-Income
Children at or Below 150 Percent of the FPL (Sec. 457.555)
Section 2103(e)(3)(A)(ii) of the Act specifies that the State plan
may not impose a deductible, cost sharing, or similar charge that
exceeds an amount that is nominal as determined consistent with
regulations referred to in section 1916(a)(3) of the Act, ``with such
appropriate adjustment for inflation or other reasons as the Secretary
determines to be reasonable''. Because CHIP is designed for families
with incomes above the Medicaid eligibility levels, we believe it is
reasonable to set maximum copayments that are higher than those under
the Medicaid program, which are set forth at Secs. 447.53 and 447.54.
Therefore, we propose provisions regarding maximum allowable cost
sharing charges on targeted low-income children at 101 to 150 percent
of the FPL that mirror the provisions of Secs. 447.53 and 447.54 but
are adjusted to permit higher amounts.
For noninstitutional services provided to targeted low-income
children whose family income is from 101 to 150 percent of the FPL, we
propose a maximum copayment charge of $5.00 (as opposed to the $3.00
maximum copayment charge under Medicaid). When deciding how to adjust
the Medicaid copayment maximums for the CHIP population, we considered
adjusting for current dollars the copayment maximums at
Sec. 447.54(a)(3) (which were published in 1976) using the Consumer
Price Index (CPI) for all items, CPI--Medical Services, and Real
Personal Income Growth. After considering the figures computed using
these inflation adjustments, current copayment levels under State
programs, and the potential overall impact of copayments on the
utilization of services by children in families with incomes at or
below 150 percent of the FPL, we propose the following service
[[Page 60915]]
payment and copayment maximum amounts:
------------------------------------------------------------------------
Maximum amount
Payment for the service chargeable to
beneficiary
------------------------------------------------------------------------
$15.00 or less.......................................... $1.00
$15.01 to $40........................................... 2.00
$40.01 to $80........................................... 3.00
$80.01 or more.......................................... 5.00
------------------------------------------------------------------------
We also propose to set a maximum per visit copayment amount for
beneficiaries enrolled in managed care organizations. The Medicaid
regulations do not address cost sharing for HMO enrollees and therefore
do not address a maximum charge on cost sharing in this setting. The
$5.00 maximum copayment per visit is based upon the maximum copayment
per service amount noted in the preceding chart. We urge States to
apply this requirement in a way that continues to protect beneficiaries
from unnecessarily high out-of-pocket costs that would prevent children
from accessing essential services.
We propose to set a maximum on deductibles of $3.00 per month per
family. This CHIP maximum deductible is higher than the Medicaid
maximum deductible of $2.00 per month per family. If a State imposes a
deductible for a time period other than a month, the maximum deductible
for that time period is the product of the number of months in the time
period and $3.00. For example, the maximum deductible that a State may
impose on a family for a three-month period is $9.00.
We also propose, for the purpose of maximums on copayments and
coinsurance, that the maximum copayment or coinsurance rate relate to
the payment made to the provider, regardless of whether the payment
source is the State or an entity under contract with the State.
With regard to institutional services provided to targeted low-
income children whose family income is from 101 to 150 percent of the
FPL, we propose to use the standards set forth in the Medicaid
regulations at Sec. 447.54(c). Accordingly, we propose to require that
for targeted low-income children whose family income is at or below 150
percent of the FPL, the State plan must provide that the maximum
deductible, coinsurance or copayment charge for each institutional
admission does not exceed 50 percent of the payment made for the first
day of care in the institution. Again, we have clarified that the
percentage applies to the payment of the service regardless of the
payment source.
We propose to allow States to impose a charge for non-emergency use
of the emergency room up to twice the nominal charge for
noninstitutional services provided to targeted low-income children
whose family income is from 101 to 150 percent of the FPL. Medicaid
regulations at Sec. 447.54(b) specify that a waiver of the nominal
requirement is permitted when non-emergency services are furnished in a
hospital emergency room. We propose that the State be permitted,
without a waiver from HCFA, to charge twice the noninstitutional
copayment amount permitted when a beneficiary uses an emergency room
for nonemergency services, capped at a maximum of ten dollars. This
requirement would allow States the flexibility to charge cost sharing
amounts on inappropriate use of the emergency room, without the burden
of requesting a waiver from HCFA. The proposed ten dollar maximum is
twice the proposed nominal copayment maximum ($5.00) for
noninstitutional services under CHIP. Finally, in Sec. 457.555(d), we
proposed that States must assure that enrollees can receive emergency
services from any qualified provider, regardless of whether the
enrollee's managed care plan has a contract with that provider. We
proposed this provision because emergency care, by its nature, may need
to be obtained from the nearest available qualified provider. In
addition, we propose that States must assure that enrollees are not
held liable for any additional costs, beyond the standard co-payment
amount, of emergency services furnished outside of the individuals
managed care network.
13. Cumulative Cost Sharing Maximum (Sec. 457.560)
Section 2103(e)(3)(B) of the Act provides that any premiums,
deductibles, cost sharing or similar charges imposed on targeted low-
income children in families above 150 percent of the FPL may be imposed
on a sliding scale related to income, except that the total annual
aggregate cost sharing with respect to all targeted low-income children
in a family may not exceed 5 percent of the family's income for the
year involved. We refer to this cap on total cost sharing as the
cumulative cost sharing maximum.
We propose two general rules regarding the cumulative cost sharing
maximum. First, a State may establish a lower cumulative cost sharing
maximum than that specified in Sec. 457.560. Second, a State must count
cost sharing amount that the family has a legal obligation to pay when
computing whether a family has met the cumulative cost sharing maximum.
We propose to define the term ``legal obligation'' as the family's
obligation to pay amounts the provider actually charges the family and
any other amounts for which the family is legally liable even if the
family never pays those amounts. For example, a cost sharing charge
that is billed to the family but not paid must nevertheless be counted
toward the cumulative cost sharing maximum. We note that a State that
purchases family coverage under the authority of 2105(c)(3) of the Act
may want to count cost sharing imposed on adult family members against
the cumulative cost sharing maximum. This practice is permissible but
not mandatory because the statutory provisions on the cumulative cost
sharing maximum specify that only cost sharing charges associated with
targeted low-income children be counted toward the cumulative cost
sharing maximum. However, the statute does not preclude a State from
including other cost sharing charges.
We propose that for children in families above 150 percent of the
FPL, the plan may not impose premiums, enrollment fees, copayments,
coinsurance, deductibles, or similar cost sharing charges in excess of
5 percent of a family's income for a year (or 12 month eligibility
period). We propose that for targeted low-income children in families
at or below 150 percent of the FPL, the plan may not impose premiums,
deductibles, copayments, co-insurance or similar cost sharing charges
that, in the aggregate, exceed 2.5 percent of total family income for
the year. Section 2103(e)(3)(A) gives the Secretary the authority to
adjust cost sharing amounts so that they remain nominal, consistent
with Medicaid regulations. The requirement at section 2103(e)(1)(B),
which does not allow a State to impose cost sharing that favors
children from families with higher income over children from families
with lower income, and the Secretary's authority to make appropriate
adjustments to permissible cost sharing amounts under section
2103(e)(3)(A)(ii), serve as the basis for our proposal to place a
cumulative cost sharing maximum on the amount of cost sharing imposed
on children at or below 150 percent of the FPL.
We believe that the lower maximum is consistent with the
Congressional intent of section 2103(e)(1)(B) because it will ensure
that children from families with higher income (over 150 percent of the
FPL) are not favored over children from families with lower income (at
or below 150 percent of the FPL). In addition, we reviewed cost sharing
and
[[Page 60916]]
premium maximums for families whose incomes are under 150 percent of
the FPL, under approved State plans. After this review, we specifically
analyzed cost sharing maximums in six States that impose a maximum
other than the 5 percent maximum imposed under Sec. 457.560(c) to
determine the percentage of income that a full payment of the cost
sharing represents for a family of four at 100 percent of the FPL,
which for FY 1998 is $16,450. For example, one State imposed a $250 per
year per family cap on cost sharing. This amount represents
approximately 1.5 percent of the income of a family at 100 percent of
the FPL. We found that the cost sharing maximums range from a low of
.72 percent of the income at 100 percent of the FPL to a high of 3
percent of the family's income at 100 percent of the FPL.
The majority of the States' cost-sharing maximums represented
between 2 to 3 percent of the income of a family at 100 percent of the
FPL. We therefore propose that a cumulative cost sharing maximum of 2.5
percent of the family's income (or an equivalent dollar amount) be
placed on cost sharing imposed on children in families below 150
percent of the FPL. We encourage States and beneficiary groups to
submit comments regarding our proposed limit on this population,
because our historical data regarding cost sharing on this part of the
CHIP population is limited.
Depending on the income level of the family, the cumulative cost
sharing maximum would thus be set as 2.5 or 5 percent of a family's
income. The State may define family income as it chooses, as long as
under the State's definition, family income is no more than gross
family income used by the State for determining CHIP eligibility prior
to the application of disregards or exclusions.
14. Grievances and Appeals (Sec. 457.565)
We propose that the State must provide enrollees in a separate
child health plan the right to file grievances and appeals in
accordance with proposed Sec. 457.985 for disenrollment from the
program due to failure to pay cost sharing.
15. Disenrollment Protections (Sec. 457.570)
Section 2101(a) of the Act provides that the purpose of title XXI
is to provide funds to States to enable them to initiate and expand the
provision of child health assistance to uninsured, low-income children
in an effective and efficient manner that is coordinated with other
sources of health benefits coverage for children. Based upon this
provision of the statute, we propose in Sec. 457.570 to require that
States establish a process that gives beneficiaries reasonable notice
of and an opportunity to pay past due cost sharing amounts (premiums,
copayments, coinsurance, deductibles and similar fees) prior to
disenrollment. We would require that States have this process in place
because we do not believe it would be effective and efficient to
disenroll a child without notice to the family of the impending
disenrollment, or if a family was experiencing temporary financial
hardship and could not afford to pay a premium or any other cost
sharing amount. Examples of State processes that provide a reasonable
notice and opportunity to pay include--waiving cost sharing for
families experiencing temporary financial hardship, implementing grace
periods before disenrolling beneficiaries, observing a beneficiary's
pattern of non-payment before disenrollment, or establishing payment
schedules to allow beneficiaries time to pay their outstanding cost
sharing debts. We request comments on this requirement, including
specific comments on the determination of an amount of time that would
give beneficiaries reasonable notice and opportunity to pay cost
sharing amounts prior to disenrollment. HCFA will request that States
with approved plans submit this additional information once this
proposed rule is published and prior to the State's onsite review. We
will also ask the State to include its process in future amendments to
its State plan.
F. Subpart G--Strategic Planning, Reporting, and Evaluation
1. Basis, Scope, and Applicability (Sec. 457.700)
This subpart sets forth the State plan requirements for strategic
planning, monitoring, reporting, and evaluation under title XXI.
Specifically, this subpart implements sections 2107(a), (b), and (d) of
the Act, which relate to strategic planning, reports and program
budgets; section 2108 of the Act, which sets forth provisions regarding
annual reports and evaluation; and sections 2102(a)(7)(A) and (B),
relating to assurances of quality and appropriateness of care, and
access to covered services.
Although States are given great flexibility in developing title XXI
programs, sections 2107 and 2108 of the Act emphasize accountability at
both the State and Federal level. Title XXI provides for performance
measurement, evaluation, and reporting that promote the collection and
analysis of data critical to understanding the impact of CHIP on
children's insurance coverage, access to care, and use of health care
services. Reporting and evaluating the progress of program design and
implementation involve articulating program objectives and translating
them into meaningful, measurable evaluation goals; using valid and
reliable performance measures; and developing data collection and
analysis strategies that are relevant to the measures. Sections 2107
and 2108 of the Act require the Secretary to monitor State program
development and implementation, and to evaluate and compare the
effectiveness of State plans. Under section 2108(a) of the Act, States
must assess the operation of their State plans in each preceding
Federal fiscal year and report to the Secretary annually on their
progress in reducing the number of uncovered, low-income children. In
addition, section 2108(b)(1) requires States to submit an evaluation of
their program by March 31, 2000. Under section 2108(b)(2), the
Secretary is required to submit a report to Congress based on these
evaluations by December 31, 2001 and to make the report available to
the public.
Sections 2107 and 2108 of the Act contain guidance on reporting,
performance measurement, and evaluation activities. These activities
will provide the critical information necessary for meeting Federal
reporting requirements, documenting program achievements, improving
program function, and assessing program effectiveness in achieving
policy goals. Data that facilitate the objective assessment of how
programs are working will allow States to examine critical program
design decisions and take action to improve their programs. Reporting
and evaluation also will assist States and program advocates in
documenting title XXI achievements. We share States' concern for the
need to accurately measure the impact of CHIP. While this section
outlines current Federal requirements related to measuring program
achievements, we are soliciting comments for additional measures that
will assist in articulating the success of programs implemented under
title XXI. As part of our effort to increase understanding and
knowledge of title XXI programs, we plan to establish an information
dissemination policy that includes making State annual reports, State
evaluations, and a summary of State expenditures and statistical
reports regularly available on the Internet.
States have a strong interest in developing data collection
strategies and capabilities that will allow them to
[[Page 60917]]
document that title XXI funds are being used efficiently and
effectively to provide children with affordable, quality health
insurance coverage. By enacting title XXI, Congress has made a
significant investment in providing health insurance coverage to a
substantial proportion of uninsured children. Continued support and
funding will depend on providing policy makers with objective and
accurate data about the success of the program.
Reporting and evaluating data will be critical to following the
progress of States as they develop their own unique approaches to
insuring children. Title XXI affords States broad flexibility and
choice in program design and implementation. The array of choices
available to States allows them to develop programs that address their
specific needs. However, the variability in programs complicates the
effort to measure and document program effectiveness and to make State-
to-State comparisons. In developing their reporting strategy, States
may find it helpful to work with their HCFA Regional Offices to
identify technical assistance needs and to coordinate approaches to
meeting those needs. We plan to work collaboratively with States on
technical assistance issues in order to encourage utilization of
relevant and valid program and quality of care performance measures
that facilitate reporting and evaluation.
2. State Plan Requirements: Strategic Objectives and Performance Goals
(Sec. 457.710)
In accordance with section 2107(a) of the Act and the intent of the
Government Performance and Results Act of 1993 (GPRA), proposed
Sec. 457.710 encourages program evaluation and accountability by
requiring the State plan to describe the strategic objectives,
performance goals, and performance measures the State has established
for providing child health assistance to targeted low-income children
under the plan and for otherwise maximizing health benefits coverage
for other low-income children and children generally in the State.
In accordance with section 2107(a)(2) of the Act, at
Sec. 457.710(b), we propose that the State plan must identify specific
strategic objectives related to increasing the extent of health
coverage among targeted low-income children and other low-income
children. We understand there will be variation among States in
specific evaluation approaches and terminology. However, we encourage
States to view development of strategic objectives as a process that
involves translating the basic overall aims of the State plan into a
commitment to achieving specific performance goals or targets. One of
the strategic objectives established in the Act is the reduction in the
number of low-income, uninsured children. Although this objective is of
central importance, States must articulate other strategic objectives,
such as increasing access to health care and improving the quality of
health services delivered to beneficiaries.
Under section 2107(a)(3) of the Act, States must identify one or
more performance goals for each strategic objective. We propose to
implement this statutory provision at Sec. 457.710(c). The performance
goals should be central to the State's strategic objectives and should
facilitate assessing the extent to which strategic objectives are being
achieved. Performance goals should be more specific than strategic
objectives. Performance goals express target levels of performance in
the form of tangible, measurable expected levels of achievement against
which actual achievements for an explicit time frame can be measured.
In formulating strategic objectives and performance goals, States
should consider not only the general population targeted for CHIP
enrollment but also special population subgroups of particular
interest. Such subgroups may include racial or ethnic minorities,
specific high-risk groups such as children with special needs, children
in foster care, homeless children, or hard to reach groups such as
children who live in under-served rural areas or urban areas. Health
services research studies have documented racial, ethnic, and cultural
differences in health insurance coverage and patterns of care. For
example, studies show that non-white children are more likely to be
uninsured and under-immunized. Therefore, States may want to consider
developing performance goals that relate to improving coverage, access,
and utilization for specific subgroups.
In accordance with section 2107(a)(4) of the Act, proposed
Sec. 457.710(d) provides that the State plan must describe how
performance under the plan will be measured through objective,
independently verifiable means and compared against performance goals.
For purposes of measurement, States may find it helpful to
conceptualize performance in two broad categories: quality of care
measures and program operations measures. Quality of care measures
focus on access to care, health status and delivery of clinical
services. A measure of performance in either category must be valid
(that is, reflect the concept it is intended to capture) and reliable
(that is, yield results that are reproducible in repeated analyses).
For example, waiting time for appointments with health care providers
is a widely used, standardized measure of access.
Developing and testing performance measures to ensure their
validity and reliability can prove expensive and time-consuming. For
this reason, States may want to carefully review widely used measures
including all of the following:
The percentage of Medicaid-eligible children enrolled in
Medicaid;
The percentage of children with a usual source of health
care;
The percentage of children with unmet need for physician
services and/or delayed care;
The reduction of hospitalization for ambulatory-sensitive
conditions;
The array of measures in the Health Employer Data and
Information Set (HEDIS) and the Consumer Assessments of Health Plans
Study (CAHPS).
We note that HEDIS is widely used by private sector purchasers of
managed care services. It contains a wide range of quality measures,
including child and adolescent immunization measures and well child
care and well adolescent care visits. The Agency for Health Care Policy
and Research (AHCPR) has sponsored the development of a set of
standardized CAHPS surveys and reporting formats. CAHPS measures and
reports on consumer experience and satisfaction with specific aspects
of health care such as access, interpersonal interactions between
patients and providers, and service availability.
States may also find it helpful to use their measures to compare
performance with widely recognized standards, benchmarks or guidelines.
Prominent examples include:
The US Preventive Services Task Force Guidelines;
Bright Futures: Guidelines for Health Supervision of
Infants, Children and Adolescents;
The Office of Disease Prevention and Health Promotion's
Healthy People 2000 and Healthy People 2010.
States also may want to keep apprised of major efforts that are
currently underway to develop new child quality measures such as the
National Committee for Quality Assurance (NCQA) and Foundation for
Accountability (FACCT) Child and Adolescent Health Measurement
Initiative (CAHMI).
Similarly, States should also consider using widely accepted
program performance measures. For example, many States are likely to
adopt outreach
[[Page 60918]]
and substitution of private coverage performance goals because of the
substantial public policy focus on these areas. In order to report and
evaluate progress in these two areas, States may want to adopt a broad
measurement strategy that characterizes structural aspects of program
operations, program processes, and program outcomes. To use such a
broad array of performance measures, States may want to consider a
variety of data collection approaches including administrative data
collection; mail, in-person, or telephone beneficiary surveys;
disenrollee surveys; surveys of employers; site visit interviews and
observation; and focus group interviews with beneficiaries, potential
enrollees and employers.
Potential substitution of coverage performance measures include:
beneficiary self-reported coverage status at eligibility determination,
beneficiary self-reported coverage status after disenrollment, self-
reported knowledge of low-income workers and small employers about the
availability of public insurance, and length of waiting period for
child health insurance. We understand that substitution is particularly
challenging to measure because assessment relies so heavily on
beneficiaries' self reported behavior and employers reports of their
motivation for reducing or eliminating employer coverage. However, the
public policy importance of the issue of substitution of coverage
suggests that States should try to design data collection and analysis
strategies that promote assessing the effectiveness of their
substitution prevention policies.
Potential outreach performance measures include: proportion of
families who know about the program, application simplification,
enrollment application processing time, number of outreach workers per
estimated eligible child, time elapsed between initial coverage request
and enrollment, the percentage of mail-in applications (instead of on-
site applications), number and productivity of out-stationed
eligibility workers, total expenditures on outreach per estimated
number of eligible children, number of children using a 12-month
continuous eligibility option, the number of times an enrollee reports
having been exposed to CHIP information prior to requesting an
application, and enrollee satisfaction with the intake/enrollment
process.
3. State Plan Requirement: State Assurance Regarding Data Collection,
Records, and Reports and State Annual Reports and Evaluation
(Secs. 457.720 and 457.730)
Section 2107(b)(1) of the Act requires the State plan to provide an
assurance that the State will collect the data, maintain the records,
and furnish the reports to the Secretary, at the times and in the
standardized format that the Secretary may require to enable the
Secretary to monitor State program administration and compliance and to
evaluate and compare the effectiveness of State plans under title XXI.
In accordance with the statute, we would implement this provision at
Sec. 457.720.
Section 2107(b)(2) of the Act discusses the requirement that the
State plan include a description of the State's approach to submitting
annual reports and the State evaluation. Accordingly, we would
implement this provision at Sec. 457.730. In order to facilitate report
submission, a group of States has worked with staff from the National
Academy of State Health Policy, with HCFA representation, to develop an
optional model framework for the State evaluation due March 31, 2000.
This framework has been finalized and sent to every State and territory
with an approved State plan. States are permitted to submit their FY
1999 annual report and their State evaluation on March 31, 2000,
together as one comprehensive document. Each State's submission will
need to meet the title XXI requirements for both the FY 1999 annual
report and the State evaluation. The NASHP framework has been designed
to accommodate these requirements. The State workgroup facilitated by
NASHP will reconvene to develop an optional model framework for future
annual reports. We encourage States to use this optional framework to
assure the reporting of timely and consistent data. We will continue to
work with States to support this effort.
4. State Plan Requirement: State Assurance of the Quality and
Appropriateness of Care (Sec. 457.735)
Sections 2102(a)(7)(A) and (B) of the Act require the State plan to
describe the strategy the State has adopted for assuring the quality
and appropriateness of care, particularly with respect to providing
well baby care, well-child care, well adolescent care, and childhood
and adolescent immunizations and for ensuring access to covered
services, including emergency services and covered post-stabilization
services. We propose to implement this provision at Sec. 457.735. In
this section of the State plan, States should discuss the specific
elements of its quality assessment and improvement strategies,
including the use of any of the following methods: Quality of care
standards; performance measurement, information and reporting
strategies, licensing standards, credentialing/recredentialing
processes, periodic reviews and external reviews. In developing quality
assessment strategies, States may find it helpful to refer to the
Medicaid Managed Care proposed rule, published on September 29, 1998,
for a discussion of standardized methods and tools in quality assurance
and improvement and the Quality Improvement System for Managed Care
(QISMC) Initiative (63 FR 52039). States are encouraged but not
required to describe the State's strategy to assure that children have
access to pediatricians and other health care providers with expertise
in meeting the health care needs of children.
We propose to include an additional set of assurances that we
believe is necessary to ensure the quality and appropriateness of care
for enrollees. In Sec. 457.735(b) we propose that States must assure
that there are appropriate procedures in place to monitor and treat
enrollees with complex and serious medical conditions, including access
to specialists. While we believe that treatment plans are a desirable
approach to address the needs of individuals with such medical
conditions, we did not propose to require treatment plans. In addition,
our proposed language does not mirror the language set forth in the
proposed Medicaid managed care rule, which requires an adequate number
of ``direct access'' visits because this language implies the use of a
managed care approach that may not be applicable under CHIP.
5. State Expenditures and Statistical Reports (Sec. 457.740)
The recent implementation of CHIP, results of welfare reform,
increased economic stability and reductions in unemployment have
affected the scope of health insurance coverage for children. Because
each of these factors may confound the coverage level, additional data
is needed from States to measure the effectiveness of CHIP in providing
coverage to low-income, uninsured children. Consistent quarterly
enrollment data for separate child health programs, Medicaid
expansions, and regular Medicaid is necessary for HCFA to effectively
administer CHIP, to understand its relative impact on rates of
uninsurance among low-income children, and to
[[Page 60919]]
meet the changing needs of this population.
Therefore, section 2107(b)(1) of the Act, as implemented in
proposed Secs. 457.720 and 457.730, requires that the State plan
contain certain assurances regarding the submission of reports to the
Secretary. In addition, Sec. .16 of the Medicaid regulations specifies
that a State plan must provide that the Medicaid agency will submit all
reports required by the Secretary, follow the Secretary's instructions
with regard to the format and content of those reports, and comply with
any provisions that the Secretary finds necessary to verify and assure
the correctness of the reports. These statutory provisions and
regulations serve as our authority for proposing State expenditure and
statistical reporting requirements at Sec. 457.740. (For information on
forms that States should use in reporting expenditures and statistical
data, see the proposed rule concerning State Children's Health
Insurance Program Allotments and Payments to States, published in the
Federal Register on March 4, 1999 (64 FR 10412). The final approved
forms were published on December 2, 1998 (64 FR 66552).
We would require that the State collect required data beginning on
the date of implementation of the approved State plan. States must
submit quarterly reports on the number of children under 19 years of
age who are enrolled in separate child health programs, Medicaid-
expansion programs, and regular Medicaid programs (at regular FMAP) by
age, income and service delivery categories. (Territories are excepted
from the definition of ``State'' for the purposes of quarterly
statistical reporting.) We also propose to require that thirty days
after the end of the Federal fiscal year, the State must submit an
unduplicated count for that Federal fiscal year of children who are
enrolled in the separate child health program, the Medicaid expansion
program and the Medicaid program as appropriate by age, service
delivery, and income categories. Reporting an unduplicated count will
provide insight into the continuity of coverage by clarifying the
dynamics of program retention, dropout, and re-enrollment and
facilitate designing and implementing more effective outreach policies.
We propose that the age categories that must be used to report the
data are: Under 1 year of age, 1 through 5 years of age, 6 through 12
years of age, and 13 through 18 years of age. These age categories were
chosen because they correspond with eligibility categories as well as
with health status/health risk categories. States also are required to
report by service delivery categories because it is important to
understand the provider setting in which care is organized and
delivered. The service delivery system categories that the State would
be required to use are: Managed care, fee-for-service, and primary care
case management.
We propose that States must report income by using State-defined
countable income and State-defined family size to determine Federal
poverty level (FPL) categories. We propose that States that do not
impose cost-sharing and States that only impose cost-sharing based on a
fixed percentage of income (such as 2 percent) in their Medicaid-
expansion program or their separate child health program must report
their CHIP and Medicaid enrollment by using two categories: At or below
150 percent of the Federal poverty level (FPL) and over 150 percent of
FPL. States that impose cost-sharing at defined levels (for example, at
185 percent and over of FPL) in their Medicaid-expansion program and
separate child health program would be required to report their CHIP
and Medicaid enrollment by poverty level (that is, countable income and
household size) categories that match their Medicaid-expansion program
and separate child health program cost sharing categories.
We propose to require enrollment reporting by countable family
income as defined by the State consistent with the definition at
proposed Sec. 457.10 rather than gross income. We are requiring the use
of countable income because this maintains consistency with the program
operational level definition of income and recognizes the wide
variation that exists in how States compute enrollee family income and
household size.
We also propose to require enrollment reporting by income for
Medicaid as well as for CHIP. Because the income of low-income families
tends to vary, children's eligibility status may change quite
frequently and many children may be required to shift back and forth
between Medicaid and the Medicaid-expansion or separate child health
program. Therefore, it is important to understand program enrollment by
income levels.
We propose that required standardized reporting be limited to
expenditure data and enrollment data as reported by age, poverty level,
and service delivery categories. We developed these proposed reporting
requirements through extensive consultation with interested States and
agencies within the Department and careful consideration of the need to
document the progress of title XXI programs.
We also believe States should, as a matter of sound administration
of their programs, collect other relevant demographic data on enrollees
such as sex, race, national origin, and primary language. Collection of
such data will encourage design of outreach and health care delivery
initiatives that address disparities based on race and national origin.
It also will facilitate State compliance with Office for Civil Rights
data needs in the event of complaint investigations or compliance
reviews.
In order to streamline State reporting requirements, we plan to
develop an option for States to provide the needed CHIP data through
existing statistical reporting systems in the future. We are currently
evaluating possible modifications to the Medicaid Statistical
Information System (MSIS), which captures State eligibility and claims
records on a quarterly basis. The modifications will give States the
option of using MSIS to supply the data elements that will meet the
title XXI quarterly statistical reporting requirements. Under the
implementation schedule for the FY 1999 MSIS changes, this option will
not be available at an early enough date for States to report the data
required by these regulations.
6. Annual Report (Sec. 457.750)
Section 2108(a) of the Act provides that the State must assess the
operation of the State child health plan in each fiscal year, and
report to the Secretary, by January 1 following the end of the fiscal
year, on the results of the assessment. In addition, this section of
the Act provides that the State must assess the progress made in
reducing the number of uncovered, low-income children. We would
implement the statutory provision requiring assessment of the program
and submission of an annual report at proposed Sec. 457.750(a).
At Sec. 457.750(b), we set forth the proposed required contents of
the annual report. Specifically, in accordance with the statute, the
annual report must provide an assessment of the operation of the State
plan in the preceding Federal fiscal year including the progress made
in reducing the number of uncovered, low-income children. In addition,
we propose to require that the State report on progress made in meeting
other strategic objectives and performance goals identified by the
State, successes in program design, planning, and implementation of the
State plan, identify barriers to program development and
implementation, and
[[Page 60920]]
the State's approach to overcoming these barriers. We also propose to
require that the State report on the effectiveness of its policies in
discouraging the substitution of public coverage for private coverage.
Further, we would require that the annual report discuss the State's
progress in addressing any specific issues, such as outreach, that it
agreed to assess in its State plan. In accordance with section 2107(d)
of the Act, we also propose that a State also must provide the current
fiscal year budget update, including details on the planned use of
funds and any changes in the sources of the non-Federal share of plan
expenditures. We also propose that the State must identify the total
State expenditures for family coverage and total number of children and
adults covered by family coverage during the preceding Federal fiscal
year. We believe that a State must report on these issues in order to
appropriately assess the operations of the State plan under section
2108(a) of the Act.
We propose that, in order to report on the progress made in
reducing the number of uncovered low-income children in the annual
report, a State must choose a methodology to establish an initial
baseline estimate of the number of low-income children who are
uninsured in the State and provide estimates, using the chosen
methodology, of the annual change in this number of low-income
uninsured children at two poverty levels: 200 percent FPL and at the
current upper eligibility level of the State's CHIP program. In making
these estimates, a State would not be required to use the same
methodology that it used in identifying the estimated number of CHIP
eligibles in the State plan.
We are requiring States to provide an estimate of the number of
low-income, uninsured children at two poverty levels in order to gain
insight into the progress made in providing low-income children with
health insurance coverage. By requiring an estimate at the current
upper eligibility level of the State's program, we can obtain data on
the state interpretation of the number of low income children current
targeted for enrollment. Over time, as some States choose to increase
their upper eligibility levels, we will be able to identify how the
number of targeted children has changed because of expanded income
eligibility thresholds. By also requiring the State to provide a
baseline estimate at the 200 percent FPL, we can obtain an aggregated
state interpretation of the number of low income children in the United
States. Title XXI generally defines low income children as children in
families with income below 200 percent of the FPL. Most public policy
and survey research experts also adopt this definition. Therefore,
requiring the State to estimate the baseline number of uninsured
children at this FPL will allow us to compare an aggregated State
estimate with estimates obtained from other sources.
We would require that a State base the annual baseline estimates on
either : (1) Data from the March supplement to the Current Population
Survey (CPS); (2) data from State-specific surveys; (3) other
statistically adjusted CPS data; or (4) other appropriate data. We also
propose that a State must submit a description of the methodology used
to develop these estimates and the rationale for its use, including the
specific strengths and weaknesses of the methodology, unless the State
bases the estimate on March CPS data. We propose that once a State
submits a specific methodology in the annual report for estimating the
baseline numbers, the State must use the same methodology to provide
annual estimates unless it provides a detailed justification for
adopting a different methodology.
We propose to give States the option of deciding how to estimate
the number of uninsured children in the State, rather than requiring
the use of one standard methodology. We note that making such estimates
is inherently difficult and all the existing data sources have
limitations. Traditionally, most national estimates of uninsured
children have been based on the Bureau of Census March Current
Population Survey (CPS). In fact, Congress used CPS estimates of the
uninsured to allocate the CHIP funds available to each State. The CPS
is a monthly survey of approximately 57,000 households in the United
States. Each March the CPS includes supplemental survey questions about
health insurance status. More specifically, individuals are asked
whether they had any of various types of private or public health
insurance in the previous year. Individuals who do not report insurance
coverage are categorized as having been uninsured.
One major reason for the CPS's widespread use is that it is the
only data source with the capacity to generate State-by-State estimates
of uninsured children. However, in States with small populations, CPS
State-specific estimates rely on very small sample sizes and may not be
reliable. Because of this concern, Congress used 3-year averages of CPS
estimates to allocate CHIP funds to States.
Despite its shortcomings, the CPS generally is relied upon by
policy makers to provide an overall estimate of insurance status and
insurance trends in the nation. Other major surveys that provide
insight into the number of uninsured Americans include the Survey of
Income and Program Participation (SIPP), the Medical Expenditure Panel
Survey (MEPS), the Community Tracking Study, the National Health
Interview Survey (NHIS) and the National Survey of American Families.
However, these surveys produce estimates with a significant time lag,
and several are conducted on an irregular or infrequent basis. For
example, the Urban Institute conducted the National Survey of American
Families in a sample of households in 13 States in 1997 and plans
additional survey rounds in 1999 and 2001, but results of the 1997
survey will not be available until Spring of 1999 and the results of
the 1999 survey will not be available until late 2000.
Although the National Center for Health Statistics has been
developing the State and Local Area Integrated Survey (SLAITS) with a
health care module, it currently remains unfunded and some
methodological concerns have been raised about its applicability to
CHIP. Therefore, we expect that most State-specific estimates of the
number of uninsured children will use the CPS, a statistically adjusted
CPS, or a State funded survey of the uninsured population. A well-
designed State-specific survey can maximize the opportunity to capture
information that is most relevant and of greatest interest. However,
cost and time considerations will limit the reliability and validity
testing of State-specific surveys, and these limitations can increase
concerns about methodological shortcomings. Because data sources and
methodologies for estimating the number of uninsured children may vary
significantly across States, State-by-State comparisons of the
estimates may be difficult. We will continue to work with States to
give us the ability to compare estimates and develop comparable data.
7. State Evaluations (Sec. 457.760)
Proposed Sec. 457.760 discusses the requirement that States submit
a comprehensive evaluation by March 31, 2000 that analyzes the progress
and effectiveness of the State child health program. In the evaluation,
a State must report on the operation of its Medicaid expansion program,
separate child health program, or combination program. As specified in
section 2108(b)(1)(B) of the Act, the State evaluation must include all
of the following:
An assessment of the effectiveness of the State plan in
increasing the
[[Page 60921]]
number of children with creditable health coverage. In addition, the
State must report on progress made in meeting other strategic
objectives and performance goals identified by the State plan.
An assessment of the State's progress in meeting other
strategic objectives and performance goals identified by the State
plan.
A description and analysis of the effectiveness of
elements of the State plan, including the following elements:
--The characteristics of the children and families assisted under the
State plan, including age of the children and family income. The State
also must report on children's access to, or coverage by, other health
insurance prior to the existence of the State program and after
eligibility for the State program ends (the child is disenrolled). As
an optional strategy, the State also should consider reporting on other
relevant characteristics of children and their families such as sex,
ethnicity, race, primary language, parental marital status, and family
employment status.
--The quality of health coverage provided under the State plan,
including the results or plans to assess the results of any quality
assurance and improvement, monitoring, and performance measurement
process or other process that is used to assure the quality and
appropriateness of care.
--The amount and level of assistance including payment of part or all
of any premiums, copayments, or enrollment fees provided by the State.
--The service area of the State plan (for example, Metropolitan
Statistical Area (MSA) or non-MSA).
--The time limits for coverage of a child under the State plan. As an
optional strategy, the State should consider reporting the average
length of time children are assisted under the State plan.
--The extent of substitution of public coverage for private coverage
and the State's effectiveness in designing policies that discourage
substitution.
--The State's choice of health benefits coverage, including types of
benefits provided and the scope and range of these benefits, and other
methods used for providing child health assistance.
--The sources of non-Federal funding used in the State plan.
An assessment of the effectiveness of other public and
private programs in the State in increasing the availability of
affordable quality individual and family health insurance for children.
A review and assessment of State activities to coordinate
the CHIP plan with other public and private programs providing health
care and health care financing, including Medicaid and maternal and
child health services;
An analysis of changes and trends in the State that affect
the provision of accessible, affordable, quality health insurance and
health care to children.
A description of any plans the State has for improving the
availability of health insurance and health care for children.
Recommendations for improving the CHIP program.
G. Subpart H--Substitution of Coverage
1. Basis, Scope, and Applicability (Sec. 457.800)
One of the fundamental principles of title XXI is that CHIP
coverage should not supplant existing public or private coverage. Title
XXI contains provisions specifically designed to ensure that States use
CHIP funds to provide coverage only to uninsured children. These
provisions maximize the use of Federal dollars. Specifically, title XXI
requires that States ensure that coverage provided under CHIP does not
substitute for coverage under either private group health plans or
Medicaid. Section 2102(b)(3)(C) of the Act requires that State plans
include descriptions of procedures used to ensure that the insurance
provided under the State child health plan does not substitute for
coverage under group health plans. A final provision in title XXI
relating to substitution of coverage is in section 2105(c)(3)(B), which
sets out the conditions for a waiver for the purchase of family
coverage as described in proposed Sec. 457.1010. Under this provision,
States must establish that family coverage would not be provided if it
would substitute for other health insurance provided to children. In
addition, title XXI contains three provisions aimed at preventing CHIP
from substituting for current Medicaid coverage.
First, section 2102(c)(2) of the Act requires States to describe
procedures used to coordinate their CHIP programs with other public and
private programs. Second, section 2105(d) of the Act includes
``maintenance of effort'' provisions for Medicaid eligibility. That is,
under section 2105(d) of the Act, a State that chooses to create a
separate child health program cannot adopt income and resource
methodologies for Medicaid children that are more restrictive than
those in effect on June 1, 1997. Furthermore, title XXI also provides
that a State that chooses to create a Medicaid expansion program, is
not eligible for enhanced matching for CHIP coverage provided to
children who would have been eligible for Medicaid in the State under
the Medicaid standards in effect on March 31, 1997. Third, section
2102(b)(3)(B) of the Act requires that any child who applies for CHIP
must be screened for Medicaid eligibility and, if found eligible,
enrolled in Medicaid.
This subpart interprets and implements section 2102(b)(3)(C) of the
Act regarding substitution of group health coverage and sets forth
State plan requirements relating to substitution of coverage in general
and specific requirements relating to substitution of coverage under
employer-sponsored group health plans. These requirements apply to
separate child health programs.
2. State Plan Requirements: Private Coverage Substitution
(Sec. 457.805)
The potential for substitution of CHIP coverage for private group
health coverage exists because CHIP coverage costs less or provides
better coverage than coverage some individuals and employers purchase
with their own funds. Specifically, employers who make contributions to
coverage for dependents of lower-wage employees could potentially save
money if they reduce or eliminate their contributions for such coverage
and encourage their employees to enroll their children in CHIP. At the
same time, families that make significant contributions towards
dependent group health coverage could have an incentive to drop that
coverage and enroll their children in CHIP if the benefits would be
comparable or better and their out-of-pocket costs would be reduced.
In accordance with section 2102(b)(3)(C) of the Act, we propose at
Sec. 457.805 to require that each State plan include a description of
reasonable procedures that the State will use to ensure that coverage
under the plan does not substitute for group health plans. We will
review State CHIP plans for the procedures.
The following is a discussion of the procedures relating to
substitution of coverage under CHIP.
State plan requirements to prevent substitution. States that
operate a separate child health program will be required in their State
plans to describe procedures to address the potential for substitution.
There is general agreement that substitution is a more significant
problem at higher levels of income where a greater proportion of
children have access to coverage. Therefore, we propose to more closely
scrutinize State
[[Page 60922]]
plans that expand eligibility for children in families with higher
income levels.
We would consider the following to be reasonable procedures to
prevent substitution:
States that provide coverage to children in families at or
below 150 percent of the Federal poverty line (FPL) should, at a
minimum, have procedures to monitor the extent of substitution of that
coverage for existing private group health coverage. We believe that
there is limited evidence of substitution at income levels below 150
percent of FPL.
States that provide coverage to children in families
between 150 and 200 percent of FPL should, at a minimum, have
procedures to study the incidence of substitution of that coverage for
existing private group health coverage. In addition, States should
specify in their State plans the steps they will take to prevent
substitution in the event that the States' monitoring efforts discover
substitution has occurred at an unacceptable level. In the event that
the Secretary finds an unacceptable level of substitution, the State in
question should implement the procedures to limit substitution that
were identified in its State plan. We would apply a stricter standard
for this higher income group because of the increased potential risk of
substitution at this income level.
States that provide coverage to children in families above
200% of FPL should implement, concurrent with program implementation,
specific procedures or a strategy to limit substitution. We will not
prescribe a particular strategy, but will evaluate each State's
strategy separately.
We will ask States to assess the procedures to limit substitution
in their evaluations submitted in March of 2000. States that monitor
substitution in their plans will also submit information on
substitution in their annual reports. We will examine any data on the
effectiveness of States' procedures to prevent substitution of
coverage. If our review of States' experience shows that substitution
is occurring at an unacceptable rate, we may issue new requirements and
require States to alter their plans at a future date.
The other option that we considered was to require a set of
specific procedures that each State would have to use to address
substitution. We rejected this option because the statute authorizes
States to design approaches to prevent substitution, not the Federal
government. We also recognized that there is not substantial evidence
favoring any specific approach to reduce the potential for
substitution.
We have received questions about applying substitution provisions
to the Medicaid eligibility group for the ``optional targeted low-
income children'', which was added to section 1902(a)(10)(A)(ii)(XIV)
of the Act in accordance with section 4911 of the BBA. We are not
proposing to require States to apply eligibility-related substitution
provisions such as periods of uninsurance to the ``optional targeted
low-income children'' group, because we believe that such eligibility
conditions are inconsistent with the entitlement nature of Medicaid.
States that currently apply eligibility-related substitution provisions
to optional targeted low-income children will need to come into
compliance with this policy. We recognize that States expanding
Medicaid to this group at higher income levels may be particularly
concerned about the potential for substitution of coverage. We will
review section 1115 demonstration requests for substitution provisions
and consider those that are consistent with our proposed policy under
title XXI. State proposals to apply substitution provisions must
satisfactorily demonstrate how the proposal will test new ideas of
policy merit and be formally evaluated, consistent with the research
and demonstration objectives of section 1115 of the Act. States that
have approved Medicaid demonstration projects under section 1115(a)(2)
that currently apply substitution provisions, such as waiting periods,
to expansion populations under this demonstration authority may
continue to do so. Moreover, States may use mechanisms other than
eligibility restrictions to discourage substitution of coverage.
3. Premium Assistance for Employer-Sponsored Group Health Plans:
Required Protections Against Substitution (Sec. 457.810)
We will particularly scrutinize CHIP programs under which States
subsidize coverage under employer-sponsored group health plans,
regardless of the income levels of the children who benefit from the
subsidies, because we believe there is a greater potential for
substitution of public funding for existing private funding for health
insurance in this type of arrangement. First, we believe that State
subsidies of private coverage under CHIP might increase the likelihood
that families that purchase dependent coverage under employer-sponsored
plans would drop that coverage and seek CHIP coverage if these families
could obtain the same coverage under CHIP at lower cost. Lower income
families may actually be more likely to drop their contribution to
employer-sponsored coverage than higher income families because of the
higher cost of insurance relative to their income. Second, employers
with low-wage workers may have incentives to reduce or eliminate their
premium contributions for dependent coverage if the CHIP assistance
could replace that contribution.
We propose under Sec. 457.810 to require any State that implements
a separate child health program under which the State provides premium
assistance for coverage under employer-sponsored group health plans, to
adopt specific protections against substitution. A State must describe
these protections in the State plan. We believe that without these
additional protections, new Federal dollars will not extend coverage to
as many uninsured, low-income children. The following four requirements
must be met to protect against substitution:
The child must not have been covered by employer-sponsored
group health insurance during a period of at least six months prior to
application for CHIP. States may require a child to have been without
insurance for a longer period, but that period may not exceed 12
months. We believe that any longer waiting period would conflict with
the overall goal of title XXI to provide child health assistance to
uninsured, low-income children. We do not believe a waiting period of
longer than 12 months is a reasonable procedure to prevent substitution
of coverage. Exceptions to the minimum period without insurance would
be allowed if the prior coverage was involuntarily terminated. Newborns
who are not covered by dependent coverage would not be subject to any
such waiting period.
We proposed this waiting period without employer-sponsored group
health insurance to ensure that coverage is targeted to children in
families that previously were unable to afford dependent coverage. We
chose a minimum waiting period of 6 months because we felt that this
time period would be long enough to significantly deter families from
dropping existing coverage. The other option we considered was a 3
month waiting period. We believe, however, that parents would be more
willing to drop existing coverage and allow their children to be
uninsured for this shorter time period in order to take advantage of
the premium assistance coverage through CHIP.
We believe that States that do not impose a 6-month waiting period
must have a viable alternative to waiting periods, subject to approval
by HCFA.
[[Page 60923]]
For example, a State could not simply reduce the waiting period from
our minimum period of 6 months. It is important to note, however, that
the waiting period is based only on coverage by employer-sponsored
group health insurance, not CHIP or Medicaid coverage. If an otherwise
eligible child does not meet the requirement for a minimum period
without employer-sponsored group health coverage, the State can enroll
the child in a separate State program or in Medicaid without purchasing
employer-sponsored coverage for the interim waiting period, and can
still consider the child uninsured for purposes of the waiting period.
That is, coverage under a separate State program or Medicaid does not
count for purposes of the waiting period.
The employer must make a substantial contribution to the
cost of family coverage, equal to 60 percent of the total cost of
family coverage. We propose this requirement to discourage employers
from lowering or eliminating their existing contributions for dependent
coverage. We chose 60 percent based on several employer studies, which
show that, on average, employers contribute roughly two thirds of the
cost of family coverage. The Department is reluctant to permit a rate
of contribution significantly lower than the 60 percent standard.
States proposing an employer contribution rate below this standard must
provide the Department with data that exemplify a lower average
employer contribution in their State. The data must support the State's
contention that the lower level of contribution will be equally
effective in ensuring maintenance of statewide levels of employer
contributions. We would also consider a somewhat lower level if a State
had additional, effective, provisions to limit employers' ability to
lower contribution levels or a State could show through specific data
that the average employer contribution in the State is lower than 60
percent. For example, one State demonstrated to us by using the Medical
Expenditures Panel Survey (MEPS) that the contribution rate was lower
than 60 percent (55 percent) in that State. For ease of administration,
the State may establish a minimum dollar employer contribution or some
other method that is roughly equivalent to the 60 percent requirement
to assure that employers continue to pay a meaningful share of the
costs in these programs. The employee must apply for the full premium
contribution available from the employer. We propose this requirement
to promote cost-effectiveness and maximum employer contribution. This
employer contribution would reduce the CHIP contribution toward the
premium.
The State's premium assistance for employer-sponsored
coverage must not be greater than the payment that the State otherwise
would make on the child's behalf for other coverage under the State's
CHIP program. We have proposed this requirement to ensure that the
provision of child health assistance through employer-sponsored group
health plans is cost-effective and that the State is not
inappropriately providing premium assistance for coverage for the
adults in a family.
The State must collect information and evaluate the amount
of substitution that occurs as a result of the subsidies and the effect
of subsidies on access to coverage. To conduct this evaluation, States
must assess the prior insurance coverage of enrolled children. States
may obtain information on prior coverage through the enrollment
process, separate studies of CHIP enrollees, or other means for
reliably gathering information about prior health insurance status.
States should consider collecting the following information on the
application to evaluate the prevalence of substitution:
--When did you last have insurance? __ Never __ less than 3 months ago
__ 3-6 months ago __ 6-12 months ago __ more than 12 months ago
--What type of insurance did you have most recently? __ Medicaid __
Employer-sponsored insurance __ Individual __ Other (e.g., CHAMPUS,
Medicare , VA) [Note: More than one may apply.]
--What reason best characterizes why you don't have insurance today? __
No longer working for the employer who offered the insurance __ Can't
afford insurance __ Employer dropped coverage __ Public benefits are
better __ No longer need insurance __ Employer does not offer health
insurance
These questions may need to be adapted by survey researchers to obtain
the appropriate information. Proposed Sec. 457.750 and Sec. 457.760
provide additional information on reporting and evaluation
requirements. To determine the level of substitution, we encourage
States to analyze the number of families who choose to enroll in CHIP
who might have retained or bought private insurance had they not
received CHIP funding for employer-sponsored insurance. We would ask
States that choose to provide premium assistance for children's
coverage through employer-sponsored group health plans to describe in
their State plan and annual reports (described in proposed
Sec. 457.750) their compliance with these guidelines. We would also ask
States to discuss their adherence to these guidelines in their March
31, 2000 evaluations. Based on the State evaluations submitted in March
of 2000, we will reevaluate our position on these requirements for
States that subsidize employer-sponsored group health plans.
H. Subpart I--Program Integrity and Beneficiary Protections
We propose to add a new subpart I, that would specify the
provisions necessary to ensure the implementation of program integrity
measures and beneficiary protections within the State Children's Health
Insurance Program. In addition, this subpart discusses the President's
Consumer Bill of Rights and Responsibilities as it relates to the CHIP
program. This subpart also describes how the intent of the GPRA can be
upheld by including program integrity performance and measures as part
of the State plans.
1. Basis, Scope, and Applicability (Sec. 457.900)
We remain committed to our proactive efforts to preserve the
integrity of our Federal and State government health care programs.
Indeed, among HCFA's top priorities is to strengthen our ability to
fight waste, fraud, and abuse in the Medicare and Medicaid programs and
now in CHIP. We specify in Sec. 457.900, that sections 2101(a) and
2107(e) authorize HCFA to set forth fundamental program integrity
requirements and options for the States.
Specifically, section 2101(a) of the Act specifies that the purpose
of the Children's Health Insurance Program is to provide funds to
States to enable them to initiate and expand the provision of child
health assistance to uninsured, low-income children in an effective and
efficient manner. We believe that assuring program integrity is an
integral part of an effective and efficient CHIP program and we have
used this section of the Act as part of the authority for this subpart.
In addition, section 2107(e) of the Act lists specific sections of
title XIX and title XI and provides that these sections apply to States
under title XXI in the same manner they apply to a State under title
XIX. Therefore, we include the provisions set forth in section 2107(e)
in specifying the authority for this subpart.
We note that the program integrity provisions contained in this
proposed rule only apply to States that implement separate child health
programs under the authority of section 2101(a)(1) of the
[[Page 60924]]
Act. States that implement a Medicaid expansion program are subject to
the Medicaid program integrity provisions set forth in the Medicaid
regulations at part 455, Program Integrity: Medicaid. While we are
dedicated to preserving the inherent flexibility the Act provides to
States that implement separate child health programs, we are proposing
that States design programs that address the fundamental program
integrity protections established for the Medicaid program. We believe
this approach to program integrity will ensure continuity among States
in implementing CHIP, while at the same time allowing States the
opportunity to maximize efficiencies from existing administrative
processes and practices that States have established for program
integrity.
2. Definitions (Sec. 457.902)
We have included five definitions for the purpose of this subpart.
The terms ``contractor,'' ``managed care entity,'' and ``fee-for-
service entity'' relate to the entities with which States may contract
in order to provide services to the CHIP population. We defined the
terms ``contractor'' and ``managed care entity'' in this subpart
because the two terms are used most significantly in reference to
accountability for ensuring program integrity. We wanted to find a term
that would encompass all health care related entities involved in
service delivery to this population. We defined the term ``grievance''
to provide some context into the section requiring States to have
written procedures for grievances and appeals. In addition, we defined
the term ``State program integrity unit'' because separate child health
programs may elect to create an organization whose purpose is to
conduct program integrity activities. We created this term to have a
uniform way of describing this organization for States that take the
opportunity to develop a fraud and abuse prevention system for separate
child health programs. Such a system could be similar to that of the
Medicaid Fraud Control Units (MFCUs), but activities would be funded
through Title XXI rather than Medicaid.
Specifically, we propose that ``contractor'' means any individual
or entity that enters into a contract, or a subcontract to provide,
arrange, or pay for services under title XXI. This definition includes,
but is not limited to, managed care organizations, prepaid health
plans, primary care case managers, and fee-for-service providers and
insurers.
We propose that a ``managed care entity'' is any entity that enters
into a contract to provide services in a managed care delivery system,
including but not limited to managed care organizations, prepaid health
plans, and primary care case managers. We propose that ``fee-for-
service entity'' means any entity that provides services on a fee-for-
service basis, including health insurance. We propose that ``State
program integrity unit'' means a part of an organization designated by
the State (at its option) to conduct program integrity activities for
separate child health programs.
Finally, we defined the term ``grievance'' to be consistent with
the proposed Medicaid managed care regulations, and to give the States
the opportunity to utilize the process that is already in place for the
Medicaid program.
3. State Program Administration (Sec. 457.910)
We are aware of the need to provide States with maximum flexibility
as they implement their State plans, while balancing the need of the
Federal government to remain accountable to Congress for the integrity
of the program. We note that section 2101(a) of the Act allows
flexibility by requiring States to provide child health assistance to
uninsured, low-income children in an effective and efficient manner.
Toward that end, we would specify in Sec. 457.910 that the State child
health plan must provide for methods of administration that the
Secretary finds necessary for the proper and efficient operation of the
State child health program. We would also provide that the State's
program must provide the safeguards necessary to ensure that
eligibility as set forth in subpart C of these proposed regulations
will be determined appropriately, and services will be provided in a
manner consistent with simplicity of administration and with the
provisions of proposed subpart D regarding benefits. We believe these
requirements are relevant and consistent with the general program
integrity protections that are common to most Federal and State health
programs and provide States with flexibility in tailoring their
individual CHIP programs.
4. Fraud Detection and Investigation (Sec. 457.915)
Section 2107(e) references sections 1903(i)(2), and 1128A of the
Act, which authorize certain fraud detection and investigation
activities. Section 2107(e) states that these provisions apply under
title XXI in the same manner as applied to a State under title XIX.
Moreover, these provisions are cited as authority in the Medicaid
regulations at part 455, subpart A--Medicaid Agency Fraud Detection and
Integrity Program. We recognize that States that implement their State
plans through the Medicaid expansion option are subject to all Medicaid
program integrity requirements under part 455, Program Integrity:
Medicaid. However, States that implement separate child health programs
have more flexibility in designing and implementing program integrity
procedures for their programs. In recognition of this flexibility, we
considered three possible options to ensure that separate child health
programs develop and implement adequate fraud detection and
investigation processes and procedures.
We considered declining to specify any fraud detection and
investigation assurances, thereby providing States with full discretion
in designing processes and procedures to meet their specific needs.
However, we are not proposing this option because we do not believe it
supports the Secretary's need for accountability and responsibility to
Congress for CHIP evaluation and reporting requirements. We also
considered proposing to require that all separate child health programs
follow the same processes and procedures for fraud detection and
investigation for the Medicaid program (and CHIP Medicaid expansions)
specified under Sec. 455.13 regarding methods for identification,
investigation and referral. However, while there are several advantages
in maintaining a central focal point for all State Medicaid and CHIP
activities, we did not propose this option because we believed that
this approach was not sufficiently flexible for separate child health
programs, which vary in structure from Medicaid. The compromise option
that we are proposing is to require States to address, specifically,
the Medicaid goals for fraud detection and investigation, but allow
States to design specific procedures needed to meet the requirements of
Sec. 455.13. We believe this option balances the need for maintaining
State flexibility while establishing an acceptable minimum standard
that will satisfy our need for accountability in the program. For
example, under this option we would indicate that States may consider
Medicaid agency criteria for identifying suspected fraud cases in CHIP
and work in collaboration with the State program integrity unit, legal
authorities, and law enforcement officials in referring suspected fraud
and abuse cases.
Specifically, we propose that the State must establish procedures
for assuring program integrity and detecting fraudulent or abusive
activity. We propose that HCFA and the States develop program integrity
standards and
[[Page 60925]]
measures, such as payment error rate, acceptable levels of payment
error, and the recovery of funds from erroneous payments. These
examples of measures demonstrate Federal and State commitment to the
principles and the intent of the GPRA. We would provide that the
procedures must include, at a minimum, the methods and criteria for
identifying and investigating suspected fraud and abuse cases that do
not infringe on the legal rights of persons involved and afford due
process of law. We also propose that the State may establish an
administrative agency responsible for monitoring and maintaining the
integrity of the separate child health program, which would be referred
to as the ``State Program Integrity Unit.'' We further provide that in
the event that a State chooses to establish a State Program Integrity
Unit, the State must develop and implement procedures for referring
suspected fraud and abuse cases to law enforcement officials. We would
specify that law enforcement officials include, but are not limited to
the Department of Health and Human Services Office of Inspector
General(OIG), the Department of Justice (DOJ), the Federal Bureau of
Investigation (FBI), and the State Attorney General's office.
5. Accessible Means To Report Fraud and Abuse (Sec. 457.920)
We propose that States with separate child health programs must
establish and provide access to a mechanism that facilitates
communication between the State and the public for information exchange
on instances of potentially fraudulent and abusive practices by and
among participating contractors, and other entities. This communication
mechanism may include a toll-free telephone number. We realize that
toll-free service is the primary means for referring fraud and abuse in
the Medicaid program, and that these toll-free services are unique and
vary from State to State. While States that expand current Medicaid
programs can utilize the existing toll-free services, we note that
States with separate child health programs may establish similar toll-
free service as a viable method to provide the public with an
accessible means for reporting fraud and abuse. For example, States are
free to use discretion in establishing new toll-free services
specifically designed for their enrollees, or in maximizing the
benefits of an existing Medicaid fraud and abuse toll-free service by
expanding these toll-free services to include fraud and abuse
reporting. As evidenced by the Medicare, Medicare+Choice, and Medicaid
programs, we believe that providing access to toll-free service for the
reporting of potentially fraudulent and abusive practices is an
integral part of any sound program integrity strategy.
6. Preliminary Investigation (Sec. 457.925)
We would specify that if the State receives a complaint of fraud or
abuse from any source, or identifies any questionable practices, the
State agency must conduct a preliminary investigation or implement
otherwise appropriate actions to determine whether there is sufficient
basis to warrant a full investigation. We are proposing that the State
has the option of creating a ``State program integrity unit'' for
separate child health programs that would conduct fraud and abuse
prevention activities parallel to the activities of Medicaid Fraud
Control Units. States have flexibility to define the role, if any, that
State program integrity units play. However, such activities must be
funded with monies from the State's CHIP allotment. While we are
proposing that preliminary investigations be conducted, we remain
flexible with regard to the processes and procedures that separate
child health programs may employ in conducting preliminary
investigations. We would encourage States to work closely with the
State Medicaid program integrity unit or units in structuring the
approach to program integrity and developing procedures for conducting
these investigations. Since the Medicaid and separate State program
integrity units would be working on similar issues, sometimes on
parallel investigations, the two units could reside in the same
organization, entity, or division within the State. We believe this
represents a feasible option to help States bolster their effectiveness
and efficiency in conducting fraud and abuse investigations for
separate child health programs.
7. Full Investigation, Resolution, and Reporting Requirements
(Sec. 457.930)
We would specify that the State must establish and implement
effective procedures for investigating and resolving suspected and
apparent instances of fraud and abuse. While we would preserve State
flexibility in tailoring processes to best suit their specific State
program needs, we note that States may model their approaches, to the
extent necessary as determined by the State, after fraud and abuse
investigation, resolution, and reporting congruent with the Medicaid
State agency processes and procedures as outlined in Secs. 455.15,
455.16, and 455.17 of the Medicaid regulations. For example, the State
must work in conjunction with law enforcement officials and the
Medicaid State program integrity unit. Some States may choose to adopt
the existing Medicaid State agency process for fraud and abuse
investigation, resolution, and reporting activities. However, MFCUs may
only use Medicaid funding for fraud and abuse activities in States that
provide child health assistance under a Medicaid expansion program.
Medicaid funding cannot be used for fraud investigation activities in
separate child health programs. This is because all MFCU professional
staff being paid with Medicaid dollars must be full-time employees of
the Medicaid fraud agency and devote their efforts exclusively to
Medicaid fraud activities. However, to the extent that States want to
allocate additional non-MFCU full-time staff, using CHIP dollars, to
work exclusively on fraud and abuse investigation in separate child
health programs, they may do so. States may choose to do this in
conjunction with a State program integrity unit. We note that
expenditures for this purpose would be subject to the 10 percent cap on
administrative costs.
States with separate child health programs may choose to implement
distinct and separate processes for investigating and resolving fraud
and abuse cases. In addition, some States may choose to use some of the
existing processes in their Medicaid State agency together with new and
separately developed fraud and abuse processes. Regardless of the
approach that States choose, we believe it is imperative that fraud and
abuse processes under a separate child health program maintain a sense
of continuity including elements that are generally consistent with
other State programs and that are familiar to State officials, law
enforcement officials, and the general public. Moreover, maintaining
this sense of commonality in the State's programs may help to mitigate
the risk of increasing confusion among entities that report fraud and
abuse, and may help to promote synergy between CHIP and other State
programs regarding fraud and abuse investigation, resolution, and
reporting activities.
Therefore, we propose that the State must establish and implement
effective procedures for handling suspected and apparent instances of
fraud and abuse. We further propose that, once the State determines
that a full investigation is warranted, the State may implement certain
procedures. Specifically, we would provide that, to the greatest extent
possible, the State must cooperate with and refer fraud and abuse cases
to the State program integrity unit when requested to do so
[[Page 60926]]
by that unit. The State program integrity unit would also refer fraud
cases to appropriate law enforcement officials.
8. Sanctions and Related Penalties (Sec. 457.935)
Under the authority of section 2107(e) of the Act, and consistent
with the requirements under Federal and State health care programs, we
would specify that a State may not make payments for any item or
service furnished, ordered, or prescribed under a separate child health
program to any contractor who has been excluded from participating in
the Medicare and Medicaid programs. We note that our authority stems
from section 1128 of the Act regarding exclusion of certain individuals
and entities from participation in Medicare and State administered
health care programs. We assert this authority because section 1128
specifically references the authority in sections 1124, 1126, 1128A,
and 1128B of the Act, which also have been included under section
2107(e) of the Act and apply to the Children's Health Insurance Program
in the same manner as applied to a State's Medicaid program under title
XIX. Accordingly, we would specify that the separate child health
programs are subject to program integrity provisions set forth in the
Act including: (1) Section 1124 relating to disclosure of ownership and
related information; (2) section 1126 relating to disclosure of
information about certain convicted individuals; (3) section 1128A
relating to civil monetary penalties; and (4) section 1128B(d) relating
to criminal penalties for acts involving Federal health programs. In an
effort to promote enforcement of this subsection and to provide HCFA
and the Secretary with critical fraud and abuse data, we would specify
that the separate child health programs are subject to the requirements
of section 1128E of the Act in the same manner as applied to the
Medicare and Medicaid programs. In accordance with section 1128E of the
Act, we would consistently specify that the State child health plan be
subject to the requirements pertaining to the reporting of final
adverse actions on liability findings made against health care
providers, suppliers, and practitioners. In addition, States must share
such information and data with the Office of the Inspector General in
an effort to promote enforcement.
9. Procurement Standards (Sec. 457.940)
Section 2101(a) of the Act requires that States provide services in
an effective and efficient manner. We believe that Congress intended
that title XXI funds be used to provide health services to the maximum
number of uninsured children possible. Therefore, we have an obligation
to ensure that States use these funds in a cost-effective manner. In
order to meet this obligation, we have set forth provisions at proposed
Sec. 457.940 regarding procurement standards. We note that these
provisions do not include Federal oversight of provider payments.
Rather, we propose to require that States set rates in a manner that
most efficiently utilizes limited CHIP funds.
We propose to require that States provide HCFA with a written
assurance that title XXI services will be provided in an effective and
efficient manner. The assurance must be submitted with the initial CHIP
plan or, for States with approved CHIP plans, with the first request to
amend the CHIP plan submitted to HCFA following the effective date of
these regulations.
If States contract with entities for CHIP services, they must
provide for free and open competition, to the maximum extent possible,
in the bidding of all contracts for title XXI services in accordance
with the procurement requirements of 45 CFR 74.43. As a grant program,
title XXI is subject to the requirements of 45 CFR part 74 (Uniform
Administrative Requirements for Awards and Subawards to Institutions of
Higher Education, Hospitals, Other Nonprofit Organizations, and
Commercial Organizations; and Certain Grants and Agreements with
States, Local Governments and Indian Tribal Governments), including
part 74.43.
Alternatively, States may base title XXI fee-for-service or
capitated rates on public or private payment rates for comparable
services. We believe that this option will give States maximum
flexibility and will permit them to take advantage of local market
forces in establishing CHIP rates. We propose that if a State finds it
necessary to establish higher rates than would be established using
either of the above methods, it may do so if those rates are necessary
to ensure sufficient provider participation or to enroll providers who
demonstrate exceptional efficiency or quality in the provision of
services. This method will allow States the flexibility to establish
higher rates to attract providers in under-served areas or to enroll
more costly specialty providers.
We also propose that States must provide HCFA with a description of
the manner in which they develop CHIP rates. The description would
include an assurance that the rates were competitively bid or an
explanation of the applicability of the exceptions of 45 CFR part 74, a
description of the public or private rates that were used to set the
CHIP rates, if applicable, and/or an explanation of why rates higher
than those that would be established using either of these two methods
is necessary. The description must be submitted to HCFA when a State
first determines its rates or, for approved CHIP plans, when it updates
its rates or changes its reimbursement methodology.
10. Certification for Contracts and Proposals (Sec. 457.945)
In addition to the proposed requirements in Sec. 457.950, which
specify that contractors must certify payment data is accurate,
truthful, and complete, we would also specify in Sec. 457.945 that
entities that contract with the State must also certify the accuracy,
completeness, and truthfulness of information in contracts, requests
for proposals, information on subcontractors, and other related
documents as specified by the State. We are proposing this requirement
to meet our need for accountability under CHIP (as discussed in our
rationale for proposed Sec. 457.915) and to address the concerns of the
OIG, DOJ, and HCFA regarding program integrity assurances from its
contractors.
11. Contract and Payment Requirements Including Certification of Data
That Determines Payment (Sec. 457.950)
We believe it imperative that CHIP payments for health care
services are based on accurate and validated claims information and
supporting data from managed care organizations and health care
providers. As the majority of approved State child health plans offer
some type of managed care delivery, we believe the issue of
certification of payment data is important to ensuring program
integrity in State child health plans. In addition, we share the
concerns of our other Federal government partners that adequate steps
must be taken by States to ensure the accuracy, completeness, and
truthfulness of data by contracting entities.
Therefore, at Sec. 457.950 we propose that when CHIP payments to
managed care entities are based on data submitted by the MCE, the State
must ensure their contracts with MCEs provide that the data include,
but are not limited to, enrollment information and other information
required by the State. We also provide that as a condition for
receiving payment, the MCE must attest to the accuracy, completeness,
and truthfulness of claims and payment data. We would provide that as a
condition of participation in the
[[Page 60927]]
separate child health program, MCEs must provide the State with access
to enrollee health claims data and payment data, as determined by the
State and in conformance with the appropriate privacy protections in
the State. We also propose that managed care contracts must include a
guarantee that the MCE will not avoid costs for services, such as
immunizations, covered in its contract by referring individuals to
publicly supported resources (for example, clinics that are funded by
grants provided under section 317 of the Public Health Service Act).
We would provide that when CHIP payments are made to fee-for-
service entities, the State must establish procedures to ensure and
attest that information on provider claim forms is truthful, accurate,
and complete. We also propose that as condition of participation in the
State plan, fee-for-service entities must provide the State with access
to enrollee health claims data and payment data, as determined by the
State.
12. Conditions Necessary To Contract as a Managed Care Entity (MCE)
(Sec. 457.955)
In addition to implementing program integrity protections at the
State level, we would specify under Sec. 457.955 that the State must
ensure MCEs have in place fraud and abuse detection and prevention
processes. These processes would include mechanisms for the reporting
of information to appropriate State and Federal agencies on any
unlawful practices by subcontractors or enrollees of MCEs. In order to
maintain privacy protections for enrollees, we propose that the
reporting of information on enrollees would be limited only to
information on violations of law pertaining to the actual enrollment,
provision of, and payment for health services. Furthermore, we would
provide that the State maintains the authority and the ability to
inspect, evaluate and audit MCEs as determined necessary by the State
in instances where the State determines that there is a reasonable
possibility of fraudulent or abusive activity.
We believe these requirements are necessary because the majority of
States utilize managed care delivery for children's health benefits
coverage. In addition, we believe that our proposed requirements for
CHIP managed care contracting in the area of program integrity are
similar to the program integrity assurances specified in Sec. 438.606
of the proposed Medicaid managed care provisions, published on
September 29, 1998 (63 FR 52022). However, we note that MCEs are
accountable to the State, and not to the Federal government. We believe
this approach allows MCEs and States maximum flexibility in developing
mechanisms for reporting on violations of law that are most effective
and efficient for the unique operation of the MCE, and are also in the
best interest of the specific State child health plan.
We propose that States that have Medicaid expansion programs and
contract with MCEs under section 1903(m) of the Act may arrange for an
annual independent, external review of the quality of services (EQR)
delivered by each MCE as provided for under section 1932(c)(2) of the
Act. States are permitted to draw down 75 percent FFP for this
activity. States with separate child health programs are encouraged to
provide for EQR of each MCE under contract to provide services to CHIP
enrollees; however, the State must use funds within the 10 percent
limit for administrative activities.
13. Reporting Changes in Eligibility and Redetermining Eligibility
(Sec. 457.960)
If a State chooses to require that individuals report changes in
circumstances during an eligibility period, we propose to require that
the State: (1) establish procedures to ensure that beneficiaries make
timely and accurate reports of any changes in circumstances that may
affect eligibility; and (2) promptly redetermine eligibility when it
receives information about changes in a child's circumstances that may
affect his or her eligibility.
We believe that these two requirements are important in addressing
our concern that children are appropriately enrolled in the program.
14. Documentation (Sec. 457.965)
To ensure the integrity of the program, we propose to require that
each applicant's record include certain facts that would, if necessary,
support the State's determination of a child's eligibility. This
documentation should be consistent with standard State laws and
procedures.
15. Eligibility and Income Verification (Sec. 457.970)
A key to successfully enrolling children in CHIP and Medicaid is a
simple application and enrollment process. A burdensome application and
enrollment process can be a significant barrier to successful
enrollment. However, it is important that States have in place
procedures designed to assure program integrity. We propose to require
that States have in place procedures designed to assure the integrity
of the eligibility determination process, and to abide by verification
and documentation requirements applicable to separate child health
programs under other Federal laws and regulations. We propose that
States have flexibility to determine these documentation and
verification requirements, and can use self-declaration of income and
assets.
States with separate child health programs are not required to use
the Medicaid income and eligibility verification system (IEVS) for
income and resources or to adopt a similar system.
Nonetheless, the establishment of effective program integrity
procedures as part of the eligibility determination process is an
integral part of providing coverage under a separate child health
program in an effective and efficient manner as required under section
2101(a), and of ensuring accountability to State and Federal executive
and legislative authorities. We encourage States to adopt procedures
that assure accountability but do not create barriers in the
application and enrollment process. For example, a State that provides
for self-declaration by the applicant of income and assets could
conduct random post-eligibility verification or adopt other procedures
designed to assure program integrity.
The State could also use the Medicaid IEVS verification system, or
some variation of it. For eligibility requirements that pose particular
program integrity problems, the State could require verification or
documentation as part of the eligibility determination process.
We would also allow a State to terminate the eligibility of a
beneficiary for ``good cause'' other than failure to continue to meet
the requirements for eligibility. An example of ``good cause'' would be
if any information or other action causes the beneficiary to fail to
meet the requirements of income and eligibility verification as
reasonably determined by the State. For example, a reasonable basis for
termination would exist in a case where the applicant provided false
information about an eligibility requirement. Beneficiaries terminated
for good cause must be given a notice of the termination decision that
sets forth the reasons for termination and provides a reasonable
opportunity to appeal the termination decision as specified in section
457.985.
16. Redetermination Intervals in Cases of Suspected Enrollment Fraud
(Sec. 457.975)
Among our highest priorities is to ensure that a State child health
assistance program actually provides health assistance to the
individuals
[[Page 60928]]
Congress designed the program to serve. That is, we want the State to
ensure that children applying for CHIP, but who are eligible for
Medicaid or any other form of health assistance, are enrolled in those
programs if appropriate. Furthermore, if a State suspects enrollment
fraud, the State should periodically disenroll from the program
beneficiaries that no longer meet the eligibility standards under
section 2102 of the Act for any reason including a change in age,
income, or source of other health coverage. If a State suspects
enrollment fraud, the State may, at its own discretion, perform
eligibility redeterminations at any frequency that the State considers
to be in the best interest of the CHIP program.
17. Verification of Enrollment and Provider Services Received
(Sec. 457.980)
Integral to a sound program integrity strategy is the ability to
ensure that services billed by contractors are actually received by
enrollees. Under the Medicaid program, this is accomplished in large
part by the claims processing system used by States, the Medicaid
Management Information System (MMIS). The MMIS captures provider and
service information on claims and provides individual notices, within
45 days of the payment of claims to all or a sample group of enrollees
receiving the services. These requirements and procedures under the
Medicaid program are specified under Secs. 455.20 and 433.116
accordingly. While States with Medicaid expansion programs are subject
to these Medicaid requirements, we want to ensure that separate child
health programs have procedures in place to verify receipt of provider
services. We recognize that some States may choose to use the existing
claims processing system for Medicaid expansion programs. However, some
States may choose to use separate systems for the separate child health
program. In these cases, we would specify that the program must have
established systems and procedures for verifying enrollee receipt of
provider services. In addition, we would specify that the State must
establish and maintain systems to distinguish and report enrollee
claims for which the State receives enhanced FMAP payments under
section 2105 of the Act. We believe that the requirements specified
above would serve as a fundamental component of other program integrity
activities in this proposed rule, including the fraud detection and
investigation efforts as discussed under Secs. 457.915, 457.925,
457.930.
18. Enrollee Rights To File Grievances and Appeals (Sec. 457.985)
Section 2101 of the Act allows the Secretary to provide health
assistance in an effective and efficient manner that promotes the best
interests of enrollees. Under this authority, we would specify that the
State must allow enrollees the right to due process in circumstances
where their health care services were denied, suspended, terminated or
reduced by the State or by its providers. Specifically, we propose that
States must afford individuals the opportunity to file grievances and
appeals regarding denial, suspension or termination of eligibility;
reduction or denial of services provided for in the State's plan; and
disenrollment for failure to pay cost-sharing. Sections 457.365,
457.495, and 457.560 respectively require that this section applies in
these specific circumstances.
We would specify that separate child health programs must establish
and maintain written procedures for grievances that are consistent with
the health industry practices currently in effect in the particular
State. Such procedures must include a guarantee that the grievance and
appeals processes will be resolved within a reasonable period of time.
An example of a reasonable period of time would be as proposed in the
Medicaid managed care rule (63 FR 52022), a period of 30 calendar days
or 72 hours in an expedited case.
We would further require that these procedures for grievances meet
the State rules and regulations for grievances and appeals that are
currently in effect for health insurance issuers (as defined in section
2791(b) of the Public Health Service Act) within the State. We would
require these provisions for grievances and appeals on a State-specific
basis because we realize that procedures may vary from State to State,
and States may also modify their own requirements as circumstances
warrant. Furthermore, we encourage States to use the grievance
procedures as described in part , subpart E regarding fair hearings for
Medicaid applicants and recipients, and the Medicaid grievance and
appeal procedures for Medicaid managed care entities, which were set
forth in the Medicaid Managed Care proposed rule (63 FR 52022).
The State should maintain effective, efficient, and timely
processes for grievances, appeals, and determinations for its
enrollees. In addition, the State child health program and its
providers should ensure that all enrollees receive written information
about the grievance and appeal procedures that are available to them.
We believe that assuring CHIP enrollees of their grievance rights is
consistent with the Administration's ongoing efforts to institute the
Consumer Bill of Rights and Responsibilities for all Federal health
programs.
We are concerned that beneficiaries be afforded the right to make
informed decisions about their medical care free from any form of
financial incentive or conflict of interest involving their provider of
care that could directly or indirectly affect the kinds of services or
treatment offered or provided. Therefore, we propose that the State
must guarantee, in all contracts for coverage and services, beneficiary
access to information related to actions which could be subject to
appeal in accordance with the ``Medicare+Choice'' regulation at
Sec. 422.206, which discusses the prohibition of ``gag rules'' and
protection of enrollee-provider communications, and Sec. 422.208 and
Sec. 422.210(a) and (b) which discuss physician incentive limitations
and requirements for information disclosure to beneficiaries. We remain
committed to ensuring that appropriate actions are taken to guarantee
the protection of enrollee rights regarding their health care services
under the Medicare, Medicaid, and CHIP programs.
19. Privacy Protections (Sec. 457.990)
Privacy protections are an essential part of an effective and
efficient program because these protections ensure beneficiary trust
and honest communication with caregivers and payers. Furthermore,
protecting the rights of beneficiaries is of paramount importance in
our overall efforts to manage and oversee Federal and State health care
programs. This can be evidenced through recent activities including the
Administration's commitment to the Consumer Bill of Rights and
Responsibilities, as well as HCFA's focus on beneficiary rights as
demonstrated in the recent Medicare+Choice regulations set forth at
part 422 and the proposed Medicaid managed care regulations published
on September 29, 1998 (63 FR 52022). For example, the Medicare+Choice
regulations at Sec. 422.118 and the proposed Medicaid managed care
regulations at Sec. 438.324 set forth provisions that address enrollee
privacy protections in the areas of ensuring original medical records
and information are released only in accordance with Federal or State
law, or court orders or subpoenas; safeguarding the privacy of
information; maintaining accurate and timely information and
[[Page 60929]]
records; abiding by all State and Federal laws concerning
confidentiality and disclosure of information; protecting the
confidentiality and privacy of minors in accordance with Federal and
State law; prohibiting the access to or tampering with records by
unauthorized individuals; ensuring that enrollees have timely access to
their records and to information that pertains to them; and ensuring
that MCOs release records and information only to authorized
individuals.
In light of these concerns, and our obligation under section
2102(a)(1) to ensure that States provide child health assistance in an
effective and efficient manner, we would specify that the State plan
must assure that the program complies with the title XIX provisions as
set forth under part , subpart F--Safeguarding Information on
Applicants and Recipients. Moreover, we would provide that the State
plan must assure the protection of information and data pertaining to
beneficiaries by providing that all contracts will include guarantees
that:
Original medical records are released only in accordance
with Federal or State law, or court orders or subpoenas;
Information from or copies of medical records are released
only to authorized individuals;
Medical records and other information are accessed only by
authorized individuals;
Confidentiality and privacy of minors is protected in
accordance with applicable Federal and State law;
Enrollees have timely access to their records and to
information that pertains to them; and
Beneficiary information is safeguarded by following all
Federal and State laws that pertain to confidentiality and disclosure
of mental health records, medical records, and all other applicable
health and other information specific to enrollees.
Furthermore, we continue to be concerned about privacy issues as
more States utilize electronic media such as the Internet to transmit
enrollee health care information. For example, some States have
indicated their intent to allow for the completion of CHIP applications
on-line, to allow for the downloading of completed applications and
patient enrollment records by authorized users, and to allow on-line
access to eligibility systems for qualified providers. For States
choosing to pursue these types of activities, we would specify that
State child health plans sending data to HCFA through the Internet will
be subject to HCFA's Internet Security Policy regarding confidentiality
of data transmissions (found on HCFA's website at ``www.hcfa.gov'').
Data transmissions between providers, health plans, and the State would
also be subject to these requirements. In addition, we would specify
that State child health plans are subject to any Federal requirements
as well as requirements set forth by their State regarding information
disclosure, including use of the Internet to transmit CHIP data between
and among the State and its providers. Data transmissions between
providers, health plans, and the State would be subject to these
requirements also. Finally, we would provide that the State must assure
that the program will be operated in compliance with all applicable
State and Federal requirements to protect the confidentiality of
information transmitted by electronic means, including the Internet.
20. Overview of Beneficiary Rights (Sec. 457.995)
In February 1998, the President directed the Department of Health
and Human Services, along with the Departments of Labor, Defense and
Veterans' Affairs and the Office of Personnel Management, to use their
regulatory and administrative authority to bring their health programs
into compliance with the Consumer Bill of Rights and Responsibilities,
as proposed by the President's Advisory Commission on Consumer
Protection and Quality in the Health Care Industry.
Since that time, HHS has moved aggressively to strengthen existing
consumer protections under the Medicare and Medicaid programs. In
particular, in developing regulations implementing the Medicare and
Medicaid managed care provisions of the Balanced Budget Act of 1997, we
have been able to meet or substantially address all of the rights
identified in the Consumer Bill of Rights and Responsibilities. The
Interim Final Rule for Medicare, published on June 26, 1998 (63 FR
34968), has largely taken effect as of January 1999, with the
implementation of the Medicare+Choice program. The Notice of Proposed
Rulemaking for Medicaid managed care, published on September 29, 1998
(63 FR 52022), expanded and codified protections for Medicaid
beneficiaries enrolled in managed care arrangements. However, this
regulation will not be fully implemented until the States incorporate
the changes into their new contracts, one year after the publication of
the final rule, which is expected to be issued in late 1999.
The Children's Health Insurance Program was also established by the
Balanced Budget Act of 1997. The protections that apply to the general
Medicaid program also apply to States that expand existing Medicaid
programs as a means of implementing CHIP. In considering how to apply
the President's directive for consumer protections in separate child
health programs, we have attempted to balance the Administration's
desire to ensure consumer rights for the broadest population with the
need to preserve State flexibility. In this spirit, we have identified
the following rights for enrollees in separate child health programs.
We welcome public comments on how best to address the Consumer Bill of
Rights and Responsibilities or other needed beneficiary protections in
this regulation.
Information Disclosure
The Consumer Bill of Rights and Responsibilities provides that
consumers should receive accurate, easily understood information and
assistance in making informed health care decisions about their health
plans, professionals, and facilities.
Section 2102(c) of the Act requires that State plans include
procedures ``to inform children of the availability of child health
assistance and to assist in enrolling children.'' We implement this
provision of the Act at Sec. 457.65--Duration of State plans and plan
amendments, and Sec. 457.110--Enrollment assistance and information
requirements, and Sec. 457.525--Public notice of cost sharing
requirements.
Choice of Providers and Plans
The State must provide applicants and enrollees with assistance in
making informed health care decisions (Secs. 457.110 and 457.985(e))
and have methods to assure appropriate and timely procedures to monitor
and treat enrollees with complex and serious medical conditions,
including access to specialists (Sec. 457.735). We note that this
provision is similar to the provisions set forth in the proposed
Medicaid Managed Care regulation.
Access to Emergency Services
The Consumer Bill of Rights and Responsibilities provides that
consumers should have access to emergency health services. Health plans
should provide payment when a consumer presents to an emergency
department with acute symptoms of sufficient severity--including severe
pain--that a ``prudent layperson'' could reasonably expect the absence
of medical attention to result in placing that consumer's health in
serious jeopardy, serious impairment to bodily
[[Page 60930]]
functions, or serious dysfunction of any bodily organ or part.
Section 2102(a)(7)(B) of the Act expressly requires that States
include in their CHIP plans methods ``to assure access to covered
services, including emergency services.'' We have proposed to apply in
the benefits section (Sec. 457.402) the definitions of emergency
services, emergency medical condition, and post-stabilization services,
which were included in the President's directive and proposed in the
Medicaid managed care regulation. In addition, the proposed regulation
text at Sec. 457.735--State plan requirement: State assurance of the
quality and appropriateness of care, further addresses the right to
emergency services.
Participation in Treatment Decisions
The Consumer Bill of Rights and Responsibilities would give
consumers the right and responsibility to participate in treatment
decisions and to be represented if not able to do so. Enrollees in
separate child health programs have the opportunity to make such
decisions and to receive the pertinent information (Sec. 457.110). In
addition, States must prohibit gag rules and establish principles for
disclosure of physician financial arrangements that could affect
treatment decisions (Sec. 457.985(e)).
Respect and Nondiscrimination
The Consumer Bill of Rights and Responsibilities sets forth that
consumers have the right to considerate, respectful care that is free
of discrimination in the delivery of health care services, as well as,
marketing and enrollment practices based on race, ethnicity, national
origin, religion, sex, age, mental or physical disability, sexual
orientation, genetic information, or source of payment.
We have proposed to apply general grant requirements to both States
and contractors (health plans) that preclude discrimination based on
race, sex, ethnicity, national origin, religion, or disability. The
proposed regulation text addresses this right at Sec. 457.130--Civil
rights assurance.
Confidentiality of Health Information
The Consumer Bill of Rights and Responsibilities provides that
consumers should be permitted to communicate with health care providers
in confidence and to have the confidentiality of their individually-
identifiable health care information protected. Consumers also have the
right to review and copy their own medical records and request
amendments to their records.
We believe that privacy protections are essential to effective and
efficient operation of a separate child health program, and have
proposed to require such protections at proposed Sec. 457.990--Privacy
protections. In addition, we would require that the State program
comply with other applicable Federal and State laws used to enforce
confidentiality. These proposed requirements are based on our authority
under section 2102(a)(1) of the Act to require that child health
assistance is furnished in an effective and efficient manner. We
believe protecting the confidentiality of patient information is
essential to ensure that families will be willing to enroll eligible
children and seek benefits under the program. We would require the
program to be in compliance with all applicable State and Federal rules
concerning confidentiality.
Grievances and Appeals
The Consumer Bill of Rights and Responsibilities provides that a
fair and efficient process should be in place for resolving differences
with health plans and other health care providers, including a system
of timely internal and external review of grievances and a meaningful
process for addressing complaints.
Section 2103 specifies the parameters of the coverage that must be
part of a CHIP plan. In order to ensure that this coverage is actually
furnished as specified in that section, and in the approved State plan,
we propose to require that States and their contractors afford
beneficiaries a ``fair and efficient'' appeals process, consistent with
rules applicable to health insurance issuers in the State.
The regulation also proposes at Sec. 457.985 that States must have
written processes in place and notify enrollees of those processes and
rights in accordance with procedures used by health insurance issuers
in the State and that States must ensure that resolution is reached
within a reasonable time period (for example, 30 days or 72 hours in an
expedited case).
I. Subpart J--Allowable Waivers: General Provisions
1. Basis, Scope, and Applicability (Sec. 457.1000)
At proposed Sec. 457.1000 we would provide that this subpart
interprets and implements the requirements for a waiver to permit a
State to exceed the 10 percent cost limit on expenditures under section
2105(c)(2)(B) and to permit the purchase of family coverage under
section 2105(c)(3) of the Act. This subpart applies to a separate child
health program and to a Medicaid expansion program only to the extent
that the State claims administrative costs under title XXI and seeks a
waiver of limitations on such claims in light of a community-based
health delivery system.
2. Waiver for Cost-Effective Coverage Through a Community-Based Health
Delivery System (Sec. 457.1005)
Proposed Sec. 457.1005 would interpret and implement section
2105(c)(2)(B) of the Act regarding waivers authorized for cost-
effective alternatives. As stated above, on March 4, 1999, we published
a proposed regulation that set forth financial requirements for the
CHIP program (64 FR 10412). In Sec. 457.618 of that proposed rule, we
set forth requirements to implement sections 2105(c)(1) and (c)(2)(A)
of the Act, which contain provisions related to the 10 percent limit on
certain CHIP expenditures. In Sec. 457.1005, we specify the proposed
requirements for a State wishing to obtain a waiver of the 10 percent
limit on expenditures not used for child health assistance in the form
of health benefits coverage that meets the requirements of Sec. 457.410
of these proposed regulations. This section also clarifies the extent
to which the State will be allowed to exceed the 10 percent limitation
on expenditures in order to provide child health assistance to targeted
low-income children under the State plan through cost-effective,
community-based health care delivery systems. This waiver was designed
to create flexibility for States to provide child health coverage using
community-based delivery systems. A State could use the waiver, for
example, to provide child health coverage for special groups, such as
children who are homeless or who have special health care needs.
Congress did not intend that the waiver be used simply to allow for
more administrative spending or outreach services under section
2105(a)(2), and the statute does not provide this flexibility.
To receive payment for cost effective coverage through a community-
based health delivery system under an approved waiver, we propose that
the State must demonstrate that--
Such coverage meets the coverage requirements of section
2103 of the Act and subpart D of these proposed regulations; and
The cost of coverage through the community-based health
care delivery system, on an average per child basis, does not exceed
the cost of coverage that
[[Page 60931]]
would otherwise be provided under the State plan.
A State may establish a community-based health delivery system
through contracts with health centers receiving funds under section 330
of the Public Health Service Act or with hospitals receiving
disproportionate share payment adjustments under section 1886(d)(5)(F)
or section 1923 of the Act. However, these are not the only types of
community-based health delivery systems. We believe a community-based
delivery system would include a network of providers that has a
contract with the State to provide care under title XXI and that
traditionally serves the population of targeted low-income children. A
State may define a community-based delivery system to meet the specific
needs and resources of a community. A State must ensure that its
community-based delivery system (either through direct provision or
referral) can provide all appropriate services to targeted low-income
children in accordance with section 2103 of the Act. In addition, all
participating community-based providers must comply with all other
title XXI provisions.
It is not necessary for States to serve all of their CHIP enrollees
through a cost-effective, community-based delivery system in order to
receive an approved waiver. A State may receive a waiver for each
system or network delivering care in a particular geographic area in
order to avail itself of cost-effective health coverage alternatives.
We propose that an approved waiver will remain in effect for two
years. A State may reapply three months before the end of the two-year
period.
We propose that, notwithstanding the 10 percent limit on
expenditures described in proposed Sec. 457.618, if the cost of
coverage of a child under a community-based health delivery system is
equal to or less than the cost of coverage of a child under the State
plan, the State may use the cost savings for--
Child health assistance to targeted low-income children
and other low-income children other than the required health benefits
coverage, health services initiatives, and outreach; or
Any reasonable costs necessary to administer the State
Children's Health Insurance Program.
The following example clarifies this permissible use of cost
savings. In a given State, assume that a child has three health benefit
plans under title XXI from which to choose. Two options are title XXI
managed care plans that have annual capitated rates of $1000 and $1020
respectively. One option is a plan offered through a community-based
delivery system at an annual cost of $900. By enrolling a child in the
community-based plan, the State has saved at least $100. If there are
4,000 children enrolled in the community-based provider system, the
State has saved at least $400,000. As a result, the State could exceed
the 10 percent cap by, and receive match for, an additional $400,000.
If the 10 percent cap on expenditures in this State had been estimated
to be $1,000,000 without the waiver, then the waiver under this
scenario would increase the estimated cap to $1,400,000.
3. Waiver for Purchase of Family Coverage (Sec. 457.1010)
A State must apply for a family coverage waiver when any title XXI
funds are used to purchase coverage for adult family members in
addition to targeted low-income children. For example, the State may
wish to purchase employer sponsored group health coverage for a child
but the employer does not offer a policy that covers only the
child(ren) in addition to the employee. In this case, the State will be
subsidizing the cost of both children and adults and, therefore, the
State must apply for a family coverage waiver. In the case where
employers offer ``tiered'' coverage where a State can identify the cost
of one, two or more dependents, the State may use title XXI funds to
only cover a child and, therefore, does not need to seek a family
coverage waiver. In addition, if the State has created a special child-
only option in which employers may participate and, as a result, is
providing coverage for children only, a family coverage waiver would
not be needed. In this context, the State simply needs to identify in
its State plan how it intends to provide this coverage. All other
requirements of title XXI must be met.
We are seeking comments on whether the benefits specified in title
XXI also apply to adults in a family coverage waiver. For example, if a
State offers ``wraparound coverage'' to bring an employer's benefits up
to the title XXI standards, we would seek comments as to whether the
State should be required to offer this additional coverage to adults
under the family waiver.
Proposed Sec. 457.1010 would implement section 2105(c)(3) of the
Act under which the Secretary may allow a State to purchase family
coverage under a group health plan or health insurance coverage that
includes coverage of targeted low-income children. As set forth in
subpart A of this proposed rule, ``group health plan'' has the same
meaning as given the term under section 2791 of the Public Health
Service Act. The term means an employee welfare benefit plan (as
defined in section 3(1) of ERISA) to the extent that the plan provides
medical care (as defined in section 2791(a)(2) of the Public Health
Service Act and including items and services paid for as medical care)
to employees or their dependents (as defined under the terms of the
plan) directly or through insurance, reimbursement or otherwise.
Also as set forth in subpart A, ``health insurance coverage'' has
the same meaning as given the term under section 2791 of the Public
Health Service Act. It means benefits consisting of medical care
(provided directly through insurance or reimbursement or otherwise)
under any hospital or medical service policy or certificate, hospital
or medical service plan contract, or HMO contract offered by a health
insurance issuer.
There is no statutory definition of family coverage for the
purposes of this subpart. We are therefore soliciting input from
commenters on the definition of ``family'' for purposes of this
subpart. We believe ``family'' may be defined differently for different
subparts of this regulation and are requesting input on this issue. A
specific definition may be important for this subpart because it may
define what types of adult family members can receive health benefits
coverage under a family coverage waiver. However, we may not want to
define ``family'' in this subpart since it is also possible that a
group health plan offered by an employer may include a definition of
``family'' for coverage purposes.
Based on the language of section 2105(c)(3) of the Act, we propose
at Sec. 457.1010 that a waiver for family coverage will be approved by
the Secretary if--
Purchase of family coverage is cost-effective under the
standards described in Sec. 457.1015 of this subpart;
The State will not purchase such coverage if it would
otherwise substitute for health insurance coverage that would be
provided to such children but for the purchase of family coverage; and
The coverage for the child otherwise meets the
requirements of this part.
4. Cost-Effectiveness (Sec. 457.1015)
This section defines cost-effectiveness and describes the
procedures for establishing cost-effectiveness for the purpose of a
waiver for the purchase of family coverage.
We propose that cost-effectiveness means that the cost of
purchasing family
[[Page 60932]]
coverage under a group health plan or health insurance coverage that
includes coverage for targeted low-income children is not greater than
the State's cost of obtaining such coverage only for the eligible
targeted low-income children involved. Stated more simply, cost
effectiveness means that the cost of providing family coverage
(including coverage for the parents) under title XXI is equal to or
less than the cost of covering only the uninsured children.
Cost Comparisons
The following is a discussion of our proposed requirements
regarding methods for cost comparison the State may use to demonstrate
cost-effectiveness. A State may demonstrate cost-effectiveness by
comparing the cost of family coverage that meets the requirements of
Sec. 457.1010 and 457.1015 of this subpart, to the cost of coverage
only for the targeted low-income children under the health benefits
packages offered by the State under the State plan for which the child
is eligible. We have not identified specific alternatives for cost
comparison for family coverage under CHIP. However, we recognize the
growing interest of States to utilize this option in order to keep
families together under one health plan as this practice may result in
increased access to and utilization of preventive and other necessary
health services for children. Therefore, we are willing to examine
alternatives and invite comment on additional methods to demonstrate
cost-effectiveness. We note that the most likely option for meeting the
cost-effectiveness standard is the purchase of family coverage through
an employer sponsored group health plan because the employer is
subsidizing a large part of the costs. States must meet the
requirements designed to prevent substitution of coverage (as specified
in subpart H), when employer-sponsored coverage is purchased.
Illustration of cost comparison. The cost of employer-sponsored
family coverage (for the employee and two children) is $600. The
employer pays 60 percent of the cost, which is $360, and the employee
therefore pays $240. Under the State's CHIP plan there is a $10 monthly
premium for each child with a maximum premium amount of $30 per family.
The State pays $150 per child per month for the State CHIP coverage
less the premiums paid by the family. The State would apply the cost-
effectiveness test by calculating the cost to the State of the family
coverage, which would be $220 for the employee and two children
($240-$20 premium = $220), and comparing that cost to the cost of the
State CHIP coverage for the children, which would be $280
($150 x 2-2 x $10 premium = $280). The comparison of $220 compared to
$280 shows that family coverage costs $60 less per month than CHIP
coverage only for the children. When there is such a savings the State
could buy family coverage through the employer or provide CHIP coverage
to the uninsured child or children only.
Thus far, no State has proposed to provide cost-effective family
coverage other than through employer-sponsored coverage. However, the
proposed regulation provides flexibility so that, if a State develops
another type of cost-effective coverage, we may consider that
alternative. We are also working with States to identify other
feasible, cost-effective models. We have identified this method through
the State plan approval process as one that States have proposed for
applying the cost-effectiveness test that meets Federal requirements.
We also note that the cost comparison must be made to the health
benefits package the child is actually eligible for if a State offers
different packages of services to different populations of children.
For example, a State may offer children with special health care needs
additional services under a separate health benefits package. The cost
comparison would have to be made to this separate health benefits
package if the cost effectiveness test was being done for a special
needs child.
Cost-Effective Comparison to Actual Coverage Available in the
State
We propose that the determination of cost-effectiveness must be
made based on costs for health benefit coverage that is actually
available for purchase in the State. States should not use hypothetical
premium rates and family sizes in demonstrating cost-effectiveness. For
example, if a State proposed to demonstrate cost-effectiveness based on
the assumption that the average family consists of 3.14 family members
(1.7 children and 1.44 adults), we would not approve of this approach
as further explained. Using this example and assumptions, the cost to
cover 1.7 children in a State employees' health plan would be $407.13
(if the total family premium was $752 divided by 3.14 family members,
times 1.7 children). The State asserts it can cover the entire family
under its separate child health program for $367.38 (3.14 family
members times $117 per member per month). This comparison shows that it
costs $39.75 less to cover the family ($407.13 to cover 1.7 children
minus $367.38 to cover the family). However, this would not be
acceptable because it is a hypothetical plan and not a plan that a
family can actually buy for its children in the State. In addition, we
believe demonstrations of cost-effectiveness must examine the actual
family sizes, rather than average family size.
With respect to applying the cost-effective test, we are requiring
States to make available to HCFA documentation on how much was spent on
family coverage and report how many children and adults were covered.
We are proposing that the State may base its demonstration of the cost-
effectiveness of family coverage on an assessment of cost-effectiveness
of family coverage for individual families, done on a case-by-case
basis, or for family coverage in the aggregate.
We are proposing to require the State to apply the cost-
effectiveness test annually. If an annual assessment of the cost-
effectiveness of family coverage in the aggregate reveals that it is
not cost-effective, the State must begin assessing cost-effectiveness
on a case-by-case basis.
Cost-Effectiveness of Family Coverage on a Case-by-Case Basis
If a State chooses to apply the cost-effectiveness test on a case-
by-case basis, the State must compare the cost of coverage for each
family to the cost of coverage for only the child or children in the
family under CHIP.
This approach favors larger families because most insurers offer
one rate for family coverage regardless of the number of children in
the family. Also, this approach may be resource and labor intensive for
some States.
Cost-Effectiveness of Family Coverage in the Aggregate
If a State chooses to apply the cost-effective test in the
aggregate, the State must provide an estimate of the projected total
costs of the family coverage program compared to the cost the State
would have incurred for covering just the children in those families
under the publicly available CHIP plan. Subsequently, on an annual
basis, the State must compare the total cost of covering all families
for whom the State has purchased family coverage to the cost the State
would have incurred covering just the children in those families under
the publicly available CHIP plan as outlined below. If the aggregate
cost of family coverage was less than the cost to cover the children in
the publicly available program, then the family coverage would be
considered cost-effective. If the State determines through its annual
[[Page 60933]]
assessment of cost effectiveness that family coverage is not cost-
effective in the aggregate, then the State must begin to apply the
cost-effectiveness test on a family-by-family basis.
Under this approach, States would report how much was spent on
family coverage and report how many children and adults were covered.
This test would be applied retrospectively and would represent an
aggregate cost of family coverage across all plans. The aggregate cost
would be verified by the claims submitted by the State. No additional
FFP above the cost-effective amount will be paid for these children and
families if the test shows that family coverage is not cost-effective
for the period. This option requires States clearly to separate the
costs of the family coverage from the costs of coverage under the rest
of the program.
Using the retrospective approach may potentially create some
difficulties for States in calculating cost-effectiveness (for example,
timely submission of State data, State systems may not be able to
produce necessary data, vagaries of using historical data that may not
capture recent changes). We will work with States to develop guidance
on how to conduct retrospective assessments of cost-effectiveness.
K. Expanded Coverage of Children Under Medicaid and Medicaid
Coordination
The proposed regulations discussed in this subsection are changes
to Medicaid regulations found in parts, 433, and 435. This subpart
applies to Medicaid only.
Section 4911 of the Balanced Budget Act of 1997 (BBA '97), Public
Law 105-33, enacted on August 5, 1997 and amended by section 162 of the
DC Appropriations Act, Public Law 105-100, enacted on November 19,
1997, established a new optional categorically needy eligibility group
known as ``optional targeted low-income children.'' The law provides
for an enhanced Federal matching rate to be used to determine the
Federal share of State expenditures for services to children eligible
under this group. The BBA also provides for States to receive this
enhanced Federal matching rate for services to children who meet the
definition of ``optional targeted low-income children'' and whom the
State covers by expanding an existing Medicaid eligibility group (for
example, poverty-related children). ``CHIP'' itself is not a new or
separate Medicaid eligibility group. Medicaid expansion programs under
CHIP, which may be referred to as ``M-CHIP,'' consist of the new
optional Medicaid eligibility group just mentioned, or coverage of
optional targeted low-income children through an expansion of an
existing Medicaid eligibility group, or a combination of the two.
Section 4912 of the BBA added a new section 1920A to the Act to allow
States to provide services to children during a period of presumptive
eligibility. Although these proposed regulations are related to title
XXI and CHIP, they constitute changes to the Medicaid program. All
existing Medicaid regulations also continue to apply.
1. Enhanced FMAP Rate for Children
Section 4911 the BBA as amended by section 162 of Public Law 105-
100, authorized an increase in the Federal medical assistance
percentage (FMAP) used to determine the Federal share of State
expenditures for services provided to certain children. Federal
financial participation for these children will be paid at the enhanced
FMAP rate determined in accordance with Sec. 457.622 if certain
conditions are met. The State's allotment under title XXI will be
reduced by payments made at this enhanced FMAP (see Sec. 457.616).
In order to be eligible to receive Federal payments at the enhanced
FMAP, a State must:
(1) Not adopt 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 the State plan
in effect on June 1, 1997;
(2) Have an approved title XXI State plan in effect;
(3) Have sufficient funds available under the State's title XXI
allotment to cover the payments involved; and
(4) Maintain a valid method of identifying services eligible for
the enhanced FMAP.
For purposes of determining whether an income or resource standard
or methodology is more restrictive than the standard or methodology
under the State plan in effect on June 1, 1997, we would compare it to
the standard or methodology that was actually being applied under the
plan on June 1, 1997. For purposes of this section, a pending Medicaid
State plan amendment that would establish a more restrictive standard
or methodology, but that has an effective date later than June 1, 1997,
would not be considered ``in effect'' on June 1, 1997, regardless of
when it was submitted. Also, although a State that adopted more
restrictive income or resource standards or methodologies than those in
effect on June 1, 1997 would not be eligible for enhanced FMAP, we
believe that, if a State drops an optional eligibility group entirely,
this prohibition against receiving enhanced FMAP does not apply.
The enhanced FMAP discussed in this section will be used to
determine the Federal share of State expenditures for services provided
to three groups of children. The first group for whom the enhanced FMAP
is available is the new optional eligibility group of ``optional
targeted low-income children'' described in the new Sec. 435.229.
The second group is children who meet the definition of ``targeted
low-income children'' and who would not be eligible under the Medicaid
policies in effect under the State plan on March 31, 1997. Thus, a
State need not necessarily adopt the new optional group of ``optional
targeted low-income children'' to receive the enhanced FMAP for
targeted low-income children. The State may receive the enhanced FMAP
for these children by covering them under expansions of existing
Medicaid groups, as long as the children meet the definition of
``targeted low-income children,'' including the requirement that they
be uninsured. (The State may claim its regular FMAP for children with
creditable health insurance who are covered under the expansion.)
The third group for whom the State may receive the enhanced FMAP
consists of children born before October 1, 1983 who would not be
eligible for Medicaid under the policies in the Medicaid State plan in
effect on March 31, 1997, but to whom the State extends eligibility by
using an earlier birth date in defining eligibility for the group of
poverty-level-related children described in section 1902(l)(1)(D) of
the Act. Under the law, the enhanced FMAP is available for services to
children in this third group even if they have creditable health
insurance. We note that, as the statutory phase-in of poverty-level-
related children under age 19 proceeds, the numbers of children in this
third group will diminish; by October 1, 2002, all the children in this
group will be included in the mandatory group of children described in
section 1902(l)(1)(D) of the Act, and State spending for services to
them matchable at the State's regular FMAP.
Concerning the second group above, we do not believe that Congress
intended to provide enhanced FMAP for services provided to children
who, although not eligible under the policies in effect in the Medicaid
State plan in effect on March 31, 1997, became eligible after that date
due solely to a Federal statutory change or a scheduled periodic cost-
of-living increase. We believe that such changes are inherent
[[Page 60934]]
in the State plan policies in effect on March 31, 1997. Enhanced FMAP
will be available only when children are made eligible because a State
elects to adopt an optional policy.
Federal payments made at the enhanced FMAP rate reduce the title
XXI appropriation in accordance with section 2104(d) of the Act. Thus,
HCFA must apply such payments against a State's title XXI allotment
until that allotment is exhausted. After the title XXI allotment is
exhausted, expenditures will be matched at the State's regular FMAP
rate.
2. Optional Targeted Low-income Children
Section 4911 of the BBA amended the Social Security Act by adding a
new section 1902(a)(10)(A)(ii)(XIV) to establish an optional
categorically needy group of optional targeted low-income children. The
optional eligibility group is defined as ``optional targeted low-income
children described in section 1905(u)(2)(C) of the Act.'' Section
1905(u)(2)(C), as added by section 4911 of the BBA, was subsequently
revised by section 162 of Public Law 105-100 and, in the process,
``(C)'' was changed to ``(B)''. In an apparent oversight, no conforming
change was made to section 1902(a)(10)(A)(ii)(XIV) of the Act to refer
to section 1905(u)(2)(B), rather than to 1905(u)(2)(C). Because we
believe this was simply a drafting error, we consider the reference to
1905(u)(2)(C) in this section to be a reference to 1905(u)(2)(B).
Section 1905(u)(2)(B), defines an optional targeted low-income
child as a child who meets the definition of a targeted low-income
child in section 2110(b)(1) of the Act (see Sec. 457.310(a)) and who
would not qualify for Medicaid under the Medicaid State plan as in
effect on March 31, 1997.
The very specific cross reference in section 1905(u)(2)(B) to
section 2110(b)(1) for the definition of an optional targeted low-
income child indicates that the Medicaid definition of an optional
targeted low-income child is based only on section 2110(b)(1). Thus,
the Medicaid definition does not include the exclusions described in
section 2110(b)(2) that would by contrast apply in a separate child
health program. Specifically, the exclusions from the definition of
targeted low-income children that apply in a separate child health
program but not in Medicaid are (1) children who are inmates of public
institutions and patients in institutions for mental diseases (IMD),
and (2) children of State employees, as outlined in section 2110(b)(2).
Under normal Medicaid eligibility rules, there is no eligibility
exclusion of children who are inmates of a public institution, patients
in an institution for mental diseases, or members of a family eligible
for health benefits coverage under a State health benefits plan on the
basis of a family member's employment with a public agency in the State
(although restrictions on Federal financial participation may apply
under some circumstances). Restrictions on Federal financial
participation under Medicaid, however, apply for services provided to
inmates of public institutions and patients in institutions for mental
diseases. This means no payment can be made for services to individuals
residing in an IMD. We note that under Medicaid, FFP is available for
services furnished to children in psychiatric facilities for
individuals under age 21 that meet certain standards and conditions
(see Sec. 441.150ff).
The definition of optional targeted low-income child at section
1905(u)(2)(B) of the Act excludes a child who would have been eligible
for Medical assistance under the State plan on March 31, 1997 on any
basis including medically needy. This exclusion applies to all children
eligible for Medicaid including those eligible under States' medically
needy groups. We propose to interpret the exclusion in the following
manner. Children who are eligible for Medicaid only after paying a
spenddown would not be excluded, because they are not eligible under
title XIX until the spenddown is met. However, a child who is medically
needy without a spenddown is eligible for Medicaid and therefore cannot
be an optional targeted low-income child. Thus, if a child would have
qualified for Medicaid as medically needy without a spenddown under the
State's March 31, 1997 Medicaid State plan, even if not eligible under
current rules, the child could not be covered as an optional targeted
low-income child.
The regular Medicaid financial methodologies that govern
eligibility of children in a State must also be used to determine
whether a child in that State is eligible under the new optional group
of optional targeted low-income children. These are the income and
resource methodologies under the State's AFDC plan in effect on July
16, 1996. However, a State may use the authority of Sec. 1902(r)(2) to
adopt less restrictive methods of determining countable income and
resources for this group.
States that choose to cover the group of optional targeted low-
income children are not required to provide coverage to all children
who meet the definition of an optional targeted low-income child. As
with the current Medicaid program, eligibility can be limited to a
reasonable group or reasonable groups of such children. We do not
consider it reasonable to limit a group by geographic location because
of the requirement in section 1902(a)(1) of the Act that a State plan
be in effect in all political subdivisions of the State. Also, we do
not consider it reasonable to limit a group by age other than those
specified by Congress in section 1905(a)(1) and referenced in section
1902(a)(10)(A)(ii). We believe that if Congress intended to allow use
of age to establish a reasonable category, the statutory language would
not have specified any ages. We note that in the case of the optional
targeted low-income children, a State does not have the option to have
a reasonable category of children under age 21 or 20, because the group
itself is limited to children under age 19. Although a State may not
define a reasonable group by age, the income standard used to determine
eligibility under the optional targeted low-income children's group
because it is related to income standards used for existing poverty
level groups, may be different for infants, children under age 6, and
children who have attained age 6 but have not attained age 19, if the
State's Medicaid applicable income levels for these age groups differ.
Eligibility standards for optional targeted low-income children must be
uniform throughout the State. A State is required to provide all
services covered under the plan, including EPSDT services, to optional
targeted low-income children and apply all regular Medicaid rules,
including those pertaining to immigration status.
We are not proposing to require States to apply eligibility-related
substitution provisions such as periods of uninsurance to the
``optional targeted low-income children'' group because we believe that
such eligibility conditions are inconsistent with the entitlement
nature of Medicaid.
A State is obligated to continue to provide services to eligible
optional targeted low-income children after the title XXI allotment is
exhausted, unless the Medicaid State plan is amended to drop the group
of optional targeted low-income children. Once the title XXI allotment
is exhausted, Medicaid matching funds are available for these children
at the regular matching rate rather than the enhanced rate.
[[Page 60935]]
3. Furnishing a Social Security Number
Section 1137(a)(1) of the Social Security Act requires applicants
and recipients of Medicaid to furnish the State with their social
security number(s) as a condition of eligibility. While the United
States Supreme Court in Bowen v. Roy, 476 U.S. 693 (1986) upheld this
requirement, it did so in a plurality decision in which some of the
Justices held that the challenge was moot since the claimant had
obtained a social security number. That decision did foreclose a
challenge to the requirement by an individual who had not already
secured a social security number and had religious objections to
applying for a number. The Religious Freedom Restoration Act of 1993
also raised questions about the requirements of section 1137(a) of the
Act in these cases. Thus, in 1995 HCFA announced a policy which permits
States to obtain or assign alternative identifiers to eligible
individuals who object to obtaining an SSN on religious grounds. This
policy was adopted in order to enable States to administer Medicaid in
the most efficient manner possible. While, in 1997, a portion of the
Religious Freedom Restoration Act was held to be unconstitutional, that
portion only involved the applicability of that Act to State and local
officials. The proposed rule seeks to accommodate the purpose of
section 1137(a) with the Constitution's protection of freedom of
religion and the dictates of the 1993 Act by permitting alternative
identifiers.
4. Exemption From the Limitation on FFP
Section 162 of Public Law 105-100 amended section 1903(f)(4) of the
Act to add the optional group of targeted low-income children and other
children for whom enhanced FMAP is available under Sec. 456.622 (or
would be available except for the fact that the title XXI allotment is
exhausted) to the list of those who are exempt from the limitations on
FFP found in section 1903(f). All previous citations in section 1903(f)
were references to Medicaid eligibility groups, whereas this new
provision adds not an eligibility group but children on whose behalf
enhanced FMAP is available.
With certain exceptions, section 1903(f) limits FFP to families
whose income does not exceed 133\1/3\ percent of the amount that would
ordinarily be paid to a family of the same size without any income or
resources, in the form of money payments under the program of Aid to
Dependent Children. As explained in Sec. 435.1007, this provision
effectively limits the use of the authority under section 1902(r)(2) to
expand eligibility through the use of more liberal income and resource
methodologies for those groups that are not exempt from the limitation.
However, to the extent that section 162 of Public law 105-100 resulted
in the exemption from the FFP limitation of children other than those
in the optional eligibility group of optional targeted low-income
children or in other groups already exempt from the FFP limitation, a
conflict with the comparability requirements of section 1902(a)(17) of
the Act and Sec. 435.601(d)(4) of the Medicaid regulations would arise.
We would continue to require that all children within a given group be
treated comparably. Therefore, the FFP limitations described in
Sec. 435.1007 would continue to apply to all children who are covered
as medically needy, and to those covered under an optional
categorically needy group other than the new group of optional targeted
low-income children or the optional categorically needy groups which
are already exempt. However, Federal matching may be available at the
enhanced rate for some children in the group.
5. Presumptive Eligibility for Children
Section 4912 of the BBA added a new section 1920A to the Act to
allow States to provide services to children during a period of
presumptive eligibility. Under section 1920A, services are available to
children under age 19 prior to a formal determination of Medicaid
eligibility. Under the statutory provisions, a qualified entity, as
defined in section 1920A(b)(3)(A), determines whether a child is
presumptively eligible for Medicaid on the basis of preliminary
information about the child's family income. At the time of the
determination, the qualified entity must refer the child to the
Medicaid agency. The State must provide the qualified entity with
application forms for Medicaid and information about how to assist in
completing and filing an application for regular Medicaid. If an
application for regular Medicaid is filed, the Medicaid agency will
establish whether or not the child is eligible for regular Medicaid. We
propose to require that if a State chooses to provide services to
children during a period of presumptive eligibility, the State must
make presumptive eligibility available Statewide to all children. We
considered whether to allow States to limit the availability of
presumptive eligibility to certain jurisdictions or certain groups of
children but found no indication in the statute or legislative history
that such a limitation should be allowed. Although we consider
presumptive eligibility a special status, we believe that the
requirements pertaining to Statewideness and comparability which apply
to the provision of regular Medicaid should apply here as well.
In some respects, the provisions of section 1920A mirror the
provisions related to section 1920, which provide for presumptive
eligibility for pregnant women. Where this is the case, we propose
policies associated with section 1920A that are consistent with the
March 23, 1994 notice of proposed rulemaking related to presumptive
eligibility for pregnant women (59 FR 13666). We make one exception.
The proposed regulations pertaining to presumptive eligibility for
pregnant women would require that States use gross income alone to
determine presumptive eligibility. We propose here that in determining
presumptive eligibility for children, States be permitted to request
some additional information and to apply simple disregards as explained
later in this section.
In accordance with section 1920A(b)(2), the period of presumptive
eligibility begins on the day that a qualified entity makes a
determination that a child is presumptively eligible. The child then
has until the last calendar day of the following month to file a
regular Medicaid application with the Medicaid agency. If the child
does not file a regular Medicaid application by that last day,
presumptive eligibility ends on that last day. If the child files an
application for regular Medicaid, presumptive eligibility ends on the
date that a determination is made on the regular Medicaid application.
Although section 1920A places no restrictions on the number of
periods of presumptive eligibility for a child, we believe it is
unreasonable to provide a child with unrestricted number of periods of
presumptive eligibility. Such a policy would effectively allow
continuous eligibility for children who never file an application for
regular Medicaid and are never determined to be eligible for regular
Medicaid. Also, by reinforcing the ability to establish immediate short
term eligibility for medical assistance, such an approach could be
counter productive to efforts to promote the use of preventive and
primary care and effective management of care for children. At the same
time, we also believe that it is unreasonable to limit a child to one
period of presumptive eligibility in a lifetime. Therefore, we propose
to allow States to establish reasonable methods of limiting the number
of periods of presumptive
[[Page 60936]]
eligibility that can be authorized for a child in a given time frame.
We are particularly seeking comments on what would constitute a
reasonable limitation and whether specific limitations on the number of
periods of presumptive eligibility should be imposed by regulation.
In implementing the provisions of section 1920A that specify that
determinations of presumptive eligibility must be based on family
income, we would provide limited flexibility to States in calculating
income for this purpose. We would also allow States to require that
qualified entities request and use general information other than about
income, as long as the information is relatively simple to obtain and
is requested in a fair and nondiscriminatory manner. In States that
adopt the most conservative approach to presumptive eligibility, the
qualified entity would use gross family income. The qualified entity
would compare family income to 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. As a
result, there may not be a single income standard for all children. For
example, the standards for presumptive eligibility might be 133 percent
of the Federal poverty level (FPL) for children under 6 and 100 percent
FPL for children age 6 through 19, if these were the highest standards
applicable to children of the specified ages under a State's Medicaid
plan.
We would specifically allow a State to require that qualified
entities apply simple income disregards, such as the general $90 earned
income disregard. However, we would not allow a State to require that
qualified entities deduct the costs of incurred medical expenses in
order to reduce income to the allowed income level. We believe that
Congress intended by the use of the term ``applicable level'' to
require qualified entities to make simple calculations and not
complicated adjustments of income such as those involved in applying
spenddown rules or in disregarding certain types of income. To impose
detailed and complicated calculations on qualified entities would be
administratively burdensome and contrary to efficient administration
because of the short-term nature of presumptive eligibility and because
no eligibility requirements other than income need be considered.
We do not believe that we are imposing an undue hardship on a child
by not allowing spenddown or not disregarding certain income. If a
qualified entity decides that the child does not ``appear'' to meet the
income criteria, the child has a right to apply for regular Medicaid
and have a formal eligibility determination made. We are specifically
seeking comments on whether States should be allowed to require that
qualified entities make certain adjustments to gross income and ways
that these adjustments could be limited.
Section 1920A(b)(3)(A) of the Act defines qualified entity as an
entity that:
(1) Furnishes health care items and services covered under the
approved Medicaid State plan and is eligible to receive payments under
the approved plan; or
(2) Is authorized to determine eligibility of a child to
participate in a Head Start program under the Head Start Act; or
(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; or
(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; and
(5) Is determined by the agency to be capable of making
determinations of presumptive eligibility for children. Section
1920A(b)(3)(B) authorizes the Secretary to issue regulations further
limiting those entities that may become qualified entities. We have not
proposed any further limitations at this time. We have also found no
authority to expand those entities that may be designated qualified
entities.
In accordance with section 1920A(c)(1), we would require States to
provide qualified entities with regular Medicaid application forms and
information on how to assist parents, guardians, and other persons in
completing and filing such forms. As provided by section 1920A(c)(3),
the application provided may be an application developed by the State
for use by children who wish to apply as low-income children described
in section 1902(l)(1) of the Act. We would not require States to
provide any other application forms. The date that the regular Medicaid
application form is received by the Medicaid State agency is the
Medicaid filing date for Medicaid eligibility unless State agency staff
are located on site at the qualified entity, in which case the Medicaid
filing date is the date that the onsite State agency staff person
receives the completed form. However, even though State agency staff
can receive and process applications for regular Medicaid, they cannot
make presumptive eligibility determinations unless they themselves meet
the definition of ``qualified entity'' under section 1920A(b)(3) of the
Act.
Since we are considering presumptive eligibility a special status,
we propose not to apply to a decision on presumptive eligibility the
notification requirements that a State must meet when it makes a
decision on a regular Medicaid application. Existing regulations under
Secs. 435.911 and Sec. 435.912 and part , subpart E, require Medicaid
agencies to send Medicaid applicants written notice within a specified
period of time of the agency's decision on a regular Medicaid
application, and if eligibility is denied the reasons for the denial,
the regulatory basis for it, and an explanation of rights to a hearing.
Although we propose not to apply these requirements to presumptive
eligibility determinations, we are proposing to require that the
qualified entity inform the parent or custodian of the child, in
writing, of the presumptive eligibility decision at the time of the
determination. In a case of a denial of presumptive eligibility, the
qualified entity would be required to inform the parent or custodian of
the child, in writing, of the reason for the denial and his/her right
to apply for regular Medicaid.
In accordance with section 1920A(c)(2) of the Act, we propose to
require the qualified entity to provide written information to the
parent or custodian of a child who is determined presumptively
eligible, indicating that a regular Medicaid application must be filed
on the child's behalf by the last day of the following month if the
child wishes to continue to receive services after that date. The
qualified entity must also inform the parent or custodian of the child,
in writing, that if an application for regular Medicaid is not filed on
the child's behalf by the last day of the month following the month of
the determination of presumptive eligibility, the presumptive
eligibility will end on that date. However, if an application is filed
on the child's behalf, the child will remain presumptively eligible
until a determination of the child's eligibility for regular Medicaid
has been made. Under section 1920A(c)(2), the qualified entity also
must notify the State agency within 5 working days after the date on
which the entity determines that the child is presumptively eligible.
We considered defining ``custodian'' for purposes of presumptive
eligibility but have decided to allow States flexibility to determine
who is a child's custodian. We expect that some States
[[Page 60937]]
will consider any interested adult who has the child in his/her care at
the moment to be the custodian for purposes of presumptive eligibility
under section 1920A. We expect that other States will only consider an
adult to be a child's custodian if the adult has a legal responsibility
for the child.
Because we do not consider presumptive eligibility to be
eligibility for Medicaid per se, and because termination of presumptive
eligibility occurs automatically after specified time periods, we
propose not to apply the existing provisions of the regulations that
require Medicaid agencies to provide timely written notice of reduction
or termination of Medicaid benefits and rights to appeal of an adverse
action (part , subpart E and Sec. 435.919). As indicated earlier, we
propose to require a qualified entity to provide written notice of the
date that the child can expect the presumptive eligibility to end.
However, we propose not to grant rights to appeal a denial or
termination of services under a presumptive eligibility decision
because it is not considered to be a determination of Medicaid
eligibility. If a regular Medicaid application is filed on the child's
behalf and is denied, the child would have the right to appeal that
denial.
We do not believe that we are imposing an undue burden on qualified
entities by requiring that notification be in writing. We do not
foresee that this written notice will necessarily be individual
personal letters. We considered requiring States to supply qualified
entities with preprinted notices. However, we decided to allow States
the flexibility to determine how best to arrange for this notification
within each State program.
Existing regulations at Sec. 435.914 permit States to provide
Medicaid for an entire month when the individual is eligible for
Medicaid under the plan at any time during the month. We propose not to
permit States to provide full-month eligibility for presumptive
eligibility periods because by definition a presumptive determination
is not a determination of Medicaid eligibility but eligibility for a
special status. In addition, section 1920A(b)(2) of the Act expressly
defines the period of presumptive eligibility.
Since presumptive eligibility is a special status, we considered
whether States should be required to provide all services to
presumptively eligible children or should be required or allowed to
limit the services provided. For example, we considered allowing States
to limit services to ambulatory care. Although presumptive eligibility
for pregnant women includes a statutory restriction on services, there
is no similar statutory restriction pertaining to presumptive
eligibility for children. We propose to require that States provide all
services covered under the State plan, including EPSDT, to
presumptively eligible children. We believe most presumptively eligible
children will be found retroactively eligible for Medicaid during what
was a presumptive eligibility period, and complete and adequate medical
care should not be delayed pending the decision on the regular Medicaid
application.
Section 4912 of the BBA provides that, for purposes of Federal
financial participation, services that are covered under the plan,
furnished by a provider that is eligible for payment under the plan,
and furnished to a child during a period of presumptive eligibility,
will be treated as expenditures for medical assistance under the State
plan. See Sec. 447.88 and Sec. 457.616 for a discussion of the options
for claiming FFP payment related to presumptive eligibility.
Other than payments made for children during a presumptive
eligibility period, section 4912 of the BBA does not hold States
harmless for Medicaid payments made for services provided to ineligible
children. However, HCFA and the States share a mutual commitment to
enrolling uninsured children in Medicaid. An estimated 4 million
children are eligible for Medicaid but remain uninsured due partly to
the complexities associated with outreach and enrollment efforts. A
basic strategy for overcoming this problem is simplification of States'
Medicaid applications for children, and the removal of other enrollment
barriers, such as burdensome documentation requirements.
For eligibility groups that are new, States often have no
eligibility determination experience, and may be reluctant to ease the
documentation and verification requirements because they can help ease
Medicaid eligibility quality control concerns until experience has been
gained. To remove this potential barrier to simplification, and to
encourage States to simplify the Medicaid application process and
enroll uninsured children, HCFA is asserting its policy to waive MEQC
eligibility errors resulting from the coverage of children under new
eligibility groups added by the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 and the BBA, including the
optional group of optional targeted low-income children described in
section 1902(a)(10)(A)(ii)(XIV) of the Act. If a State has an error
rate over three percent, the State is subject to a disallowance of FFP.
The State can appeal this disallowance through a waiver process
outlined in Sec. .865. As part of this waiver process error cases and
associated claims identified by the State as directly attributable to
the enrollment of children in these groups will be excluded from the
error rate calculation.
L. Medicaid Disproportionate Share Hospital (DSH) Expenditures
Section 4911 of the BBA amended section 1905(b) of the Act to
require that for expenditures for section 1905(u)(2)(A)(medical
assistance expenditures of optional targeted low-income children) or
section 1905(u)(3) (Waxman children), the Federal medical assistance
percentage is equal to the enhanced FMAP described in section 2105(b)of
the Act to the extent of the available title XXI allotment. In other
words, under the statute, States that provide health insurance coverage
to children as an expansion of their Medicaid programs may receive
enhanced match for services provided to the Medicaid expansion
population.
Under the authority of section 1902(a)(13)(A)(iv) of the Act,
States are required to take into account the situation of hospitals
that serve a disproportionate number of low-income patients with
special needs when developing rates for Medicaid inpatient hospital
services. Medicaid disproportionate share hospital (DSH) expenditures
are defined as payments made for hospital services rendered to Medicaid
eligibles and the uninsured. Some of the expenditures may be
identifiable as expenditures for services for a child in a CHIP-related
Medicaid expansion program. Those identifiable payments may qualify for
the enhanced FMAP.
Proposed Sec. 433.11 sets forth provisions regarding the enhanced
FMAP rate available for State expenditures related to services provided
to children under an expansion to the State's current Medicaid program.
Paragraph (a)(3) specifies that the enhanced FMAP rate determined in
accordance with the proposed regulation at section 457.622 will be used
to determine the Federal share of State expenditures for
disproportionate share hospital expenditures as they relate to children
eligible for health insurance coverage under an expansion to the
State's current Medicaid program.
Any DSH payments that are calculated at the enhanced matching rate
will be counted against the CHIP allotment, the Federal DSH allotments
[[Page 60938]]
as published in section 4721 of the BBA, and the disproportionate share
hospitals amount of uncompensated care cost limits as required under
section 1923(g) of the Act.
The State should work with the HCFA Regional Office to develop an
appropriate methodology to allocate a portion of the DSH payments to
the Medicaid expansion group so that these expenditures are
appropriately claimed at the enhanced FMAP and counted against the
State's title XXI allotment. Federal payments for such DSH expenditures
will also be counted against the State's Medicaid DSH allotment.
We understand that questions have been raised concerning the
interaction of title XXI allotments, Federal DSH payment allotments (as
enacted in section 4721 of the BBA) and DSH payments for services
rendered to 1905(u)(2) and 1905(u)(3) children in Medicaid.
Specifically, there is concern about whether enhanced matching rates
should apply to DSH payments. We believe a statutory change would be
needed not to apply enhanced FMAP. However, since any such statutory
changes would be completed following the publication of this proposed
regulation, we have developed this proposed regulation text in
accordance with current law.
M. Vaccines for Children Program
As discussed in the letter to State Health Officials of May 11,
1998, under the authority of section 1928(b)(2) of the Act, children
covered under a CHIP program that is a Medicaid expansion are Federally
vaccine-eligible under the Vaccines for Children (VFC) program.
Children served by a separate State child health program are not
Federally vaccine eligible because they are neither entitled to
Medicaid nor uninsured, as required in section 1928(b)(2) of the Act.
Under the authority of section 1928(b)(3), States may elect to obtain
vaccine for children enrolled in a separate child health program at the
Federal discount price (plus an amount to cover the costs of
administrative overhead and distribution). States may want to use this
authority given the existence of the VFC program and its potential to
save money.
Under section 1928 of the Social Security Act and section 317 of
the Public Health Service Act, the Centers for Disease Control and
Prevention (CDC) contracts with vaccine manufacturers to purchase
vaccines, usually at a substantial discount from retail prices. These
vaccines are furnished to State health departments, as grantees of CDC,
for distribution to providers that participate in the VFC program, and
other providers authorized to administer vaccines under section 317.
Because the immunization program of the State health department is the
CDC grantee, and has sole authority to order and distribute vaccine
purchased under the CDC discount contracts, a State that elects to
obtain these vaccines for its separate child health program population
must negotiate a memorandum of agreement between its separate child
health program and the State immunization program, to order vaccines
and distribute them to CHIP providers. As part of that agreement, the
separate child health program must agree to reimburse the immunization
program for the cost of each dose of vaccine, including a pro rata
share of administrative overhead and distribution costs. Providers who
receive vaccine must agree to comply with reporting and other
requirements of the State immunization program, in order to assure that
vaccine distributed is accounted for appropriately.
States electing to purchase vaccine at the Federal discount price
must retain overall responsibility for the required health benefits
coverage package, under the requirements of Sec. 457.490 (a)(1),
``Methods of Administration.'' However, the State may subcontract for
any and all other services, with the exception of vaccine products,
provided under its separate child health program, including
professional services required to immunize eligible children.
If HCFA establishes that the State has retained overall
responsibility for the provision of services and if the State
Immunization program has established one price per dose which includes
all charges for vaccine, the cost of vaccines will be treated as part
of the required health benefits coverage package and will not be
subject to 10 percent cap on other expenditures of title XXI funds.
Moreover, these costs are eligible for the enhanced match.
III. Regulatory Impact Analysis
A. Impact Statement
Section 804(2) of title 5, United States Code (as added by section
251 of Public Law 104-121), specifies that a ``major rule'' is any rule
that the Office of Management and Budget finds is likely to result in--
An annual effect on the economy of $100 million or more;
A major increase in costs or prices for consumers,
individual industries, Federal, State, or local government agencies, or
geographic regions; or
Significant adverse effects on competition, employment,
investment productivity, innovation, or on the ability of United States
based enterprises to compete with foreign based enterprises in domestic
and export markets.
This proposed rule does not establish the CHIP allotment amounts.
However, it provides for the implementation and administration of the
CHIP program, and as such, is an economically significant, major rule.
We have examined the impacts of this proposed rule as required by
Executive Order 12866, the Unfunded Mandate Reform Act of 1995 (Public
Law 104-4), and the Regulatory Flexibility Act (RFA) (Public Law 96-
354). Executive Order 12866 directs agencies to assess all costs and
benefits of available regulatory alternatives and, when regulations are
necessary, to select regulatory approaches that maximize net benefits
(including potential economic environments, public health and safety,
other advantages, distributive impacts, and equity).
The Unfunded Mandates Reform Act of 1995 requires that agencies
prepare an assessment of anticipated costs and benefits before
proposing any rule that may result in an expenditure by State, local,
and tribal governments, in the aggregate, or by the private sector, of
$100,000,000 or more (adjusted annually for inflation) in any one year.
Because participation in the CHIP program on the part of States is
voluntary, any payments and expenditures States make or incur on behalf
of the program that are not reimbursed by the Federal government are
made voluntarily. These regulations would implement narrowly defined
statutory language and would not create an unfunded mandate on States,
tribal or local governments.
In addition, section 1102(b) of the Act requires us to prepare a
regulatory impact analysis for any proposed rule that may have a
significant impact on the operations of a substantial number of small
rural hospitals. Such an analysis must conform to the provisions of
section 604 of the RFA. With the exception of hospitals located in
certain rural counties adjacent to urban areas, for purposes of section
1102(b) of the Act, we define a small rural hospital as a hospital that
is located outside of a Metropolitan Statistical Area and has fewer
than 50 beds. We are not preparing an analysis for section 1102(b) of
the Act because we have determined, and we certify, that this rule will
not have a significant impact on the operations of a substantial number
of small rural hospitals.
For purposes of the RFA, we prepare a regulatory flexibility
analysis unless
[[Page 60939]]
we certify that a rule will not have a significant economic impact on a
substantial number of small entities. Small entities include small
businesses, non-profit organizations, and governmental agencies. Most
hospitals and other providers and suppliers are small entities, either
by non-profit status or by having revenues of $5 million or less
annually. Individuals and State agencies are not included in the
definition of small entity. As discussed in detail below this proposed
rule will have a beneficial impact on health care providers.
B. Cost Benefit Analysis
This analysis addresses a wide range of costs and benefits of this
rule. Whenever possible, we express impact quantitatively. In cases
where quantitative approaches are not feasible, we present our best
examination of determinable costs, benefits, and associated issues.
This proposed regulation would implement all programmatic provisions of
the State Children's Health Insurance Program (CHIP) including
provisions regarding State plan requirements, benefits, eligibility,
and program integrity, which are specified in title XXI of the Act.
This proposed regulation would have a beneficial impact in that it
would allow States to expand the provision of health benefits coverage
to uninsured, low-income children who previously had limited access to
health care.
CHIP is the largest single expansion of health insurance coverage
for children since the creation of Medicaid in 1965. CHIP was designed
to reach children from working families with incomes too high to
qualify for Medicaid, but too low to afford private health insurance.
As discussed in detail below, this initiative set aside $24 billion
over five years for States to provide new health coverage for millions
of children. To date, plans prepared by all 50 States, 5 U.S.
territories, and the District of Columbia have been approved. States
expect to enroll an estimated 2.6 million children by September 2000.
The implementation of CHIP has significantly reduced the number of
uninsured children nationwide. Previously uninsured children now have
access to a range of health care services including well baby and well
child care, immunizations, and emergency services. In addition to the
obvious benefit of providing access to health care coverage for
millions of children, as discussed in detail below, CHIP will also have
a beneficial impact on the private sector.
1. Disbursement of Federal Funds
Budget authority for title XXI is specified in section 2104(a) of
the Act with additional funding authorized in Public Law 105-100. The
total national amount of Federal funding available for allotment to the
50 States, the District of Columbia, and the Commonwealths and
Territories for the life of CHIP, is established as follows:
Total Amount of Allotments
------------------------------------------------------------------------
Fiscal year Amount
------------------------------------------------------------------------
1998................................................. $4,295,000,000
1999................................................. 4,275,000,000
2000................................................. 4,275,000,000
2001................................................. 4,275,000,000
2002................................................. 3,150,000,000
2003................................................. 3,150,000,000
2004................................................. 3,150,000,000
2005................................................. 4,050,000,000
2006................................................. 4,050,000,000
2007................................................. 5,000,000,000
------------------------------------------------------------------------
Under Public Law 105-277, an additional $32 million was
appropriated for allotment only to the Commonwealths and Territories,
and only for FY 1999. In addition, we note that there was an additional
allocation of $20 million in FY 1998, which increases the FY 1998 total
allotment amount to $4.295 billion. Also, for each of the first five
years, $60 million of the allotment must be used for the special
diabetes programs. We note that the Federal spending levels for the
CHIP program are based entirely on the spending and allocation formulas
contained in the statute. The Secretary has no discretion over these
spending levels and initial allotments of funds allocated to States.
Both direct program and administrative costs are covered by the
allotments.
2. Impact on States
CHIP is a State-Federal program under which funds go directly to
States, which have great flexibility in designing their programs.
Specifically, within broad Federal guidelines, each State determines
the design of its program, eligible groups, benefit packages, payment
levels for coverage and administrative and operating procedures. As
such, it is difficult to quantify the economic impact on States. As
stated above, the total Federal payments available to States are
specified in the statute and are allocated according to a statutory
formula based on the number of uninsured, low-income children for each
State, and a geographic adjustment factor. For qualifying expenditures,
States will receive an enhanced Federal matching rate equal to its
current FMAP increased by 30 percent of the difference between its
regular matching rate and 100 percent, except that the enhanced match
cannot exceed 85 percent.
The following chart depicts estimated outlays for the CHIP program.
These estimates differ from the allotments referred to above in that
the allotments allow the money to be spent over a period of three
years.
Fiscal Year Outlays
[In $billions]
----------------------------------------------------------------------------------------------------------------
1999 2000 2001 2002 2003
----------------------------------------------------------------------------------------------------------------
Federal Share.................................. 1.4 1.9 2.8 3.5 4.3
State Share.................................... 0.6 0.8 1.2 1.5 1.9
----------------------------------------------------------------
Total.................................... 2.0 2.7 4.0 5.0 6.2
----------------------------------------------------------------------------------------------------------------
Note: These estimates are based on State and Federal budget projections and have been included in the
President's FY 2000 budget.
3. Impact on the Private Sector
We note that due to the flexibility that States have in designing
and implementing their CHIP programs it is not possible to determine
the impact on individual providers groups of providers, insurers,
health plans, or employers. However, we anticipate that the CHIP
program will benefit the private sector in a number of ways. The
program may have a positive impact on a number of small entities given
that CHIP funding will filter down to health care providers and health
plans that cover the CHIP population. Health plans that provide
insurance coverage under the CHIP program will benefit to the extent
that children are generally a
[[Page 60940]]
lower-risk population. That is, children tend to use fewer high-cost
health care services than older segments of the population. Thus, by
providing health insurance coverage for preventive care such as well-
baby and well-child care and immunizations, CHIP may benefit health
insurers by reducing the need to provide more costly health care
services for serious illnesses. Additionally, because CHIP provides
health insurance coverage to children who were previously uninsured,
health care providers will no longer have to absorb the cost of
uncompensated care for these children. The private sector may also
benefit from CHIP to the extent that children and families with health
insurance coverage are more likely to use health care services. Thus,
health care providers are likely to experience an increase in demand
for their services. Small businesses that are unable to afford private
health insurance for their employees will benefit to the extent that
the employees, or their children qualify for CHIP.
4. Impact on Beneficiaries
The main goal of CHIP is to provide health insurance coverage for
children in families that are not eligible for Medicaid, but do not
earn enough to afford private health insurance. CHIP will allow a large
number of children who were previously uninsured to have access to
health insurance and the opportunity to receive health care services on
a regular basis.
Subpart E of this proposed rule sets forth provisions regarding the
costs that beneficiaries may incur (cost sharing) under CHIP. In
accordance with the statute, we proposed provisions concerning general
cost sharing protection for lower income children and American Indians/
Alaska Natives, cost sharing for children from families with certain
income levels, and cumulative cost-sharing maximums. Section 457.555
sets forth maximum allowable cost sharing charges on targeted low-
income children in families with income from 101 to 150 percent of the
FPL. This section specifies maximum copayment amounts that may be
imposed under fee-for-service delivery systems and managed care
organizations. Additionally, regarding cumulative cost sharing
maximums, Sec. 457.560 provides that cost sharing for children with
family income above 150 percent of the Federal poverty level may not
exceed 5 percent of total family income for the year. For children with
family income at or below 150 percent of the Federal poverty level,
cost sharing may not exceed 2.5 percent of total family income for the
year.
We note that due to State flexibility in establishing cost-sharing
amounts below the maximums and differing utilization patterns among
beneficiaries, it is difficult to quantify the amount of cost sharing
that families incur to participate in CHIP. However, in light of the
number of children enrolled in CHIP, we believe that for most
beneficiaries, the benefit of access to health insurance coverage
outweighs the costs associated with participation in the program.
In accordance with the provisions of Executive Order 12866, this
regulation was reviewed by the Office of Management and Budget.
IV. Federalism
Under Executive Order 13132, we are required to adhere to certain
criteria regarding Federalism in developing regulations. Title XXI
authorizes grants to States that initiate or expand health insurance
programs for low-income, uninsured children. A Children's Health
Insurance Program (CHIP) under title XXI is jointly financed by the
Federal and State governments and is administered by the States. Within
broad Federal guidelines, each State determines the design of its
program, eligible groups, benefit packages, payment levels for coverage
and administrative and operating procedures. States have great
flexibility in designing programs to best meet the needs of their
beneficiaries. HCFA works closely with the States during the State plan
and State plan amendment approval process to ensure that we reach a
mutually agreeable decision.
Federal payments under title XXI to States are based on State
expenditures under approved plans that could be effective on or after
October 1, 1997. The short time frame between the enactment of the
Balanced Budget Act (BBA) (August 5, 1997) and the availability of the
funding for States required the Department to begin reviewing CHIP
plans submitted by States and Territories at the same time as it was
issuing guidance to States on how to operate the CHIP programs. The
Department worked closely with States to disseminate as much
information as possible, as quickly as possible, so States could begin
to implement their new programs expeditiously.
In the course of the State plan and amendment approval process, we
consulted with State and local officials to discuss all aspects of the
State's proposed plan or amendment. We discussed with each State
provisions and policy decisions that arose from its proposed plans and
amendments. In this process, States put forward their policy concerns
and proposed statutory interpretations.
The proposed programmatic regulation incorporates much of the
guidance that already has been issued to States. As the proposed
regulation builds upon previously released guidance, most of the
regulation represents policies that have been in operation for some
time and are a result of the consultation process that is required as
part of the implementation of CHIP; specifically, the State plan
approval process.
To be more specific, the Department began issuing guidance to
States within one month of enactment of the BBA. We provided
information on each State's allotment through two Federal Register
notices published on September 12, 1997 (62 FR 48098) and February 8,
1999 (64 FR 6102). We developed a model application template to assist
State's in applying for title XXI funds. We provided over 100 answers
to frequently asked questions. We issued policy guidance through a
series of 23 letters to State health officials. All of this information
is currently available on our website located on the Internet at http:/
/www.hcfa.gov. We have also provided technical assistance to all States
in development of CHIP applications.
In the exhaustive approval process, we listened to States'
concerns. This proposed regulation builds upon previously released
guidance and therefore, most of the regulation represents policies that
have been in operation for some time. States and Territories have used
this guidance to design and implement their programs.
In developing the interpretative policies set forth in this
proposed rule, we also listened to the concerns of States through
processes other than the State plan process as well, by attending
conferences and meeting with various groups representing State and
public interests.
As we continue to implement the program, however, we have
identified a number of areas in which we further elaborate on previous
guidance or propose new policies that have not yet been made public. In
an attempt to highlight the key issues, a brief summary follows:
A. Subpart A--State Plan Requirements
The regulation would clarify several conditions under which States
must submit amendments to approved CHIP plans. For example, we propose
that States submit a plan amendment when the funding source of the
State share changes, prior to such change taking effect. The purpose of
this proposed
[[Page 60941]]
requirement is to ensure that programs are operated using only
permissible sources of funding. In addition, amendments to impose cost-
sharing on beneficiaries, increase existing cost-sharing charges, or
increase the cumulative cost sharing maximum will be considered the
same as amendments proposing a restriction in benefits. Therefore, we
propose to require for these amendments that States adhere to the
statutory requirements relating to prior public notice and retroactive
effective dates.
B. Subpart C--Eligibility, Screening, Applications and Enrollment
Title XXI prohibits the participation of children of public agency
employees who are eligible to participate in a State health benefits
plan. We interpret this statutory prohibition to be triggered only when
the employer makes more than a nominal contribution available for the
child's health benefits coverage. We propose to clarify that when only
a nominal contribution is available, children would not be considered
eligible for health benefits coverage under a State health benefits
plan and could be eligible for coverage through CHIP.
C. Subpart D--Coverage and Benefits
The proposed regulation provides some flexibility for States in
updating the benefit package. States using the benchmark benefit
package option are not required to submit an amendment each time the
benchmark package changes. States need only submit amendments when
proposing to make a change to the benefit package for the separate
child health program. At that time, the State must compare their
benefit package to the most recent benchmark coverage.
The proposed regulation also clarifies policy regarding the
conditions under which abortion services are permitted under title XXI
and proposes that, when States contract with managed care entities for
CHIP services, those contracts cannot include abortion services. To the
extent that a managed care entity furnishes these services, the managed
care entity must do so under a separate contractual arrangement.
D. Subpart E--Beneficiary Financial Responsibilities
The statute places a 5 percent cap on cost-sharing expenditures for
families with incomes greater than 150 percent of the Federal Poverty
Level (FPL) who are enrolled in separate child health programs. In an
attempt to preserve State flexibility, the proposed regulation gives
States the option to use either gross or net family income when
calculating the cost-sharing cap.
In addition, the regulation proposes to place a comparable limit of
2.5 percent on cost-sharing for families with incomes below 150 percent
of the poverty line, in order to ensure that those families with lower
incomes will not be forced to pay the same amount of cost-sharing as
those with higher incomes. And States would have the option to apply
cost-sharing imposed on adults in CHIP family coverage plans toward the
cumulative maximum cap.
The regulation proposes that States must have a process in place
that will protect beneficiaries by ensuring due process before
beneficiaries can be disenrolled from the program for failure to pay
cost-sharing. This preamble suggests that States may look for a pattern
of nonpayment, provide clear notice and opportunities for late payment,
and wait at least one billing cycle before taking action to disenroll.
Finally, title XXI includes provisions to ensure enrollment and
access to health care services for American Indian and Alaska Native
(AI/AN) children. The regulation incorporates our interpretation that
in light of the unique Federal relationship with tribal governments,
cost-sharing requirements for individuals who are members of a
Federally recognized tribe are not consistent with this statutory
requirement.
E. Subpart G--Strategic Planning, Reporting and Evaluation
The proposed regulation includes provisions intended to ensure
compliance with both the statute, the elements of the State's title XXI
plan and the onsite review of State programs. In addition, monitoring
will enable tracking of CHIP data submissions, which will ultimately
help ensure enrollment in both the CHIP and Medicaid programs.
In addition, the regulation proposes that States have additional
flexibility in setting procurement standards more broadly than
Medicaid. States could choose to base payment rates on public and/or
private rates for comparable services, and where appropriate, establish
higher rates in order to ensure sufficient provider participation.
Finally, this proposed regulation includes various beneficiary
protections consistent with the President's directive regarding the
Consumer Bill of Rights and Responsibilities. Provisions are included
throughout the proposed regulation to ensure that beneficiaries are
given the opportunity to participate in and make informed medical
decisions, to have access to needed services, and to be treated with
dignity and respect.
F. Subpart I--Program Integrity and Beneficiary Protections
This subpart is intended to underscore the importance of preserving
program integrity in the Children's Health Insurance Program. The
regulation proposes that States must have fraud and abuse protections
in place, but provides flexibility to States in developing program
integrity protections for separate child health programs. States are
encouraged to utilize systems already existing for Medicaid, but are
not required to do so.
F. Subpart J--Waivers
The proposed regulation discusses the circumstances under which
States may obtain a waiver in order to provide title XXI coverage to
entire families. We propose that in order to qualify for such a waiver,
the State must meet several requirements, including a requirement that
the proposal be cost effective. The proposed regulation would give
States added flexibility by permitting alternate methods States can use
to meet the cost effectiveness test. States would be able to compare
the cost of coverage for the family to any child-only health benefits
package that is available for purchase, even if it is not included
under the State plan.
V. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), agencies are
required to provide a 60-day notice in the Federal Register and solicit
public comment before a collection of information requirement is
submitted to the Office of Management and Budget (OMB) for review and
approval. To fairly evaluate whether an information collection should
be approved by OMB, section 3506(c)(2)(A) of the PRA requires that we
solicit comments on the following issues:
Whether the information collection is necessary and useful
to carry out the proper functions of the agency;
The accuracy of the agency's estimate of the information
collection burden;
The quality, utility, and clarity of the information to be
collected; and
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
Therefore, we are soliciting public comment on each of these issues
for the information collection requirement discussed below. The
following sections
[[Page 60942]]
of this document contain information collection requirements:
Section 457.50 State Plan
In summary, Sec. 457.50 requires a State to submit a child health
plan to HCFA for approval. The child health plan is a comprehensive
written statement submitted by the State describing the purpose,
nature, and scope of its Child Health Insurance Program and giving
assurance that it will be administered in conformity with the specific
requirements of title XXI, title XIX (as appropriate), and the
regulations in this chapter. The State plan contains all information
necessary for HCFA to determine whether the plan can be approved to
serve as a basis for Federal financial participation in the State
program.
The burden associated with this requirement is the time and effort
for a State to prepare and submit its child health plan to HCFA for
approval. These collection requirements are currently approved by OMB
under OMB# 0938-0707, with a current expiration date of 6/30/2000.
Section 457.60 Amendments
In summary, Sec. 457.60 requires a State to submit to HCFA for
approval an amendment to its approved State plan, whenever necessary,
to reflect any changes in (1) Federal law, regulations, policy
interpretations, or court decisions, (2) State law, organization,
policy or operation of the program, or (3) the source of the State
share of funding.
The burden associated with this requirement is the time and effort
for a State to prepare and submit any necessary amendments to its State
plan to HCFA for approval. Based upon HCFA's previous experiences with
State plan amendments we estimate that on average, it will take a State
80 hours to complete and submit an amendment. We estimate that 10
States/territories will submit an amendment on an annual basis for a
total burden of 800 hours.
Section 457.70 Program Options
In summary, Sec. 457.70 requires a State that elects to obtain
health benefits coverage through its Medicaid plan to submit an
amendment to the State's Medicaid State plan as appropriate,
demonstrating that it meets the requirements in subparts A, and G of
part 457 and the applicable Medicaid regulations.
The burden associated with this requirement is the time and effort
for a State to prepare and submit the necessary amendment to its
Medicaid State plan to HCFA for approval. Based upon HCFA's previous
experiences with State Plan amendments we estimate that on average, it
will take a State 2 hours to complete and submit an amendment for HCFA
approval. We estimate that 28 States/territories will submit an
amendment for a total one-time burden of 56 hours.
Section 457.350 Eligibility Screening
In summary, Sec. 457.350 requires a State that chooses to screen
for Medicaid eligibility under the poverty level related groups
described in 1902(l) of the Act, to provide written notification to the
family if the child is found not to be Medicaid eligible.
The burden associated with this requirement is the time and effort
for a State to prepare and provide written notification to the family
if the child is found not to be Medicaid eligible. The average burden
upon the State to prepare the notice is a one time burden estimated to
be 10 hours and that it will take 3 minutes for the State to provide
and the family to read the information. We estimate that on average,
that each State will be required to provide 1 million notices on an
annual basis for a total annual burden of 50,000 hours, per State.
Therefore, the total estimated burden is calculated to be 2,700,000
hours on an annual basis.
Section 457.360 Facilitating Medicaid Enrollment
In summary Sec. 457.360(c) requires a State to provide full and
complete information, in writing to the family (that meets the
requirements of (c)(1) through (c)(2) of this section), to ensure that
a decision by the family not to apply for Medicaid or not to complete
the Medicaid application process represents an informed decision.
The burden associated with this requirement is the time and effort
for a State to prepare and provide written notice to the family to
ensure that a decision by the family not to apply for Medicaid or not
to complete the Medicaid application process represents an informed
decision. The average burden upon the State to disseminate a standard
notice to the family is estimated to be 3 minutes. We estimate that on
average, each State will be required to provide 1 million notices on an
annual basis for a total annual burden of 50,000 hours, per State.
Therefore, the total estimated burden is calculated to be 2,700,000
hours on an annual basis.
Section 457.361 Application for and Enrollment in CHIP
In summary, Sec. 457.361(b) requires a State to inform applicants,
in writing and orally if appropriate, about the eligibility
requirements and their rights and obligations under the program.
The burden associated with this requirement is the time and effort
for a State to inform each applicant in writing and orally if
appropriate, about the eligibility requirements and their rights and
obligations under the program. We estimate the average burden upon the
State to disseminate a standard notice to the family is estimated to be
3 minutes. We estimate that on average, each State will be required to
provide 1 million notices on an annual basis for a total annual burden
of 50,000 hours, per State. Therefore, the total estimated burden is
calculated to be 2,700,000 hours on an annual basis.
In summary, Sec. 457.361(c) requires a State to send each applicant
a written notice of the agency's decision on the application, and if
eligibility is denied or terminated, the specific reason or reasons for
the action and an explanation of the right to request a hearing within
a reasonable time.
The burden associated with this requirement is the time and effort
for a State to prepare and provide written notice to each applicant of
the agency's decision on the application, and if eligibility is denied
or terminated, the specific reason or reasons for the action and an
explanation of the right to request a hearing within a reasonable time.
We estimate that on average, it will take each State 3 minutes to
prepare each notice and that each State will be required to provide 1
million notices on an annual basis for a total annual burden of 50,000
hours, per State. Therefore, the total estimated burden is calculated
to be 2,700,000 hours on an annual basis.
Section 457.431 Actuarial Report for Benchmark-Equivalent Coverage
In summary, Sec. 457.431 requires a State that wants to obtain
approval for benchmark-equivalent benefits coverage described under
Sec. 457.430, to submit to HCFA an actuarial report that; (1) compares
the actuarial value of coverage of the benchmark package to the State-
designed benchmark-equivalent benefit package, (2) demonstrates through
an actuarial analysis of the benchmark-equivalent package that coverage
requirements under Sec. 457.430 are met, and (3) meets the requirements
of Sec. 457.431(b).
The burden associated with this requirement is the time and effort
for a State that wants to obtain approval for benchmark-equivalent
benefits coverage described under Sec. 457.430, to prepare and submit
its actuarial report to HCFA for approval. We estimate that on
[[Page 60943]]
average, it will take a State 40 hours to prepare and submit a report
for HCFA approval. We estimate that 6 States/territories will submit a
plan for a total burden of 240 hours.
Section 457.525 Public Schedule
In summary, Sec. 457.505 requires a State to make the public
schedule available to: (1) CHIP beneficiaries (enrolled and non-
enrolled) before the imposition of the charges, (2) CHIP applicants at
the time of application, (3) all CHIP participating providers, (4) the
general public.
The burden associated with this requirement is the time and effort
for a State to prepare and make available its public schedule available
to these four groups. We estimate that on average, it will take each
State/Territory 120 minutes to prepare its public schedule and 3
minutes to disseminate no more than 20,000 copies of its schedule on an
annual basis for a total annual burden of 1000 hours, per State/
Territory. Therefore, the total estimated burden is calculated to be
54,000 hours on an annual basis.
Section 457.740 State Expenditure and Statistical Reports
In summary, Sec. 457.740 requires a State to submit a report to the
Secretary that contains quarterly program expenditures and statistical
data, no later than 30 days after the end of each quarter of the
federal fiscal year. The burden associated with this requirement is the
time and effort for a State to prepare and submit its report to the
Secretary. These collection requirements are currently approved by
under OMB approval number OMB# 0938-0731, with a current expiration
date of 1/31/2002.
In addition Sec. 457.740 requires a State to submit an annual
report, thirty days after the end of the Federal fiscal year, of an
unduplicated count for the Federal fiscal year of children who are
enrolled in the title XIX Medicaid program, and the separate child
health and Medicaid-expansion programs, as appropriate, by age, service
delivery, and income categories described in paragraphs (a) and (b) of
this section.
The burden associated with this requirement is the time and effort
for a State to prepare and submit its annual report to the Secretary.
We estimate that on average, it will take a State 40 hours to complete
and submit their report. We estimate that 54 States/territories will
submit a plan for a total burden of 2160 hours.
Section 457.750 Annual Report
In summary, Sec. 457.750 requires a State to submit a report to the
Secretary by January 1 following the end of each preceding federal
fiscal year, on the results of the State's assessment of operation of
the State child health plan.
The burden associated with this requirement is the time and effort
for a State to prepare and submit its annual report on the results of
the State's assessment of operation of the State child health plan. We
estimate that on average, it will take a State 40 hours to complete and
submit their report. We estimate that 54 States/territories will submit
a plan for a total burden of 2160 hours.
Section 457.760 State Evaluations
In summary, Sec. 457.760 requires a State to submit by March 31,
2000, an evaluation to the Secretary that includes all of the elements
referenced in paragraphs (a) through (g) of this section.
The one time burden associated with this requirement is the time
and effort for a State to prepare and submit an evaluation to the
Secretary that includes all of the elements referenced in paragraphs
(a) though (g) of this section. We estimate that on average, it will
take a State 40 hours to complete and submit their evaluation. We
estimate that 54 States/territories will submit a plan for a total
burden of 2,160 hours.
Section 457.810 Premium Assistance for Employer-Sponsored Group Health
Plans: Required Protections Against Substitution
In summary, Sec. 457.810(d) requires a State that uses title XXI
funds to provide premium subsidies under employer-sponsored group
health plans to collect information to evaluate the amount of
substitution that occurs as a result of the subsidies and the effect of
subsidies on access to coverage.
The burden associated with this requirement is the time and effort
for a State to collect the necessary data to evaluate the amount of
substitution that occurs as a result of the subsidies and the effect of
subsidies on access to coverage. We estimate that on average, it will
take a State 20 hours to collect the necessary data for their
evaluation. We estimate that 54 States/territories will submit a plan
for a total burden of 1,080 hours.
Section 457.965 Documentation
In summary, Sec. 457.965 requires a State to include in each
applicant's record facts to support the State's determination of the
applicant's eligibility for CHIP. While this requirement is subject to
the PRA, we believe that the burden associated with this requirement is
exempt from the PRA as defined in 5 CFR 13203(b)(3), because this
requirement would be imposed in the absence of a Federal requirement.
Section 457.985 Enrollee Rights To File Grievances and Appeals
In summary, Sec. 457.985(b) requires a State to establish and
maintain written procedures for grievances and appeals that adhere to
generally acceptable industry practices within the State and comply
with State-specific grievance and appeal requirements currently in
effect for commercially licensed health care related businesses. While
this requirement is subject to the PRA, we believe that the burden
associated with this requirement is exempt from the PRA, as defined in
5 CFR 1320.3(b)(3), because this requirement would be imposed in the
absence of a Federal requirement.
Section 457.1005 Waiver for Cost-Effective Coverage Through a
Community-Based Health Delivery System
In summary, Sec. 457.1005 requires a State requesting a waiver for
cost-effective coverage through a community-based health delivery
system, to submit documentation to HCFA that demonstrates that they
meet the requirements of Sec. 457.1005(b)(1) and (b)(2).
The burden associated with this requirement is the time and effort
for a State that wants to obtain a waiver to prepare and submit the
necessary documentation to HCFA that demonstrates that they meet the
requirements of Sec. 457.1005.
We estimate that on average, it will take a State 24 hours to
prepare and submit a waiver request for HCFA approval. We estimate that
10 States/territories will submit a request for a total burden of 240
hours.
Section 457.1015 Cost Effectiveness
In summary, Sec. 457.1015 requires a State to report to HCFA in its
annual report the amount it spent on family coverage and the number of
children it covered. While this requirement is subject to the PRA, the
burden associate with this requirement is captured in Sec. 457.750
(Annual report).
We have submitted a copy of this proposed rule to OMB for its
review of the information collection requirements in Secs. 457.50,
457.60, 457.70, 457.350, 457.360, 457.431, 457.525, 457.555, 457.740,
457.750, 457.760, 457.810, 457.965, 457.985, 457.1005, and
[[Page 60944]]
457.1015. These requirements are not effective until they have been
approved by OMB.
If you have any comments on any of these information collection and
record keeping requirements, please mail the original and 3 copies
directly to the following:
Health Care Financing Administration, Office of Information Services,
Standards and Security Group, Division of HCFA Enterprise Standards,
Room N2-14-26, 7500 Security Boulevard, Baltimore, MD 21244-1850. Attn:
John Burke HCFA-2006-P.
And,
Office of Information and Regulatory Affairs, Office of Management and
Budget, Room 10235, New Executive Office Building, Washington, DC
20503, Attn: Lori Schack, HCFA Medicaid Desk Officer.
VI. Response to Comments
Because of the large number of items of correspondence we normally
receive on Federal Register documents published for comment, we are not
able to acknowledge or respond to them individually. We will consider
all comments we receive by the date and time specified in the DATES
section of this preamble, and, if we proceed with a subsequent
document, we will respond to the comments in the preamble to that
document.
List of Subjects
42 CFR Part 431
Grant programs-health, Health facilities, Medicaid, Privacy,
Reporting and recordkeeping requirements.
42 CFR Part 433
Administrative practice and procedure, Child support, Claims, Grant
programs-health, Medicaid, Reporting and recordkeeping requirements.
42 CFR Part 435
Aid to Families with Dependent Children, Grant programs-health,
Medicaid, Reporting and recordkeeping requirements, Supplemental
Security Income (SSI), Wages.
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Children's Health Insurance Program, Reporting and recordkeeping
requirements.
42 CFR chapter IV would be amended as set forth below:
PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION
A. Part 431 is amended as follows:
1. The authority citation for part 431 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act, (42 U.S.C.
1302).
Sec. 431.865 [Amended]
2. In Sec. 431.865(b), the definition of ``erroneous payment'' is
amended by adding the sentence, ``The term does not include payments
made for care and services covered under the State plan and furnished
to children during a presumptive eligibility period as described in
Sec. 435.1102 of this chapter.'' at the end of paragraph (3) of the
definition.
PART 433--STATE FISCAL ADMINISTRATION
B. Part 433 is amended as follows:
1. The authority citation for part 433 is revised to read as
follows:
Authority: Sec. 1102 of the Social Security Act, (42 U.S.C.
1302).
2. In Sec. 433.10, the heading of paragraph (c) is republished and
a new paragraph (c)(4) is added to read as follows:
Sec. 433.10 Rates of FFP for program services.
* * * * *
(c) Special provisions. * * *
(4) Under section 1905(b), the Federal share of State expenditures
for services provided to children described in 433.11(a) is the
enhanced FMAP rate determined in accordance with Sec. 457.622(b) of
this chapter, subject to the conditions explained in 433.11(b).
3. A new Sec. 433.11 is added to read as follows:
Sec. 433.11 Enhanced FMAP rate for children.
(a) Subject to the conditions in paragraph (b) of this section,
enhanced FMAP determined in accordance with Sec. 457.622 of this
chapter will be used to determine the Federal share of State
expenditures for--
(1) Services provided to optional targeted low-income children
described in Sec. 435.229(b) of this chapter; and
(2) Services provided to children born before October 1, 1983 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.
(3) Disproportionate share hospital expenditures identified as
payment for services provided to children described in paragraphs
(a)(1) and (a)(2) of this section.
(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 the State
plan in effect on June 1, 1997; or
(2) No funds are available in the State's title XXI allotment for
the quarter enhanced FMAP is claimed, as that allotment is determined
under part 457, subpart F of this chapter; 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.
PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA
C. Part 435 is amended as set forth below:
1. The authority citation for part 435 continues to read as
follows:
Authority: Sec. 1102 of the Social Security Act (42 U.S.C.
1302).
2. A new Sec. 435.229 is added to read as follows:
Sec. 435.229 Optional targeted low-income children.
(a) An optional targeted low-income child is a child who:
(1) Is a targeted low-income child as defined in Sec. 457.310(a) of
this chapter; and
(2) Would not be eligible for Medicaid under the policies of the
State plan in effect on March 31, 1997.
(b) The State agency may provide Medicaid to:
(1) Individuals under age 19 who are optional targeted low-income
children described in paragraph (a) of this section; or
(2) Reasonable categories of these individuals.
3. In Sec. 435.910, paragraph (h) is added to read as follows:
Sec. 435.910 Use of social security number.
* * * * *
(h) Exception. (1) An applicant who, because of well established
religious objections, refuses to obtain a Social Security Number (SSN)
may be given a Medicaid identification number by the State. Such a
number may be either an SSN obtained by the State on the applicant's
behalf or another unique identifier.
[[Page 60945]]
(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) An alternative number established by the State to identify such
an individual shall be used to the same extent as an SSN is used by the
State as described in paragraph (b)(3) of this section.
4. In Sec. 435.1001 paragraph (a) is revised to read as follows:
Sec. 435.1001 FFP for administration.
(a) FFP is available in the necessary administrative costs the
State incurs in--
(1) Determining and redetermining Medicaid eligibility and in
providing Medicaid to eligible individuals; and
(2) Determining presumptive eligibility for children and providing
services to presumptively eligible children.
* * * * *
5. Section 435.1002 is amended by adding a new paragraph (c) to
read as follows:
Sec. 435.1002 FFP for services.
* * * * *
(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
regular Medicaid following the period of presumptive eligibility.
Sec. 435.1007 [Amended]
6. In paragraph (a), the second sentence is amended by adding ``and
1905(u)'' between ``(X)'', and ``of the Act;''.
7. A new subpart L is added to part 435 to read as follows:
Subpart L--Option for Coverage of Special Groups
Sec.
435.1100 Scope.
Presumptive Eligibility for Children
435.1101 Definitions related to presumptive eligibility period for
children.
435.1102 General Rules.
Sec. 435.1100 Scope.
This subpart prescribes the requirements for providing medical
assistance to special groups who are not eligible for Medicaid as
categorically or medically needy.
Presumptive Eligibility for Children
Sec. 435.1101 Definitions related to presumptive eligibility period
for children.
Applicable income level 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.
Application form means at a minimum the application form used to
apply for Medicaid under the poverty-level-related eligibility groups
described in section 1902(l) of the Act.
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.
Qualified entity means an entity that is determined by the agency
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 the 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; or
(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.
Services means all services covered under the plan including EPSDT
(see part 440 of this chapter.)
Sec. 435.1102 General rules.
(a) The agency may provide services to children under age 19 during
one or more periods of presumptive eligibility based on a determination
of presumptive eligibility made by a qualified entity on the basis that
the child's estimated gross family income, or at State option family
income after application of simple disregards, does not exceed the
applicable income level.
(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, guardians, and other persons
in completing and filing such forms;
(2) Establish procedures to ensure that qualified entities--
(i) Notify the agency that a child is presumptively eligible within
5 working days after the date that the determination is made;
(ii) In writing at the time that a determination is made, inform
the parent or custodian of a child determined to be presumptively
eligible that if a Medicaid application is not filed by the last day of
the following month, the presumptive eligibility will end on that last
day and that if a Medicaid application 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
(iii) In writing at the time that a determination is made, inform
the parent or custodian of a child determined not to be presumptively
eligible of the reason for the determination and that he/she may file
an application for Medicaid on the child's behalf;
(3) Provide all services covered under the plan, including EPSDT:
and
(4) Make determinations of presumptive eligibility available
Statewide to all children.
(c) The agency may establish reasonable methods of determining the
number of periods of presumptive eligibility that will be authorized
for a child in a given time frame.
D. Subchapter D is redesignated as subchapter F; and Parts 462,
466, 473, and 476 are redesignated as parts 475, 476, 478 and 480,
respectively.
E. Subchapter E is redesignated as subchapter G.
F. A new subchapter D consisting of part 457 is added to read as
follows:
[[Page 60946]]
SUBCHAPTER D--CHILDREN'S HEALTH INSURANCE PROGRAM (CHIP)
PART 457--ALLOTMENTS AND GRANTS TO STATES
Subpart A--Introduction; State Plans for Child Health Insurance
Programs and Outreach Strategies
Sec.
457.1 Program description.
457.2 Basis and scope of subchapter D.
457.10 Definitions and use of terms.
457.30 Basis, scope, and applicability of subpart A.
457.40 State program administration.
457.50 State plan.
457.60 Amendments.
457.65 Duration of State plans and plan amendments.
457.70 Program options.
457.80 Current State child health insurance coverage and
coordination.
457.90 Outreach.
457.110 Enrollment assistance and information requirements.
457.120 Public involvement in program development.
457.125 Provision of child health assistance to American Indian and
Alaska Native children
457.130 Civil rights assurance.
457.135 Assurance of compliance with other provisions.
457.140 Budget.
457.150 HCFA review of State plan material.
457.160 Notice and timing of HCFA action on State plan material.
457.170 Withdrawal process.
457.190 Administrative and judicial review of action on State plan
material.
Subpart B--[Reserved]
Subpart C--State Plan Requirements: Eligibility, Screening,
Applications, and Enrollment
457.300 Basis, scope, and applicability.
457.301 Definitions and use of terms.
457.305 State plan provisions.
457.310 Targeted low-income child.
457.320 Other eligibility standards.
457.340 Application.
457.350 Eligibility screening.
457.360 Facilitating Medicaid enrollment.
457.361 Application for and enrollment in CHIP.
457.365 Grievances and appeals.
Subpart D--Coverage and Benefits: General Provisions
457.401 Basis, scope, and applicability.
457.402 Child health assistance and other definitions.
457.410 Health benefits coverage options.
457.420 Benchmark health benefits coverage.
457.430 Benchmark-equivalent health benefits coverage.
457.431 Actuarial report for benchmark-equivalent coverage.
457.440 Existing comprehensive State-based coverage.
457.450 Secretary-approved coverage.
457.470 Prohibited coverage.
457.475 Limitations on coverage: Abortions.
457.480 Preexisting condition exclusions and relation to other
laws.
457.490 Delivery and utilization control systems.
457.495 Grievances and appeals.
Subpart E--State Plan Requirements: Beneficiary Financial
Responsibilities
457.500 Basis, scope, and applicability.
457.505 General State plan requirements.
457.510 Premiums, enrollment fees, or similar fees: State plan
requirements.
457.515 Co-payments, coinsurance, deductibles, or similar cost
sharing charges: State plan requirements.
457.520 Cost sharing for well-baby and well-child care.
457.525 Public schedule.
457.530 General cost sharing protection for lower income children.
457.535 Cost sharing protection to ensure enrollment of American
Indians/Alaska Natives.
457.540 Cost sharing charges for children in families at or below
150 percent of the Federal poverty line (FPL).
457.545 Cost sharing for children in families above 150 percent of
the FPL.
457.550 Restriction on the frequency of cost sharing charges on
targeted low-income children in families at or below 150 percent of
the FPL.
457.555 Maximum allowable cost sharing charges on targeted low-
income children at or below 150 percent of the FPL.
457.560 Cumulative cost sharing maximum.
457.565 Grievances and appeals.
457.570 Disenrollment protections.
Subpart F--[Reserved]
Subpart G--Strategic Planning, Reporting, and Evaluation
457.700 Basis, scope, and applicability.
457.710 State plan requirements: Strategic objectives and
performance goals.
457.720 State plan requirement: State assurance regarding data
collection, records, and reports.
457.730 State plan requirement: State annual reports and
evaluation.
457.735 State plan requirement: State assurance of the quality and
appropriateness of care.
457.740 State expenditures and statistical reports.
457.750 Annual report.
457.760 State evaluations.
Subpart H--Substitution of Coverage
457.800 Basis, scope, and applicability.
457.805 State plan requirements: Private coverage substitution.
457.810 Premium assistance for employer-sponsored group health
plans: Required protections against substitution.
Subpart I--Program Integrity and Beneficiary Protections
457.900 Basis, scope, and applicability.
457.902 Definitions.
457.910 State program administration.
457.915 Fraud detection and investigation.
457.920 Accessible means to report fraud and abuse.
457.925 Preliminary investigation.
457.930 Full investigation, resolution, and reporting requirements.
457.935 Sanctions and related penalties.
457.940 Procurement standards.
457.945 Certification for contracts and proposals.
457.950 Contract and payment requirements including certification
of payment-related information.
457.955 Conditions necessary to contract as a managed care entity
(MCE).
457.960 Reporting changes in eligibility and redetermining
eligibility.
457.965 Documentation.
457.970 Eligibility and income verification.
457.975 Redetermination intervals in cases of suspected enrollment
fraud.
457.980 Verification of enrollment and provider services received.
457.985 Enrollee rights to file grievances and appeals.
457.990 Privacy protections.
457.995 Consumer Bill of Rights and Responsibilities.
Subpart J--Allowable Waivers: General Provisions
457.1000 Basis, scope, and applicability.
457.1005 Waiver for cost-effective coverage through a community-
based health delivery system.
457.1010 Waiver for purchase of family coverage.
457.1015 Cost-effectiveness.
Authority: Section 1102 of the Social Security Act (42 U.S.C.
1302).
Subpart A--Introduction; State Plans for Child Health Insurance
Programs and Outreach Strategies
Sec. 457.1 Program description.
Title XXI of the Social Security Act, enacted in 1997 by the
Balanced Budget Act, authorizes Federal grants to States for provision
of child health assistance to uninsured, low-income children. The
program is jointly financed by the Federal and State governments and
administered by the States. Within broad Federal rules, each State
decides eligible groups, types and ranges of services, payment levels
for benefit coverage, and administrative and operating procedures.
Sec. 457.2 Basis and scope of subchapter D.
(a) Basis. This subchapter implements title XXI of the Act, which
authorizes Federal grants to States for the provision of child health
assistance to uninsured, low-income children.
(b) Scope. The regulations in subchapter D set forth State plan
requirements, standards, procedures, and conditions for obtaining
Federal financial participation (FFP) to enable States to provide
health benefit coverage to targeted low-income children, as defined in
457.310(b).
[[Page 60947]]
Sec. 457.10 Definitions and use of terms.
For purposes of this part the following definitions apply:
American Indian/Alaska Native
(AI/AN) means--
(1) A member of a Federally recognized Indian tribe, band, or group
or a descendant in the first or second degree of any such member;
(2) An Eskimo or Aleut or other Alaska Native enrolled by the
Secretary of the Interior pursuant to the Alaska Native Claims
Settlement Act, 43 U.S.C. 1601 et seq.;
(3) A person who is considered by the Secretary of the Interior to
be an Indian for any purpose; or
(4) A person who is determined to be an Indian under regulations
promulgated by the Secretary.
Child means an individual under the age of 19.
Child health assistance has the meaning assigned in Sec. 457.402.
Children's Health Insurance Program (CHIP) means a program
established and administered by a State, but jointly funded with the
Federal government to provide child health assistance to uninsured,
low-income children through a separate child health program, a Medicaid
expansion program, or a combination of both.
Combination program means a program under which a State provides
child health assistance through both a Medicaid expansion program and a
separate child health program.
Contractor has the meaning assigned in Sec. 457.902.
Cost-effectiveness has the meaning assigned in Sec. 457.1015.
Creditable health coverage has the meaning given the term
``creditable coverage'' at 45 CFR 146.113.
Emergency medical condition has the meaning assigned at
Sec. 457.402.
Emergency medical services has the meaning assigned at
Sec. 457.402.
Employment with a public agency has the meaning assigned in
Sec. 457.301.
Family income means income as determined by the State for a family
as defined by the State.
Federal fiscal year starts on the first day of October each year
and ends on the last day of September.
Fee-for-service entity has the meaning assigned in Sec. 457.902.
Grievance has the meaning assigned at Sec. 457.902.
Group health insurance coverage has the meaning assigned at 45 CFR
144.103.
Group health plan has the meaning assigned at 45 CFR 144.103.
Health benefits coverage has the meaning assigned in Sec. 457.402.
Health maintenance organization (HMO) plan has the meaning assigned
in Sec. 457.420.
Legal obligation has the meaning assigned in Sec. 457.555.
Low-income child means a child whose family income is at or below
200 percent of the poverty line for the size family involved.
Managed care entity (MCE) has the meaning assigned in Sec. 457.902.
Medicaid applicable income level means, with respect to a child,
the effective income level (expressed as a percentage of the poverty
line) that has been specified under the State plan under title XIX of
the Act (including for these purposes, a section 1115 waiver authorized
by the Secretary or under the authority of section 1902(r)(2)), as of
March 31, 1997, for the child to be eligible for medical assistance
under either section 1902(l)(2) or 1905(n)(2).
Medicaid expansion program means a program where a State receives
Federal funding at the enhanced matching rate available for expanding
eligibility to targeted low-income children.
Post-stabilization services has the meaning assigned in
Sec. 457.402.
Poverty line/Federal poverty level means the poverty guidelines
updated annually in the Federal Register by the U.S. Department of
Health and Human Services under authority of 42 U.S.C. 9902(2).
Preexisting condition exclusion has the meaning assigned at 45 CFR
144.103.
Premium assistance for employer-sponsored group health plans means
State payment of part or all of premiums for group health plan or group
health insurance coverage of an eligible child or children.
Public agency has the meaning assigned in Sec. 457.301.
Separate child health program means a program under which a State
receives Federal funding from its title XXI of the Act allotment under
an approved plan that obtains child health assistance through obtaining
coverage that meets the requirements of section 2103 of the Act.
State means all States, the District of Columbia, Puerto Rico, the
U.S. Virgin Islands, Guam, American Samoa and the Northern Mariana
Islands.
State health benefits plan has the meaning assigned in
Sec. 457.301.
State plan means the approved or pending title XXI State child
health plan.
State program integrity unit has the meaning assigned in
Sec. 457.902.
Targeted low-income child has the meaning assigned in Sec. 457.310.
Uncovered child means a child who does not have creditable health
coverage.
Well-baby and well-child care services means regular or preventive
diagnostic and treatment services necessary to ensure the health of
babies and children as defined by the State. For purposes of cost
sharing, the term has the meaning assigned at Sec. 457.520.
Sec. 457.30 Basis, scope, and applicability of subpart A.
(a) Statutory basis. This subpart is based on the following
sections of the Act:
(1) Section 2101(a) of the Act specifies that the purpose of title
XXI of the Act is to provide to States funds to enable them to initiate
and expand child health assistance to uninsured low-income children in
an effective and efficient manner that is coordinated with other
sources of health benefits coverage for children.
(2) Section 2101(b) requires that the State submit a State plan.
(3) Section 2102(a) sets forth requirements regarding the contents
of the State plan.
(4) Section 2102(c) requires that the State plan include a
description of the procedures to be used by the State to accomplish
outreach and coordination with other health insurance programs.
(5) Section 2106 specifies the process for submission, approval,
and amendment of State plans.
(6) Section 2107(c) requires that the State plan include a
description of the process used to involve the public in the design and
implementation of the plan.
(7) Section 2107(d) requires that the State plan include a
description of the budget for the plan.
(8) Section 2107(e) of the Act, which provides that certain
provisions of title XIX and title XI of the Act apply under title XXI
of the Act in the same manner that they apply under title XIX.
(b) Scope. This subpart sets forth provisions governing the
administration of a CHIP, the general requirements for a State plan,
and a description of the process for review of a State plan or plan
amendment.
(c) Applicability. This subpart applies to all States that request
Federal financial participation to provide child health assistance
under title XXI of the Act.
Sec. 457.40 State program administration.
(a) Program operation. The State must implement its program in
accordance with the approved State plan, any approved State plan
amendments, the requirements of title XXI and title XIX of the Act (as
appropriate), and the
[[Page 60948]]
regulations in this chapter. HCFA monitors the operation of the
approved State plan and plan amendments to ensure compliance with the
requirements of title XXI, title XIX of the Act (as appropriate) and
this chapter.
(b) State authority to submit State plan. A State plan or plan
amendment must be signed by the State Governor, or signed by an
individual who has been delegated authority by the Governor to submit
it.
(c) State program officials. The State must identify, in the State
plan or State plan amendment, the State officials who are responsible
for program administration and financial oversight.
(d) State legislative authority. The State plan must include an
assurance that the State will not claim expenditures for child health
assistance prior to the time that the State has legislative authority
to operate the State plan or plan amendment as approved by HCFA.
Sec. 457.50 State plan.
The State plan is a comprehensive written statement submitted by
the State to HCFA for approval, which describes the purpose, nature,
and scope of the State's CHIP and gives assurance that the program is
administered in conformity with the specific requirements of title XXI,
title XIX of the Act (as appropriate), and the regulations in this
chapter. The State plan contains all information necessary for HCFA to
determine whether the plan can be approved to serve as a basis for
Federal financial participation (FFP) in the State program.
Sec. 457.60 Amendments.
(a) Submittal of plan amendments. A State may amend its approved
State plan in whole or in part at any time through the submission of an
amendment to HCFA. A State must amend its State plan whenever necessary
to reflect--
(1) Changes in Federal law, regulations, policy interpretations, or
court decisions;
(2) Changes in State law, organization, policy, or operation of the
program; and
(3) Changes in the source of the State share of funding.
(b) Budget amendment. When the State plan amendment makes any
modification to the approved budget, a State must include an amended
budget that describes the State's planned expenditures for a three year
period.
Sec. 457.65 Duration of State plans and plan amendments.
(a) Effective date in general. (1) A State plan or plan amendment
takes effect on the day specified in the plan but no earlier than
October 1, 1997. The effective date is no earlier than the date on
which the State begins to incur costs to implement its State plan or
plan amendment.
(2) A State plan amendment that takes effect prior to submission of
the amendment to HCFA may remain in effect only until the end of the
State fiscal year in which the State makes it effective, or, if later,
the end of the 90-day period in which the State makes it effective,
unless the State submits the amendment to HCFA for approval before the
end of that State fiscal year or 90-day period.
(b) Amendments relating to eligibility or benefits. A State plan
amendment that eliminates or restricts eligibility or benefits may not
be in effect for longer than a 60-day period unless the amendment is
submitted to HCFA before the end of that 60-day period. The amendment
may not take effect unless--
(1) The State certifies that it has provided prior public notice of
the proposed change in a form and manner provided under applicable
State law; and
(2) The public notice was published before the requested effective
date of change.
(c) Amendments relating to cost sharing. A State plan amendment
that implements cost sharing charges, increases existing cost sharing
charges, or increases the cumulative cost sharing maximum as set forth
at Sec. 457.555 is considered an amendment that restricts benefits and
must meet the requirements in paragraph (b) of this section.
(d) Amendments relating to source of State funding. (1) A State
must submit a plan amendment to HCFA before any change in the source of
the State share of funding from the source reflected in the approved
State plan can take effect.
(2) A State is not required to submit a plan amendment for changes
in the type of non-health care related revenues used to generate
general revenue.
(e) Continued approval. An approved State plan continues in effect
unless--
(1) The State adopts a new plan by obtaining approval under
Sec. 457.60 of an amendment to the State plan; or
(2) The Secretary finds substantial noncompliance of the plan with
the requirements of the statute or regulations.
Sec. 457.70 Program options.
(a) Health benefits coverage options. A State may elect to obtain
health benefits coverage under its plan through--
(1) A Medicaid expansion program;
(2) A separate child health program; or
(3) A combination program.
(b) State plan requirement. A State plan must include a description
of the State's chosen program option.
(c) Medicaid expansion program requirements. A State that elects to
obtain health benefits coverage through its Medicaid plan must--
(1) Meet the requirements of the following subparts of this part--
(i) Subpart A;
(ii) Subpart B (if the State claims administrative costs under
title XXI of the Act;
(iii) Subpart C (with respect to the definition of a targeted low-
income child only);
(iv) Subpart F (with respect to determination of the allotment for
purposes of the enhanced matching rate, determination of the enhanced
matching rate, and payment of any claims for administrative costs under
title XXI of the Act only);
(v) Subpart G;
(vi) Subpart H (if the State elects the eligibility group for
optional targeted low-income children and elects to pay for employer-
sponsored insurance); and
(vii) Subpart J (if the State claims administrative costs under
title XXI of the Act and seeks a waiver of limitations on such claims
based on a community based health delivery system).
(2) Submit an approvable amendment to the State's Medicaid State
plan as appropriate.
(d) Separate child health program requirements. A State that elects
to obtain health benefits coverage under its plan through a separate
child health program must meet all the requirements of part 457.
(e) Combination program requirements. A State that elects to obtain
health benefits coverage through both a separate child health program
and a Medicaid expansion program must meet the requirements of
paragraphs (c) and (d) of this section.
Sec. 457.80 Current State child health insurance coverage and
coordination.
A State plan must include a description of--
(a) The extent to which, and manner in which, children in the
State, including targeted low-income children and other classes of
children, by income level and other relevant factors, currently have
creditable health coverage (as defined in Sec. 457.10) and, if
sufficient information is available, whether the creditable health
coverage they have is under public health insurance programs or health
insurance
[[Page 60949]]
programs that involve public-private partnerships;
(b) Current State efforts to provide or obtain creditable health
coverage for uncovered children, including the steps the State is
taking to identify and enroll all uncovered children who are eligible
to participate in public health insurance programs and health insurance
programs that involve public-private partnerships;
(c) Procedures the State uses to accomplish coordination of CHIP
with other public and private health insurance programs, including
procedures designed to increase the number of children with creditable
health coverage and to ensure that only eligible targeted low-income
children are covered under CHIP.
Sec. 457.90 Outreach.
(a) Procedures required. A State plan must include a description of
procedures used to inform families of children likely to be eligible
for child health assistance under the plan or under other public or
private health coverage programs of the availability of the programs,
and to assist them in enrolling their children in one of the programs.
(b) Examples. Outreach strategies may include but are not limited
to the following:
(1) Education and awareness campaigns, including targeted mailings
and information distribution through various organizations.
(2) Enrollment simplification, such as simplified or joint
application forms.
Sec. 457.110 Enrollment assistance and information requirements.
(a) Information disclosure. The State must make accurate, easily
understood information available to families of targeted low-income
children and provide assistance to these families in making informed
health care decisions about their health plans, professionals, and
facilities.
(b) Required information. The State must have a mechanism in place
to ensure that the following information is made available to
applicants and beneficiaries in a timely manner:
(1) Types of benefits, and amount, duration and scope of benefits
available under the program.
(2) Names and locations of current participating providers.
Sec. 457.120 Public involvement in program development.
A State plan must include a description of the method the State
uses to--
(a) Involve the public in both the design and initial
implementation of the program; and
(b) Ensure ongoing public involvement once the State plan has been
implemented.
Sec. 457.125 Provision of child health assistance to American Indian
and Alaska Native children.
(a) Enrollment. A State must include a description of procedures
used to ensure the provision of child health assistance to American
Indian and Alaska Native children. HCFA requests that the State
official responsible for CHIP consult with Federally recognized Tribes
and other Indian tribes and organizations in the State on the
development and implementation of these procedures.
(b) Exemption from cost sharing. HCFA will not approve a State plan
that imposes cost sharing on American Indian and Alaska Native
children.
Sec. 457.130 Civil rights assurance.
The State plan must include an assurance that the State will comply
with all applicable civil rights requirements, including title VI of
the Civil Rights Act of 1964, title II of the Americans with
Disabilities Act of 1990, section 504 of the Rehabilitation Act of
1973, the Age Discrimination Act of 1975, 45 CFR part 80, part 84, and
part 91, and 28 CFR part 35.
Sec. 457.135 Assurance of compliance with other provisions.
The State plan must include an assurance that the State will comply
under title XXI with the following provisions of titles XIX and XI of
the Social Security Act:
(a) Section 1902(a)(4)(C) (relating to conflict of interest
standards).
(b) Paragraphs (2), (16) and (17) of section 1903(i) (relating to
limitations on payment).
(c) Section 1903(w) (relating to limitations on provider donations
and taxes).
(d) Section 1132 (relating to periods within which claims must be
filed).
Sec. 457.140 Budget.
The State plan, or plan amendment as required at Sec. 457.60(b),
must include a budget that describes the State's planned expenditures
for a 3-year period. The budget must describe:
(a) Planned use of funds, including--
(1) Projected amount to be spent on health services;
(2) Projected amount to be spent on administrative costs, such as
outreach, child health initiatives, and evaluation; and
(3) Assumptions on which the budget is based, including cost per
child and expected enrollment.
(b) Projected source of non-Federal plan expenditures, including
any requirements for cost-sharing by beneficiaries.
Sec. 457.150 HCFA review of State plan material.
(a) Basis for action. HCFA reviews each State plan and plan
amendment to determine whether it meets or continues to meet the
requirements for approval under relevant Federal statutes, regulations,
and guidelines furnished by HCFA to assist in the interpretation of
these regulations.
(b) Action on complete plan. HCFA approves or disapproves the State
plan or plan amendment only in its entirety.
(c) Authority. The HCFA Administrator exercises delegated authority
to review and then to approve or disapprove the State plan or plan
amendment, or to determine that previously approved material no longer
meets the requirements for approval. The Administrator does not make a
final determination of disapproval without first consulting the
Secretary.
(d) Initial submission. The Administrator designates an official to
receive the initial submission of State plans.
(e) Review process. (1) The Administrator designates an individual
to coordinate HCFA's review for each State that submits a State plan.
(2) HCFA notifies the State of the identity of the designated
individual in the first correspondence relating to that plan, and at
any time there is a change in the designated individual.
(3) In the temporary absence of the designated individual during
regular business hours, an alternate individual will act in place of
the designated individual.
Sec. 457.160 Notice and timing of HCFA action on State plan material.
(a) Notice of final determination. The Administrator provides
written notification to the State of the approval or disapproval of a
State plan or plan amendment.
(b) Timing. (1) A State plan or plan amendment will be considered
approved unless HCFA, within 90 calendar days after receipt of the
State plan or plan amendment in the HCFA central office, sends the
State--
(i) Written notice of disapproval; or (ii) Written notice of
additional information it needs in order to make a final determination.
(2) A State plan or plan amendment is considered received when the
[[Page 60950]]
designated official or individual, as determined in Sec. 457.150(d) and
(e), receives an electronic, fax or paper copy of the complete
material.
(3) If HCFA requests additional information, the 90-day review
period for HCFA action on the State plan or plan amendment--
(i) Stops on the day HCFA sends a written request for additional
information or the next business day if the request is sent on a
Federal holiday or weekend; and
(ii) Resumes on the next calendar day after the HCFA designated
individual receives an electronic, fax, or hard copy from the State of
all the requested additional information, unless the information is
received after 5 p.m. eastern time on a day prior to a non-business day
or any time on a non-business day, in which case the review period
resumes on the following business day.
(4) The 90-day review period cannot stop or end on a non-business
day. If the 90th calendar day falls on a non-business day, HCFA will
consider the 90th day to be the next business day.
(5) HCFA may send written notice of its need for additional
information as many times as necessary to obtain the complete
information necessary to review the State plan or plan amendment.
Sec. 457.170 Withdrawal process.
A State may withdraw its State plan or plan amendment at any time
during the review process by providing written notice to HCFA of the
withdrawal.
Sec. 457.190 Administrative and judicial review of action on State
plan material.
(a) Request for reconsideration. Any State dissatisfied with the
Administrator's action on State plan material under Sec. 457.150 may,
within 60 days after receipt of the notice of final determination
provided under Sec. 457.160(a), request that the Administrator
reconsider whether the State plan or plan amendment conforms with the
requirements for approval.
(b) Notice of hearing. Within 30 days after receipt of the request,
the Administrator notifies the State of the time and place of a hearing
to be held for the purpose of reconsideration.
(c) Hearing procedures. The hearing procedures set forth in part
430, subpart D of this chapter govern a hearing requested under this
section.
(d) Effect of hearing decision. HCFA does not delay the denial of
Federal funds, if required by the Administrator's original
determination, pending a hearing decision. If the Administrator
determines that his or her original decision was incorrect, HCFA pays
the State a lump sum equal to any funds incorrectly denied.
(e) Judicial review. Judicial review of a final determination made
under this subchapter is governed by Sec. 430.38 of this chapter.
Subpart B--[Reserved]
Subpart C--State Plan Requirements: Eligibility, Screening,
Applications, and Enrollment
Sec. 457.300 Basis, scope, and applicability.
(a) Statutory basis. This subpart interprets and implements --
(1) Section 2102(b) of the Act, which relates to eligibility
standards and methodologies;
(2) Section 2105(c)(6)(B) of the Act, which relates to no payment
for expenditures for child health assistance provided to children
eligible for coverage under other Federal health care programs other
than programs operated or financed by the Indian Health Service; and
(3) Section 2110(b) of the Act, which provides a definition of
targeted low-income child.
(b) Scope. This subpart sets forth the requirements relating to
eligibility standards and to screening, application and enrollment
procedures.
(c) Applicability. The requirements of this subpart apply to child
health assistance provided under a separate child health program and
apply to a Medicaid expansion program only with respect to the
definition of a targeted low-income child.
Sec. 457.301 Definitions and use of terms.
As used in this subpart--
Employment with a public agency includes employment with an entity
under a contract with a public agency;
Public agency means a State, county, city or other type of
municipal agency, including a public school district, transportation
district, irrigation district, or any other type of public entity;
State health benefits plan means a plan that is offered or
organized by the State government on behalf of State employees or other
public agency employees within the State. The term does not include a
separately run county, city, or other public agency plan or a plan that
provides coverage only for a specific type of care, such as dental or
vision care.
Sec. 457.305 State plan provisions.
The State plan must include a description of standards consistent
with Sec. 457.310 and Sec. 457.320 used to determine the eligibility of
children for coverage under the State plan.
Sec. 457.310 Targeted low-income child.
(a) Definition. A targeted low-income child is a child who meets
the standards set forth in paragraph (b) of this section and other
eligibility standards established by the State under Sec. 457.320.
(b) Standards. A targeted low-income child must meet the following
standards:
(1) Financial need. A child who resides in a State with a Medicaid
applicable income level must have a family income at or below 200
percent of the Federal poverty line or family income that--
(i) Exceeds the Medicaid applicable income level but not by more
than 50 percentage points (expressed as a percentage of the Federal
poverty line); or
(ii) Does not exceed the Medicaid applicable income level
calculated using June 1, 1997 instead of March 31, 1997.
(2) No other coverage. A targeted low-income child must not be--
(i) Found eligible for Medicaid (determined either through the
Medicaid application process or the screening process described at
Sec. 457.350); or
(ii) Covered under a group health plan or under health insurance
coverage, unless the health insurance coverage program has been in
operation since before July 1, 1997, and is administered by a State
that receives no Federal funds for the program's operation. A child
would not be considered covered under a group health plan if the child
did not have reasonable access to care under that plan.
(c) Exclusions. Notwithstanding paragraph (a) of this section, the
following groups are excluded from the definition of targeted low-
income children:
(1) Children eligible for certain State health benefits coverage.
(i) A targeted low-income child may not be a member of a family
eligible for health benefits coverage under a State health benefits
plan in the State on the basis of a family member's employment with a
public agency, even if the family declines to accept the coverage.
(ii) A child is considered eligible for health benefits coverage
under a State health benefits plan if a more than nominal contribution
to the cost of health benefits coverage under a State health benefits
plan is available from the State or public agency with respect to the
child. A contribution over $10
[[Page 60951]]
towards the cost of dependent coverage is considered more than nominal.
(iii) The contribution with respect to the child is calculated by
deducting amounts only available to an adult employee from the total
State or public agency contribution.
(2) Residents of an institution. A child must not be an inmate of a
public institution or a patient in an institution for mental diseases
as defined at Sec. 435.1009 of this chapter, at the time of initial
application or any redetermination of eligibility.
Sec. 457.320 Other eligibility standards.
(a) Except as provided in paragraph (b) of this section, the State
plan may adopt eligibility standards for one or more groups of children
related to--
(1) Geographic area(s) served by the plan;
(2) Age (not to exceed 18 years);
(3) Income;
(4) Resources;
(5) Spenddowns;
(6) Disposition of resources;
(7) Residency;
(8) Disability status;
(9) Access to or coverage under other health coverage; or
(10) Duration of eligibility (as long as eligibility is determined
at least every 12 months).
(b) In establishing eligibility standards, a State may not--
(1) Cover children with higher family income without covering
children with a lower family income within any defined group of covered
targeted low-income children;
(2) Deny eligibility based on a preexisting medical condition;
(3) Restrict eligibility based on disability status;
(4) Require that any individual provide a social security number,
including the social security number of the child or that of a family
member whose income or resources might be used in making the child's
eligibility determination;
(5) Exclude American Indian or Alaska Native children based on
eligibility for, or access to, medical care funded by the Indian Health
Service;
(6) Violate any other Federal laws or regulations pertaining to
eligibility for CHIP, including laws that require exclusion of certain
income or resources from all consideration and laws that require
verification of certain items or statuses;
(7) Exclude individuals based on citizenship or nationality, to the
extent that the children are U.S. citizens, U.S. nationals or qualified
aliens (except to the extent that 8 U.S.C. 1613(a) precludes them from
receiving Federal means-tested public benefits).
(c) In establishing eligibility for CHIP coverage, States must
obtain proof of citizenship (including nationals of the U.S.) and
verify qualified alien status in accordance with section 432 of PRWORA,
as amended (8 U.S.C. 1642).
Sec. 457.340 Application.
(a) Opportunity to apply. The State must afford every individual
the opportunity to apply for child health assistance without delay.
(b) Application forms. The application form used to apply for child
health assistance may be--
(1) A joint application for both Medicaid and CHIP; or
(2) A separate application for CHIP only.
Sec. 457.350 Eligibility screening.
(a) State plan requirement. The State plan must include a
description of the screening procedures that the State will use, at
intake and any follow-up eligibility determination, including any
periodic redetermination, to ensure that only targeted low-income
children are furnished child health assistance under the plan.
(b) Screening with joint application. A State that uses a joint
application for Medicaid and CHIP must use the screening procedures
described in paragraphs (c) and (d) of this section for children who
apply for CHIP.
(c) Screening objectives. Except as described in paragraph (e) of
this section, a State must use screening procedures to identify, at
minimum, any child who--
(1) Is potentially eligible for Medicaid under one of the poverty
level related groups described in section 1902(l) of the Act; or
(2) If the State has not extended eligibility in the groups
described in paragraph (c)(1) of this section to children of a
particular age, is potentially eligible for Medicaid because the child
meets the highest categorical income standards used under Medicaid to
establish eligibility for non-disabled children of that age.
(d) Eligibility test. To identify the children in paragraph (c) of
this section, at a minimum, States must either initially apply a gross
income test described in paragraph (d)(1) of this section and then use
an adjusted income test described in paragraph (d)(2) of this section
for applicants whose State-defined income exceeds the initial test, or
use only the adjusted income test for all applicants.
(1) Initial gross income test. Under this test, a State initially
screens for Medicaid eligibility by comparing gross family income to
the appropriate Medicaid income standard.
(2) Adjusted income test. Under this test, a State screens for
Medicaid eligibility by comparing adjusted family income to the
appropriate Medicaid income standard. The State must apply all Medicaid
policies relating to income for the particular Medicaid eligibility
group, including--
(i) Income standards;
(ii) Income exclusions and disregards; and
(iii) Methodologies for determining countable income and resources
including State Medicaid policies and procedures for deeming of income.
(e) Treatment of children found potentially eligible for Medicaid.
After applying the appropriate eligibility tests, the State must--
(1) Find ineligible for CHIP a child whose State-defined income or
adjusted family income is below the applicable Medicaid income
standard, or who is found potentially eligible for Medicaid under any
other tests that the State has chosen to apply, unless a completed
Medicaid application for that child is denied;
(2) Redetermine eligibility for a child found ineligible for CHIP
through the screening process if--
(i) An application for Medicaid is completed for the child and the
child is found ineligible for Medicaid; or
(ii) The child's circumstances change and another screening shows
that the child is ineligible for Medicaid; and
(3) Provide that the child found ineligible for CHIP remains
ineligible for CHIP unless the child's circumstances change even if the
child refuses to apply for Medicaid or does not complete the Medicaid
application process for any reason.
(f) Treatment of child found potentially ineligible for Medicaid.
If the State uses a screening procedure other than a full determination
of Medicaid eligibility under all possible groups, and the screening
reveals that the child is ineligible for Medicaid, the State must
provide the child's family the following in writing:
(1) A statement that, based on an initial review, the child does
not appear eligible for Medicaid, but Medicaid eligibility can only be
determined based on review of a full Medicaid application.
(2) Information about Medicaid benefits (if that information was
not already furnished).
(3) Information about how and where to apply for Medicaid.
Sec. 457.360 Facilitating Medicaid enrollment.
(a) State Plan requirement. The State plan must include a
description of reasonable procedures, including the
[[Page 60952]]
procedures described in paragraphs (b) and (c) of this section, to
ensure that children found through the screening process described in
Sec. 457.350 to be eligible for Medicaid actually apply for and are
enrolled in Medicaid.
(b) The State must establish procedures through which the State
initiates the Medicaid enrollment process for children found through
eligibility screening to be potentially Medicaid eligible consistent
with the following requirements:
(1) States that use a separate Medicaid application must either--
(i) Provide Medicaid application assistance at the CHIP office to
the extent permitted under Medicaid law and regulations;
(ii) Send information obtained through the screening process to the
appropriate Medicaid office or to Medicaid staff, to begin the Medicaid
application process; or
(iii) Use other reasonable procedures designed to ensure
application and enrollment in Medicaid.
(2) States that use a joint Medicaid and CHIP application must send
the application to the appropriate Medicaid office or to Medicaid staff
to make the Medicaid eligibility determination.
(c) Informed application decisions. A State must ensure that a
decision by a family not to apply for Medicaid or not to complete the
Medicaid application process represents an informed decision by
providing full and complete information, in writing, about--
(1) The State's Medicaid program, including the benefits covered
and, restrictions on cost-sharing; and
(2) The effect on eligibility for CHIP of neither applying for
Medicaid nor completing the Medicaid application process.
Sec. 457.361 Application for and enrollment in CHIP.
(a) Application assistance. A State must afford families a
reasonable opportunity to complete the application process and must
offer assistance to families in understanding and completing
applications and in obtaining any required documentation.
(b) Notice of rights and responsibilities. A State must inform
applicants, in writing and orally if appropriate, about the eligibility
requirements, their obligations under the program, and their right to
file grievances and appeals in accordance Sec. 457.985.
(c) Notice of decision concerning eligibility. The State must send
each applicant a written notice of the decision on the application and,
if eligibility is denied or terminated, the specific reason or reasons
for the action and an explanation of the right to request a hearing
within a reasonable time.
(d) Timely determinations of eligibility. The State must establish
time standards for determining eligibility and inform the applicant of
those standards. These standards may not exceed forty-five calendar
days.
(1) In applying the time standards, the State must count each
calendar day from the day of application to the day the agency mails
notice of its decision to the applicant.
(2) The agency must determine eligibility within the standards
except in unusual circumstances, for example--
(i) When the agency cannot reach a decision because the applicant
delays or fails to take a required action; or
(ii) When there is an administrative or other emergency beyond the
agency's control.
(3) The agency must not use the time standards--
(i) As a waiting period before determining eligibility; or
(ii) As a reason for denying eligibility (because it has not
determined eligibility within the time standards).
(e) Effective date of eligibility. The State must specify in its
approved state plan a method for determining the effective date of CHIP
eligibility, which can be determined based on the date of application
or through any other reasonable method.
Sec. 457.365 Grievances and appeals.
The State must provide enrollees in separate child health programs
with an opportunity to file grievances and appeals for denial,
suspension or termination of eligibility in accordance with
Sec. 457.985.
Subpart D--Coverage and Benefits: General Provisions
Sec. 457.401 Basis, scope, and applicability.
(a) Statutory basis. This subpart interprets and implements--
(1) Section 2102(a)(7) of the Act, which requires that States make
assurances relating to certain types of care;
(2) Section 2103 of the Act, which outlines coverage requirements
for children's health insurance;
(3) Section 2109 of the Act, which describes the relation of the
CHIP program to other laws;
(4) Section 2110(a) of the Act, which describes child health
assistance; and
(5) Section 2110(c) of the Act, which contains definitions
applicable to this subpart.
(b) Scope. This subpart sets forth requirements for health benefits
coverage and child health assistance under a separate child health
plan.
(c) Applicability. The requirements of this subpart apply to child
health assistance provided under a separate child health program and do
not apply to a Medicaid expansion program.
Sec. 457.402 Child health assistance and other definitions.
(a) Child health assistance. For the purpose of this subpart, the
term ``child health assistance'' means payment for part or all of the
cost of health benefits coverage provided to targeted low-income
children for:
(1) Inpatient hospital services.
(2) Outpatient hospital services.
(3) Physician services and surgical services.
(4) Clinic services (including health center services) and other
ambulatory health care services.
(5) Prescription drugs and biologicals and the administration of
these drugs and biologicals, only if these drugs and biologicals are
not furnished for the purpose of causing, or assisting in causing, the
death, suicide, euthanasia, or mercy killing of a person.
(6) Over-the-counter medications.
(7) Laboratory and radiological services.
(8) Prenatal care and prepregnancy family planning services and
supplies.
(9) Inpatient mental health services, other than services described
in paragraph (a)(17) of this section but including services furnished
in a State-operated mental hospital and including residential or other
24-hour therapeutically planned structured services.
(10) Outpatient mental health services, other than services
described in paragraph (a)(18) of this section but including services
furnished in a State-operated mental hospital and including community-
based services.
(11) Durable medical equipment and other medically-related or
remedial devices (such as prosthetic devices, implants, eyeglasses,
hearing aids, dental devices and adaptive devices).
(12) Disposable medical supplies.
(13) Home and community-based health care services and related
supportive services (such as home health nursing services, personal
care, assistance with activities of daily living, chore services, day
care services, respite care services, training for family members and
minor modification to the home.)
(14) Nursing care services (such as nurse practitioner services,
nurse midwife services, advanced practice
[[Page 60953]]
nurse services, private duty nursing, pediatric nurse services and
respiratory care services) in a home, school, or other setting.
(15) Abortion only if necessary to save the life of the mother or
if the pregnancy is the result of rape or incest.
(16) Dental services.
(17) Inpatient substance abuse treatment services and residential
substance abuse treatment services.
(18) Outpatient substance abuse treatment services.
(19) Case management services.
(20) Care coordination services.
(21) Physical therapy, occupational therapy, and services for
individuals with speech, hearing and language disorders.
(22) Hospice care.
(23) Any other medical, diagnostic, screening, preventive,
restorative, remedial, therapeutic, or rehabilitative services (whether
in a facility, home, school, or other setting) if recognized by State
law and only if the service is--
(i) Prescribed by or furnished by a physician or other licensed or
registered practitioner within the scope of practice as defined by
State law;
(ii) Performed under the general supervision or at the direction of
a physician; or
(iii) Furnished by a health care facility that is operated by a
State or local government or is licensed under State law and operating
within the scope of the license.
(24) Premiums for private health care insurance coverage.
(25) Medical transportation.
(26) Enabling services (such as transportation, translation, and
outreach services) only if designed to increase the accessibility of
primary and preventive health care services for eligible low-income
individuals.
(27) Any other health care services or items specified by the
Secretary and not excluded under this subchapter.
(b) Emergency medical condition means a medical condition
manifesting itself by acute symptoms of sufficient severity (including
severe pain) such that a prudent layperson, with an average knowledge
of health and medicine, could reasonably expect the absence of
immediate medical attention to result in--
(1) Serious jeopardy to the health of the individual or, in the
case of a pregnant woman, the health of a woman or her unborn child;
(2) Serious impairment of bodily function; or
(3) Serious dysfunction of any bodily organ or part.
(c) Emergency services means covered inpatient or outpatient
services that are--
(1) Furnished by any provider qualified to furnish emergency
services without requirement for prior authorization; and
(2) Needed to evaluate or stabilize an emergency medical condition.
(d) Post-stabilization services means medically necessary non-
emergency services furnished to an enrollee after he or she is
stabilized related to the emergency medical condition.
(e) Health benefits coverage means an arrangement under which
enrolled individuals are protected from some or all liability for the
cost of specified health care services.
Sec. 457.410 Health benefits coverage options.
(a) Types of health benefits coverage. States may choose to provide
any of the following four types of health benefits coverage:
(1) Benchmark coverage in accordance with Sec. 457.420.
(2) Benchmark-equivalent coverage in accordance with Sec. 457.430.
(3) Existing comprehensive State-based coverage in accordance with
Sec. 457.440.
(4) Secretary-approved coverage in accordance with Sec. 457.450.
(b) Required coverage. Regardless of the type of health benefits
coverage described under paragraph (a) of this section that the State
chooses to obtain, the State must obtain coverage for--
(1) Well-baby and well-child care;
(2) Immunizations in accordance with the recommendations of the
Advisory Committee on Immunization Practices (ACIP); and
(3) Emergency services as defined in Sec. 457.402(c).
Sec. 457.420 Benchmark health benefits coverage.
Benchmark coverage is health benefits coverage that is
substantially equal to the health benefits coverage in one of the
following benefit packages:
(a) Federal Employees Health Benefit Plan (FEHBP). The standard
Blue Cross/Blue Shield preferred provider option service benefit plan
that is described in and offered to Federal employees, under 5 U.S.C.
8903(1).
(b) State employee plan. A health benefits plan that is offered and
generally available to State employees in the State.
(c) Health maintenance organization (HMO) plan. The health
insurance coverage plan that is offered through an HMO (as defined in
section 2791(b)(3) of the Public Health Service Act) and has the
largest insured commercial, non-Medicaid enrollment in the State.
Sec. 457.430 Benchmark-equivalent health benefits coverage.
(a) Aggregate actuarial value. Benchmark-equivalent coverage must
have an aggregate actuarial value determined in accordance with
Sec. 457.431 that is at least actuarially equivalent to the coverage
under one of the benchmark packages specified in Sec. 457.420.
(b) Required services. 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 provided in accordance with the recommendations of the
ACIP.
(c) Additional services. (1) In addition to the categories of
services in paragraph (b) of this section, benchmark-equivalent
coverage may include coverage for any additional services specified in
Sec. 457.402.
(2) If the benchmark coverage package used by the State for
purposes of comparison in establishing the aggregate actuarial value of
the benchmark-equivalent coverage package includes coverage for
prescription drugs, mental health services, vision services or hearing
services, the actuarial value of the coverage for each of these
categories of service in the benchmark-equivalent coverage package must
be at least 75 percent of the value of the coverage for such a category
or service in the benchmark plan used for comparison by the State.
(3) If the benchmark coverage package does not cover one of the
categories of services in paragraph (c)(2) of this section, then the
benchmark-equivalent coverage package may, but is not required to,
include coverage for that category of service.
Sec. 457.431 Actuarial report for benchmark-equivalent coverage.
(a) To obtain approval for benchmark-equivalent health benefits
coverage described under Sec. 457.430, the State must submit to HCFA an
actuarial report that contains an actuarial opinion that the health
benefits coverage meets the actuarial requirements under Sec. 457.430.
The report must also specify the benchmark coverage used for
comparison.
(b) The actuarial report must state that it was prepared--
(1) By an individual who is a member of the American Academy of
Actuaries;
[[Page 60954]]
(2) Using generally accepted actuarial principles and methodologies
of the American Academy of Actuaries;
(3) Using a standardized set of utilization and price factors;
(4) Using a standardized population that is representative of
privately insured children of the age of those expected to be covered
under the State plan;
(5) Applying the same principles and factors in comparing the value
of different coverage (or categories of services);
(6) Without taking into account any differences in coverage based
on the method of delivery or means of cost control or utilization used;
and
(7) Taking into account the ability of a State to reduce benefits
by considering the increase in actuarial value of health benefits
coverage offered under the State plan that results from the limitations
on cost sharing under that coverage.
(c) The actuary who prepares the opinion must select and specify
the standardized set and population to be used under paragraphs (b)(3)
and (b)(4) of this section.
(d) The State must provide sufficient detail to explain the basis
of the methodologies used to estimate the actuarial value or, if
requested by HCFA, to replicate the State's result.
Sec. 457.440 Existing comprehensive State-based coverage.
(a) General requirements. Existing comprehensive State-based health
benefits coverage must--
(1) Include coverage of a range of benefits;
(2) Be administered or overseen by the State and receive funds from
the State;
(3) Be offered in the State of New York, Florida or Pennsylvania;
and (4) Have been offered as of August 5, 1997.
(b) Modifications. A State may modify an existing comprehensive
State-based coverage program described in paragraph (a) of this section
if--
(1) The program continues to include a range of benefits; and
(2) The modification does not reduce the actuarial value of the
coverage under the program below the lower of either--
(i) The actuarial value of the coverage under the program as of
August 5, 1997; or
(ii) The actuarial value of a benchmark benefit package as
described in Sec. 457.430 evaluated at the time the modification is
requested.
Sec. 457.450 Secretary-approved coverage.
A State may provide health benefits coverage that the Secretary
determines, upon application by a State, provides appropriate coverage
for the population of targeted low-income children covered under the
program. Secretary-approved coverage, for which no actuarial analysis
is required, may include--
(a) Coverage that is the same as the coverage provided under the
Medicaid State plan;
(b) Comprehensive coverage offered by the State under a Medicaid
demonstration project approved by the Secretary under section 1115 of
the Act that either includes coverage for the full Early and Periodic
Screening, Diagnostic, and Treatment (EPSDT) benefit or that the State
has extended to the entire Medicaid population in the State;
(c) Coverage that includes benchmark coverage, as specified in
Sec. 457.420, plus any additional coverage; or
(d) Coverage, including coverage under an employer-sponsored group
health plan purchased by the State, that the State demonstrates to be
substantially equivalent to benchmark coverage, as specified in
Sec. 457.420, through use of a benefit-by-benefit comparison of the
coverage demonstrating that each benefit meets or exceeds the
corresponding benefit in the benchmark.
Sec. 457.470 Prohibited coverage.
A State is not required to provide health benefits coverage under
the plan for an item or service for which payment is prohibited under
title XXI of the Act even if any benchmark package includes coverage
for that item or service.
Sec. 457.475 Limitations on coverage: Abortions.
(a) General rule. FFP under title XXI of the Act is not available
in expenditures for an abortion, or in expenditures for the purchase of
health benefits coverage that includes coverage of abortion services
unless the abortion services meet the conditions specified in
paragraphs (b)(1) and (b)(2) of this section.
(b) Exceptions. (1) Life of mother. FFP is available in
expenditures for abortion services when a physician has found that the
abortion is necessary to save the life of the mother.
(2) Rape or incest. FFP is available in expenditures for abortion
services performed to terminate a pregnancy resulting from an act of
rape or incest.
(c) Partial Federal funding prohibited. (1) FFP is not available to
a State for any amount expended under the title XXI plan to assist in
the purchase, in whole or in part, of health benefits coverage that
includes coverage of abortions other than those specified in paragraph
(b) of this section.
(2) If a State wishes to have managed care entities provide
abortions in addition to those specified in paragraph (b) of this
section, those abortions must be provided under a separate contract
using non-Federal funds. A State may not set aside a portion of the
capitated rate to be paid with State-only funds, or append riders,
attachments or addenda to existing contracts to separate the additional
abortion services from the other services covered by the contract.
(3) Nothing in this section affects the expenditure by a State,
locality, or private person or entity of State, local, or private funds
(other than those expended under the State plan) for any abortion
services or for health benefits coverage that includes coverage of
abortion services.
Sec. 457.480 Preexisting condition exclusions and relation to other
laws.
(a) Preexisting condition exclusions. (1) Subject to paragraph
(a)(2) of this section, the State child health insurance plan may not
permit the imposition of any pre-existing condition exclusion for
covered benefits under the plan.
(2) If the State obtains health benefits coverage through payment
for, or a contract with, a group health plan or group health insurance
coverage, the State may permit the imposition of a pre-existing
condition exclusion but only to the extent that the exclusion is
permitted under the applicable provisions of part 7 of subtitle B of
title I of the Employee Retirement Income Security Act of 1974 (ERISA)
and title XXVII of the Public Health Service Act.
(b) Relation of title XXI to other laws. (1) ERISA. Nothing in this
title affects or modifies section 514 of ERISA with respect to a group
health plan as defined by section 2791(a)(1) of the Public Health
Service Act.
(2) Health Insurance Portability and Accountability Act (HIPAA).
Health benefits coverage provided under a State plan and coverage
provided as a cost-effective alternative, as described in subpart J of
this part, is creditable coverage for purposes of part 7 of subtitle B
of title II ERISA, title XXVII of the Public Health Service Act, and
subtitle K of the Internal Revenue Code of 1986.
(3) Mental Health Parity Act (MHPA). A State plan under this
subpart must comply with the requirements of the MHPA of 1996 regarding
parity in the application of annual and lifetime dollar limits to
mental health benefits in accordance with 45 CFR 146.136.
(4) Newborns and Mothers Health Protection Act (NMHPA). A State
plan under this subpart must comply with the requirements of the NMHPA
of 1996
[[Page 60955]]
regarding requirements for minimum hospital stays for mothers and
newborns in accordance with 45 CFR 146.130 and 148.170.
Sec. 457.490 Delivery and utilization control systems.
A State that elects to obtain health benefits coverage through a
separate child health program must include in its State plan a
description of the child health assistance provided under the plan for
targeted low-income children, including a description of the proposed
methods of delivery and utilization control systems. A State must--
(a) Describe the methods of delivery of child health assistance
including the choice of financing and the methods for assuring delivery
of the insurance products to the children, including any variations;
and
(b) Describe utilization controls systems designed to ensure that
children use only appropriate and medically necessary health care
approved by the State or its subcontractor.
Sec. 457.495 Grievances and appeals.
States must provide enrollees in a separate child health program
the right to file grievances or appeals for reduction or denial of
services as specified in Sec. 457.985.
Subpart E--State Plan Requirements: Beneficiary Financial
Responsibilities
Sec. 457.500 Basis, scope, and applicability.
(a) Statutory basis. This subpart implements section 2103(e) of the
Act, which sets forth provisions regarding State plan requirements for
cost sharing limitations and options.
(b) Scope. This subpart consists of provisions relating to the
imposition under a separate child health program of cost sharing
charges including enrollment fees, premiums, deductibles, coinsurance,
copayments, and similar cost sharing charges.
(c) Applicability. The requirements of this subpart apply to child
health assistance provided under a separate child health program and,
with respect to the mandatory cost sharing waiver for AI/AN children
only, a Medicaid expansion program.
Sec. 457.505 General State plan requirements.
The State plan must include a description of --
(a) The amount of premiums, deductibles, coinsurance, copayments,
and other cost sharing imposed;
(b) The methods, including the public schedule, the State uses to
inform beneficiaries, applicants, providers and the general public of
the cost sharing charges, the cumulative cost sharing maximum, and any
changes to these amounts; and
(c) When States purchase coverage through, or provide premium
assistance for, employer sponsored group health plans--
(1) The procedures the State uses to ensure that beneficiaries are
not charged copayments, coinsurance, deductibles or similar fees on
well-baby and well-child care as defined in Sec. 457.520. A procedure
that primarily relies on a refund given by the State for overpayment by
a beneficiary is not an acceptable procedure.
(2) The procedures to ensure that AI/AN children are not charged
premiums, copayments, coinsurance, deductibles, or similar fees as
required in Sec. 457.535. A procedure that primarily relies on a refund
given by the State for overpayment by a beneficiary is not an
acceptable procedure.
(3) The procedures to ensure that beneficiaries are not charged
cost sharing in excess of the cumulative cost sharing maximum specified
in Sec. 457.555. A procedure that primarily relies on a refund given by
the State for overpayment by a beneficiary is not an acceptable
procedure.
Sec. 457.510 Premiums, enrollment fees, or similar fees: State plan
requirements.
When a State imposes premiums, enrollment fees, or similar fees on
CHIP beneficiaries, the State plan must describe--
(a) The amount of the premium, enrollment fee or similar fee
imposed on beneficiaries;
(b) The time period for which the charge is imposed;
(c) The group or groups that are subject to the premium, enrollment
fees, or similar charges;
(d) The consequences for a beneficiary who does not pay a charge;
and
(e) A methodology to ensure that total cost sharing liability for a
family does not exceed the cumulative cost sharing maximum specified in
Sec. 457.560. A methodology that primarily relies on a refund given by
the State for overpayment by a beneficiary is not an acceptable
methodology.
Sec. 457.515 Co-payments, coinsurance, deductibles, or similar cost
sharing charges: State plan requirements.
To impose copayments, coinsurance, deductibles or similar charges
on beneficiaries, the State plan must describe--
(a) The service for which the charge may be imposed;
(b) The amount of the charge;
(c) The group or groups that may be subject to the cost sharing
charge;
(d) The consequences for a beneficiary who does not pay a charge;
and
(e) The methodology used to ensure that total cost sharing
liability for a family does not exceed the cumulative cost sharing
maximum specified in Sec. 457.560. A methodology that primarily relies
on a refund given by the State for overpayment by a beneficiary is not
an acceptable methodology.
(f) An assurance that--
(1) Enrollees will not be held liable for additional costs, beyond
the copayment amounts specified in the State plan, that are associated
with emergency services provided at a facility that is not a
participating provider in the enrollee's managed care network; and
(2) The State will not charge different copayment amounts for
emergency services, based upon the location (in network or out of
network) at which those services were provided.
Sec. 457.520 Cost sharing for well-baby and well-child care.
(a) The State plan may not impose copayments, deductibles,
coinsurance or other cost sharing with respect to well-baby and well-
child care services as defined by the State in either the managed care
delivery setting or the fee-for-service delivery setting.
(b) For the purposes of this subpart, any of the following services
covered under the State plan are well-baby and well-child care
services:
(1) All healthy newborn inpatient physician visits, including
routine screening whether provided on an inpatient or outpatient basis.
(2) Routine physical examinations.
(3) Laboratory tests.
(4) Immunizations and related office visits as recommended and
updated in the American Academy of Pediatrics (AAP) ``Guidelines for
Health Supervision III'' and described in ``Bright Futures: Guidelines
for Health Supervision of Infants, Children and Adolescents.''
(5) Routine preventive and diagnostic dental services (such as oral
examinations, prophylaxis and topical fluoride applications, sealants,
and x-rays) as described in the most recent guidelines issued by the
American Academy of Pediatric Dentistry (AAPD).
Sec. 457.525 Public schedule.
(a) The State must make available to the groups in paragraph (b) of
this section a public schedule that contains the following information:
(1) Current cost sharing charges.
(2) Beneficiary groups subject to the charges.
(3) Cumulative cost sharing maximums.
[[Page 60956]]
(4) The consequences for a beneficiary who does not pay a charge.
(b) The State must make the public schedule available to the
following groups:
(1) CHIP beneficiaries, at the time of enrollment, and when cost
sharing charges and cumulative cost sharing maximums are revised.
(2) CHIP applicants, at the time of application.
(3) All CHIP participating providers.
(4) The general public.
Sec. 457.530 General cost sharing protection for lower income
children.
The State may vary premiums, deductibles, coinsurance, copayments
or any other cost sharing based on family income only in a manner that
does not favor children from families with higher income over children
from families with lower income.
Sec. 457.535 Cost sharing protection to ensure enrollment of American
Indians/Alaska Natives.
States must exclude from premiums, deductibles, coinsurance,
copayments or any other cost sharing charges those children who are
American Indians and Alaska Natives, members of a Federally recognized
tribe, and enrolled in a separate child health program.
Sec. 457.540 Cost sharing charges for children in families at or below
150 percent of the Federal poverty line (FPL).
The State may impose premiums, enrollment fees, deductibles,
copayments, coinsurance, cost sharing and other similar charges for
children whose family income is at or below 150 percent of the FPL as
long as--
(a) Aggregate monthly enrollment fees, premiums, or similar charges
imposed on a family are less than or equal to the maximum monthly
charges described in Sec. 447.52 of this chapter for a Medicaid
eligible family of the same size and income;
(b) For children whose family income is at or below 100 percent of
the FPL, any copayments, coinsurance, deductibles or similar charges
are equal to or less than the amounts permitted under Sec. 447.54 of
this chapter;
(c) For children whose family income is 101 percent to 150 percent
of the FPL, any copayments, coinsurance, deductibles or similar charges
are equal to or less than the amounts permitted under Sec. 457.555;
(d) The frequency of cost sharing charges is consistent with
Sec. 457.550; and
(e) Aggregate annual cost sharing of all types, with respect to all
targeted low-income children in a family, does not exceed the maximum
permitted under Sec. 457.560(d).
Sec. 457.545 Cost sharing for children in families above 150 percent
of the FPL.
The State may impose premiums, enrollment fees, copayments,
deductibles, coinsurance, cost sharing and similar charges on children
in families above 150 percent of the FPL, as long as aggregate annual
cost sharing, of all types, with respect to all targeted low-income
children in a family, does not exceed the maximum permitted under
Sec. 457.555(c).
Sec. 457.550 Restriction on the frequency of cost sharing charges on
targeted low-income children in families at or below 150 percent of the
FPL.
(a) The State plan may not impose more than one type of cost
sharing charge (deductible, copayment, or coinsurance) on a service.
(b) The State plan may not impose more than one copayment for
multiple services furnished during one office visit.
(c) For targeted low-income children whose family income is from
101 to 150 percent of the FPL, a standard copayment amount for any
service may be determined by applying the maximum copayment amounts
specified in paragraphs (b) and (c) of this section to the State's
average or typical payment for that service.
Sec. 457.555 Maximum allowable cost sharing charges on targeted low-
income children in families with income from 101 to 150 percent of the
FPL.
(a) Non-institutional services. For targeted low-income children
whose family income is from 101 to 150 percent of the FPL, the State
plan must provide that for non-institutional services--
(1) Any copayment or similar charge the State imposes under a fee-
for-service delivery system does not exceed the following amounts:
------------------------------------------------------------------------
Maximum amount
Payment for the service chargeable to
beneficiary
------------------------------------------------------------------------
$15.00 or less.......................................... $1.00
$15.01 to $40........................................... 2.00
$40.01 to $80........................................... 3.00
$80.01 or more.......................................... 5.00
------------------------------------------------------------------------
(2) Any copayment that the State imposes under a managed care
organization may not exceed $5.00 per visit;
(3) Any coinsurance rate the State imposes may not exceed 5 percent
of the payment the State directly or through contract makes for the
service; and
(4) Any deductible the State imposes may not exceed $3.00 per
month, per family for each period of CHIP eligibility.
(b) Institutional services. For targeted low-income children whose
family income is from 101 to 150 percent of the FPL, the maximum
deductible, coinsurance or copayment charge for each institutional
admission may not exceed 50 percent of the payment the State makes
directly or through contract for the first day of care in the
institution.
(c) Nonemergency use of the emergency room. For targeted low-income
children whose family income is from 101 to 150 percent of the FPL, the
State may charge up to twice the charge for non-institutional services,
up to a maximum amount of $10.00, for services furnished in a hospital
emergency room if those services do not result from an emergency
medical condition.
(d) Emergency room services provided outside of the enrollee's
managed care network. States must assure that enrollees will not be
held liable for additional costs associated with emergency services
provided at a facility that is not a participating provider in the
enrollee's managed care network beyond the specified co-payment amount.
Sec. 457.560 Cumulative cost sharing maximum.
(a) Legal obligation means liability to pay amounts a provider
actually charges and any other amounts for which payment may be
required under applicable State law for covered services to eligible
children, even if payment is never actually made.
(b) General rules. (1) The State plan may set cumulative cost
sharing maximum levels lower than the maximum levels specified in
paragraphs (c) and (d) of this section, but may not set maximum levels
in excess of the specified levels.
(2) A State must count cost sharing amounts that the family has a
legal obligation to pay in computing whether a family has met the
cumulative cost sharing maximum.
(c) Children with family incomes above 150 percent of the FPL. For
targeted low-income children with family income above 150 percent of
the FPL, the State plan may not impose premiums, enrollment fees,
copayments, coinsurance, deductibles, or similar cost sharing charges
that, in the aggregate, exceed 5 percent of total family income for a
year (or 12 month eligibility period).
[[Page 60957]]
(d) Children with family incomes at or below 150 percent of the
FPL. For targeted low-income children with family income at or below
150 percent of the FPL, the plan may not impose premiums, deductibles,
copayments, coinsurance, enrollment fees, or similar cost sharing
charges that, in the aggregate, exceed 2.5 percent of total family
income for the year.
Sec. 457.565 Grievances and appeals.
The State must provide enrollees in a separate child health program
the right to file grievances and appeals as specified in Sec. 457.985
for disenrollment from the program due to failure to pay cost sharing.
Sec. 457.570 Disenrollment protections.
The State must establish a process that gives beneficiaries
reasonable notice of and an opportunity to pay past due premiums,
copayments, coinsurance, deductibles or similar fees prior to
disenrollment.
Subpart F--[Reserved]
Subpart G--Strategic Planning, Reporting, and Evaluation
Sec. 457.700 Basis, scope, and applicability.
(a) Statutory basis. This subpart implements--
(1) Sections 2102(a)(7)(A) and (B) of the Act, which relate to
assurances of quality and appropriateness of care, and access to
covered services;
(2) Sections 2107(a), (b) and (d) of the Act, which set forth
requirements for strategic planning, reports, and program budgets; and
(3) Section 2108 of the Act, which sets forth provisions regarding
annual reports and evaluation.
(b) Scope. This subpart sets forth requirements for strategic
planning, monitoring, reporting and evaluation under title XXI of the
Act.
(c) Applicability. The requirements of this subpart apply to
separate child health programs and Medicaid expansion programs.
Sec. 457.710 State plan requirements: Strategic objectives and
performance goals.
(a) Plan description. A State plan must include a description of--
(1) The strategic objectives as described in paragraph (b) of this
section;
(2) The performance goals as described in paragraph (c) of this
section; and
(3) The performance measurements, as described in paragraph (d) of
this section, that the State has established for providing child health
assistance to targeted low-income children under the plan and otherwise
for maximizing health benefits coverage for other low-income children
and children generally in the State.
(b) Strategic objectives. The State plan must identify specific
strategic objectives relating to increasing the extent of creditable
health coverage among targeted low-income children and other low-income
children.
(c) Performance goals. The State plan must specify one or more
performance goals for each strategic objective identified.
(d) Performance measurements. The State plan must describe how
performance under the plan is--
(1) Measured through objective, independently verifiable means; and
(2) Compared against performance goals.
Sec. 457.720 State plan requirement: State assurance regarding data
collection, records, and reports.
A State plan must include an assurance that the State collects
data, maintains records, and furnishes reports to the Secretary, at the
times and in the standardized format the Secretary may require to
enable the Secretary to monitor State program administration and
compliance and to evaluate and compare the effectiveness of State plans
under title XXI of the Act.
Sec. 457.730 State plan requirement: State annual reports and
evaluation.
A State plan must include a description of the State's strategy for
the submission of the annual reports required under Sec. 457.750, and
the evaluation required by Sec. 457.760.
Sec. 457.735 State plan requirement: State assurance of the quality
and appropriateness of care.
(a) A State plan must include a description of the methods that a
State uses for assuring the quality and appropriateness of care
provided under the plan, particularly with respect to--
(1) Well-baby care, well-child care, well-adolescent care and
childhood and adolescent immunizations; and
(2) Access to covered services, including covered emergency
services and covered post-stabilization services as defined at
Sec. 457.402.
(b) States must assure appropriate and timely procedures to monitor
and treat enrollees with complex and serious medical conditions,
including access to specialists.
Sec. 457.740 State expenditures and statistical reports.
(a) Required quarterly reports. A State must submit a report to
HCFA that contains quarterly program expenditures and statistical data
no later than 30 days after the end of each quarter of the Federal
fiscal year. Territories are excepted from the definition of ``State''
for the purposes of quarterly reporting. A State must collect required
data beginning on the date of implementation of the approved State
plan. The quarterly reports must include data on--
(1) Program expenditures; and
(2) The number of children under 19 years of age who are enrolled
in the title XIX Medicaid program, the separate child health program,
and in the Medicaid-expansion program, as appropriate, by the following
categories:
(i) Age (under 1 year of age, 1 through 5 years of age, 6 through
12 years of age, and 13 through 18 years of age).
(ii) Service delivery system (managed care, fee-for-service, and
primary care case management).
(iii) Family income as a percentage of the Federal poverty level as
described in paragraph (b) of this section.
(b) Reportable family income categories. (1) A State that does not
impose cost sharing or a State that only imposes cost-sharing based on
a fixed percentage of income must report by two family income
categories:
(i) At or below 150 percent of FPL.
(ii) Over 150 percent of FPL.
(2) A State that imposes cost sharing at one or more poverty levels
must report by poverty level categories that match the poverty level
categories used for purposes of cost sharing in the separate child
health program and in the Medicaid-expansion program.
(c) Required unduplicated counts. Thirty days after the end of the
Federal fiscal year, the State must submit an unduplicated count for
the Federal fiscal year of children who are enrolled in the Medicaid
program, the separate child health program, and the Medicaid-expansion
program, as appropriate, by age, service delivery, and poverty level
categories described in paragraphs (a) and (b) of this section.
Sec. 457.750 Annual report.
(a) Report required for each Federal fiscal year. A State must
report to HCFA by January 1 following the end of each Federal fiscal
year, on the results of the State's assessment of the operation of the
State plan.
(b) Contents of annual report. In the annual report required under
paragraph (a) of this section, a State must--
(1) Describe the State's progress in reducing the number of
uncovered, low-income children and in meeting other strategic
objectives and performance goals identified in the State plan;
(2) Report on the effectiveness of the State's policies for
discouraging the
[[Page 60958]]
substitution of public coverage for private coverage;
(3) Identify successes and barriers in State plan design and
implementation, and the approaches the State is considering to overcome
these barriers;
(4) Describe the State's progress in addressing any specific issues
(such as outreach) that the State plan agreed to periodically monitor
and assess;
(5) Provide an updated budget for the current Federal fiscal year
with details on the planned use of funds and any changes in the sources
of the non-Federal share of State plan expenditures; and
(6) Identify the total State expenditures for family coverage and
total number of children and adults covered by family coverage during
the preceding Federal fiscal year.
(c) Methodology for estimate of number of uninsured, low-income
children. (1) To report on the progress made in reducing the number of
uncovered, low-income children as required in paragraph (b) of this
section, a State must choose a methodology to establish an initial
baseline estimate of the number of low-income children who are
uninsured in the State and to provide an annual estimate of changes in
this number at two poverty levels, 200 percent FPL and at the current
upper eligibility level of the State's program. A State may base the
estimate on data from--
(i) The March supplement to the Current Population Survey (CPS);
(ii) A State-specific survey;
(iii) A statistically adjusted CPS; or
(iv) Another appropriate source.
(2) A State must submit a description of the methodology used to
develop the initial baseline estimate and the rationale for its use
unless the State bases the estimate on data from the March supplement
to the CPS.
Sec. 457.760 State evaluations.
By March 31, 2000, a State that has an approved State plan must
submit to HCFA a report on the operation of its Medicaid-expansion
program, separate child health program, or combination program. The
report must provide an evaluation of the State plan that includes the
following:
(a) An assessment of the effectiveness of the State plan in
increasing the number of children with creditable health coverage.
(b) A report on progress made in meeting other strategic objectives
and performance goals identified by the State plan.
(c) A description and analysis of the effectiveness of elements of
the State plan, including--
(1) The characteristics of the children and families assisted under
the State plan, including age of the children, family income, and the
assisted children's access to coverage or coverage by other health
insurance prior to the State plan and after eligibility for coverage
under the State plan ends;
(2) The quality of health coverage provided, including the results
or the plans to assess the results of any monitoring or other methods
used to assure quality and appropriateness of care;
(3) The amount and level of assistance (including payment of part
or all of any premiums, copayments, or enrollment fees) provided by the
State;
(4) The service area of the State program;
(5) The time limits for coverage of a child under the program;
(6) The extent of substitution of public coverage for private
coverage and the State's effectiveness in designing policies that
discourage substitution.
(7) The State's choice of health benefits coverage, including the
types of benefits provided and the scope and range of these benefits,
and other methods used for providing child health assistance; and
(8) The sources of non-Federal funding used in the program.
(d) A State that subsidizes children's coverage through employer-
sponsored group health plans must provide an assessment of the
effectiveness of its substitution prevention strategies.
(e) An assessment of the effectiveness of other public and private
programs in the State in increasing the availability of affordable
quality individual and family health insurance for children.
(f) A review and assessment of State activities to coordinate the
program with other public and private programs providing health care
and health care financing, including Medicaid and maternal and child
health services.
(g) An analysis of changes and trends in the State that affect the
provision of accessible, affordable, quality health insurance and
health care to children.
(h) A description of any plans the State has for improving the
availability of health insurance and health care for children.
(i) Recommendations for improving the program.
Subpart H--Substitution of Coverage
Sec. 457.800 Basis, scope, and applicability.
(a) Statutory basis. This subpart interprets and implements section
2102(b)(3)(C) of the Act, which provides that the State plan must
include a description of procedures the State uses to ensure that
insurance provided under the State plan does not substitute for
coverage under group health plans.
(b) Scope. This subpart sets forth State plan requirements relating
to substitution of coverage in general and specific requirements
relating to substitution of coverage under employer-sponsored group
health plans.
(c) Applicability. The requirements of this subpart apply to
separate child health programs.
Sec. 457.805 State plan requirements: Private coverage substitution.
The State plan must include a description of reasonable procedures
to ensure that coverage provided under the plan does not substitute for
coverage under group health plans as defined at Sec. 457.10.
Sec. 457.810 Premium assistance for employer-sponsored group health
plans: Required protections against substitution.
If a State obtains health benefits coverage through employer-
sponsored group health plans, the State must provide the protections
against substitution of CHIP coverage for private coverage specified in
this section. States must describe these provisions in their State
plan, annual reports, and State evaluations.
(a) Minimum period without employer-sponsored group health
coverage. (1) As a condition of eligibility for CHIP payment for
employer-sponsored group health coverage, a child must not have had
employer-sponsored group health coverage for a period of at least 6
months and not more than 12 months prior to application for CHIP.
(2) States may permit exceptions to the minimum period without
employer-sponsored group health coverage if a child's coverage during
the minimum period was involuntarily terminated by an employer.
(3) A newborn is not required to have a period without insurance as
a condition of eligibility for CHIP payment for employer-sponsored
group health coverage.
(b) Employer contribution. As a condition of eligibility for CHIP
payment for employer-sponsored group health coverage--
(1) The employee who is eligible for the coverage must apply for
the full premium contribution available from the employer; and
(2) The employer must make a substantial contribution to the cost
of family coverage equal to--
(i) 60 percent of the total cost; or
(ii) A lower amount if the State can show that the average
contribution in the State is lower than 60 percent.
[[Page 60959]]
(c) Cost effectiveness. The State's payment for coverage for a
child under an employer-sponsored group health plan must not be greater
than the cost of other CHIP coverage.
(d) State evaluation. The State must evaluate the amount of
substitution that occurs as a result of payments for employer sponsored
group health plans and the effect of those payments on access to
coverage.
Subpart I--Program Integrity and Beneficiary Protections
Sec. 457.900 Basis, scope and applicability.
(a) Statutory basis. This subpart interprets and implements--
(1) Section 2101(a) of the Act, which provides that the purpose of
title XXI of the Act is to provide funds to States to enable them to
initiate and expand the provision of child health assistance to
uninsured, low-income children in an effective and efficient manner;
and
(2) Section 2107(e) of the Act, which provides that certain title
XIX and title XI provisions, including the following, apply to States
under title XXI in the same manner as they apply to a State under title
XIX:
(i) Section 1902(a)(4)(C) of the Act, relating to conflict of
interest standards.
(ii) Paragraphs (2), (16), and (17), of section 1903(i) of the Act,
relating to limitations on payment.
(iii) Section 1903(w) of the Act, relating to limitations on
provider taxes and donations.
(iv) Section 1124 of the Act, relating to disclosure of ownership
and related information.
(v) Section 1126 of the Act, relating to disclosure of information
about certain convicted individuals.
(vi) Section 1128 of the Act, relating to exclusions.
(vii) Section 1128A of the Act, relating to civil monetary
penalties.
(viii) Section 1128B(d) of the Act, relating to criminal penalties
for certain additional charges.
(ix) Section 1132 of the Act, relating to periods within which
claims must be filed.
(b) Scope. This subpart sets forth requirements, options, and
standards for program integrity assurances that must be included in the
approved State plan.
(c) Applicability. This subpart only applies to States that
implement separate child health programs. States that implement
Medicaid expansion programs are subject to the program integrity rules
and requirements specified under title XIX of the Act.
Sec. 457.902 Definitions.
As used in this subpart--
Contractor means any individual or entity that enters into a
contract, or a subcontract to provide, arrange, or pay for services
under title XXI of the Act. This definition includes, but is not
limited to, managed care organizations, prepaid health plans, primary
care case managers, and fee-for-service providers and insurers.
Fee-for-service entity means any entity that furnishes services,
under the program on a fee-for-service basis, including health
insurance services.
Grievance means a written communication, submitted by or on behalf
of an enrollee in a child health program, expressing dissatisfaction
with any aspect of a State, a managed care or fee-for-service entity,
or a provider's operations, activities or behavior that pertains to--
(1) The availability, delivery, or quality of health care services,
including utilization review decisions that are adverse to the
enrollee;
(2) Payment, treatment, or reimbursement of claims for health care
services; or
(3) Issues unresolved through the complaint process established in
accordance with Sec. 457.985(e).
Managed care entity (MCE) means an entity that enters into a
contract to provide services in a managed care delivery system,
including but not limited to managed care organizations, prepaid health
plans, and primary care case managers.
State program integrity unit means a part of an organization
designated by the State (at its option) to conduct program integrity
activities for separate child health programs.
Sec. 457.910 State program administration.
The State's child health program must include--
(a) Methods of administration that the Secretary finds necessary
for the proper and efficient operation of the separate child health
program; and
(b) Safeguards necessary to ensure that--
(1) Eligibility will be determined appropriately in accordance with
subpart C of this part; and
(2) Services will be provided in a manner consistent with
administrative simplification and with the provisions of subpart D of
this part.
Sec. 457.915 Fraud detection and investigation.
(a) State program requirements. The State must establish procedures
for ensuring program integrity and detecting fraudulent or abusive
activity. These procedures must include the following:
(1) Methods and criteria for identifying suspected fraud and abuse
cases.
(2) Methods for investigating fraud and abuse cases that--
(i) Do not infringe on legal rights of persons involved; and
(ii) Afford due process of law.
(b) State program integrity unit. The State may establish an
administrative agency responsible for monitoring and maintaining the
integrity of the separate child health program (hereafter referred to
as the ``State program integrity unit''),
(c) Program coordination. The State must develop and implement
procedures for referring suspected fraud and abuse cases to the State
program integrity unit and to law enforcement officials. Law
enforcement officials include, but are not limited to the--
(1) U.S. Department of Health and Human Services Office of
Inspector General (OIG);
(2) U.S. Attorney's Office, Department of Justice (DOJ);
(3) Federal Bureau of Investigation (FBI); and
(4) State Attorney General's office.
Sec. 457.920 Accessible means to report fraud and abuse.
The State agency must establish and provide access to a mechanism
for communication between the State and the public about potentially
fraudulent and abusive practices by and among contractors,
beneficiaries, and other entities. This communication mechanism may
include a toll-free telephone number.
Sec. 457.925 Preliminary investigation.
If the State agency receives a complaint of fraud or abuse from any
source or identifies any questionable practices, the State agency must
conduct a preliminary investigation or take otherwise appropriate
action to determine whether there is sufficient basis to warrant a full
investigation.
Sec. 457.930 Full investigation, resolution, and reporting
requirements.
The State must establish and implement effective procedures for
investigating and resolving suspected and apparent instances of fraud
and abuse. Once the State determines that a full investigation is
warranted, the State must implement procedures including, but not
limited to the following:
(a) Cooperate with and refer potential fraud and abuse cases to the
State program integrity unit, if such a unit exists, when requested to
do so by that unit.
(b) Conduct a full investigation; or
(c) Refer the fraud and abuse case to appropriate law enforcement
officials.
[[Page 60960]]
Sec. 457.935 Sanctions and related penalties.
(a) A State may not make payments for any item or service
furnished, ordered, or prescribed under a separate child health program
to any contractor who has been excluded from participating in the
Medicare and Medicaid programs.
(b) The following provisions and their corresponding regulations
apply to a State under title XXI of the Act, in the same manner as
these provisions and regulations apply to a State under title XIX:
(1) Part 455, subpart B of this chapter.
(2) Section 1124 of the Act pertaining to disclosure of ownership
and related information.
(3) Section 1126 of the Act pertaining to disclosure by
institutions, organizations, and agencies of owners and certain other
individuals who have been convicted of certain offenses.
(4) Section 1128 of the Act pertaining to exclusions.
(5) Section 1128A of the Act pertaining to civil monetary
penalties.
(6) Section 1128B of the Act pertaining to criminal penalties for
acts involving Federal health care programs.
(7) Section 1128E of the Act pertaining to the reporting of final
adverse actions on liability findings made against health care
providers, suppliers, and practitioners under the health care fraud and
abuse data collection program.
Sec. 457.940 Procurement standards.
(a) A State must submit to HCFA a written assurance that title XXI
services will be provided in an effective and efficient manner. The
State must submit the assurance--
(1) With the initial State plan; or
(2) For States with approved plans, with the first request to amend
the approved plan.
(b) A State must provide child health assistance in an effective
and efficient manner by--
(1) Providing for free and open competition, to the maximum extent
possible, in the bidding of all procurement contracts for coverage or
other services in accordance with the procurement requirements of 45
CFR 74.43; or
(2) Basing title XXI payment rates on public and/or private payment
rates for comparable services.
(c) A State may establish higher rates than permitted under
paragraph (a) of this section if such rates are necessary to ensure
sufficient provider participation or to enroll providers who
demonstrate exceptional efficiency or quality in the provision of
services.
(d) All contracts under this part must include provisions that
define a sound and complete procurement contract, as required by 45 CFR
part 74.
(e) The State must provide to HCFA, if requested, a description of
the manner in which rates were developed in accordance with the
requirements of paragraphs (a) or (b) of this section. HCFA may request
this description either when a State--
(1) Determines its rates initially;
(2) Updates its rates; or
(3) Changes its reimbursement methodology.
Sec. 457.945 Certification for contracts and proposals.
Entities that contract with the State under a separate child health
program must certify the accuracy, completeness, and truthfulness of
information in contracts and proposals, including information on
subcontractors, and other related documents as specified by the State.
Sec. 457.950 Contract and payment requirements including certification
of payment-related information.
(a) Managed care entity. A State that makes payments to a managed
care entity under a separate child health program, based on data
submitted, must ensure that its contract requires the managed care
entity to provide, under penalty of perjury --
(1) Enrollment information and other information required by the
State;
(2) An attestation to the accuracy, completeness, and truthfulness
of claims and payment data, upon penalty of perjury;
(3) Access for the State to enrollee health claims data and payment
data, as determined by the State in conformance with the appropriate
privacy protections in the State; and
(4) A guarantee that managed care entities will not avoid costs for
services covered in its contract by referring beneficiaries to publicly
supported health care resources.
(b) Fee-for-service entities. A State that makes payments to fee-
for-service entities under a separate child health program must--
(1) Establish procedures to ensure and attest that information on
claim forms is truthful, accurate, and complete; and
(2) Require, as a condition of participation, that fee-for-service
entities provide the State with access to enrollee health claims data
and claims payment data as determined necessary by the State.
Sec. 457.955 Conditions necessary to contract as a managed care entity
(MCE).
(a) The State must assure that any entity seeking to contract as an
MCE under a separate child health program has administrative and
management arrangements or procedures designed to safeguard against
fraud and abuse.
(b) Unless otherwise provided for by State law, the State must
ensure the arrangements or procedures required in paragraph (a) of this
section --
(1) Enforce MCE compliance with all applicable Federal and State
standards; and
(2) Include a mechanism for the MCE to report to the State, and to
HCFA and/or the Office of Inspector General (OIG) information on
violations of law by subcontractors or enrollees of an MCE and other
individuals.
(c) With respect to enrollees, the reporting requirement in
paragraph (b) of this section applies only to information on violations
of law that pertain to enrollment in the plan, or the provision of, or
payment for, health services.
(d) The State may inspect, evaluate, and audit MCEs at any time, as
necessary, in instances where the State determines that there is a
reasonable possibility of fraudulent and abusive activity.
Sec. 457.960 Reporting changes in eligibility and redetermining
eligibility.
If the State requires reporting of changes in circumstances that
may affect their eligibility for child health assistance, the State
must:
(a) Establish procedures to ensure that beneficiaries make timely
and accurate reports of any changes; and
(b) Promptly redetermine eligibility when the State has information
about these changes.
Sec. 457.965 Documentation.
The State must include in each applicant's record facts to support
the State's determination of the applicant's eligibility for CHIP.
Sec. 457.970 Eligibility and income verification.
(a) The State must establish procedures to ensure --
(1) The integrity of the eligibility determination process; and
(2) Compliance with verification and documentation requirements
applicable to separate child health programs under other Federal laws
and regulations.
(b) A State may use its discretion in establishing reasonable
income and eligibility verification mechanisms.
(c) The State may choose to use the income and eligibility
verification system requirements set forth in section 1137 of title XI
of the Act at Secs. 435.940 through 435.953 of this chapter.
(d) The State may terminate the eligibility of an applicant or
beneficiary for ``good cause''.
[[Page 60961]]
(1) For purposes of this section, ``good cause'' exists if any
information or other action makes the beneficiary fail to meet the
requirements of income and eligibility verification or documentation as
reasonably determined by the State.
(2) Beneficiaries terminated for good cause must be given notice of
the termination decision that sets forth the reasons for termination
and provides a reasonable opportunity to appeal the termination
decision as specified in Sec. 457.985.
Sec. 457.975 Redetermination intervals in cases of suspected
enrollment fraud.
If a State suspects enrollment fraud, the State may, at its own
discretion, perform eligibility redetermination at any frequency
interval that is considered by the State to be in the best interest of
the program.
Sec. 457.980 Verification of enrollment and provider services
received.
(a) The State must establish methodologies to verify whether
beneficiaries have received services for which providers are billed.
(b) The State must establish and maintain systems to identify,
report, and verify those enrolled children that meet requirements of
section 2105(a) of the Act, where enhanced Federal medical assistance
percentage computations apply.
Sec. 457.985 Enrollee rights to file grievances and appeals.
(a) The State and its participating providers must give applicants
and enrollees written notice of their right to file grievances and
appeals in cases where the State or its contractors take actions to:
(1) Deny, suspend or terminate eligibility;
(2) Disenroll for failure to pay cost-sharing; or
(3) Reduce or deny services provided for in the benefit package.
(b) The State must establish and maintain written procedures for
addressing grievances and appeal requests, including processes for
internal review by the contractor and external review by an independent
entity or the State agency, that comply with State-specific grievance
and appeal requirements currently in effect for health insurance
issuers (as defined in section 2791(b) of the Public Health Service
Act) in the State. Such procedures must include a guarantee that
resolution of grievances and appeal requests will be completed within a
reasonable amount of time.
(c) The State may elect in its State plan to use the rules,
systems, and procedures used in the Medicaid program such as--
(1) Part 431, subpart E of this chapter regarding fair hearings for
Medicaid applicants and recipients; and
(2) Medicaid appeal procedures for Medicaid managed care entities.
(d) The State and its contractors must have in place a meaningful
process for reviewing and resolving complaints that are submitted
outside of the grievance and appeals procedures as part of the quality
assurance process.
(e) The State must guarantee in all contracts for coverage and
services, beneficiary access to information related to actions which
could be subject to grievance or appeal in accordance with:
(1) Section 422.206 of this chapter, which prohibits interference
with health care professionals' advice to enrollees; and
(2) Sections 422.208 and 422.210(a) and (b) of this chapter,
related to limitations on physician incentives, or compensation
arrangements that have the effect of reducing or limiting services, and
information disclosure requirements respectively.
Sec. 457.990 Privacy protections.
(a) The State plan must assure that the program will be operated in
compliance with the provisions of part 431, subpart F of this chapter
related to safeguarding information on Medicaid applicants and
recipients.
(b) The State plan must assure the protection of information and
data pertaining to beneficiaries by providing that all contracts will
include guarantees that--
(1) Original medical records are released only in accordance with
Federal or State law, or court orders or subpoenas;
(2) Information from or copies of medical records are released only
to authorized individuals;
(3) Medical records and other information are accessed only by
authorized individuals;
(4) Confidentiality and privacy of minors is protected in
accordance with applicable Federal and State law;
(5) Enrollees will have timely access to their records and to
information that pertains to them;
(6) Beneficiary information is safeguarded in accordance with all
Federal and State law relating to confidentiality and disclosure of
mental health records, medical records, and other related information
about the beneficiary; and
(7) Any electronic transmission of data to HCFA must comply with
HCFA's policies and requirements regarding privacy and confidentiality
of data transmissions. Data transmissions between providers, health
plans and the State are also subject to these requirements.
(c) The State plan is subject to any Federal information disclosure
safeguards as well as requirements mandated by the State including the
use of the Internet to transmit CHIP data between the State and its
providers.
(d) The State must assure that the program will be operated in
compliance with all applicable State and Federal requirements to
protect the confidentiality of information transmitted by electronic
means, including the Internet.
Sec. 457.995 Overview of beneficiary rights.
In order to ensure that coverage and services are effectively and
efficiently furnished to eligible beneficiaries, the following
beneficiary protections are addressed in this part:
(a) Information. States are required to provide information to
families of targeted low-income children regarding:
(1) Types of benefits, the amount, duration and scope of those
benefits, and names and locations of current participating providers
(Sec. 457.110(b));
(2) Either individually or through public notice, changes related
to cost sharing or any other restrictions of eligibility or benefits
(Secs. 457.525 and 457.65);
(3) Enrollment assistance to potentially eligible children and
their families (Sec. 457.360(d)) and information about beneficiary
rights and obligations under the program (Sec. 457.360(e)); and
(4) Information must be accurate and easily understood and provide
assistance to families in making informed health care decisions.
(b) Choice of providers and plans. States must provide enrollees
assistance in making health care decisions and must assure appropriate
and timely procedures to monitor and treat enrollees with complex and
serious medical conditions including access to specialists in
accordance with Secs. 457.110 and 457.735(c) respectively.
(c) Access to emergency services. (1) States are required to
provide an assurance of the quality and appropriateness of care,
including access to covered services, including emergency services and
covered post-stabilization services, as defined in Sec. 457.402 and in
accordance with Sec. 457.735 respectively.
(2) States must assure that enrollees will not be held liable for
additional costs, beyond the copayment amounts specified in the State
plan, that are associated with emergency services provided by a
facility that is not a
[[Page 60962]]
participating provider in the enrollee's managed care network
(Sec. 457.515(f)).
(d) Participation in treatment decisions. Enrollees have the right
to participate in their own care and to receive information on health
plans, professionals, and facilities (Sec. 457.110 and
Sec. 457.985(e)). States must prohibit gag rules and establish
principles for disclosure of physician financial arrangements that
could affect treatment decisions (Sec. 457.985(e)).
(e) Respect and nondiscrimination. States must assure that families
of targeted low-income children are treated with respect and
nondiscrimination in accordance with applicable civil rights assurances
and requirements found at Sec. 457.130.
(f) Confidentiality of health information. States must ensure the
confidentiality of a beneficiary's health information and provide
beneficiaries access to medical records only in accordance with
applicable Federal and State laws (Sec. 457.990).
(g) Grievances and appeals. (1) States and their participating
contractors must ensure the family's right to file grievances and
appeals by notifying beneficiaries of this right, and by having written
procedures in place to afford applicants and enrollees the right to
file grievances in cases where action is taken to--
(i) Deny, suspend or terminate eligibility in accordance with
Sec. 457.365;
(ii) Reduce or deny benefits provided for in the plan in accordance
with Sec. 457.495; or
(iii) Disenroll for failure to pay cost-sharing in accordance with
Sec. 457.560.
(2) Procedures for grievances, complaints and appeals must be
conducted and resolved in a timely manner that is consistent with the
standard health insurance practices in the State in accordance with
Sec. 457.985.
Subpart J--Allowable Waivers: General Provisions
Sec. 457.1000 Basis, scope, and applicability.
(a) Statutory basis. This subpart interprets and implements --
(1) Section 2105(c)(2)(B) of the Act, which sets forth the
requirements for a waiver to permit a State to exceed the 10 percent
cost limit on expenditures other than benefit package expenditures; and
(2) Section 2105(c)(3) of the Act, which permits a waiver for the
purchase of family coverage.
(b) Scope. This subpart sets forth requirements for obtaining a
waiver under title XXI of the Act.
(c) Applicability. The requirements of this subpart apply to child
health assistance provided under a separate child health program and to
a Medicaid expansion program only to the extent that the State claims
administrative costs under title XXI and seeks a waiver of limitations
such claims in light of a community-based health delivery system.
Sec. 457.1005 Waiver for cost-effective coverage through a community-
based health delivery system.
(a) Availability of waiver. The Secretary may waive the
requirements of Sec. 457.618 regarding the 10 percent limit on
expenditures not used for child health assistance in the form of health
benefits coverage meeting the requirements of Sec. 457.410, in order to
provide child health assistance to targeted low-income children under
the State plan through a cost-effective, community-based health care
delivery system, such as through contracts with health centers
receiving funds under section 330 of the Public Health Service Act or
with hospitals such as those that receive disproportionate share
payment adjustments under section 1886(c)(5)(F) or section 1923 of the
Act.
(b) Requirements for obtaining a waiver. To obtain a waiver for
cost effective coverage through a community-based health delivery
system, a State must demonstrate that --
(1) The coverage meets the coverage requirements of section 2103 of
the Act and subpart D of this part; and
(2) The cost of such coverage, on an average per child basis, does
not exceed the cost of coverage under the State plan.
(c) Two-year approval period. An approved waiver remains in effect
for 2 years. A State may reapply for approval 3 months before the end
of the 2-year period.
(d) Application of cost savings. If the cost of coverage of a child
under a community-based health delivery system is equal to or less than
the cost of coverage of a child under the State plan, the State may use
the difference in the cost of coverage for each child enrolled in a
community-based health delivery system for--
(1) Other child health assistance, health services initiatives, and
outreach; or
(2) Any reasonable costs necessary to administer the State's
program.
Sec. 457.1010 Waiver for purchase of family coverage.
A State may purchase family coverage under a group health plan or
health insurance coverage that includes coverage for targeted low-
income children if the State establishes that--
(a) Purchase of family coverage is cost effective under the
standards described in Sec. 457.1015;
(b) The State does not purchase the coverage if it would otherwise
substitute for health insurance coverage that would be provided to
targeted, low-income children but for the purchase of family coverage;
and
(c) The coverage for the child otherwise meets the requirements of
this part.
Sec. 457.1015 Cost-effectiveness.
(a) Definition. For purposes of this subpart, ``cost-effective''
means that the cost paid under the plan of purchasing family coverage
under a group health plan or health insurance coverage that includes
coverage for targeted low-income children is equal to or less than the
State's cost of obtaining coverage under the plan only for the eligible
targeted low-income children involved.
(b) Cost comparisons. A State may demonstrate cost-effectiveness by
comparing the cost of coverage for the family that meets the
requirements of Sec. 457.1010 to the cost of coverage only for the
targeted low-income children under--
(1) The health benefits packages offered by the State under the
State plan for which the child is eligible; or
(2) Any child-only health benefits package available for purchase
in the State that meets the requirements of Sec. 457.410, even if the
State does not offer it under the State plan.
(c) Individual or aggregate basis. (1) The State may base its
demonstration of the cost-effectiveness of family coverage on an
assessment of cost-effectiveness of family coverage for individual
families, done on a case-by-case basis, or on the cost of family
coverage in the aggregate.
(2) The State must assess cost-effectiveness in its initial request
for a waiver and then annually. For any State that chooses the
aggregate cost method, if an annual assessment of the cost-
effectiveness of family coverage in the aggregate reveals that it is
not cost-effective, the State must assess cost-effectiveness on a case-
by-case basis.
(d) Reports on family coverage. A State with a waiver under this
section must include in its annual report pursuant to subpart G of this
part the cost of family coverage purchased under the waiver, and the
number of children and adults covered under family coverage pursuant to
the waiver.
PART 457--ALLOTMENTS AND GRANTS TO STATES
G. Part 457 is amended as follows:
1. The authority citation for part 457 continues to read as
follows:
[[Page 60963]]
Authority: Section 1102 of the Social Security Act (42 U.S.C.
1302).
2. Section 457.204(d)(2), as proposed at 64 FR 10428, March 4,
1999, is revised to read as follows:
Sec. 457.204 Withholding of payment for failure to comply with Federal
requirements.
* * * * *
(d) * * *
(2) Opportunity for corrective action. If enforcement actions are
proposed, the State must submit evidence of corrective action related
to the findings of noncompliance to the Administrator within 30 days
from the date of the preliminary notification. Corrective action is
action to ensure that the plan is, and will be, administered consistent
with applicable law and regulations, to ameliorate past deficiencies in
plan administration, or to ensure that beneficiaries will be treated
equitably.
* * * * *
(Section 1102 of the Social Security Act (42 U.S.C. 1302)
(Catalog of Federal Domestic Assistance Program No. 00.000, State
Children's Health Insurance Program)
Dated: March 16, 1999.
Nancy-Ann Min DeParle,
Administrator, Health Care Financing Administration.
Dated: September 23, 1999.
Donna E. Shalala,
Secretary.
[FR Doc. 99-28693 Filed 11-1-99; 8:45 am]
BILLING CODE 4120-01-P