[Federal Register Volume 75, Number 83 (Friday, April 30, 2010)]
[Rules and Regulations]
[Pages 23068-23104]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-9734]



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Part III





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. 75 , No. 83 / Friday, April 30, 2010 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 440

[CMS-2232-F4]
RIN 0938-AP72


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 rule revises the final rule published on December 3, 2008 
to 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. That rule 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-eligible individuals. In addition, this 
final rule responds to public comments on the February 22, 2008 
proposed rule and comments received in response to rules published 
subsequently that delayed the effective date of the December 3, 2008 
final rule until July 1, 2010.

DATES: Effective Date: These regulations are effective on July 1, 2010.

FOR FURTHER INFORMATION CONTACT: Fran Crystal, (410) 786-1195.

SUPPLEMENTARY INFORMATION: 

I. Background

A. Regulatory History

    On December 3, 2008, we published a final rule in the Federal 
Register entitled ``Medicaid Program; State Flexibility for Medicaid 
Benefit Packages'' (73 FR 73694), hereafter referred to as the December 
3, 2008 rule. The December 2008 rule was to implement provisions of 
section 6044 of the Deficit Reduction Act (DRA) of 2005, (Pub. L. 109-
171), enacted on February 8, 2006, which amends the Social Security Act 
(the Act) by adding a new section 1937 related to the coverage of 
medical assistance under approved State plans.
    Subsequent to the publication of the December 3, 2008 rule, and in 
accordance with the memorandum of January 20, 2009 from the Assistant 
to the President and the Chief of Staff, entitled ``Regulatory 
Review,'' we published an interim final rule with comment period (74 FR 
5808) on February 2, 2009 in the Federal Register to temporarily delay 
for 60 days the effective date of the December 3, 2008 rule entitled, 
``Medicaid Program; State Flexibility for Medicaid Benefit Packages.'' 
The February 2, 2009 interim final rule also reopened the comment 
period on the policies set out in the December 3, 2008 rule. We 
received nine timely items of correspondence in response to the 
February 2, 2009 interim final rule.
    On April 3, 2009, we published a second interim final rule (74 FR 
15221) in the Federal Register effectively delaying implementation of 
the December 3, 2008 rule until December 31, 2009. The second interim 
final rule was published in order to allow time to incorporate 
provisions of the Children's Health Insurance Program Reauthorization 
Act (CHIPRA) of 2009 (Pub. L. 111-3) enacted on February 4, 2009, which 
corrected language in the DRA as if these amendments were included in 
the DRA, and subsequently amended section 1937 of the Act ``State 
Flexibility for Medicaid Benefit Packages''. This delay also allowed 
for sufficient time to fully consider all of the public comments 
received on this regulation. In response to the April 3, 2009 interim 
final rule with a 30-day comment period, we received seven timely items 
of correspondence.
    Upon further review and consideration of the new provisions of the 
American Recovery and Reinvestment Act (ARRA) of 2009 (Pub. L. 111-5), 
enacted on February 17, 2009), CHIPRA, and the public comments received 
during the reopened comment period, we believed it necessary to revise 
a substantial portion of the December 3, 2008 rule. Therefore, on 
October 30, 2009, we published a proposed rule in the Federal Register 
(74 FR 56151) to solicit public comments on further delaying the 
effective date of the December 3, 2008 rule until July 1, 2010. We 
proposed to further delay the effective date of the December 3, 2008 
rule from December 31, 2009 to July 1, 2010 to allow us sufficient time 
to revise a substantial portion of the final rule based on our review 
and consideration of the new provisions of CHIPRA, ARRA, and the public 
comments received during the reopened comment periods. To allow time to 
make these revisions, the Department determined that several more 
months were needed to fully consider necessary changes to the rule.
    In the proposed rule, we noted that the comments received during 
the reopened comment periods were complex and presented numerous policy 
issues which require extensive consultation, review and analysis. 
Additionally, because both CHIPRA and ARRA contain provisions that 
impact the American Indian and Alaska Native community, we stated that 
the development of the final rule required collaboration with other HHS 
agencies and the Tribal governments. We believed that this time period 
would allow sufficient time to further consider public comments, 
analyze the impact of the revisions on affected stakeholders, and 
develop appropriate revisions to the regulation.
    We received one timely item of correspondence in response to the 
October 30, 2009 proposed rule. The comment did not directly address 
our proposal to delay the effective date of the December 3, 2008 rule 
until July 1, 2010. The comment was limited to the exemption of the 
benchmark and bench-mark equivalent packages from the assurance of 
transportation requirements. Because the comment was outside the scope 
of the proposed rule on the delay of the effective date of the December 
3, 2008 rule, but instead addresses the issue of revisions that are 
needed to comply with statutory changes, we have addressed the comment 
in the revisions to the final rule.
    On November 30, 2009, we published a final rule in the Federal 
Register (74 FR 62501) delaying the effective date of the December 3, 
2008 final rule until July 1, 2010.

B. General Provisions

    Under title XIX of 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 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

[[Page 23069]]

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 (EPSDT)services for individuals under age 21, 
family planning services and supplies to individuals of child-bearing 
age, nurse-midwife services, certified pediatric nurse practitioner, 
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 DRA 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 required to enroll in a benchmark coverage 
plan. 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.

C. CHIPRA Technical Corrections

    On February 4, 2009, CHIPRA was enacted. Section 611 of CHIPRA made 
technical corrections to the Benchmark Benefit provisions in section 
1937 of the Act, which were originally established under the DRA. The 
CHIPRA technical correction changes take effect as if included in the 
DRA.
    Section 611(a)(1)(C) and section 611(a)(3) of CHIPRA require States 
to assure that children under the age of 21, rather than those under 19 
as originally specified in the DRA, who are included in benchmark or 
benchmark-equivalent plans, have access to full EPSDT services (that 
is, those found in sections 1905(a)(4)(B), 1905(r), and 1902(a)(43) of 
the Act). These EPSDT services may be provided through a benchmark or 
benchmark-equivalent plan and/or as an additional benefit to those 
plans under section 1937 of the Act.
    Section 611(a)(1)(A)(i) of CHIPRA changed the ``Notwithstanding any 
other provision of this title * * *'' language in section 1937(a)(1)(A) 
of the Act to ``Notwithstanding section 1902(a)(1) (relating to 
statewideness), section 1902(a)(10)(B) (relating to comparability) and 
any other provision of this title which would be directly contrary to 
the authority under this section and subject to [subparagraph] (E)''. 
One effect of this CHIPRA change is to clarify the requirement, under 
42 CFR 431.53 and section 1902(a)(4) of the Act, to assure 
transportation for Medicaid beneficiaries in order for them to have 
access to covered State plan services is applicable, regardless of 
whether beneficiaries are or are not enrolled in benchmark or 
benchmark-equivalent plans.
    These two sections in CHIPRA affect the implementation of benchmark 
and benchmark-equivalent plans and thus the ``Analysis of and Responses 
to Public Comments'' in section III of this final rule, as well as the 
regulation, reflect these changes.
    Section 611(a)(2) of CHIPRA changed the heading of section 
1937(a)(1)(C) of the Act to replace the term ``Wrap-Around'' with 
``Additional'' and to accordingly strike the term ``wrap-around'' in 
the text of section 1937(a)(1)(C) of the Act.
    Section 611(b) of CHIPRA clarifies the reference to children 
receiving foster care under section 1937(a)(2)(B)(viii) to apply to 
individuals receiving ``child welfare services,'' not ``aid'' or 
``assistance''.
    Section 611(c) of CHIPRA requires the Secretary to post on the CMS 
Web site and publish in the Federal Register, with respect to benchmark 
and benchmark-equivalent plans approved by the Secretary, those 
provisions of title XIX of the Act which were determined by the 
Secretary as not applicable to the State's benchmark and/or benchmark-
equivalent plan, as well as the reason for such determinations.

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-eligible individuals. 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 Sec.  440.300, 
Sec.  440.305, and Sec.  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 statutory 
authority for States to provide medical assistance to individuals, 
within one or more groups of Medicaid eligible individuals 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 due to 
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:
     An individual 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.
     An individual who qualifies for medical assistance under 
the State plan

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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 individual who is eligible for medical 
assistance on the basis of section 1902(e)(3) of the Act.
     An individual who is entitled to benefits under any part 
of Medicare.
     An individual who is terminally ill and is receiving 
benefits for hospice care under title XIX.
     An individual 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.
     An individual 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; children in foster care or other out of home 
placement; or children 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.
     An individual who qualifies for Medicaid based on medical 
condition for medical assistance for long-term care services described 
in section 1917(c)(1)(C) of the Act.
     An individual 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.
     An individual 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 
includes 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).
     An individual 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.
     An individual who qualifies for medical assistance as a 
TB-infected individual on the basis of section 1902(a)(10)(A)(ii)(XII) 
of the Act.
     Individuals who are only eligible for Medicaid coverage of 
the 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 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 improve the integration of disease management 
programs to provide better coordinated care that 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 individuals specified in Sec.  
440.315. When a State offers exempt individuals the option to enroll in 
a benchmark or benchmark-equivalent benefit package, the State would 
inform the individuals that enrollment is voluntary and that the 
individual may disenroll from 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 individual 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. As proposed, 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

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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.
    A State may select one or more benchmark coverage plan options. The 
State may also specify the benchmark plan for any specific individual. 
For example, one individual may be enrolled in the FEHBP-equivalent 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 proposed to 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. As proposed, individuals mandated into 
a benchmark or benchmark-equivalent plan and entitled to have access to 
EPSDT services cannot disenroll from the benchmark or benchmark-
equivalent plan just to receive these services. While, as proposed, 
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 individuals have access 
to full EPSDT services under section 1905(r) of the Act.
    In addition, as proposed, individuals would need to first seek 
coverage of EPSDT services through the benchmark or benchmark-
equivalent plan before seeking coverage of such services through other 
options established by the State for receiving wrap-around benefits 
under section 1937 of the Act.

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

[[Page 23072]]

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 premium payments on 
behalf of the individual 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 
non-exempt individual 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 be required 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 
individuals 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 
individuals 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 
individuals without regard to freedom of choice. States may restrict 
individuals 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 
individuals 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. In response to the February 2, 
2009 interim final rule with a 30-day comment period (the first 
temporary delay of the December 3, 2008 final rule), we received nine 
timely items of correspondence. In response to the April 3, 2009 
interim final rule with a 30-day comment period (the second temporary 
delay of the December 3, 2008 final rule), we received seven timely 
items of correspondence. In response to the October 30, 2009 proposed 
rule on delaying the effective date of the final rule to July 1, 2010, 
we received one timely item of correspondence.
    The majority of the comments received on the proposed rule 
represented transportation providers, medical providers, and Medicaid 
beneficiaries, particularly Medicaid beneficiaries who rely on dialysis 
treatments. Other comments represented State and local advocacy groups, 
national associations that represent various beneficiary sub-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 February 22, 2008 proposed rule, the February 2, 2009 
interim final rule with a 30-day comment period (the first temporary 
delay of the December 3, 2008 final rule) and the April 2, 2009 final 
rule with a 30-day comment period (the second temporary delay of the 
December 3, 2009 final rule), as well as the one comment that we 
received in response to our October 30, 2009 proposed rule delaying the 
effective date of the December 3, 2008 final rule, which addressed the 
issue of revisions required to comply with statutory changes. 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

[[Page 23073]]

comments in our publication of CMS-2244-F.

A. General Comments

    Comments: A few commenters supported the proposed rule and a few 
commenters strongly supported certain provisions of the December 3, 
2008 rule. However, most commenters oppose either the February 22, 2008 
proposed rule or certain sections of the December 3, 2008 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 believe 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 acknowledge and appreciate the views of the commenters 
who both supported and opposed the February 22, 2008 proposed rule and 
the December 3, 2008 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. We address comments relating to 
restrictive interpretations below in the discussion of specific 
proposed provisions that arguably were not required by the statutory 
provision.
    Comment: Several commenters believe that the accelerated pace of 
the short comment period for the proposed rule, given the broad 
implications, will lead to a short-sighted, onerous rule that has 
dangerous health impacts for the poor. The proposed rule was issued in 
the Federal Register on February 22, 2008. The deadline for submission 
of comments was March 24, 2008. The commenters stated that other 
rulemaking has taken a longer period and that given the impact of the 
provisions, a longer time period is warranted.
    Some commenters stated that the 30-day comment period in the 
proposed rule 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 proposed 
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 
by 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: As described in the ``Background'' in section I of this 
regulation under ``Regulatory History,'' in section I.A. of this 
regulation a 30-day public comment period on the February 22, 2008 
proposed rule was provided and two additional 30-day public comment 
periods were provided on the December 3, 2008 rule. We believe that 
these comment periods allowed sufficient time for public comment.

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 individuals 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. We have interpreted this statutory 
term to mean any eligibility category listed under section 1905(a) of 
the Act. Thus, all individuals within a category covered or potentially 
covered under the State's Medicaid plan could 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 individuals 
will deter those individuals, including children, from receiving 
appropriate care. Commenters indicated that individuals with low 
incomes are likely to forego 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: The benchmark and benchmark-equivalent coverage was 
authorized by the statute. Under the statute, the benchmark flexibility 
is an option that States can choose to use in redesigning their current 
Medicaid benefit program. It should be noted that as a result of the 
CHIPRA changes to the DRA, this option is not as broad as it had been 
and we have revised the regulations to comply with CHIPRA by stating 
that States must comply with all requirements of title XIX other than 
sections 1902(a)(1) and 1902(a)(10(B) of the Act, unless such 
requirement can be shown to be directly contrary to the authority under 
section 1937 of the Act. For example, under the CHIPRA changes 
transportation is a required service and benchmark plans utilizing 
managed care delivery systems must meet managed care rules.
    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, there have been some reports that 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

[[Page 23074]]

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 individuals. 
Those commenters are concerned that many private insurance plans do not 
provide adequate mental health services. Other commenters noted that 
benchmark coverage is likely to prove entirely inadequate for 
individuals who need mental health services. The commenters 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, the commenters 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.
    Similarly, 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-eligible individuals experiencing mental illness or who 
have a developmental disability. The commenters 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 created section 1937 in response to States' 
desire for more flexibility in designing their Medicaid programs and 
adopting benefit programs tailored to the needs of the varied 
populations they serve. The DRA provides that States can provide 
alternative benchmark or benchmark-equivalent benefit packages at their 
option; that is, States are not required to implement these provisions. 
We have incorporated elements in this regulation that are designed to 
protect vulnerable populations and to help assure that individuals 
enrolled in a benchmark benefit plan will have access to services that 
are appropriate to their individual needs to the extent permitted by 
the statute.
    To protect individuals with disabilities we have included in this 
rule a basic minimum definition of medically frail and special medical 
needs to insure that people with disabilities and special health care 
needs are not mandatorily enrolled in benchmark benefit plans. Rather, 
they can only be voluntarily enrolled after being fully informed of the 
differences between the benchmark benefit plan and the traditional 
State plan. We have added language at Sec.  440.305(b)(2) that requires 
States electing to offer benchmark benefit plans or wishing to 
substantively change an approved benchmark benefit plan to provide 
advance public notice with an opportunity to comment. Before submitting 
to CMS a State plan amendment to implement a benchmark benefit plan or 
an amendment to substantially modify the benefits or eligibility 
provisions of an approved benchmark benefit plan, the State must first 
provide the public the opportunity to review the proposed change and 
comment on it.
    We acknowledge and agree with the commenters on the importance of 
providing adequate mental health benefits and will be separately 
addressing how post DRA-enactments, specifically the Paul Wellstone and 
Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 
relate to benchmark benefits.
    The new benefit option provides States with additional tools to 
provide care to maximize health outcomes for certain individuals. These 
tools may be used in conjunction with other Medicaid and Children's 
Health Insurance Program (CHIP) authorities to strategically align the 
Medicaid program with the current health care environment and expand 
access to care by leveraging existing benefit and coverage options to 
improve quality and coordination of care.
    States seeking to use benchmark and benchmark-equivalent plans to 
provide coverage for children and adults with special medical needs, 
individuals with HIV/AIDS, and long-term care and community-based 
service options, must design a benchmark benefit package that is 
appropriate to meet the health care needs of the population being 
served, including coverage that may be more generous than a State's 
Medicaid plan.
    We think it is important to note that States are required to 
provide children under the age of 21 with EPSDT services either as an 
additional service and or as part of the benchmark or benchmark-
equivalent benefit plan. States are required to inform families about 
how and where to access these services particularly if the benchmark or 
benchmark-equivalent benefit does not identify the full range of EPSDT 
services needed by the beneficiary as being covered. States must assure 
that these services are provided in the most seamless way possible and 
the families understand how to access such services through the 
Medicaid State plan.
    Moreover, certain 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.
    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. Congress 
has provided States with the flexibility to align Medicaid benefit 
packages for certain populations with commercial insurance plans. 
States now have the ability to provide additional services that are 
uniquely designed to meet the

[[Page 23075]]

needs of targeted populations. For example, individuals with asthma and 
chronic obstructive pulmonary disease who reside in a certain area of 
the State may be offered disease management services which are not 
otherwise available under the traditional State plan to all individuals 
with asthma and chronic obstructive pulmonary disease. A State may 
elect to provide beneficiaries with incentives for healthy behavior by 
offering additional services. For example, a State could offer certain 
(enhanced) preventive services not available under the regular State 
plan, such as smoking cessation counseling or nutritional/dietary 
management, to beneficiaries with certain medical conditions and/or in 
certain parts of the State. Prior to the enactment of the DRA, a State 
that wanted to tailor its Medicaid program to meet the unique needs of 
its beneficiaries would have to utilize a demonstration or waiver 
program.
    Comment: One commenter stated that the proposed rule, read together 
with other CMS rules like the citizenship documentation requirement and 
CMS's Children's Health Insurance Program (CHIP) 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 American Indians and Alaska Natives to prove 
both citizenship and identity in order to obtain Medicaid services. 
Commenters also raised concerns about the CHIP review strategy outlined 
in an August 17, 2007 letter sent to State Health Officials. Commenters 
also 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 agree that the DRA benchmark rules can create some 
risk that beneficiaries may not be able to access needed care, and we 
will implement the rules mindful of this possibility and consistent 
with the Federal law. Additionally, CHIPRA included two significant 
technical changes to the DRA that amended section 1937 of the Act. In 
order to reflect these changes, we modified the regulation at Sec.  
440.390 to clarify that States must assure necessary transportation to 
and from providers and at Sec.  440.345 to clarify that States must 
assure that children under the age of 21 who are enrolled in 
alternative benefit plans must have full access to EPSDT services. 
Additionally, we expanded paragraph (b)(5) in Sec.  440.335, which 
lists the mandatory services that benchmark-equivalent plans must 
provide, to include family planning services and supplies as a required 
preventive service.
    Citizenship documentation requirements 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 of the Act. However, it should be noted that the August 
17, 2007 State Health Officials letter on CHIP eligibility levels and 
crowd out was withdrawn on February 4, 2009, at the direction of 
President Obama. The CHIPRA, signed into law on that same day, provides 
new flexibility to States for streamlining citizenship documentation. 
CHIPRA also includes technical amendments to the DRA which clarify 
documentation requirements, provide for a reasonable opportunity period 
for individuals to submit such documentation, and expand the list of 
documents that are acceptable for verifying citizenship.
    Comment: Several comments were provided by organizations that have 
an interest in how the benchmark and benchmark-equivalent benefit 
packages impact American Indians/Alaska Natives. The commenters 
believed that alternative benefit packages serve as a substantial 
barrier to American Indians/Alaska Natives enrollment in the Medicaid 
program. They noted that, because of the Federal government's trust 
responsibility to provide health care to American Indians/Alaska 
Natives, implementing benchmark and benchmark-equivalent benefit 
packages have specific tribal implications that were not addressed in 
the proposed rule. Several commenters believed that American Indians/
Alaska Natives should be exempt from mandatory enrollment in benchmark 
and benchmark-equivalent benefit programs entirely.
    Response: In Medicaid, there is no statutory basis to exempt 
American Indians/Alaska Natives from Medicaid alternative benefit 
provisions. Section 1937 of the Act does not provide for such an 
exemption. Section 1937 does provide some specific exemptions from 
mandatory enrollment in benchmark or benchmark-equivalent benefit 
packages and it is possible that some American Indians/Alaska Natives 
would fit into one of these exempt groups. Section 1937 does not 
however give CMS authority to identify additional exempt groups.
    To address the unique needs of the American Indians/Alaska Natives 
population, we expect States to ensure that alternative benefit 
packages recognize the unique services offered by IHS and tribal 
providers, and the unique health needs of the American Indians/Alaska 
Natives population. To ensure this, section 5006 of ARRA requires 
States to consult with Indian Health Programs or Urban Indian 
Organizations that furnish health care services on matters that are 
likely to have a direct effect on these health programs. It also 
requires that services provided to Indians through managed care 
organizations provide access to IHS providers.
    Comment: One commenter contended that there are no provisions to 
require States to ensure that American Indians/Alaska Natives 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 American Indians/
Alaska Natives' health care status and the health care status of the 
rest of the country. The commenter added that for American Indians/
Alaska Natives, 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 American Indians/Alaska Natives 
individuals. 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. Section 1937 of the Act does not 
provide any special protections for benefit packages applicable to 
American Indians/Alaska Natives individuals, but this does not mean 
that benefit packages will be deficient.
    Section 5006(e) of the ARRA, which was signed on February 17, 2009 
and became effective July 1, 2009, requires that in the case of any 
State in which one or more Indian Health Program or Urban Indian 
Organization furnishes health care services, the Medicaid State plan 
specify a process under which the State seeks advice from designees of 
such programs or organizations on matters that are likely to have a 
direct effect on these health programs.
    As noted previously, to address the unique needs of the American 
Indians/

[[Page 23076]]

Alaska Natives population, we expect States to work with Indian Health 
Programs or Urban Indian Organizations that furnish health care 
services to ensure that alternative benefit packages recognize the 
unique services offered by IHS and tribal providers, and the unique 
health needs of the American Indians/Alaska Natives population.
    With regard to the assurance of transportation and freedom of 
choice of providers, CHIPRA amended the ``notwithstanding any other 
provisions of this title'' language. This change in the law clarifies 
that the authority under section 1937 of the Act to deviate from 
otherwise applicable Medicaid requirements is limited. Therefore, we 
revised the regulation at Sec.  440.390 to require States to assure 
necessary transportation to and from providers for individuals enrolled 
in benchmark and benchmark-equivalent plans and at Sec.  440.385 by 
removing the option to provide benchmark and benchmark-equivalent 
coverage without regard to freedom of choice of providers. While we do 
not anticipate that there will be many requirements of title XIX that 
would be contrary to implementing a benchmark benefit plan, States may 
request an exemption from a provision of title XIX if they can 
demonstrate how the provision would be directly contrary to section 
1937 of the Act.
    Comment: Another commenter stated on behalf of American Indians/
Alaska Natives, the Indian and tribal health care system is woefully 
under-funded and tribal providers rely on Medicaid revenues to 
supplement that meager funding. Forcing American Indians/Alaska Natives 
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: We acknowledge that benchmark plans could reduce covered 
benefits. To date, however, CMS has approved ten benchmark benefit 
programs, and most offer State plan services plus additional services 
like preventive care, personal assistance services, or disease 
management services. For individuals under the age of 21, section 1937 
of the Act ensures that all needed services will be available through 
the requirement that EPSDT services must be provided either in addition 
to, or as part of, the benchmark or benchmark-equivalent plan.
    Section 1937 of the Act does not provide a basis to exclude IHS or 
tribal health providers from participation in the delivery system for 
alternative benefits. Futhermore, CMS does not determine IHS funding 
levels.
    In an effort to reach out to Tribes we held several discussions 
with Tribes about the changes made to the DRA and section 1937 of the 
Act by section 611 of CHIPRA. These discussions took place during the 
All Tribes call on July 2, 2009, and during two face to face open 
consultation meetings held with Tribes on July 8th and July 10th, 2009. 
We covered all CHIPRA related issues, including the changes made to 
section 1937 of the Act during all of these meetings. Also, on June 29, 
2009 we covered section 611 of CHIPRA during the Tribal Technical 
Advisory Group (T-TAG) meeting CMSO had with the T-TAG policy advisors. 
CMS is committed to enhancing communication with Tribes and to assuring 
that the obligation of States to consult with American Indians/Alaska 
Natives on all issues affecting Indian health services are followed by 
State Medicaid agencies.
    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 American Indians/Alaska Natives 
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 American Indians/Alaska Natives 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. Though the 
effect on American Indians/Alaska Natives individuals results from the 
statute itself, and not this rule, CMS did consult with the Tribes 
about the changes made to the DRA and section 1937 of the Act by 
section 611 of CHIPRA as described in the previous response.
    Section 5006(e) of ARRA, which was signed on February 17, 2009 and 
became effective July 1, 2009, provides American Indians/Alaska Natives 
individuals with new protections because it requires that Medicaid 
State plans specify a process under which the State seeks advice from 
designees of Indian Health Programs or Urban Indian Organizations that 
furnish health care services on matters that are likely to have a 
direct effect on these health programs. States that elect to implement 
alternative benefit packages must consult with Tribes and notify them 
about State plan amendments that will directly affect the Tribes. 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. Questions about the 
Indian Health Services budget should be directed to Indian Health 
Services.
    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 co-pays 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.

[[Page 23077]]

Premiums and cost sharing act as a deterrent to those receiving health 
care and may cause low income populations to choose between healthcare 
and basic needs such as food. The commenter indicated that American 
Indians/Alaska Natives and other low-income groups should be exempt 
from premiums and cost-sharing requirements.
    Response: States have the option to impose cost sharing in Medicaid 
but are limited by the requirements of sections 1916 and 1916A 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 individuals may not exceed cost sharing limits 
applicable under sections 1916 and 1916A of the Act. In a State that 
imposes cost sharing under either 1916 or 1916A the State would be 
permitted to apply different cost sharing requirements for individuals 
enrolled in the benchmark or benchmark-equivalent plan than it imposes 
for those not enrolled in such plans. In some cases individuals 
enrolled in benchmark or benchmark-equivalent plans may actually have 
lower cost sharing than is required of individuals enrolled in the 
traditional State plan benefit package. Under section 1916A of the Act, 
there are tiered individual service limits based on family income, and 
an aggregate cap of five percent of family income. These limits apply 
to all individuals enrolled in benchmark plans.
    Section 5006 of ARRA added new protections for American Indians/
Alaska Native related to: premiums and cost sharing; exclusion of 
certain American Indians/Alaska Natives specific property from estate 
recovery in Medicaid; new rules regarding American Indians/Alaska 
Natives, Indian Health Providers and Indian Managed Care entities in 
Medicaid; and new consultation requirements for Medicaid, CHIP and 
other health care programs funded under the Act involving Indian Health 
programs and Urban Indian organizations.
    It is important to note that alternative benefit package programs 
are provided at the State's option. However, we recognize the concerns 
raised by these commenters.
    Numerous Medicaid eligibility categories are exempt from mandatory 
enrollment in alternative benefit packages and can only select the 
alternative benefit package voluntarily. Such individuals must be 
provided a comparison of the benchmark option versus the State plan 
option before they choose to enroll. That comparison must include 
information on the cost-sharing obligations of beneficiaries. In 
choosing the benchmark option over the State plan option, these 
individuals would thus have actively made an informed choice. Finally, 
exempt individuals must be able to revert back to traditional Medicaid 
at any time. States electing to offer an alternative benefit package 
and choosing to allow voluntary enrollment for exempt populations must 
demonstrate how the State will operationalize the disenrollment 
provisions as well as provide detailed information on how informed 
choice will occur.
    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 individuals 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 
acknowledge that this is a possibility. However, for the benchmark 
State plan amendments implemented to date, most offer traditional State 
plan services as well as additional services like prevention and 
disease management.
    States can consider benchmark-equivalent coverage as long as the 
coverage includes mandatory services such as inpatient and outpatient 
hospital services, physicians' surgical and medical services, 
laboratory and x-ray services, emergency services, well-baby and well-
child care including age-appropriate immunizations, and other 
appropriate preventive services. We have determined that other 
appropriate preventive services must include family planning services 
and supplies.
    Benchmark-equivalent plans may also include care management, care 
coordination, and/or home health services, but it is possible that some 
plans will not include these services. We do not agree that a 
requirement that States include these specific services would be 
consistent with the statute.
    An important protection for children enrolled in alternative 
benefit packages is the requirement to ensure full access to the EPSDT 
benefit for children under the age of 21. If services are not provided 
as part of the benchmark or benchmark-equivalent plan, these services 
must be provided by the State as additional benefits. States electing 
the benchmark benefit option must provide CMS with information 
describing how it will inform families of the availability of such 
services and how the State will coordinate access to those services 
when they must be provided outside of the benchmark plan. Furthermore, 
States, at their option, can provide for additional services to 
benchmark or benchmark-equivalent programs.
    Additionally, exempt individuals must make an informed choice 
before they elect to voluntarily enroll 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. The exempt individual has 
the right to return to State plan coverage at any time. For example, if 
the exempt individual is in need of services not offered in the 
benchmark plan, the individual can return to the regular Medicaid 
benefit package immediately. In order to assure that exempt individuals 
voluntarily choose to enroll in a benchmark benefit plan, we revised 
Sec.  440.320 to require States to track the number of voluntary 
enrollments and disenrollments in benchmark benefit plans by exempt 
individuals. Section 440.320 also requires States to act promptly on 
requests from exempt individuals for disenrollment and to ensure that 
these individuals have full access to standard State plan services 
while disenrollment requests are being processed.
    Comment: One commenter said the provisions of the regulation on 
exempting populations and covering benefits should be consistent with 
the Americans with Disabilities Act (ADA).
    Response: While exempt populations under this regulation are 
specified in section 1937 of the Act and CMS does not have authority 
under the statute to expand the definition of exempt

[[Page 23078]]

populations through the regulatory process, we would consider any 
implications of the ADA when reviewing a benchmark plan amendment and 
in monitoring implementation of the option by a State.
    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 differences in covered 
benefits be excluded as a justifiable cause for beneficiaries to switch 
health plans after the change period.
    Response: In light of the statutory changes made by CHIPRA, we 
revised the regulation at Sec.  440.305 to incorporate compliance with 
Medicaid managed care requirements at section 1932 of the Act and at 42 
CFR part 438 of Federal regulations. Thus, in providing information to 
beneficiaries who are offered managed care plans to obtain alternate 
benefit coverage, States are required to comply with the requirements 
at 42 CFR 438.10, and therefore 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; cost sharing, 
if any, and the process and procedures for obtaining emergency 
services.
    With regard to deviating from the lock-in provisions of Medicaid 
managed care regulations at 42 CFR part 438, we believe that the 
disenrollment provisions of Sec.  438.56, which provide for a 90-day 
period after initial enrollment in which a managed care enrollee may 
change plans is consistent with the requirements of section 1932(a)(4) 
of the Act and represents a reasonable time period for enrollees to 
decide whether the plan in which they are enrolled will best meet their 
needs. This trial period of enrollment is even more critical when the 
plan is offering a benchmark or benchmark-equivalent benefit package. 
We are not convinced that this limited period of time provides an 
incentive for enrollees to plan-hop in order to access specific 
benchmark benefits.
    Further, CMS has specified three circumstances where cause for 
disenrollment exists and permitted States to develop other reasons, 
including but not limited to, the examples in Sec.  438.56(d)(iv). 
Beyond these requirements, States have the flexibility to create 
additional causes for disenrollment as best serves their beneficiaries 
and the Medicaid Program.
    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: Access standards apply to all aspects of the Medicaid 
program, including benchmark and benchmark-equivalent plans. If States 
choose to offer benchmark or benchmark-equivalent plans to Medicaid 
beneficiaries, States must assure that access to providers and claims 
payment are in compliance with current Federal regulations.
    Comment: One commenter raised the 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 re-bill plans in the event that a 
plan is billed for a Medicaid individual 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: 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 stated the regulation should require plan to 
plan reconciliations of payment in instances where beneficiaries have 
switched from one benefit plan to another, and in order to minimize 
confusion about plan enrollment and benefits, benchmark plans should be 
required to coordinate the receipt of beneficiary ID cards with the 
beneficiary's effective date of enrollment.
    Response: We acknowledge the commenter's concern regarding 
coordination of beneficiary enrollment in a plan and reconciliation of 
payment to providers. These are implementation and administrative 
issues that are, at least initially, best addressed by the State. We 
expect the State to appropriately coordinate enrollment and payment 
processes in a fashion that minimizes confusion and we expect the State 
to ameliorate coordination of payment issues so that providers are paid 
appropriately and in a timely fashion. However, we believe that these 
issues need not be addressed in regulation at this time, and that most 
States already have systems in place to coordinate enrollment and 
provider payments between managed care plans. Should there be evidence 
of problems CMS will revisit this issue.
    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 
when mandatory enrollment can occur are outlined in Sec.  440.431 and 
specify that only certain

[[Page 23079]]

groups of full benefit eligibles can be mandatorily enrolled in 
benchmark benefit packages. We are requiring in Sec.  440.320 that 
exempt individuals be fully informed regarding the choice for 
enrollment in benchmark or benchmark-equivalent plans and that they 
affirmatively enroll in benchmark and benchmark-equivalent plans. We 
are also requiring that States comply with the Medicaid 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, except with respect to children, 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. Children must be 
provided access to the full range of EPSDT services, as defined in 
section 1905(r). While section 1905(r) of the Act specifically requires 
that States provide children necessary health care, diagnostic 
services, treatment and other measures described in section 1905(a) 
related to conditions discovered by a screening service, we believe 
that any encounter with a health professional practicing within the 
scope of his or her practice should be considered to be a screening 
service for the purpose of the EPSDT requirement.
    It is important to note that for those who voluntarily enroll in 
benchmark or benchmark-equivalent plans, such individuals must be 
permitted to revert to traditional Medicaid coverage at any time. 
Requests by individuals to disenroll must be acted upon promptly. 
Furthermore, we included at Sec.  440.320 a requirement for States to 
have a process in place to ensure that any disenrollment request is 
processed promptly and the individual is immediately able to access 
services described in the standard Medicaid State plan while the State 
is processing the individual's disenrollment request.
    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 exceed 5 percent of the 
family's income. Consistent with section 5006 of the ARRA, States are 
required to ensure that eligible Indians are neither charged premiums 
nor required to participate in cost sharing for services provided by 
IHS providers or through contract health services through IHS 
providers. The Act also provides that States may implement undue 
hardship provisions for premiums and may permit providers to waive cost 
sharing on a case-by-case basis.
    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 through the denial 
of medically necessary services 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 and could impose considerable hardship 
and result in the denial of necessary health service for beneficiaries.
    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 noted 
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 must 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, but we 
intend these processes to be meaningful and will be reviewing how they 
are conducted to assure compliance with the law.
    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-eligible individuals. The commenter asserts 
that Medicaid-eligible individuals 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-eligible individuals receiving 
treatment for chronic illnesses.
    Response: States are required to submit State plan amendments to 
establish rates and rate methodologies for all fee-for-service 
institutional and non-institutional services as part of their approved 
Medicaid State plan. Benchmark plans that utilize fee-for-service 
delivery systems must follow the State plan reimbursement process. This 
process is detailed at Sec.  447.200 and Sec.  447.201 and includes a 
public notice requirement detailed at Sec.  447.205. We published 
general rate setting regulations for drugs at 42 CFR part 447 subpart I 
and for managed care entities at Sec.  438.6(c), and we expect States 
to follow these rules when setting rates for benchmark and benchmark-
equivalent plans.
    With regard to benchmark benefit plans that use managed care as the 
delivery system, the requirements for actuarial soundness at part 438 
apply in the same way they apply to any Medicaid managed care entity, 
but we do not have statutory authority to review or approve 
reimbursement rates to contracted providers under managed care 
arrangements once the premium has been certified as actuarially 
appropriate for the populations and

[[Page 23080]]

services in the contract. We do however, have the authority and 
responsibility to review the provider network to determine that 
individuals have adequate access to all medically necessary services.
    With regard to mail order prescriptions, section 1937 did not 
address or limit the use of mail order prescription requirements, or 
otherwise address or limit the coverage of, or payment for, 
prescription drugs.
    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. 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 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. We recognize that applying benchmark 
benefit plans to medically needy individuals can be cumbersome 
depending on the arrangements for benchmark coverage. If the State 
administers its own benchmark benefit plan, enrolling and disenrolling 
these individuals would be no more problematic than standard Medicaid 
enrollment.

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 mandatory enrollment in alternate 
benefit package. We have included the medically needy with the list of 
exempt populations because the medically needy population is 
effectively exempted from mandatory enrollment by exclusion from the 
definition of ``full benefit eligible''.
    We have defined ``medically frail'' and ``special medical needs'' 
individuals who are exempt from mandatory enrollment. At a minimum, 
States must include children with serious emotional disturbances, 
individuals with disabling mental disorders, individuals with serious 
and complex medical conditions, and individuals with physical and or 
mental disabilities that significantly prevent them from performing one 
or more activities of daily living. Accordingly, we revised the 
regulation at Sec.  440.315(f) to reflect this change. These are 
minimum standards and States have the flexibility to expand this 
definition.
    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: In the proposed rule we published on February 22, 2008, 
we stated that we interpreted the exemption from mandatory enrollment 
in section 1937(a)(2)(B)(ix) of the Act to apply only to those 
individuals who qualify for Medicaid because the State has elected to 
link Medicaid eligibility to TANF eligibility. Under the law, since 
passage of the Personal Responsibility and Work Opportunity 
Reconciliation Act of 1996 (PRWORA), Medicaid eligibility is not tied 
to TANF eligibility. While many States automatically enroll people 
receiving TANF in Medicaid they do so because the design of the TANF 
and Medicaid rules means that, in fact, all TANF individuals qualify 
under the Medicaid rules. There is no direct eligibility link under 
law, however, between TANF and Medicaid.
    We have determined that our proposed regulation did not adequately 
take into account the references in section 1937 to title IV-A, and 
section 1931 of the Act. Section 1902(a)(10)(A)(i)(I) of the Act still 
requires States to cover, in their Medicaid programs, individuals 
receiving cash assistance under part A of title IV. However, section 
1931 of the Act provides the rules for determining whether an 
individual is treated as a recipient of title IV-A assistance for 
purposes of Medicaid eligibility. Under section 1931 of the Act, 
references to title IV-A must be considered to be references to the IV-
A State plan that was in effect prior to the date that title I of 
PRWORA took effect. In other words, the AFDC cash assistance rules are 
carried over to Medicaid eligibility under section 1931, (States may 
adopt less restrictive rules under section 1931(b)(2) of the Act), but 
actual eligibility for or receipt of cash assistance is not a 
requirement under section 1931. Accordingly, we are revising our 
regulation at Sec.  440.315(i) to provide that parents or caretakers 
who qualify for medical assistance on the basis of eligibility to 
receive assistance under a State plan funded under part A of title IV, 
as determined under section 1931 of the Act, are exempt from the 
requirement to enroll in benchmark or benchmark-equivalent coverage. 
These are the parents who, at a minimum, States must cover under 
section 1931. We are also clarifying that we interpret the reference to 
``parents'' in section 1937(a)(2)(B)(ix) to include caretakers, as 
defined in section 1931. We are not requiring that parents or 
caregivers who qualify for Medicaid on the basis of more liberal income 
or resource methodologies which a State uses pursuant to the option 
available under section 1931(b)(2)(C) be exempt from mandatory 
enrollment in benchmark or benchmark-benefit plans, although States 
may, at their option, exempt some or all such individuals.
    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, American 
Indians/Alaska Natives. Several commenters believed that the same 
compelling policy reasons for excluding American Indians/Alaska Natives 
from mandatory managed care

[[Page 23081]]

support excluding them from mandatory enrollment in benchmark plans, 
and requested that we revise the rule to be consistent with current 
policy described in the Medicaid managed care rule of 2002.
    Response: In the proposed rule 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. We have therefore 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 
statutorily exempt category at section 1937(a)(2)(vi) of the Act 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 an 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 include a separate definition of 
adults with special medical needs in the proposed rule.
    After reviewing public comment, we have determined that States 
should be allowed flexibility to adopt reasonable definitions of 
``individuals with special medical needs'' as long as that definition 
includes, at a minimum, the children specified in Sec.  438.50(d)(3), 
children with serious emotional disturbances, individuals with 
disabling mental disorders, individuals with serious and complex 
medical conditions and individuals with physical, and/or mental 
disabilities that significantly impair their ability to perform one or 
more activities of daily living.
    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 those special protections were not 
included under section 1937 of the Act. 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 American Indians/Alaska Natives are not a statutory group 
that is exempt from enrollment in an alternative benefit package, they 
remain exempt from mandatory enrollment in managed care when such an 
option is utilized under section 1932 of the Act. As a result, a State 
that operates an alternative benefit package through managed care 
providers must provide American Indians/Alaska Natives 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 as well as section 1932(h) of the Act, added by ARRA, that 
addresses the requirement that American Indians/Alaska Natives enrolled 
in managed care have access to IHS providers.
    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: The benchmark benefit is an option that States may elect 
to utilize within their Medicaid State plan when the State determines 
its value for a defined population. The additional steps needed in 
determining eligibility are necessary to assure that the benefit plan 
is targeted appropriately. The ultimate value of a benchmark benefit 
plan to both the State and beneficiaries is dependent upon the clear 
definition of eligibility for the defined benefit package. The exempt 
categories were established by statute and must be evaluated as a 
condition of providing a benchmark or benchmark-equivalent benefit.
    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 in light of the 
particular eligibility conditions in that State. For example, the 
phrase could refer to States that qualify under section 209(b) of the 
Act, 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 medically determinable severe 
impairment, which does not exactly match the criteria for a 
determination of ``disabled.'' Additionally, 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: After considering public comment on the issue, we have 
included in the text at Sec.  440.315(f) guidance on how States must, 
at a minimum, define ``medically frail.'' Additionally, we will require 
that States offering alternative benefit packages 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, 
the required public input process should include informing interested 
parties of the State's proposed definition of ``medically frail.''
    Comment: Another commenter suggested CMS use the existing 
definition of children with special health care needs which is defined 
by the Department of Health and Human Services, Health Resources and 
Services Administration, Maternal and Child Health Bureau (MCHB) as: 
``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 definition of ``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

[[Page 23082]]

nevertheless are significantly impaired by their mental disorder.
    Response: In the February 22, 2008 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 services or who are receiving services 
through a community based coordinated care system.
    We appreciate commenters' suggestions of additional populations of 
children and adults for inclusion in the definition of special medical 
needs. In this final rule, we are allowing States the flexibility to 
adopt a reasonable definition of the term ``special medical needs'' and 
we expect States to consider, at a minimum, all of these individuals 
for inclusion in the definition of ``individuals with special medical 
needs.''
    To maintain State flexibility, we have provided guidance to States 
in our discussion of these terms and in the regulation at Sec.  
440.315(f) and we are requiring that the exempt population include, at 
a minimum, those children identified in Sec.  438.50(d)(3), children 
with serious emotional disturbances, individuals with disabling mental 
disorders, individuals with serious and complex medical conditions and 
individuals with physical and or mental disabilities that significantly 
impair their ability to perform one or more activities of daily living.
    Also, as stated previously, CMS will require that States offering 
alternative benefit packages inform CMS as to their definition of 
``medically frail'' and ``special medical needs.'' States will be 
required to ensure that exempt populations, including individuals with 
``special medical needs'' or who are ``medically frail'' are not 
mandatorily enrolled in alternative benefit packages, but are instead 
offered an informed choice. Additionally, CMS will 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 if States plan to offer 
enrollment in a benchmark plan to exempt individuals, the State must 
provide information and assistance to exempt individuals or their legal 
guardians/caregivers who are given the option to enroll in alternative 
coverage plans so they can make an informed choice. We proposed in 
Sec.  440.320 that States must inform the individuals that enrollment 
is voluntary and that the individual may disenroll from the benchmark 
or benchmark-equivalent benefit package at any time and regain 
immediate access to the standard full Medicaid program under the State 
plan while the State processes their disenrollment request. We also 
proposed that States must inform the individual of the benefits 
available under the benchmark or benchmark-equivalent benefit package 
and provide a comparison of how the benefits, and if relevant, the cost 
share differ from the benefits and cost share 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 revised the regulation at Sec.  440.320(a) 
to require the State to effectively inform exempt individuals about the 
voluntary nature of their enrollment, and that they may choose to 
disenroll at any time from the benchmark or benchmark-equivalent plan 
in order to have immediate and full access to the standard Medicaid 
benefits, the benefits available under the benchmark benefit plan, the 
cost associated with the benchmark benefit plan, and to provide a 
comparison between the benefits available under the benchmark benefit 
plan and cost share, to the benefits and cost share provided by the 
standard, full Medicaid program. To support these requirements we have 
also included the requirement that the State document in the 
individual's eligibility file that the individual elected to enroll in 
the benchmark plan after receiving such information regarding benefits 
and disenrollment rights.
    As part of the State Plan Amendment (SPA) approval process whereby 
States receive approval from CMS to implement new benefits under their 
State plan, States must define their disenrollment process and include 
a specific time period for disenrolling a beneficiary and assuring full 
access to standard Medicaid coverage. To the extent that the informed 
choice process continues to raise concerns, we will consider the 
development of additional guidance as to what processes are necessary 
to insure that the informed choice process is effective.
    Comment: One commenter said that ``exempt'' populations should not 
be allowed to enroll in an alternative benefit plan at all.
    Response: The statute states that exempt individuals may not be 
required to enroll in an alternative benefit plan, and with the 
protections noted, it is reasonable to give such individuals the 
opportunity to enroll in such plans. Alternative benefit plans may in 
fact have richer benefits than traditional State plan services and be 
targeted to the specific needs of exempt individuals. We are aware, 
however, that the benchmark plan may not provide all the services as 
the traditional plan and that exempt groups should not in any way be 
enrolled in such plans involuntarily, or without full knowledge of the 
consequences. Accordingly, this regulation provides new protections to 
assure that exempted individuals are fully informed about their options 
for enrolling and disenrolling from an alternative benefit plan.
    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 disenroll from the benchmark plan. One 
commenter suggested that CMS establish literacy and translation 
standards for benefit information sheets and another commenter 
requested that at a minimum, information should be provided in the 
beneficiary's spoken language and at an appropriate reading level.
    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. 
Furthermore, individuals should also receive information on how to 
disenroll from 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 and any cost

[[Page 23083]]

sharing. Exempt individuals must be afforded the opportunity to 
disenroll from benchmark or benchmark-equivalent coverage promptly and 
without any loss of access to the full standard Medicaid benefits, if 
they determine that the coverage is not meeting their health care 
needs.
    Comment: Some commenters stated that the rules should provide for 
immediate revocation of any voluntary election at the discretion of 
those exempt individuals who elect an alternative plan. These 
commenters 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. The commenters 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. The commenters 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 they want to return to traditional Medicaid and/or 
for individuals who are later determined eligible for an exempted 
group, disenrollment requests must be acted upon promptly and States 
must have a process in place to ensure full access to standard Medicaid 
State plan services while disenrollment requests are being processed. 
Furthermore, we expect that for individuals who voluntarily enroll and 
later decide to return to traditional Medicaid and/or for individuals 
who are later determined eligible for an exempted group, the State will 
process disenrollment requests consistent with the managed care 
regulations at Sec.  438.56(e), and the effective date of disenrollment 
must be no later than the first day of the second month following the 
month in which the enrollee files the request.
    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.
    We will monitor implementation to determine if additional measures 
are needed.
    Comment: Other commenters indicated that CMS should require strong 
beneficiary protections for people, including frail older and disabled 
beneficiaries, who have the opportunity to voluntarily enroll in 
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. 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 re-determining eligibility for enrollees.
    Additionally, if 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), 
the State will have to provide such individuals with information about 
their benefit options as soon as the State becomes aware of the change 
in eligibility. If the individual chooses to disenroll, the individual 
must have full access to standard Medicaid State plan services that may 
not be available in the benchmark plan while the State implements the 
disenrollment process.
    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 automatic enrollment or 
default enrollment approach to their enrollment. They suggested that 
the proposed language could allow or even encourage States to adopt an 
automatic or default enrollment approach without further clarification 
because the language could be read to allow States to initially enroll 
all exempt persons who do not affirmatively choose not to enroll. 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 of the Act 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

[[Page 23084]]

amended the final rule to make this clear and to require the State to 
inform the exempt individual of the benefits available under the 
benchmark or benchmark-equivalent package and the cost of such a 
package. Furthermore, 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 be 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, and examination of individual case records. We also 
require in Sec.  440.320 that the State track and maintain the total 
number of individuals that have voluntarily enrolled in a benchmark 
benefit plan and the total number of individuals that have elected to 
disenroll from the benchmark benefit plan.
    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 offer 
benchmark or benchmark-equivalent benefit options to individuals exempt 
from mandatory enrollment such individuals 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, as well as any differences in cost sharing. In order 
for exempt individuals to make an informed choice, the information must 
be fully detailed by the State in a format that is understandable by 
the beneficiary.
    Comment: A commenter believed CMS should prohibit States from 
implementing procedures that make it more difficult 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. 
Another commenter was concerned that a State could reduce its standard 
Medicaid State plan services in order to force exempt beneficiaries to 
enroll in a benchmark or benchmark-equivalent plan.
    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. With regard to States reducing their standard 
Medicaid State plan services, section 1937 of the Act does not change 
State flexibility to reduce or add optional 1905(a) medical services. 
However, if such changes are done for the purpose of coercing exempt 
individuals to enroll in benchmark plans, such action may not be 
consistent with the requirement that exempt individuals must be 
permitted to make a fully voluntary decision to enroll in a benchmark 
plan.
    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 timely transition of individuals if they become eligible for exempt 
categories and thus are 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 States inform exempt individuals that they may 
disenroll at any time and provide them with information about the 
disenrollment process. We have also revised Sec.  440.320 to require 
that disenrollment requests be acted upon promptly and that States have 
a process in place to ensure full access to standard Medicaid State 
plan services while any disenrollment requests are being processed. We 
further revised Sec.  440.320 to include a requirement for States to 
maintain data that tracks the number of voluntary enrollments in 
benchmark and benchmark-equivalent benefit plans and the number of 
disenrollments from these plans.
    These requirements also apply to individuals who become 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 
notify these individuals of their change in status and to provide them 
with information explaining their right to disenroll from the benchmark 
or benchmark-equivalent benefit plan and return to the traditional 
Medicaid State plan. We believe that States should not rely on the 
individual's ability to recognize that their change in status permits 
them to revert back to traditional Medicaid and that they are entitled 
to the full range of Medicaid benefits. It is therefore the 
responsibility of the State to assure that these individuals have the 
choice to receive benchmark plan benefits, or the benefits available 
under 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, 
are exempt individuals who cannot be mandatorily enrolled in benchmark 
plans because in most cases they are only eligible for emergency 
services under Medicaid.
    Unqualified or undocumented individuals who are otherwise eligible 
for Medicaid (for example, meet income or residency requirements) are 
only covered for emergency medical services under section 1903(v) of 
the Act. Generally, the determination that such an individual has 
received an emergency medical service is made retrospectively by the 
State. Therefore, it is unlikely that a State would decide to offer the 
benchmark or benchmark-equivalent benefit option for these individuals, 
even if enrollment were voluntary.

[[Page 23085]]

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. The 
State 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 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. To 
date, the majority of the approved benchmark plans are Secretary-
approved benchmark plans and most of these include not only all regular 
Medicaid State plan services but provide for additional services like 
disease management and/or preventive services.
    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 woman's freedom of choice is 
critical in the delivery of these services. The commenters stated that 
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, the commenters believed 
that 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: If one of the statutorily-specified benchmark packages 
(that is, FEHB, State Employees plan, and commercial HMO plan) did not 
contain family planning services and supplies, the statute permitted 
States to base an alternative benefit package on that

[[Page 23086]]

specific benchmark plan. CMS had no authority to disapprove the use of 
a statutorily-specified benchmark plan as the basis for an alternative 
benefit package. However, at the time that this regulation was being 
revised the Patient Protection and Affordable Care Act (PPACA), (Pub. 
L. 111-148), had not yet been enacted. That law has now amended section 
1937(b) of the Act to add additional requirements affecting benchmark 
and benchmark-equivalent coverage, including the requirements for 
coverage of family planning services and supplies. We intend to issue a 
second final rule implementing the changes made by PPACA with a 
shortened effective date to bring the provisions of this regulation 
into conformity with the statute.
    Consequently, we are revising Sec.  440.375 to update the title and 
revise the regulation at this section to indicate that States can 
provide benchmark or benchmark-equivalent coverage to individuals 
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 Secretary-approved coverage, we agree with the 
commenters that if such a benchmark benefit plan is provided to 
individuals of child bearing age that does not include family planning 
services and supplies, it would not be appropriate to meet the needs of 
the population it serves and would have to therefore include these 
services. Additionally, if a non-Secretary approved benchmark plan such 
as a commercial HMO plan does not include family planning services and 
supplies, States have the option of adding family planning services to 
the benchmark, at the enhanced FMAP rate established for these 
services.
    With respect to benchmark-equivalent coverage in Sec.  440.335, we 
have added family planning services and supplies as required services. 
In addition we have added emergency services as other required 
appropriate preventive services designated by the Secretary, consistent 
with the strong emphases the Medicaid statute places on these 
preventive services.
    Comment: Other commenters believed that one reason States may wish 
to design a plan under the option for benchmark-equivalent or 
Secretary-approved plans 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 plans can be offered as benchmark plans, so long as 
the identified basic services are provided as part of the benchmark-
equivalent benefits and the benefit package is appropriate to meet the 
needs of the population it serves for Secretary-approved coverage. The 
rule is consistent with the statute. The rule provides that the scope 
of a Secretary approved health benefits package or any 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 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.

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 lower 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 is still 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

[[Page 23087]]

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: One commenter requested that benchmark-equivalent plans be 
required to provide the full continuum of care including the care 
required by individuals with cancer.
    Another commenter pointed out that the benchmark-equivalent 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: Section 1937 of the Act does not specifically require 
that benchmark or benchmark-equivalent plans provide a full continuum 
of care, nor does it guarantee all services that might be considered 
medically necessary.
    Furthermore, while all services described under section 1905(a) of 
the Act are provided based on medical necessity, not all of those 
services are considered mandatory Medicaid services that States must 
include in the standard Medicaid plan. Prescription drugs, certain 
mental health services, vision services, and hearing services are not 
mandatory services under the State plan for adults. The DRA specifies 
that 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 plan is also not required to provide the coverage. 
In calculating the actuarial value of the benchmark-equivalent, the 
actuarial value would be calculated based only on the services included 
in the specified benchmark plan and not calculated based on services 
that are not included in that plan. This rule is consistent with the 
statutory provision.
    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 certain 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 also specified the inclusion of emergency services, 
and within the context of preventive services, family planning services 
and supplies, but have left States with the flexibility to define other 
appropriate preventive services.
    It is important to note, however, that States, at their option, can 
provide additional services to benchmark or benchmark-equivalent plans. 
The inclusion of rehabilitation services may be appropriate for some 
populations as determined by the State based on the requirements of the 
population utilizing the benchmark plan. Additional services are 
discussed in Sec.  440.360 of this rule.
    We did not receive any additional comments to Sec.  440.340, 
Actuarial report. Therefore, in this final rule, Sec.  440.340 will be 
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. Some 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: It is important for individuals to receive services from 
the same provider whenever possible and we believe that an individual's 
physician is in the best position to ``manage'' an individual's care. 
If an individual is entitled to additional services, the treating 
physician should be responsible for providing and/or coordinating the 
individual's care and should be aware of any additional services the 
individual needs. To ensure that individuals under the age of 21 
receive full EPSDT services we revised Sec.  440.345 to require States 
to not only include a description of how additional benefits will be 
provided, but also how access to additional benefits will be 
coordinated and how beneficiaries and providers will be informed of 
these processes.
    Comment: Some commenters objected to the provision in the proposed 
rule that stipulates that individuals must first seek coverage of EPSDT 
services

[[Page 23088]]

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 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: We believe that children enrolled in a benchmark benefit 
plan should have a medical provider that serves as the ``medical home'' 
for the child and that this medical provider will coordinate the 
child's care and facilitate access to specialists and necessary support 
services.
    It is the responsibility of the State Medicaid program to assure 
that individuals enrolled in benchmark and benchmark-equivalent benefit 
plans receive EPSDT services that can be accessed in the most 
beneficial and seamless manner possible, and that individuals under 21 
and their parent, guardian or care giver are informed and understand 
how and where to gain access to these services. We therefore revised 
Sec.  440.345 by removing the requirement that individuals must first 
seek coverage of EPSDT services through the benchmark plan before 
seeking coverage of these services through additional benefits. 
Additionally, to further ensure that these individuals have access to 
the full EPSDT benefit, we revised the requirement to include a 
description of how the additional benefits will be provided, how access 
to additional benefits will be coordinated and how beneficiaries and 
providers will be informed of these processes. States must ensure that 
information is given to the providers either through the State or 
through the managed care entity in order to ensure that providers are 
aware of the child's right to additional services, as necessary, 
through the EPSDT benefit so that they can assist individuals with 
accessing necessary care.
    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 replaced with ``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. It should be noted that CHIPRA 
underscored that full EPSDT services must be provided. 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 of the State Medicaid Manual. Information must be given to 
individuals no later than within 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 must clearly explain the benchmark and additional benefits 
available to EPSDT eligibles under the age of 21.
    Additionally, we agree with the commenter that the word ``may'' was 
inaccurate in the preamble to the proposed rule. The law specifically 
requires States to provide additional 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 
eligible individuals. 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 rather than 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 disenroll.
    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 disenroll. 
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 21 applies to benchmark and benchmark-equivalent 
coverage. We have provided that States can offer premium assistance for 
employer sponsored insurance if the insurance is considered a benchmark 
or benchmark-equivalent 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 economy and efficiency requirements at Sec.  440.370. By 
requiring that employer sponsored plans meet the requirements of 
benchmark or benchmark-equivalent coverage, and given that benchmark or 
benchmark-equivalent coverage must provide EPSDT to children under the 
age of 21 either as part of or in addition 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 
21. We believe this is

[[Page 23089]]

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: Section 611 of CHIPRA raised the age for mandatory EPSDT 
coverage from 19 to 21 years of age. We have changed the regulation 
text accordingly.
    Comment: One State Medicaid official suggested, instead of the 
current language in the published proposed rule on (73 FR 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 have revised the rule to effectuate the clarification 
provided by section 611(a)(1)(C) and 611(a)(3) of CHIPRA which requires 
States to assure that children under the age of 21, rather than those 
under 19 as originally specified in the DRA, have access to the full 
range of EPSDT services.

I. Section 440.350 Employer-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 in addition to services covered 
separately under Medicaid), a State may elect to provide premium 
payments on behalf of the individual 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 21 to receive 
EPSDT either as an additional service 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 economical and efficient, 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 economy and 
efficiency 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 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 did 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 additional 
benefits are options that can be added by the State to benchmark or 
benchmark-equivalent coverage. Any services that are added do not need 
to include all State plan services; however, these additional services 
must be coverable under the benefit categories under the benchmark plan 
or under section 1905(a) of the Act.
    The only requirement for additional services is at section 
1937(a)(1)(A)(ii) of the Act, which provides that if children under the 
age of 21 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 additional services 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 
benefit categories available under a benchmark coverage package or 
under 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 ten State benchmark programs. Of these ten, eight have been 
approved as Secretary-approved programs. We did not receive any 
additional comments related to Sec.  440.355 ``Payment of premiums.''

[[Page 23090]]

Therefore, in this final rule, 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 
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 DRA 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 include no such requirement for the inclusion of dental 
coverage as additional services nor does section 1937 of the Act 
provide examples of additional coverage. The rule provides that 
additional 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 plan or considered to be health benefits under 
section 1905(a) of 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 21 must 
receive EPSDT services, including all medically necessary dental 
services, consistent with section 1905(r) of the Act either as part of, 
or as additional services to, the benchmark or benchmark-equivalent 
plan. Therefore, medically necessary dental coverage must be provided 
to children under the age of 21 enrolled in benchmark plans regardless 
of whether or not the actual benchmark plan includes such coverage.

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 
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 
individuals 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. Therefore, we 
will adopt Sec.  440.370 as written in the proposed rule of February 
22, 2008 with the change of the title to ``Economy and Efficiency'' 
which more appropriately reflects Medicaid payment principles.

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 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. Section 611 of CHIPRA 
clarified and narrowed the ``notwithstanding'' provision but did 
specifically mention comparability.'' Therefore, it is clear that 
States may offer benchmark or benchmark-equivalent coverage to certain 
specified Medicaid populations. This regulation provision gives meaning 
to the statutory language permitting States to offer benchmark or 
benchmark-equivalent coverage to certain, but not all, Medicaid 
populations.
    We would note that States can design disease management services 
without

[[Page 23091]]

relying on DRA benchmark or benchmark-equivalent plans, as outlined in 
the March 31, 2006 State Medicaid Director letter, which provided 
guidance on the implementation of section 6044 of the DRA but this 
benchmark option offers another way for States to meet the needs of 
their Medicaid populations.

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 individuals 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'' and the more 
narrow and explicit language in CHIPRA which specifically states 
``Notwithstanding statewideness * * *''. It is therefore clear that 
States could offer different benchmark or benchmark-equivalent coverage 
to Medicaid individuals in 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 can test new benefit concepts in pilot areas 
before expanding the benchmark program to the entire State. We believe 
that this is consistent with Congressional intent in allowing 
flexibility regarding statewideness 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 commenter asserted that provider freedom of choice is critical 
because of the potentially sensitive nature of the service. The 
commenter argued that, if unable to obtain confidential services from 
the provider of their choice, some managed care enrollees may forgo 
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: Section 1937(a)(1) of the Act, as amended by section 611 
of CHIPRA, narrowed the flexibility States have and we amended Sec.  
440.385 by removing the option to provide benchmark benefit plans 
without regard to the requirements for free choice of providers at 
Sec.  431.51 of this chapter.
    CHIPRA also made it clear that benchmark benefit programs may vary 
only from the requirements for statewideness, comparability, and ``any 
other provision of this title which would be directly contrary to the 
authority under this section and subject to subsection (E).'' Title XIX 
permits States the option to offer Medicaid through managed care 
entities. Thus, requiring States to comply with Medicaid managed care 
statutes and regulations would not be directly contrary to the 
authority of section 1937 of the Act. We have therefore revised the 
regulation at Sec.  440.385 to clarify that States wishing to deliver 
benchmark and benchmark-equivalent packages through a managed care 
entity may do so but must comply with the requirements of section 1932 
of the Act, 42 CFR part 438, and any other provisions of title XIX or 
the regulations pertaining to managed care.
    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 or 1932(a) under the 
State plan. Selective contracting provides States with the opportunity 
to contract with certain providers, practitioners or managed care 
entities so long as certain other criteria are maintained. 
Specifically, the State must ensure that in order to selectively 
contract with providers, practitioners or managed care entities the 
selective process does not restrict providers in emergency situations 
or providers of family planning services and supplies; 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.
    Section 1937(a)(1) of the Act as amended by section 611 of CHIPRA 
allows selective contracting through benchmark or benchmark-equivalent 
plans when provision of free choice of providers would be directly 
contrary to efficient and effective operation of the proposed benchmark 
benefit program.
    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: Based on changes made by CHIPRA to section 1937 of the 
Act States must comply with all freedom of choice requirements under 
title XIX except to the extent the State can demonstrate that freedom 
of choice would be contrary to the effective and efficient 
implementation of a benchmark or benchmark-equivalent plan. We 
therefore revised Sec.  440.385 by striking the option for States to 
provide benchmark benefit plans without regard to the requirements for 
freedom of choice. This revision eliminates the need to include an 
``any willing provider'' provision.

[[Page 23092]]

O. Section 440.390 Assurance of Transportation

    In responding in this final rule to all of the comments received we 
took into consideration the numerous remarks on the subject of 
transportation which generally disagreed with the provision in the 
proposed rule and the rule published December 3, 2008 that would allow 
States the option to exclude non-emergency medical transportation 
(NEMT) as a benefit under benchmark and benchmark-equivalent plans. In 
addition to considering these comments we now must also consider the 
new CHIPRA legislation which clarifies that the authority under section 
1937 to deviate from otherwise applicable Medicaid requirements is 
limited.
    It is true that benchmark benefit packages such as Federal 
Employees Health Benefit Plan coverage, State Employees Health Benefit 
coverage, and coverage offered by an HMO in the State with the largest 
insured commercial non-Medicaid population, generally do not cover non-
emergency medical transportation (NEMT) to and from medical providers. 
However, pursuant to section 1902(a)(4) of the Act and 42 CFR 431.53 
there is a general requirement that the State plan assure necessary 
transportation to and from providers for beneficiaries when needed to 
access Medicaid covered services. The CHIPRA amendment to the DRA made 
it clear that Medicaid provisions that are not directly contrary to the 
provision of services under benchmark or benchmark-equivalent plans 
continue to apply under the DRA benchmark provisions. Therefore, in 
accordance with the changes made to the DRA by CHIPRA, and since this 
assurance of NEMT would not directly conflict with the offering of 
benchmark or benchmark-equivalent benefit packages as authorized by 
section 1937 of the Act, the assurance of necessary transportation to 
and from providers remains applicable when a State elects the 1937 
option, and regardless of whether it is or is not a covered benefit 
under a benchmark or benchmark-equivalent benefit plan.
    Thus, we have revised the regulation at Sec.  440.390 to require 
States to assure necessary transportation to and from providers for 
beneficiaries enrolled in benchmark and benchmark-equivalent plans, 
even if the plans themselves do not include transportation.
    States have several options when assuring necessary transportation 
for beneficiaries enrolled in a benchmark or benchmark-equivalent plan. 
States may provide transportation and transportation-related services 
under a benchmark plan as provided at Sec.  440.330 (FEHB plan, State 
Employees plan, Commercial HMO plan or Secretary-approved plan); under 
a benchmark-equivalent plan as an additional service as provided at 
Sec.  440.335; or as an additional service as provided at Sec.  
440.360, and receive Federal financial participation (FFP) at the 
Federal matching rate designated for that State for covered Medicaid 
services (FMAP rate).
    If transportation and transportation-related services or some 
portion of the transportation provided for beneficiaries enrolled in a 
benchmark or benchmark-equivalent plan is not covered under section 
1937 of the Act, then such transportation and transportation-related 
services must be claimed as an administrative expense at the 50 percent 
Federal matching rate. If transportation and transportation-related 
services are claimed as a medical service under section 1937 of the 
Act, the State must adhere to the general Medicaid requirements which 
pertain to claiming transportation as a medical service, such as only 
claiming direct vendor payments.
    Our responses to the following comments received on transportation 
reflect the changes made by section 611 of CHIPRA, which clarifies that 
the authority under section 1937 to deviate from otherwise applicable 
Medicaid requirements is limited and therefore the assurance of 
transportation remains applicable even when the State has elected the 
section 1937 option.
    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: 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, generally do not pay for 
NEMT to and from medical providers in all instances. However, section 
611(a)(1)(A)(i) of CHIPRA changed the ``notwithstanding any other 
provision of this title'' language and this change in the law clarifies 
that the authority under section 1937 to deviate from otherwise 
applicable Medicaid requirements such as those specified in section 
1902(a)(4) of the Act and 42 CFR 431.53, which require States to assure 
that beneficiaries have access to covered medical services, is limited. 
Accordingly, we have revised the regulation at Sec.  440.390 to require 
States to assure necessary transportation to and from providers.
    Comment: A preponderance of commenters 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 services because of the difficulty 
in accessing needed care and provided examples of the negative impact 
on the Medicaid program that would be created by not assuring 
transportation. For example, patients with End-Stage Renal Disease 
(ESRD), would be unable to access dialysis services.
    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

[[Page 23093]]

transportation and require specialized transportation that would 
otherwise not be available should State Medicaid 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 wheelchairs, 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: In light of these comments and because CHIPRA amended 
section 1937 of the Act by clarifying that the authority to deviate 
from otherwise applicable Medicaid requirements is limited, we have 
revised the regulation at Sec.  440.390 to require States to assure 
necessary transportation to and from providers. Thus, the frail, 
elderly, disabled and those with ESRD will be entitled to receive 
transportation to and from medical providers.
    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 individuals 
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. 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.
    One commenter indicated that coordinating transportation would 
reduce the cost of providing transportation. Another 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.
    Response: CHIPRA amended section 1937 of the Act by clarifying that 
the authority to deviate from otherwise applicable Medicaid 
requirements is limited and we have therefore revised the regulation at 
Sec.  440.390 to require States to assure necessary transportation to 
and from providers.
    Comment: 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: We do not understand the relevance of this comment to the 
provision of benchmark and benchmark-equivalent benefit plans and are 
therefore unable to respond.
    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: As we previously stated, CHIPRA amended section 1937 of 
the Act by clarifying that the authority to deviate from otherwise 
applicable Medicaid requirements is limited and we have revised the 
regulation at Sec.  440.390 to require States to assure necessary 
transportation to and from providers. Therefore, the commenter's 
concern about the lack of transportation contributing to missed 
appointments and late appointments has been addressed.
    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 intact 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: CHIPRA clarified that the requirement to assure necessary 
transportation applies to benchmark and benchmark-equivalent benefit 
plans.
    With regard to the comment that CMS require for benchmark and 
benchmark-equivalent benefit plans the same

[[Page 23094]]

ambulance transportation guidelines used by commercial insurance, we 
disagree with this comment because there is no authority under section 
1937 of the Act to do so.
    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 emergency 
medical systems (EMS), 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. Some 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: Because CHIPRA clarified that the assurance of necessary 
transportation is applicable to benchmark and benchmark-equivalent 
benefit plans, we revised the regulation in Sec.  440.390 to require 
States to assure necessary transportation. Therefore, we do not believe 
that the responsibility for Medicaid NEMT will be shifted to municipal 
EMS systems, ADA paratransit programs, or beneficiaries. Consistent 
with Federal regulations, States are required to assure non-emergency 
transportation 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 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: CHIPRA clarified that the assurance of necessary 
transportation is applicable to benchmark and benchmark-equivalent 
plans. We therefore revised the regulation at Sec.  440.390 to require 
States to assure all necessary 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.
    Response: The reduction of fraud and abuse should always be 
considered by States when designing or implementing their State 
Medicaid program and we expect States to implement policies that reduce 
fraud and abuse. CMS will review the provision of these services 
consistent with our responsibility to work with States to reduce fraud 
and abuse in the 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 and it is clear 
that the proposed rule is contrary to the intent of Congress.
    Response: CMS did not attempt to end the requirement for States to 
assure Medicaid non-emergency transportation. On August 23, 2007, CMS 
published a rule on the ``State Option to Establish a Non-Emergency 
Medical Transportation Program'' which intended to enhance the ability 
of States to provide NEMT by offering an additional option for 
providing more cost effective non-emergency transportation as a medical 
service through a brokerage program. Furthermore, we have revised the 
regulation at Sec.  440.390 to require States to assure necessary 
transportation for beneficiaries enrolled in benchmark and benchmark-
equivalent plans.
    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 encouraging use of a brokerage program, while on the 
other hand proposing 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: Because CHIPRA clarified that the requirement for States 
to assure necessary transportation is applicable to section 1937 of the 
Act, we revised the regulation in Sec.  440.390 to require States to 
assure necessary transportation for beneficiaries enrolled in 
alternative benefit plans. Therefore, the brokerage program option for 
delivering non-emergency medical transportation and the benchmark or 
benchmark-equivalent benefits option do not contravene each other as 
the commenter suggests.
    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 presumes 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 changes made to section 1937 of the Act by the CHIPRA 
legislation make it clear that regardless of whether NEMT and emergency 
ambulance services are included in the benchmark or benchmark-
equivalent plan the State has chosen to offer Medicaid beneficiaries, 
the requirement to assure necessary transportation for eligible 
Medicaid beneficiaries remains applicable.
    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 of the private sector, because States are not 
mandated to participate in the benchmark plans. This precludes any 
discussion of the shift in 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

[[Page 23095]]

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 revised the regulation in Sec.  440.390 to require 
States to assure necessary transportation for beneficiaries enrolled in 
benchmark and benchmark-equivalent benefit plans and have therefore 
revised the ``Regulatory Impact Analysis,'' to account for the impact 
of providing transportation.
    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 include 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 
individuals 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: Since CHIPRA clarified that the assurance of necessary 
transportation is a mandatory State plan requirement that applies to 
section 1937 of the Act, we have revised the regulation at Sec.  
440.390 to require States to assure necessary transportation. 
Therefore, the commenter's concerns regarding the provision of 
emergency transportation services and the need for States to properly 
distinguish between emergency and non-emergency transportation services 
have been addressed.
    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-emergency 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: In accordance with changes made by CHIPRA to section 1937 
of the Act and the clarification these changes provided we revised the 
regulation at Sec.  440.390 to require States to assure necessary 
transportation.
    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. The commenter cites 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 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 individuals 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: Section 611(a)(1)(C) of CHIPRA amended the 
``notwithstanding any other provision of this title * * *'' language. 
This change in the law clarifies that the authority under section 1937 
to deviate from otherwise applicable Medicaid requirements is limited. 
Therefore, we have revised the regulation at Sec.  440.390 to require 
States to assure necessary transportation to and from providers.
    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'' an individual who might require medically necessary 
ambulance transportation due

[[Page 23096]]

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, while CMS wishes to maintain some 
State flexibility in defining the term medically frail we have provided 
further guidance on the characteristics of medically frail and special 
needs individuals. We expect States to take this guidance into 
consideration when determining what type of transportation is needed by 
these individuals.
    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 individuals 
receive. Also, the commenters asserted that the statutory provision 
authorizing use of benchmark and benchmark-equivalent plans, 
``notwithstanding any other provision of this title'' will not pass a 
challenge in the court system because it discriminates against disabled 
individuals.
    Response: Section 611(a)(1)(C) of CHIPRA amended the 
``notwithstanding any other provision of this title'' language. This 
change in the law clarifies that the authority under section 1937 to 
deviate from otherwise applicable Medicaid requirements is limited. 
Accordingly, we revised the regulation at Sec.  440.390 to require 
States to assure necessary transportation to and from providers for 
individuals, including those with special needs, who are enrolled in 
benchmark and benchmark-equivalent benefit plans.
    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: Section 611(a)(1)(C) of CHIPRA amended the 
``notwithstanding any other provision of this title'' language. This 
change in the law clarifies that the authority under section 1937 to 
deviate from otherwise applicable Medicaid requirements is limited. 
Accordingly, we revised the regulation at Sec.  440.390 to require 
States to assure necessary transportation to and from providers. We do 
not believe that Executive Order 13330, which relates to the 
coordination of transportation among Federal agencies, is relevant to 
this rule as this rule pertains to the provision of transportation by 
States under State Medicaid programs.
    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 recognize the important value of Medicaid 
transportation services to the AN population. As stated previously 
CHIPRA amended the ``notwithstanding any other provision of this title 
* * *'' language and this change in the law clarifies that the 
authority under section 1937 to deviate from otherwise applicable 
Medicaid requirements is limited. Therefore, we have revised the 
regulation at Sec.  440.390 to require States to assure necessary 
transportation to and from providers for those enrolled in benchmark 
and benchmark-equivalent benefit plans.

IV. Provisions of the Final Regulations

    In general, this final rule incorporates the provisions of the 
February 2008 proposed rule and the changes made by CHIPRA. The 
provisions of this final rule that differ from the February 2008 
proposed rule are as follows:

Scope (Sec.  440.305)

    We added a new paragraph (d) at Sec.  440.305 to require public 
input before States submit a State plan amendment under this section of 
the law. We removed the exception at Sec.  440.305(e) to the managed 
care rules that existed in the February 22, 2008 proposed rule because 
section 611(a) of CHIPRA required adherence to all rules except those 
directly contrary to the authority under this section. By removing this 
exception to the managed care rules all benchmark and benchmark-
equivalent benefit plans that are delivered through a managed care 
entity must comply with managed care rules.

Exempt Individuals (Sec.  440.315)

    We revised paragraph (f) at Sec.  440.315 to indicate that States 
will have flexibility in adopting definitions of individuals who are 
``medically frail'' and/or individuals with special medical needs, but 
that these definitions must at least include those individuals 
described in Sec.  438.50(d)(3), children with serious emotional 
disturbances, individuals with disabling mental disorders, individuals 
with serious and complex medical conditions, and individuals with 
physical and or mental disabilities that prevent them from performing 
one or more activities of daily living. Further, we deleted the 
reference to Sec.  438.50(d)(1) for individuals entitled to Medicare 
benefits as these individuals are already exempt individuals who cannot 
be required to enroll in benchmark or benchmark-equivalent plans 
because of the requirement in section 1937(a)(2)(iii) of the Act.
    We revised paragraph (h) of Sec.  440.315 to clarify that exempt 
individuals include ``an individual with respect to whom child welfare 
services are made available under part B of title IV to children in 
foster care and individuals with respect to whom adoption or foster 
care assistance is made available under part E of title IV, without 
regard to age.''
    We have revised paragraph (i) at Sec.  440.315 to state that 
parents and caretaker relatives whom States are required to cover under 
section 1931 of the Act, are considered exempt individuals. This 
provision reverses the prior rule which limited the exemption to 
individuals who were eligible for Medicaid based on the eligibility for 
TANF; eligibility for Medicaid is not based, under Federal laws, on 
eligibility for TANF.
    We 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 who 
are exempt from mandatory enrollment in benchmark or benchmark-
equivalent plans.

[[Page 23097]]

Section 440.320 State Plan Requirements: Optional Enrollment for Exempt 
Individuals

    We revised paragraphs (a)(1), (a)(2), and (a)(3) at Sec.  440.320 
to require that a State that chooses to offer enrollment in a benchmark 
or benchmark-equivalent plan to exempt individuals must effectively 
inform such individuals prior to enrollment that the individual is 
exempt and that enrollment is voluntary. The State 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 in the individual's 
eligibility file that prior to enrollment the beneficiary was provided 
a comparison of the benchmark or benchmark-equivalent benefit package 
to the State plan 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 added a new paragraph (a)(4) to clarify 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 added new paragraphs (b)(1) and (b)(2) in Sec.  440.320 to 
clarify the disenrollment process for exempt individuals and require 
that States act upon disenrollment requests promptly for those exempt 
individuals who choose to disenroll from benchmark or benchmark-
equivalent coverage and to require that the State have a process in 
place to ensure continuous access to all standard State plan services 
while requests to disenroll from benchmark or benchmark-equivalent 
coverage are being processed. States must also maintain data to track 
the number of exempt individuals who enroll in, and dissenroll from 
benchmark or benchmark-equivalent plans.

Benchmark-Equivalent Health Benefits Coverage (Sec.  440.335)

    We revised paragraph (b) in Sec.  440.335, which lists the 
mandatory services that benchmark-equivalent plans must provide. In the 
December 3, 2008 final rule, emergency services was included in the 
description of other appropriate preventive services designated by the 
Secretary. To clarify that benchmark equivalent coverage must include 
emergency services we made emergency services a separate and distinct 
requirement in paragraph (b)(5) and renumbered the paragraph relating 
to preventive services as (b)(6) in Sec.  440.335. We also added family 
planning services and supplies to the description of required 
preventive services.

Actuarial Report for Benchmark-Equivalent Coverage (Sec.  440.340)

    We revised Sec.  440.340(b)(7) to require States to take into 
account the impact of cost sharing limitations when calculating 
actuarial equivalency.

EPSDT Services Requirement (Sec.  440.345)

    We revised paragraph (a) in Sec.  440.345 to reflect the new 
requirements in CHIPRA to cover 19 and 20 year olds for full EPSDT 
services. This section requires 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 
additional benefits to those plans for any child under 21 years of age 
eligible under the State plan in a category under section 
1902(a)(10)(A) of the Act.''
    We removed the term ``wrap-around'' and replaced it with 
``additional'' in paragraphs (a)(1) and (a)(2) in Sec.  440.345 of this 
regulation, and the words ``through wrap-around,'' and replaced them 
with ``additional'' in Sec.  440.345(b) of this regulation. We have 
also revised the ``sufficiency'' provision. Together these 
modifications are intended to make it clear that EPSDT services must in 
all circumstances be provided by the State Medicaid program; either 
through the benchmark or benchmark-equivalent plan or as an 
``additional'' service. We have also added a statutory cite ``under 
section 1937 of the Act'' after the word ``benefits'' in Sec.  
440.345(b) of this regulation.

Employer-Sponsored Insurance Health Plans (Sec.  440.350)

    We removed the language ``the additional or wrap-around'' and 
replaced it with ``additional'' in Sec.  440.350(a) of this regulation.
    We replaced the term ``cost-effectiveness'' with ``economy and 
efficiency'' in Sec.  440.350(b) of this regulation to be consistent 
with the new section heading of Sec.  440.370.

State Plan Requirement for Providing Additional Services (Sec.  
440.360)

    We removed the term ``wrap-around'' in the section heading in Sec.  
440.360 of this regulation. We also revised Sec.  440.360 by removing 
the language ``or wrap-around''.

Economy and Efficiency (Sec.  440.370)

    We removed the section heading ``Cost-effectiveness'' and replaced 
it with ``Economy and efficiency'' in Sec.  440.370 of this regulation.

Comparability (Sec.  440.375)

    We removed the section heading ``Comparability and scope of 
coverage'' and replaced it with ``Comparability'' in Sec.  440.370 of 
this regulation. We also revised Sec.  440.375 by removing the language 
``or requirements relating to the scope of coverage other than those 
contained in this subpart''.

Delivery of Benchmark and Benchmark-Equivalent Coverage Through Managed 
Care Entities (Sec.  440.385)

    We replaced the title ``Freedom of choice'' with ``Delivery of 
benchmark and benchmark-equivalent coverage through managed care 
entities.'' We revised this section by removing the option to provide 
benchmark or benchmark-equivalent benefit plans without regard to the 
requirements for freedom of choice in Sec.  431.51 of this chapter. 
Section 611(a) of CHIPRA clarified that benchmark and benchmark 
equivalent plans must comply with all requirements of title XIX other 
than 1902(a)(1) and 1902(a)(10)(B). We therefore revised the title and 
text of 440.385 to provide that States wishing to deliver benchmark and 
benchmark-equivalent benefit packages through a managed care entity may 
do so but must comply with the requirements of section 1932 of the Act 
and 42 CFR part 438.

Assurance of Transportation (Sec.  440.390)

    We revised Sec.  440.390 to specify that if a benchmark or 
benchmark-equivalent plan does not include transportation to and from 
medically necessary covered Medicaid services, the State must 
nevertheless assure that emergency and non-emergency transportation is 
covered for beneficiaries enrolled in the benchmark and benchmark-
equivalent plan, as required under Sec.  431.53 of this chapter.

V. Collection of Information Requirements

    The following requirements are subject to the Paperwork Reduction 
Act (PRA). While some elements contained in the sections listed below 
are approved under OMB control number 0938-0993, the current 
information collection will need to be revised to reflect changes 
contained in this final rule. CMS is revising this PRA package to make 
necessary updates and to incorporate any new requirements not currently 
approved by OMB. The revised package will be published in a

[[Page 23098]]

60-day Federal Register notice seeking public comment.

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 disenroll 
from the benchmark or benchmark-equivalent coverage at any time and 
regain immediate access to standard full Medicaid coverage under the 
State plan; (2) Inform the exempt individual 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 
individual's eligibility file that the individual 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 Sec.  
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 additional services will be provided to 
ensure that all individuals under 21 receive full EPSDT services. The 
description must describe the populations covered and 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 
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

    A State must assure medically necessary transportation for 
beneficiaries enrolled in a benchmark or benchmark-equivalent plan even 
if transportation is not a service provided in the benchmark or 
benchmark-equivalent plan.

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), 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), Executive Order 13132 on Federalism 
(August 4, 1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Order 12866 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 rules with economically significant 
effects of $100 million or more in any 1 year. As a result, since there 
is an economic impact of more than $100 million in any 1 year, this 
final rule is categorized as economically significant and thus is 
consequentially a major rule under the Congressional Review Act.
    The regulatory impact analysis in this final rule incorporates 
provisions of the Children's Health Insurance Program Authorization Act 
(CHIPRA) of 2009, enacted on February 4, 2009, which corrected language 
in the DRA and subsequently amended section 1937 ``State Flexibility 
for Medicaid Benefit Packages.'' In addition, this final rule 
incorporates provisions of the American Recovery and Reinvestment Act 
(ARRA) of 2009 related to the temporary increase in the Federal 
matching percentage (FMAP) for Medicaid, enacted on February 17, 2009. 
The estimated aggregate Federal savings for fiscal years 2006 through 
2014, as shown in Table 1, is estimated to be $4.97 billion. Also, the 
estimated aggregate State savings for fiscal years 2006 through 2014, 
as shown in Table 2, is $3.36 billion.
    In the December 3, 2008 ``final rule,'' we estimated aggregate 
impacts for fiscal years 2006 through 2010 of $2.28 billion in Federal 
savings and $1.72 billion in State savings. In this final rule, the 
updated aggregate impacts, for the same time period of fiscal years 
2006 through 2010, are $1.84 billion in Federal savings and $1.05 in 
State savings. As a result, relative to the December 3, 2008 final 
rule, this yields a reduction in the aggregate impacts of $440 million 
in Federal savings and $670 million in State savings, for fiscal years 
2006 through 2010. We 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 
assumed 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. We do not assume any further expansion beyond 2011.
    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 assumed States are equipped to

[[Page 23099]]

implement these plans and will be part of their normal administrative 
spending.
    Also, 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.

                   Table 1--Estimated Annual Federal Savings Discounted at 0 Percent, 3 Percent and 7 Percent--From FY 2006 to FY 2014
                                                                     [In $millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Total savings
                     Discount rate                         2006     2007     2008     2009     2010     2011     2012     2013     2014      2006-2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
0%.....................................................      $50     $210     $340     $570     $670     $710     $740     $810     $870          $4,970
3%.....................................................       49      198      311      506      578      595      602      639      667           4,145
7%.....................................................       47      183      278      435      478      473      461      471      473           3,299
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 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 CHIP 
programs. Because States are no longer tied to statewideness and 
comparability rules for individuals who are not disabled, not aged, or 
not blind, they will be able to offer individuals and families 
different types of plans consistent with their needs and available 
delivery systems.

                    Table 2--Estimated Annual State Savings Discounted at 0 Percent, 3 Percent and 7 Percent--From FY 2006 to FY 2014
                                                                     [In $millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                           Total savings
                     Discount rate                         2006     2007     2008     2009     2010     2011     2012     2013     2014      2006-2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
0%.....................................................      $40     $160     $250     $280     $320     $480     $560     $610     $660          $3,360
3%.....................................................       39      151      229      249      276      402      455      482      506           2,788
7%.....................................................       37      140      204      214      228      320      349      355      359           2,206
--------------------------------------------------------------------------------------------------------------------------------------------------------

    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 $7 million to $34.5 million in any 1 year). (For details, 
see the Small Business Administration's final rule that set forth size 
standards for health care industries, at 65 FR 69432, November 17, 
2000.) Individuals and States are not included in the definition of a 
small entity. The Secretary has determined 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. The Secretary has 
determined 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 2010, that threshold is approximately $135 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. As a result, there is no mandate for 
the State. Therefore, we estimate this final will not mandate 
expenditures in the threshold amount of $135 million in any 1 year.
    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 governments 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 American Indians/Alaska Natives 
beneficiaries to participate.

[[Page 23100]]

    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 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 American Indians/Alaska Natives 
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 individual, regardless of income, 
eligibility category, or geographic location. Some States offered 
alternative benefit packages to certain individuals 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 a waiver, States may form larger pools by 
combining Medicaid individuals with their public employees.

C. Alternatives Considered

    This rule finalizes requirements for States to elect alternative 
Medicaid benefit programs through the adoption of a Medicaid State plan 
amendment. The final requirements in this rule were designed to permit 
State flexibility while assuring that beneficiaries will get quality 
care that meets their needs. Under this rule, we will allow States to 
define the alternative benefit packages by reference to the benchmark 
or benchmark-equivalent standard, while making it clear that children 
under 21 are eligible for the full range of Medicaid benefits under 
EPSDT. We will also permit States to combine an alternative benefit 
package with alternative benefit delivery methods, such as through 
managed care or employer-based coverage, although compliance with all 
Medicaid rules other than comparability or statewideness is required 
unless directly contrary to this statute. 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 3 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 3--Accounting Statement: Classification of Estimated Expenditures, From FY 2006 to FY 2014
                                                                     [In $millions]
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                Transfers
                                                --------------------------------------------------------------------------------------------------------
                    Category                                                   Units discount rate
                                                   Year dollar  ------------------------------------------------              Period covered
                                                                       7%              3%              0%
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.................            2006         -$506.3         -$532.3        -$552.22  FYs 2006-2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
From Whom To Whom?.............................                               Federal Government to beneficiaries, providers
--------------------------------------------------------------------------------------------------------------------------------------------------------
Annualized Monetized Transfers.................            2006          -338.5          -358.1         -373.33  FYs 2006-2014
--------------------------------------------------------------------------------------------------------------------------------------------------------
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 Federal and State annualized monetized impacts of the rule are 
presented.
    Column 2: Year Dollar--Contains the year to which dollars are 
normalized; that is, the first year that dollars are discounted in the 
estimate.
    Column 3: 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 4: 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

[[Page 23101]]

present value of the stream of costs (savings) estimated over the 
period covered.
    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.
    Estimated Savings--The following table shows the discounted costs 
(savings) for each discount rate over the period covered. The monetized 
figures represent the net present value of the impact in the year the 
rule takes effect. These numbers represent the anticipated annual 
reduction in Federal and State Medicaid spending under this rule.
    ``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 expenditures represent a reduction in Federal and 
State governments spending on behalf of beneficiaries.

E. Conclusion

    We estimate that the use of benchmark plans under this rule will 
result in total Federal savings of $4.97 billion and State savings of 
$3.36 billion for fiscal years 2006 through 2014. This translates to an 
annualized Federal savings of $506.3 million and $532.3 million at the 
7 percent and 3 percent discount rates. Also, this yields an annualized 
State savings of $338.5 million and $358.1 million at the 7 percent and 
3 percent discount rates over the same time period of fiscal years 2006 
through 2014. 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. Subpart C, consisting of Sec.  440.300 through Sec.  440.390, is 
revised 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 services.
440.365 Coverage of rural health clinic and federally qualified 
health center (FQHC) services.
440.370 Economy and efficiency.
440.375 Comparability.
440.380 Statewideness.
440.385 Delivery of benchmark and benchmark-equivalent coverage 
through managed care entities.
440.390 Assurance of transportation.

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 individuals, specified by the State under an approved 
State plan amendment, through enrollment in coverage that provides 
benchmark or benchmark-equivalent health care benefit coverage.


Sec.  440.305  Scope.

    (a) General. This subpart sets out requirements for States that 
elect to provide medical assistance to certain Medicaid eligible 
individuals within one or more groups of individuals specified by the 
State, through enrollment of the individuals in coverage, identified as 
``benchmark'' or ``benchmark-equivalent.''
    (b) Limitations. A State may only apply the option in paragraph (a) 
of this section for an individual whose eligibility is based on an 
eligibility category under section 1905(a) of the Act that could have 
been covered under the State's plan on or before February 8, 2006.
    (c) A State may not require but may offer enrollment in benchmark 
or benchmark-equivalent coverage to the Medicaid eligible individuals 
listed in Sec.  440.315. States allowing individuals to voluntarily 
enroll must be in compliance with the rules specified at Sec.  440.320.
    (d) Prior to submitting to the Centers for Medicare and Medicaid 
Services for approval a State plan amendment to establish a benchmark 
or benchmark-equivalent benefit plan or an amendment to substantially 
modify an existing benchmark or benchmark-equivalent benefit plan, a 
State must have provided the public with advance notice of the 
amendment and reasonable opportunity to comment with respect to such 
amendment, and have included in the notice a description of the method 
for assuring compliance with Sec.  440.345 of this subpart related to 
full access to EPSDT services, and the method for complying with the 
provisions of section 5006(e) of the American Recovery and Reinvestment 
Act of 2009.


Sec.  440.310  Applicability.

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


Sec.  440.315  Exempt individuals.

    Individuals within one (or more) of the following categories are 
exempt from mandatory enrollment in benchmark or benchmark-equivalent 
coverage.
    (a) The individual is a pregnant woman who is required to be 
covered under the State plan under section 1902(a)(10)(A)(i) of the 
Act.
    (b) The individual qualifies for medical assistance under the State 
plan on the basis of being blind or disabled (or being treated as being 
blind or disabled) without regard to whether the

[[Page 23102]]

individual is eligible for Supplemental Security Income benefits under 
title XVI on the basis of being blind or disabled and including an 
individual who is eligible for medical assistance on the basis of 
section 1902(e)(3) of the Act.
    (c) The individual is entitled to benefits under any part of 
Medicare.
    (d) The individual is terminally ill and is receiving benefits for 
hospice care under title XIX.
    (e) The individual is an inpatient in a hospital, nursing facility, 
intermediate care facility for the mentally retarded, or other medical 
institution, and is required, as a condition of receiving services in 
that institution under the State plan, to spend for costs of medical 
care all but a minimal amount of the individual's income required for 
personal needs.
    (f) The individual is medically frail or otherwise an individual 
with special medical needs. For these purposes, the State's definition 
of individuals who are medically frail or otherwise have special 
medical needs must at least include those individuals described in 
Sec.  438.50(d)(3) of this chapter, children with serious emotional 
disturbances, individuals with disabling mental disorders, individuals 
with serious and complex medical conditions, and individuals with 
physical and/or mental disabilities that significantly impair their 
ability to perform one or more activities of daily living.
    (g) The individual qualifies based on medical condition for medical 
assistance for long-term care services described in section 
1917(c)(1)(C) of the Act.
    (h) The individual is an individual with respect to whom child 
welfare services are made available under part B of title IV to 
children in foster care and individuals with respect to whom adoption 
or foster care assistance is made available under part E of title IV, 
without regard to age.
    (i) The individual is a parent or caretaker relative whom the State 
is required to cover under section 1931 of the Act.
    (j) The individual is a woman who is receiving medical assistance 
by virtue of the application of sections 1902(a)(10)(ii)(XVIII) and 
1902(aa) of the Act.
    (k) The individual qualifies for medical assistance on the basis of 
section 1902(a)(10)(A)(ii)(XII) of the Act.
    (l) The individual is only covered by Medicaid for care and 
services necessary for the treatment of an emergency medical condition 
in accordance with section 1903(v) of the Act.
    (m) The individual is determined eligible as medically needy or 
eligible because of a reduction of countable income based on costs 
incurred for medical or other remedial care under section 1902(f) of 
the Act or otherwise based on incurred medical costs.


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 disenroll from the benchmark or benchmark-equivalent coverage at 
any time and regain immediate access to standard full Medicaid coverage 
under the State plan.
    (2) Prior to any enrollment in benchmark or benchmark-equivalent 
coverage, the State must inform the exempt individual of the benefits 
available under the benchmark or benchmark-equivalent benefit package 
and the costs under such a package and provide a comparison of how they 
differ from the benefits and costs available under the standard full 
Medicaid program. The State must also inform exempt individuals that 
they may disenroll at any time and provide them with information about 
the process for disenrolling.
    (3) The State must document in the exempt individual's eligibility 
file that the individual was informed in accordance with this section 
prior to enrollment, was given ample time to arrive at an informed 
choice, and voluntarily and affirmatively chose to enroll in the 
benchmark or benchmark-equivalent benefit package.
    (4) For individuals who the State determines have become exempt 
individuals while enrolled in benchmark or benchmark-equivalent 
coverage, the State must comply with the requirements in paragraphs 
(a)(1) through (a)(3) of this section above within 30 days after such 
determination.
    (b) Disenrollment Process. (1) The State must act upon requests 
promptly for exempt individuals who choose to disenroll from benchmark 
or benchmark-equivalent coverage.
    (2) The State must have a process in place to ensure that exempt 
individuals have access to all standard State plan services while 
disenrollment requests are being processed.
    (3) The State must maintain data that tracks the total number of 
beneficiaries that have voluntarily enrolled in a benchmark plan and 
the total number of individuals that have disenrolled from the 
benchmark plan.


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 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 elect Secretarial approved coverage should 
submit a full description of the proposed coverage, (including a 
benefit-by-benefit comparison of the proposed plan to one or more of 
the three other benchmark plans specified above or to the State's 
standard full Medicaid coverage package under section 1905(a) of the 
Act), and of the population to which the coverage would be offered. In 
addition, the State should submit any other information that would be 
relevant to a determination that the proposed health benefits coverage 
would be appropriate for the proposed population. The scope

[[Page 23103]]

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 under 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) Emergency services.
    (6) Family planning services and supplies and other appropriate 
preventive services, as designated by the Secretary.
    (c) Additional coverage. (1) In addition to the categories of 
services of this section, benchmark-equivalent coverage may include 
coverage for any additional services in a category included in the 
benchmark plan or described in section 1905(a) of the Act.
    (2) If the benchmark coverage package used by the State for 
purposes of comparison in establishing the aggregate actuarial value of 
the benchmark-equivalent package includes any of the following four 
categories of services: Prescription drugs; mental health services; 
vision services; and hearing services; then the actuarial value of the 
coverage for each of these categories of service in the benchmark-
equivalent coverage package must be at least 75 percent of the 
actuarial value of the coverage for that category of service in the 
benchmark plan used for comparison by the State.
    (3) If the benchmark coverage package does not cover one of the 
four categories of services in paragraph (c)(2) of this section, then 
the benchmark-equivalent coverage package may, but is not required to, 
include coverage for that category of service.


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 considering the increase in actuarial value of health benefits 
coverage offered under the State plan that results from the limitations 
on cost sharing (with the exception of premiums) under that coverage.
    (c) The actuary preparing the opinion must select and specify the 
standardized set of factors and the standardized population to be used 
in paragraphs (b)(3) and (b)(4) of this section.
    (d) The State must provide sufficient detail to explain the basis 
of the methodologies used to estimate the actuarial value or, if 
requested by CMS, to replicate the State's result.


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 additional benefits provided 
by the State for any child under 21 years of age eligible under the 
State plan in a category under section 1902(a)(10)(A) of the Act.
    (1) Sufficiency. Any additional EPSDT benefits not provided by the 
benchmark or benchmark-equivalent plan must be sufficient so that, in 
combination with the benchmark or benchmark-equivalent benefits plan, 
these individuals have access to the full EPSDT benefit.
    (2) State Plan requirement. The State must include a description of 
how the additional benefits will be provided, how access to additional 
benefits will be coordinated and how beneficiaries and providers will 
be informed of these processes in order to ensure that these 
individuals have access to the full EPSDT benefit.
    (b) [Reserved]


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 
additional services covered separately under Medicaid) for individuals 
with access to private health insurance.
    (b) The State must assure that employer sponsored plans meet the 
requirements of benchmark or benchmark-equivalent coverage, including 
the economy and efficiency requirements at 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 individuals.


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 
services.

    In addition to the requirements of Sec.  440.345 the State may 
elect to provide additional coverage to individuals enrolled in 
benchmark or benchmark-equivalent plans. The State plan must describe 
the populations covered and the payment methodology for these services. 
Additional services must be in categories that are within the scope of 
the benchmark coverage, or are described in section 1905(a) of the Act.


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

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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  Economy and efficiency.

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


Sec.  440.375  Comparability.

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


Sec.  440.380  Statewideness.

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


Sec.  440.385  Delivery of benchmark and benchmark-equivalent coverage 
through managed care entities.

    In implementing benchmark or benchmark-equivalent benefit packages, 
States must comply with the managed care provisions at section 1932 of 
the Act and part 438 of this chapter, if benchmark and benchmark-
equivalent benefits are provided through a managed care entity.


Sec.  440.390  Assurance of transportation.

    If a benchmark or benchmark-equivalent plan does not include 
transportation to and from medically necessary covered Medicaid 
services, the State must nevertheless assure that emergency and non-
emergency transportation is covered for beneficiaries enrolled in the 
benchmark or benchmark-equivalent plan, as required under Sec.  431.53 
of this chapter.

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

    Dated: January 21, 2010.
Charlene Frizzera,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: March 2, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-9734 Filed 4-29-10; 8:45 am]
BILLING CODE 4120-01-P