[Federal Register Volume 73, Number 233 (Wednesday, December 3, 2008)]
[Rules and Regulations]
[Pages 73694-73727]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-28330]



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Part II





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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42 CFR Part 440



Medicaid Program; State Flexibility for Medicaid Benefit Packages; 
Final Rule

  Federal Register / Vol. 73, No. 233 / Wednesday, December 3, 2008 / 
Rules and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 440

[CMS-2232-F]
RIN 0938 A048


Medicaid Program; State Flexibility for Medicaid Benefit Packages

AGENCY: Centers for Medicare & Medicaid Services (CMS), HHS.

ACTION: Final rule.

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SUMMARY: This final rule will implement provisions of section 6044 of 
the Deficit Reduction Act of 2005, which amends the Social Security Act 
by adding a new section 1937 related to the coverage of medical 
assistance under approved State plans. It also provides States 
increased flexibility under an approved State plan to define the scope 
of covered medical assistance by offering coverage of benchmark or 
benchmark-equivalent benefit packages to certain Medicaid recipients. 
In addition, this final rule responds to public comments on the 
February 22, 2008, proposed rule that pertain to the State Medicaid 
benefit package provisions.

DATES: Effective Date: These regulations are effective on February 2, 
2009.

FOR FURTHER INFORMATION CONTACT: Donna Schmidt, (410) 786-5532.

SUPPLEMENTARY INFORMATION:

I. Background

    Under title XIX of the Social Security Act (the Act), the Secretary 
is authorized to provide funds to assist States in furnishing medical 
assistance to needy individuals whose income and resources are 
insufficient to meet the costs of necessary medical services, including 
families with dependent children and individuals who are aged, blind, 
or disabled. To be eligible for funds under this program, States must 
submit a State plan, which must be approved by the Secretary. Programs 
under title XIX are jointly financed by Federal and State governments. 
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.
    Before the passage of the Deficit Reduction Act (DRA), States were 
required to offer at minimum a standard benefit package to eligible 
populations identified in section 1902(a)(10)(A) of the Act (with some 
specific exceptions, for example, for certain pregnant women, who could 
be limited to pregnancy-related services). Under section 1902(a)(10)(A) 
of the Act, this standard benefit package had to include certain 
specific benefits identified in the definition of ``medical 
assistance'' at section 1905(a) of the Act. These identified benefits 
include inpatient and outpatient hospital services, physician services, 
medical and surgical services furnished by a dentist, rural health 
clinic services, federally qualified health center services, laboratory 
and X-ray services, nursing facility services, early and periodic 
screening, diagnostic and treatment services for individuals under age 
21, family planning services to individuals of child-bearing age, 
nurse-midwife services, certified pediatric nurse practitioner 
services, and certified family nurse practitioner services. Under 
section 1902(a)(10)(D) of the Act, the standard benefit package is also 
required to include home health services.
    Section 6044 of the Deficit Reduction Act of 2005 (DRA) (Pub. L. 
109-171), enacted on February 8, 2006, amended the Act by adding a new 
section 1937 that allows States to amend their Medicaid State plans to 
provide for the use of benefit packages other than the standard benefit 
package, namely benchmark benefit packages or benchmark-equivalent 
packages, for certain populations. The statute delineates what benefit 
packages qualify as benchmark packages and what would constitute a 
benchmark-equivalent package. The statute also specifies those exempt 
populations that may not be included or mandated in the benchmark 
coverages. To be eligible for funds under this new provision, States 
must submit a State plan amendment, which must be approved by the 
Secretary. On March 31, 2006, we issued a State Medicaid Director 
letter providing guidance on the implementation of section 6044 of the 
DRA.

II. Provisions of the Proposed Regulations

    We published a proposed rule in the Federal Register on February 
22, 2008 (73 FR 9714) that implemented the provisions of the DRA of 
2005, which amends the Act by adding a new section 1937 related to the 
coverage of medical assistance under approved State plans. Under this 
new provision, States have increased flexibility under an approved 
State plan to define the scope of covered medical assistance by 
offering coverage of benchmark or benchmark-equivalent benefit packages 
to certain Medicaid recipients. For a complete and full description of 
the States' Medicaid Benefit Packages provisions as required by the 
DRA, see the February 2008 State Flexibility for Medicaid Benefit 
Packages proposed rule. In the February 2008 proposed rule, we proposed 
to add a new subpart C beginning with Sec.  440.300 as follows:

A. Subpart C--Benchmark Packages: General Provisions Sections 440.300, 
440.305, and 440.310 Basis, Scope, and Applicability

    At proposed Sec.  440.300 (Basis), Sec.  440.305 (Scope), and Sec.  
440.310 (Applicability), the regulations would reflect the new 
statutory authority for States to provide medical assistance to 
recipients, within one or more groups of Medicaid eligible recipients 
specified by the State, through enrollment in benchmark coverage or 
benchmark-equivalent coverage. A State may only require that 
individuals obtain benefits by enrolling in that coverage if they are a 
``full benefit eligible'' whose eligibility is based on an eligibility 
category under section 1905(a) of the Act that would have been covered 
under the State's plan on or before February 8, 2006, and are not 
within exempted categories under the statute. The proposed regulatory 
definition of full benefit eligible individuals would include 
individuals who would otherwise be eligible to receive the standard 
full Medicaid benefit package under the approved Medicaid State plan, 
but would not include individuals who are within the statutory 
exemptions, who are determined eligible by the State for medical 
assistance under section 1902(a)(10)(C) of the Act or by reason of 
section 1902(f) of the Act, or who are otherwise eligible based on a 
reduction of income based on costs incurred for medical or other 
remedial care (other medically needy and spend-down populations).

B. Section 440.315 Exempt Individuals

    Proposed Sec.  440.315 would reflect statutory limitations on 
mandatory enrollment of specified categories of individuals. A State 
may not require enrollment in a benchmark or benchmark-equivalent 
benefit plan by the following individuals:
     The recipient who is a pregnant woman who is required to 
be covered under the State plan under section 1902(a)(10)(A)(i) of the 
Act.
     The recipient who qualifies for medical assistance under 
the State plan on the basis of being blind or disabled (or being 
treated as being blind or disabled) without regard to whether the 
individual is eligible for SSI benefits under title XVI on the basis of 
being blind or disabled and including an

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individual who is eligible for medical assistance on the basis of 
section 1902(e)(3) of the Act.
     The recipient who is entitled to benefits under any part 
of Medicare.
     The recipient who is terminally ill and is receiving 
benefits for hospice care under title XIX.
     The recipient who is an inpatient in a hospital, nursing 
facility, intermediate care facility for the mentally retarded, or 
other medical institution, and is required, as a condition of receiving 
services in such institution under the State plan, to spend for costs 
of medical care all but a minimal amount of the individual's income 
required for personal needs.
     The recipient who is medically frail or otherwise an 
individual with special medical needs (as described by the Secretary in 
section 440.315(f)). For purposes of this section, we proposed that 
individuals with special needs includes those groups defined by Federal 
regulations at Sec.  438.50(d)(1) and Sec.  438.50(d)(3) of the managed 
care regulations (that is, dual eligibles and certain children under 
age 19 who are eligible for SSI; eligible under section 1902(e)(3) of 
the Act, TEFRA children; in foster care or other out of home placement; 
or receiving foster care or adoption assistance). We did not propose a 
definition for medically frail populations but we invited public 
comments to assist us in defining this term in the final regulation.
     The recipient who qualifies based on medical condition for 
medical assistance for long-term care services described in section 
1917(c)(1)(C) of the Act.
     The recipient who receives aid or assistance under part B 
of title IV for children in foster care or an individual with respect 
to whom adoption or foster care assistance is made available under part 
E of title IV, without regard to age.
     The recipient who qualifies for medical assistance on the 
basis of eligibility to receive assistance under a State plan funded 
under part A of title IV (as in effect on or after the welfare reform 
effective date defined in section 1931(i) of the Act). This provision 
relates to those individuals who qualify for Medicaid solely on the 
basis of qualification under the Temporary Assistance for Needy 
Families (TANF) rules (that is, the State links Medicaid eligibility to 
TANF eligibility).
     The recipient who is a woman receiving medical assistance 
by virtue of the application of sections 1902(a)(10)(ii)(XVIII) and 
1902(a) of the Act. This provision relates to those individuals who are 
eligible for Medicaid based on the breast or cervical cancer 
eligibility provisions.
     The recipient who qualifies for medical assistance as a 
TB-infected individual on the basis of section 1902(a)(10)(A)(ii)(XII) 
of the Act.
     The recipient who is not a qualified alien (as defined in 
section 431 of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996) and receives only care and services 
necessary for the treatment of an emergency medical condition in 
accordance with section 1903(v) of the Act.

C. Section 440.320 State Plan Requirements: Optional Enrollment for 
Exempt Individuals

    At proposed Sec.  440.320, we would allow States to offer exempt 
individuals specified in Sec.  440.315 the option to enroll into a 
benchmark or benchmark-equivalent benefit plan. The State plan would 
identify in its State plan the exempt groups for which this coverage is 
available. There may be instances in which an exempt individual may 
benefit from enrolling in a benchmark or benchmark-equivalent benefit 
package. States would be permitted to elect in the State plan to offer 
exempt individuals a benchmark or benchmark-equivalent package, but 
States may not require them to enroll in one. For example, in some 
States the State employee benchmark coverage may be more generous than 
the State Medicaid plan. Secretary-approved coverage may offer the 
opportunity for disabled individuals to obtain integrated coverage for 
acute care and community-based long-term care services. Additionally, 
States may be able to better integrate disease management programs to 
provide better coordinated care which targets the specific needs of 
individuals with special health needs.

D. Section 440.325 State Plan Requirements: Coverage and Benefits

    At proposed Sec.  440.325, we set forth the conditions under which 
a State may offer enrollment to exempt recipients specified in Sec.  
440.315. When a State offers exempt recipients the option to enroll in 
a benchmark or benchmark-equivalent benefit package, the State would 
inform the recipients that enrollment is voluntary and that the 
individual may opt out of the benchmark or benchmark-equivalent benefit 
package at any time and regain immediate eligibility for the standard 
full Medicaid program under the State plan. The State would inform the 
recipient of the benefits available under the benchmark or benchmark-
equivalent benefit package and provide a comparison of how they differ 
from the benefits available under the standard full Medicaid program. 
The State would document in the individual's eligibility file that the 
individual was informed in accordance with this paragraph and 
voluntarily chose to enroll in the benchmark or benchmark-equivalent 
benefit package.
    At proposed Sec.  440.325, a State would have the option to choose 
the benchmark or benchmark-equivalent coverage packages offered under 
the State's Medicaid plan. A State may select one or all of the 
benchmark plans described in Sec.  440.330 or establish benchmark-
equivalent plans described in Sec.  440.335, respectively.

E. Section 440.330 Benchmark Health Benefits Coverage

    At proposed Sec.  440.330, benchmark coverage is described as any 
one of the following:
     Federal Employees Health Benefit Plan Equivalent Coverage 
(FEHBP--Equivalent Health Insurance Coverage). A benefit plan 
equivalent to the standard Blue Cross/Blue Shield preferred provider 
option service benefit plan that is described in and offered to Federal 
employees under 5 U.S.C. 8903(1).
     State employee coverage. A health benefits plan that is 
offered and generally available to State employees in the State 
involved.
     Health Maintenance Organization (HMO) plan. A health 
insurance plan that is offered through an HMO (as defined in section 
2791(b)(3) of the Public Health Service Act) that has the largest 
insured commercial, non-Medicaid enrollment in the State.
     Secretary approved coverage. Any other health benefits 
coverage that the Secretary determines, upon application by a State, 
provides appropriate coverage for the population proposed to be 
provided that coverage. States wishing to opt for Secretarial approved 
coverage should submit a full description of the proposed coverage and 
include a benefit-by-benefit comparison of the proposed plan to one or 
more of the three benchmark plans specified above or to the State's 
standard full Medicaid coverage package under section 1905(a) of the 
Act, as well as a full description of the population that would be 
receiving the coverage. In addition, the State should submit any other 
information that would be relevant to a determination that the proposed 
health benefits coverage would be appropriate for the proposed 
population. The scope of a Secretary-approved health benefits package 
will be limited to benefits

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within the scope of the categories available under a benchmark coverage 
package or the standard full Medicaid coverage package under section 
1905(a) of the Act.
    A State may select one or more benchmark coverage plan options. The 
State may also specify the benchmark plan for any specific recipient. 
For example, one recipient may be enrolled in the FEHBP and another may 
be enrolled into State Employee Coverage at the option of the State.

F. Section 440.335 Benchmark-Equivalent Health Benefits Coverage

    At proposed Sec.  440.335, we would provide that if a State designs 
or selects a benchmark plan other than those specified in Sec.  
440.330, the State must provide coverage that is equivalent to 
benchmark coverage. Coverage that meets the following requirements will 
be considered to be benchmark-equivalent coverage:
     Required Coverage. Benchmark-equivalent coverage includes 
benefits for items and services within each of the following categories 
of basic services and must include coverage for the following 
categories of basic services:
    + Inpatient and outpatient hospital services.
    + Physicians' surgical and medical services.
    + Laboratory and x-ray services.
    + ``Well-baby'' and ``well-child'' care, including age-appropriate 
immunizations.
    + Other appropriate preventive services, as designated by the 
Secretary.
     Aggregate actuarial value equivalent to benchmark 
coverage. Benchmark-equivalent coverage must have an aggregate 
actuarial value, determined in accordance with proposed Sec.  440.340 
that is at least equivalent to coverage under one of the benchmark 
packages outlined in Sec.  440.330.
     Additional coverage. In addition to the categories of 
services set forth above, benchmark-equivalent coverage may include 
coverage for any additional services included in the benchmark plan or 
described in section 1905(a) of the Act.
     Application of actuarial value for benchmark-equivalent 
coverage that includes prescription drugs, mental health, vision, and 
hearing services. Where the benchmark coverage package used by the 
State as a basis for comparison in establishing the aggregate actuarial 
value of the benchmark-equivalent package includes any or all of the 
following four categories of services: Prescription drugs; mental 
health services; vision services; and hearing services; then the 
actuarial value of the coverage for each of these categories of service 
in the benchmark-equivalent coverage package must be at least 75 
percent of the actuarial value of the coverage for that category of 
service in the benchmark plan used for comparison by the State.
    If the benchmark coverage package does not cover one of the four 
categories of services mentioned above, then the benchmark-equivalent 
coverage package may, but is not required to, include coverage for that 
category of service.

G. Section 440.340 Actuarial Report for Benchmark-Equivalent Health 
Benefit Coverage

    In accordance with 1937(a)(3) of the Act, at Sec.  440.340, we 
proposed to 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.  440.335.
    At Sec.  440.340, we proposed to require the actuarial report to 
obtain approval for benchmark-equivalent health benefit coverage and to 
meet all the provisions of the statute. The actuarial report must state 
the following:
     The actuary issuing the opinion is a member of the 
American Academy of Actuaries (AAA) (and meets Academy standards for 
issuing an opinion).
     The actuary used generally accepted actuarial principles 
and methodologies of the AAA, standard utilization and price factors 
and a standardized population representative of the population 
involved.
     The same principles and factors were used in analyzing the 
value of different coverage (or categories of services) without taking 
into account differences in coverage based on the method of delivery or 
means of cost control or utilization used.
     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 of health benefits coverage offered under the State 
plan that results from the limitations on cost sharing (with the 
exception of premiums) under that coverage.
     The actuary preparing the opinion must select and specify 
the standardized set of utilization and pricing factors as well as the 
standardized population.
     The actuary preparing the opinion must provide sufficient 
detail to explain the basis of the methodologies used to estimate the 
actuarial value or, if requested by CMS, to replicate the State's 
result.

H. Section 440.345 EPSDT Services Requirement

    At Sec.  440.345, we proposed to require States to make available 
EPSDT services as defined in section 1905(r) of the Act that are 
medically necessary for those individuals under age 19 who are covered 
under the State plan. We expected that most benchmark or benchmark-
equivalent plans will offer the majority of EPSDT services. To the 
extent that any medically necessary EPSDT services are not covered 
through the benchmark or benchmark-equivalent plan, States are required 
to supplement the benchmark or benchmark-equivalent plan in order to 
ensure access to these services. Individuals mandated into a benchmark 
or benchmark-equivalent plan and entitled to have access to EPSDT 
services cannot opt out of the benchmark or benchmark-equivalent plan 
just to receive these services. While individuals are required to have 
access to such medically necessary services first under the benchmark 
or benchmark-equivalent plan, the State may provide wrap-around or 
additional coverage for medically necessary services not covered under 
such plan. Any wrap-around benefits must be sufficient so that, in 
combination with the benchmark or benchmark-equivalent benefits 
package, an individual would have coverage for his or her medically 
necessary services consistent with the requirements under section 
1905(r) of the Act. The State plan would include a description of how 
wrap-around benefits or additional services will be provided to ensure 
that these recipients have access to full EPSDT services under 1905(r) 
of the Act.
    In addition, individuals would need to first seek coverage of EPSDT 
services through the benchmark or benchmark-equivalent plan before 
seeking coverage of such through wrap-around benefits.

I. Section 440.350 Employer Sponsored Insurance Health Plans

    At Sec.  440.350, we proposed that the use of benchmark or 
benchmark-equivalent benefit coverage would be at the discretion of the 
State and may be used in conjunction with employer sponsored health 
plans as a coverage option for individuals with access to private 
health insurance. Additionally, the use of benchmark or benchmark-
equivalent coverage may be used for individuals with access to private 
health insurance coverage. For example, if an individual has access to 
employer sponsored coverage and that coverage is determined by the 
State to be benchmark or benchmark-equivalent, a State may, at its 
option, provide

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premium payments on behalf of the recipient to purchase the employer 
coverage. Additionally, a State could create a benchmark or benchmark-
equivalent plan combining employer sponsored insurance and wrap-around 
benefits to that employer sponsored insurance benefit package. The 
premium payments would be considered medical assistance and the State 
could require the recipient to enroll in the group health plan.

J. Section 440.355 Payment of Premiums

    At Sec.  440.355, we proposed that payment of premiums by the 
State, net of beneficiary contributions, to obtain benchmark or 
benchmark-equivalent benefit coverage on behalf of beneficiaries under 
this section will be treated as medical assistance under section 
1905(a) of the Act.

K. Section 440.360 State Plan Requirement for Providing Additional 
Wrap-Around Services

    At Sec.  440.360, we proposed that a State may at its option 
provide additional wrap-around services to the benchmark or benchmark-
equivalent plans. The wrap-around services do not need to include all 
State plan services. However, the State plan would need to describe the 
populations covered and the payment methodology for assuring those 
services. Such additional or wrap-around services must be within the 
scope of categories of services covered under the benchmark plan, or 
described in section 1905(a) of the Act.

L. Section 440.365 Coverage of Rural Health Clinic and Federally 
Qualified Health Center (FQHC) Services

    At Sec.  440.365, we proposed that a State that provides benchmark 
or benchmark-equivalent coverage to individuals must assure that the 
individual has access, through that coverage or otherwise, to rural 
health clinic services and FQHC services as defined in subparagraphs 
(B) and (C) of section 1905(a)(2) of the Act. Payment for these 
services must be made in accordance with the payment provisions of 
section 1902(bb) of the Act.

M. Section 440.370 Cost Effectiveness

    At Sec.  440.370, we proposed that benchmark or benchmark-
equivalent coverage and any additional benefits must be provided in 
accordance with Federal upper payment limits, procurement requirements 
and other economy and efficiency principles that would otherwise be 
applicable to the services or delivery system through which the 
coverage and benefits are obtained.

N. Section 440.375 Comparability

    At Sec.  440.375, we proposed that a State may at its option amend 
its State plan to provide benchmark or benchmark-equivalent coverage to 
recipients without regard to comparability.

O. Section 440.380 Statewideness

    At Sec.  440.380, we proposed that a State may at its option amend 
its State plan to provide benchmark or benchmark-equivalent coverage to 
recipients without regard to statewideness.

P. Section 440.385 Freedom of Choice

    At Sec.  440.385, we proposed that a State may at its option amend 
its State plan to provide benchmark or benchmark-equivalent coverage to 
recipients without regard to freedom of choice. States may restrict 
recipients to obtaining services from (or through) selectively procured 
provider plans or practitioners that meet, accept, and comply with 
reimbursement, quality and utilization standards under the State Plan, 
to the extent that the restrictions imposed meet the following 
requirements:
    (+) Do not discriminate among classes of providers on grounds 
unrelated to their demonstrated effectiveness and efficiency in 
providing the benchmark benefit package.
    (+) Do not apply in emergency circumstances.
    (+) Require that all provider plans are paid on a timely basis in 
the same manner as health care practitioners must be paid under Sec.  
447.45 of the chapter.

Q. Section 440.390 Assurance of Transportation

    At Sec.  440.390, we proposed that a State may at its option amend 
its State plan to provide benchmark or benchmark-equivalent coverage to 
recipients without regard to the assurance of transportation to 
medically necessary services requirement specified in Sec.  431.53.

III. Analysis of and Responses to Public Comments

    In response to the February 2008 proposed rule, we received over 
1,100 timely items of correspondence. The majority of the commenters 
represented transportation providers, medical providers, and Medicaid 
beneficiaries, particularly Medicaid beneficiaries who rely on dialysis 
treatments. Other commenters represented State and local advocacy 
groups, national associations that represent various aspects of 
beneficiary groups, State Medicaid agency senior officials, and human 
services agencies. In this section, we provide a discussion of the 
public comments we received on the proposed rule. Comments related to 
the impact of this rule are addressed in the ``Collection of 
Information Requirements'' section of this regulation.
    Additionally, we published a proposed rule in the Federal Register 
on February 22, 2008 (73 FR 9727) titled, ``Medicaid Program: Premiums 
and Cost Sharing'' (CMS-2244-P). Comments on CMS-2244-P were also due 
March 24, 2008 similar to this rule. Some comments for CMS-2244-P were 
forwarded as comments to this rule (CMS-2232-P). Consistent with the 
Administrative Procedures Act, CMS is not responding to those comments 
in this regulation, but we addressed the issues raised by otherwise 
timely comments in our publication of CMS-2244-F.

A. General Comments

    Comments: A few commenters supported the rule. Some commenters also 
requested a more restrictive interpretation of the statutory 
provisions. However, most commenters oppose the rule. Many commenters 
are concerned that the benchmark or benchmark-equivalent benefit 
packages are inadequate benefit packages for, among others, individuals 
with mental illness, children with serious emotional disturbance, the 
disabled and elderly, individuals with end-stage renal disease, and 
American Indians. Many of the commenters believed that to enroll 
Medicaid beneficiaries in benchmark or benchmark-equivalent benefit 
packages without the assurance of transportation could lead to poorer 
health outcomes, costlier care because individuals will be forced into 
hospital emergency rooms, and shifts in costs to the Emergency Medical 
Services.
    Response: We thank those commenters who supported the rule. Those 
who opposed the rule generally raised concerns about the underlying 
wisdom of the statutory provision at section 1937 of the Act, which 
this final rule implements. CMS is charged with implementing the 
statute as written. We address suggestions for restrictive 
interpretations below in the discussion of specific proposed 
provisions.
    Comment: Several commenters believe that the accelerated pace of 
this short comment period, given the broad implications, will lead to a 
short-cited, onerous rule that has dangerous health impacts for the 
poor. This rule was issued in the Federal Register on

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February 22, 2008. The deadline for submission of comments was March 
24, 2008. Other rulemaking has taken a longer period. Given the impact 
of the discussion, a longer time period is warranted.
    Some commenters stated that the 30-day comment period was not 
sufficient for Tribes to comment on a regulation that could potentially 
have a significant impact on Tribal communities.
    Other commenters noted that while the Department views the rule as 
merely formalizing its earlier policy statements delivered only to 
State Medicaid Directors, a 30-day public comment period is too short 
for meaningful public review, analysis, and comment. Some commenters 
believe that the 30-day comment period is discouraging of full review 
and consideration by States.
    One commenter requests that the public comment period be extended 
60 days for a total of a 90-day comment period. Additional time is 
needed to provide sufficient time for stakeholders to be able to 
adequately assess the potential effects of the proposed rule.
    Response: We disagree with the commenters suggesting that 30 days 
is too short of a time period to respond to the regulation. Section 
553(c) of the Administrative Procedures Act requires that after the 
publication of a proposed rule, the Agency shall give interested 
persons an opportunity to participate in the rulemaking. Neither the 
Administrative Procedures Act nor the Medicaid statute specify a time 
period for submission of comments. For Medicaid rules we allow 30 days 
or 60 days based on the complexity and size of the rule, or the need to 
publish the final rule quickly. We elected a 30-day comment period 
because of the limited deviation from plain statutory requirements and 
the interest of getting guidance quickly to States on the DRA 
flexibilities contained herein. Since this provision of the DRA was 
effective March 31, 2006 it made sense to provide guidance to States as 
quickly as possible.

B. Section 440.300 Basis

    Comment: One commenter believed that the proposed limitations on 
eligibility groups who can be provided alternative benefit packages are 
overly restrictive. The commenter suggested that the rule should allow 
application to any eligibility category the State had the option to 
implement on or before the date of enactment of section 1937 (February 
8, 2006). The commenter reasoned that States are continually adding and 
changing eligibility requirements and these program changes are 
inherent in Medicaid programs. The commenter asserted that, if the rule 
is considered beneficial for recipients in eligibility categories that 
existed before February 8, 2006, it is logical to suppose it would also 
be beneficial for those created after that date.
    Response: The language in section 1937(a)(1)(B) of the Act 
specifies that the State may only exercise the option to offer 
benchmark or benchmark-equivalent coverage for an individual eligible 
under an eligibility category that had been established under the State 
plan on or before February 8, 2006. In an effort to provide States with 
maximum flexibility, we have interpreted this statutory term to mean 
any eligibility category listed under section 1905(a) of the Act. Thus, 
all recipients within a category covered or potentially covered under 
the State's Medicaid plan would be eligible to participate in a 
benchmark or benchmark-equivalent plan at the State's option, unless 
specifically excluded by statute, even when the State makes 
modifications to the income and resource eligibility levels or 
methodologies, ages covered, etc., for a group or category after 
February 8, 2006.

C. Section 440.305 Scope

    Comment: Numerous commenters believed that offering benchmark and 
benchmark-equivalent benefit packages to certain Medicaid recipients 
will deter those individuals, including children, from receiving 
appropriate care. Commenters indicated that individuals with low 
incomes are likely to forgo needed treatment if all medically necessary 
services and transportation are not included in the benchmark program. 
Most commenters believed that our most vulnerable populations, those 
with chronic medical needs, will be required to choose to provide for 
their basic needs like food and shelter rather than obtain necessary 
medical health care because of the rigor created by following a private 
health insurance model of benefits and the need to provide their own 
method of transportation.
    Response: We have developed these policies based on what is 
provided for in statue. And, since the Medicaid program is administered 
broadly by the States, they have the flexibility to determine how they 
will design their programs. We do review and approve all State plan 
amendments to assure continuity of and access to necessary medical 
health care.
    Comment: Other commenters indicated that the DRA does not require 
that States offer the same Medicaid benefits statewide, meaning States 
could design different benefit packages for rural and urban areas. 
States may also ``tailor'' packages for different populations, although 
the commenter acknowledges, certain groups are exempt from mandatory 
changes to their Medicaid benefits package. In States where this has 
already been done, behavioral healthcare advocates report the changes 
have been unsatisfactory. Several commenters believed that allowing 
States to ``tailor'' benefit packages would mean that individuals may 
not have access to the services they need. Benefit packages designed 
outside the important consumer protections in traditional Medicaid may 
fail to meet beneficiaries' needs, and will not save money if these 
individuals experience significant unmet needs that escalate into 
problems that require treatment in emergency rooms.
    One commenter mentioned that private health plans such as those 
listed as benchmarks under the law, frequently have limited coverage of 
mental health services. The commenter asserted that few cover any of 
the intensive community services that are covered by Medicaid under the 
rehabilitation category or the home and community-based services 
option. The commenter noted that, under the DRA, these limited mental 
health benefits can be further reduced by 25 percent of their actuarial 
value. Other commenters expressed concern that the reliance on 
commercial benefit plans is inappropriate for Medicaid recipients. 
Those commenters are concerned that many private insurance plans do not 
provide adequate mental health services. And other commenters noted 
that benchmark coverage is likely to prove entirely inadequate for 
individuals who need mental health services. They noted that children 
with serious mental and/or physical disorders often qualify for 
Medicaid on a basis of family income and are not, for various reasons, 
receiving Supplemental Security Income (SSI) benefits or otherwise 
recognized as children with disabilities and would not be exempt from 
mandatory enrollment. In addition, they noted that many low-income 
parents on Medicaid have been found to have serious depression, which 
could not be adequately treated with a very limited mental health 
benefit.
    In a similar vein, many commenters believed that the proposed rule 
has the potential to become the behavioral healthcare Medicaid Trojan 
horse: it appears harmless but it will reverse hard-fought progress won 
over years of struggle that brought about equitable, decent care for 
Medicaid recipients experiencing mental illness or who have

[[Page 73699]]

a developmental disability. They asserted that, in the end, these rules 
will have costlier results and not the desired economizing while also 
negatively impacting peoples' lives, their well-being and care, and our 
society.
    Another commenter believed that it is critical for beneficiaries 
with life-threatening conditions such as HIV/AIDS to maintain access to 
the comprehensive range of medical and support services required to 
effectively manage HIV disease. The commenter stated that allowing 
States to ``tailor'' benefit packages in ways that essentially 
eliminate coverage for critical health services places the health of 
Medicaid beneficiaries with HIV/AIDS in serious jeopardy.
    Response: The DRA was enacted in response to States' desire for 
more flexibility in modernizing their Medicaid programs and adopting 
benefit programs tailored to the needs of the varied populations they 
serve. This regulation is consistent with Congressional intent and 
reflects little interpretive policy by CMS. The DRA provides that 
States can impose alternative benchmark or benchmark-equivalent benefit 
packages at their option; that is, States are not required to implement 
these provisions.
    As a result, we believe that the concerns expressed by these 
commenters on the sufficiency of potential alternative benefit packages 
should be addressed to States for consideration in determining whether 
to elect alternative benefit packages, and the scope of such packages.
    We disagree that benchmark and benchmark-equivalent programs 
necessarily lead to barriers to access and care. Benchmark and 
benchmark-equivalent plans are simply tools that States can use to 
contain costs and inhibit over-utilization of health care through 
Medicaid, particularly through the emergency room, while at the same 
time providing States new opportunities to provide benefit plans to 
meet the appropriate health care needs of Medicaid populations. We 
believe States may use this flexibility to create innovative Medicaid 
programs that further strengthen and support the overall health care 
system.
    This new flexibility provides States the tools they need to provide 
person-centered care to maximize health outcomes for individuals. These 
tools may be used in conjunction with other Medicaid and State 
Children's Health Insurance Program (SCHIP) authorities to 
strategically align the Medicaid program with today's health care 
environment and expand access to affordable mainstream coverage and 
improve quality and coordination of care.
    Regarding the coverage of mental health services, children and 
adults with special medical needs, individuals with HIV/AIDS, and long-
term care and community-based service options, benchmark and benchmark-
equivalent plans must be appropriate to meet the health care needs of 
the population being served, which may mean that benchmark coverage may 
be more generous than a State's Medicaid plan. Benchmark coverage may 
offer the opportunity for disabled individuals to obtain integrated 
coverage for acute care and community-based long-term care services. 
Additionally, States may be able to better integrate disease management 
programs to provide better coordinated care, targeting the specific 
needs of individuals with special health needs.
    We also think it is important to note that children under the age 
of 19 are required to receive EPSDT services either as a wrap-around 
service or as part of the benchmark or benchmark-equivalent benefit 
plan.
    Moreover, certain Medicaid eligibility coverage groups cannot be 
included in a mandatory enrollment for an alternative benefit package--
among others, pregnant women, dual eligibles, terminally ill 
individuals receiving hospice, inpatients in institutional settings, 
and individuals who are medically frail or have special medical needs. 
These individuals may be offered a choice to enroll and, in considering 
the choice, must be provided a comparison of benchmark benefits versus 
the traditional Medicaid State plan benefit. Their decision to enroll 
is voluntary and individuals must be provided the opportunity to revert 
back to traditional Medicaid at any time. The law provides that States 
can offer these alternative benefit packages and we do not believe this 
rule poses a barrier to accessing health care.
    Comment: One commenter noted that the preamble language refers to 
meeting the ``* * * needs of today's Medicaid populations and the 
health care environment.'' The commenter believed the preamble should 
describe these needs in some detail so that there is a shared 
understanding of the types of needs this new flexibility is intended to 
address.
    Response: We agree that it is important to understand the needs of 
today's Medicaid populations and the health care environment. States 
requested maximum flexibility in designing their Medicaid programs in 
order to provide appropriate health care coverage to our Nation's most 
vulnerable populations and to maintain growth and provide for the 
sustainability of the Medicaid program over the long term. Congress, in 
working with our Nation's leaders, responded and enacted the DRA of 
2005.
    In providing for benchmark benefit packages, several innovative 
ways of providing coverage to the Medicaid populations have been 
provided to States. Benchmark options include Federal Employees Health 
Benefits Plan Equivalent coverage, State Employee coverage, Health 
Maintenance Organization coverage, or Secretary approved coverage. 
States have the option of considering Employer Sponsored Insurance 
coverage as long as the Employer Sponsored Insurance coverage meets the 
criteria of benchmark coverage. States can also consider benchmark-
equivalent coverage as long as the coverage includes basic services 
consisting of inpatient and outpatient hospital services, physicians' 
surgical and medical services, laboratory and x-ray services, well-baby 
and well-child care including age-appropriate immunizations, and other 
appropriate preventive services, such as emergency services. 
Specifically, benchmark plans can be designed to address the specific 
health care needs of specific populations, and a State may select one 
or more benchmark coverage options. The flexibility granted to States 
in considering these options provides that States can tailor benefits 
to better meet the needs of their low-income populations.
    Comment: One commenter stated that the proposed rule, read together 
with other CMS rules like the citizenship documentation requirement and 
CMS's SCHIP crowd-out directive of August 17, 2007, create major 
barriers to access to appropriate health care, and that the proposed 
rule has a devastating impact on the low-income populations. In 
particular, some commenters raised concerns about requirements for 
Native Americans to prove both citizenship and identity in order to 
obtain Medicaid services. Commenters also raised concerns about the 
SCHIP review strategy outlined in an August 17, 2007 letter sent to 
State Health Officials. And commenters asserted that other proposed 
rules released by CMS like the Rehabilitation Rule and the Targeted 
Case Management Rule coupled with this rule will have a devastating 
effect on individuals in need of transportation since these rules also 
eliminate non-emergency medical transportation services.
    Response: We disagree that providing States with benefit 
flexibility creates

[[Page 73700]]

barriers to accessing appropriate care and instead contend that this 
provides flexibilities to States in an effort to create benefit 
packages that appropriately meet the needs of their Medicaid 
populations. Citizenship documentation requirements, the August 17 
State Health Officials letter, and the Rehabilitation and Case 
Management requirements are not part of this rule and we do not address 
them here. This regulation implements the statutory provisions of 
section 1937, and CMS policy discretion was very limited.
    Comment: Several comments were provided by organizations that have 
an interest in how the benchmark and benchmark-equivalent benefit 
packages impact American Indians and Alaska Natives (AI/ANs). The 
commenters believed that alternative benefit packages serve as a 
substantial barrier to AI/AN enrollment in the Medicaid program. They 
noted that, because of the Federal Government's trust responsibility to 
provide health care to AI/ANs, implementing benchmark and benchmark-
equivalent benefit packages have specific tribal implications that were 
not addressed in these proposed rules. Several commenters believed that 
AI/ANs should be exempt from mandatory enrollment in benchmark and 
benchmark-equivalent benefit programs entirely.
    Response: In Medicaid, there is no statutory basis to exempt AI/ANs 
from Medicaid alternative benefit provisions. Section 1937 of the Act 
does not provide for such an exemption. Section 1937 provides some 
specific exemptions from mandatory enrollment into benchmark or 
benchmark-equivalent benefit packages and it is possible that some AI/
ANs would fit into one of these exempt groups. Section 1937 does not 
give CMS authority to identify additional exempt groups.
    To address the unique needs of the AI/AN population, we recommend 
working with States to ensure that alternative benefit packages 
recognize the unique services offered by IHS and tribal providers, and 
the unique health needs of the AI/AN population.
    Comment: One commenter contended that there are no provisions to 
require States to ensure that AI/ANs continue to have access to 
culturally competent health services through the Indian Health Service 
(IHS) or tribally operated health programs. The commenter stated that 
the proposed rules allow States to offer coverage without regard to 
comparability, statewideness, freedom of choice, the assurance of 
transportation to medically necessary services, and other requirements. 
There are large disparities between AI/ANs' health care status and the 
health care status of the rest of the country. The commenter added that 
for AI/ANs, the patient should always have the option of the provider 
being an Indian Health Service or tribal health program.
    Response: State Medicaid programs provide health care services to 
many diverse populations including AI/ANs. We believe that culturally 
competent services are important for all Medicaid beneficiaries and 
access to care and facilities in remote parts of the country, where it 
is especially difficult to find providers who will agree to participate 
in the Medicaid program, is paramount. The Medicaid statute does not 
provide any special protections for benefit packages applicable to AI/
AN recipients, but this does not mean that benefit packages will be 
deficient. As noted above, to address the unique needs of the AI/AN 
population, we recommend working with States to ensure that alternative 
benefit packages recognize the unique services offered by IHS and 
tribal providers, and the unique health needs of the AI/AN population. 
Futhermore, AI/AN beneficiaries are not prevented from going to IHS or 
tribal facilities for health care as a result of this rule.
    Comment: Another commenter stated on behalf of AI/ANs, the Indian 
and tribal health care system is woefully under-funded and tribal 
providers rely on Medicaid revenues to supplement that meager funding. 
Forcing AI/ANs into benchmark plans, which may have dramatically 
reduced coverage or payments, would thus jeopardize Indian health, 
injure tribal health systems, and thereby violate the Federal trust 
obligation to care for the health needs of Indian people.
    Response: CMS does not anticipate a dramatic decrease in services 
furnished under benchmark plans versus traditional Medicaid benefits. 
In fact, to date CMS has approved nine benchmark benefit programs, and 
most offer State plan services plus additional services like preventive 
care, personal assistance services, or disease management services. 
Indeed, for individuals under the age of 19, section 1937 ensures that 
all needed services will be available through the requirement that 
EPSDT services must be provided either as wrap-around to, or as part 
of, the benchmark or benchmark-equivalent plan.
    Moreover, section 1937 does not provide a basis to exclude IHS or 
tribal health providers from participation in the delivery system for 
alternative benefits. In terms of the assertion of overall under-
funding for IHS and tribal health programs, CMS does not determine 
those funding levels.
    Comment: Some commenters believed that the proposed rule did not 
comply with the Department of Health and Human Services' Tribal 
Consultation policy, since CMS did not consult with Tribes in the 
development of these regulations before they were promulgated.
    These commenters noted that CMS did not obtain advice and input 
from the CMS Tribal Technical Advisory Group (TTAG), even though the 
TTAG meets on a monthly basis through conference calls and holds 
quarterly face to face meetings in Washington, DC. They also noted that 
CMS did not utilize the CMS TTAG Policy Subcommittee, which was 
specifically established by CMS for the purpose of obtaining advice and 
input in the development of policy guidance and regulations.
    These commenters also noted that the proposed rule does not contain 
a Tribal summary impact statement describing the extent of the tribal 
consultation or lack thereof, nor an explanation of how the concerns of 
Tribal officials have been met. Several commenters request that these 
regulations not be made applicable to AI/AN Medicaid beneficiaries 
until Tribal consultation is conducted, or be modified to specifically 
require State Medicaid programs to consult with Indian Tribes before 
the development of any policy which would require mandatory enrollment 
of AI/ANs in benchmark or benchmark-equivalent plans. One commenter 
suggested that this consultation should be similar to the way in which 
consultation takes place with Indian Tribes in the development of 
waiver proposals. And, a commenter urged that, after appropriate tribal 
consultation and revision reflecting these and other comments, the rule 
be republished with a longer public comment period.
    One Tribe commented that the proposed rule does not honor treaty 
obligations for health services that are required by the Federal 
Government's unique legal relationship with Tribal governments.
    Response: CMS currently operates under the Department of Health and 
Human Services' Tribal Consultation Policy. The Departmental guidelines 
provide information as to the regulatory activities that rise to the 
level that require consultation (include prior notification of 
rulemaking). We have considered the Departmental guidelines and believe 
that there was no requirement for consultation on this rule, since the 
effect on AI/AN

[[Page 73701]]

recipients results from the statute itself, and not this rule. The rule 
itself does not have a direct effect on such individuals, or on the 
relationship between the Federal government and Tribes. Therefore, we 
have concluded that this rule does not reach the threshold of requiring 
consultation.
    We encourage States which decide to implement alternative benefit 
packages to consult with Tribes and notify them whenever possible on 
policies that will directly affect the Tribes. In terms of exempting 
AI/ANs from benchmark plans, it is important to note that this 
rulemaking was taken directly from provisions of section 1937 of the 
Act, as added by section 6044 of the DRA. These provisions give States 
increased flexibilities in the management of their Medicaid programs. 
This regulation exempts from mandatory enrollment in an alternative 
benefit package the groups specifically set forth in section 1937. The 
statute provides no authority to mandate exemption of other groups. It 
is possible that some AI/ANs fit into one of the exempt groups.
    These regulations implement section 1937 of the Act, as enacted by 
Congress, and do not address treaty rights of American Indians. These 
regulations neither diminish nor increase such treaty rights.
    Comment: Several commenters believed that States should not have 
the ability to create benchmarks that allow for increases in cost 
sharing. Specifically, States can establish a benchmark coverage 
package that requires copays for health care access, whereby the cost 
sharing will actually be a limitation on coverage. However, if the 
selected benchmark plan indicates that it provides coverage for only 
half of the cost of mental health services, CMS views that as a 
coinsurance requirement rather than as a limitation on coverage. 
Premiums and cost sharing act as a deterrent to those receiving health 
care and may cause low-income populations to choose between health care 
and basic needs such as food. The commenter indicated that Native 
Americans and other low-income groups should be exempt from premiums 
and cost-sharing requirements.
    Response: This rule concerns new flexibility for States in 
providing health care coverage through alternate benefit packages that 
was authorized under section 1937 of the Act. To the extent that these 
benchmark packages impose premiums or cost sharing, this final 
regulation stipulates that any cost sharing and premiums for recipients 
may not exceed cost-sharing limits applicable under sections 1916 and 
1916A of the Act. Under section 1916A of the Act, there are tiered 
individual service limits based on family income, and an aggregate cap 
of 5 percent of family income. These limits protect individuals in 
benchmark plans.
    It is important to note, first, that alternative benefit package 
programs are at a State's option. Second, numerous Medicaid eligibility 
categories are exempt from mandatory enrollment in alternative benefit 
packages and can be enrolled only voluntarily. Such individuals must be 
provided a comparison of the benchmark option versus the State plan 
option before they choose to enroll. That comparison would include 
information on the cost-sharing obligations of beneficiaries. In 
choosing the benchmark option over the State plan option, these 
individuals would thus have made an informed choice. And if the 
benchmark option is not meeting the exempt individual's needs, they may 
revert back to traditional Medicaid at any time.
    Comment: One commenter urged CMS to add provisions to provide 
special protections for individuals with disabilities, dual-eligibles, 
and persons with other chronic medical conditions to ensure access to 
benchmark packages that are uniquely designed to address physical 
impairments and rehabilitation needs.
    Another commenter believed CMS should require State Medicaid 
agencies to provide access to care management and care coordination 
services to Medicaid recipients who are incapable of managing their 
benchmark plan services. The commenter further believed that home 
health services should be included in all benchmark plan packages.
    Several commenters recommended that all State programs include 
prevention services and promote health, wellness, and fitness. Physical 
therapists are involved in prevention by promoting health, wellness and 
fitness, and in performing screening activities.
    One commenter is concerned that the managed care model is better 
suited for a ``well'' population as opposed to children with chronic 
special health care needs and adults with disabilities.
    Response: To the extent that the commenter is concerned that 
alternative benefit packages will result in a reduction in services, we 
do not believe that will necessarily be the case. For the nine 
benchmark State plan amendments approved to date, most offer 
traditional State plan services as well as additional services like 
prevention and disease management.
    By tying benefit flexibility to benchmark plans, Congress ensured 
that alternative benefit packages will be similar to those available in 
the marketplace. This protects Medicaid recipients from significant 
reductions in benefits. Benchmark options include Federal Employees 
Health Benefits Plan coverage, State Employee coverage, coverage 
offered by a Health Maintenance Organization in the State with the 
largest commercial non-Medicaid population, or Secretary approved 
coverage. States have the option of considering Employer Sponsored 
Insurance coverage so long as the Employer Sponsored Insurance coverage 
meets the criteria of benchmark coverage. States can also consider 
benchmark-equivalent coverage as long as the coverage includes basic 
services such as inpatient and outpatient hospital services, 
physicians' surgical and medical services, laboratory and x-ray 
services, well-baby and well-child care including age-appropriate 
immunizations, and other appropriate preventive services. We have 
determined that other appropriate preventive services should include 
emergency services.
    Benchmark equivalent plans may include care management, care 
coordination, and/or home health services, but it is possible that some 
plans will not include these services and we do not believe that a 
requirement that States include these specific services would be 
consistent with the statutory goal of increasing State flexibility.
    Another important protection from benefit reduction is that the 
alternative benefit package is required to include the EPSDT benefit 
for children under the age of 19. If the services are not provided as 
part of the benchmark or benchmark-equivalent plan, these services must 
be provided by the State as wrap-around benefits. Further, States, at 
their option, can provide for additional services or wrap-around 
services to benchmark or benchmark-equivalent programs.
    Another protection is that exempt individuals have the opportunity 
to make an informed choice before enrolling in benchmark or benchmark-
equivalent plans. This includes the requirement that States must 
provide exempt individuals with a comparison of the benefits included 
in the benchmark or benchmark-equivalent plan versus the benefits 
included in traditional State plan coverage. If the benchmark or 
benchmark-equivalent is not meeting the exempt individual's health care 
needs, the exempt individual has the option to return to State plan 
coverage immediately. If the exempt individual is in need of these 
services and they are not offered in the

[[Page 73702]]

benchmark plan, the individual can return to the regular Medicaid 
benefit package.
    Comment: One commenter believed current regulations governing 
managed care in Medicaid that describe the information States must 
provide and how that information should be provided should be 
incorporated in the rule governing benchmark benefit plans. The 
information should include a comparison of features between Medicaid 
and the benchmark plan, whenever they differ.
    Other commenters urged CMS to allow States to deviate from the 
lock-in provisions of Medicaid managed care regulations at 42 CFR part 
438. They assert that, if beneficiaries covered by an alternative 
benefit package, rather than full Medicaid benefits, can pick and 
choose benefits during an enrollment period by plan-hopping, plans will 
have no way to establish cost-effective premiums tied to the limited 
benefit package. The commenters requested that CMS allow States 
providing alternate benefit packages to offer as little as a 30-day 
change period after initial assignment, and that differences in covered 
benefits be excluded as a justifiable cause for beneficiaries to switch 
health plans after the change period.
    Response: We have revised the regulation at Sec.  440.305 to 
incorporate compliance with managed care requirements at section 1932 
of the Act and at 42 CFR part 438 of Federal regulations, except when 
the State demonstrates that such requirements are impractical in the 
context of, or inconsistent with, methods of offering coverage that is 
appropriate to meet the needs of the targeted population. This would 
mean that, in providing information to beneficiaries who are offered 
managed care plans to obtain alternate benefit coverage, States would 
be required to comply with the requirements at Sec.  438.10, so that 
States must provide all enrollment notices, informational materials, 
and instructional materials relating to the enrollees and potential 
enrollees in a manner and format that may be easily understood. This 
informational material must include, among other things, information 
concerning enrollment rights and protections; any restrictions on 
freedom of choice among providers; procedures for obtaining benefits 
including prior authorization requirements; information on grievances 
and fair hearings procedures; information on physicians, the amount, 
duration, and scope of benefits; and the process and procedures for 
obtaining emergency services.
    In order to maintain State flexibility, State plan amendments will 
be reviewed on an individual case-by-case basis and could provide for 
exceptions from managed care requirements when impractical or 
inconsistent with the methods of delivering appropriate coverage to the 
targeted population. This would mean that, if States can meet the 
standard of offering benchmark or benchmark-equivalent coverage that is 
appropriate to meet the health care needs of the targeted population, 
CMS would consider State program designs that require flexibility in 
this regard.
    Comment: Some commenters believed that CMS should require that all 
non-managed care plans ensure adequate access to providers that accept 
assignment of benefits and bill benchmark plans directly.
    Response: If States choose to offer benchmark or benchmark-
equivalent plans to Medicaid beneficiaries, States must assure that 
access to providers and claims payment must be in compliance with 
current Federal regulations.
    Comment: One commenter raised potential problems of billing 
alternate benefit insurers. The commenter believed CMS should ensure 
that benchmark plan options should impose no additional administrative 
burdens on participating Medicaid providers. Providers should not be 
depended upon to refund payments and rebill plans in the event that a 
plan is billed for a Medicaid recipient who is retroactively enrolled 
into a different plan. Individual plan requirements should be 
streamlined into the existing system to minimize complexity to the 
already complex billing requirements.
    Response: This rule does not address provider billing issues 
because this is the kind of administrative issue that is more properly 
handled on a State level. Provider billing procedures will vary among 
the States based on the particular health care delivery system in the 
State at issue. We do not anticipate that provider billing under an 
alternative benefit program will necessarily differ from the way in 
which providers currently bill for Medicaid services, or that providers 
will have to establish new processes and systems to calculate, track, 
bill, and report benchmark services. Moreover, because most States 
already offer managed care enrollment, they already have experience 
ensuring coordination of provider claims among different managed care 
entities. Thus, we do not believe that the offering of alternate 
benefit packages will impose significant administrative burdens on 
providers.
    Comment: One commenter asserted that the final rule should require 
States to provide an exceptions process in which beneficiaries can 
obtain services not covered by a benchmark plan when they are medically 
necessary, and to educate beneficiaries about how to pursue this 
essential safeguard.
    Similarly, States should also be required to provide hardship 
exemptions if beneficiaries are unable to meet cost-sharing 
requirements in benchmark plans and should review each beneficiary's 
eligibility category to ensure they meet statutory requirements for 
assignment to benchmark plans.
    Response: CMS agrees with the commenter that States should review 
each beneficiary's eligibility category to ensure they meet statutory 
requirements for assignment to benchmark plans. The requirements for 
which mandatory enrollment can occur are outlined in Sec.  440.431 and 
specify that only full benefit eligibles can be mandatorily enrolled in 
benchmark benefit packages. We have required in Sec.  440.320 that 
exempt individuals be fully informed regarding the choice for 
enrollment in benchmark or benchmark-equivalent plans. We have also 
required that States comply with the managed care regulations including 
the information requirements for enrollees and potential enrollees.
    We are not requiring that States provide a process for 
beneficiaries to obtain services not covered by a benchmark plan when 
they are medically necessary, because such a process is not authorized 
by section 1937 of the Act. Benchmark or benchmark-equivalent plans 
offered to beneficiaries constitute the individual's medical assistance 
health care coverage and the services provided by the benchmark plan 
are expected to be appropriate to meet the needs of the population it 
serves.
    It is important to note that for those who voluntarily enroll in 
benchmark or benchmark-equivalent plans, if medically necessary 
services are needed that are not provided as part of the benchmark 
program, such individuals can revert to traditional Medicaid coverage 
at any time to receive the services. Requests for individuals to opt 
out must be acted upon promptly. Further, we included a requirement for 
States to have a process in place to ensure continuous access to 
services while any opt out request is being processed. See 42 CFR 
440.320.
    In terms of cost sharing, States are required to ensure that 
benchmark or benchmark-equivalent plans comply with the cost-sharing 
requirements at sections 1916 and 1916A of the Act, which includes the 
provision that premiums and/or cost sharing not

[[Page 73703]]

exceed 5 percent of the family's income. These sections provide States 
with the flexibility to consider individuals who are unable to meet 
their cost-sharing obligations and establish a course of action that 
will be taken in such an instance. Exemptions for individuals in the 
case of undue hardship, however, are a state option and may not be 
available in all States.
    Comment: One commenter believed alternative plans should include a 
provision for mandatory cost sharing, where applicable, in return for 
treatment or services. Uncollected cost-sharing places an unfair 
financial burden on providers.
    Response: States are required to ensure that benchmark or 
benchmark-equivalent plans comply with the cost-sharing requirements at 
Sections 1916 and 1916A of the Act. These sections provide that States 
can impose premiums and cost sharing on certain Medicaid beneficiaries, 
and Section 1916A provides for enforcement of such premiums and cost 
sharing on certain Medicaid beneficiaries (certain limitations do 
apply). The enforcement of premiums and cost sharing is at a State's 
option. CMS is not requiring that cost sharing be mandated in return 
for treatment or services, since this would be inconsistent with the 
statutory language provided by Congress in the DRA.
    Comment: One commenter mentioned that because of the potential for 
harm to beneficiaries, this rule should mandate strong requirements for 
meaningful public input at both the Federal and State level when States 
propose use of alternative benefit packages. Only a full open process 
in which all stakeholders can participate will provide the thorough, 
thoughtful analysis needed to determine whether specific changes will 
foster genuine efficiency or threaten beneficiaries' access to 
appropriate care.
    These commenters noted that the State plan amendment process 
provides almost no meaningful opportunity for public input. They 
complained that States can implement changes the day after publishing a 
notice, with no requirement to acknowledge or address comments.
    The commenter suggested that meaningful opportunities for public 
comment could include well-publicized and easily accessible public 
hearings, ample opportunity for stakeholders to provide written 
comments, and a requirement that State and Federal officials provide 
written responses to comments.
    Response: We agree that States should seek public input concerning 
plans to offer alternative benefit packages. Thus, we are requiring in 
Sec.  440.305 Scope that States secure public input prior to any 
submission to CMS of a proposed State plan amendment that would provide 
for an alternative benefit package. We are not requiring any specific 
process to secure public input, in order to permit States flexibility 
to design and use a public input process that meets State needs.
    We note that there are already a number of Federal requirements for 
States to provide public notice of, and seek public involvement in, 
Medicaid program issues. CMS requires in Sec.  447.205 that States must 
provide public notice of any significant proposed change in its methods 
and standards for setting payment rates for services. There are public 
process requirements for setting institutional payment rates at section 
1902(a)(13)(A) of the Act. We also require in Sec.  438.50(b)(4) that 
States offering benefits through a mandatory managed care program must 
specify the process the State uses to involve the public in both design 
and initial implementation of the managed care program and the methods 
it uses to ensure ongoing public involvement once the managed care 
program has been implemented. Additionally, States submitting a section 
1115 demonstration proposal must provide a written description of the 
process the State will use for receipt of public input into the 
proposal. (See 59 FR 49249).
    Comment: One commenter suggested that CMS require States to include 
in Medicaid contracts with alternative benefit packages provisions that 
require fair reimbursement for providers at rates no less than rates 
paid under the traditional Medicaid program, including a reasonable 
dispensing fee for pharmacy providers.
    Further, the commenter believed that CMS should prohibit States 
from procuring contracts that contain mail order prescription 
requirements for Medicaid recipients. The commenter asserts that 
Medicaid recipients who are required to enroll in benchmark plans 
should have the option of receiving pharmacy services in a retail 
pharmacy setting. CMS should also require that contracts contain an 
assurance that allows extended quantities of medications from retail 
pharmacies for Medicaid recipients receiving treatment for chronic 
illnesses.
    Response: Rate setting is a process that States undertake with 
their contracted providers. It is outside the scope of this rule, and 
was not addressed by the provisions of section 1937 of the Act. Nor did 
section 1937 address or limit the use of mail order prescription 
requirements, or otherwise address or limit the coverage of, or payment 
for, prescription drugs. These issues are outside of the scope of this 
rule.
    Comment: One commenter recommended that CMS include in its rule an 
evaluation of the impact on beneficiaries of the benchmark benefit 
packages.
    Response: CMS points the commenter to the ``Regulatory Impact 
Analysis'' in section VI.B ``Anticipated Effects'' of this regulation.

D. Section 440.310 Applicability

    Comment: One commenter disagreed that the medically needy 
population should be exempt from participating in benchmark plans. The 
commenter believed the rule should permit voluntary enrollment of 
medically needy into benchmark plans in States such as Minnesota which 
provide full benefits across the board to both categorically and 
medically needy. Section 1937 of the Act only expressly prohibits 
required participation by the medically needy but is silent as to 
whether they can be voluntarily enrolled. It is illogical for CMS to 
interpret Congressional intent to permit scaled back benefit coverage 
for the categorically needy, while shielding the medically needy from 
scaled back benefit packages.
    Response: We agree with the commenter's suggestion that medically 
needy populations may be offered voluntary enrollment in an alternative 
benefit package. Thus, we have revised the rule at Sec.  440.315 
``Exempt Individuals'' to indicate that benchmark and benchmark-
equivalent benefits can be offered as a voluntary option to medically 
needy or those eligible as a result of a reduction of countable income 
based on costs incurred for medical care.

E. Section 440.315 Exempt Individuals

    Comment: One commenter believed that these alternative benefit 
packages should provide exemptions to additional Medicaid coverage 
groups. Other commenters suggested that CMS use its discretion to 
expand the categories of exempt individuals to include adults with 
serious mental illness and children with serious emotional 
disturbances.
    Some commenters believed that all people with mental illness should 
be exempt.
    Response: The statute does not authorize CMS to exempt additional 
categories of individuals from alternate benefit package requirements. 
We have included the medically needy with the

[[Page 73704]]

list of exempt populations because the medically needy population is 
effectively exempted by exclusion from the definition of ``full benefit 
eligible''.
    We note that we have allowed States flexibility to define the 
exempt group of ``medically frail and special needs'' individuals, and 
States could include in this group, for example, children with serious 
emotional disturbances and individuals with mental illness.
    We encourage States to broadly define medically frail and/or 
individuals with special medical needs to include these individuals.
    Comment: One commenter requested a definition for exempt 
individuals ``who qualify for Medicaid solely on the basis of 
qualification under the State's TANF rules.'' The commenter noted that 
no individual can qualify to receive Medicaid benefits solely on the 
basis of their TANF eligibility, since TANF is not linked to Medicaid.
    Response: We released a State Medicaid Director's letter on June 5, 
1998 in which CMS provided guidance that Medicaid eligibility is not 
tied under Federal law to States' TANF eligibility criteria.
    The impact of this exemption in the context of alternative benefit 
packages would be that only individuals receiving medical assistance 
solely on the basis of the individual's TANF eligibility can be exempt 
from mandatory enrollment into benchmark or benchmark-equivalent 
packages. Because we believe linking does not currently occur in State 
Medicaid programs, we believe there are no individuals affected by this 
exemption. It is important to note that individuals eligible under 
section 1931 of the Act can be mandatorily enrolled in benchmark or 
benchmark-equivalent plans and are also not affected by this exemption.
    Comment: A commenter stated the proposed rule defines the exempt 
``special medical needs'' group to include two of the three groups that 
are also exempt from mandatory enrollment in managed care plans under 
section 1932(a)(2) of the Act, ``dual eligibles'' and certain children. 
However, the proposed rule does not exempt the third group that is 
exempt from mandatory enrollment in managed care plans, AI/ANs. Several 
commenters believed that the same compelling policy reasons for 
excluding AI/ANs from mandatory managed care support excluding them 
from mandatory enrollment in benchmark plans, and request that we 
revise the rule to be consistent with current policy described in the 
Medicaid managed care rule of 2002.
    Response: The commenter pointed out that we mistakenly confused two 
distinct groups in our definition of ``individuals with special needs'' 
and included individuals eligible for Medicare as a special needs 
population when it is identified in section 1937 as a separate exempt 
population. That was a misreading of the statute and we have deleted 
that reference. Section 1937(a)(2)(iii) of the Act exempts individuals 
entitled to Medicare benefits (dual eligibles), regardless of medical 
need, from mandatory enrollment in an alternative benefit package. 
There is a separate statutory exempt category at section 1937(a)(2)(vi) 
for individuals who are medically frail or have special medical needs. 
This final regulation includes both of these groups separately.
    Specifically, in the proposed rule, we specified that ``individuals 
with special needs'' means the populations identified in Sec.  
438.50(d)(1) and Sec.  438.50(d)(3). The reference to Sec.  
438.50(d)(1) was the erroneous reference to the dual eligible 
population discussed above. The reference to Sec.  438.50(d)(3) was 
made because that population was a pre-existing definition of the 
statutory term ``children with special medical needs'' contained at 
section 1932(a)(2)(A) of the Act. We did not contain a separate 
definition of adults with special medical needs.
    After reviewing public comment, we have determined to allow States 
flexibility to adopt reasonable definitions of ``individuals with 
special medical needs'' as long as that definition includes the 
children specified in Sec.  438.50(d)(3).
    We recognize that Congress included special protections for 
American Indians under the managed care provisions at section 
1932(a)(2)(C) of the Act, but we must also recognize that those special 
protections were not included under section 1937. It is possible that 
the managed care protections were based on the fact that American 
Indians have access to the IHS and tribal health care delivery system, 
and there was concern about mandating enrollment in a managed care plan 
that would not be consistent with that health care delivery system.
    While AI/ANs are not a statutory group that is exempt from 
enrollment in an alternative benefit package, they remain exempt from 
mandatory enrollment in managed care. As a result, a State that 
operates an alternative benefit package through managed care providers 
must provide AI/ANs with a health care delivery system that is 
consistent with the special protections related to managed care 
enrollment contained in section 1932(a)(2)(C) of the Act.
    Comment: One commenter believed that States may be discouraged from 
pursuing the benchmark option because of the extra work required for 
determining eligibility, along with the fact that potential savings may 
be limited. The commenter asked that CMS not impose any additional 
definition of sub-groups that must be identified and carved out of 
benchmark plans.
    Response: CMS does not believe there is extra work involved in 
determining eligibility that would reduce potential savings. CMS 
currently has approved nine State plan amendments offering benchmark 
benefits to Medicaid beneficiaries. Some States have converted some of 
their section 1115 populations into State plan populations covered 
through benchmark benefit packages. CMS also has several benchmark 
State plan amendments pending Federal review. We would like to point 
out that this Medicaid State plan option was modeled partly based on 
the success seen in separate SCHIP programs as well as in section 1115 
demonstrations with similar flexibility. Additionally, CMS has 
identified in section VI of the ``Regulatory Impact Analysis'' of this 
regulation that savings can accrue if States choose to adopt 
alternative benefit programs and that savings will be achieved through 
cost avoidance of future anticipated costs by providing appropriate 
benefits based on meeting a population's health care needs, achieving 
appropriate utilization of services, and through gains in efficiencies 
through contracting. We believe States will be able to take greater 
advantage of marketplace dynamics within their State, and we anticipate 
that a number of States will use this flexibility to create programs 
that are similar to their SCHIP programs. We believe that because 
States are no longer tied to statewideness and comparability, States 
will be able to offer individuals and families different types of plans 
consistent with their health care needs and available delivery systems.
    Comment: One commenter asked for additional clarification of the 
phrase ``or being treated as being blind or disabled'' in Sec.  440.315 
of this regulation.
    Response: This phrase needs to be interpreted by each State in 
light of the particular eligibility conditions in that State. For 
example, the phrase could refer to 209(b) States, since States with 
this classification can have a more restrictive definition of blindness 
or disability. The term could also refer to one of the working disabled 
groups, since one group has a categorical requirement that the person 
have a

[[Page 73705]]

medically determinable severe impairment, which does not exactly match 
the criteria for a determination of ``disabled''. And the Territories 
operate on a different definition of blindness and disability than the 
50 States.
    Comment: Some commenters stated that the proposed rule exempts from 
mandatory enrollment the ``medically frail.'' Several commenters 
suggested this term be given specific meaning in the rule. They 
suggested it include anyone who is eligible for or is receiving 
Medicare or Medicaid services for home health, hospice, personal care, 
rehabilitation or home and community-based waivers, or who is at 
imminent risk of need for these types of services.
    Another commenter suggested this group be defined as individuals 
with multiple medical conditions and/or a chronic illness.
    Response: We have not defined this term in this rule and, after 
considering public comment on the issue, have determined to allow State 
flexibility in adopting a reasonable interpretation. CMS will require 
that States offering alternative benefit packages to inform CMS as to 
their definition of ``medically frail.'' States will be required to 
include information regarding which population groups will be 
mandatorily enrolled in the benchmark program and will need to ensure 
that enrollment is optional for exempt populations, including 
individuals defined by the State as ``medically frail.'' Additionally, 
CMS intends to interpret the required public input process, to include 
informing interested parties of the State's proposed definition of 
``medically frail.''
    Comment: Another commenter suggested CMS use the existing HHS 
(Maternal and Child Health Bureau) definition of ``children with 
special health care needs'': ``Children who have or are at increased 
risk for a chronic physical, developmental, behavioral, or emotional 
condition and who also require health and related services of a type or 
amount beyond that required by children generally.''
    Other commenters believed the ``special medical needs individuals'' 
should include adults who meet the Federal definition of an individual 
with serious mental illness and children who meet the Federal 
definition of children with serious emotional disturbance, as 
promulgated by the Substance Abuse and Mental Health Services 
Administration (SAMHSA). The SAMHSA definition would include some 
individuals who, for one reason or another, are not eligible as persons 
with a disability, but nevertheless are significantly impaired by their 
mental disorder.
    Response: In the proposed rule, we defined individuals with special 
medical needs to be consistent with Sec.  438.50(d)(3), which 
implements and interprets the term ``children with special medical 
needs'' used in section 1932(a)(2)(A) of the Act. This definition 
refers to children under age 19 who are eligible for SSI, section 
1902(e)(3) of the Act TEFRA children, children in foster care or 
receiving other out of home placement, children receiving foster care 
or adoption assistance or are receiving services through a community 
based coordinated care system.
    We appreciate commenters' suggestions of additional populations for 
inclusion in the definition of special medical needs. In this final 
rule, we are allowing States flexibility to adopt a reasonable 
definition of the term. CMS encourages States to consider all of these 
individuals for inclusion in the definition of ``individuals with 
special medical needs.''
    To maintain maximum State flexibility, we are thus not imposing a 
Federal definition other than requiring that the population include at 
least those children identified in Sec.  438.50(d)(3). CMS will require 
that States offering alternative benefit packages inform CMS as to 
their definition of ``special medical needs.'' States will be required 
to ensure that exempt populations, including individuals with ``special 
medical needs'' are not mandatorily enrolled in alternative benefit 
packages, but are instead offered an informed choice. Additionally, CMS 
intends to interpret the required public input process to include 
informing interested parties as to the proposed definition of ``special 
medical needs.''

F. Section 440.320 State Plan Requirements--Optional Enrollment for 
Exempt Individuals

    Comment: One commenter supported our regulation at Sec.  440.320 
and appreciated the willingness of CMS to provide for optional 
enrollment of otherwise exempt individuals. Several other commenters 
urged CMS to require States to provide more information and assistance 
to exempt individuals who are given the option to enroll in alternative 
coverage.
    Response: We agree with the commenter that States should provide 
information and assistance to exempt individuals who are given the 
option to enroll in alternative coverage so they can make an informed 
choice. We proposed in Sec.  440.320 that States must inform the 
recipients that enrollment is voluntary and that the individual may opt 
out of the benchmark or benchmark-equivalent benefit package at any 
time and regain immediate eligibility for the standard full Medicaid 
program under the State plan. We also proposed that States must inform 
the recipient of the benefits available under the benchmark or 
benchmark-equivalent benefit package and provide a comparison of how 
the benefits differ from the benefits available under the standard full 
Medicaid program. We also required that the State document in the 
individual's eligibility file that the individual was informed and 
voluntarily chose to enroll in the benchmark or benchmark-equivalent 
benefit package.
    After considering public concerns as to the importance of the 
informed choice process, we have revised the proposed rule at Sec.  
440.320(a)(1) to require that the State must ``effectively'' inform the 
individuals. To the extent that the informed choice process continues 
to raise concerns, we may issue guidance as to what processes are 
necessary to insure that the informed choice process is effective.
    Comment: One commenter believed the proposed rule was silent on the 
requirement that the State provide information in plain language that 
is understood by the individual, parent, or guardian including clear 
instructions on how to access EPSDT services not provided by the 
benchmark plan and how to opt out.
    Response: We agree that it is important to provide information in 
plain language and individuals should be provided clear instructions on 
how to access EPSDT services not provided by benchmark plans. Further, 
individuals should also receive information on how to opt out of 
benchmark plans. We are requiring in Sec.  440.320 that States 
effectively inform exempt individuals of the choice, and provide 
sufficient information in order to make an informed choice, including a 
comparison of benefits. Exempt individuals must be afforded the 
opportunity to opt out of benchmark or benchmark-equivalent coverage if 
it is determined that the coverage is not meeting their health care 
needs.
    In addition, when alternative benefit packages are furnished 
through managed care contractors, all managed care requirements apply, 
as indicated at Sec.  440.305(e). For managed care entities, pursuant 
to Sec.  438.10, all informational materials and instructional 
materials relating to enrollees and potential enrollees must be 
provided in a manner and format that may be easily understood.
    Comment: Some commenters stated that the rules should provide for

[[Page 73706]]

immediate revocation of any voluntary election at the discretion of 
those excluded individuals who elect an alternative plan. They urged 
that revocation be permitted through telephone, in writing, in person, 
by electronic communication, or by a designee, so as to make revocation 
as simple as possible and as quick as possible for beneficiaries. They 
also asserted that the State should be required to provide immediate 
notification to such individuals of the right to revoke their election 
if they fall into an excluded category. And they urged that coverage 
and payment should not be interrupted during changes in election and 
marketing should not be permitted by alternate plans to excluded 
groups.
    These commenters asked that the disenrollment process from 
benchmark plans allow a seamless transition to and from the selected 
program and minimize the administrative burden on the provider while 
ensuring care delivery is not interrupted.
    Response: We agree that coverage and payment should not be 
interrupted during changes in election. It is important that 
coordination of care continue during any time of transition either from 
one Medicaid eligibility group to another or from one benefit program 
to another. Thus, in considering the commenters' suggestions, we have 
provided in Sec.  440.320 that, for individuals who voluntarily enroll 
and later determine it necessary to revert to traditional Medicaid and/
or for individuals who are later determined eligible for an exempted 
group, opt out requests must be acted upon promptly and States must 
have a process in place to ensure continuous access to services while 
opt out requests are being processed.
    Comment: Some commenters recommended that CMS enhance the proposed 
rule to include a section on CMS oversight containing a requirement 
that CMS approve State informational materials that provide comparative 
information and information on choice. Other commenters were concerned 
that inappropriate marketing activities such as those they believe are 
being used by some Medicare Advantage plans, may be adopted by 
benchmark plans. These commenters urged CMS to be aware of the 
potential for inappropriate marketing tactics, require States to 
oversee marketing activities, and impose limits on marketing to ensure 
individuals are not enrolled under false pretenses.
    Response: To the extent that benchmark and benchmark-equivalent 
benefit packages are provided through managed care plans, States must 
comply with the Medicaid managed care rules at 42 CFR part 438. 
Marketing requirements for managed care plans are described in Sec.  
438.104. States must consider these requirements in contracting with 
these entities.
    At this time, we do not see a need for additional oversight 
measures when alternative benefit packages are offered outside of the 
managed care context.
    Comment: Other commenters indicated that CMS should require strong 
beneficiary protections for people, including frail older and disabled 
beneficiaries, who have the opportunity to voluntary opt into benchmark 
plans. The commenters indicated that these protections should include 
objective counseling to make sure they understand the potential for 
higher costs and make truly informed decisions, a ban on aggressive and 
coercive marketing such as door-to-door sales, a requirement to 
document network adequacy for additional populations, and ongoing 
monitoring to ensure that these beneficiaries are getting the care they 
need. Some commenters indicated that, even with full information, 
individuals who voluntarily enroll may be likely to make an 
inappropriate election. They suggested a professional counselor 
independent of the plan be available to review their plan selection.
    Response: We believe a professional counselor or enrollment broker 
would be a reasonable administrative protection that could be adopted 
by a State, but we are not requiring it. This is an operational issue 
that may depend on the circumstances of a particular State's program. 
States who contract with an enrollment broker can receive 
administrative match from CMS at the 50 percent match rate. To the 
extent that the State offers alternative benefits through managed care 
plans, enrollment brokers must operate consistently with the 
requirements at Sec.  438.810. And, consistent with the managed care 
rules at Sec.  438.10, States are encouraged to provide information at 
least annually as to an individual's enrollment choice under the 
benchmark option or the traditional State plan option. This could be 
accomplished at the point of redetermining eligibility for enrollees.
    Additionally, if it becomes apparent that a change in eligibility 
status has occurred (for example, non-pregnant female mandatorily 
enrolled in the benchmark plan becomes pregnant and is no longer 
eligible for mandatory enrollment), it is incumbent upon the State to 
provide the individual with information about their benefit options. 
These individuals must have the opportunity to receive State plan 
services that may not be available in the benchmark plan either as 
wrap-around to the benchmark plan or by reverting to traditional 
Medicaid.
    Comment: Several commenters believed exempt individuals will be 
automatically enrolled without their expressed consent and wanted an 
assurance that this will not occur. These commenters urged CMS to 
safeguard exempt individuals from being enrolled in benchmark or 
benchmark-equivalent plans without their prior informed consent by more 
expressly prohibiting States from taking an ``opt-out'' approach to 
their enrollment. They suggested that the proposed language could allow 
or even encourage States to adopt an opt-out approach without further 
clarification, the language could be read to allow States to initially 
enroll all exempt persons who do not affirmatively opt out. These 
commenters indicated that failure to clarify this point would be 
construed as approval of opt-out practices and would not protect 
against any form of automatic or ``presumed voluntary'' enrollment.
    Response: Section 1937 provides that exempt individuals cannot be 
mandatorily enrolled in benchmark or benchmark-equivalent plans. We 
proposed to permit States to offer exempt individuals a voluntary 
option to enroll, based on informed choice. In order for exempt 
individuals not to be mandatorily enrolled and to have made an 
``informed choice'' about enrollment, the choice must take place before 
enrollment in the benchmark or benchmark-equivalent plan. We have 
amended the final rule to make this clear. Further, these actions 
should occur before the receipt of services in a benchmark or 
benchmark-equivalent plan. We mentioned earlier that we require that 
the individual's file is documented to reflect that an exempt 
individual is fully informed and has chosen to be enrolled in a 
benchmark or benchmark-equivalent plan. CMS, in response to these 
comments, has made it clear that individuals cannot be enrolled until 
an informed election is made.
    In terms of CMS monitoring, we provide in Federal regulations at 
Sec.  430.32 for program reviews of State and local administration of 
the Medicaid program. In order to determine whether the State is 
complying with the Federal requirements and the provisions of its 
Medicaid plan, we may conduct reviews that include analysis of the 
State's policies and procedures, on-site review of selected aspects of 
agency operation,

[[Page 73707]]

and examination of individual case records.
    Comment: One commenter believed that the rule should describe the 
level of detail required in the State's description of the difference 
between State Plan benefits and benchmark-equivalent plan benefits 
because the commenter believed it is important that there be a 
detailed, written comparison.
    Response: We agree with the commenter on the importance of the 
benefit comparison. We have required that if the State chooses to 
provide benchmark or benchmark-equivalent benefit options, individuals 
exempt from mandatory enrollment must be given, prior to benchmark 
enrollment, a comparison of traditional State plan benefits and the 
benefits offered in the benchmark or benchmark-equivalent benefit 
package. We believe that in order for exempt individuals to make an 
informed choice, the information must be fully detailed. But we have 
determined not to include specific standards for these benefit 
crosswalks in the regulation itself because we believe this issue is 
better addressed in case-by-case program reviews.
    Comment: Another commenter believed CMS should prohibit States from 
implementing procedures that make it harder for beneficiaries to stay 
in the regular Medicaid program than to enroll in benchmark benefit 
plans. Beneficiaries should not be asked to make a choice without being 
afforded a reasonable time to evaluate the options.
    Response: We agree that individuals should be given a reasonable 
time to evaluate the options in considering traditional Medicaid 
benefits versus benchmark or benchmark-equivalent options. In order for 
individuals to make an informed choice, individuals must have ample 
time to consider the options available. Therefore, we have revised the 
regulatory provision at Sec.  440.320(a)(3) to require that the State 
document that the individual had ample time for an informed choice. We 
are not prescribing standards for what constitutes ``ample time'' 
because we believe this may vary based on the circumstances and/or 
individual involved.
    Comment: Another commenter believed CMS should require States to 
institute expedited processes to transition out of benchmark plans 
those individuals who become eligible for exempted categories.
    Response: We agree with the commenter that States should provide 
for transition of individuals if they become eligible for exempt 
categories and thus not required to be mandatorily enrolled in a 
benchmark plan. Congress clearly identified individuals who are exempt 
from mandatory enrollment in benchmark or benchmark-equivalent plans. 
As mentioned previously, we have revised the final rule at Sec.  
440.320 to require that opt out requests are acted upon promptly and 
that States must have a process in place to ensure continuous access to 
services while any opt out requests are being processed. These State 
plan requirements would mean that if an individual becomes part of an 
exempt population for which no mandatory enrollment can occur, it is 
incumbent upon the State to ensure that procedures are in place to 
transition individuals quickly and/or to provide information to 
individuals quickly to ensure an informed choice. We believe that 
States should not rely on the individual's ability to revert back to 
Medicaid. These individuals are entitled to the full range of Medicaid 
benefits. They must have the choice to receive them either as part of, 
or as wrap-around to, the benchmark plan or as part of the traditional 
Medicaid State plan.
    Comment: One commenter asked for clarification on whether the 
benchmark or benchmark-equivalent benefit packages would apply to 
``unqualified individuals'' who fall under the ``exempt category'' and 
who could be offered optional enrollment in a benchmark benefit 
package.
    Response: We wish to clarify that unqualified individuals (aliens 
who are not lawfully admitted for permanent residence in the United 
States or otherwise do not meet the Medicaid eligibility requirements 
for aliens; for example, aliens who are residing in the U.S. illegally 
or who have not met the 5-year bar for lawful permanent resident 
aliens) are exempt individuals that cannot be mandatorily enrolled in 
benchmark plans.
    Unqualified individuals are not entitled to Medicaid unless they 
are aliens eligible for Medicaid coverage in situations where care and 
services are necessary for the treatment of the alien's emergency 
medical condition (see section 1903(v) of the Act). Thus, these 
individuals can be enrolled in a benchmark or benchmark-equivalent plan 
on a voluntary basis. The limitations in Sec.  440.320 and section 
1903(v) of the Act would apply.

G. Section 440.330 Benchmark Health Benefits Coverage

    Comment: A few commenters questioned the coverage standards of a 
Secretary-approved benefit package. They contended that under this 
option, CMS could approve coverage of any kind, one that may include or 
exclude any benefits the State chooses. They asserted that this failure 
to recognize any minimum set of required benefits in Medicaid could 
limit access to critical health care services. They argued that 
allowing States even greater flexibility, by not requiring that 
coverage meet benchmark levels, is inappropriate and is likely to 
result in more beneficiaries going without health care services until 
they become sick and require emergency treatment.
    Another commenter agreed and stated that the proposed rule says, 
``Secretary approved coverage is any other health benefits coverage 
that the Secretary determines * * * provides appropriate coverage for 
the population proposed to be provided this coverage.'' The commenter 
finds this statement troublesome. This provision gives the Secretary 
the wide discretion to approve a number of plans that are more flexible 
than the benchmark plan requirements as articulated in this rule. This 
provision would give States the option to craft qualifying plans that 
include or exclude any benefits that the State chooses.
    The commenters urged CMS to remove this fourth option for 
Secretary-approved benchmark packages from the proposed rule.
    Response: The statute provides States with the option of Secretary-
approved coverage, and we believe we have provided for sufficient 
protections to ensure that this option will be consistent with the 
statutory purpose of meaningful health benefits coverage while also 
allowing State flexibility. In this final rule, we have articulated the 
general standard that Secretary-approved coverage must be appropriate 
coverage to meet the needs of the population provided that coverage. 
The regulations also provide a number of documentation requirements so 
that CMS can determine that this standard has been met. States are 
required to submit a full description of the proposed coverage. They 
must include a benefit-by-benefit comparison of the proposed plan to 
one or more of the three benchmark plans specified in Sec.  440.330 or 
to the State's standard full Medicaid coverage package under section 
1905(a) of the Act, as well as a full description of the population 
that would receive the coverage. Additionally, States will be providing 
to CMS any other information that would be relevant in making a 
determination that the proposed coverage would be appropriate for the 
proposed population. In considering Secretary approved coverage, we 
will review individual State designs on a case-by-case basis. To the 
extent that State

[[Page 73708]]

designs deviate from the other options for benchmark coverage (for 
example, State employees coverage, etc.) or traditional Medicaid State 
plan coverage, we will consider the information provided as a result of 
the public input process and any other information States submit that 
would be relevant to a determination that the proposed coverage would 
be appropriate for the proposed population.
    We believe that Secretary-approved coverage can be appropriate to 
meet the needs of the targeted population provided that coverage. We 
have approved six Secretary-approved benchmark plans. All of these six 
plans include not only all regular Medicaid State plan services but 
provide for additional services like disease management and/or 
preventive services as well.
    Comment: Some commenters believed that to allow States to establish 
alternative health benefit programs that do not include family planning 
services is counter productive to ensuring the health of Americans and 
maintaining the sustainability of the Medicaid program. Also, a 
benchmark or benchmark-equivalent plan would not be appropriate for 
individuals of childbearing age if it did not include access to family 
planning services. The commenter believed that no health benefits 
package would be ``appropriate'' for individuals of childbearing age if 
it did not include access to family planning services and supplies, and 
asked CMS to revise the proposed rule to clarify that, in order to be 
considered ``appropriate,'' a benchmark or benchmark-equivalent plan 
must include coverage of family planning services and supplies.
    The commenter also urged CMS to amend the rule to allow 
beneficiaries to disenroll from any such alternative benefit plan and 
reenroll in traditional Medicaid if the plan does not cover family 
planning services and supplies.
    Several commenters noted that family planning is basic preventive 
health care for women and that ensuring a women's freedom of choice is 
critical in the delivery of these services. Birth control, the main 
component of family planning coverage, is the most effective way to: 
(1) Prevent unwanted pregnancies, (2) safely space pregnancies in the 
interest of the mother and child's health, and (3) keep women in the 
workforce. Furthermore, birth control enables preventive behaviors and 
allows for the early detection of disease by getting women into 
doctor's offices for regular health screenings.
    One commenter believed that the legislation authorizes the 
Secretary to approve benchmark plans that provide ``appropriate 
coverage for the population proposed to be provided that coverage.'' 
Similarly, the legislation requires benchmark-equivalent coverage to 
include ``other appropriate preventive services, as designated by the 
Secretary.'' Coverage offered to women of reproductive age cannot be 
considered ``appropriate'' if it excludes coverage of family planning 
services and supplies.
    Some commenters asserted that permitting some plans to exclude 
coverage of family planning runs directly counter to three of the major 
goals articulated by the legislation's supporters: reducing Medicaid 
costs, promoting personal responsibility and improving enrollees' 
health.
    Other commenters believed that approximately half of all 
pregnancies in the United States are unplanned and there is a strong 
correlation between unintended pregnancies and failure to obtain timely 
prenatal care. They stated that guaranteeing coverage of family 
planning services for women enrolled in Medicaid benchmark plans 
increases the likelihood that these women will be under the care of a 
health professional before pregnancy, and that when they do become 
pregnant they will obtain timely prenatal care as recommended by the 
American College of Obstetricians and Gynecologists.
    The commenters urged the Department to revise Sec.  440.330 to 
clarify that in order for Secretary-approved coverage to be considered 
appropriate coverage for women of reproductive age, it must include 
family planning services and supplies. In addition, the commenters 
urged the Department to modify Sec.  440.335 to designate family 
planning services and supplies as a required preventive service that 
must be included in all benchmark-equivalent plans offered to women of 
reproductive age.
    Response: Even if one of the statutorily-specified benchmark 
packages did not contain family planning services, the statute 
nonetheless permits States to base an alternative benefit package on 
that benchmark. CMS has no authority to disapprove the use of a 
statutorily-specified benchmark plan as the basis for an alternative 
benefit package. Consequently, we are revising Sec.  440.375 to update 
the title and revise the text of this section to indicate that States 
can provide benchmark or benchmark-equivalent coverage to recipients 
without regard to the requirements relating to the scope of coverage 
that would otherwise apply under traditional Medicaid benefit packages. 
The scope of coverage would still need to be consistent with the 
requirements for the scope of coverage contained in this subpart, which 
are based on the statutory benchmark or benchmark-equivalent coverage 
provisions.
    With respect to Secretarially-approved coverage, we agree with the 
commenters that if a benchmark benefit plan is provided to individuals 
of child bearing age that did not include family planning services, it 
may not be appropriate to meet the needs of the population it serves. 
Additionally, if a benchmark or benchmark-equivalent benefit package 
does not include family planning services, States have the option of 
providing wrap-around or additional benefits to the benchmark. Because 
of the flexibility granted by the DRA, States can submit innovative 
designs for implementing Medicaid programs to their beneficiaries. CMS 
will review each State plan amendment on a case by case basis and will 
consider the merit of each design based on the standard that benchmark 
benefit packages ``are appropriate to meet the needs of the targeted 
population.''
    Comment: Other commenters believed that one reason States may wish 
to design a plan under the option for benchmark-equivalent or Secretary 
approved is to offer beneficiaries important services that are not 
otherwise covered by Medicaid or a standard benchmark plan. The 
commenters stated that this rule does not permit this. CMS should allow 
States to submit proposals that include other services and judge the 
overall plan proposed by the State to assess its efficiency.
    Response: Section 1937 provides that benchmark-equivalent or 
Secretary-approved can be offered as benchmark plans, so long as basic 
services are provided as part of the benchmark-equivalent benefits or 
the benefit package is appropriate to meet the needs of the population 
it serves for Secretary-approved coverage. The rule is consistent with 
these flexibilities. Additionally, the rule provides that the scope of 
a Secretary-approved health benefits package or any wrap-around or 
additional benefits will be limited to benefits within the scope of the 
categories available under a benchmark coverage package or the standard 
full Medicaid coverage under section 1905(a) of the Act. This provision 
allows States flexibility to offer additional health care services that 
would not otherwise be offered. Additional services are limited to 
those in categories offered under a benchmark

[[Page 73709]]

plan or section 1905(a) of the Act because section 1937 of the Act did 
not expressly authorize coverage beyond the defined scope of medical 
assistance, and these limits ensure that additional services will be of 
the type generally considered as health care services.
    In considering the benchmark packages that have been approved by 
CMS, States have created innovative designs that do offer additional 
services and do provide for efficiency.

H. Section 440.335 Benchmark-Equivalent Health Benefits Coverage

    Comment: One commenter urged CMS to clarify that plans cannot use 
actuarial methods that further reduce benefits because of cost-sharing 
limits.
    Another commenter noted that the preamble of the proposed rule 
indicates that even if the benchmark plan has 50 percent coinsurance, 
the State would have to ensure that cost sharing does not exceed the 
applicable limits in Medicaid, which are substantially lower.
    However, Sec.  440.340 specifies that the actuarial report ``should 
also state if the analysis took into account the State's ability to 
reduce benefits because of 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.'' The commenter 
strongly urged CMS to clarify that this language does not allow States 
to reduce mental health benefits below 75 percent of the value of the 
benchmark benefits because there are less co-payments in the benchmark-
equivalent plan. Congress intended that individuals would get 75 
percent of the value of the benefit; they did not intend to reduce the 
value of this benefit through cost-sharing limitations.
    Response: We agree that clarification is needed in terms of using 
actuarial methods to further reduce benefits because of cost-sharing 
limits. We have specified in Sec.  440.340 that, as a condition of 
approval of benchmark-equivalent coverage, States must provide an 
actuarial report with an actuarial opinion that the benchmark-
equivalent coverage meets the actuarial requirements for coverage 
specified in Sec.  440.335. We have also specified in Sec.  440.340 
that the actuarial report must--
     Be prepared by a member of the American Academy of 
Actuaries and must meet the standards of this Academy;
     Use generally accepted actuarial principles and 
methodologies of the Academy, standard utilization and price factors, 
and a standardized population representative of the population 
involved;
     Use the same principles and factors in analyzing the value 
of different coverage (or categories of services) without taking into 
account differences in coverage based on the method of delivery or 
means of cost control or utilization use;
     Indicate if the analysis took into account the State's 
ability to reduce benefits because of 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;
     Select and specify the standardized set of utilization and 
pricing factors as well as the standardized population; and
     Provide sufficient detail to explain the basis of the 
methodologies used to estimate the actuarial value.
    In considering the actuarial value, we expect that the States and 
the actuaries making the determination of actuarial equivalence will 
account for changes in cost sharing between the benchmark-equivalent 
plan and the benchmark plan as well as account for any differences in 
income and assets between Medicaid beneficiaries and the enrollees in 
the benchmark plan. Cost sharing for the Medicaid benchmark-equivalent 
plan will still be subject to the limitations set forth in this rule 
and in sections 1916 and 1916A of the Act. The determination of 
actuarial equivalence should provide an aggregate actuarial value that 
is at least equal to the value of one of the benchmark benefit 
packages, or if prescription drugs, mental health services, vision and/
or hearing services are included in the benchmark plan, an aggregate 
actuarial value that is at least 75 percent of the actuarial value of 
prescription drugs, mental health services, vision and/or hearing 
services of one of the benchmark benefit packages. Changes to the 
benchmark-equivalent plans, including changes in the cost-sharing 
structure that would result in expected benefit amounts less than under 
the benchmark plan or less than 75 percent of the actuarial value of 
prescription drugs, mental health services, vision and/or hearing 
services, would not be allowed under this rule.
    Comment: Several commenters note that the standard for adopting a 
benchmark-equivalent coverage package is set at 75 percent of the 
actuarial value of that category of services in the benchmark plan and 
wants to understand if the percentage is set in statute. The commenters 
believe that if this percentage is not a statutory provision, it would 
be important to describe the basis for this standard.
    Response: The DRA provides for this standard. Section 1937(b)(2)(C) 
of the Act specifies that the benchmark-equivalent coverage with 
respect to prescription drugs, mental health services, vision services, 
and/or hearing services must have an actuarial value equal to at least 
75 percent of the actuarial value of the coverage of that category of 
services in the benchmark plan. We have maintained this standard in the 
rule consistent with the statutory provision.
    Comment: Another commenter pointed out that the benchmark plans are 
allowed to provide 75 percent of the actuarial value of mental health 
and prescription drugs. The commenter is concerned that if the plan 
used as a benchmark does not cover mental health treatment or 
prescription drugs, the new Medicaid benefit package does not have to 
provide this coverage.
    Other commenters are concerned about language indicating that a 
benchmark-equivalent coverage package is not required to include 
coverage for prescription drugs, mental health services, vision 
services, or hearing services. The commenter believed all of these 
services are necessary medical services.
    Response: CMS clarifies that any and all services under section 
1905(a) of the Act must meet medical necessity. Prescription drugs, 
mental health services, vision services, or hearing services would meet 
the test of medical necessity, however, it is important to note that 
these services are not considered mandatory services under the State 
plan but rather are considered optional services. Many States have 
chosen not to provide Medicaid beneficiaries with optional services 
under their state's Medicaid State plan.
    Further, it is the DRA that specifies if coverage for prescription 
drugs, mental health, vision and/or hearing is provided in the 
benchmark plan, the benchmark-equivalent plan must provide at least 75 
percent of the actuarial value of the coverage. If coverage is not 
provided under the benchmark plan, the benchmark-equivalent is also not 
required to provide the coverage. This would be logical since, in 
calculating the actuarial value of the benchmark-equivalent, the 
actuarial value would be calculated based only on the services included 
in the benchmark plan and not calculated based on services that are not 
included. This is consistent with the statutory provision, and we have 
maintained this flexibility in the rule.

[[Page 73710]]

    Comment: Some commenters questioned how the State will assure the 
aggregate actuarial value is equivalent if there is lesser coverage in 
prescription drugs, mental health, vision, and/or hearing services.
    Response: Section 1937(b)(2)(C) of the Act specifies that, in 
considering a benchmark-equivalent benefit, if prescription drugs, 
mental health, vision, and/or hearing are provided in the benchmark 
plan, the benchmark-equivalent must provide at least 75 percent of the 
actuarial value of that coverage. This section specifies the minimum 
coverage levels but does not specify the maximum level. Thus, States 
have the option to cover these services at higher than 75 percent of 
the actuarial value. To assure that the aggregate actuarial value is 
equivalent, we required in Sec.  440.340 that, as a condition of 
approval of benchmark-equivalent coverage, States must provide an 
actuarial report that provides, among other things, sufficient detail 
as to the basis of the methodologies used to estimate the actuarial 
value of the benchmark-equivalent coverage.
    Comment: Another commenter suggested that rehabilitation services 
should be added to the list of services included at Sec.  440.335.
    Response: The DRA specifies that benchmark-equivalent coverage must 
include basic services; that is, inpatient and outpatient hospital 
services; physicians' surgical and medical services; laboratory and x-
ray services; well-baby and well-child care including age-appropriate 
immunizations; and other appropriate preventive services. We have 
interpreted other appropriate preventive services to include services 
such as emergency services, but have left States with flexibility to 
define other appropriate preventive services. We disagree with the 
commenter that additional services should be added to the list of 
services that are required services under benchmark-equivalent plans.
    It is important to note, however, that States, at their option, can 
provide additional or wrap-around services to benchmark or benchmark-
equivalent plans. Including rehabilitation services may be appropriate 
for some populations. Additional and wrap-around services are discussed 
in Sec.  440.360 of this rule.
    We did not receive any comments to Sec.  440.340 Actuarial report. 
Therefore, Sec.  440.340 will adopted as written in the proposed rule 
of February 22, 2008.

I. Section 440.345 EPSDT Services Requirement

    Comment: Some commenters supported the proposed regulation that 
would require individuals to first seek coverage of EPSDT services 
through the benchmark or benchmark-equivalent plan before seeking 
coverage of services through wrap-around benefits. Commenters believed 
that when individuals need to access additional services as a wrap-
around either for children or adults, States should be required to 
ensure they continue to be able to receive services from the same 
provider.
    Response: We agree that it is important for individuals to receive 
services from the same provider, whenever possible. We believe that an 
individual's primary care provider is in the best position to 
``manage'' an individual's care. For individuals enrolled in a 
benchmark or benchmark-equivalent benefit plan, the primary care 
provider is going to be serving the individual under that plan. If an 
individual is entitled to additional services, the primary care 
provider should be responsible for providing and/or coordinating the 
individual's care and should be aware of any additional services the 
individual needs.
    Comment: Some commenters objected to the provision in the proposed 
rule that stipulates that individuals must first seek coverage of EPSDT 
services through the benchmark plan before seeking coverage of these 
services through wrap-around benefits. These commenters asserted that 
Congress intended to allow States the option of providing these 
benefits directly to Medicaid beneficiaries or to provide these 
benefits in whole or in part by the benchmark provider. They indicated 
that CMS provides no justification as to why children must first 
wrestle with the administrators of the benchmark benefit package before 
accessing EPSDT services. One commenter asked that the rule be amended 
to eliminate the requirement that a family first seek coverage of EPSDT 
services through the benchmark plans.
    Response: It is important for individuals to first seek coverage of 
EPSDT services through the benchmark plan since we believe the 
benchmark provider should serve as the ``medical home'' for the 
individual. Thus, the benchmark provider becomes the one central source 
of a child's pediatric record and can guard against duplication and 
gaps in services. The benchmark provider ensures that care is managed 
and coordinated, providing access to specialists and necessary support 
services. Also, the benchmark provider facilitates access to 
information regarding the services to which the individual is entitled 
and information regarding how and when to access such services. We 
believe that in accessing services first through the benchmark plan the 
provider can act as a facilitator who coordinates and leverages the 
attributes and resources of a complex healthcare system and advocate 
for the beneficiary as they navigate care options and information 
available to them. As such, we believe the individual will be provided 
with better health care service and will experience better health care 
outcomes overall.
    Comment: One commenter believed that families are unlikely to 
realize that their children have access to more coverage than that 
provided through the benchmark. Even if they understood, they may not 
know how to request such a service. The commenter suggested that this 
section be strengthened by requiring States to explain, in detail, how 
a family will be informed of their rights under EPSDT once they are 
enrolled in a benchmark plan and to explain the specific process the 
state will then go through to approve or disapprove these services. 
States should also explain timelines for consideration of EPSDT 
requests in emergency, urgent and routine cases.
    The commenter goes on further to say the preamble to the proposed 
rule stated, ``the State may provide wrap-around * * * under such 
plan.'' The commenter urged that CMS clarify that the word ``may'' 
should be read ``must'' because the word ``may'' inaccurately suggested 
that States are not required to provide these services. The commenter 
noted that, in other areas of the proposed rule, CMS correctly stated 
that EPSDT services must wrap-around benchmark plans.
    Response: We agree that States should be required to inform 
families of their rights under EPSDT. The commenter is correct that 
children enrolled in benchmark or benchmark-equivalent plans may be 
entitled to additional services. Therefore, we are clarifying that 
States must ensure that information is provided to all EPSDT eligibles 
and/or their families about the benefits of preventive health care, 
what services are available under the EPSDT benefit, where and how to 
access those services, that transportation and scheduling assistance 
are available, and that services are available at no cost. This is 
consistent with the requirements of section 1902(a)(43)(A) of the Act 
and current policy outlined in Section 5121

[[Page 73711]]

of the State Medicaid Manual. Information must be given to individuals 
no later than 60 days of the individual's initial Medicaid eligibility 
determination, and annually thereafter if they have not utilized EPSDT 
services. We believe most States have booklets to inform individuals of 
their benefits, rights, responsibilities, etc. This information is 
typically presented to families by the eligibility worker at the time 
of application and/or sent to individuals as part of an enrollment 
packet from the managed care plan. These types of documents should 
clearly explain the benchmark and wrap-around benefits available to 
EPSDT eligibles under the age of 19.
    Additionally, we agree with the commenter that the word ``may'' was 
inaccurate in the preamble to the proposed rule. The law specifically 
requires that States are required to wrap-around services (if the full 
range of EPSDT services is not provided as part of the benchmark or 
benchmark-equivalent plan) to assure that all EPSDT services are 
available to eligibles. We are providing clarification here in response 
to the comment; however, we are not revising the regulation text, since 
the language in Sec.  440.345 clearly indicates that this is a 
requirement, and not a choice.
    Comment: One commenter stated that the rule was silent on the 
requirement that the state provide information in plain language that 
is understood by the individual, parent or guardian including clear 
instructions on how to access EPSDT services not provided by the 
benchmark plan and how to opt out.
    Response: We agree that it is important that individuals be 
provided with clear instructions in plain language on how to access 
EPSDT services not provided by the benchmark plan and how to opt out. 
This is already required by the EPSDT outreach provisions of section 
1902(a)(43) of the Act, which are applicable to alternative benefit 
packages. To the extent that alternative benefit packages are delivered 
through managed care plans, States must also comply with managed care 
rules at 42 CFR part 438. According to Sec.  438.10, information 
provided must be in an easily understood language and format.
    Comment: One commenter noted that proposed Sec.  440.350 failed to 
specify that under the employer-sponsored insurance plan option States 
must still ensure that children have access to the wrap-around EPSDT 
benefit. This section should be amended to note this requirement.
    Response: The requirement to provide EPSDT benefits to children 
under the age of 19 applies to benchmark and benchmark-equivalent 
coverage. We have provided that States can offer employer sponsored 
insurance if the insurance is considered a benchmark plan. 
Additionally, we have indicated in Sec.  440.350(b) that the State must 
assure that employer sponsored plans meet the requirements of benchmark 
or benchmark-equivalent coverage, including the cost-effectiveness 
coverage requirements at Sec.  440.370. By requiring that employer 
sponsored plans meet the requirements of benchmark or benchmark-
equivalent coverage and since benchmark or benchmark-equivalent 
coverage must provide EPSDT to children under the age of 19 either as 
part of, or as wrap-around to, the benchmark or benchmark-equivalent 
plan, we are requiring that any employer sponsored insurance coverage 
provide EPSDT services to children under the age of 19. We believe this 
is clear in the regulation, so we have not revised the regulation text 
in this regard.
    Comment: Another commenter believed that limiting the mandatory 
EPSDT benefit to children under age 19 rather than under age 21 denies 
19 and 20 years olds access to critical health care services. The 
commenter stated that this provision is inconsistent with the title XIX 
definition of EPSDT. Removing EPSDT for 19 and 20 years olds may 
exacerbate existing health disparities for minority adolescents, 
compromise 19 and 20 years olds' ability to transition successfully 
into adulthood, and impede identification of physical and mental 
conditions.
    Response: We have promulgated language in this rule consistent with 
the statutory language enacted in the DRA. Requiring States to extend 
EPSDT benefits to 19 and 20 year olds enrolled in benchmark plans would 
require a change in law since section 1937(a)(1)(A)(ii) of the Act 
provides only that children under 19 years old must receive coverage of 
EPSDT as defined in section 1905(r) of the Act. States are given the 
option to extend EPSDT benefits in benchmark plans to 19 and 20 year 
olds. This option is similar to the choice States currently have in 
extending Medicaid eligibility to 19 and 20 year olds; thus, extending 
EPSDT to 19 and 20 year olds under the State plan. We note that in 
approving nine benchmark State plan amendments, most States with 
approved benchmark plans have extended EPSDT coverage to 19 and 20 year 
olds enrolled in these plans.
    Comment: One State Medicaid official suggested, instead of the 
current language in the published proposed rule on (page 9727) of the 
Federal Register regarding EPSDT, the following amendment be made to be 
consistent with Federal laws: ``(a) The State must ensure access to 
EPSDT services, through benchmark * * * for any child under 19 years of 
age eligible under the State plan in a category under section 
1902(a)(10)(A) of the Act.''
    Response: We agree to adopt the language precisely as included in 
the statute. We have revised the rule to effectuate the clarification.

I. Section 440.350 Employee-Sponsored Insurance Health Plans

    Comment: One commenter requested information about enrollment in 
commercial plans and suggested a discussion of how such arrangements 
might actually be operationalized; that is, how premiums would be paid 
and tracked, and the level of Medicaid contribution to such plans.
    Response: Benchmark or benchmark-equivalent benefit coverage may be 
offered through employer sponsored insurance health plans for 
individuals with access to private health insurance. If an individual 
has access to employer sponsored coverage and that coverage is 
determined by the State to offer a benchmark or benchmark-equivalent 
benefit package (either alone or with the addition of wrap-around 
services covered separately under Medicaid), a State may elect to 
provide premium payments on behalf of the recipient to purchase the 
employer coverage. Non-exempt individuals can be required to enroll in 
employer sponsored insurance, and the premium payments would be 
considered medical assistance. The requirement for children under the 
age of 19 to receive EPSDT either as wrap-around or as part of the 
benchmark coverage would still be applicable. The premium payments and 
any other cost-sharing obligations by beneficiaries would be subject to 
the premium and cost-sharing requirements outlined in sections 1916 and 
1916A of the Act, including the requirement that cost sharing not 
exceed the aggregate limit of 5 percent of the family's income, as 
applied on a monthly or quarterly basis specified by the State.
    If the employer plan is cost-effective, States have the flexibility 
to take advantage of the coverage, without requiring a uniform employer 
contribution. It is likely that a substantial employer contribution 
would be necessary in order to meet the cost-effectiveness requirement. 
States must identify the specific minimum contribution level that they 
are requiring of participating employers.
    We have not approved any Medicaid benchmark programs at this time 
that provide for employer sponsored

[[Page 73712]]

coverage; however, we have approved section 1115 demonstrations in 
which States have provided premium assistance payments and employer 
sponsored insurance coverage to Medicaid beneficiaries. For these 
section 1115 demonstration programs, some States have required 
beneficiaries to provide proof of premium assistance payments. Then, 
after such proof is received, the State reimburses the beneficiary 
directly. Some States use a voucher system in which they provide a 
monthly voucher directly to the beneficiary for the premium payment in 
purchasing the employer sponsored insurance. We are not specifying the 
way in which States operationalize employer sponsored insurance 
benchmark plans; however, we provide this information for 
consideration.
    Comment: One commenter supported the inclusion of wrap-around 
services in general and wrap-around services for employer sponsored 
insurance plans as an option available to States, but does not support 
a requirement for additional wrap-around services. The commenter 
requested that language be added to describe the permissibility of 
various types of market innovations in coverage such as high deductible 
plans, health savings accounts, consumer-directed plans and wellness 
plans or that there be language added indicating such market 
innovations are acceptable as ``Secretary-approved coverage'' through a 
State plan amendment.
    Response: Section 1937(a)(1)(C) of the Act provides that wrap-
around or additional benefits are options that can be added by the 
State as additional benefits to benchmark or benchmark-equivalent 
coverage. Any wrap-around services that are added do not need to 
include all State plan services; however, wrap-around services must be 
within the scope of categories of services covered under the benchmark 
plan, or described in section 1905(a) of the Act.
    The only requirement for wrap-around services is at section 
1937(a)(1)(A)(ii) of the Act, which provides that if children under the 
age of 19 are receiving services in a benchmark or benchmark-equivalent 
benefit plan, they are entitled to EPSDT services as defined in section 
1905(r) of the Act and so must receive medically necessary services 
consistent with EPSDT either as services provided in the benchmark or 
as wrap-around to the benchmark plan.
    We have further provided in Sec.  440.330 that Secretary-approved 
coverage can be offered as benchmark coverage, consistent with the DRA. 
This coverage must be appropriate to meet the needs of the targeted 
population. We have required that States wishing to opt for Secretary-
approved coverage should submit a full description of the proposed 
coverage and include a benefit-by-benefit comparison of the proposed 
plan to one or more of the other benchmark options listed in this 
section or to the State's standard full Medicaid coverage package under 
section 1905(a) of the Act, as well as a full description of the 
population that would be receiving the coverage. In addition, the State 
should submit any other information that would be relevant to a 
determination that the proposed health benefits coverage would be 
appropriate for the proposed population. The scope of the Secretary-
approved health benefits package will be limited to benefits within the 
scope of the categories available under a benchmark coverage package or 
the standard full Medicaid coverage package under section 1905(a) of 
the Act.
    To the extent that a benchmark coverage plan that is used as the 
comparison for the Secretary-approved benchmark plan provides for 
market innovations such as high deductible health plans, health savings 
accounts, consumer-directed plans, and/or wellness plans, we would 
consider these on a case-by-case basis as components included in a 
Secretary-approved benchmark option. It should be noted that CMS has 
approved nine benchmark programs. Of these nine, six have been approved 
as Secretary-approved programs. At least one of the Secretary-approved 
plans includes such innovations as high deductible health plans.
    We did not receive any comments to Sec.  440.355 Payment of 
premiums. Therefore, Sec.  440.355 will be adopted as written in the 
proposed rule of February 22, 2008.

J. Section 440.360 State Plan Requirement for Providing Additional 
Wrap-Around Services

    Comment: A dental provider indicated that the proposed rules give 
States the ability to create new benefit packages tailored to different 
populations and that States have the flexibility to provide ``wrap-
around'' and ``additional benefits.'' The commenter noted that CMS 
cited in a press release ``dental coverage'' as an example of 
``additional benefits'' but, in the actual language of the proposed 
rule there are no examples or reference to ``dental coverage.'' 
Further, the commenter noted that the conference report to the DRA 
includes guidance to States by explaining that both benchmark and 
benchmark-equivalent coverage would include ``qualifying child 
benchmark dental coverage.'' The commenter also noted that in the 
context of employer group health plans, stand-alone dental arrangements 
are very often offered as a supplemental coverage that is separate from 
medical care coverage. The commenter indicated that this option would 
align Medicaid more closely with private market insurance options and 
give States more control over their Medicaid benefit packages.
    The commenter requested that CMS provide guidance to the States 
with respect to ``additional benefits'' such as ``dental coverage.'' 
The commenter recommended the rule be amended to include an additional 
paragraph that would provide that States have the option to provide 
additional benefits that specifically include dental benefits that may 
be offered as a supplement to medical care coverage.
    Response: The House Conference Report 109-362 provided for the 
language that benchmark or benchmark-equivalent coverage would include 
``qualifying child benchmark dental coverage.'' The conference 
agreement removed this reference. Thus, the final provisions of section 
1937 of the Act includes no such requirement for the inclusion of 
dental coverage as wrap-around or additional services. In fact, section 
1937 of the Act provides no examples of wrap-around or additional 
coverage. The rule provides that additional or wrap-around services do 
not need to include all State plan services but would be health 
benefits that are of the same type as those covered under the benchmark 
or considered to be health benefits under the Medicaid statute.
    We do agree that dental coverage could be added to benchmark or 
benchmark-equivalent benefit plans. Further, it is possible that, 
because of the plan options that have been identified by Congress as 
benchmark coverage, dental services may already be covered services in 
these plans.
    If the commenter is concerned that children will not receive dental 
coverage, we wish to point out that children under the age of 19 must 
receive EPSDT services consistent with section 1905(r) of the Act 
either as part of, or as wrap-around to, the benchmark plan. Therefore, 
dental coverage will be provided to children under the age of 19 
enrolled in benchmark plans.

K. Section 440.365 Coverage of Rural Health Clinic and Federally 
Qualified Health Center (FQHC) Services

    Comment: One commenter was concerned that the proposed rule only

[[Page 73713]]

stipulated that States with benchmark plans need only assure that these 
individuals have access through such coverage and that FQHCs are to be 
reimbursed for such services as provided under the FQHC reimbursement 
requirements found in section 1902(bb) of the Act. The commenter 
indicated further concern that CMS did not elaborate further on these 
requirements, and particularly, that it did not lay out minimum steps a 
State must take to assure that these patient and health center 
protections are effectively implemented. The commenter believed it is 
important that the final rule and preamble make clear that there are 
minimum steps a State must take to be in compliance with these FQHC 
statutory requirements.
    Specifically, the commenter asked that it should be clear that 
recipients who are mandatorily or voluntarily enrolled in a benchmark 
plan: (1) Remain eligible to receive from an FQHC all of the services 
included in the definition of the services of an FQHC, as provided in 
section 1902(a)(2)(C); and (2) must be informed that one or several of 
the providers by whom they may choose to be treated under this coverage 
is (or are) an FQHC. The commenter asserted that, to the extent these 
same individuals receive benchmark coverage, both the State and the 
benchmark plans must be encouraged to contract with FQHCs as providers 
of services to these enrolled Medicaid populations. These FQHC(s) must 
be identified by name. The commenter further stated that, in the event 
the benchmark plans identified do not contract with an FQHC, enrollees 
must be informed that they still may receive Medicaid covered services 
from FQHCs. In the preamble and final rule, the commenter provided that 
CMS should underline to the States the importance of full compliance 
with the FQHC reimbursement requirements of section 1937(b)(4) of the 
Act and Sec.  440.365. The commenter added that adoption of these 
recommendations is important to assure that the requirements of section 
1937(b)(4) of the Act are met.
    Response: We agree with the commenters and we have required in 
Sec.  447.365 that if a State provides benchmark or benchmark-
equivalent coverage to individuals, it must assure that the individual 
has access, through that coverage or otherwise, to rural health clinic 
services and FQHC services and that payment for these services must be 
made in accordance with the payment provisions of section 1902(bb) of 
the Act. We also agree that individuals always have access to FQHC 
services, even if the State does not contract with an FQHC to provide 
such services, and we encourage States to contract with FQHCs as 
providers.
    We did not receive any comments to Sec.  440.370 Cost-
effectiveness. Therefore, we will adopt Sec.  440.370 as written in the 
proposed rule of February 22, 2008.

L. Section 440.375 Comparability

    Comment: One commenter encouraged CMS to require comparability 
across traditional Medicaid and Medicaid benchmark alternatives.
    Response: The language included in the rule allowing for States to 
offer benchmark or benchmark-equivalent health care coverage without 
regard to comparability is based on the DRA language providing that 
``notwithstanding any other provision of Title XIX'' States can offer 
medical assistance to certain Medicaid beneficiaries through benchmark 
or benchmark-equivalent benefit packages. We interpreted this 
``notwithstanding language'' to provide that States could offer 
benchmark or benchmark-equivalent coverage to certain specified 
Medicaid populations, considering different benefit packages, and to 
different regions within the State. This provision gives meaning to the 
statutory language permitting States to offer benchmark or benchmark-
equivalent coverage to certain, but not all, Medicaid populations.
    For example, States could craft benchmark options that provide 
individuals with a benefit that integrates acute care and long term 
care services and a different benefit that provides for traditional 
State plan services with the addition of disease management services. 
We believe this provides that States can better meet the needs of their 
Medicaid populations, and we further believe that this is consistent 
with Congressional intent in establishing maximum flexibility for 
implementing benchmark benefit options.

M. Section 440.380 Statewideness

    Comment: One commenter is concerned that States are given the 
option to amend their State plan to provide benchmark plan coverage to 
Medicaid recipients without regard to statewideness. This proposed 
regulation would likely result in health care disparities among 
individuals living in different parts of the State, has no basis in the 
statute, and should therefore be excluded from the final regulations. 
The commenter stated that the proposed Sec.  440.380 should be revised 
to ensure that beneficiaries across the State are not subject to 
disparities in health care services.
    Response: The language included in the rule allowing for States to 
offer benchmark or benchmark-equivalent health care coverage without 
regard to statewideness is based on the DRA language providing that 
``notwithstanding any other provision of Title XIX'' States can offer 
medical assistance to certain Medicaid beneficiaries through benchmark 
or benchmark equivalent benefit packages. We interpreted this 
``notwithstanding language'' to provide that States could offer 
benchmark or benchmark-equivalent coverage to certain Medicaid 
populations, considering different benefit packages, and to different 
regions within the State. This provision also gives meaning to the 
language permitting States to offer benchmark or benchmark-equivalent 
coverage to certain, but not all, Medicaid populations.
    For example, States could craft benchmark options that provide 
individuals with a benefit in an urban area of the State that is 
different from the benefit offered to individuals in the rural area of 
the State. Moreover, States can test new concepts in pilot areas before 
expanding the benchmark program to the entire State. We believe this 
provides that States can better meet the needs of their Medicaid 
populations, and we further believe that this is consistent with 
Congressional intent in establishing maximum flexibility for benchmark 
benefit options.

N. Section 440.385 Freedom of Choice

    Comment: One commenter noted that CMS protects the free choice of 
emergency services providers but failed to do so for family planning 
services providers. The commenter urged CMS to preserve the free choice 
of family planning services providers by amending the rule to include a 
provision preserving the free choice of family planning providers. The 
commenter believes that this has been a long standing policy of the 
Congress and the Medicaid program.
    The commenter added that the proposed rules would permit States to 
deny freedom of choice of a provider for managed care enrollees seeking 
family planning services and supplies. The commenter argued that this 
provision lacks any basis in the statute and is contrary to the clear, 
repeated articulated intent of Congress.
    The provider asserted that provider freedom of choice is critical 
because of the potentially sensitive nature of the service. The 
commenter argued that, unable to obtain confidential services from the 
provider of their choice, some managed care enrollees may forgo

[[Page 73714]]

obtaining family planning services entirely. This would threaten 
beneficiaries' access to high quality, confidential reproductive health 
care and set a precedent of inequity between beneficiaries in fee-for-
service programs and beneficiaries in managed care plans.
    The commenter noted that Congress has clearly indicated that while 
States may require Medicaid beneficiaries to enroll in managed care 
plans and obtain care from providers affiliated with those plans, an 
exception should be made for individuals seeking family planning. The 
commenter also noted that Federal regulations at Sec.  431.51 state, 
``A recipient enrolled in a primary care case management system, a 
Medicaid MCO, or other similar entity will not be restricted in freedom 
of choice of providers of family planning services.'' The commenters 
urged the Department to revise Sec.  440.385 to reflect that provider 
freedom of choice for family planning should be retained.
    Response: We agree. Accordingly, we have revised the regulation to 
ensure that selective contracting does not apply to family planning 
services providers.
    Comment: One commenter requested that CMS explain the concept of 
``selective contracting'' and provide more detail as to how this would 
be operationalized under benchmark plans.
    Response: Selective contracting is a term usually referred to in 
the context of section 1915(b)(4) waiver programs. Selective 
contracting provides States with the opportunity to contract with 
certain providers so long as certain other criteria are maintained. 
Specifically, the State must ensure that in order to selectively 
contract with providers, the selective process does not restrict 
providers in emergency situations; is based on reimbursement, quality 
and utilization standards under the State plan; and does not 
discriminate among classes of providers on grounds unrelated to their 
demonstrated effectiveness and efficiency in providing benchmark 
benefit packages. Also, all providers must be paid on a timely basis 
consistent with Federal regulations at Sec.  447.45. States previously 
requested section 1915(b)(4) waiver authority for selective 
contracting, but now because of the flexibilities outlined in the DRA, 
we will provide that States can selectively contract with providers in 
offering benchmark benefit coverage without requesting a 1915(b) 
waiver. By using State plan authority, the burden for requesting waiver 
renewals every 2 years would be eliminated.
    We believe the authority to provide for selectively contracting is 
as a result of the DRA language that provides that ``notwithstanding 
any other provision of Title XIX,'' States can offer medical assistance 
through the use of alternative benchmark benefits to certain Medicaid 
beneficiaries. We believe that Congress intended for States to have a 
great amount of flexibility to tailor benefit packages appropriate to 
specified groups of Medicaid recipients. We also believe that Congress 
intended that efficiency and cost-effectiveness should be maintained in 
implementing State Medicaid programs. Thus, we have required in Sec.  
440.370 that benchmark or benchmark-equivalent coverage must be 
provided in accordance with economy and efficiency principles. 
Selective contracting of providers affords the greatest amount of 
flexibility, works to provide beneficiaries with continuity of care, 
and is cost-effective.
    Comment: One commenter noted that CMS should include an ``any 
willing provider'' provision in Medicaid contracts for alternate plans 
that allow Medicaid participating providers the opportunity to continue 
serving those who are required by the State to enroll in a benchmark 
plan.
    Response: We are not requiring States to incorporate an ``any 
willing provider'' requirement when selectively contracting for 
benchmark or benchmark-equivalent benefits. We believe that the 
protections we have incorporated into the selective contracting 
provisions at Sec.  440.385 are sufficient to ensure beneficiary access 
to benchmark or benchmark-equivalent benefits. And, even under the 
selective contracting provisions, States have the option to provide 
that ``any willing provider'' can provide services to individuals who 
enroll in benchmark plans, so long as the provider is a qualified 
provider that meets the criteria established in title XIX and in 
Federal regulations as a qualified provider, and agrees to accept the 
reimbursement, quality, and utilization standards set forth in the 
State plan.
    This would mean that States can contract with specific providers in 
offering specific services; for example, States could contract with a 
dental managed care plan to provide Medicaid beneficiaries with dental 
services. We recognize that individuals may have concerns with the 
flexibility granted herein that States can selectively contract with 
providers if certain conditions are met. However, over the years States 
have selectively contracted with providers and we believe individuals 
continue to receive quality care. We believe that to allow States the 
option to selectively contract with providers gives States the 
flexibility to provide for benchmark or benchmark-equivalent packages 
consistent with the intent of the DRA while still providing that 
individuals continue to receive quality health care.

O. Section 440.390 Assurance of Transportation

    Comment: One commenter agreed with the interpretation of the 
notwithstanding language to ``bypass'' the assurance of transportation, 
including the elimination of non-emergency medical transportation 
(NEMT). The commenter noted that the ability of States to exclude NEMT 
services in their benchmark benefits is evident not only from the broad 
language of the statute but also from Congressional intent. The 
commenter noted that one of the stated purposes of section 6044 of the 
DRA is to allow States to offer benefit packages that mirror commercial 
packages.
    Response: We agree that offering benchmark or benchmark-equivalent 
benefit packages without regard to the assurance of transportation is 
consistent with the benchmark options that Congress specified: Federal 
Employees Health Benefit Plan equivalent coverage, State employees 
coverage, and coverage offered by an HMO in the State with the largest 
insured commercial non-Medicaid population. These benchmark plans 
generally do not pay for NEMT to and from medical providers in all 
instances. Since section 1937 of the Act gives States the flexibility 
to provide benefits that are similar to commercial packages, it would 
appear inconsistent with that flexibility to require the States to 
provide NEMT that the selected benchmark package do not offer.
    Comment: A preponderance of commenters, however, disagreed with the 
provision in the rule that would allow States the option to exclude 
NEMT as a benefit under a benchmark and benchmark-equivalent plan. 
Generally, these comments were submitted by transportation providers, 
medical providers, and Medicaid beneficiaries, particularly Medicaid 
beneficiaries who rely on dialysis treatments.
    Most of the commenters believed that the goals of the Medicaid 
program would be undermined if needy individuals were unable to get to 
and from healthcare services and such an option would create a barrier 
to care. They asserted that assurance of transportation is a vital 
component of the Medicaid program and is of particular importance to 
mentally and physically disabled and elderly patients. They expressed 
concern that vulnerable populations might not receive medically 
necessary and often life sustaining

[[Page 73715]]

services because of their difficulty to access the needed care. For 
example, one commenter stated that, in the case of patients with ESRD, 
many patients would be unable to access dialysis services.
    Response: We disagree that benchmark and/or benchmark-equivalent 
plan options undermine the intent of the Medicaid program and create 
major barriers to access appropriate care. The benchmark and benchmark-
equivalent plan options provide unprecedented flexibilities to States 
in an effort to create benefit packages that appropriately meet the 
needs of their Medicaid populations. In order to provide States with 
maximum flexibility, the rule provides that States can offer benchmark 
or benchmark-equivalent coverage without regard to the assurance of 
transportation, which will align these plans with today's health care 
environment.
    Generally, private health insurance plans do not offer non-
emergency medical transportation as a medical benefit to enrollees. 
However, many private health plans do cover emergency ambulance 
transport, and in some cases, non-emergency ambulance transport for 
circumstances such as transporting beneficiaries between facilities. 
When a State selects a private health plan that provides coverage of 
emergency ambulance and/or non-emergency ambulance transport, the State 
is required to follow the coverage policy for transportation that is 
contained in the private health plan.
    If, however, the private health plan does not provide emergency 
transportation or NEMT benefits, the State may choose to provide some 
or all transportation assistance as a wrap-around service to the 
benchmark plan. To date, nine States have approved benchmark State 
plans. Of these nine States, only three do not provide NEMT services to 
beneficiaries enrolled in benchmark programs.
    It is, therefore, important to recognize that section 1937 of the 
Act contains protections for children and exempt individuals. Children 
will continue to have access to NEMT as an EPSDT benefit. Exempt 
individuals will have an informed choice to determine whether 
enrollment in a alternative benefit package is advantageous, and may 
take into account the availability of NEMT in making that election.
    Comment: Several commenters noted that elimination of the 
requirement to provide transportation would actually drive up Medicaid 
costs because medical visits would become less frequent, resulting in a 
higher incidence of more serious and costly medical problems, an 
increase in the use of emergency medical services, and an increase in 
long term nursing home admissions. A number of these commenters cited a 
2006 Cost Benefit Analysis conducted by the Marketing Institute of 
Florida State University College of Business as proof of the cost 
effectiveness of providing NEMT to Medicaid beneficiaries. Another 
commenter cited several studies that compared Medicaid recipients 
residing in States that do provide access to NEMT. The commenter stated 
that these studies found that access to non-emergency transportation 
produces cost savings and increased health care results.
    One commenter indicated that CMS requires States to comply with 
economy and efficiency principles in offering benchmark or benchmark-
equivalent benefit packages to Medicaid beneficiaries, but does not 
require non-emergency medical transportation in benchmark or benchmark-
equivalent plans, when according to several studies it has been proven 
that providing this service is cheaper overall and leads to better 
health outcomes for Medicaid beneficiaries.
    One commenter suggested that this rule sets up a system that would 
limit mileage payments to drivers for non-emergency doctor visits. The 
commenter indicated that medical mileage is funded in part to drivers 
who transport people for medical care on a non-emergency basis.
    Response: Generally, the populations that are mandated to enroll in 
a benchmark program are healthier and require medical services less 
frequently than most Medicaid eligibles. Moreover, children who are 
enrolled in benchmark or benchmark-equivalent coverage will continue to 
receive NEMT services because NEMT is required under EPSDT. The most 
vulnerable individuals are statutorily exempt individuals, such as 
those with disabilities or special medical needs, who cannot be 
mandated to enroll in a benchmark benefit plan but rather must be 
provided the choice to enroll, including a comparison of the benefits 
in the benchmark or benchmark-equivalent plan versus those in the 
traditional State plan package. If exempt individuals choose to enroll 
in a plan that does not cover NEMT services, these individuals have the 
right to disenroll at any time if they find that they need 
transportation assistance. Because the population for which NEMT may 
not be provided could be very limited, we do not agree that the impact 
of allowing States to choose not to provide NEMT will be great enough 
to increase Medicaid costs.
    To the extent that the commenters are correct that noncoverage of 
NEMT will lead to higher eventual costs, we believe that States will 
respond by ensuring coverage for NEMT. It is a State's choice whether 
to include NEMT benefits when offering benchmark or benchmark-
equivalent coverage. It is certain States will consider the potential 
impact on costs and beneficiaries' health care utilization and status 
when they make these decisions.
    Comment: One commenter stated that the number one reason that 
dentists and doctors do not wish to accept Medicaid patients is that 
Medicaid beneficiaries do not show-up for appointments or are late for 
appointments. If CMS does not require transportation benefits, no-shows 
will increase and the result will be that fewer providers will 
participate in Medicaid.
    Response: We do not agree with the commenter that not requiring 
NEMT will result in fewer providers participating in the Medicaid 
program. Provider participation in Medicaid is based on a number of 
reasons, including patient loads and reimbursement rates.
    To the extent that the commenters are correct that noncoverage of 
NEMT will lead to lower provider participation, we believe that States 
will respond by ensuring coverage for NEMT. It is a State's choice 
whether to include NEMT benefits when offering benchmark or benchmark-
equivalent coverage. It is certain States will consider the potential 
impact on provider participation when they make these decisions.
    Comment: Many of the commenters focused on the impact that the 
proposed regulation would have on dialysis patients who require 3 
weekly trips to and from dialysis facilities in order to survive. They 
noted that effective care of ESRD patients requires meticulous 
coordination of dialysis treatment and drug therapy with frequent and 
specialized care. Dialysis patients often have multiple co-morbidities 
and, therefore, require frequent transportation to multiple services. 
The severity of the complications that develop due to missed treatments 
is often life threatening. Elimination of transportation services would 
make it very difficult and often impossible for beneficiaries with ESRD 
to consistently access the frequent dialysis services that sustain 
their lives.
    Many commenters stated that individuals with physical or mental 
disabilities have difficulty using public transportation and require 
specialized transportation that would otherwise not be available should 
State Medicaid

[[Page 73716]]

programs be allowed to stop providing transportation. For many 
beneficiaries, the cost of frequent trips in specialized vehicles would 
be unaffordable. Often beneficiaries live in rural areas where the only 
available transportation to and from medical appointments is provided 
through the Medicaid program. Without Medicaid transportation services, 
many beneficiaries would be unable to access needed care and ultimately 
would require more costly services, costly emergency care, and 
expensive emergency ambulance services and/or expensive non-medical 
wheelchair van care.
    Other commenters indicated that co-occurring physical health 
conditions such as diabetes or heart disease, as well as mental health 
conditions such as depression and anxiety affect an individual's 
ability to drive.
    Several commenters indicated that people suffering with HIV/AIDS, 
some in wheel chairs, others who are extremely fragile or elderly, have 
monthly office visits where they are assessed and treated. To remove 
their only means of free transportation will take away their compliance 
with medical office treatment.
    Response: As we stated in a previous response, beneficiaries with 
end-stage renal disease who rely on dialysis treatments and 
beneficiaries with other physical and mental disabilities, individuals 
with HIV/AIDS, and those who are medically frail and elderly are likely 
exempt populations for which mandatory enrollment in benchmark or 
benchmark-equivalent plans may not occur. If exempt individuals who 
voluntarily enroll in benchmark plans determine that the plan is not 
meeting all of their health care needs including NEMT, such exempt 
individuals must be given the opportunity to disenroll from the 
benchmark program and revert to traditional Medicaid at any time. 
Additionally, children under the age of 19 must be provided with EPSDT 
services and thus will receive NEMT. Furthermore, the benchmark or 
benchmark-equivalent plans available may provide NEMT services. 
Consequently, we believe that only a very limited number of the cited 
individuals would not be provided with NEMT services.
    Comment: Many commenters stated that the possible elimination of 
transportation will not only decrease access to healthcare but would 
imperil the financial stability of ambulance services across the 
Emergency Medical Services (EMS) community. EMS providers depend on 
reimbursement from non-emergency transports to sustain operational 
costs and maintain optimal readiness standards for emergency 
transports. Without adequate reimbursement from Medicaid for non-
emergency transports, many ambulance providers, especially those in 
rural areas, would cease to stay in business, causing a serious 
reduction in the overall availability of ambulance services. Many 
commenters stated the provision would likely cause over-utilization of 
emergency ambulance services, since beneficiaries would need to rely 
more frequently on more expensive emergency ambulance transport. One 
commenter suggested that CMS implement the same ``medically necessary 
transportation'' guidelines for the Medicaid program that already exist 
and govern non-emergency ambulance transportation for Medicare 
patients, because commercial insurance almost universally uses these 
guidelines as the benchmark for reimbursement for non-emergency 
ambulance transportation.
    One commenter noted that the GAO has found that the current 
Medicare rates for ambulance transportation is on average 6 percent 
below the cost of providing care. Medicaid rates are currently even 
less. Ambulance transportation is a vital service for Medicaid 
beneficiaries, and ambulance companies are currently operating under a 
fee schedule that does not compensate them for the cost of providing 
that care. To further reduce the overall reimbursement to the ambulance 
providers while leaving benefits in tact for hospitals, physicians, and 
labs is unfair. Ambulance transport is a vital link between the patient 
and these other services, and should not be relegated to non-payment.
    Response: Because there are significant portions of the Medicaid 
population that will still be able to receive NEMT services, even if 
their State has chosen to implement the benchmark plan option, we do 
not believe that the flexibility in not providing NEMT to beneficiaries 
enrolled in benchmark plans would greatly reduce the overall 
availability of ambulance services, nor would it imperil the financial 
stability of ambulance services across the EMS community. It should 
also be noted that Medicaid is not responsible for the general 
operation or deficit financing of public or private transportation 
providers. The commenter's assumption that the elimination of NEMT 
would likely cause over-utilization of emergency ambulance services is 
unfounded. States as well as private insurers have in place policies 
stipulating when transport by emergency ambulance is appropriate, and 
these policies make it less likely that there would be abuse on the 
part of beneficiaries.
    With regard to the comment that CMS implement the same ``medically 
necessary transportation'' guidelines for the Medicaid program that 
already exist and govern non-emergency ambulance transportation for 
Medicare patients, because commercial insurance almost universally uses 
these guidelines as the benchmark for reimbursement for non-emergency 
ambulance transportation, we do not believe that it is necessary to 
require in this regulation specific guidelines that are universally 
used by commercial insurance. Due to the benchmarking requirements, 
services in universal use will probably be included in benchmark or 
benchmark-equivalent plans.
    Comment: Many commenters indicated that the proposed rule would 
shift financial responsibility for Medicaid non-emergency 
transportation to non-profit and municipal fire service-based EMS 
systems, ADA paratransit programs, beneficiaries, beneficiaries' 
families, and other segments of the population who often do not have 
sufficient funds to pay for trips to and from providers. The commenters 
believed that the proposed cuts in transportation conflict with the 
protections afforded to the disabled under the Americans with 
Disabilities Act. Commenters stated the shifting of the financial 
burden for Medicaid non-emergency transportation to ADA paratransit 
services and local transit programs without any additional funding 
constitutes an unfunded mandate.
    Response: We continue to believe that the responsibility for 
Medicaid NEMT will not be shifted to municipal EMS systems, ADA 
paratransit programs, or beneficiaries. Many beneficiaries are exempt 
from mandatory enrollment in benchmark benefit plans and therefore will 
continue to receive NEMT services if they choose to remain in 
traditional State plan coverage. If they enroll in benchmark or 
benchmark-equivalent coverage and determine that the coverage is not 
meeting their needs, they can revert to traditional Medicaid State plan 
coverage at any time. Also, children under the age of 19 will receive 
NEMT because of the EPSDT requirements. Consistent with Federal 
regulations, States are required to assure non-emergency transportation 
only when the beneficiary has no other means of transportation.
    Comment: Several commenters stated that under section 1937 of the 
Act, a benchmark-equivalent package must offer a specific range of 
services set forth

[[Page 73717]]

in Sec.  440.335(b)(1)-(5) of the proposed regulation and that the 
majority of qualifying benchmark plans cover emergency ambulance 
services. To ensure that enrollees in benchmark-equivalent plans 
receive coverage that is qualitatively equivalent to benchmark plans 
that provide emergency ambulance transportation, CMS should require 
benchmark-equivalent plans to cover emergency ambulance transportation.
    Response: Benchmark and benchmark-equivalent plans model the 
private health insurance plans which frequently cover emergency medical 
transportation. Thus, there is no need to specifically require coverage 
of emergency ambulance transportation.
    Comment: One commenter noted that instead of saving money by 
eliminating non-emergency transportation, CMS should do a better job of 
policing the system to reduce fraud and abuse. Another commenter 
indicated that coordinating transportation would reduce the cost of 
providing transportation.
    Response: Coordination and monitoring of the provision of 
transportation services is not relevant to this rule. We agree that the 
reduction of fraud and abuse by States should always be considered by 
States when designing or implementing their State Medicaid program.
    Comment: One commenter believed that during the DRA process CMS 
attempted to end the Medicaid transportation service. This attempt was 
turned back by Congress with the clear intention that transportation 
was essential for adequate access to health services. It is clear that 
the proposed rule is contrary to the intent of Congress.
    Response: We are unaware of any attempt by CMS during this 
regulatory process to end the requirement for States to assure Medicaid 
non-emergency transportation. On the contrary, on August 23, 2007, CMS 
published a rule on the ``State Option to Establish a Non-Emergency 
Medical Transportation Program.'' When implemented, this regulation 
will enhance the ability of States to provide NEMT by offering the new 
option to provide more cost effective non-emergency transportation as a 
medical service through a brokerage program.
    Comment: One commenter noted the proposed rule on the State Option 
to Establish a Non-Emergency Medical Transportation Program providing 
guidance on section 6083 of the DRA and wonders how CMS on one hand is 
providing guidance regarding non-emergency medical transportation and 
encourages use of a brokerage program, while at the same time provides 
guidance on the elimination of non-emergency medical transportation in 
benchmark or benchmark-equivalent plans.
    Additionally, the commenter believed that the transportation 
benefit currently operates in a fiscally sound manner. As currently 
structured, the commenter asserted that the transportation benefit is 
cost effective in most States. The commenter noted that States 
generally limit reimbursement for transportation to the least costly 
form of transport that is medically appropriate based on the 
beneficiary's condition. Moreover, Medicaid beneficiaries are generally 
required to use free transportation resources before the program will 
provide reimbursement for transportation. The commenter stated that, 
consequently, patients who receive transportation under State Medicaid 
programs are required, as a condition of coverage, to have no other 
means of getting to or from providers of medical care.
    Response: CMS understands that there are two separate provisions in 
the DRA, one providing for a brokerage program for non-emergency 
medical transportation and the other offering benchmark or benchmark-
equivalent benefits to certain Medicaid beneficiaries. These benchmark 
plans can be offered without regard to the assurance of transportation, 
including non-emergency medical transportation. CMS understands the 
confusion this may cause; however, it should be noted that in adopting 
these transportation provisions in the DRA, Congress provided States 
with additional flexibilities to redesign their Medicaid programs in 
order to maintain sustainability. These options are intended to be used 
by States to improve the delivery of health care to Medicaid 
beneficiaries as well as to reduce overall costs, including improving 
the delivery of non-emergency medical transportation.
    The brokerage program option for delivering non-emergency medical 
transportation and the benchmark or benchmark-equivalent benefits 
option that allows States to deliver benchmark health plans without 
regard to the assurance of transportation do not contravene each other 
as the commenter suggests. These are merely options that are part of an 
array of improvements and cost saving measures that can be selected by 
States. Because there is no requirement for a State to select either 
the brokerage program option or the benchmark or benchmark-equivalent 
option we do not believe that these transportation provisions are 
contradictory.
    Moreover, as noted below, the fact that States have options to 
operate fiscally sound transportation programs simply indicates that 
the flexibility with respect to benchmark and benchmark-equivalent 
coverage will not necessarily result in the elimination of needed 
transportation benefits.
    Comment: A few commenters stated that in the proposed rule CMS 
proposed to create more ``flexibility'' for States by allowing them to 
craft more mainstream packages like those found in the private health 
insurance market, and private health plans do not offer transportation 
as a covered benefit for enrollees. These commenters disagreed with 
this assumption because it assumes that Medicaid patients are of equal 
financial standing with enrollees of private health care plans in their 
ability to assume the cost of transportation to and from health care 
services and that private health plans do not provide non-emergency 
ambulance transportation, when in fact they do.
    Response: The DRA provided that benchmark or benchmark-equivalent 
plans be available to States at their option and States are not 
required to implement these provisions. If States choose to offer 
benchmark or benchmark-equivalent benefit packages to Medicaid 
beneficiaries, States must comply with the requirements of section 1937 
of the Act including EPSDT for children under age 19 and voluntary 
enrollment and informed choice to exempt individuals. Further, States 
can offer additional or wrap-around services to beneficiaries. If NEMT 
and emergency ambulance services are included in the benchmark or 
benchmark-equivalent plan the State has chosen to offer Medicaid 
beneficiaries, these transportation services should be provided to the 
beneficiaries enrolled in the benchmark or benchmark-equivalent plan. 
States also have the option of providing NEMT and/or emergency 
transportation services as a wrap-around benefit.
    Comment: One commenter stated that CMS did not conduct an analysis 
of the impact that excluding the transportation benefit would have on 
the populations affected or on the States. The commenter also noted 
that in the ``Regulatory Impact Analysis,'' CMS states that they are 
under no obligation to assess anticipated costs and benefits of this 
rule, even if the rule may result in expenditures by the State, local, 
or tribal governments or the private sector, because States are not 
mandated to participate in the benchmark plans. This precludes any 
discussion of the shift in

[[Page 73718]]

costs to other agencies that may result from the exclusion of 
transportation benefits. The commenter stated that in the proposed rule 
CMS says that shifting the financial burden to the vulnerable Medicaid 
populations is simply a matter of personal responsibility. The 
commenter believed that the elimination of transportation is a scenario 
for less effective, more expensive health care because fewer people 
will seek preventive care since they won't have transportation and will 
therefore end up needing more expensive medical services.
    Response: We disagree with the commenter. In the ``Regulatory 
Impact Analysis,'' we made two key assumptions: (1) The per capita cost 
of benchmark plans relative to per capita costs for Medicaid, and (2) 
the rate at which these plans will be used. Given the amount of 
flexibility States have in designing these plans, we do not have 
information that drills down into service-level estimates. 
Subsequently, we did not specifically account for the impact that not 
providing NEMT would have. In our opinion, the proposed rule provides 
States with so much flexibility it would not be possible to anticipate 
how many States might have benchmark plans that would have an impact on 
transportation. Furthermore, since there are significant portions of 
the Medicaid population that will still be able to receive 
transportation services, even if their State chooses to implement a 
benchmark or benchmark-equivalent plan that has limited or no 
transportation coverage, we do not believe the impact as being 
significant since beneficiaries have always been personally responsible 
for seeking alternative transportation before requesting assistance 
from the Medicaid program.
    Comment: Several commenters noted the lack of definition addressing 
the difference between emergency and non-emergency transportation. 
Several other commenters requested that CMS provide a universal 
definition of non-emergency transportation, because without this 
guidance there would be chaos and an inability to adjudicate issues and 
disputes over what is and is not non-emergency transportation.
    One commenter urged CMS to require that benchmark and benchmark-
equivalent plans cover emergency ambulance transportation and do so by 
clarifying that the reference to ``emergency services'' in proposed 
Sec.  440.335 includes emergency ambulance services. Several commenters 
stated the regulation fails to make a distinction between emergency and 
non-emergency transport and CMS assumes that ``to and from providers'' 
means non-emergency medical transportation; however, this may not 
always be the case. According to the commenter, transport is often 
required for Medicaid patients who develop critical conditions that 
require immediate care beyond the scope of the initial facility, 
resulting in the patient being transported to another facility for 
care. If States are no longer required to ensure necessary 
transportation for recipients to and from providers, the State will 
likely not cover this type of transport under a benchmark or benchmark-
equivalent plan. This type of transport fits the parameters of the 
regulation because it is from one provider to another, but the 
regulation does not make the distinction that it must be a non-
emergency transport.
    Other commenters believed ambulance service, whether considered 
non-emergency or emergency transportation, should be required in all 
benchmark or benchmark-equivalent plans.
    Response: States have broad flexibility in designing non-emergency 
and emergency transportation programs for the Medicaid population. 
Consistent with this flexibility, we believe that States are best 
suited to define the differences between emergency and non-emergency 
transportation and when and under what conditions it is appropriate to 
transport beneficiaries by ambulance. In determining this difference, 
we expect States to remain consistent with the definition of 
transportation found in Sec.  440.170.
    Additionally, experience has shown us that many of the States that 
have submitted benchmark State plan amendments have included 
transportation as a covered benefit, even when the private plan does 
not provide a transportation benefit.
    Comment: A number of commenters disagreed with the assumption that 
non-emergency transportation is not covered by private health 
insurance. They stated that many private health insurance plans do 
provide coverage for non-emergent ambulance transportation when 
medically necessary. One commenter stated that CMS is ignoring the fact 
that many commercial plans have provided services to Medicaid 
beneficiaries and are thus equipped to provide the transportation 
benefit. The same commenter requested that if the provision on non-
emergency transportation remains in the final regulation, CMS should 
require that no benchmark or benchmark-equivalent plan be allowed to 
require emergency ambulance services to join a network as a condition 
of obtaining necessary information for billing or as a condition of 
prompt payment, and that benchmark and benchmark-equivalent plans be 
required to pay for emergency ambulance transportation at a rate not 
less than the State Medicaid approved rate. One commenter noted that if 
CMS intends to make this a rationale for the elimination of Medicaid 
benefits, it should first study this issue and release its findings.
    Response: We acknowledge that many private health plans cover 
emergency medical transport and some also cover non-emergency ambulance 
transport. Therefore, it is highly likely that benchmark plans will 
cover these services. However, we maintain that private health plans do 
not generally cover transportation to and from outpatient providers for 
routine services.
    In terms of contracting with providers, the contracting process 
between States and providers is a State process. CMS is not intending 
to enter into that process as part of this rule.
    Comment: Many of the commenters voiced concerns that CMS has 
overreached in its rationale for allowing States to opt-out of the 
transportation requirements, and that CMS did not support its 
rationale. Several commenters stated that CMS did not have the legal 
authority to allow States to choose not to provide non-emergency 
transportation. One commenter stated that Sec.  440.390 exceeds the 
Department's administrative authority, results in an impermissible 
legislative action by the agency, and violates the separation of powers 
doctrine of the Constitution. Generally, an executive agency's 
authority is limited to implementing laws and to clarifying ambiguities 
in statutes passed by Congress (Chevron U.S.A. v. Natural Resources 
Defense Council, 467 U.S. 837 (1984)).
    A number of commenters noted that CMS's interpretation of the 
language in section 1937 of the Act is ``overbroad'' because it permits 
CMS too much discretion. Several commenters also stated that in 
believing that it could change a long standing Medicaid policy on the 
assurance of transportation, CMS wrongly interpreted the statute and 
had not supported its rationale for allowing States to waive the 
provider-to-provider transportation requirement. A number of commenters 
believed that allowing States to choose not to provide transportation 
was inconsistent with Medicaid's mission of increasing access to 
healthcare. Many commenters indicated that exempting States from the 
transportation requirement set forth in Sec.  431.53 ``renders those 
provisions to mere surplusage'' and that CMS's

[[Page 73719]]

interpretation affords CMS the unfettered ability to make ad hoc 
determinations about what laws and regulations will apply to benchmark 
and benchmark-equivalent plans. Many commenters stated that the 
requirements in Sec.  431.53 exist to protect beneficiaries and to 
ensure that they receive access to healthcare. Also, CMS should not be 
permitted to allow States to deprive Medicaid recipients of necessary 
transportation based upon an illogical interpretation of a provision of 
the Act.
    Several commenters stated that CMS is providing sufficient 
flexibility to States through the option to provide benchmark or 
benchmark-equivalent coverage without regard to comparability, 
statewideness, and freedom of choice. The commenter did not see how 
relieving the State of the requirement to assure transportation to and 
from providers offers any additional flexibility.
    Response: We disagree with the commenters that believe we do not 
have authority to allow for States to offer benchmark or benchmark-
equivalent plans without regard to the assurance of transportation. 
Section 1937 permits States to offer benchmark or benchmark-equivalent 
coverage ``notwithstanding any other provision of Title XIX.'' We have 
interpreted this language to provide a basis for flexibility with 
regard to requirements related to the scope of benefits available 
through benchmark or benchmark-equivalent coverage to provide that such 
benefits can be offered without regard to the requirement at Sec.  
431.53 to assure transportation to and from covered medical services. 
This regulation is thus consistent with the statutory language, and the 
overall purpose to ensure State flexibility in offering benefits. 
Moreover, the assurance of transportation is not a statutory benefit, 
but is a regulatory requirement that should not be given precedence 
over the statutory flexibility expressly provided by Congress. The 
statute itself provides that States can impose alternative benchmark or 
benchmark-equivalent benefit packages at their option, and must 
reasonably be read to include flexibility in the scope of benefits 
including transportation benefits.
    We also note that the availability of this flexibility does not 
mean that beneficiaries will necessarily lose transportation benefits. 
States are not required to offer benchmark or benchmark-equivalent 
coverage and, if they do, they are not required to limit coverage of 
transportation to and from providers. As noted above, States may 
determine that such coverage is essential to ensuring appropriate 
coverage to meet the needs of the target population.
    Comment: Several commenters mentioned earlier that CMS offered a 
definition of ``special medical needs'' but pointed out that CMS did 
not offer a definition of ``medically frail.'' The commenters urged 
CMS, in considering transportation, to include in any definition of 
``medically frail'' a recipient who might require medically necessary 
ambulance transportation due to their physical or mental condition, 
illness, injury, disability, in a bed confined or wheelchair confined 
state, such that transportation by any means other than ambulance would 
likely jeopardize the patient's health or safety.
    Response: As stated earlier, we have not defined ``medically 
frail'' because CMS wishes to maintain the State flexibility; however, 
we encourage States to consider all of these examples in their 
definition, when considering that these individuals may be in need of 
transportation.
    Comment: Several commenters stated the proposed elimination of 
transportation was discriminatory because individuals with special 
needs are not able to access transportation services and will be de 
facto denied the medical services that other Medicaid recipients 
receive. Also, the commenters asserted that the ``notwithstanding any 
other provision of this title'' will not pass a challenge in the court 
system because it discriminates against disabled individuals.
    Response: We disagree with the commenters that the flexibility to 
not assure transportation is discriminatory because this requirement 
applies to all individuals enrolled in benchmark or benchmark-
equivalent plans (with certain limitations). All individuals are 
treated equally including all exempt individuals. Disabled individuals 
can only enroll in a benchmark program that does not include NEMT by 
choice.
    Comment: Several commenters noted that Executive Order 13330 
requires coordination for elderly and handicapped transportation 
programs among Federal agencies. Creating Federal DHHS standards for 
appropriate service levels would promote this coordination effort and 
in the interests of quality services, lower costs and enhanced 
coordination, DHHS should develop parallel standards that would drive 
cost savings derived by competitive procurement instead of denying 
services to those who need it the most. Removing an essential element 
such as transportation in order to save money will ultimately result in 
greater reliance on institutional care at a much higher cost. One 
commenter believed that CMS should withdraw the regulation and allow 
the Coordinating Council on Access and Mobility, which was established 
by Executive Order 13330, to develop the benchmark policy on non-
emergency transportation.
    Response: We do not believe that this rule contravenes Executive 
Order 13330, which requires coordination of transportation among 
Federal agencies, but does not supersede program coverage limitations 
or purposes. In other words, section 1937 simply does not require NEMT 
to be included as a benefit or administrative activity of alternative 
benefit programs, and Executive Order 13330 does not change that 
circumstance.
    Comment: One commenter, submitting on behalf of the Alaska Natives 
(ANs) Tribal Health Consortium, wrote that in Alaska nearly 40 percent 
of the Medicaid eligible populations are ANs. The vast majority of AN 
villages are accessible only by plane, boat, snow-machine, or dog-sled. 
Due to the extreme poverty found in AN villages, Congress authorized 
tribal health programs to bill the Medicare and Medicaid programs for 
covered services. Tribal health services rely heavily on Medicaid and 
Medicare payments. The commenter is profoundly concerned that the 
proposed rule would allow States to curtail Medicaid coverage of 
crucial health services currently provided to ANs and would eliminate 
coverage of transportation needed by ANs to access medical services.
    Response: We understand that Alaska has unique transportation needs 
and that the vast majority of AN villages are accessible only by plane, 
boat, snow machine, or dog-sled. We are also aware that tribal health 
services provide the majority of health care to Medicaid eligible 
tribal populations. Before the passage of the DRA, Alaska provided 
transportation through a broker under section 1915(b) authority. In 
2006, Alaska converted its non-emergency transportation waiver to the 
State plan non-emergency medical transportation brokerage program 
option provided by the DRA.
    While AN beneficiaries have not been specifically excluded from 
mandatory enrollment in a benchmark plan, due to the rural nature of 
the areas in which these beneficiaries live and the unique 
transportation needs of ANs in Alaska, we do not believe that AN 
beneficiaries are at risk of losing needed transportation benefits. We 
do not believe it is in the interest of the State to eliminate such 
benefits, nor that it would be consistent with appropriate

[[Page 73720]]

coverage to meet the needs of the targeted population.

IV. Provisions of the Final Regulations

    For the most part, this final rule incorporates the provisions of 
the February 2008 proposed rule. Those provisions of this final rule 
that differ from the February 2008 proposed rule are as follows:

Scope (Sec.  440.305)

    We have added a new paragraph (d) at Sec.  440.305 to provide for 
public input, which states ``Any state that opts to offer alternative 
benchmark or benchmark-equivalent coverage to Medicaid beneficiaries 
must secure public input prior to the submission of any State plan 
amendment to CMS.''
    We have also added a new paragraph (e) at Sec.  440.305 to indicate 
that in implementing benchmark or benchmark-equivalent package, States 
must comply with the managed care rules at section 1932 of the Act and 
42 CFR part 438 if benchmark or benchmark-equivalent benefits are 
provided through managed care plans, except when the State demonstrates 
that such requirements are impractical in the context of, or 
inconsistent with, methods of offering coverage that is appropriate to 
meet the needs of the targeted population.

Exempt Individuals (Sec.  440.315)

    We have revised paragraph (f) to indicate that the definition of 
individuals who are medically frail and/or the definition of 
individuals with special medical needs will be left to State discretion 
but the definition for individuals with special medical needs must at 
least include those individuals described in Sec.  438.50(d)(3). 
Further, we deleted the reference to Sec.  438.50(d)(1) for individuals 
entitled to Medicare benefits as these individuals are already exempt 
individuals for whom voluntary enrollment because of the requirement in 
section 1932(a)(2)(iii) of the Act.
    We have added a new paragraph (m) in Sec.  440.315 to include 
medically needy or those eligible as a result of a reduction of 
countable income based on costs incurred for medical care in the list 
of populations for which voluntary enrollment in benchmark or 
benchmark-equivalent plans can occur.

Section 440.320 State Plan Requirements: Optional Enrollment for Exempt 
Individuals

    We have revised paragraphs (a)(1), (a)(2), and (a)(3) to indicate 
that the State must effectively inform exempt individuals prior to 
enrollment that the individual has the opportunity to voluntarily 
enroll in a benchmark or benchmark-equivalent plan, must inform the 
individual of the benefits in the benchmark or benchmark-equivalent 
plan and provide a comparison of how they differ from traditional 
Medicaid State plan coverage, and document the individual's eligibility 
file that prior to enrollment he was provided a comparison of the 
benefit package, was given ample time to make an informed choice as to 
enrollment and voluntarily choose to enroll in the benchmark or 
benchmark-equivalent plan.
    We have added a new paragraph (a)(4) to indicate that States must 
comply with the requirements of Sec.  440.320(a)(1), (a)(2), and (a)(3) 
within 30 days after a determination is made that an individual has 
become part of an exempt group while enrolled in benchmark or 
benchmark-equivalent coverage.
    We have added a new paragraph (b)(1) and (b)(2) to discuss the 
disenrollment/opt out process and require that States act upon opt out 
requests promptly for those exempt individuals who choose to opt out of 
benchmark or benchmark-equivalent coverage and must have a process in 
place to ensure continuous access to services while requests to opt out 
of benchmark or benchmark-equivalent coverage are being processed.

EPSDT Services Requirement (Sec.  440.345)

    We have revised paragraph (a) in Sec.  440.345 to be completely 
reflective of the statutory language, which indicates that ``The State 
must assure access to early and periodic screening, diagnostic and 
treatment (EPSDT) services through benchmark or benchmark-equivalent 
plan benefits or as wrap-around benefits to those plans for any child 
under 19 years of age eligible under the State plan in a category under 
section 1902(a)(10)(A) of the Act.''

Comparability and Scope of Coverage (Sec.  440.375)

    We revised the title and text of this section to indicate that 
States have the option to amend their State plan to provide benchmark 
or benchmark-equivalent coverage to recipients without regard to 
comparability or requirements relating to the scope of coverage other 
than those contained in this subpart.

Freedom of Choice (Sec.  440.385)

    We have redesignated paragraph (b)(3) as paragraph (b)(4) in Sec.  
440.385 of this regulation. In newly revised paragraph (b)(3), we have 
made clarifying changes to indicate that selective contracting does not 
apply to family planning providers.

V. Collection of Information Requirements

    While the following requirements are subject to the PRA, they are 
currently approved under OMB 0938-0993 with an expiration date 
of October 31, 2009.

Section 440.320 State Plan Requirements: Optional Enrollment for Exempt 
Individuals

    Section 440.320(a) requires a State to: (1) Inform the individuals 
that the enrollment is voluntary and that the individual may opt out of 
the benchmark or benchmark-equivalent coverage at any time and regain 
immediate access to standard full Medicaid coverage under the State 
plan; (2) Inform the exempt recipient of the benefits available under 
the benchmark or benchmark-equivalent benefit package and provide a 
comparison of how they differ from the benefits available under the 
standard full Medicaid program; and, (3) Document in the exempt 
recipient's eligibility file that the recipient was informed in 
accordance with this section and voluntarily chose to enroll in the 
benchmark or benchmark-equivalent benefit package.

Section 440.330 Benchmark Health Benefits Coverage

    Section 440.330(d) requires States wishing to opt for Secretarial-
approved coverage to submit a full description of the proposed coverage 
and include a benefit-by-benefit comparison of the proposed plan to one 
or more of the three other benchmark plans specified.

Section 440.340 Actuarial Report for Benchmark-Equivalent Coverage

    Section 440.340 requires a State trying to obtain approval for 
benchmark-equivalent health benefits coverage described in 440.335 to 
submit, as part of its State Plan Amendment, an actuarial report. The 
report must provide sufficient detail to explain the basis of the 
methodologies used to estimate the actuarial value or, if requested by 
CMS, to replicate the State's result.

Section 440.345 Requirement To Provide EPSDT Services

    Section 440.345(a)(2) requires a State to include a description in 
their State Plan of how the wrap-around benefits or additional services 
will be provided to ensure that recipients receive full EPSDT services. 
The description must describe the populations covered and

[[Page 73721]]

the procedures for assuring those services.

Section 440.350 Employer-Sponsored Insurance Health Plans

    Section 440.350(b) requires a State to set forth in the State plan 
the criteria it will use to identify individuals who would be required 
to enroll in an available group health plan to receive benchmark or 
benchmark-equivalent coverage.

Section 440.360 State Plan Requirement for Providing Additional Wrap-
around Services

    This section requires States opting to provide additional services 
to the benchmark-equivalent plans, to describe the populations covered 
and the payment methodology for these services in their State plan.

Section 440.390 Assurance of Transportation

    At proposed Sec.  440.390, a State may at its option amend its 
State plan to provide benchmark or benchmark-equivalent coverage to 
recipients without regard to the assurance of transportation to 
medically necessary services requirement specified in section 42 CFR 
431.53.

VI. Regulatory Impact Analysis

A. Overall Impact

    We have examined the impacts of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993, as 
further amended), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Act, section 202 of the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive 
Order 13132 on Federalism (August 4, 1999), and Congressional Review 
Act (5 U.S.C. 804(2)).
    Executive Order 12866 (as amended by Executive Order 13258, which 
merely reassigns responsibility of duties) directs agencies to assess 
all costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year).
    We issued a State Medicaid Director's letter on March 31, 2006, 
providing guidance on the new flexibilities available to States as a 
result of the enactment of the Deficit Reduction Act of 2005. This 
final rule simply codifies that guidance. States have already begun 
implementing this provision well in advance of this final rule. As a 
result, while we anticipate that implementation of this flexibility 
will be economically significant, the significance is based on the 
changes authorized by statute and not based on discretionary policies 
contained in the rule itself. The impact of the rule will be limited to 
ensuring uniform policies for States that implement the flexibility 
afforded under section 1937 of the Act, as added by the DRA of 2005. 
The aggregate amount of Federal savings is estimated to be $2.3 billion 
from FY 2006 through FY 2010.
    We have estimated the impact of this rule by analyzing the 
potential Federal savings related to lower per capita spending that may 
be achieved if States choose to enroll beneficiaries in eligible 
populations in plans that are less costly than projected Medicaid 
costs. To do this, we developed estimates based on the following 
assumptions:
     The number of eligible beneficiaries and the Federal 
Medicaid costs of these beneficiaries are based on 2003 Medicaid 
Statistical Information System (MSIS) data;
     Projections of the number of eligible beneficiaries and 
their associated Federal Medicaid costs were made using assumptions 
from the President's Budget 2007, including enrollment growth rates and 
per capita spending growth rates;
     The relative costs of the new plans allowed under this 
rule to current Medicaid spending were estimated based on reviews of 
Medicaid spending data and the plans described in this rule. 
Additionally, we have assumed that not all States would immediately use 
the options made available through this rule; therefore, we assume that 
State use of these plans will continue to increase through 2011. We 
assume that use in 2006 will be about 10 percent of 2011-level of use; 
40 percent in 2007; 60 percent in 2008; 80 percent in 2009; and 90 
percent in 2010.
    These estimates assume that there will be a negligible impact on 
State administration costs. As States already have experience in 
dealing with alternative plan designs, including through waivers or 
managed care plans, we have assumed States are equipped to implement 
these plans and will be part of their normal administrative spending.
    These estimates are subject to a substantial amount of uncertainty 
and actual experience may be significantly different. The range of 
possible experience is greater than under most other rules for the 
following two reasons. First, this rule provides the option for States 
to use alternative plans; to the extent that States participate more or 
less than assumed here (both the number of States that participate and 
the extensiveness of States' use of these plans), Federal savings may 
be greater than or less than estimated. Second, this rule also provides 
a wide range of options for States in designing these plans; to the 
extent that States use plans that are relatively more or less costly 
than assumed here, Federal savings may be less than or greater than 
estimated.

                       Estimated Annual Federal Savings Discounted at 0 Percent, 3 Percent and 7 Percent--From FY 2006 to FY 2010
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Total 2006-
                      Discount rate                            2006            2007            2008            2009            2010            2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
0%......................................................             $70            $280            $460            $660            $810           2,280
3%......................................................              68             264             421             586             699           2,038
7%......................................................              65             245             375             504             578           1,767
--------------------------------------------------------------------------------------------------------------------------------------------------------

    We anticipate that States will phase in alternative benefit 
programs, and changes will not be fully realized until 2010. The 
majority of savings will be achieved through cost avoidance of future 
anticipated costs by providing appropriate benefits based on a 
population's health care needs, appropriate utilization of services, 
and through gains in efficiencies through contracting. States will be 
able to take greater advantage of marketplace

[[Page 73722]]

dynamics within their State. We also anticipate that a number of States 
will use this flexibility to create programs that are more similar to 
their SCHIP programs. Because States are no longer tied to 
statewideness and comparability rules for non-disabled, non-aged, and 
non-blind populations, they will be able to offer individuals and 
families different types of plans consistent with their needs and 
available delivery systems.

                        Estimated Annual State Savings Discounted at 0 Percent, 3 Percent and 7 Percent--From FY 2006 to FY 2010
                                                                      [In millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                            Total 2006-
                      Discount rate                            2006            2007            2008            2009            2010            2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
0%......................................................             $50            $210            $350            $500            $610          $1,720
3%......................................................              49             198             320             444             526           1,537
7%......................................................              47             183             286             381             435           1,332
--------------------------------------------------------------------------------------------------------------------------------------------------------

    The RFA requires agencies to analyze options for regulatory relief 
of small businesses if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities as 
that term is used in the RFA (include small businesses, nonprofit 
organizations, and small governmental jurisdictions). The great 
majority of hospitals and most other health care providers and 
suppliers are small entities, either by being nonprofit organizations 
or by meeting the SBA definition of a small business (having revenues 
of less than $6.5 million to $31.5 million in any 1 year.) Individuals 
and States are not included in the definition of a small entity. We 
have determined, and the Secretary certifies, that this provision 
applies to States only and will not affect small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. 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 100 beds. We have determined, and 
the Secretary certifies, that this rule would not have a significant 
impact on the operations of a substantial number of small rural 
hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) 
(Pub. L. 104-4) also requires that agencies assess anticipated costs 
and benefits before issuing any rule whose mandates require spending in 
any 1 year of $100 million in 1995 dollars, updated annually for 
inflation. In 2008, that threshold is approximately $127 million. 
Because this rule does not mandate State participation in using these 
benchmark plans, there is no obligation for the State to make any 
change to their Medicaid program. Therefore, there is no mandate for 
the State. We believe this final rule will not mandate expenditures in 
that amount.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. This final rule will not impose direct cost on States or 
local government or preempt State law. The rule will provide States the 
option to implement alternative Medicaid benefits through a Medicaid 
State plan amendment.
    Comment: One commenter questioned the validity of CMS's Regulatory 
Impact Analysis, believing that the proposed rule will cause additional 
administrative effort in order for AI/AN beneficiaries to participate.
    Response: CMS is required by Executive Order 12866 (September 1993, 
Regulatory Planning and Review), the Regulatory Flexibility Act (RFA) 
(September 19, 1980, Pub. L. 96-354), section 1102(b) of the Act, the 
Unfunded Mandates Reform Act of 1995 (Pub. L. 104-4), and Executive 
Order 13132 on Federalism, and the Congressional Review Act (5 U.S.C. 
804(2)) to conduct a regulatory analysis of the impact of any 
regulatory revision to the Medicare, Medicaid, and/or State Children's 
Health Insurance Program before adoption of any rule. A Regulatory 
Impact Analysis was completed for this rule. We believe there is 
negligible impact on State administrative costs since States already 
have experience in dealing with alternative plan designs, including 
through waivers or managed care plans. Thus, we have assumed States are 
equipped to implement these plans and that costs will be part of their 
normal administrative spending. We believe this would be true for any 
State that chooses to offer benchmark or benchmark-equivalent plans to 
the Medicaid beneficiaries including AI/AN Medicaid beneficiaries.

B. Anticipated Effects

    Before section 6044 of the DRA became effective on March 31, 2006, 
State Medicaid programs generally were required to offer at minimum the 
same standard benefit package to each recipient, regardless of income, 
eligibility category, or geographic location. Some States offered 
alternative benefit packages to certain recipients under section 1115 
demonstration waivers approved by the Centers for Medicare & Medicaid 
Services. This provision allows for similar program alternatives under 
the State plan without the constraints of a waiver. Moreover, Medicaid 
families will gain continuity in coverage as family members move 
together from Medicaid and the State Children's Health Insurance 
Program (SCHIP) to, eventually, private coverage. Today, because of the 
lack of flexibility in Medicaid, one child may be receiving Medicaid, 
another in SCHIP, and the parent has access to private coverage. With 
benefit flexibility in State Medicaid programs, families could enroll 
under the same plan, with the same providers and one set of 
administrative rules. Administrative simplification can help families 
maintain health insurance coverage and give them experience with 
private insurance coverage that would become important when their 
income rises above Medicaid and SCHIP eligibility levels and mitigate 
the need for dependence. States with strong employer-based coverage may 
emphasize family coverage premium assistance. States may form larger 
pools by combining Medicaid recipients with their public employees.

C. Alternatives Considered

    This rule finalizes requirements for States to elect alternative 
Medicaid benefit programs through the adoption

[[Page 73723]]

of a Medicaid State plan amendment. The final requirements in this rule 
were designed to maximize State flexibility while assuring that 
beneficiaries will get quality care that meets their needs. Under this 
rule, we will permit States to define the alternative benefit packages 
only by reference to the benchmark or benchmark-equivalent standard 
(with the exception of the EPSDT wrap-around benefits). We will also 
permit States to combine an alternative benefit package with 
alternative benefit delivery methods, such as through managed care, 
employer-based coverage, or selective contracting. An alternative might 
have been to require the State to document any deviation from otherwise 
applicable State plan requirements, much as is required under section 
1115 demonstration waivers, 1915(b) waivers, 1915(c) waivers, or any 
combination thereof. We have not elected this alternative because it 
would be cumbersome for States, it will not be consistent with the 
statutory use of benchmark and benchmark-equivalent coverage as 
reference points for permissible benefit packages, and it will not 
improve the clarity of the State plan. Another alternative might have 
been to limit State flexibility under this provision to variation in 
the amount, duration and scope of benefits without providing authority 
for an integrated approach combining alternative benefits with 
alternative benefit delivery methods. We have not elected this 
alternative because an integrated approach allows greater State 
flexibility to tailor both benefits and delivery methods to the 
eligible groups of individuals being served.

D. Accounting Statement

    As required by OMB Circular A-4 (available at http://www.whitehouse.gov/omb/circulars/a004/a-4.pdf), in Table 15 below, we 
have prepared an accounting statement showing the classification of the 
expenditures associated with the provisions of this rule. This table 
provides our best estimate of the decrease in Medicaid payments as a 
result of the changes presented in this rule. All savings are 
classified as transfers to the Federal Government, as well as to 
States.

                                Table--Accounting Statement: Classification of Estimated Savings, From FY 2006 to FY 2010
                                                                     [In $millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
 
--------------------------------------------------------------------------------------------------------------------------------------------------------
                           Category                                                                     Transfers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................................     Year dollar                     Units discount rate                   Period covered
                                                               -----------------------------------------------------------------------------------------
                                                                                         7%                3%                0%
                                                               -----------------------------------------------------------------------------------------
                                                                      2006                 -$430.8           -$445.0           -$456.0      2006-2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom To Whom?............................................                       Federal Government to Beneficiaries, Providers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                             Year                                     2006              2007              2008              2009              2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................................              -$70             -$280             -$460             -$660             -$810
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom to Whom?............................................                       Federal Government to Beneficiaries, Providers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................................     Year dollar                     Units discount rate                   Period covered
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                         7%                3%                0%
                                                               -----------------------------------------------------------------------------------------
                                                                      2006                 -$324.9           -$335.7           -$344.0      2006-2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom to Whom?............................................                        State Governments to Beneficiaries, Providers
--------------------------------------------------------------------------------------------------------------------------------------------------------
                             Year                                     2006              2007              2008              2009              2010
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers................................              -$50             -$210             -$350             -$500             -$610
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom to Whom?............................................                        State Governments to Beneficiaries, Providers
--------------------------------------------------------------------------------------------------------------------------------------------------------

    Column 1: Category--Contains the description of the different 
impacts of the rule; it could include monetized, quantitative but not 
monetized, or qualitative but not quantitative or monetized impacts; it 
also may contain unit of measurement (such as, dollars). In this case, 
the only impact is the Federal annualized monetized impact of the rule.
    Column 2: Primary Estimate--Contains the quantitative or 
qualitative impact of the rule for the respective category of impact. 
Monetized amounts are generally shown in real dollar terms. In this 
case, the federalized annualized monetized primary estimate represents 
the equivalent amount that, if paid (saved) each year over the period 
covered, would result in the same net present value of the stream of 
costs (savings) estimated over the period covered.
    Column 3: Year Dollar--Contains the year to which dollars are 
normalized; that is, the first year that dollars are discounted in the 
estimate.
    Column 4: Unit Discount Rate--Contains the discount rate or rates 
used to estimate the annualized monetized impacts. In this case, three 
rates are used: 7 percent; 3 percent; 0 percent.
    Column 5: Period Covered--Contains the years for which the estimate 
was made.
    Rows: The rows contain the estimates associated with each specific 
impact and each discount rate used.
    ``From Whom to Whom?''--In the case of a transfer (as opposed to a 
change in aggregate social welfare as described in the OMB Circular), 
this section describes the parties involved in the transfer of costs. 
In this case, the costs represent a reduction in Federal Government 
spending on behalf of beneficiaries. The table may also contain minimum 
and maximum

[[Page 73724]]

estimates and sources cited. In this case, there is only a primary 
estimate and there are no additional sources for the estimate.
    Estimated Savings--The following table shows the discounted costs 
(savings) for each discount rate and for each year over the period 
covered. ``Total'' represents the net present value of the impact in 
the year the rule takes effect. These numbers represent the anticipated 
annual reduction in Federal Medicaid spending under this rule.

E. Conclusion

    We project that the use of benchmark plans under this rule will 
result in $2.3 billion in Federal savings from 2006-2010. These savings 
would arise as States use the plans described by this rule to manage 
the costs of their Medicaid program by modifying plan benefits for 
targeted beneficiaries. The actual savings will heavily depend on the 
number of States that ultimately implement these plans, the number of 
beneficiaries States cover with these plans, and the specific design 
and selection of benchmark plans.
    For reasons stated above, we are not preparing analyses for either 
the RFA or section 1102(b) of the Act because we have determined that 
this rule will not have a significant economic impact on a substantial 
number of small entities or a significant impact on the operations of a 
substantial number of small rural hospitals.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects in 42 CFR Part 440

    Grant programs--health, Medicaid.

0
For the reasons set forth in the preamble, the Centers for Medicare & 
Medicaid Services amends 42 CFR chapter IV as set forth below:

PART 440--SERVICES: GENERAL PROVISIONS

0
1. The authority citation for part 440 continues to read as follows:

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


0
2. A new subpart C, consisting of Sec.  440.300 through Sec.  440.390, 
is added to part 440 to read as follows:
Subpart C--Benchmark Benefit and Benchmark-Equivalent Coverage
Sec.
440.300 Basis.
440.305 Scope.
440.310 Applicability.
440.315 Exempt individuals.
440.320 State plan requirements: Optional enrollment for exempt 
individuals.
440.325 State plan requirements: Coverage and benefits.
440.330 Benchmark health benefits coverage.
440.335 Benchmark-equivalent health benefits coverage.
440.340 Actuarial report for benchmark-equivalent coverage.
440.345 EPSDT services requirement.
440.350 Employer-sponsored insurance health plans.
440.355 Payment of premiums.
440.360 State plan requirement for providing additional wrap-around 
services.
440.365 Coverage of rural health clinic and federally qualified 
health center (FQHC) services.
440.370 Cost-effectiveness.
440.375 Comparability and Scope of Coverage.
440.380 Statewideness.
440.385 Freedom of choice.
440.390 Assurance of Transportation.

Subpart C--Benchmark Benefit and Benchmark-Equivalent Coverage


Sec.  440.300  Basis.

    This subpart implements section 1937 of the Act, which authorizes 
States to provide for medical assistance to one or more groups of 
Medicaid-eligible recipients specified by the State under an approved 
State plan amendment through enrollment in coverage that provides 
benchmark or benchmark-equivalent health care benefit coverage.


Sec.  440.305  Scope.

    (a) General. This subpart sets out requirements for States that 
elect to provide medical assistance to certain Medicaid eligible 
recipients within one or more groups of individuals specified by the 
State, through enrollment of the recipients in coverage, identified as 
``benchmark'' or ``benchmark-equivalent.''
    (b) Limitations. A State may only apply the option in paragraph (a) 
of this section for an individual whose eligibility is based on an 
eligibility category under section 1905(a) of the Act that would have 
been covered under the State's plan on or before February 8, 2006.
    (c) A State may not require but may offer enrollment in benchmark 
or benchmark-equivalent coverage to the Medicaid eligible individuals 
listed in Sec.  440.315. States allowing individuals to opt in must be 
in compliance with the rules specified at Sec.  440.320.
    (d) Any State that opts to offer alternative benchmark or 
benchmark-equivalent coverage to Medicaid beneficiaries must secure 
public input prior to the submission of any State plan amendment to 
CMS.
    (e) In implementing benchmark or benchmark-equivalent package, 
States must comply with the managed care rules at section 1932 of the 
Act and part 438 of this chapter if benchmark or benchmark-equivalent 
benefits are provided through managed care plans unless the State 
demonstrates that such requirements are impractical in the context of, 
or inconsistent with, methods of offering coverage appropriate to meet 
the health care needs of the targeted population.


Sec.  440.310  Applicability.

    (a) Enrollment. The State may require ``full benefit eligible'' 
recipients not excluded in Sec.  440.315 to enroll in benchmark or 
benchmark-equivalent coverage.
    (b) Full benefit eligible. A recipient is a full benefit eligible 
if determined by the State to be eligible to receive the standard full 
Medicaid benefit package under the approved State plan if not for the 
application of the option available under this subpart.


Sec.  440.315  Exempt individuals.

    For recipients within one (or more) of the following categories, 
the State plan may offer, but may not require under Sec.  440.310, the 
opportunity to obtain benefits through enrollment in benchmark or 
benchmark-equivalent coverage:
    (a) The recipient is a pregnant woman who is required to be covered 
under the State plan under section 1902(a)(10)(A)(i) of the Act.
    (b) The recipient qualifies for medical assistance under the State 
plan on the basis of being blind or disabled (or being treated as being 
blind or disabled) without regard to whether the individual is eligible 
for Supplemental Security Income benefits under title XVI on the basis 
of being blind or disabled and including an individual who is eligible 
for medical assistance on the basis of section 1902(e)(3) of the Act.
    (c) The recipient is entitled to benefits under any part of 
Medicare.
    (d) The recipient is terminally ill and is receiving benefits for 
hospice care under title XIX.
    (e) The recipient is an inpatient in a hospital, nursing facility, 
intermediate care facility for the mentally retarded, or other medical 
institution, and is required, as a condition of receiving services in 
that institution under the State plan, to spend for costs of medical 
care all but a minimal amount of the individual's income required for 
personal needs.
    (f) The recipient is medically frail or otherwise an individual 
with special medical needs. For these purposes, the State's definition 
of individuals with special needs must at least include

[[Page 73725]]

those individuals described in Sec.  438.50(d)(3) of this chapter.
    (g) The recipient qualifies based on medical condition for medical 
assistance for long-term care services described in section 
1917(c)(1)(C) of the Act.
    (h) The recipient is an individual with respect to whom aid or 
assistance is made available under part B of title IV to children in 
foster care and individuals with respect to whom adoption or foster 
care assistance is made available under part E of title IV, without 
regard to age.
    (i) The recipient qualifies for medical assistance on the basis of 
eligibility to receive assistance under a State plan funded under part 
A of title IV (as in effect on or after welfare reform effective date 
defined in section 1931(i) of the Act). This provision relates to those 
individuals who qualify for Medicaid solely on the basis of 
qualification under the State's TANF rules.
    (j) The recipient is a woman who is receiving medical assistance by 
virtue of the application of sections 1902(a)(10)(ii)(XVIII) and 
1902(a) of the Act.
    (k) The recipient qualifies for medical assistance on the basis of 
section 1902(a)(10)(A)(ii)(XII) of the Act.
    (l) The recipient is not a qualified alien (as defined in section 
431 of the Personal Responsibility and Work Opportunity Reconciliation 
Act of 1996) and receives care and services necessary for the treatment 
of an emergency medical condition in accordance with section 1903(v) of 
the Act.
    (m) The recipient is determined eligible as medically needy or 
eligible because of a reduction of countable income based on costs 
incurred for medical or other remedial care under section 1902(f) of 
the Act or otherwise based on incurred medical costs.


Sec.  440.320  State plan requirements: Optional enrollment for exempt 
individuals.

    (a) General rule. A State plan that offers exempt individuals as 
defined in Sec.  440.315 the option to enroll in benchmark or 
benchmark-equivalent coverage must identify in its State plan the 
exempt groups for which this coverage is available, and must comply 
with the following provisions:
    (1) In any case in which the State offers an exempt individual the 
option to obtain coverage in a benchmark or benchmark-equivalent 
benefit package, the State must effectively inform the individual prior 
to enrollment that the enrollment is voluntary and that the individual 
may opt out of the benchmark or benchmark-equivalent coverage at any 
time and regain immediate access to standard full Medicaid coverage 
under the State plan.
    (2) Prior to any enrollment in benchmark or benchmark-equivalent 
coverage, the State must inform the exempt recipient of the benefits 
available under the benchmark or benchmark-equivalent benefit package 
and provide a comparison of how they differ from the benefits available 
under the standard full Medicaid program.
    (3) The State must document in the exempt recipient's eligibility 
file that the recipient was informed in accordance with this section 
prior to enrollment, was given ample time to arrive at an informed 
choice, and voluntarily chose to enroll in the benchmark or benchmark-
equivalent benefit package.
    (4) For individuals who the State determines have become exempt 
individuals while enrolled in benchmark or benchmark-equivalent 
coverage, the State must comply with the requirements in paragraphs 
(a)(1) through (a)(3) of this section within 30 days after such 
determination.
    (b) Disenrollment or Opt/Out Process.
    (1) The State must act upon requests promptly for exempt 
individuals who choose to opt out of benchmark or benchmark-equivalent 
coverage.
    (2) The State must have a process in place to ensure that exempt 
individuals have continuous access to services while opt out requests 
are being processed.


Sec.  440.325  State plan requirements: Coverage and benefits.

    Subject to requirements in Sec.  440.345 and Sec.  440.365, States 
may elect to provide any of the following of types of health benefits 
coverage:
    (a) Benchmark coverage in accordance with Sec.  440.330.
    (b) Benchmark-equivalent coverage in accordance with Sec.  440.335.


Sec.  440.330  Benchmark health benefits coverage.

    Benchmark coverage is health benefits coverage that is equal to the 
coverage under one or more of the following benefit plans:
    (a) Federal Employees Health Benefit Plan Equivalent Coverage 
(FEHBP--Equivalent Health Insurance Coverage). A benefit plan 
equivalent to the standard Blue Cross/Blue Shield preferred provider 
option service benefit plan that is described in and offered to Federal 
employees under 5 U.S.C. 8903(1).
    (b) State employee coverage. Health benefits coverage that is 
offered and generally available to State employees in the State.
    (c) Health maintenance organization (HMO) plan. A health insurance 
plan that is offered through an HMO, (as defined in section 2791(b)(3) 
of the Public Health Service Act) that has the largest insured 
commercial, non-Medicaid enrollment in the State.
    (d) Secretary approved coverage. Any other health benefits coverage 
that the Secretary determines, upon application by a State, provides 
appropriate coverage to meet the needs of the population provided that 
coverage. States wishing to opt for Secretarial approved coverage 
should submit a full description of the proposed coverage, (including a 
benefit-by-benefit comparison of the proposed plan to one or more of 
the three other benchmark plans specified above or to the State's 
standard full Medicaid coverage package under section 1905(a) of the 
Act), and of the population to which the coverage would be offered. In 
addition, the State should submit any other information that would be 
relevant to a determination that the proposed health benefits coverage 
would be appropriate for the proposed population. The scope of a 
Secretary-approved health benefits package will be limited to benefits 
within the scope of the categories available under a benchmark coverage 
package or the standard full Medicaid coverage package under section 
1905(a) of the Act.


Sec.  440.335  Benchmark-equivalent health benefits coverage.

    (a) Aggregate actuarial value. Benchmark-equivalent coverage is 
health benefits coverage that has an aggregate actuarial value, as 
determined in Sec.  440.340 that is at least actuarially equivalent to 
the coverage under one of the benchmark benefit packages described in 
Sec.  440.330 for the identified Medicaid population to which it will 
be offered.
    (b) Required coverage. Benchmark-equivalent health benefits 
coverage must include coverage for the following categories of 
services:
    (1) Inpatient and outpatient hospital services.
    (2) Physicians' surgical and medical services.
    (3) Laboratory and x-ray services.
    (4) Well-baby and well-child care, including age-appropriate 
immunizations.
    (5) Other appropriate preventive services, such as emergency 
services as designated by the Secretary.
    (c) Additional coverage.
    (1) In addition to the categories of services of this section, 
benchmark-equivalent coverage may include coverage for any additional 
services in

[[Page 73726]]

a category included in the benchmark plan or described in section 
1905(a) of the Act.
    (2) If the benchmark coverage package used by the State for 
purposes of comparison in establishing the aggregate actuarial value of 
the benchmark-equivalent package includes any of the following four 
categories of services: prescription drugs; mental health services; 
vision services; and hearing services; then the actuarial value of the 
coverage for each of these categories of service in the benchmark-
equivalent coverage package must be at least 75 percent of the 
actuarial value of the coverage for that category of service in the 
benchmark plan used for comparison by the State.
    (3) If the benchmark coverage package does not cover one of the 
four categories of services in paragraph (c)(2) of this section, then 
the benchmark-equivalent coverage package may, but is not required to, 
include coverage for that category of service.


Sec.  440.340  Actuarial report for benchmark-equivalent coverage.

    (a) A State plan amendment that would provide for benchmark-
equivalent health benefits coverage described in Sec.  440.335, must 
include an actuarial report. The actuarial report must contain an 
actuarial opinion that the benchmark equivalent health benefits 
coverage meets the actuarial requirements set forth in Sec.  440.335. 
The report must also specify the benchmark coverage used for 
comparison.
    (b) The actuarial report must state that it was prepared according 
to the following requirements:
    (1) By an individual who is a member of the American Academy of 
Actuaries (AAA).
    (2) Using generally accepted actuarial principles and methodologies 
of the AAA.
    (3) Using a standardized set of utilization and price factors.
    (4) Using a standardized population that is representative of the 
population involved.
    (5) Applying the same principles and factors in comparing the value 
of different coverage (or categories of services).
    (6) Without taking into account any differences in coverage based 
on the method of delivery or means of cost control or utilization used.
    (7) Taking into account the ability of the State to reduce benefits 
by taking into account the increase in actuarial value of health 
benefits coverage offered under the State plan that results from the 
limitations on cost sharing (with the exception of premiums) under that 
coverage.
    (c) The actuary preparing the opinion must select and specify the 
standardized set of factors and the standardized population to be used 
in paragraphs (b)(3) and (b)(4) of this section.
    (d) The State must provide sufficient detail to explain the basis 
of the methodologies used to estimate the actuarial value or, if 
requested by CMS, to replicate the State's result.


Sec.  440.345  EPSDT services requirement.

    (a) The State must assure access to early and periodic screening, 
diagnostic and treatment (EPSDT) services through benchmark or 
benchmark-equivalent plan benefits or as wrap-around benefits to those 
plans for any child under 19 years of age eligible under the State plan 
in a category under section 1902(a)(10)(A) of the Act.
    (1) Sufficiency: Any wrap-around EPSDT benefits must be sufficient 
so that, in combination with the benchmark or benchmark-equivalent 
benefits plan, these individuals have access to the full EPSDT benefit.
    (2) State Plan requirement: The State must include a description of 
how the wrap-around benefits will be provided to ensure that these 
recipients have access to the full EPSDT benefit.
    (b) Individuals must first seek coverage of EPSDT services through 
the benchmark or benchmark-equivalent plan before seeking coverage of 
such through wrap-around benefits.


Sec.  440.350  Employer-sponsored insurance health plans.

    (a) A State may provide benchmark or benchmark-equivalent coverage 
by obtaining employer sponsored health plans (either alone or with the 
addition of wrap-around services covered separately under Medicaid) for 
individuals with access to private health insurance.
    (b) The State must assure that employer sponsored plans meet the 
requirements of benchmark or benchmark-equivalent coverage, including 
the cost-effectiveness requirements at Sec.  440.370.
    (c) A State may provide benchmark or benchmark-equivalent coverage 
through a combination of employer sponsored health plans and additional 
benefit coverage provided by the State that wraps around the employer 
sponsored health plan which, in the aggregate, results in benchmark or 
benchmark-equivalent level of coverage for those recipients.


Sec.  440.355  Payment of premiums.

    Payment of premiums by the State, net of beneficiary contributions, 
to obtain benchmark or benchmark-equivalent benefit coverage on behalf 
of beneficiaries under this section will be treated as medical 
assistance under section 1905(a) of the Act.


Sec.  440.360  State plan requirement for providing additional wrap-
around services.

    If the State opts to provide additional or wrap-around coverage to 
individuals enrolled in benchmark or benchmark-equivalent plans, the 
State plan must describe the populations covered and the payment 
methodology for these services. Additional or wrap-around services must 
be in categories that are within the scope of the benchmark coverage, 
or are described in section 1905(a) of the Act.


Sec.  440.365  Coverage of rural health clinic and federally qualified 
health center (FQHC) services.

    If a State provides benchmark or benchmark-equivalent coverage to 
individuals, it must assure that the individual has access, through 
that coverage or otherwise, to rural health clinic services and FQHC 
services as defined in subparagraphs (B) and (C) of section 1905(a)(2) 
of the Act. Payment for these services must be made in accordance with 
the payment provisions of section 1902(bb) of the Act.


Sec.  440.370  Cost-effectiveness.

    Benchmark and benchmark-equivalent coverage and any additional 
benefits must be provided in accordance with Federal upper payment 
limits, procurement requirements and other economy and efficiency 
principles that would otherwise be applicable to the services or 
delivery system through which the coverage and benefits are obtained.


Sec.  440.375  Comparability and scope of coverage.

    States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to comparability or requirements relating to the scope of coverage 
other than those contained in this subpart.


Sec.  440.380  Statewideness.

    States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to statewideness.


Sec.  440.385  Freedom of choice.

    (a) States have the option to amend their State plan to provide 
benchmark or benchmark-equivalent coverage to recipients without regard 
to the

[[Page 73727]]

requirements for free choice of provider in Sec.  431.51 of this 
chapter.
    (b) States may restrict recipients to obtaining services from (or 
through) selectively procured provider plans or practitioners that 
meet, accept, and comply with reimbursement, quality and utilization 
standards under the State Plan, to the extent that the restrictions 
imposed meet the following requirements:
    (1) Do not discriminate among classes of providers on grounds 
unrelated to their demonstrated effectiveness and efficiency in 
providing the benchmark benefit package.
    (2) Do not apply in emergency circumstances.
    (3) Does not apply to family planning providers.
    (4) Require that all provider plans are paid on a timely basis in 
the same manner as health care practitioners must be paid under Sec.  
447.45 of this chapter.


Sec.  440.390  Assurance of transportation

    A State may at its option amend its State plan to provide benchmark 
or benchmark-equivalent coverage to recipients without regard to the 
assurance of transportation to medically necessary services requirement 
specified in Sec.  431.53 of this chapter.

(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: August 8, 2008.
Kerry Weems,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: September 29, 2008.
Michael O. Leavitt,
Secretary.

    Editorial Note:  This document was received in the Office of the 
Federal Register on Monday, November 24, 2008.

[FR Doc. E8-28330 Filed 12-2-08; 8:45 am]
BILLING CODE 4120-01-P