[Federal Register Volume 75, Number 103 (Friday, May 28, 2010)]
[Rules and Regulations]
[Pages 30244-30265]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-12954]



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Part V





Department of Health and Human Services





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Centers for Medicare & Medicaid Services



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47 CFR Parts 447 and 457



Medicaid Program; Premiums and Cost Sharing; Final Rule

  Federal Register / Vol. 75, No. 103 / Friday, May 28, 2010 / Rules 
and Regulations  

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 447 and 457

[CMS-2244-FC]
RIN 0938-AP73


Medicaid Program; Premiums and Cost Sharing

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

ACTION: Final rule with comment period.

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SUMMARY: This final rule revises the November 25, 2008 final rule 
entitled, ``Medicaid Programs; Premiums and Cost Sharing (73 FR 
71828),'' to address public comments received during reopened comment 
periods, and to reflect relevant statutory changes made in section 
5006(a) of the American Recovery and Reinvestment Act of 2009 (the 
Recovery Act). This revised final rule implements and interprets 
section 1916A of the Social Security Act (the Act), which was added by 
sections 6041, 6042, and 6043 of the Deficit Reduction Act of 2005 
(DRA), amended by section 405(a)(1) of the Tax Relief and Health Care 
Act of 2006 (TRHCA) and further amended by section 5006(a) of the 
American Recovery and Reinvestment Act of 2009 (the Recovery Act). 
These provisions increase State flexibility to impose premiums and cost 
sharing for coverage of certain individuals whose family income exceeds 
specified levels. This revised rule also provides a further opportunity 
for public comment on revisions made to implement and interpret section 
5006(a) of the Recovery Act. The Recovery Act prohibits States from 
charging premiums and cost sharing under Medicaid to Indians furnished 
items or services directly by the Indian Health Service, Indian Tribes, 
Tribal Organizations, or Urban Indian Organizations or through referral 
under contract health services.

DATES: 
    Effective Date: These regulations are effective on July 1, 2010.
    Comment Date: To be assured of consideration, comments limited to 
the implementation of section 5006(a) of the Recovery Act must be 
received at one of the addresses provided below, no later than 5 p.m. 
on July 27, 2010.

ADDRESSES: In commenting, please refer to file code CMS-2244-FC.
    You may submit comments in one of four ways (please choose only one 
of the ways listed). We cannot accept comments by facsimile (FAX) 
transmission.
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the instructions under 
the ``More Search Options'' tab.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2244-FC, P.O. Box 8010, 
Baltimore, MD 21244-8010.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2244-FC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:

a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.

    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)

b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.

    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-9994 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT: Christine Gerhardt, (410) 786-0693.

SUPPLEMENTARY INFORMATION:
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Background

A. Statutory Authority

    The Deficit Reduction Act of 2005 (DRA) (Pub. L. 109-171) was 
enacted on February 8, 2006. Sections 6041, 6042, and 6043 of the DRA 
established a new section 1916A of the Social Security Act (the Act), 
which was amended by section 405(a)(1) of the Tax Relief and Health 
Care Act of 2006 (TRHCA) (Pub. L. 109-432, enacted on December 20, 
2006). Section 1916A of the Act sets forth State options for 
alternative premiums and cost sharing, including options for higher 
cost sharing for non-preferred prescription drugs and for non-emergency 
use of a hospital emergency room.
    Section 6041 of the DRA established new subsections 1916A(a) and 
(b) of the Act, which allow States to amend their State plans to impose 
alternative premiums and cost sharing on certain groups of individuals, 
for items and services other than drugs (which are subject to a 
separate provision discussed below), and to adopt certain rules with 
respect to the nonpayment and payment of the premiums and cost sharing. 
Subsections 1916A(a) and (b) of the Act set forth limitations on 
alternative premiums and cost sharing that vary based on family income, 
and exclude some specific services from alternative

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cost sharing. Section 6041 of the DRA also created a new section 
1916(h) of the Act, which requires the Secretary to increase the 
``nominal'' cost sharing amounts under section 1916 of the Act for each 
year (beginning with 2006) by the annual percentage increase in the 
medical care component of the consumer price index for all urban 
consumers (CPI-U) as rounded up in an appropriate manner. Section 
405(a)(1) of the TRHCA modified subsections 1916A(a) and (b) of the 
Act.
    Section 6042 of the DRA created section 1916A(c) of the Act, which 
provides States with additional options to encourage the use of 
preferred drugs. Section 405(a)(1) of the TRHCA also modified section 
1916A(c) of the Act. Under section 1916A(c) of the Act, States may 
amend their State plans to require increased cost sharing by certain 
groups of individuals for non-preferred drugs and to waive or reduce 
the otherwise applicable cost sharing for preferred drugs. States may 
also permit pharmacy providers to require the receipt of a cost sharing 
payment from an individual before filling a prescription.
    Section 6043 of the DRA created section 1916A(e) of the Act, which 
permits States to amend their State plans to allow hospitals, after an 
appropriate medical screening examination under section 1867 of the Act 
(per the Emergency Medical Treatment and Active Labor Act), to impose 
higher cost sharing upon certain groups of individuals for non-
emergency care or services furnished in a hospital emergency 
department. Section 405(a)(1) of the TRHCA modified section 1916A(e) of 
the Act. Under this option, if the hospital determines that an 
individual does not have an emergency medical condition and that an 
available and accessible alternate non-emergency services provider can 
provide the services in a timely manner without the imposition of the 
same cost sharing, before providing the non-emergency services and 
imposing cost sharing, it must inform the individual of the 
availability of such services from the accessible non-emergency 
services provider and coordinate a referral to that provider. After 
notice is given, the hospital may require payment of the cost sharing 
before providing non-emergency services, if the individual elects to 
receive the non-emergency services from the hospital. The cost sharing 
cannot be imposed if no available alternative non-emergency service 
provider exists.
    Section 5006(a) of the American Recovery and Reinvestment Act of 
2009 (the Recovery Act) (Pub. L. 111-5, enacted on February 17, 2009) 
amended sections 1916 and 1916A of the Act effective July 1, 2009. 
Specifically, Section 5006(a)(1)(A) of the Recovery Act amended section 
1916 of the Act to add a new subsection (j), which prohibits premiums 
and cost sharing for Indians who are provided services or items covered 
under the Medicaid State plan by Indian health care providers or 
through referral under contract health services. Section 5006(a)(2) of 
the Recovery Act amended section 1916A(b)(3)(A) of the Act to add a new 
clause prohibiting premiums on an Indian furnished an item or service 
directly by Indian health care providers or through referral under 
contract health services, and also added a clause to 1916A(b)(3)(B) 
prohibiting cost sharing for that population. In addition, section 
5006(a)(1)(B) of the Recovery Act amended section 1916 of the Act to 
specify that payments to Indian health care providers or to a health 
care provider through referral under contract health services for 
Medicaid services or items furnished to Indians cannot be reduced by 
the amount of any enrollment fee, premium, or cost sharing that 
otherwise would be due from the individual.
    We also acknowledge the importance of providing adequate mental 
health benefits and will be separately addressing how the laws 
following the DRA, including the Paul Wellstone and Pete Domenici 
Mental Health Parity and Addiction Equity Act of 2008 (Pub. L. 110-
343), relate to the Medicaid program regarding the treatment of 
beneficiary cost sharing.

B. Regulatory History

    On February 22, 2008, we published a proposed rule in the Federal 
Register (73 FR 9727) that proposed to implement and interpret the 
provisions of sections 6041, 6042, and 6043 of the DRA. A final rule 
entitled ``Medicaid Program; Premiums and Cost Sharing'' was published 
in the Federal Register on November 25, 2008 (73 FR 71828).
    On January 27, 2009, prior to the effective date of the November 
25, 2008 final rule, we published a final rule in the Federal Register 
(74 FR 4888) that temporarily delayed for 60 days the effective date of 
the November 25, 2008 final rule and reopened the comment period on the 
policies set out in the November 25, 2008 final rule.
    On March 27, 2009, we published a second final rule in the Federal 
Register (74 FR 13346) that further delayed the effective date of the 
November 25, 2008 final rule until December 31, 2009. We stated that 
the delay was needed because our initial review had indicated that 
substantial revisions to the final rule would be needed. Also, the 
comment period was again reopened, for two purposes: for additional 
comments on the policies set forth in the November 25, 2008 final rule, 
and for comments on revisions needed to reflect section 5006(a) of the 
Recovery Act (related to the exclusion of Indians from payment of 
premiums and cost sharing).
    On October 30, 2009, we published a proposed rule in the Federal 
Register (74 FR 56151) to delay further the effective date of the 
November 25, 2008 final rule until July 1, 2010. Upon review and 
consideration of the public comments received and the provisions of the 
Recovery Act, we determined that we needed more time to review and 
revise the November 25, 2008 final rule. On November 30, 2009, we 
published a third final rule in the Federal Register (74 FR 62501) that 
delayed the effective date of the November 25, 2008 final rule until 
July 1, 2010.

II. Provisions of the November 25, 2008 Final Rule and the Extended 
Comment Period and Analysis of and Response to Public Comments

A. Public Comments

    We received approximately 50 timely items of correspondence during 
the public comment period for the February 22, 2008 proposed rule, 
which we addressed in the November 25, 2008 final rule. We received 
approximately 5 timely items of correspondence (including 20 specific 
comments) in response to the January 27, 2009 reopening of the comment 
period. In addition, we received approximately 10 timely items of 
correspondence (including 36 specific comments) in response to the 
March 27, 2009 reopening of the comment period. Summaries of those 
public comments and our responses are set forth in the various sections 
of this final rule under the appropriate heading.

B. General Comments

    A majority of the public comments received for the January 27, 2009 
and March 27, 2009 extended comment periods were similar to comments 
received on the February 22, 2008 proposed rule, which we addressed in 
the November 25, 2008 final rule. In light of the continued concerns 
reflected by these comments, and additional review of available 
research, State practice, and changes in overall economic circumstances 
throughout the country, we have reconsidered our responses to these 
comments. In

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particular, we have given greater weight to concerns about maintaining 
access to services for needy families. A summary of the general 
comments received and our responses are as follows:
    Comment: Several commenters stated that the rule would 
significantly reduce affordability of care and patients' access to 
adequate care, and would result in decreased utilization of essential 
health care services, increased adverse events, and worsened health 
status due to less use of health care characterized as ``effective'' 
and subsequent use of more costly care. These commenters requested that 
the final rule reflect the need for caution and care when imposing 
premiums and cost sharing charges on low-income Medicaid beneficiaries. 
These commenters asserted that the November 25, 2008 final rule would 
allow States to increase health care expenses for vulnerable citizens, 
result in more crisis situations that lead to more expensive 
hospitalizations, limit access to basic health care, and force out 
people who need services most. These commenters argued that increased 
flexibility for States to impose premiums or cost sharing is 
detrimental to low-income populations, unless there are explicit 
restrictions on maximum premium and cost sharing levels.
    One commenter described her personal situation that she would have 
inadequate money for food or rent if her copayments were increased.
    Response: We appreciate the significant concerns expressed in these 
comments and agree that there is ample evidence that cost is a 
significant barrier to people accessing coverage and care, particularly 
for those with low or moderate incomes. These are important issues with 
which States must contend when they determine whether to impose 
premiums and cost sharing for their Medicaid and Children's Health 
Insurance Program (CHIP) populations and as they design and implement 
these provisions. CMS also must be mindful of these issues as we 
promulgate rules and oversee the operation of Medicaid and CHIP. 
However, to the extent that these comments reflect fundamental 
disagreements with the statutory flexibility and requirements enacted 
in sections 1916 and 1916A of the Act, we note that CMS is charged with 
implementing applicable statutory provisions.
    We have developed the revised final rule in accordance with the 
provisions set forth at sections 1916 and 1916A of the Act. This 
regulation is consistent with the statute and reflects little 
interpretive policy by CMS; therefore, we are unable to change major 
aspects of the revised final rule based on these comments.
    In light of public comments, we have, however, reconsidered some of 
our prior responses to comments on specific interpretive issues, in 
order to increase the protections for vulnerable populations to the 
extent consistent with the statutory requirements. As we discuss in 
greater detail in responding to specific public comments on each issue 
below, in this revised rule we are:
     Reducing the maximum copayment amount from $5.70 (the 
maximum copayment amount for children in separate CHIP programs) to 
$3.40 per visit in fiscal year 2009 (which is then adjusted for 
inflation annually) for Medicaid expansion optional targeted low income 
children enrolled in managed care organizations, when a State does not 
have a fee-for-service system.
     Specifying that a State that adopts cost sharing rules 
that could result in aggregate costs to the family that exceed five 
percent of the family's income must: (1) Describe in its Medicaid State 
plan the methodology it will use to identify beneficiaries who are 
subject to premiums or cost sharing for specific items or services; and 
(2) track beneficiaries' incurred premiums and cost sharing through a 
mechanism developed by the State that does not rely on beneficiaries. 
These requirements are imposed so that the State is able to inform 
beneficiaries and providers of beneficiaries' liability and notify 
beneficiaries and providers when individual beneficiaries have reached 
the five percent limit on family out-of-pocket expenses and so are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period. Ideally, for ease of 
administration and accuracy, States will use automated systems to track 
these cost sharing amounts.
     Specifying that a State must describe in its Medicaid 
State plan how the State identifies for providers, ideally through the 
use of automated systems, whether cost sharing for a specific item or 
service may be imposed on an individual beneficiary and whether the 
provider may require the beneficiary, as a condition for receiving the 
item or service, to pay the cost sharing charge.
     Specifying at a minimum the services listed at Sec.  
457.520 as the preventive services that must be excluded from cost 
sharing for children younger than age 18, which reflect the well baby 
and well child care and immunizations described by the Bright Futures 
guidelines of the American Academy of Pediatrics.
     Requiring States to describe in their Medicaid State plan 
their process for beneficiaries to request a reassessment of the 
family's aggregate limit for premiums and cost sharing if the family's 
income is reduced or if eligibility is being terminated due to 
nonpayment of premiums.
     Clarifying that the statutory exclusion of family planning 
services and supplies from cost sharing encompasses the entire range of 
such services for which the State claims or could claim the enhanced 
Federal matching rate for family planning services and supplies under 
section 1903(a)(5) of the Act, including contraceptives and other 
pharmaceuticals.
     Clarifying that the statutory exclusion of certain 
populations and services from cost sharing exceeding a nominal amount 
means that drugs not identified by a State as non-preferred drugs 
within a class of pharmaceuticals are subject to the same exclusions 
from cost sharing as preferred drugs.
     Requiring States to submit documentation with a State plan 
amendment proposing to establish or substantially modify alternative 
premiums or cost sharing under section 1916A of the Act that the State 
provided the public with advance notice of the amendment and reasonable 
opportunity for comment in a form and manner provided under applicable 
State law.
    CMS will continue to carefully review State plan amendments 
submitted to implement or modify premiums or cost sharing to ensure 
that the processes described adhere to the statutory and regulatory 
requirements.
    We further note that the concerns expressed by the commenters may 
be widely shared. To date, only 8 States have approved State plan 
amendments for alternative premiums and/or cost sharing under section 
1916A of the Act. These provisions are usually applied to narrowly 
defined, higher income populations and/or to limited services, such as 
premiums for specific expansion populations or slightly more than 
nominal pharmacy copayments.
    Comment: We also received a recommendation that the rule should 
reflect the change in course signaled by the Children's Health 
Insurance Program Reauthorization Act of 2009 (CHIPRA) to strengthen 
quality of care, ensure the availability of preventive services, and 
enhance access to needed services to improve health outcomes. The 
commenter also recommended that rigorous data collection accompany any 
enhanced cost sharing, to determine whether higher co-payment 
requirements present a greater access

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barrier to people with disabilities. The commenter further recommended 
that providers report to States and that States report to CMS at least 
a sample of the race and ethnicity of individuals for whom providers 
approved a waiver from mandatory co-payments on a case-by-case basis, 
in order to demonstrate that the waiver does not have a disparate 
effect on people of color or non-English-speaking individuals.
    Response: While we agree with the commenter's overall sentiments, 
we believe it is important to consider these kinds of recommended 
information collection and reporting requirements separately, in 
conjunction with other similar potential information collection and 
reporting requirements. CMS has broad authority under section 
1902(a)(6) of the Act to require States to report any needed 
information, but it is important to carefully consider such reporting 
requirements and ensure that they can be integrated with existing State 
responsibilities and are not overly burdensome. Because providers are 
not required to report on their claims for Medicaid reimbursement 
whether the provider collected a mandatory copayment, requiring 
providers to obtain and submit information about the race and ethnicity 
of individuals for whom the provider waived a copayment would be 
burdensome and costly for all involved, even for a sample of claims.

C. General Comments on the Exemption of Indians From Premiums and Cost 
Sharing

    We received the following general comments concerning the exemption 
of Indians furnished items or services directly by an Indian health 
care provider (the Indian Health Service (IHS), an Indian Tribe, a 
Tribal Organization, or an Urban Indian Organization) or through 
referral under contract health services from payment of premiums and 
cost sharing effective July 1, 2009, in accordance with the section 
5006(a) of the Recovery Act.
    Comment: Several commenters urged CMS to fulfill its 
responsibilities for early Tribal consultation, which did not occur 
with the original cost-sharing rule.
    Response: CMS believes that it is in compliance with applicable 
Tribal consultation responsibilities, but notes that considerable 
additional consultation was undertaken since the original cost sharing 
rule was published. Further, we are open to specific suggestions as to 
how to maximize the effectiveness of Tribal consultation. In our March 
27, 2009 final rule, we specifically requested public comment on the 
new provisions exempting Indians from premiums and cost sharing, and we 
believe that there has been a full opportunity for Tribes to raise 
issues of concern. Moreover, the Recovery Act contains expanded 
consultation responsibilities for States in implementing options under 
the Federal Medicaid and CHIP statutes.
    In keeping with the Department's Tribal consultation policy and the 
new provisions in the Recovery Act, CMS collaborated and consulted with 
the Tribal Technical Advisory Group (TTAG) and the IHS to solicit 
advice on implementing these provisions. The Tribal Affairs Group and 
the Center for Medicaid, CHIP and Survey and Certification within CMS 
jointly hosted two All Tribes Calls on June 5 and 12, 2009, to consult 
on implementation of section 5006 of the Recovery Act. Two face-to-face 
consultation meetings were held in Denver on July 8 and 10, 2009, to 
solicit advice and input on these provisions from federally-recognized 
Tribes, Indian health care providers, and Urban Indian Organizations. 
An All-States Call was held on June 10, 2009, with the State Medicaid 
and CHIP programs, to describe the CMS Tribal consultation process and 
the Recovery Act provisions and to solicit feedback and questions from 
States.
    Comment: A commenter asserted that CMS should adopt the TTAG 
recommendation to adopt an interim rule to implement section 5006(a) of 
the Recovery Act by July 1, 2009, because, otherwise, violations of the 
new provision could occur and go undetected. The commenter stated that 
it is important for CMS to assure that mechanisms are put in place 
timely at the State level, to assure compliance with this new provision 
as of the effective date of July 1, 2009.
    Response: The requirements of section 5006(a) of the Recovery Act 
were effective as of July 1, 2009, and CMS intends to work with States 
to implement the statutory requirements through its compliance reviews 
and reviews of State plan amendments. CMS issued a letter to State 
Medicaid Directors and State Health Officials on January 22, 2010 
(SMDL 10-001/ARRA 6), providing guidance on 
implementation of section 5006 of the Recovery Act.
    The Congress did not expressly provide authority for interim final 
rulemaking authority under the Recovery Act. In light of the strong 
public interest in timely protection of the exempt Indian populations, 
we provided the interim guidance to States described above and have 
diligently pursued the rulemaking process.
    Comment: A commenter asked that CMS establish effective procedures 
to properly enforce this provision, including a new audit element to 
quickly detect any prohibited reductions in providers' payments or 
other violations. The commenter asserted that States must make 
supplemental payments to providers for any prohibited reductions in 
payment.
    Response: Congress did not provide for any new enforcement 
mechanism for these provisions, and it is not clear that existing 
enforcement mechanisms are inadequate. All States have an appeal 
process through which beneficiaries and providers can appeal State 
determinations concerning the amount of medical assistance. CMS 
involvement is primarily through the State plan approval process. In 
addition, CMS has authority to initiate compliance actions under 
section 1904 of the Act in the event of systemic noncompliance by a 
State.
    Comment: Another commenter recommended that CMS include 
requirements for administrative simplicity in the implementation of the 
Recovery Act's new exclusion of Native Americans from cost-sharing, 
including ease of tribal membership documentation.
    Response: We agree that administrative simplicity is very 
important. Therefore, we have defined the term ``Indian'' for purposes 
of the exemption from premiums and cost sharing in broad terms that 
indicate the kinds of documentation that could support the application 
of the exception.
    Specifically, Indian means any individual defined at 25 USC 
1603(c), 1603(f), or 1679(b), or who has been determined eligible as an 
Indian, pursuant to 42 CFR 136.12. This means the individual:
    (1) Is a member of a Federally-recognized Indian tribe;
    (2) resides in an urban center and meets one or more of the four 
criteria: (a) Is a member of a tribe, band, or other organized group of 
Indians, including those tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member; (b) is an Eskimo or Aleut or other Alaska Native; (c) is 
considered by the Secretary of the Interior to be an Indian for any 
purpose; or (d) is determined to be an Indian under regulations 
promulgated by the Secretary;
    (3) is considered by the Secretary of the Interior to be an Indian 
for any purpose; or

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    (4) is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.
    Documentation that an individual is an Indian could include Tribal 
enrollment and membership cards, a certificate of degree of Indian 
blood issued by the Bureau of Indian Affairs, a Tribal census document, 
or a document issued by a Tribe indicating an individual's affiliation 
with the Tribe. The Indian health care programs and urban Indian health 
programs are responsible for determining who is eligible to receive an 
item or service furnished by their programs and so a medical record 
card or similar documentation that specifies an individual is an Indian 
as defined above could suffice as appropriate documentation. These 
documents are examples of documents that may be used, but do not 
constitute an all-inclusive list of such documents.
    Comment: A commenter also stated that Tribal leaders are not 
cognizant of all the impacts that these changes will have on the 
elderly Indian populations enrolled in Medicaid. The commenter stated 
that none of this information has been provided by CMS or the IHS.
    Response: As described above, CMS has engaged in an extensive 
Tribal consultation process, providing information to the Tribes, 
soliciting their input, and incorporating changes into this revised 
rule based on that input.
    Comment: A commenter stated that for Indians who use the IHS 
system, Medicaid is considered the primary payer, and IHS is considered 
the payer of last resort according to 42 CFR 136.61. Therefore, the 
commenter asserted that a conflict exists between section 5006 of the 
Recovery Act specifying circumstances under which Indians may not be 
charged cost-sharing (and so defining when they may be charged cost 
sharing) and the IHS payer of last resort policy, as well as Federal 
responsibility in providing health care for Native Americans.
    Response: We do not see any conflict between the exclusion of 
Indians from Medicaid premiums and cost sharing and the IHS payer of 
last resort rule, which was included in section 2901 of the Patient 
Protection and Affordable Care Act of 2010, Public Law 111-148. We also 
do not see any conflict with overall Federal responsibilities toward 
Indian health care. Indeed, we believe that these policies are 
consistent and ensure that Medicaid programs will pay for health care 
coverage of Medicaid items and services primary to both IHS and to 
individual Indians.
    Comment: A commenter expressed concern that CMS seems to feel that 
the statutory framework for the cost sharing rule reflects the 
principle that States are in the best position to weigh the Tribes' 
concerns, as Sovereign Nations, and that the States alone are to 
determine the appropriate levels and scope of alternative cost sharing. 
The commenter noted that the Tribes' poorest people who are on Medicaid 
cannot afford even the smallest cost sharing, and the commenter was 
concerned that CMS ensure that States follow requirements to consult 
with Tribes prior to implementing cost sharing that will directly 
affect the Tribes and indigent patients.
    Response: We agree that there are special concerns about cost 
sharing for Indians, and we believe that Congress recognized these 
concerns in enacting the Recovery Act protections for Indians from cost 
sharing that are being implemented in this revised final rule, and the 
new requirements for CMS to maintain the TTAG and for States to engage 
in tribal consultation under section 5006(e) of the Recovery Act. We 
will continue to monitor State compliance with tribal consultation 
requirements in all aspects of the Medicaid program.

D. Comments From the January 27, 2009 and March 27, 2009 Extended 
Comment Periods on the November 25, 2008 Final Rule

    Following is a summary of each provision in the February 22, 2008 
proposed rule entitled ``Medicaid Programs: Premiums and Cost Sharing'' 
that was addressed in a public comment. We include a background summary 
of any changes included in the final rule published on November 25, 
2008 based on comments received during the initial comment period; and 
then a summary of the additional comments on the final rule that were 
received during the reopened comment periods beginning on January 27 
and March 27, 2009; and responses to those additional comments.
Maximum Allowable and Nominal Charges (Sec.  447.54)
    Under DRA Sec.  6041(b)(2), adding Sec.  1916(h) to the Social 
Security Act, the Secretary was authorized to adjust the regulatory 
definition of nominal charges. In reviewing those definitions, we also 
addressed the issue of maximum charges by managed care organizations 
(MCO). CMS had previously, in interpreting regulatory provisions that 
addressed maximum charges only under fee-for-service systems, limited 
MCO charges to an estimate of the charges that would have been allowed 
under a fee-for-service system. In the February 22, 2008 proposed rule, 
we proposed to revise Sec.  447.54 to provide updates for Federal 
fiscal year (FY) 2007 to the existing ``nominal'' Medicaid cost sharing 
amounts, specifically the nominal deductible amount described at Sec.  
447.54(a)(1) and the nominal copayment amounts described at Sec.  
447.54(a)(3) by applying an inflation factor, and described a 
methodology for future inflation-based updates that included rounding 
the maximum copayment amounts to the next highest 10-cent increment. We 
also proposed to add a new Sec.  447.54(a)(4) to establish a maximum 
copayment amount for Federal FY 2007 for services provided by an MCO, 
in light of the difficulty in determining comparable fee-for-service 
charges. We noted that a similar MCO limit was applied under the CHIP 
program.
    In the November 25, 2008 final rule, we updated the maximum nominal 
copayments to reflect amounts for Federal FY 2009. The amounts were 
rounded to the next highest 5-cent increment rather than 10-cent 
increment, to be consistent with the Medicare Part D program. In 
addition, we clarified that we would calculate the update each year 
without considering any rounding adjustment made in the previous year. 
A new paragraph (a)(4) was added to specify that the copayment amount 
for services provided by an MCO may not exceed the copayment amount for 
comparable services under a fee-for-service delivery system. In the 
circumstance when there is no fee-for-service delivery system under the 
plan, we specified that the copayment amount for services furnished by 
an MCO may not exceed the maximum copayment amount under a fee-for-
service delivery system, which was $3.40 per visit for Federal FY 2009 
(based on the maximum fee-for-service copayment under Medicaid), or for 
individuals referenced in an approved State child health plan under 
title XXI of the Act, a higher different maximum MCO copayment amount 
of $5.70 per visit (based on the maximum fee-for-service amount for 
children enrolled in separate CHIP programs under title XXI of the 
Act).
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters recommended deletion of the $5.70 per

[[Page 30249]]

visit maximum Medicaid copayment specifically for children in CHIP-
related Medicaid expansions under managed care plans when a State does 
not have a fee-for-service system. This amount was added in the final 
rule published on November 25, 2008.
    Response: We agree with the underlying concern that copayments for 
such children would exceed levels otherwise considered nominal under 
the Medicaid program. Therefore, in this revised final rule, we have 
deleted the higher maximum copayment amount for Medicaid expansion 
children enrolled with MCOs. The same maximum copayment of $3.40 per 
visit for Federal FY 2009 will be applied for Medicaid expansion 
children as for all other Medicaid beneficiaries enrolled in MCOs. 
While our intent had been to align the Medicaid and CHIP programs by 
permitting the same copayment levels under either program, we have been 
convinced by the commenters that the status of the children under the 
Medicaid program should be of primary importance, because it indicates 
a State's determination that the children should be entitled to all the 
benefits and protections of the Medicaid program. We have always 
applied Medicaid-specific rules to Medicaid expansion programs, even if 
those rules vary from the rules applicable to separate CHIP programs. 
The importance of ensuring coverage for children and reducing barriers 
to such coverage has been affirmed generally by Congress in CHIPRA, 
which expanded and improved the CHIP program while maintaining the 
option of using CHIP funding for serving children through the Medicaid 
program.
Alternative Premiums and Cost Sharing: Basis, Purpose and Scope (Sec.  
447.62)
    In the February 22, 2008 proposed rule, we proposed to implement 
the flexibility for States to impose alternative premiums and cost 
sharing with the protections outlined in the TRHCA, including the 
imposition of nominal cost sharing for individuals with family income 
at or below 100 percent of the FPL limited to prescription drugs and 
non-emergency services furnished in a hospital emergency room.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without change but added a provision that clarified 
that individuals with family income at or below 100 percent of the FPL 
could be charged nominal copayments to the extent consistent with 
section 1916 of the Act.
    Specific comments on this section received during the reopened 
comment period, and our responses to those additional comments, are as 
follows:
    Comment: Several commenters recommended that the alternative 
premium and cost sharing rules be simplified and clarified as much as 
possible, such as the different requirements based on the family's 
income level, because neither the State nor providers have the 
resources to implement these complex rules.
    Response: We agree that the regulatory presentation of the 
statutory limitations on alternative premiums and cost sharing may have 
been confusing. In this revised final rule at Sec.  447.62(a) and 
(b)(1), we have attempted to clarify the regulatory provisions to 
better ensure consistency with the statutory requirements in sections 
1916 and 1916A of the Act. The basic provisions of this section, such 
as the different exclusions and limits based on a family's income 
level, are defined in statute and are by nature complex. We have 
attempted to describe these complex exclusions and limits in the 
simplest and most straightforward manner possible in this revised rule.
    Comment: A commenter recommended that the rule be revised to make 
it clear that the Secretary of Health and Human Services' (HHS) 
authority to waive cost sharing provisions under section 1916A of the 
Act is limited in accordance with section 1916(f) of the Act.
    Response: In this revised final rule, we included language in Sec.  
447.62(b) to clarify the text, taking into account the amendment to 
section 1916(f) of the Act made by section 6041(b)(1) of the DRA. In 
light of section 1916A of the Act and the provision of the DRA that 
applies section 1916(f) to 1916A of the Act, we are reviewing our 
policies under section 1115 of the Social Security Act.
    Comment: Several commenters advised that giving States the 
flexibility to exclude additional groups of individuals from payment of 
premiums or cost sharing should not have the effect of discriminating 
against individuals on the basis of race, color, national origin, or 
disability (title VI of the Civil Rights Act of 1964, Americans with 
Disabilities Act (ADA), 42 CFR 430.2(b), 45 CFR Part 80).
    Response: We agree. Existing HHS regulations under these civil 
rights and other statutes, including section 504 of the Rehabilitation 
Act, already prohibit both States and entities that receive Federal 
Medicaid funding from taking discriminatory actions. The HHS Office for 
Civil Rights (responsible for Departmental enforcement of most civil 
rights laws) and the Department of Justice (which also has 
responsibility for enforcement of certain civil rights laws, including 
the Americans with Disabilities Act), are available to investigate any 
questions or complaints as to illegal discrimination under these 
statutes and the implementing regulations.
Alternative Premiums, Enrollment Fees, or Similar Charges: State Plan 
Requirements (Sec.  447.64)
    We proposed at Sec.  447.64(a), that the State plan describe the 
group or groups of individuals that may be subject to such premiums, 
enrollment fees, or similar charges. We further proposed in Sec.  
447.64(b) that the State plan include a schedule of the premiums, 
enrollment fees, or similar charges. At Sec.  447.64(c), we proposed 
that the State plan describe the methodology used to determine family 
income, including the period and periodicity of those determinations. 
We also proposed in Sec.  447.64(d) that the State plan describe the 
methodology the State would use to ensure that the aggregate amount of 
premiums and cost sharing imposed for all individuals in the family 
does not exceed 5 percent of family income as applied during the 
monthly or quarterly period specified by the State. In addition, at 
Sec.  447.64(e), we proposed that the State plan specify the process 
for informing beneficiaries, applicants, providers, and the public of 
the schedule. We further proposed in Sec.  447.64(f) that the State 
plan describe the premium payment terms for the group or groups and the 
consequences for an individual who does not pay.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule with no substantive changes.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that the State agency, rather 
than beneficiaries or managed care organizations, be required to track 
each beneficiary's aggregate incurred premiums and cost sharing, to 
assure that a beneficiary's aggregate limit is not exceeded.
    Response: We agree with the commenters' request because we are 
concerned that it would be overly burdensome for beneficiaries to track 
aggregate incurred cost sharing that may have been made in small cash 
transactions when such information can be more efficiently tracked 
through the State's eligibility, enrollment, and claims processing 
systems. In this

[[Page 30250]]

revised final rule, we have modified paragraph (d) of Sec.  447.64 to 
specify that if a State chooses to charge premiums and cost sharing 
that could result in aggregate costs to a family that exceed 5 percent 
of the family's income, the State must develop a tracking mechanism and 
not rely on the so-called ``shoebox'' method that puts the burden on 
families to track cost sharing. Specifically, a State must describe in 
its Medicaid State plan the methodology it will use to identify 
beneficiaries who are subject to premiums or cost sharing for specific 
items or services and track their incurred premiums and cost sharing, 
in order to inform beneficiaries and providers of beneficiaries' 
liability and notify beneficiaries and providers when individual 
beneficiaries have incurred the 5 percent limit on family out-of-pocket 
expenses and are no longer subject to further cost sharing for the 
remainder of the family's current monthly or quarterly cap period. Such 
methods must assure that families' cost sharing will not exceed the 
statutory limits. Ideally, for ease of administration and accuracy, 
States will use automated systems to track these cost sharing amounts.
    We encourage States to track such costs through their Medicaid 
Management Information System (MMIS). Some States already use MMIS for 
this purpose. To the extent that they do so, enhanced Federal funding 
is available for development and operation of system improvements.
    As part of our review of State plan amendments and our ongoing 
reviews and audits of State Medicaid programs, we will review how 
States that impose costs that could exceed the 5 percent limit meet 
these requirements, to assure their compliance with the statutory and 
regulatory requirements. We will also share best practices among States 
to promote effective and efficient tracking systems. We note that 
States that design their cost sharing rules so that costs cannot exceed 
the 5 percent limit need not develop a tracking system.
General Alternative Premium Protections (Sec.  447.66)
    In the February 22, 2008 proposed rule at Sec.  447.66(a), we 
proposed to implement statutory requirements of section 1916A(b)(3)(A) 
of the Act that limit the application of alternative premiums under 
section 1916A by requiring that States exclude certain classes of 
individuals from the imposition of premiums. In addition, we proposed 
at Sec.  447.66(b) that a State may exempt additional classes of 
individuals from premiums.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without change.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that the Recovery Act's 
exclusion of premiums and cost sharing for Indians under certain 
circumstances be broadened to exclude from premiums and cost-sharing 
all Indians receiving any Medicaid service from any Medicaid provider.
    Response: The Recovery Act specifies under what circumstances 
States are required to exclude Indians from payments of premiums and 
cost sharing under sections 1916 and 1916A of the Act, and we are not 
authorized to expand on these statutory circumstances. In this revised 
final rule at Sec.  447.66(a)(7), we are specifying that States may not 
impose alternative premiums upon an Indian who is eligible to receive 
or has received an item or service furnished by an Indian health care 
provider or through referral under contract health services under 
authorities for serving Indians. This language would not preclude 
States from excluding from premiums individuals based on other criteria 
that could have the effect of broadening the circumstances in which 
Indian populations would be exempt from premiums. We add at Sec.  
447.66(c) to clarify that nothing in this subsection shall be construed 
as restricting the application of any other limitations on the 
imposition of premiums that may apply to an individual receiving 
Medicaid who is an Indian. And, at Sec.  447.70(e) we specify that 
States may exempt additional individuals, items, or services from cost 
sharing. We anticipate that additional exemptions, if needed to protect 
Indian populations, will be an issue raised in the tribal consultation 
process.
Alternative Copayments, Coinsurance, Deductibles, or Similar Cost 
Sharing Charges: State Plan Requirements (Sec.  447.68)
    In the February 22, 2008 proposed rule at Sec.  447.68(a), we 
proposed that the State plan describe the group or groups of 
individuals that may be subject to such cost sharing. We further 
proposed in Sec.  447.68(b) that the State plan must describe the 
methodology used to determine family income, including the period and 
periodicity of those determinations. We also proposed in Sec.  
447.68(c) that the State plan describe the item or service for which 
the charge is imposed. In Sec.  447.68(d), we proposed that the State 
plan must describe methods, such as the use of integrated automated 
systems, for tracking cost sharing charges, informing beneficiaries and 
providers of the beneficiary's liability, and notifying them when a 
beneficiary has reached the aggregate maximum for a period. In Sec.  
447.68(e), we proposed that the State plan must specify the process of 
publicizing the schedule of cost sharing charges. In Sec.  447.68(f), 
we proposed that the State plan must explain the methodology the State 
would use to ensure that the aggregate amount of premiums and cost 
sharing imposed for all individuals in the family does not exceed 5 
percent as applied during the monthly or quarterly period specified by 
the State. In addition, at Sec.  447.68(g), we proposed that the State 
plan specify how notice is provided of the time frame and manner of 
required cost sharing and the consequences for an individual who does 
not pay.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without any substantive change.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: Several commenters requested that States be required to 
describe in their State plans a method by which States identify for 
Medicaid providers which beneficiaries, services, and items are 
exempted from cost sharing, in accordance with Sec.  447.70 and Sec.  
447.71. Commenters also stated that States should be required to 
provide accurate and updated information to providers about appropriate 
cost sharing for each beneficiary. One commenter stated that States 
should be required to demonstrate, before implementing alternative 
premiums and cost sharing, that adequate State administrative systems 
are in place to protect families from exceeding the cost sharing 
limits. Other commenters requested that States, rather than 
beneficiaries or managed care organizations, be required to track 
beneficiaries' aggregate premiums and cost sharing, to assure that 5 
percent of a family's income is not exceeded. Another commenter stated 
that CMS should require States to implement automated systems to 
support the tracking and computing of beneficiaries' copayments at the 
point-of-sale and to adopt policies that support electronic 
identification of non-preferred drugs. The commenter also stated that 
States must be required to make information

[[Page 30251]]

electronically available at the point-of-sale regarding a beneficiary's 
required cost sharing and whether the beneficiary's family has met its 
applicable monthly or quarterly aggregate limit. In addition, the 
commenter stated that CMS should make an enhanced 90 percent 
administrative match available to States that implement such a system.
    Response: We agree with many of these comments that beneficiaries 
should not bear the full burden of accounting for aggregate cost 
sharing maximums. In this revised final rule, we have thus revised 
paragraph (d) of Sec.  447.68 to specify that a State must describe in 
its Medicaid State plan the methodology it will use to identify 
beneficiaries who are subject to premiums or to cost sharing for 
specific items or services and, if cost sharing could exceed 5 percent 
of family income, to track beneficiaries' incurred premiums and cost 
sharing in order to inform beneficiaries and providers of 
beneficiaries' liability and to notify beneficiaries and providers when 
individual beneficiaries have reached the five percent limit on family 
out-of-pocket expenses to assure that costs do not exceed the 5 percent 
statutory limit. Also, a State is required to describe in its State 
plan the State's methods for assuring that providers and beneficiaries 
are effectively informed of cost sharing requirements in the State 
plan, in accordance with Sec.  447.68(d). States must be mindful of the 
need for clear, non-technical explanations and that accommodations must 
be made for individuals for whom English is not the first language.
    For example, one State informs providers and members 
(beneficiaries) of allowable cost sharing amounts via provider updates 
and a member Enrollment and Benefits booklet. Another State conducts 
public meetings and sends a letter to each beneficiary for whom cost 
sharing is applicable.
    While this rule requires States imposing cost sharing that could 
exceed the 5 percent statutory cap to have a methodology to track costs 
and to assure that costs do not exceed the 5 percent limit, the rule 
does not require one particular system for tracking. Some of the 
methods that States are using to track families' incurred premiums and 
cost sharing and to assure that they do not exceed the aggregate 
maximum of 5 percent of the family's income include:
     On State has its premium collection vendor track premium 
payments. Its MCPs track enrollees' copayments. If a family reaches its 
aggregate maximum, the premium vendor will waive premiums and suspend 
invoicing for the remainder of the benefit period. The MCOs will notify 
their pharmacy and ambulance transportation providers to waive the 
family's copayments through a specified date.
     Another State uses MMIS to track and enforce cost sharing 
limits. The system calculates a family's quarterly out-of-pocket 
maximum based on the family's income, and tracks the family's cost 
sharing payments associated with submitted claims. If a family's 
maximum is reached, an indicator is changed in MMIS and providers are 
alerted as part of eligibility verification that the family is not 
subject to copayments.
     Another State calculates each family's cost sharing limit 
as part of the eligibility determination process, records this 
information in the eligibility system, copies the State's benefits 
administrator, and informs the family of the limit in the eligibility 
approval notice. It encourages families to track their payments, but it 
also has the benefits administrator track families' payments and notify 
the State if a family reaches its maximum. Families can also call the 
State to check on the amount of out-of-pocket expenses they have 
incurred. If the maximum is reached, the State moves the family to a 
no-cost benefits plan for the remainder of their plan year and notifies 
the family of this change in writing.
     Another State has its eligibility and enrollment broker 
inform families of their out-of-pocket limits in the letter notifying 
them of enrollment in a health plan. It also notifies the health plan. 
The health plan tracks families' cost sharing payments. If the limit is 
reached, the health plan notifies the family by letter and annotates 
the family's file in the electronic claims system in order to notify 
providers that no further cost sharing is required.
     Another State has its system track families' out-of-pocket 
payments, and stops deducting the copayment amount from the allowed 
amount on a provider's claim if a family reaches its limit. The system 
notes on an Explanation of Benefits (EOB) when a family reaches its 
maximum, and families may share the EOB with providers. Such a notice 
is also included in the point-of-sale system used by pharmacists. 
Monthly reports are generated to track copayments.
    We are requiring that States describe their method of tracking when 
they impose cost sharing that could exceed the 5 percent statutory 
limit, and are recommending that, whenever possible, they employ 
automated systems to do so. The Health Insurance Portability and 
Accountability Act of 1996 (HIPAA) governs the contents and format of 
electronic transactions providing information from a State's MMIS, 
including an electronic transaction sent by a State Medicaid program in 
response to an enrolled provider's electronic request for information 
related to a beneficiary's Medicaid eligibility (for example, 
information about a beneficiary's cost sharing responsibilities and 
payments). MMIS system changes and operations are subject to an 
enhanced Federal matching rate. As part of our review of State plan 
amendments and our ongoing reviews and audits of State Medicaid 
programs, we will review how States meet the premium and cost sharing 
requirements, to assure their compliance with the statutory and 
regulatory requirements. We will also share best practices to help 
other States learn about effective and efficient ways to track cost 
sharing.
General Alternative Cost Sharing Protections (Sec.  447.70)
    In the February 22, 2008 proposed rule, we proposed that State 
plans may not impose alternative cost sharing under section 1916A(a) of 
the Act for certain services including emergency services and family 
planning services and supplies. We also proposed that State plans could 
not impose cost sharing for preferred drugs within a class for the same 
categories of individuals. We proposed that the State may exempt 
additional individuals or services from cost sharing. Also, we proposed 
that cost sharing applicable to a preferred drug be charged for a non-
preferred drug if the prescribing physician determines that the 
preferred drug would not be as effective for the individual or would 
have adverse effects for the individual or both. We further proposed 
that such overrides meet the State's criteria for prior authorization 
and be approved through the State's prior authorization process.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without substantive changes.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter recommended that the rule define the 
preventive services which are excluded from alternative cost-sharing 
(see Sec.  447.70(a)(2)), such as by using the definition in the 
American Academy of Pediatrics Bright Futures guidelines.
    Response: We agree. In this revised final rule, we revised Sec.  
447.70(a)(2) to

[[Page 30252]]

specify that, at the minimum, the preventive services listed at Sec.  
457.520 must be excluded from cost sharing for children younger than 18 
years old, which reflect the well baby and well child care and 
immunizations described by the Bright Futures guidelines of the 
American Academy of Pediatrics. These guidelines are used for well baby 
and well child care services in the CHIP program. They provide an 
explanation of the periodicity schedule recommended by the American 
Academy of Pediatrics for preventive visits and appropriate 
immunizations for children. The referencing of such a schedule allows 
for flexibility in the definition of preventive services to reflect the 
most current medical practice standards. States are permitted to exempt 
preventive services beyond those described in the Bright Futures 
guidelines.
    Comment: Several commenters recommended that the entire package of 
family planning services and supplies described and mandated at section 
1905(a)(4)(C) of the Act be excluded from cost sharing, as required by 
sections 1916A(b)(3)(B)(vii) and 1916(a)(2)(D) of the Act, so that even 
nominal cost sharing is not permitted for non-preferred family planning 
drugs (for example, contraceptive drugs not on a State's preferred drug 
list) and cost sharing does not otherwise distinguish between family 
planning methods.
    Response: While we agree with the concerns of commenters, we are 
not authorized by the statute to generally preclude alternate cost 
sharing under section 1916A(c) of the Act for family planning drugs. 
The protections under section 1916A(b)(3)(B)(vii) of the Act are 
``subject to the succeeding provisions of this section'' which include 
the special provisions concerning alternate cost sharing under section 
1916A(c) of the Act. But we believe it is reasonable to require that 
States have a consistent treatment of family planning drugs. In this 
revised final rule, we have revised Sec.  447.70(a)(7) to clarify that 
the exclusion for family planning services and supplies encompasses 
contraceptives and other prescription drugs for which the State claims 
or could claim the Federal matching rate available under section 
1903(a)(5) of the Act for family planning services and supplies.
    Comment: Several commenters requested that the rule be made 
consistent with section 1916A(c)(2)(B) of the Act by limiting 
alternative cost sharing for non-preferred prescription drugs for the 
items or services listed at Sec.  447.70(a) to no more than the nominal 
amount, in order to protect vulnerable populations such as pregnant 
women.
    Response: While we understand the underlying concerns of 
commenters, we are not authorized by the statute to generally preclude 
alternate cost sharing under section 1916A(c) of the Act for the 
services listed at Sec.  447.70(a). The protections under section 
1916A(b)(3)(B)(vii) of the Act are ``subject to the succeeding 
provisions of this section'' which include the special provisions 
concerning alternate cost sharing under section 1916A(c) of the Act. As 
a result of our review of these comments, however, we realized that we 
had not integrated the protections at section 1916A(c)(3) of the Act 
into these regulations, and thus we have integrated into the revised 
final rule at Sec.  447.70(d) the provision that drugs identified as 
non-preferred drugs are subject to the same exclusions and limits for 
cost-sharing as preferred drugs if the individual's prescribing 
physician determines that the preferred drug for treatment of the same 
condition either would be less effective for the individual or would 
have adverse effects for the individual or both. We deleted as 
unnecessary the additional requirement that the State's criteria for 
prior authorization, if any, must be met.
Alternative Premium and Cost Sharing Exemptions and Protections for 
Individuals With Family Incomes Above 100 Percent but at or Below 150 
Percent of the FPL (Sec.  447.72)
    In the February 22, 2008 proposed rule, we proposed at Sec.  
447.72(a) that the State plan exclude individuals with family incomes 
above 100 percent but at or below 150 percent of the FPL from the 
imposition of premiums. We also proposed at Sec.  447.72(b) that cost 
sharing for those individuals under the State plan not exceed 10 
percent of the payment the State Medicaid agency makes for that item or 
service, with the exception that cost sharing not exceed the nominal 
cost sharing amount for non-preferred drugs or twice the nominal cost 
sharing amount for non-emergency services furnished in a hospital 
emergency department. In the case of States that do not have fee-for-
service payment rates, we proposed that any copayment imposed by a 
State for services provided by an MCO may not exceed $5.20 for FY 2007. 
In addition, we proposed at Sec.  447.72(c) that aggregate premiums and 
cost sharing for individuals whose family income exceeds 100 percent, 
but does not exceed 150 percent of the FPL, not exceed the 5 percent 
aggregate maximum permitted under Sec.  447.78(a).
    In the November 25, 2008 final rule, we revised Sec.  447.74(b) to 
specify that the copayment amount for services provided by an MCO may 
not exceed $3.40 per visit for Federal FY 2009 when the State does not 
have a comparable fee-for-service system. We added a higher copayment 
limit of $5.70 for Federal FY 2009 for services provided by an MCO for 
Medicaid expansion optional targeted low-income children in that 
circumstance. In addition, we revised the methodology for updating the 
maximum nominal amounts for Medicaid each October 1 by rounding to the 
next highest 5-cent increment rather than 10-cent increment, to be 
consistent with the Medicare Part D program.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: As we discussed above, several commenters recommended that 
the separate $5.70 per visit maximum co-payment added in the final rule 
published on November 25, 2008, be deleted for Medicaid expansion 
optional targeted low income children in managed care plans when a 
State does not have a fee-for-service system.
    Response: We are accepting this comment for the reasons discussed 
above. The result is that the same per visit maximum will apply to all 
Medicaid managed care enrollees when the State does not have a fee-for-
service system.
Alternative Premium and Cost Sharing Protections for Individuals With 
Family Incomes Above 150 Percent of the FPL (Sec.  447.74)
    In the February 22, 2008 proposed rule at Sec.  447.74(a), we 
proposed that a State plan may impose premiums upon individuals with 
family income above 150 percent of the FPL, subject to the aggregate 
limit on premiums and cost sharing at Sec.  447.78. We also proposed at 
Sec.  447.74(b) that cost sharing for those individuals under the State 
plan not exceed 20 percent of the payment the State Medicaid agency 
makes for that item or service. In the case of States that do not have 
fee-for-service payment rates, we proposed that any copayment that the 
State imposes for services provided by an MCO may not exceed $5.20 for 
FY 2007. In addition, we proposed at Sec.  447.74(c) that aggregate 
cost sharing for individuals whose family income exceeds 150 percent of 
the FPL not exceed the maximum permitted under Sec.  447.78(a).
    In the November 25, 2008 final rule, we revised Sec.  447.74(b) to 
specify that

[[Page 30253]]

the copayment amount for services provided by an MCO may not exceed 
$3.40 per visit for Federal FY 2009. We added a higher limit for 
Medicaid expansion optional targeted low-income children of $5.70 for 
Federal FY 2009. In addition, we revised the methodology for updating 
the nominal amounts for Medicaid each October 1 by rounding to the next 
highest 5-cent increment rather than 10-cent increment, to be 
consistent with the Medicare Part D program.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter stated that the cost sharing permitted for 
higher income individuals would be excessive. The commenter stated that 
for individuals with incomes above 150 percent FPL, the cost sharing 
amount would increase to 20 percent. The commenter also recommended 
that cost sharing be capped at a reasonable amount.
    Response: Cost sharing limits are specified in this rule as 
required by section 1916A of the Act. However, because a 20 percent 
cost sharing amount can be difficult or even impossible for Medicaid 
beneficiaries to pay given their limited incomes, in this revised final 
rule at Sec.  447.62(b)(3), we clarify that States have the option to 
impose premiums and cost sharing that are below the maximum levels 
permitted under this subpart.
Public Schedule (Sec.  447.76)
    In the February 22, 2008 proposed rule, we proposed at Sec.  
447.76(a) that State plans provide for schedules of premiums and cost 
sharing and specified the information contained on such schedules. In 
addition, at Sec.  447.76(b), we proposed that the State make the 
public schedule available to beneficiaries at the time of enrollment 
and reenrollment, applicants, all participating providers, and the 
general public.
    In the November 25, 2008 final rule, we added Sec.  447.76(a)(7) to 
specify that the State must make available either a list of preferred 
drugs or a method to obtain such a list upon request.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter requested that States give adequate notice 
to pharmacy providers, beneficiaries, and the public of changes to 
cost-sharing requirements when State plan amendments implementing the 
changes are submitted to CMS, no later than 60 days prior to the 
effective date.
    Response: We agree that providers need adequate time to adjust 
their procedures and protocols to incorporate changes, and that 
beneficiaries and their advocates need time to prepare for changes in 
cost sharing. Such notice is consistent with administration of the 
State plan in the best interests of beneficiaries. In this revised 
final rule, we added a new paragraph (c) to Sec.  447.76 to require a 
State to provide the public with advance notice and reasonable 
opportunity to comment in a form and manner provided under applicable 
State law prior to submitting for CMS approval a Medicaid State plan 
amendment (SPA) to establish alternative premiums or cost sharing under 
section 1916A of the Act or to modify substantially an existing plan 
for alternative premiums or cost sharing. Also, the State must submit 
documentation with the SPA to demonstrate that this requirement was 
met. This requirement is similar to the requirements at Sec.  447.205 
about public notice prior to submitting a Medicaid SPA revising 
providers' payment rates for services and at Sec.  457.65(b)-(d) about 
public notice prior to submitting a CHIP SPA eliminating or restricting 
eligibility or benefits or implementing or increasing cost sharing 
charges or the cumulative cost sharing maximum.
    Section 447.76 also requires States to make a public schedule with 
cost sharing information available to beneficiaries, applicants, 
providers, and the general public. Therefore, the public schedule must 
be changed as necessary to remain current. In this revised final rule, 
we modified Sec.  447.76 (b)(1), to clarify that beneficiaries must 
receive advance written notice when their premiums, cost sharing 
charges, or aggregate limits are revised.
Aggregate Limits on Alternative Premiums and Cost Sharing (Sec.  
447.78)
    In the February 22, 2008 proposed rule at Sec.  447.78(a), we 
proposed that for individuals with family income above 100 percent of 
the FPL the aggregate amount of premiums and cost sharing imposed under 
sections 1916 and 1916A of the Act not exceed 5 percent of a family's 
income for a monthly or quarterly period, as specified in the State 
plan. We received no comments questioning this proposal, and received 
at least one comment supporting the broad reach of this language. Thus, 
we included this language in the November 25, 2008 final rule. While 
sections 1916A(b)(1)(B)(ii) and (2)(A) of the Act for families with 
income above 100 percent of the FPL only specifically reference 
sections 1916A(c) and (e) of the Act in reference to the 5 percent 
aggregate limit, we read these provisions together with the provision 
at section 1916A(a)(2)(B) to establish a 5 percent aggregate limit 
regardless of which statutory option the State selects. To read these 
provisions in isolation would frustrate the statutory purpose and 
permit a State to effectively impose aggregate cost sharing far in 
excess of 5 percent of family income by using the two statutory cost 
sharing options cumulatively. Such a result would be an inadequate 
beneficiary protection, and would not achieve the statutory purpose of 
the aggregate limit. The clear statutory purpose is to limit family 
cost sharing obligations to 5 percent of family income and that purpose 
can be achieved only if the aggregate limit applies to all cost sharing 
imposed under the State plan for all family members, including cost 
sharing imposed under section 1916. Thus, we believe that Congress 
intended the three aggregate limit provisions to establish a single 
aggregate limit for cost sharing under either section 1916 or 1916A 
regardless of the underlying authority for the cost sharing. Applying 
all cost sharing under the State plan to the aggregate limit is also 
consistent with simplicity of administration and the best interests of 
beneficiaries as required by section 1902(a)(19) of the Act because it 
eliminates any need to distinguish between the statutory authority for 
any particular cost sharing.
    At Sec.  447.78(b) of the proposed rule, we proposed that for 
individuals with family income at or below 100 percent of the FPL the 
aggregate amount of cost sharing under sections 1916 and 1916A of the 
Act not exceed 5 percent of a family's income for the monthly or 
quarterly period, as required by section 1916A(a)(2)(B) of the Act, and 
consistent with the reading above. We also proposed at Sec.  447.78(c) 
that family income should be determined in a manner for that period as 
specified by the State in the State plan. We clarified that States may 
use gross income to compute family income and that they may use a 
different methodology for computing family income for purposes of 
determining the aggregate limits than for determining income 
eligibility.
    In the November 25, 2008 final rule, we revised Sec.  447.78(c) to 
include the phrase, ``including the use of such disregards as the State 
may provide.''
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:

[[Page 30254]]

    Comment: One commenter recommended that the total aggregate amount 
of cost sharing for individuals in a family be limited to 2 percent of 
the family's income.
    Response: We are unable by rule-making to revise the total 
aggregate limit of 5 percent specified in statute at sections 
1916A(b)(1)(B)(ii) and 1916A(b)(2)(A) of the Act. However, in this 
revised final rule, we clarify at Sec.  447.62(b)(3) that States have 
the option to impose premiums and cost sharing below the maximum levels 
under this subpart. Also, we recognize that some families include 
children in Medicaid and CHIP, so we encourage States to consider 
implementing a 5 percent limit on families' aggregate premiums and cost 
sharing in both Medicaid and CHIP.
    Comment: One commenter stated that families should be permitted to 
request a change in the aggregate limit on their cost sharing when the 
household's income changes.
    Response: We had not previously considered this issue, and we agree 
with the commenter. In this revised final rule, we have modified Sec.  
447.78(c) to require that State plans include a process for individuals 
to request a reassessment of the family's aggregate limit if the 
family's income is reduced or if eligibility is being terminated due to 
nonpayment of a premium.
Enforceability of Alternative Premiums and Cost Sharing (Sec.  447.80)
    In the February 22, 2008 proposed rule at Sec.  447.80(a), we 
proposed to permit a State to condition Medicaid eligibility for 
individuals in a specified group or groups upon prepayment of premiums, 
to terminate the eligibility of an individual for failure to pay after 
60 days or more, and to waive payment in any case where requiring the 
payment would create undue hardship. At Sec.  447.80(b), we proposed 
that a State permit a provider, including a pharmacy, to require an 
individual to pay cost sharing imposed under section 1916A of the Act 
as a condition of receiving an item or service. However, at Sec.  
447.80(b)(1), we specified that a provider, including a pharmacy or 
hospital, may not require an individual whose family income is at or 
below 100 percent of the FPL to pay the cost sharing charge as a 
condition of receiving the item or service. In addition, at Sec.  
447.80(b)(2), we proposed that a hospital that has determined after an 
appropriate medical screening under section 1867 of the Act that an 
individual does not have an emergency medical condition, before it can 
require payment of the cost sharing and treat the non-emergency medical 
condition, must first provide the individual with the name and location 
of an available and accessible alternate non-emergency services 
provider, information that the alternate provider can provide the 
services with imposition of no or lesser cost sharing, and a referral 
to coordinate scheduling of treatment. Finally, at Sec.  447.80(b)(3), 
we proposed that a provider may reduce or waive cost sharing imposed 
under section 1916A of the Act on a case-by-case basis.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without substantive changes.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter recommended that States not be given the 
option to deny treatment for Medicaid beneficiaries or terminate them 
from Medicaid eligibility if they are unable to pay a premium or 
copayment. Also, the commenter recommended that States be encouraged to 
use alternative payment schedules.
    Response: Under section 1916A(d) of the Act, States have the 
flexibility to take certain specified actions in the event of 
nonpayment of premiums, and may allow providers to condition the 
delivery of services on payment of the alternative cost sharing. The 
statute expressly permits States and providers to use such enforcement 
flexibly, to respond to individual circumstances. For example, a State 
may waive premiums on a case-by-case basis due to hardship. Also, 
providers may reduce or waive cost sharing on a case-by-case basis.
    Comment: One commenter asked who would want to decide if an 
emergency was ``serious enough'' so a copayment would not be charged.
    Response: We clarify here that we interpret an emergency to include 
circumstances consistent with the ``prudent layperson'' standard set 
forth in section 1932(b)(2) of the Act and Sec.  438.114(a). Under that 
standard, an emergency service is one needed to evaluate or stabilize 
an emergency medical condition, which is a condition manifesting itself 
by acute symptoms of sufficient severity (including severe pain) such 
that a prudent layperson, who possesses an average knowledge of health 
and medicine, could reasonably expect the absence of medical attention 
to result in jeopardy to health (including the health of an unborn 
child), serious impairment to bodily functions, or the serious 
dysfunction of any bodily organ or part. This would, at a minimum, 
include the required medical screening under current regulations at 
Sec.  489.24, including circumstances under which services are required 
to stabilize the patient.
    Comment: One commenter recommended that copayments for non-
emergency use of hospital emergency departments not be imposed if 
Medicaid beneficiaries are using the emergency room due to lack of 
access to primary care physicians or other alternative care.
    Response: We agree that this is what the statute requires. The 
requirements at Sec.  447.80(b)(2) are intended to assure that 
alternative copayments for non-emergency use of hospital emergency 
departments are not imposed if alternative non-emergency services 
providers are not available and accessible in a timely manner to treat 
the individual's medical condition.
    Comment: Several commenters recommended that Sec.  447.80(b) 
specify that giving providers the discretion to waive mandatory 
copayments on a case-by-case basis may not have the effect of 
discriminating against individuals who do not speak English or against 
individuals on the basis of race, color, national origin, or disability 
(title VI of the Civil Rights Act of 1964, Americans with Disabilities 
Act, 42 CFR 430.2(b), 45 CFR Part 80).
    Response: Existing HHS regulations under these civil rights and 
other statutes, including section 504 of the Rehabilitation Act, 
already prohibit both States and entities that receive Medicaid funding 
from taking discriminatory actions. The HHS Office for Civil Rights 
(responsible for Departmental enforcement of most civil rights laws) 
and the Department of Justice (which also has responsibility for 
enforcement of certain civil rights laws, including the Americans with 
Disabilities Act), are available to investigate any questions or 
complaints as to illegal discrimination under these statutes and the 
implementing regulations.
    Comment: A commenter agreed with the rule that providers should be 
able to decide when to reduce or waive cost sharing on a case-by-case 
basis. If a State significantly increases cost sharing, the pharmacy 
provider, rather than the State, must decide whether to condition 
rendering pharmacy services on the receipt of full payment of cost-
sharing from the beneficiary. Otherwise, the providers will likely be 
the ones paying the higher charges, especially in States where pharmacy 
providers are quite often unable to collect the current nominal co-
payments.
    Response: We agree. This policy is consistent with the statute and 
the

[[Page 30255]]

revised final rule at Sec.  447.82(a). If a State elects the option 
permitting providers to require a beneficiary to pay an allowable cost 
sharing charge as a condition for receiving an item or service, the 
provider has the discretion to reduce or waive the application of cost 
sharing on a case-by-case basis. In this revised final rule, we added a 
new paragraph (c) to Sec.  447.82 requiring States to identify for 
providers, ideally through the use of automated systems, whether cost 
sharing for a specific item or service may be imposed on an individual 
beneficiary and whether the provider may require the beneficiary, as a 
condition for receiving the item or service, to pay the cost sharing 
charge.
    Comment: A commenter advised that the rule should provide guidance 
for how hospitals are to implement cost sharing for non-emergency 
services rendered in a hospital emergency department without violating 
the Emergency Medical Treatment and Active Labor Act (EMTALA), which 
requires hospitals to screen patients who request an emergency 
examination and not delay treatment to stabilize a patient in order to 
inquire about the individual's method of payment or insurance status.
    Response: We are revising Sec.  447.80(c)(1) to state that nothing 
in paragraph (b)(2) relating to alternate cost sharing for non-
emergency services in hospital emergency departments shall be construed 
to limit a hospital's obligations with respect to screening and 
stabilizing treatment of an emergency medical condition under EMTALA, 
which is codified at section 1867 of the Act relating to EMTALA, and is 
the basis for the regulation at Sec.  489.24.
Restrictions on Payments to Providers (Sec.  447.82)
    In the February 22, 2008 proposed rule at Sec.  447.80(a), we 
proposed to require States to reduce the amount of the State's payments 
to providers by the amount of beneficiaries' cost sharing obligations, 
regardless of whether the provider successfully collects the cost 
sharing. We noted in the rule's preamble that States have the ability 
to increase total State plan rates to providers to maintain the same 
level of State payment when cost sharing is introduced.
    In the November 25, 2008 final rule, we accepted the provisions of 
the proposed rule without change.
    Specific comments to this section submitted during the reopened 
comment periods and our responses to those additional comments are as 
follows:
    Comment: One commenter recommended that States not be required to 
reduce payments to providers by the required copayments if the provider 
waives or reduces the cost sharing amounts. Another commenter stated 
that the DRA cost sharing is tantamount to a hidden rate reduction for 
MCOs and other providers. Since cost sharing is deducted from 
providers' payments, MCOs must decide whether to absorb high 
administrative costs to track cost sharing or to forego the collection 
of the fees. Also, commenters requested that MCOs be required to pay 
providers in full when providers decide not to collect cost sharing 
from beneficiaries; otherwise, providers will leave the network.
    Response: The requirement that States not reimburse providers for 
unpaid cost sharing is a longstanding Medicaid policy set forth at 
Sec.  447.57, and is consistent with the overall policy set forth at 
Sec.  447.15, that the Medicaid agency must limit participation in the 
Medicaid program to providers who accept, as payment in full, the 
amounts paid by the agency plus any deductible, coinsurance or 
copayment required by the State plan to be paid by the individual. 
There is no indication of any intent to change this longstanding policy 
in the DRA provisions that added section 1916A to the Act.
    Consistent with such requirements, section 5006(a) of the Recovery 
Act added section 1916(j)(1)(B) of the Act to require that payment due 
to an Indian health care provider or a health care provider through 
referral under contract health services for directly furnishing an item 
or service to a Medicaid-eligible Indian not be reduced by the amount 
of any enrollment fee, premium, or similar charge, or any deductible, 
copayment, cost sharing, or similar charge that would otherwise be due. 
Each State through its regular administrative and political processes, 
in consultation with the Tribes as required by section 5006(e) of the 
Recovery Act, must decide how to implement this requirement and how to 
assure that providers are paid in full under such circumstances.

III. Provisions of the Revised Final Rule

    In this revised final rule, we are adopting the provisions as set 
forth in the November 25, 2008 final rule, subject to the following 
changes.

A. Implementation of Section 5006(a) of the Recovery Act

    The following provisions are open for public comment. The 
provisions implement and interpret section 5006(a) of the Recovery Act, 
which exempts Indians from premiums and cost sharing under certain 
circumstances effective July 1, 2009. Also, the provisions respond to 
public comments received on these new statutory requirements during the 
March 27, 2009 extended comment period on the November 25, 2008 final 
rule.
    Section 5006(a) of the Recovery Act amends sections 1916 and 1916A 
of the Act, to exempt Indian applicants and beneficiaries from Medicaid 
premium and cost sharing requirements under certain circumstances and 
to assure that Indian health care providers, and health care providers 
providing contract health services (CHS) under a referral from an 
Indian health care provider, will receive full payment. Premiums and 
cost sharing exemptions for Indians under CHIP are not affected. The 
provisions took effect on July 1, 2009.
    Specifically, the Recovery Act:
     Exempts Indians from payments of enrollment fees, 
premiums, or similar chargesif they either are eligible to receive or 
have received an item or service furnished by an Indian health care 
provider or through referral under CHS.
     Exempts Indians from payment of a deductible, coinsurance, 
copayment, or similar charge for any item or service covered by 
Medicaid if the Indian is furnished the item or service directly by an 
Indian health care provider or through referral under CHS.
     Prohibits any reduction of payment that is due under 
Medicaid to an Indian health care provider or a health care provider 
through referral under CHS for directly furnishing an item or service 
to an Indian. The State must pay these providers the full Medicaid 
payment rate for furnishing the item or service. Their payments may not 
be reduced by the amount of any enrollment fee, premium, deductible, 
copayment, or similar charge that otherwise would be due from the 
Indian.
Definitions
    In administering the Recovery Act's cost sharing provisions related 
to Indians, the following definitions apply--
     Indian health care provider means a health care program 
operated by the Indian.
     Health Service (IHS) or by an Indian Tribe, Tribal 
Organization, or Urban Indian Organization (otherwise known as an I/T/
U) as those terms are defined in section 4 of the Indian Health Care 
Improvement Act (25 U.S.C. 1603).
     Indian means any individual defined at 25 U.S.C. 1603(c), 
1603(f), or 1679(b), or who has been determined eligible as an Indian, 
pursuant to 42 CFR 136.12. This means the individual:

[[Page 30256]]

    (1) Is a member of a Federally-recognized Indian tribe;
    (2) resides in an urban center and meets one or more of the four 
criteria: (a)Is a member of a tribe, band, or other organized group of 
Indians, including those tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member; (b) is an Eskimo or Aleut or other Alaska Native; (c) is 
considered by the Secretary of the Interior to be an Indian for any 
purpose; or (d) is determined to be an Indian under regulations 
promulgated by the Secretary;
    (3) is considered by the Secretary of the Interior to be an Indian 
for any purpose; or
    (4) is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.
    The IHS administers the CHS Program for the provision of services 
to Indians when those services are not available at IHS or Tribal 
facilities. Any IHS-eligible Indian Medicaid beneficiary who receives a 
referral, including any authorization for payment, by an IHS or Tribal 
provider to an outside provider for contract health service is eligible 
for the exemption from cost sharing for that service. States will need 
to educate non-IHS providers about such documents, so that providers 
will know to waive cost sharing requirements for referrals through CHS 
for which payment may be made by Medicaid. States must inform 
providers, ideally through the use of automated systems, whether an 
individual is exempted from premiums or cost sharing. Reference 
materials about CHS may be accessed on the IHS Web page at: http://www.ihs.gov/NonMedicalPrograms/chs/.
    State Medicaid programs must consult with the IHS, Tribes, Tribal 
Organizations, and Urban Indian Organizations within the State to 
determine what documents the Indian health care providers will use for 
exemption of Indians from enrollment fees, premiums, or other similar 
charges and from deductibles, coinsurance, copayments, or similar 
charges for referrals to providers through the CHS Program.
Cost Sharing: Basis and Purpose (Sec.  447.50)
    We added a new paragraph (b) with definitions for ``Indian'' and 
``Indian health care provider.''
Requirements and Options (Sec.  447.51)
    We added a new paragraph (a)(2) that exempts Indians from payments 
of enrollment fees, premiums, or similar charges if they are eligible 
to receive or have received an item or service furnished by an Indian 
health care provider or through referral under CHS.
Applicability; Specification; Multiple Charges (Sec.  447.53)
    We added a new paragraph (b)(6) to exclude from cost sharing under 
Medicaid all items and services furnished to an Indian directly by an 
Indian health care provider or through referral under CHS.
Restrictions on Payments to Providers (Sec.  447.57)
    We added a new paragraph (c) to specify that payment under Medicaid 
due to an Indian health care provider or a health care provider through 
referral under CHS for directly furnishing an item or service to an 
Indian may not be reduced by the amount of any enrollment fee, premium, 
or similar charge or any deductible, copayment, cost sharing, or 
similar charge that otherwise would be due. Note that there is no 
exemption for cost sharing, such as deductibles, coinsurance or co-
payments, on services rendered to eligible individuals at non-Indian 
health care providers where there was not referral or authorization 
through CHS as defined below.
    Contract health service means any health service that is (1) 
delivered based on a referral by, or at the expense of, an Indian 
health program; and (2) provided by a public or private medical 
provider or hospital that is not a provider or hospital of the Indian 
health program.
General Alternative Premium Protections (Sec.  447.66)
    We added a new paragraph (a)(7) to exclude Indians from payments of 
enrollment fees, premiums, or similar charges if they are eligible to 
receive or have received an item or service furnished by an Indian 
health care provider or through referral under contract health 
services.
    In addition, we added a new paragraph (c) to specify that a State 
may apply additional limitations on imposition of premiums that may 
apply to an individual receiving Medicaid who is an Indian.
General Alternative Cost Sharing Protections (Sec.  447.70)
    We added a new paragraph (a)(10) to exclude from cost sharing under 
Medicaid all items and services furnished to an Indian directly by an 
Indian health care provider or through referral under CHS.
Restrictions on Payments to Providers (Sec.  447.82)
    We added a new paragraph (b) to specify that payment under Medicaid 
due to an Indian health care provider or a health care provider through 
referral under CHS for furnishing an item or service directly to an 
Indian may not be reduced by the amount of any enrollment fee, premium, 
or similar charge, or any deductible, copayment, cost sharing, or 
similar charge that otherwise would be due.

B. Additional Changes to the Medicaid Regulations in Response to Public 
Comments Requirements and Options (Sec.  447.51)

    We revised paragraphs (a) and (c) to clarify the requirements for 
consistency with section 1916 of the Act, to specify the categorically 
needy populations for which the State Medicaid agency may impose an 
enrollment fee, premium, or similar charge in accordance with section 
1916(c), (d), (g), or (i) of the act.
Applicability; Specification; Multiple Charges (Sec.  447.53)
    We revised the definition of ``emergency services'' in paragraph 
(b)(4) to cite the definition which includes the ``prudent layperson'' 
standard at section 1932(b)(2) of the Act and Sec.  438.114(a).
Maximum Allowable and Nominal Charges (Sec.  447.54)
    We revised paragraph (a)(1) and (a)(3)(ii) to clarify the 
requirements for consistency with section 1916 of the Act. Also, we 
revised the example in paragraph (a)(1) for a 6-month certification 
period rather than a 3-month period for consistency with States' 
practices.
    We also revised paragraph (a)(4), in response to public comments, 
to delete a higher maximum copayment of $5.70 per visit for services 
provided by an MCO, when the State does not have a fee-for-service 
delivery system, for Medicaid expansion optional targeted low income 
children for whom enhanced Federal match is paid under section XXI of 
the Act. Since these are Medicaid-eligible children, they will be 
subject to the Medicaid limit for such coverage of $3.40 per visit, 
rather than the limit imposed for separate CHIP programs under title 
XXI.
    In addition, we revised paragraph (b) to correct a citation to 
Sec.  431.57. Also, the paragraph was revised for consistency with 
sections 1916(a)(3) and 1916(b)(3) of the Act that the Secretary of 
Health & Human Services will only

[[Page 30257]]

approve a waiver of the requirement that cost sharing charges must be 
limited to a nominal amount if the State establishes to the Secretary's 
satisfaction that alternative sources of nonemergency, outpatient 
services are actually available and accessible to Medicaid 
beneficiaries in a timely manner.
Standard Co-Payment (Sec.  447.55)
    We revised paragraph (b) to correct a citation to Sec.  447.54(a) 
and (c).
Alternative Premiums and Cost Sharing: Basis, Purpose and Scope (Sec.  
447.62)
    We revised paragraph (a) to clarify the requirements for 
consistency with section 1916A of the Act.
    We also revised paragraph (b) to take into account the amendment to 
section 1916(f) of the Act made by section 6041(b)(1) of the DRA.
Alternative Premiums, Enrollment Fees, or Similar Charges: State Plan 
Requirements (Sec.  447.64)
    We revised paragraphs (a), (c), and (d) to clarify the requirements 
for consistency with section 1916A of the Act.
    We also revised paragraph (d), in response to public comments, to 
require that if a State imposes cost sharing that could result in 
aggregate costs to a family that exceed five percent of the family's 
income, the State must develop a tracking mechanism and not rely on the 
so-called ``shoebox'' method that puts the burden on families to track 
cost sharing. Specifically, a State must describe in its Medicaid State 
plan the methodology it will use to identify beneficiaries who are 
subject to premiums or cost sharing for specific items or services and 
track the premiums and cost sharing incurred, in order to inform 
beneficiaries and providers of beneficiaries' liability and notify 
beneficiaries and providers when individual beneficiaries have reached 
the five percent limit on family out-of-pocket expenses and are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period. Such methods must 
assure that families' cost sharing will not exceed the statutory limit.
Alternative Copayments, Coinsurance, Deductibles, or Similar Cost 
Sharing Charges: State Plan Requirements (Sec.  447.68)
    We revised paragraphs (b), (c), (d), (f)(1), and (f)(2) to clarify 
the requirements for consistency with section 1916A of the Act.
    We revised paragraph (d) to specify that a State must describe in 
its Medicaid State plan the methodology it will use to identify 
beneficiaries who are subject to premiums or cost sharing for specific 
items or services and, if cost sharing could exceed five percent of 
family income, to track beneficiaries' incurred premiums and cost 
sharing through a tracking system developed by the State, in order to 
inform beneficiaries and providers of beneficiaries' liability and 
notify beneficiaries and providers when individual beneficiaries have 
reached the five percent limit on family out-of-pocket expenses to 
assure that costs do not exceed the five percent statutory limit.
    Paragraph (f) is revised to clarify that the aggregate limit under 
Sec.  447.78 on a family's premium and cost sharing applies to section 
1916 and/or 1916A for all individuals in the family enrolled in 
Medicaid.
General Alternative Cost Sharing Protections (Sec.  447.70)
    We renumbered and revised this section to make it consistent with 
section 1916A of the Act. In addition, we revised this section in 
response to public comments.
    We revised the definition of ``emergency services'' in paragraph 
(a)(6) (previously (a)(1)(vi)) and referenced this term in paragraph 
(b) to cite the definition which includes the ``prudent layperson'' 
standard at section 1932(b)(2) of the Act and Sec.  438.114(a).
    We revised paragraph (a)(2) (previously (a)(1)(ii)) to specify at a 
minimum the services listed at Sec.  457.520 as the preventive services 
excluded from alternative cost sharing for children younger than age 
18, which reflect the well baby and well child care and immunizations 
described by the Bright Futures guidelines of the American Academy of 
Pediatrics.
    We revised paragraph (a)(7) (previously (a)(1)(vii)) to specify 
that the family planning services and supplies exempted from cost 
sharing include contraceptives and other pharmaceuticals for which the 
State claims or could claim Federal match at the enhanced rate under 
section 1903(a)(5) of the Act for family planning services and 
supplies.
    We revised paragraph (a)(9) (previously (a)(1)(ix)) to explain that 
disabled children receiving medical assistance by virtue of sections 
1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act who are exempted from 
alternative cost sharing are those covered in accordance with the 
Medicaid eligibility option offered by the Family Opportunity Act.
    We revised paragraph (a)(11) (previously (a)(1)(x)) and paragraph 
(c) (previously (b)) to specify that drugs not identified by the 
State's Medicaid program as non-preferred drugs within a class are 
subject to the same exclusions and limits for cost sharing as drugs 
identified by the State as preferred drugs within a class.
    We revised paragraph (b) (previously (a)(2)) for consistency with 
section 1916A(e)(2)(B) of the Act to specify that cost sharing of no 
more than the nominal amounts defined in Sec.  447.54 may be imposed on 
the exempt populations specified in paragraph (a) of this section for 
nonemergency services furnished in a hospital emergency department, 
under certain conditions.
    Also, we revised paragraph (d) (previously (c)) to specify that 
drugs identified by a State's Medicaid program as non-preferred drugs 
within a class are subject to the same exclusions and limits for cost 
sharing as preferred drugs within a class if the individual's 
prescribing physician determines that the preferred drug for treatment 
of the same condition either would be less effective for the individual 
or would have adverse effects for the individual or both. We deleted as 
unnecessary the additional requirement that the State's criteria for 
prior authorization, if any, must be met.
Alternative Premium and Cost Sharing Exemptions and Protections for 
Individuals With Family Incomes at or Below 100 Percent of the FPL 
(Sec.  447.71)
    We revised paragraphs (b)(1), (b)(3), and (c) and added a new 
paragraph (d) to clarify the requirements for consistency with sections 
1916 and 1916A of the Act. Paragraph (d) specifies that a State may not 
impose on individuals with family income at or below 100 percent of the 
FPL the DRA's alternative premiums and cost sharing defined at section 
1916A of the Act, but may impose cost sharing that does not exceed the 
nominal amounts specified at Sec.  447.54.
Alternative Premium and Cost Sharing Exemptions and Protections for 
Individuals With Family Incomes Above 100 Percent but at or Below 150 
Percent of the FPL (Sec.  447.72)
    We revised the introduction to paragraph (b) and its subsection (2) 
and paragraph (c) to clarify the requirements for consistency with 
section 1916A of the Act.
    We revised paragraph (b)(3), in response to public comments, to 
delete a higher maximum copayment of $5.70

[[Page 30258]]

per visit for services provided by an MCO, when the State does not have 
a fee-for-service delivery system, for Medicaid expansion optional 
targeted low income children for whom enhanced Federal match is paid 
under section XXI of the Act. Since these are Medicaid-eligible 
children, they will be subject to the Medicaid limit for such coverage 
of $3.40 per visit in FY 2009, rather than the limit imposed for 
separate CHIP programs under title XXI.
Alternative Premium and Cost Sharing Protections for Individuals With 
Family Incomes Above 150 Percent of the FPL (Sec.  447.74)
    We revised paragraphs (a), (b), and (c) to clarify the requirements 
for consistency with section 1916A of the Act.
    We also revised paragraph (b) to delete a higher maximum copayment 
of $5.70 per visit for services provided by an MCO, when the State does 
not have a fee-for-service delivery system, for Medicaid expansion 
optional targeted low income children for whom enhanced Federal match 
is paid under section XXI of the Act. Since these are Medicaid-eligible 
children, they will be subject to the Medicaid limit for such coverage 
of $3.40 per visit in FY 2009, rather than the limit imposed for 
separate CHIP programs under title XXI.
Public Schedule (Sec.  447.76)
    We revised paragraph (b)(1) for a minor change by replacing the 
words ``and the'' with the word ``or'' before ``aggregate''.
    Also, in response to public comments, we added a new paragraph (c) 
to require a State to provide the public with advance notice and 
reasonable opportunity to comment in a form and manner provided under 
applicable State law prior to submitting for CMS approval a Medicaid 
State plan amendment (SPA) to establish alternative premiums or cost 
sharing under section 1916A of the Act or to modify substantially an 
existing plan for alternative premiums or cost sharing. Also, the State 
must submit documentation with the SPA to demonstrate that this 
requirement was met.
Aggregate Limits on Alternative Premiums and Cost Sharing (Sec.  
447.78)
    We revised paragraphs (a), (b), (c), and (c)(2) to clarify the 
requirements for consistency with section 1916A of the Act. In 
particular, we clarify that the total aggregate limit of 5 percent of a 
family's income applies for premiums and/or cost sharing imposed under 
section 1916 and/or 1916A of the Act for all individuals in the family 
enrolled in Medicaid.
    We also revised paragraph (c), in response to public comments, to 
require that States describe in their State plan for alternative 
premiums or cost sharing the process for individuals to request a 
reassessment of the family's aggregate limit if the family's income is 
reduced or if eligibility is being terminated due to nonpayment of a 
premium.
Enforceability of Alternative Premiums and Cost Sharing (Sec.  447.80)
    We revised paragraphs (a)(3) and (b) and added a new paragraph (c) 
to clarify and specify the requirements for consistency with section 
1916A of the Act related to alternative cost sharing for nonemergency 
services provided in hospital emergency departments. Also, we revised 
paragraph (b)(2) to reference the definition of ``emergency services'' 
at section 1932(b)(2) of the Act and Sec.  438.114(a).
Restrictions on Payments to Providers (Sec.  447.82)
    We revised this section to make the existing text a new paragraph 
(a).
    We added a new paragraph (c) to require that a State describe in 
its Medicaid State plan how the State identifies for providers, ideally 
through the use of automated systems, whether cost sharing for a 
specific item or service may be imposed on an individual beneficiary 
and whether the provider may require the beneficiary, as a condition 
for receiving the item or service, to pay the cost sharing charge.

C. Changes to the CHIP Regulations

Maximum Allowable Cost Sharing Charges on Targeted Low-Income Children 
in Families With Income From 101 to 150 Percent of the FPL (Sec.  
457.555)
    We revised paragraphs (a)(1)(i) and (a)(2) for minor changes in 
clarification.

IV. Response to Comments on Revised Final Rule

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

V. Waiver of Proposed Rulemaking

    We ordinarily publish a notice of proposed rulemaking in the 
Federal Register and invite public comment on the proposed rule. The 
notice of proposed rulemaking includes a reference to the legal 
authority under which the rule is proposed, and the terms and 
substances of the proposed rule or a description of the subjects and 
issues involved. This procedure can be waived, however, if an agency 
finds good cause that a notice-and-comment procedure is impracticable, 
unnecessary, or contrary to the public interest and incorporates a 
statement of the finding and its reasons in the rule issued.
    A proposed rule was published on February 22, 2008 with a public 
comment period. A final rule was issued on November 25, 2008. The 
November 25, 2008 final rule published in the Federal Register included 
a description of changes to the proposed rule based on the public 
comments and our responses to comments received during the public 
comment period. On January 27, 2009 and March 27, 2009, we published 
final rules to delay the effective date of the November 25, 2008 final 
rule and to reopen the public comment period. The March 27, 2009 final 
rule specifically indicated that analysis of comments received during 
the first reopened comment period indicated a need for revisions to the 
November 25, 2008 final rule, and also specifically requested public 
comments on changes needed to address section 5006(a) of the Recovery 
Act. On October 30, 2009, we published a proposed rule in the Federal 
Register to delay the effective date of the November 25, 2008 final 
rule until July 1, 2010.
    In keeping with the Department's Tribal consultation policy and the 
new provisions in the Recovery Act, CMS collaborated and consulted with 
the Tribal Technical Advisory Group (TTAG) and the IHS to solicit 
advice on implementing these provisions. The Tribal Affairs Group and 
the Center for Medicaid, CHIP, and Survey and Certification within CMS 
jointly hosted two All Tribes Calls on June 5 and 12, 2009, to consult 
on implementation of section 5006 of the Recovery Act. Two face-to-face 
consultation meetings were held in Denver on July 8 and 10, 2009, to 
solicit advice and input on these provisions from federally-recognized 
Tribes, Indian health care providers, and Urban Indian Organizations. 
An All States Call was held on June 10, 2009, with the State Medicaid 
and CHIP programs to describe the CMS Tribal consultation process and 
the Recovery Act provisions and to solicit feedback and questions from 
States. We believe the requirement of a notice of proposed rulemaking 
has been effectively met through the issuances described in the

[[Page 30259]]

preceding paragraphs. However, to the extent that the requirement has 
not been met, we find good cause to waive a notice of proposed 
rulemaking because it is unnecessary when the purposes of the 
requirement have been met through the prior issuances, which clearly 
indicated the intent to revise the November 25, 2008 final rule and 
invited public comment to inform our revisions.
    Specifically, the two 2009 final rules included a reopening of the 
public comment period, indicated that the November 25, 2008 final rule 
would be revised, and requested specific comments on the changes 
required by section 5006(a) of the Recovery Act. In doing so, these 
final rules effectively proposed revision of the November 25, 2008 
final rule and invited public comment. These actions fully satisfied 
the requirements for notice of proposed rulemaking, and further process 
would be unnecessary.
    With respect to the provisions of this revised final rule that 
concern section 5006(a) of the Recovery Act, we further find good cause 
to waive the notice of proposed rulemaking based on the strong public 
interest in protecting beneficiaries from premiums and cost sharing in 
accordance with law. Section 5006(a)(1) became effective on July 1, 
2009, and prompt implementation is necessary to ensure that its 
protections are applied without delay. Delay in implementation would 
harm the Indian beneficiaries whom the statute was specifically 
intended to help.
    Therefore, we find good cause to waive the notice of proposed 
rulemaking and to issue this final rule on an interim basis. We are 
providing a 30-day public comment period.

VI. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 30-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. In 
order to fairly evaluate whether an information collection should be 
approved by OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act 
of 1995 requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    We are soliciting public comment on each of these issues for the 
following sections of this document that contain information collection 
requirements (ICRs):

A. ICRs Regarding

Section 447.64 Alternative Premiums, Enrollment Fees, or Similar 
Charges: State Plan Requirements
    Section 447.64 requires a State imposing alternative premiums, 
enrollment fees, or similar charges on individuals to describe in the 
State plan:
    (a) The group or groups of individuals that may be subject to the 
premiums, enrollment fees, or similar charges.
    (b) The schedule of the premiums, enrollment fees, or similar 
charges imposed.
    (c) The methodology used to determine family income for purposes of 
the imitations on premiums related to family income level that are 
described in Sec.  447.78(c) of this chapter, including the period and 
periodicity of those determinations.
    (d) The methodology used by the State to:
    (1) Identify beneficiaries who are subject to premiums or to cost 
sharing for specific items or services; and
    (2) If the State adopts cost sharing rules that could place 
families at risk of reaching the total aggregate limit for premiums and 
cost sharing under Medicaid, defined at Sec.  447.78 as 5 percent of 
the family's income, track beneficiaries' incurred premiums and cost 
sharing through a mechanism developed by the State that does not rely 
on beneficiaries, in order to inform beneficiaries and providers of 
beneficiaries' liability and notify beneficiaries and providers when 
individual beneficiaries have reached the 5 percent limit on family 
out-of-pocket expenses and are no longer subject to further cost 
sharing for the remainder of the family's current monthly or quarterly 
cap period.
    (e) The process for informing the beneficiaries, applicants, 
providers, and the public of the schedule of premiums, enrollment fees, 
or similar charges for a group or groups of individuals in accordance 
with Sec.  447.76.
    (f) The notice of, timeframe for, and manner of required premium 
payments for a group or groups of individuals and the consequences for 
an individual who does not pay.
    The burden associated with this requirement is the time and effort 
it would take for a State to include this detailed description in the 
State plan. We estimate it would take one State approximately 20 
minutes to incorporate this information in their plan. We believe 56 
States will be affected by this requirement for a total annual burden 
of 18.67 hours.
Section 447.68 Alternative Copayments, Coinsurance, Deductibles, or 
Similar Cost Sharing Charges: State Plan Requirements
    Section 447.68 requires a State imposing alternative copayments, 
coinsurance, deductibles, or similar cost sharing charges on 
individuals to describe in the State plan:
    (a) The group or groups of individuals that may be subject to the 
cost sharing charge.
    (b) The methodology used to determine family income, for purposes 
of the limitations on cost sharing related to family income that are 
described in Sec.  447.78(c) of this chapter, including the period and 
periodicity of those determinations.
    (c) The schedule of the copayments, coinsurance, deductibles, or 
similar cost sharing charges imposed for each item or service for which 
a charge is imposed.
    (d) The methodology used by the State to identify beneficiaries who 
are subject to premiums or cost sharing for specific items or services 
and, if the State adopts cost sharing rules that could place families 
at risk of reaching the total aggregate limit for premiums and cost 
sharing under Medicaid, defined at Sec.  447.78 as 5 percent of the 
family's income, track beneficiaries' incurred premiums and cost 
sharing through a tracking system developed by the State, in order to 
inform beneficiaries and providers of beneficiaries' liability and 
notify beneficiaries and providers when the individual beneficiaries 
reached the 5 percent limit on family out-of-pocket expenses and are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period.
    (e) The process for informing beneficiaries, applicants, providers, 
and the public of the schedule of cost sharing charges for specific 
items and services for a group or groups of individuals in accordance 
with Sec.  447.76 of this chapter.
    (f) The methodology used to ensure that:
    (1) The aggregate amount of premiums and cost sharing imposed under 
section 1916 and section 1916A of the Act for all individuals in the 
family enrolled in Medicaid with family income above 100

[[Page 30260]]

percent of the Federal poverty level (FPL) does not exceed 5 percent of 
the family's income of the family involved.
    (2) The aggregate amount of cost sharing under section 1916 and 
section 1916A of the Act for all individuals in the family enrolled in 
Medicaid with family income at or below 100 percent of the FPL does not 
exceed 5 percent of the family's income of the family involved.
    (g) The notice of, timeframe for, and manner of required cost 
sharing and the consequences for failure to pay.
    The burden associated with this requirement is the time and effort 
it would take for a State to include this detailed description in the 
State plan. We estimate it would take one State approximately 20 
minutes to incorporate this information in their plan. We believe 56 
States will be affected by this requirement for a total annual burden 
of 18.67 hours.
Section 447.76 Public Schedule
    Section 447.76(a) requires States to make available to the groups 
in paragraph (b) of this section a public schedule that contains the 
following information:
    (1) Current premiums, enrollment fees, or similar charges.
    (2) Current cost sharing charges.
    (3) The aggregate limit on premiums and cost sharing or just cost 
sharing.
    (4) Mechanisms for making payments for required premiums and 
charges.
    (5) The consequences for an applicant or beneficiary who does not 
pay a premium or charge.
    (6) A list of hospitals charging alternative cost sharing for non-
emergency use of the emergency department.
    (7) Either a list of preferred drugs or a method to obtain such a 
list upon request.
    The burden associated with this requirement is the time and effort 
it would take the State to prepare and make available to appropriate 
parties a public schedule. We estimate that it would take 20 minutes 
per State. We believe 56 States and territories will be affected by 
this requirement for an annual burden of 18.67 hours.
    Section 447.76(c) requires the State, prior to submitting to the 
Centers for Medicare & Medicaid Services for approval a Medicaid State 
plan amendment to establish alternative premiums or cost sharing under 
section 1916A of the Act or an amendment to modify substantially an 
existing plan for alternative premiums or cost sharing, to provide the 
public with advance notice of the amendment and allow reasonable 
opportunity to comment with respect to such amendment in a form and 
manner provided under applicable State law. The State must submit 
documentation with the SPA to demonstrate that this requirement was 
met.
    The burden associated with this requirement is the time and effort 
it would take for a State to provide advance notice to the public and 
prepare and submit documentation with the SPA. We estimate it would 
take 1 State approximately 3 hours to meet this requirement; therefore, 
the total annual burden associated with this requirement is 3 hours.
Section 447.80 Enforceability of Alternative Premiums and Cost Sharing
    Section 447.80(b)(2) states that a hospital that has determined 
after an appropriate medical screening pursuant to Sec.  489.24, that 
an individual does not need emergency services before providing 
treatment and imposing alternative cost sharing on an individual in 
accordance with Sec.  447.72(b)(2) and Sec.  447.74(b) of this chapter 
for non-emergency services as defined in section 1916A(e)(4)(A) of the 
Act, must provide:
    (1) The name and location of an available and accessible alternate 
non-emergency services provider, as defined in section 1916A(e)(4)(B) 
of the Act;
    (2) Information that the alternate provider can provide the 
services in a timely manner with the imposition of a lesser cost 
sharing amount or no cost sharing; and
    (3) A referral to coordinate scheduling of treatment by this 
provider.
    The burden associated with this requirement is the time and effort 
it would take for a hospital to provide the name and location of an 
alternate provider who can provide services of a lesser cost sharing 
amount or no cost sharing and a referral to that provider. We estimate 
the burden on a hospital to be 5 minutes. We believe the number of 
hospital visits will be 4,077,000; therefore, the total annual burden 
is 339,750 hours.

B. Comments on ICRs

    We have submitted a copy of this final rule to OMB for its review 
of the information collection requirements described above. We will 
revise OMB number 0938-0993 to reflect any additional burden not 
currently approved.
    If you comment on these information collection and recordkeeping 
requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this revised final rule with comment period; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
2244-FC, Fax: (202) 395-6974; or E-mail: [email protected].

VII. Response to Comments

    Because of the large number of public comments we normally receive 
on Federal Register documents, we are not able to acknowledge or 
respond to them individually. We will consider all comments we receive 
by the date and time specified in the DATES section of this preamble, 
and, when we proceed with a subsequent document, we will respond to the 
comments in the preamble to that document.

VIII. 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 Social Security 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 major rules with economically 
significant effects of $100 million or more in any 1 year. We estimate 
this final rule with comment period will not reach the economically 
significant threshold of $100 million in benefits and costs and 
consequently is not a major rule under the Congressional Review Act.
    The economic impact associated with this final rule relates to 
changes it proposes to the November 25, 2008, final rule. The main 
change estimated to have a budget impact is the Recovery Act's 
exemption of Indians from premiums and cost sharing under certain 
circumstances. The estimated budget impact of section 5006 of the 
Recovery Act has been included in the FY 2011 President's budget. The 
RFA requires agencies to analyze options for regulatory relief of small 
businesses, if a rule has a significant impact on a

[[Page 30261]]

substantial number of small entities. 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 Small 
Business Administration's (SBA) definition of a small business (having 
revenues of less than $7 million to $34.5 million in any 1 year.) 
Individuals and States are not included in the definition of a small 
entity. Therefore, the Secretary has determined that this final rule 
with comment period will not have a significant impact on a substantial 
number of 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. Therefore, the Secretary 
has determined that this final rule with comment period will 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) 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 2009, that 
threshold is approximately $133 million. This final rule with comment 
period will not impose spending costs on State, local, or tribal 
governments in the aggregate, or by the private sector, of $133 million 
in any one 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 with comment period will not have 
substantial direct requirement costs on State and local governments, 
preempt State law, or otherwise have Federalism implications.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 447

    Accounting, Administrative practice and procedure, Drugs, Grant 
programs--Health, Health facilities, Health professions, Medicaid, 
Reporting and recordkeeping requirements, Rural areas.

42 CFR Part 457

    Administrative practice and procedure, Grant programs--Health, 
Health insurance, Reporting and recordkeeping requirements.


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 447--PAYMENTS FOR SERVICES

0
1. The authority citation for part 447 continues to read as follows:

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


0
2. Section 447.50 is amended by adding a new paragraph (b) to read as 
follows:


Sec.  447.50  Cost sharing: Basis and purpose.

* * * * *
    (b) Definitions. For the purposes of this subpart:
    (1) Indian means any individual defined at 25 USC 1603(c), 1603(f), 
or 1679(b), or who has been determined eligible as an Indian, pursuant 
to Sec.  136.12 of this part. This means the individual:
    (i) Is a member of a Federally-recognized Indian tribe;
    (ii) Resides in an urban center and meets one or more of the 
following four criteria:
    (A) Is a member of a tribe, band, or other organized group of 
Indians, including those tribes, bands, or groups terminated since 1940 
and those recognized now or in the future by the State in which they 
reside, or who is a descendant, in the first or second degree, of any 
such member;
    (B) Is an Eskimo or Aleut or other Alaska Native;
    (C) Is considered by the Secretary of the Interior to be an Indian 
for any purpose; or
    (D) Is determined to be an Indian under regulations promulgated by 
the Secretary;
    (iii) Is considered by the Secretary of the Interior to be an 
Indian for any purpose; or
    (iv) Is considered by the Secretary of Health and Human Services to 
be an Indian for purposes of eligibility for Indian health care 
services, including as a California Indian, Eskimo, Aleut, or other 
Alaska Native.

0
3. Section 447.51 is amended by revising paragraph (a) and the 
introductory text of paragraph (c) to read as follows:


Sec.  447.51  Requirements and options.

    (a) The plan must provide that the Medicaid agency does not impose 
any enrollment fee, premium, or similar charge for any services 
available under the plan upon:
    (1) Categorically needy individuals, as defined in Sec.  435.4 and 
Sec.  436.3 of this subchapter, except for the following populations in 
accordance with sections 1916(c), (d), (g), and (i) of the Act:
    (i) A pregnant woman or an infant under one year of age described 
in subparagraph (A) or (B) of section 1902(l)(1) of the Act, who is 
receiving medical assistance on the basis of section 
1902(a)(10)(A)(ii)(IX) of the Act and whose family income equals or 
exceeds 150 percent of the Federal poverty level (FPL) applicable to a 
family of the size involved;
    (ii) A qualified disabled and working individual described in 
section 1905(s) of the Act whose income exceeds 150 percent of the FPL;
    (iii) An individual provided medical assistance only under section 
1902(a)(10)(A)(ii)(XV) or section 1902(a)(10)(A)(ii)(XVI) of the Act 
and the Ticket to Work and Work Incentives Improvement Act of 1999 
(TWWIIA); and
    (iv) A disabled child provided medical assistance under section 
1902(a)(10)(A)(ii)(XIX) of the Act in accordance with the Family 
Opportunity Act; and
    (2) An Indian who either is eligible to receive or has received an 
item or service furnished by an Indian health care provider or through 
referral under contract health services.
* * * * *
    (c) For each charge imposed under paragraph (a) or (b) of this 
section, the plan must specify--
* * * * *

0
4. Section 447.53 is amended by revising paragraph (b)(4) and adding a 
new paragraph (b)(6) to read as follows:


Sec.  447.53  Applicability; specification; multiple charges.

* * * * *
    (b) * * *
    (4) Emergency services. Services as defined at section 1932(b)(2) 
of the Act and Sec.  438.114(a).
* * * * *
    (6) Indians. Items and services furnished to an Indian directly by 
an

[[Page 30262]]

Indian health care provider or through referral under contract health 
services.
* * * * *


Sec.  447.54  [Amended]

0
5. Section 447.54 is amended by--
0
A. Republishing the introductory text.
0
B. Revising paragraph (a)(1), paragraph (a)(3)(ii), and paragraph 
(a)(4).
0
C. Revising paragraph (b).
    The revisions read as follows:


Sec.  447.54  Maximum allowable and nominal charges.

    Except as provided at Sec.  447.62 through Sec.  447.82 of this 
part, the following requirements must be met:
    (a) Non-institutional services. Except as specified in paragraph 
(b) of this section, for non-institutional services, the plan must 
provide that the following requirements are met:
    (1) For Federal FY 2009, any deductible it imposes does not exceed 
$2.30 per month per family for each period of Medicaid eligibility. For 
example, if Medicaid eligibility is certified for a 6-month period, the 
maximum deductible which may be imposed on a family for that period of 
eligibility is $13.80. In succeeding years, any deductible may not 
exceed these amounts as updated each October 1 by the percentage 
increase in the medical care component of the CPI-U for the period of 
September to September ending in the preceding calendar year, and then 
rounded to the next higher 5-cent increment.
* * * * *
    (3) * * *
    (ii) Thereafter, any copayments may not exceed these amounts as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next higher 5-
cent increment.
    (4) For Federal FY 2009, any copayment that the State imposes for 
services provided by a managed care organization (MCO) may not exceed 
the copayment permitted under paragraph (a)(3)(i) of this section for 
comparable services under a fee-for-service delivery system. When there 
is no fee-for-service delivery system, the copayment may not exceed 
$3.40 per visit. In succeeding years, any copayment may not exceed 
these amounts as updated each October 1 by the percentage increase in 
the medical care component of the CPI-U for the period of September to 
September ending in the preceding calendar year and then rounded to the 
next higher 5-cent increment.
    (b) Waiver of the requirement that cost sharing amounts be nominal. 
Upon approval from CMS, the requirement that cost sharing charges must 
be nominal may be waived, in accordance with sections 1916(a)(3) and 
1916(b)(3) of the Act and Sec.  431.57 of this chapter, for non-
emergency services furnished in a hospital emergency department, if the 
State establishes to the satisfaction of the Secretary that alternative 
sources of nonemergency, outpatient services are actually available and 
accessible to Medicaid beneficiaries in a timely manner.
* * * * *

0
6. Section 447.55 is amended by revising paragraph (b) to read as 
follows:


Sec.  447.55  Standard co-payment.

* * * * *
    (b) This standard copayment amount for any service may be 
determined by applying the maximum copayment amounts specified in Sec.  
447.54(a) and (c) to the agency's average or typical payment for that 
service. For example, if the agency's typical payment for prescribed 
drugs is $4 to $5 per prescription, the agency might set a standard 
copayment of $.60 per prescription. This standard copayment may be 
adjusted based on updated copayments as permitted under Sec.  
447.54(a)(3).

0
7. Section 447.57 is amended by adding a new paragraph (c) to read as 
follows:


Sec.  447.57  Restrictions on payments to providers.

* * * * *
    (c) Payment under Medicaid due to an Indian health care provider or 
a health care provider through referral under contract health services 
for directly furnishing an item or service to an Indian may not be 
reduced by the amount of any enrollment fee, premium, or similar 
charge, or any deductible, copayment, cost sharing, or similar charge 
that otherwise would be due from the Indian.

0
8. Section 447.62 is revised to read as follows:


Sec.  447.62  Alternative premiums and cost sharing: Basis, purpose and 
scope.

    (a) Section 1916A of the Act sets forth options for a State through 
a Medicaid State plan amendment to impose alternative premiums and cost 
sharing, which are premiums and cost sharing that are not subject to 
the limitations under section 1916 of the Act as described in 
Sec. Sec.  447.51 through 447.56. For States that impose alternative 
premiums or cost sharing, Sec.  447.64, Sec.  447.66, Sec.  447.68, 
Sec.  447.70, Sec.  447.71, Sec.  447.72, Sec.  447.74, Sec.  447.76, 
Sec.  447.78, Sec.  447.80, and Sec.  447.82 prescribe State plan 
requirements and options for alternative premiums and cost sharing for 
a group or groups of individuals (as specified by the State) for 
services or items (as specified by the State) and the standards and 
conditions under which States may impose them. The State may vary the 
premiums and cost sharing among groups of individuals or types of 
services or items, consistent with the limitations specified in this 
subpart and section 1916A(a)(1) of the Social Security Act. Otherwise, 
premiums and cost sharing must comply with the requirements described 
in Sec.  447.50 through Sec.  447.60.
    (b) Waivers of the limitations described in this subpart on 
deductions, cost sharing, and similar charges may be granted only in 
accordance with the provisions of section 1916(f) of the Act.


Sec.  447.64  [Amended]

0
9. Section 447.64 is amended by revising paragraphs (a), (c), and (d) 
to read as follows:


Sec.  447.64  Alternative premiums, enrollment fees, or similar 
charges: State plan requirements.

* * * * *
    (a) The group or groups of individuals that may be subject to the 
premiums, enrollment fees, or similar charges.
* * * * *
    (c) The methodology used to determine family income for purposes of 
the limitations on premiums related to family income level that are 
described in Sec.  447.78(c) of this chapter, including the period and 
periodicity of those determinations.
    (d) The methodology used by the State to:
    (1) Identify beneficiaries who are subject to premiums or cost 
sharing for specific items or services; and
    (2) If the State adopts cost sharing rules that could place 
families at risk of reaching the total aggregate limit for premiums and 
cost sharing under Medicaid, defined at Sec.  447.78, track 
beneficiaries' incurred premiums and cost sharing through a mechanism 
developed by the State that does not rely on beneficiaries, in order to 
inform beneficiaries and providers of beneficiaries' liability and 
notify beneficiaries and providers when individual beneficiaries have 
incurred family out-of-pocket expenses up to that limit and are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period.
* * * * *

0
10. Section 447.66 is amended by--

[[Page 30263]]

0
A. Adding a new paragraph (a)(7).
0
B. Adding a new paragraph (c).
    The additions read as follows:


Sec.  447.66  General alternative premium protections.

    (a) * * *
    (7) An Indian who is eligible to receive or has received an item or 
service furnished by an Indian health care provider or through referral 
under contract health services.
* * * * *
    (c) Nothing in this subsection shall be construed as restricting 
the application of any other limitations on the imposition of premiums 
that may apply to an individual receiving Medicaid who is an Indian.

0
11. Section 447.68 is amended by revising paragraphs (b) through (d) 
and (f) to read as follows:


Sec.  447.68  Alternative copayments, coinsurance, deductibles, or 
similar cost sharing charges: State plan requirements.

* * * * *
    (b) The methodology used to determine family income, for purposes 
of the limitations on cost sharing related to family income level that 
are described in Sec.  447.78(c) of this chapter, including the period 
and periodicity of those determinations.
    (c) The schedule of the copayments, coinsurance, deductibles, or 
similar cost sharing charges imposed for each item or service for which 
a charge is imposed.
    (d) The methodology used by the State to identify beneficiaries who 
are subject to premiums or cost sharing for specific items or services 
and, if families are at risk of reaching the total aggregate limit for 
premiums and cost sharing under Medicaid defined at Sec.  447.78, track 
beneficiaries' incurred premiums and cost sharing through a mechanism 
developed by the State that does not rely on beneficiaries, in order to 
inform beneficiaries and providers of beneficiaries' liability and 
notify beneficiaries and providers when individual beneficiaries have 
incurred family out-of-pocket expenses up to that limit and are no 
longer subject to further cost sharing for the remainder of the 
family's current monthly or quarterly cap period.
* * * * *
    (f) The methodology used to ensure that:
    (1) The aggregate amount of premiums and cost sharing imposed under 
section 1916 and section 1916A of the Act for all individuals in the 
family enrolled in Medicaid with family income above 100 percent of the 
Federal poverty level (FPL) does not exceed 5 percent of the family's 
income of the family involved.
    (2) The aggregate amount of cost sharing imposed under section 1916 
and section 1916A of the Act for all individuals in the family enrolled 
in Medicaid with family income at or below 100 percent of the FPL does 
not exceed 5 percent of the family's income of the family involved.
* * * * *

0
12. Section 447.70 is revised to read as follows:


Sec.  447.70  General alternative cost sharing protections.

    (a) States may not impose alternative cost sharing for the 
following items or services. Except as indicated, these limits do not 
apply to alternative cost sharing for prescription drugs identified by 
a State's Medicaid program as non-preferred within a class of such 
drugs or for non-emergency use of the emergency room.
    (1) Services furnished to individuals under 18 years of age who are 
required to be provided Medicaid under section 1902(a)(10)(A)(i) of the 
Act, including services furnished to individuals with respect to whom 
child welfare services are being made available under Part B of title 
IV of the Act on the basis of being a child in foster care and 
individuals with respect to whom adoption or foster care assistance is 
made available under Part E of that title, without regard to age.
    (2) Preventive services, at a minimum the services specified at 
Sec.  457.520, provided to children under 18 years of age regardless of 
family income, which reflect the well baby and well child care and 
immunizations in the Bright Futures guidelines issued by the American 
Academy of Pediatrics.
    (3) Services furnished to pregnant women, if those services relate 
to the pregnancy or to any other medical condition which may complicate 
the pregnancy.
    (4) Services furnished to a terminally ill individual who is 
receiving hospice care (as defined in section 1905(o) of the Act).
    (5) Services furnished to any individual who is an inpatient in a 
hospital, nursing facility, intermediate care facility for the mentally 
retarded, or other medical institution, if the individual is required, 
as a condition of receiving services in that institution under the 
State plan, to spend for costs of medical care all but a minimal amount 
of the individual's income required for personal needs.
    (6) Emergency services as defined at section 1932(b)(2) of the Act 
and Sec.  438.114(a), except charges for services furnished after the 
hospital has determined, based on the screening and any other services 
required under Sec.  489.24 of this chapter, that the individual does 
not need emergency services consistent with the requirements of 
paragraph (b) of this section.
    (7) Family planning services and supplies described in section 
1905(a)(4)(C) of the Act, including contraceptives and other 
pharmaceuticals for which the State claims or could claim Federal match 
at the enhanced rate under section 1903(a)(5) of the Act for family 
planning services and supplies.
    (8) Services furnished to women who are receiving medical 
assistance by virtue of the application of sections 
1902(a)(10)(A)(ii)(XVIII) and 1902(aa) of the Act (breast or cervical 
cancer provisions).
    (9) Services furnished to disabled children who are receiving 
medical assistance by virtue of the application of sections 
1902(a)(10)(A)(ii)(XIX) and 1902(cc) of the Act, in accordance with the 
Family Opportunity Act.
    (10) Items and services furnished to an Indian directly by an 
Indian health care provider or through referral under contract health 
services.
    (11) Preferred drugs within a class, or drugs not identified by the 
State's Medicaid program as a non-preferred drug within a class, for 
individuals for whom cost sharing may not otherwise be imposed as 
described in paragraphs (a)(1) through (10) of this section.
    (b) For the exempt populations specified in paragraph (a) of this 
section, a State may impose nominal cost sharing as defined in Sec.  
447.54 of this chapter for services furnished in a hospital emergency 
department, other than those required under Sec.  489.24, if the 
hospital has determined based on the medical screening required under 
Sec.  489.24 that the individual does not need emergency services as 
defined at section 1932(b)(2) of the Act and Sec.  438.114(a), the 
requirements of Sec.  447.80(b)(1) are met, and the services are 
available in a timely manner without cost sharing through an outpatient 
department or another alternative non-emergency health care provider in 
the geographic area of the hospital emergency department involved.
    (c) In the case of a drug that a State's Medicaid program either 
has identified as a preferred drug within a class or has not otherwise 
identified as a non-preferred drug within a class, cost sharing may not 
exceed the nominal levels permitted under section 1916 of the Act as 
specified in Sec.  447.54 of this chapter. Cost sharing can be imposed

[[Page 30264]]

that exceeds the nominal levels permitted under section 1916 of the Act 
for drugs that are identified by a State's Medicaid program as non-
preferred drugs within a class in accordance with section 1916A(c) of 
the Act.
    (d) In the case of a drug that is identified by a State's Medicaid 
program as a non-preferred drug within a class, the cost sharing is 
limited to the amount imposed for a preferred drug if the individual's 
prescribing physician determines that the preferred drug for treatment 
of the same condition either would be less effective for the individual 
or would have adverse effects for the individual or both.
    (e) States may exempt additional individuals, items, or services 
from cost sharing.

0
13. Section 447.71 is amended by--
0
A. Revising paragraphs (b)(1), (b)(3), and (c).
0
B. Adding a new paragraph (d).
    The additions and revisions read as follows:


Sec.  447.71  Alternative premium and cost sharing exemptions and 
protections for individuals with family incomes at or below 100 percent 
of the FPL.

* * * * *
    (b) * * *
    (1) The State may impose cost sharing under authority provided 
under section 1916 of the Act and consistent with the levels described 
in such section and Sec.  447.54.
* * * * *
    (3) The State may impose cost sharing for non-emergency services 
furnished in a hospital emergency department that does not exceed the 
nominal amount as defined in Sec.  447.54 as long as the services are 
available in a timely manner without cost sharing through an outpatient 
department or other alternative non-emergency services health care 
provider in the geographic area of the hospital emergency department 
involved.
    (c) Aggregate cost sharing under sections 1916 and 1916A of the Act 
for all individuals in the family enrolled in Medicaid may not exceed 
the maximum permitted under Sec.  447.78(b).
    (d) The State may not impose alternative premiums and cost sharing 
in accordance with section 1916A of the Act on individuals whose family 
income is at or below 100 percent of the FPL, but may impose cost 
sharing that does not exceed the nominal amount as defined at Sec.  
447.54 and section 1916 of the Act.
0
14. Section 447.72 is amended by revising paragraphs (b) and (c) to 
read as follows:


Sec.  447.72  Alternative premium and cost sharing exemptions and 
protections for individuals with family incomes above 100 percent but 
at or below 150 percent of the FPL.

* * * * *
    (b) Cost sharing may be imposed under the State plan for 
individuals whose family income exceeds 100 percent, but does not 
exceed 150 percent, of the FPL if the cost sharing does not exceed 10 
percent of the payment the agency makes for the item or service, with 
the following exceptions:
    (1) Cost sharing for non-preferred drugs cannot exceed the nominal 
amount as defined in Sec.  447.54.
    (2) Cost sharing for non-emergency services furnished in the 
hospital emergency department cannot exceed twice the nominal amount as 
defined in Sec.  447.54. A hospital must meet the requirements 
described at Sec.  447.80(b)(2) before the cost sharing can be imposed.
    (3) In the case of States that do not have fee-for-service payment 
rates, any copayment that the State imposes for services provided by an 
MCO to a Medicaid beneficiary, including a child covered under a 
Medicaid expansion program for whom enhanced match is claimed under 
title XXI of the Act, may not exceed $3.40 per visit for Federal FY 
2009. Thereafter, any copayment may not exceed this amount as updated 
each October 1 by the percentage increase in the medical care component 
of the CPI-U for the period of September to September ending in the 
preceding calendar year and then rounded to the next highest 5-cent 
increment.
    (c) Aggregate cost sharing under sections 1916 and 1916A of the Act 
for all individuals in the family enrolled in Medicaid may not exceed 
the maximum permitted under Sec.  447.78(a).

0
15. Section 447.74 is revised to read as follows:


Sec.  447.74  Alternative premium and cost sharing protections for 
individuals with family incomes above 150 percent of the FPL.

    (a) States may impose premiums under the State plan consistent with 
the aggregate limits set forth in Sec.  447.78(a) on individuals whose 
family income exceeds 150 percent of the FPL.
    (b) Cost sharing may be imposed under the State plan on individuals 
whose family income exceeds 150 percent of the FPL if the cost sharing 
does not exceed 20 percent of the payment the agency makes for the item 
(including a non-preferred drug) or service, with the following 
exception: In the case of States that do not have fee-for-service 
payment rates, any copayment that the State imposes for services 
provided by an MCO to a Medicaid beneficiary, including a child covered 
under a Medicaid expansion program for whom enhanced match is claimed 
under title XXI of the Act, may not exceed $3.40 per visit for Federal 
FY 2009. Thereafter, any copayment may not exceed this amount as 
updated each October 1 by the percentage increase in the medical care 
component of the CPI-U for the period of September to September ending 
in the preceding calendar year and then rounded to the next highest 5-
cent increment.
    (c) Aggregate premiums and cost sharing under sections 1916 and 
1916A of the Act for all individuals in the family enrolled in Medicaid 
may not exceed the maximum permitted under Sec.  447.78(a).

0
16. Section 447.76 is amended by revising paragraph (b)(1) and adding a 
new paragraph (c) to read as follows:


Sec.  447.76  Public schedule.

* * * * *
    (b) * * *
    (1) Beneficiaries, at the time of their enrollment and reenrollment 
after a redetermination of eligibility, and when premiums, cost sharing 
charges, or aggregate limits are revised.
* * * * *
    (c) Prior to submitting to the Centers for Medicare & Medicaid 
Services for approval a State plan amendment (SPA) to establish 
alternative premiums or cost sharing under section 1916A of the Act or 
an amendment to modify substantially an existing plan for alternative 
premiums or cost sharing, the State must provide the public with 
advance notice of the amendment and reasonable opportunity to comment 
with respect to such amendment in a form and manner provided under 
applicable State law, and must submit documentation with the SPA to 
demonstrate that this requirement was met.

0
17. Section 447.78 is revised to read as follows:


Sec.  447.78  Aggregate limits on alternative premiums and cost 
sharing.

    (a) The total aggregate amount of premiums and cost sharing imposed 
under sections 1916 and 1916A of the Act for all individuals in a 
family enrolled in Medicaid with family income above 100 percent of the 
FPL may not exceed 5 percent of the family's income for the monthly or 
quarterly period, as specified by the State in the State plan.
    (b) The total aggregate amount of cost sharing imposed under 
sections 1916 and 1916A of the Act for all individuals

[[Page 30265]]

in a family enrolled in Medicaid with family income at or below 100 
percent of the FPL may not exceed 5 percent of the family's income for 
the monthly or quarterly period, as specified by the State in the State 
plan.
    (c) Family income shall be determined in a manner, for such period, 
and at such periodicity as specified by the State in the State plan, 
including the use of such disregards as the State may provide and the 
process for individuals to request a reassessment of the family's 
aggregate limit if the family's income is reduced or if eligibility is 
being terminated due to nonpayment of a premium.
    (1) States may use gross income or any other methodology.
    (2) States may use a different methodology for determining the 
family's income to which the 5 percent aggregate limit is applied than 
is used for determining income eligibility.

0
18. Section 447.80 is amended by--
0
A. Revising paragraph (a)(3), the introductory text of paragraph (b), 
and paragraph (b)(2).
0
B. Adding a new paragraph (c).
    The additions and revisions read as follows:


Sec.  447.80  Enforceability of alternative premiums and cost sharing.

* * * * *
    (a) * * *
    (3) Waive payment of a premium in any case where the State 
determines that requiring the payment would create an undue hardship 
for the individual.
    (b) With respect to alternative cost sharing, a State may amend its 
Medicaid State plan to permit a provider, including a pharmacy or 
hospital, to require an individual, as a condition for receiving the 
item or service, to pay the cost sharing charge, except as specified in 
paragraphs (b)(1) through (3) of this section.
* * * * *
    (2) A hospital that has determined after an appropriate medical 
screening pursuant to Sec.  489.24 of this chapter, that an individual 
does not need emergency services as defined at section 1932(b)(2) of 
the Act and Sec.  438.114(a), before providing treatment and imposing 
alternative cost sharing on an individual in accordance with Sec.  
447.72(b)(2) and Sec.  447.74(b) of this chapter for non-emergency 
services as defined in section 1916A(e)(4)(A) of the Act, must provide:
    (i) The name and location of an available and accessible alternate 
non-emergency services provider, as defined in section 1916A(e)(4)(B) 
of the Act.
    (ii) Information that the alternate provider can provide the 
services in a timely manner with the imposition of a lesser cost 
sharing amount or no cost sharing.
    (iii) A referral to coordinate scheduling of treatment by this 
provider.
* * * * *
    (c) Nothing in paragraph (b)(2) of this section shall be construed 
to:
    (1) Limit a hospital's obligations with respect to screening and 
stabilizing treatment of an emergency medical condition under section 
1867 of the Act; or
    (2) Modify any obligations under either State or Federal standards 
relating to the application of a prudent-layperson standard with 
respect to payment or coverage of emergency medical services by any 
managed care organization.


Sec.  447.82  [Amended]

0
19. Section 447.82 is revised to read as follows:


Sec.  447.82  Restrictions on payments to providers.

    (a) The plan must provide that the State Medicaid agency reduces 
the payment it makes to a provider by the amount of a beneficiary's 
cost sharing obligation, regardless of whether the provider 
successfully collects the cost sharing.
    (b) Payment that is due under Medicaid to an Indian health care 
provider or a health care provider through referral under contract 
health services for directly furnishing an item or service to an Indian 
may not be reduced by the amount of any enrollment fee, premium, or 
similar charge, or any deductible, copayment, cost sharing, or similar 
charge that otherwise would be due.
    (c) The plan must describe how the State identifies for providers, 
ideally through the use of the automated systems, whether cost sharing 
for a specific item or service may be imposed on an individual 
beneficiary and whether the provider may require the beneficiary, as a 
condition for receiving the item or service, to pay the cost sharing 
charge.

PART 457--ALLOTMENTS AND GRANTS TO STATES

0
20. The authority citation for part 457 continues to read as follows:

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

0
21. Section 457.555 is amended by revising paragraphs (a)(1)(i) and 
(a)(2) to read as follows:


Sec.  457.555  Maximum allowable cost sharing charges on targeted low-
income children in families with income from 101 to 150 percent of the 
FPL.

    (a) * * * *
    (1)(i) For Federal FY 2009, any co-payment or similar charge the 
State imposes under a fee-for-service delivery system may not exceed 
the amounts shown in the following table:

------------------------------------------------------------------------
                                                                Maximum
                State payment for the service                  Copayment
------------------------------------------------------------------------
$15 or less.................................................       $1.15
$15.01 to $40...............................................       $2.30
$40.01 to $80...............................................       $3.40
$80.01 or more..............................................       $5.70
------------------------------------------------------------------------

* * * * *
    (2) For Federal FY 2009, any co-payment that the State imposes for 
services provided by a managed care organization may not exceed $5.70 
per visit. In succeeding years, any copayment may not exceed this 
amount as updated each October 1 by the percentage increase in the 
medical care component of the CPI-U for the period of September to 
September ending in the preceding calendar year and then rounded to the 
next higher 5-cent increment.
* * * * *
(Catalog of Federal Domestic Assistance Program No. 93.778, Medical 
Assistance Program)

    Dated: April 22, 2010.
Marilyn Tavenner,
Acting Administrator and Chief Operating Officer, Centers for Medicare 
& Medicaid Services.
    Approved: May 18, 2010.
Kathleen Sebelius,
Secretary.
[FR Doc. 2010-12954 Filed 5-27-10; 8:45 am]
BILLING CODE 4120-01-P