[Federal Register Volume 77, Number 215 (Tuesday, November 6, 2012)]
[Rules and Regulations]
[Pages 66670-66701]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-26507]



[[Page 66669]]

Vol. 77

Tuesday,

No. 215

November 6, 2012

Part II





Department of Health and Human Services





-----------------------------------------------------------------------





Centers for Medicare & Medicaid Services





-----------------------------------------------------------------------





42 CFR Parts 438, 441 and 447





Medicaid Program; Payments for Services Furnished by Certain Primary 
Care Physicians and Charges for Vaccine Administration Under the 
Vaccines for Children Program; Final Rule

  Federal Register / Vol. 77 , No. 215 / Tuesday, November 6, 2012 / 
Rules and Regulations  

[[Page 66670]]


-----------------------------------------------------------------------

DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Part 438, 441, and 447

[CMS-2370-F]


RIN 0938-AQ63

Medicaid Program; Payments for Services Furnished by Certain 
Primary Care Physicians and Charges for Vaccine Administration 
Under the Vaccines for Children Program

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

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: This final rule implements Medicaid payment for primary care 
services furnished by certain physicians in calendar years (CYs) 2013 
and 2014 at rates not less than the Medicare rates in effect in those 
CYs or, if greater, the payment rates that would be applicable in those 
CYs using the CY 2009 Medicare physician fee schedule conversion 
factor. This minimum payment level applies to specified primary care 
services furnished by a physician with a specialty designation of 
family medicine, general internal medicine, or pediatric medicine, and 
also applies to services rendered by these provider types paid by 
Medicaid managed care plans contracted by states to provide the primary 
care services. It also provides for 100 percent federal financial 
participation (FFP) for any increase in payment above the amounts that 
would be due for these services under the provisions of the approved 
Medicaid state plan, as of July 1, 2009. In other words, there will not 
be any additional cost to states for payments above the amount required 
by the 2009 rate methodology. In this final rule, we specify which 
services and types of physicians qualify for the minimum payment level 
in CYs 2013 and 2014, and the method for calculating the payment amount 
and any increase for which increased federal funding is due.
    In addition, this final rule will update the interim regional 
maximum fees that providers may charge for the administration of 
pediatric vaccines to federally vaccine-eligible children under the 
Pediatric Immunization Distribution Program, more commonly known as the 
Vaccines for Children (VFC) program.

DATES: The provisions of this final rule are effective on January 1, 
2013.

FOR FURTHER INFORMATION CONTACT: Mary Cieslicki, (410) 786-4576, or 
Linda Tavener, (410) 786-3838, for issues related to payments for 
primary care physicians.
    Mary Beth Hance, (410) 786-4299, for issues related to charges for 
the administration of pediatric vaccines.

SUPPLEMENTARY INFORMATION: 

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    This final rule implements sections 1902(a)(13), 1902(jj), 1905(dd) 
and 1932(f) of the Social Security Act directing payment by state 
Medicaid agencies of at least the Medicare rates in effect in CYs 2013 
and 2014 or, if higher, the rate using the CY 2009 conversion factor 
(CF) for primary care services furnished by a physician with a 
specialty designation of family medicine, general internal medicine, or 
pediatric medicine. Also, this final rule implements the statutory 
payment provisions uniformly across all states and defines, for 
purposes of enhanced federal match, eligible primary care physicians, 
identifies eligible primary care services, and specifies how the 
increased payment should be calculated. Finally, this rule provides 
general guidelines for implementing the increased payment for primary 
care services delivered by managed care plans.
    This final rule also provides updates to vaccine rates that have 
not been updated since the VFC program was established in 1994.
2. Summary of the Major Provisions
a. Payments to Physicians for Primary Care Services
    This final rule will implement Medicaid payment for primary care 
services furnished by certain physicians in calendar years (CYs) 2013 
and 2014 at rates not less than the Medicare rates in effect in those 
CYs or, if greater, the payment rates that will be applicable in those 
CYs using the CY 2009 conversion factor (CF). It will also provide for 
a 100 percent federal matching rate for any increase in payment above 
the amounts that were due for these services under the provisions of 
the state plan as of July 1, 2009. In other words, there will not be 
any additional cost to states for payments above the amount required by 
the 2009 rate methodology.
b. Vaccine Administration Under the Vaccines for Children (VFC) Program
    This final rule updates the regional maximum fees that providers 
may charge for the administration of pediatric vaccines to federally 
vaccine-eligible children under the Pediatric Immunization Distribution 
Program, more commonly known as the Vaccines for Children (VFC) 
program. The formula used to determine the updated rates used the 
Medicare Economic Index (MEI) which is a price index used by CMS as 
part of the updates to Medicare physician payments. We believe the MEI 
is the best tool to update these rates because: (1) It reflects input 
price inflation faced by physicians inclusive of the time period when 
the national average was established in 1994; and (2) we believe that 
input prices associated with this specific type of physician-provided 
service are consistent with overall input prices. The MEI was most 
recently updated at the end of 2011.
3. Summary of the Costs and Benefits

----------------------------------------------------------------------------------------------------------------
         Provision description                         Total costs                        Total benefits
----------------------------------------------------------------------------------------------------------------
Payments to Physicians for Primary      The overall economic impact of this       The overall benefit of this
 Care Services.                          final rule is an estimated $5.600         rule is the expected increase
                                         billion in CY 2013 and $5.745 billion     in provider participation by
                                         in CY 2014 (in constant 2012 dollars).    primary care physicians
                                         In CY 2013, the federal cost for          resulting in better access to
                                         Medicaid and CHIP is approximately        primary and preventive health
                                         $5.835 billion with $235 million in       services by Medicaid
                                         state savings. In CY 2014, the federal    beneficiaries.
                                         cost for Medicaid and CHIP is
                                         approximately $6.055 billion with $310
                                         million in state savings. The
                                         associated impact of this final rule
                                         requiring states to reimburse specified
                                         physicians for vaccine administration
                                         at the lesser of the Medicare rate or
                                         the VFC regional maximum during CYs
                                         2013 and 2014, is estimated at an
                                         additional $975 million in federal
                                         costs. Specifically, this reflects
                                         federal costs for CYs 2013 and 2014 of
                                         $495 million and $480 million,
                                         respectively.

[[Page 66671]]

 
Increase in Vaccines for Children       This rule updates the maximum rate that   The overall benefit of this
 Program Maximum Administration Fee.     states could pay providers for the        provision is that it gives
                                         administration of vaccines under the      states the ability to
                                         VFC program in years after CY 2014.       increase their VFC vaccine
                                         While states have the flexibility to      administration rates. We
                                         raise their VFC ceilings up to the new    expect that this increase
                                         regional maximum administration fee,      will help maintain provider
                                         they are not anticipated to do so in      participation in the VFC
                                         2013 and 2014 because of the              program.
                                         implementation of the primary care
                                         payment increase.
                                        If all states were to increase their
                                         reimbursement rates to the updated
                                         maximum administration fee, it is
                                         estimated that the total economic
                                         impact would be $75 million per year.
----------------------------------------------------------------------------------------------------------------

B. Background

1. Payments to Physicians for Primary Care Services: Statutory and 
Regulatory Framework
a. Improving Primary Care
    On March 23, 2010, the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was enacted and on March 30, 2010, the Health Care 
and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152) was 
enacted; together they are known as the Affordable Care Act. This final 
rule will implement sections 1902(a)(13), 1902(jj), 1932(f), and 
1905(dd) of the Social Security Act, as amended by the Affordable Care 
Act. Section 1902(a)(13) of the Act requires payment by state Medicaid 
agencies of at least the Medicare rates in effect in calendar years 
(CYs) 2013 and 2014 or, if higher, the rate that will be applicable 
using the CY 2009 Medicare conversion factor (CF), for primary care 
services furnished by a physician with a specialty designation of 
family medicine, general internal medicine, or pediatric medicine.
    Primary care for any population is critical to ensuring continuity 
of care, as well as to providing necessary preventive care, which 
improves overall health and can reduce health care costs. The 
availability of primary care is particularly important for Medicaid 
beneficiaries, to establish a regular source of care and to provide 
services to a group that is more prone to chronic health conditions 
that can be appropriately managed by primary care physicians. Primary 
care physicians provide services that are considered to be a core part 
of a state's Medicaid benefit package. Additionally, these physicians 
can perform the vital function of coordinating care, including 
specialty care.
    As we move towards CY 2014 and the expansion of Medicaid 
eligibility, it is critical that a sufficient number of primary care 
physicians participate in the Medicaid program. Section 1902(a)(13) of 
the Act is intended to encourage primary care physicians to participate 
in Medicaid by increasing payment rates in CYs 2013 and 2014.
b. Medicaid Payment to Providers
    Section 1902(a)(30)(A) of the Act requires that Medicaid payments 
be consistent with efficiency, economy, and quality of care and be 
sufficient to enlist enough providers so that care and services are 
available under the plan at least to the extent that such care and 
services are available to the general population in the geographic 
area. In meeting these requirements, states have broad discretion in 
establishing and updating Medicaid service payment rates to primary 
care providers. For instance, many states reimburse based on the cost 
of providing the service, a review of the amount paid by commercial 
payers in the private market, or as a percentage of rates paid under 
the Medicare program for equivalent services. States may update rates 
based on specific trending factors such as the MEI or a Medicaid 
specific trend factor that incorporates a state-determined inflation 
adjustment rate. Increasingly, states are providing a range of Medicaid 
services through managed care plans under contracts with managed care 
organizations (MCOs) and other organized delivery systems, such as 
prepaid inpatient health plans (PIHPs) and prepaid ambulatory health 
plans (PAHPs). According to the Medicaid and CHIP Payment and Access 
Commission (MACPAC), 49 million Medicaid beneficiaries receive services 
through some form of Medicaid managed care. The contract between the 
state and the managed care plan requires the plan to provide access to 
and make payments to primary care physicians using the funds the state 
pays to the managed care plan.
    Section 1902(a)(13)(C) of the Act requires that states pay a 
minimum payment amount for certain primary care services delivered by 
designated primary care physicians. Primary care services are defined 
in new section 1902(jj) of the Act and include certain specified 
procedure codes for evaluation and management (E&M) services and 
certain vaccine administration codes. Under this provision, states must 
reimburse at least as much as the Medicare physician fee schedule 
(MPFS) rate in CYs 2013 and 2014 or, if greater, the payment rate that 
will apply using the CY 2009 Medicare CF. The directive for payment at 
the Medicare rate extends to primary care services paid on a fee-for-
service (FFS) basis, as well as to those paid on a capitated or other 
basis by Medicaid managed care plans. This regulation will specify 
which services and physicians qualify for the increased payment amount 
in CYs 2013 and 2014, and the method for calculating that payment.
    Section 1905(dd) of the Act provides for higher FFP for the 
required increase in physician payment for services provided on a fee 
for service basis and through managed care arrangements. The FFP rate 
will be 100 percent for the difference between the Medicaid state plan 
rate in effect on July 1, 2009, and the amount required to be paid 
under section 1902(a)(13)(C) of the Act, or by application, under 
section 1932(f). That means that, unless a state has reduced its rates 
since 2009, it will be fully reimbursed for these increased payments by 
the federal government.
    One goal of this rule is to define the payment provisions further 
so that states may uniformly identify the rate differential. 
Specifically, we proposed a payment methodology that took into account 
potential changes in Medicare rates between CYs 2013 and 2014 and CY 
2009 that is independent of the legislatively required payment 
reductions caused by Medicare's sustainable growth rate mechanism. 
Furthermore, this final rule will address Medicare's use of different 
fee schedules that take into account the site of service (for example, 
physician's office, or outpatient department of a hospital) and 
geographical location of the provider.
    The Affordable Care Act amended section 1932(f) of the Act to 
clarify that states must incorporate the requirement for increased 
payment to primary care providers into contracts with managed care 
organizations. We proposed general guidelines for states to follow when

[[Page 66672]]

identifying the amounts by which MCOs must increase existing payments 
to primary care providers, and any additional capitation costs to the 
state attributable to such required increases in existing payments. We 
also proposed to extend this same treatment to PIHPs and PAHPs through 
regulations at part 438, to the extent that primary care provider 
payments are made by these entities.
    We solicited comments on how best to implement through regulation 
the provision that managed care plans pay primary care providers at the 
Medicare rate for primary care services, consistent with those paid on 
a FFS basis. Additionally, we solicited comments from states and other 
stakeholders on the best way to adequately identify the increase in 
managed care capitation payments made by the state that is attributable 
to the increased provider payment, for the purpose of claiming 100 
percent FFP. We were particularly interested in ensuring that primary 
care physicians receive the benefit of the increased payment. Section 
1932(f) of the Act, as amended by the Affordable Care Act, requires 
that the managed care contracts pay providers at the applicable 
Medicare rate levels. We proposed to review managed care contracts to 
ensure that this requirement is imposed on managed care plans by the 
state. We also proposed to require managed care plans to report to the 
state the payments made to physicians under this provision to justify 
any adjustments to the capitation rates paid by the state under the 
contract. In proposing this approach, we were mindful of balancing the 
need for adequate documentation of the payment with the administrative 
burden it places on states and managed care plans. We requested comment 
on these provisions and additional suggestions on how to ensure that 
managed care plans provide the necessary data to the state, as well as 
how to ensure and monitor that managed care plans appropriately pass on 
to physicians the portion of the increased capitation rate that is 
attributable to the primary care rate increase.
    This final rule also addresses identification of the rate 
differential eligible for 100 percent federal matching funds for 
vaccine administration, as set forth in section 1905(dd) of the Act. In 
2011, the vaccine administration billing codes were changed so it is 
not possible to track the Medicaid state plan rate in CY 2009 directly 
to the rates applicable in CYs 2013 and 2014. We requested comment on 
our proposal for imputing the CY 2009 rate.
c. Medicare Payment to Primary Care Providers
    Medicare provides health insurance coverage to people who are aged 
65 and over, people with disabilities or people who meet other special 
criteria, under title XVIII of the Act. For institutional care, such as 
hospital and nursing home care, Medicare makes payments to providers 
using prospective payment systems. Payment for physicians' services 
under Medicare is based on the MPFS. The MPFS assigns relative value 
units (RVUs) for each procedure, as well as geographic practice cost 
indices (GPCIs) for geographic variations in payments, and a global CF, 
which converts relative value units (RVUs) into dollars. Individual fee 
schedule amounts for the MPFS are the product of the geographic 
adjustment, RVUs, and CF. Site of service (for example, physician 
office or outpatient hospital) is reflected as an adjustment to the 
RVUs. We generally issue the MPFS final rule for the subsequent 
calendar year on or before November 1st each year. The MPFS final rule 
includes the RVUs and CF for the upcoming calendar year, which permits 
the calculation of rates. Updates may occur throughout the year, but 
normally occur quarterly.
2. Vaccine Administration Under the Vaccines for Children (VFC) Program
    The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), (Pub. L. 
103-66), created the Vaccines for Children (VFC) Program, which became 
effective October 1, 1994. Section 13631 of OBRA 1993 added section 
1902(a)(62) to the Act to require that states provide for a program for 
the purchase and distribution of pediatric vaccines to program-
registered providers for the immunization of vaccine-eligible children 
in accordance with section 1928 of the Act. Section 1928 of the Act 
requires each state to establish a VFC Program (which may be 
administered by the state Department of Health) under which certain 
specified groups of children are entitled to receive qualified 
pediatric immunizations without charge for the cost of the vaccine.
    Under the VFC Program, a provider, in administering a qualified 
pediatric vaccine to a federally vaccine-eligible child, may not impose 
a charge for the cost of the vaccine. Section 1928(c)(2)(C)(ii) of the 
Act allows a provider to impose a fee for the administration of a 
qualified pediatric vaccine as long as the fee, in the case of a 
federally vaccine-eligible child, does not exceed the costs of such 
administration (as determined by the Secretary based on actual regional 
costs for such administration). However, a provider may not deny 
administration of a qualified pediatric vaccine to a vaccine-eligible 
child due to the inability of the child's parents or legal guardian to 
pay the administration fee.
    This regulation updates the administration fee for the first time 
since the VFC program began in 1994. We requested comments on the 
methodology used to calculate the administration fee update as well as 
the impact of the updated administration fee on uninsured and 
underinsured VFC-eligible children.

II. Summary of Proposed Provisions and Analysis of and Response to 
Public Comments

    On May 11, 2012, we published a proposed rule (77 FR 27671) in the 
Federal Register entitled ``Medicaid Program; Payments for Services 
Furnished by Certain Primary Care Physicians and Charges for Vaccine 
Administration under the Vaccines for Children Program.''
    We received a total of 171 comments from states, advocacy groups, 
health care providers, employers, health insurers, health care 
associations, as well as individual citizens. The comments ranged from 
general support for the proposed provisions to specific questions or 
comments regarding the proposed changes.
    The following are brief summaries of each proposed provision, 
summaries of the public comments received, and our responses to those 
public comments:

General Comments

    Comment: Several commenters questioned whether the provisions of 
this rule apply to services paid under the Children's Health Insurance 
Program (CHIP). CHIP programs can be structured as expansions of the 
state's Medicaid program, as separate CHIP programs, or as a 
combination of a Medicaid expansion program and a separate CHIP 
program.
    Response: The statute applies to fee for service and managed care 
payments made for services provided to Medicaid beneficiaries. 
Therefore, this rule applies only to CHIP Medicaid expansion programs 
since beneficiaries in such programs are Medicaid-eligible. CHIP stand-
alone programs are not eligible for 100 percent FFP and physicians 
providing services to children in those programs are not eligible for 
higher payment at the Medicare rate by operation of these rules. At 
state option, states may align their CHIP payment rates for primary 
care providers with these Medicaid payment provisions.

[[Page 66673]]

    Comment: Many commenters suggested that the rule be modified to 
specifically require that states collect and report to CMS data that 
would help the Congress determine whether or not to extend the 
provision beyond 2014.
    Response: We agree and have revised Sec.  447.400(d) accordingly, 
as described below.
    Comment: Many commenters believe that the budget impact estimates 
underestimate the time and resources for states to undertake the 
significant coding and related systems work, conduct the necessary 
analyses and develop policies, implement the regulation as part of 
regular operations and maintain compliance with the regulation as 
proposed in the proposed rule.
    Response: We are sensitive to state concerns about the difficulty 
of implementing some of the provisions of the proposed rule and have 
modified this final rule to limit the administrative burden on states 
to the extent possible. We will also provide technical assistance to 
states as they implement the requirements of this rule to help minimize 
the administrative burden.
    Comment: Several commenters stated that the proposed rule is 
contrary to current state and federal efforts to incentivize the entire 
health care delivery system to move away from volume-based 
reimbursement and would force states to relinquish savings in Medicaid 
efficiencies that have already been put into place. One commenter 
disagreed with our determination that each individual service code must 
be reimbursed at the Medicare payment level and believed that states 
should be permitted to increase total payments in the aggregate, with 
flexibility to determine how those payments are distributed. The 
commenter recommended that, at a minimum, a value-based option for 
implementing the increase be added to the final rule. Several 
commenters suggested that the final rule permit states to develop 
methodologies to calculate the aggregate value of the primary care rate 
increase across all qualified providers and services and to use non fee 
for service payment mechanisms to deliver that aggregate increase 
equitably to eligible providers.
    Response: The statute requires that state plans provide for 
``payment for primary care services * * * at a rate not less than 100 
percent of the payment rate that applies to such services and 
physicians under part B of title XVIII * * *'' Since the Medicare 
payment rate reimburses services individually, we continue to believe 
that this language precludes aggregated payments not specific to the 
service and physician. However, this does not preclude states from 
creating incentive payments or penalties based on performance measures. 
While we believe the Congress intended the payment levels to rise to 
Medicare payments, there is no prohibition on states having incentives/
penalties external to the rates under traditional fee-for-service or 
managed care delivery systems.
    Comment: One commenter asked about the applicability of the rule to 
services provided under section 1115 demonstration waivers.
    Response: This final rule implements the statutory payment 
provisions uniformly across the states regardless of the authority 
under which a state's Medicaid program operates. Specified primary care 
services delivered by eligible primary care physicians must be 
reimbursed at the enhanced rate. We intend to continue a dialogue with 
states with waivers through the implementation process.

A. Payments to Physicians for Primary Care Services

1. Primary Care Services Furnished by Physicians With Specified 
Specialty and Subspecialty (Sec.  447.400)
a. Specified Specialties and Subspecialties
    Section 1902(a)(13)(C) of the Act specifies that physicians with a 
specialty designation of family medicine, general internal medicine, 
and pediatric medicine qualify as primary care providers for purposes 
of increased payment. We proposed that services provided by 
subspecialists within the primary care categories designated in the 
statute would also qualify for higher payment. These subspecialists 
would be recognized in accordance with the American Board of Medical 
Specialties (ABMS) designations. For example, a pediatric cardiologist 
would qualify for payment if he or she rendered one of the specified 
primary care services by virtue of that physician's subspecialty within 
the qualifying specialty of pediatric medicine. Additionally, we 
proposed a method for states to use in identifying practitioners who 
may receive the increased payment.
    Under the proposed rule, states were required to establish a system 
to require physicians to identify to the Medicaid agency their 
specialty or subspecialty before an increased payment was made. For 
program integrity purposes, the state would be required to confirm the 
self-attestation of the physician before paying claims from that 
provider at the higher Medicare rate. We proposed that this be done 
either by verifying that the physician was Board certified in an 
eligible specialty or subspecialty or through a review of a physician's 
practice characteristics.
    Specifically, for a physician who attested that he or she was an 
eligible primary care specialist or subspecialist but who was not Board 
certified (including those who are Board-eligible, but not certified), 
we required that a review of the physician's billing history be 
performed by the Medicaid agency. We proposed that at least 60 percent 
of the codes billed by the physician for all of CY 2012 be for the E&M 
codes and vaccine administration codes specified in this regulation. 
For a new physician who enrolled during either CY 2013 or CY 2014 and 
who attested that he or she was within one of the eligible specialties 
or subspecialties and who was not Board certified we proposed that, 
following the end of the CY in which enrollment occurs, the state would 
review the physician's billing history to confirm that 60 percent of 
codes billed during the CY of enrollment were for primary care services 
eligible for payment under sections 1902(a)(13)(C) and 1902(jj) of the 
Act.
    Comment: Most commenters supported the inclusion of subspecialists. 
However, some commenters requested that CMS permit payment for 
subspecialists recognized by Boards outside of the ABMS, pointing out 
that other Boards are just as relevant. In particular, commenters noted 
that osteopaths, who are recognized as physicians under Medicaid 
regulations, are licensed by their own specialty Board and are excluded 
under the provisions of the proposed rule.
    Response: We agree and have revised the rule to include physicians 
recognized by the American Board of Physician Specialties (ABPS) and 
the American Osteopathic Association (AOA), as well as the American 
Board of Medical Specialties. These are the major, nationally 
recognized physician Boards.
    Comment: Many commenters disagreed with the inclusion of 
subspecialists. The commenters stated that the proposed rule would 
create disincentives for delivery of primary care services in the most 
appropriate settings, and posed a ``threat'' with regard to states' 
ability to meet the statutory requirements of section 1902(a)(30) of 
the Act, which requires that payments under the state plan be 
consistent with economy, efficiency and quality of care. The commenters 
stated

[[Page 66674]]

that the proposal would add 44 additional specialty designations to the 
list of physicians eligible to receive higher payments without a 
``rational'' correlation to the subspecialists that do, or that might 
as a result of the temporary payment increase, deliver primary care. 
Commenters believed that this provision of the proposed rule would 
actually work against an expansion in true primary care.
    One commenter stated that states will not be able to sustain 
increased payment after 2014 because the proposed rule would result in 
payments that are so widely distributed across the delivery system as 
to make the impact of the increase extremely difficult to evaluate. 
This, in turn, would hamper states' ability to demonstrate cost savings 
necessary to gain approval from their legislatures for continued higher 
payment.
    One commenter noted that CMS said it was particularly swayed by 
arguments that pediatric subspecialists provide primary care services 
in deciding to extend higher payment to all subspecialists. The 
commenter believes that the absence of a justification for including 
subspecialists does not lead to the conclusion that all subspecialists 
should be included. Rather, the decision to expand to other 
subspecialists should be based on an analysis of whether increasing 
payment rates is likely to improve access to primary care services for 
Medicaid beneficiaries. Since states are in the best position to make 
that assessment, the commenter urged CMS to permit states the 
flexibility to determine which approach best meets the needs of its 
beneficiaries.
    Several commenters were concerned that including subspecialists 
will add ``unwarranted'' costs. The commenters encouraged CMS ``to 
adhere more closely to the intent of the law and only qualify true 
primary care physicians for this increased payment.'' Several stated 
that the regulation exceeds the authority granted in the Affordable 
Care Act, which they believed limits the categories of providers to 
physicians with specialty designations of family medicine, general 
internal medicine, or pediatric medicine.
    Response: We continue to believe that the statute supports 
inclusion of subspecialists related to the three specialty categories 
designated in the statute and disagree that extending payments to 
subspecialists will dilute the impact of the regulation on Medicaid 
beneficiary access to primary care or result in ``unwarranted'' costs. 
The American Academy of Pediatrics cited the importance of pediatric 
subspecialists, particularly neonatologists, as a source of primary 
care services. The Web site of the American Academy of Family 
Physicians notes that primary care services can be delivered outside an 
office setting and that physicians who are not trained in the primary 
care specialties of family medicine, general internal medicine or 
general pediatrics may sometimes provide patient care services that are 
usually delivered by primary care physicians. This rule only provides 
for higher payment to subspecialists to the degree that they actually 
furnish the E&M codes specified in the regulation and, consequently, 
will not result in costs that are for services that are not properly 
considered primary care. Therefore, we continue to believe that all 
subspecialists related to the three specialty categories designated in 
the statute should be eligible for higher payment to the extent that 
they provide covered E&M services.
    Comment: Other commenters indicated that the proposed rule, while 
properly recognizing E&M codes provided in emergency departments, 
unfairly excluded the majority of emergency physicians who are either 
not Board certified or are certified in emergency medicine. Other 
commenters urged that obstetricians and gynecologists (OB/GYNs) be 
included because of the important role they play in providing primary 
care to women.
    Response: The statute provides for higher payment of services 
furnished by ``a physician with a primary specialty designation of 
family medicine, general internal medicine or pediatric medicine.'' 
Therefore, although we recognize the role that other specialty 
physicians play in providing primary care services, the authority does 
not exist to extend the payment to other categories of physicians, 
including OB/GYNs.
    Comment: While some commenters strongly supported the proposed rule 
requirements that Medicaid agencies verify self-attestations with 
evidence of Board certification or practice history (60 percent of 
codes billed in a prior period were to be for E&M codes specified in 
the proposed rule), others cited both requirements as administratively 
burdensome and as requiring major and costly modifications to state 
processes and systems. They indicated that states have different 
enrollment and claims processing capacity and may not be able to 
identify all provider subspecialties or reimburse a different rate by 
subspecialty. Commenters suggested that states be permitted to use 
their existing enrollment processes, usually self-attestation alone, to 
identify which physicians qualify for payment, or to be permitted to 
use Medicare's NPI designation, which is also based on self-
attestation. One commenter suggested that self-attestation could be 
verified with a random audit by the Medicaid agency.
    Some commenters stated that permitting self-attestation to be 
verified with evidence of Board certification alone creates an 
inequity. This is because many traditional primary care providers who 
are not Board certified and do not reach the 60 percent threshold of 
E&M codes billed will be excluded from increased payment in favor of 
subspecialists who provide relatively few primary care services.
    One commenter disagreed with our decision to base the 60 percent 
claims verification threshold on the Medicare primary care incentive 
program threshold, stating that the Congress could have imposed a 
similar requirement on Medicaid, but did not. They do not believe it is 
appropriate to designate any threshold of claims verification. They 
also suggested permitting non-Board certified physicians to qualify if 
they completed an approved residency in any of the three designated 
primary care physician specialties. Other commenters suggested using 
allowed charges as the threshold to parallel the Medicare primary care 
payment or services paid, rather than billed, asserting that data on 
rejected claims is not readily available.
    One commenter suggested that states be permitted to define eligible 
physicians based on enrollment criteria for existing state primary care 
programs. Another commenter suggested that states be given flexibility 
to rely on methods that already exist within each state's payment 
systems, such as requiring eligible providers to bill with a unique 
modifier.
    One commenter also asked that we clarify procedures for the 
identification of qualifying out-of-state providers, suggesting that 
the home state's verification be used.
    Response: We agree that there is variation among states for 
provider enrollment procedures and Medicaid Management Information 
System (MMIS) capabilities. We acknowledge that many states have 
existing programs designed to increase the availability of primary care 
services and that those programs may differ from the provisions of the 
proposed rule. We also acknowledge that permitting self-attestation to 
be verified with evidence of Board certification alone creates an 
inequity in that Board certified physicians who provide few primary

[[Page 66675]]

care services will be eligible for higher payment while non-Board 
certified physicians who provide many primary care services but not 
enough to meet the 60 percent threshold will be excluded. We continue 
to believe that there must be uniform, auditable standards for the 
identification of eligible physicians and that Board certification and 
claims history are appropriate standards. However, we acknowledge the 
concerns regarding the significant administrative burden of this 
requirement. Therefore, this rule removes the requirement that the 
State Medicaid agency verify the self-attestation of all physicians by 
confirming Board certification or an appropriate claims history. 
Instead, this rule requires that physicians self-attest that they are 
either Board certified in family medicine, general internal medicine, 
or pediatric medicine or a subspecialty within those specialties or 
that that sixty percent of all Medicaid services they bill, or provide 
in a managed care environment, are for the specified E&M and vaccine 
administration codes. This rule also clarifies that states may defer to 
the state where the physician's practice is located with respect to a 
determination of a physician's eligibility for higher payment.
    For the threshold itself, we often use Medicare program standards 
in developing policy for the Medicaid program, and we believe that it 
is appropriate to apply the 60 percent threshold applicable to the 
Medicare primary care incentive payment to the Medicaid payment as 
well.
    Comment: One commenter suggested that the proposed Sec.  447.400(a) 
be amended to add a subsection to define what is meant by self-
attestation of a specialty or subspecialty designation.
    Response: We believe that the meaning of self-attestation is 
generally understood in this context as both the states and managed 
care organizations credential providers. Therefore, we do not agree 
that an amendment to Sec.  447.400(a) is necessary.
    Comment: Commenters questioned whether the process for identifying 
eligible providers was the same across delivery systems and if states 
with MCOs, PIHPs or PAHPs could rely on the definition of primary care 
provider established through the managed care contract. Commenters 
suggested that the broad definition of primary care provider proposed 
by the proposed rule would reward providers that do not focus their 
practice on primary care.
    Response: We recognize that the definition of a primary care 
provider under existing managed care contracts may, in some instances, 
be more or less targeted than that proposed under this rule. The 
contract definition may also exceed the scope of those primary care 
physicians that qualify for this payment. However, section 
1902(a)(13)(C) of the Act, as amended by the Affordable Care Act, 
specifies that physicians with a specialty designation of family 
medicine, general internal medicine, and pediatric medicine qualify as 
primary care providers for the purposes of the increased payment rate. 
The proposed rule clarified that qualified providers include 
subspecialists related to the three designated provider practice types. 
Therefore, we must require that the same approach apply to identifying 
eligible providers reimbursed under managed care delivery systems.
    Comment: A commenter noted that some physicians have more than one 
identifier and asked if separate information on both identifications 
would be necessary if the physician receives differing rates based on 
the identification number used.
    Response: This is an operational issue beyond the scope of this 
rule.
    Comment: A commenter suggested that non-contracted providers that 
deliver primary care services to managed care enrollees that have a 
permissible out-of-network encounter should not be eligible for payment 
at the Medicare rate.
    Response: We disagree. Section 1932(f) of the Act, as amended by 
the Affordable Care Act, requires that managed care contracts pay 
designated providers for the provision of designated services at the 
Medicare rate. Further, there are no exceptions made in the statute to 
the minimum payment requirement for services provided out of network. 
If a Medicaid beneficiary receives eligible services out-of-network 
from a provider covered by this rule, the reimbursement rate must also 
align with the requirements stated herein.
    Comment: One commenter stated that not all subspecialists providing 
services through managed care delivery systems have the expertise to 
function as a primary care provider.
    Response: This rule does not create new requirements for primary 
care providers. Rather, it assures payment of the Medicare rate for 
services that the subspecialist bills within the E&M and vaccine 
administration code range specified in the rule.
    Comment: One commenter asked if the intent of the managed care 
payment is to include subspecialties such as otolaryngology, 
ophthalmology or urology and also stated that the payment should be 
limited to subspecialists that directly serve primary care needs.
    Response: The intent of the managed care payment is to reimburse at 
the Medicare rate only those primary care subspecialists and related 
subspecialists designated in this rule and only for the E&M and vaccine 
administration code range specified in the rule.
    Summary of Final Policy: This final rule provides for higher 
payment in both the fee for service and managed care settings to 
physicians practicing within the scope of practice of medicine or 
osteopathy with a specialty designation of family medicine, general 
internal medicine and pediatric medicine. It also provides for higher 
payment for subspecialists related to those specialty categories as 
recognized by the American Board of Medical Specialties, American 
Osteopathic Association and the American Board of Physician 
Specialties. Lists of specialists and subspecialists can be found at 
the respective Board Web sites which are: www.abms.org, 
www.osteopathic.org and www.abps.org. This rule removes the requirement 
that the state Medicaid agency verify the self-attestation of all 
physicians by confirming Board certification or an appropriate claims 
history. However, in the absence of an industry-wide definition of 
``primary care physician'' we believe it is necessary to impose a 
uniform standard to identify such providers. Therefore, this rule 
requires that physicians self-attest that they are either Board 
certified in family medicine, general internal medicine, or pediatric 
medicine or a subspecialty related to those specialties or that 60 
sixty percent of all Medicaid services they bill, or provide in a 
managed care environment, are for the specified E&M and vaccine 
administration codes.
    State Medicaid agencies may pay physicians based on their self-
attestation alone or in conjunction with any other provider enrollment 
requirements that currently exist in the state. However, if a state 
relies on self-attestation it must annually review a statistically 
valid sample of physicians who have self-attested that they are 
eligible primary care physicians to ensure that the physician is either 
Board certified in an eligible specialty or subspecialty or that 60 
percent of claims either billed or paid are for eligible E&M codes. In 
the case of services provided through a managed care delivery system, 
states will be given flexibility in the manner in which they perform 
this verification. We expect states to work with the health plans to 
determine an appropriate verification methodology.
    We recognize that data may not be readily available on rejected 
claims, making services paid a more appropriate

[[Page 66676]]

threshold and either claims billed or claims paid can be used in the 
sample. This rule also clarifies that a state whose beneficiaries 
receive services from a physician in a neighboring state may accept the 
determination of eligibility for higher payment made by the physician's 
home state in making higher payment under this rule.
b. Services Furnished by a Specified Physician
    Section 1902(a)(13)(C) of the Act requires increased payment for 
``primary care services furnished in CYs 2013 and 2014 by a physician 
with a primary specialty designation of family medicine, general 
internal medicine, or pediatric medicine.'' The proposed rule specified 
that the increased payment applies only for services under the 
``physicians' services'' benefit at section 1905(a)(5)(A) of the Act 
and in regulations at Sec.  440.50. Increased payment would not be 
available for services provided by a physician delivering services 
under any other benefit under section 1905(a) of the Act such as, but 
not limited to, the Federally Qualified Health Center (FQHC) or Rural 
Health Clinics (RHC) benefits because, in those instances, payment is 
made on a facility basis and is not specific to the physician's 
services. Section 1902(a)(13)(C) of the Act requires payment ``for 
primary care services * * * furnished by a physician with a primary 
specialty designation of family medicine, general internal medicine, or 
pediatric medicine at a rate no less than 100 percent of the payment 
rate that applies to such services and physicians under Part B of Title 
XVIII.'' We believe that the statute limits payment to physicians who, 
if Medicare providers, would be reimbursed using the MPFS. The MPFS is 
not used to reimburse physicians in settings such as FQHCs or RHCs. 
Therefore, we believe physicians delivering primary care services at 
FQHCs and RHCs are not eligible for increased payments under section 
1902(a)(13) of the Act. Furthermore, we noted that the Medicaid statute 
already provides a payment methodology for FQHCs and RHCs that is 
designed to reimburse those providers at the appropriate rate.
    In specifying that payment is made for qualified primary care 
services under the physicians' services benefit at Sec.  440.50, the 
increased payment for primary care services would be required for 
services furnished ``by or under the personal supervision'' of a 
physician who is one of the primary care specialty or subspecialty 
types designated in the regulation. In Medicaid, many primary care 
physician services are actually furnished under the personal 
supervision of a physician by nonphysician practitioners, such as nurse 
practitioners and physician assistants. Such services are usually 
billed under the supervising physician's program enrollment number and 
are treated in both Medicare and Medicaid as services of the 
supervising physician. Consistent with that treatment, we proposed that 
primary care services be paid at the higher rates if properly billed 
under the provider number of a physician who is enrolled as one of the 
specified primary care specialists or subspecialists, regardless of 
whether furnished by the physician directly, or under the physician's 
personal supervision. This would align with Medicaid's longstanding 
practice in providing physician services, as well as Medicare's Part B 
FFS payment methodology for professional services. Additionally, this 
policy would recognize the important role that non physician 
practitioners working under the supervision of physicians have in the 
delivery of primary care services.
    Comment: Most commenters supported the proposal to include 
practitioners working under the supervision of a physician, however 
they disagreed with the exclusion of those same practitioners when 
billing under their own Medicaid number. Numerous commenters urged CMS 
to include independently practicing certified nurse midwives, nurse 
practitioners, certified registered nurse anesthetists, clinical nurse 
specialists and other advanced practice nurses, as well as pharmacists, 
who often administer vaccines, as eligible practitioners on the grounds 
that they provide identical services to those provided by primary care 
physicians.
    Some commenters urged CMS to extend increased payment to FQHCs and 
RHCs, pointing out their important role in the provision of primary 
care services in underserved areas. Several urged that services 
provided by other types of clinics and Health Departments be included 
and asked whether services provided by public health providers in those 
settings were eligible if billed by an eligible physician using his own 
National Provider Identifier (NPI). One commenter asked how primary 
care services reimbursed as part of a nursing facility per diem rate 
and billed under the nursing facility's Medicaid number would be 
reimbursed.
    Response: The statute provides for higher payments for ``primary 
care services furnished * * * by physicians with a primary specialty 
designation of family medicine, general internal medicine or pediatric 
medicine * * *.'' Therefore, consistent with the statute, services 
provided by pharmacists or independently practicing nonphysician 
practitioners not under the supervision of an eligible physician are 
excluded. In addition, we continue to believe that eligible services 
are those reimbursed on a physician fee schedule. Services provided in 
FQHCs, RHCs and clinics and Health Departments, to the extent that they 
are reimbursed on an encounter or visit rate, are not eligible for 
higher payment, nor are services provided in nursing facilities that 
are reimbursed as part of the per diem rate.
    Comment: A commenter noted that managed care contracts may require 
that FQHC and RHC services be paid at a level not less than that 
received by other providers under contract for the same scope of 
services, and that any increase to the FQHC or RHC service rate to 
account for enhanced payments to primary care providers under this rule 
should be eligible for 100 percent FFP. One commenter recommended that 
the final rule clarify that, if a state requires managed care 
organizations to increase payments to primary care providers in FQHCs, 
the state should make a corresponding adjustment in the plan's 
capitation rate in a transparent and timely fashion. An additional 
comment was made that FQHCs and RHCs should be eligible for higher 
payment under this rule, thereby reducing the managed care ``wrap 
around'' required by the prospective payment system (PPS).
    Response: The increased payment for primary care services eligible 
for 100 percent federal matching funds is implemented as a physician 
payment under section 1905(a)(5) of the Act. This means that services 
delivered by physicians under another Medicaid benefit at section 
1905(a) of the Act, such as FQHC services, are not subject to the 
higher payment requirement or eligible for enhanced federal matching 
funds. Managed care contractual payment arrangements for FQHCs and RHCs 
are unaffected by and beyond the scope of this rule.
    Comment: One state asserted that the proposed rule unfairly treats 
comparable providers unequally based solely on their practice setting 
or enrollment status. That same commenter noted that precluding 
independently enrolled practitioners from receiving the enhanced 
reimbursement undermines the purpose of section 1902(kk) of the Act to 
improve data collection and program integrity by requiring ``all 
rendering or referring physicians or other professionals to be enrolled 
under the state plan or under a waiver as a participating provider.'' 
In order to

[[Page 66677]]

comply, the state has been requiring independent enrollment of 
nonphysician practitioners, where possible under state law.
    Many commenters expressed concern with the requirement that 
services be billed under the physician's billing number. They indicated 
that many states have billing and oversight policies and procedures 
designed to elicit desirable policy goals or analyses, but which will 
also make it administratively difficult for nonphysician providers to 
receive the higher Medicare rate. They also stated that some states 
require certain nonphysician providers to obtain and bill under their 
own provider number, even when being supervised by a physician, and 
that the definition of a physician at Sec.  440.50 does not specify 
that services must be billed under the physician's number. Another 
commenter indicated that, in many situations, the billing entity is 
often a legal entity, not a practitioner. In the case of a group 
practice, the claim would most likely be billed under the practice 
number and not the physician's number.
    Another commenter stressed that states have varying definitions of 
``physician supervision'' and suggested that CMS defer to state rules 
on this point. Commenters suggested that CMS permit various kinds of 
arrangements or agreements between physicians and independently billing 
nonphysician practitioners so that primary care services such as those 
provided by nurse practitioners and physician assistants at commercial 
emergency facilities could receive increased reimbursement.
    Response: We acknowledge the variation in billing practices and 
requirements among states. Therefore, this rule removes the requirement 
that services be billed under the physician's billing number. We also 
acknowledge that states have varying requirements with regard to 
services provided under the supervision of a physician. However, by 
specifying in the statute that services be furnished by physicians, we 
believe that the Congress clearly intended that there be direct 
physician involvement in the services provided. Therefore, while 
deferring to state requirements, this rule assumes a relationship in 
which the physician has professional oversight or responsibility for 
the services provided by the practitioners under his or her 
supervision. This precludes the types of arrangements in which 
independent nurse managed clinics or other practitioners enter into 
arms-length arrangements with physicians for purposes of establishing a 
relationship that leads to higher payment of the practitioner services.
    Comment: CMS was asked to clarify in the final rule that services 
provided by all advanced practice clinicians, including nurse midwives, 
providing services under the supervision of a physician will be 
eligible for higher payment.
    Response: Eligible services provided by all advanced practice 
clinicians providing services within their state scope of practice 
under the supervision of an eligible physician will be eligible for 
higher payment. This includes those not specifically mentioned in the 
proposed rule, such as nurse midwives.
    Comment: CMS was asked to clarify whether services provided by 
advanced practice clinicians under the supervision of a physician will 
be billed at 100 percent of the Medicare physician rate, or the 
practitioner rate, since many states reimburse services provided by 
supervised nonphysician practitioners at a percentage of the physician 
fee schedule rate.
    Response: The statute provides for 100 percent FFP on the 
difference between the Medicaid rates paid as of July 1, 2009 and the 
applicable Medicare rates in CYs 2013 and 2014. Therefore, if the state 
plan in 2009 reimbursed services provided by nonphysician practitioners 
under the supervision of a physician at a percentage of the physician 
fee schedule rate, that same practice must be continued in CYs 2013 and 
2014. If a state reimbursed all physician services at a single rate in 
2009, it should continue to reimburse in that manner in CYs 2013 and 
2014.
    Summary of Final Policy: This rule provides for higher payment for 
services provided by eligible physicians reimbursed pursuant to a 
physician fee schedule. Higher payment is not available for physicians 
who are reimbursed through a FQHC, RHC or health department/clinic 
encounter or visit rate or as part of a nursing facility per diem rate.
    This rule provides for higher payment for services provided under 
the personal supervision of eligible physicians by all advanced 
practice clinicians. In recognition of state efforts to enroll advanced 
practice clinicians in the Medicaid program and to require them to use 
their own Medicaid number, this rule removes the requirement that 
services be billed under the physician's billing number. However, it 
requires that the physician have professional oversight or 
responsibility for the services provided by the practitioners under his 
or her supervision. This rule also provides that the state reimburse 
for services provided by advanced practice clinicians in 2013 and 2014 
in the manner in which it reimbursed for those services as of July 1, 
2009. If the state reimbursed for services actually rendered by 
supervised advanced practice clinicians at a percentage of the 
physician fee schedule rate, it should continue to do so in 2013 and 
2014.
c. Eligible Primary Care Services (Sec.  447.400(b))
    We proposed that Healthcare Common Procedure Coding System (HCPCS) 
(E&M) codes 99201 through 99499 and vaccine administration codes 90460, 
90461, 90471, 90472, 90473 and 90474 or their successors will be 
eligible for higher payment and FFP. These codes are specified by the 
statute and include those primary care E&M codes not reimbursed by 
Medicare.
    Specifically, we proposed to include as primary care services the 
following E&M codes that are not reimbursed by Medicare:
     New Patient/Initial Comprehensive Preventive Medicine--
codes 99381 through 99387;
     Established Patient/Periodic Comprehensive Preventive 
Medicine--codes 99391 through 99397;
     Counseling Risk Factor Reduction and Behavior Change 
Intervention--codes 99401 through 99404, 99408, 99409, 99411, 99412, 
99420 and 99429;
     E&M/Non Face-to-Face physician Service--codes 99441 
through 99444.
    Comment: Most commenters were supportive of the range of E&M codes 
identified for higher payment and of the inclusion of codes not 
reimbursed by Medicare. Two commenters suggested expanding the list of 
covered codes to include HCPCS ``G'' codes and two suggested permitting 
states to designate additional codes at their discretion. Two 
commenters suggested extending higher payment to all codes billed by a 
primary care pediatrician, pediatric subspecialist, or surgical 
specialist.
    Some commenters stated that some of the codes identified by CMS are 
not viewed by the industry as constituting primary care. These include 
the following: Hospital Observation Care and Inpatient Consultation 
codes for inpatient services provided by the non-admitting physician 
(99217-99220, 99224-99226, 99251-99255, 99231-99233); Consultations 
(99241-99245, 99251-99255); Emergency Department Services (99281-
99288); and Critical Care Services (99291-99292). Commenters stated 
that some are rendered in settings not known for primary care delivery 
such as intensive care units and emergency departments. They believe 
that inclusion of those

[[Page 66678]]

codes will encourage inappropriate utilization and result in increased 
health care costs overall. One commenter suggested limiting increased 
reimbursement to office-based services.
    However, other commenters commended the inclusion of these same 
codes. They stated that these settings often are the point of first 
contact for primary care due to new injuries or lack of timely access 
to primary care services in the community.
    Response: The statute identifies specific services according to 
HCPCS codes that will receive the increased payment. Accordingly, we 
are finalizing the list of codes specified in the proposed rule.
    Comment: One state indicated that it is still using local codes 
rather than the E&M codes identified in this rule and asked for 
confirmation that services billed using those codes will be eligible 
for higher payment. It was suggested that states be permitted to 
provide CMS with a crosswalk of those local codes to the E&M codes they 
represent.
    Response: We confirm that higher payment may be made for services 
billed using local codes. States will need to submit a crosswalk of 
those codes to the eligible E&M codes as part of the required 
implementing state plan amendment. However, this flexibility is limited 
to substitutes for covered E&M codes and does not extend to vaccine 
administration codes.
    Comment: A number of states indicated that they do not reimburse 
for all of the codes in the specified E&M range and asked that CMS 
clarify that they are not required to do so for purposes of this rule. 
Other commenters suggested that states be required to pay for all codes 
specified in the regulation. Several commenters stated that all of the 
E&M codes specified in section 1902(jj) of the Act are not necessarily 
included in managed care contracts and questioned whether reimbursement 
of all E&M codes was a requirement under this rule.
    One commenter stated that the definition of primary care services 
by CMS is broader than what is currently used by some MCOs and 
expressed concern that the rate adjustment will inadvertently fail to 
adjust for the scope in services.
    Response: This rule clarifies that states need not pay for codes 
within the specified range that are not otherwise reimbursable under 
their Medicaid program and that managed care contracts need not be 
amended to specifically require coverage of previously non-covered 
codes. To that end, we do not anticipate an impact on the scope of 
primary care services eligible for enhanced federal match under managed 
care delivery systems that would affect rate setting.
    Comment: A commenter asked whether CMS intends for providers to be 
reimbursed at a higher rate for services provided through managed care 
irrespective of actual billed charges or if MCOs are required to 
utilize the Medicaid fee schedule in payment of providers and services 
designated in the rule.
    Response: The statute requires providers to be reimbursed at the 
Medicare rate for primary care services when furnished by the qualified 
physicians and does not make exceptions for a situation where a 
provider may be charging less than the required amount. Therefore, no 
such exception is carved out for managed care payment. If a MCO 
reimburses a physician a fee schedule amount then the rate must be at 
least as much as the Medicare rate used for FFS payment. We intend to 
continue to work with the states regarding the identification of the 
2009 baseline rate for eligible services and the rate differential 
eligible for 100 percent federal matching.
    Comment: A number of states asked if the 2009 base rate for a code 
not reimbursed by the state in 2009, but currently reimbursed, would be 
$0. This includes three codes (subsequent observation care) in the E&M 
code range which have been added since 2009.
    Response: For new codes added to the E&M code range since 2009, we 
confirm that the 2009 rate would be $0 and 100 percent FFP will be 
available for the entire payment. This is also true for other codes 
within the range not reimbursed by the state in 2009 but subsequently 
added to the fee schedule as covered codes. However, we do not expect 
states to make modifications to their code sets in 2013 or 2014 solely 
for the purpose of maximizing FFP. We will require that the state plan 
amendment submitted by the state providing for reimbursement under this 
rule list not only the codes for which higher payment will be available 
in 2013 and 2014 but that it specifically identify the codes which have 
been added since 2009 as well.
    Comment: One commenter asked if states that reimburse the 
consultation codes reimbursed by Medicare in 2009 but not covered in 
2013 and 2014 still will receive the enhanced federal match for these 
codes.
    Response: States will receive 100 percent FFP for the payment 
differential for the difference in payment made for codes in effect in 
2013 and 2014 and the base year. In general, a state will receive 
enhanced match for any code that it reimbursed in the baseline period 
and in 2013 or 2014, even if the code is not reimbursed by Medicare. As 
stated earlier, we will develop Medicare-like rates in 2013 and 2014 
for CPT codes not reimbursed by Medicare but recognized for 
reimbursement in the final rule.
    Comment: A comment was made regarding the baseline for payment to 
out-of-state providers, in particular, that states and managed care 
organizations should be allowed to use statewide or ``rest of state'' 
rates to pay those providers for the provision of eligible primary care 
services.
    Response: In setting the requirement for managed care payment the 
statute does not make an exception to permit out of state providers to 
be reimbursed at less than the minimum amount. Therefore, managed care 
contracts must assure such providers receive the Medicare FFS rate.
    Comment: We received a number of comments about how states should 
be able to set the minimum payment in a managed care environment. Some 
commenters believed that payment should be consistent with the Medicare 
rate in the aggregate for the capitated group, while another urged us 
to permit states to implement a rate based on a multiple of the 
Medicare rate derived from using the state's average Medicaid fee 
schedule versus the Medicare schedule for the state. Another commenter 
asked whether we expect MCOs, PIHPs or PAHPs to unbundle payments to be 
able to track individual services.
    Response: We do not specify in this rule how a state must meet the 
statutory requirement for payment at the Medicare rate under managed 
care delivery systems. Rather, the methodologies required under new 
Sec.  438.804(a)(1) will need to identify the 2009 baseline rate and 
rate differential based on reasonable and documented data and 
assumptions available to the state. As stated throughout this rule, we 
will continue a dialogue with the states on these issues during the 
implementation process.
    Summary of Final Policy: This rule requires state Medicaid agencies 
to reimburse at the applicable 2013 or 2014 Medicare rate for E&M codes 
99201 through 99499 to the extent that those codes are covered by the 
approved Medicaid state plan or included in a managed care contract. 
The 2009 base rate for codes not covered in 2009 but subsequently added 
will be $0. Services billed using local codes will be eligible for 
higher payment if the state Medicaid agency submits, as part of the 
required state plan amendment, a crosswalk of

[[Page 66679]]

those codes to the specified E&M codes. States will also be required to 
identify all codes in use and eligible for higher payment as well as 
those codes added since 2009 for which the base rate will be $0. States 
will be given flexibility in developing a methodology to identify the 
base payment under managed care delivery systems.
2. Amount of Required Minimum Payments (Sec.  447.405)
    Section 1902(a)(13)(C) of the Act requires payment not less than 
the amount that applies under the MPFS in CYs 2013 and 2014 or, if 
greater, the payment rate that would be applicable if the 2009 CF were 
used to calculate the MPFS.
a. Use of Fee Schedule Amount Applicable to the Geographic Location of 
Service
    We proposed that states use the MPFS rate applicable to the site of 
service and geographic location of the service at issue. The Medicare 
Part B rates vary by geographic location and site of service. For 
example, rates are higher for services provided in an office setting as 
opposed to the outpatient hospital setting. We proposed that states 
would be required to use the MPFS payment amounts applicable to the 
site of service and geographic location because we believed these are 
integral to the MPFS payment system. Individual fee schedule amounts 
for the MPFS are the product of the geographic adjustment, relative 
value units (RVUs), and conversion factor (CF) that converts adjusted 
RVUs into dollar amounts. Site of service is reflected as an adjustment 
to the RVUs used to set the rate.
    We proposed that states be required to use the MPFS as published by 
CMS. Medicare primary care incentive payments made under section 1833 
of the Act, as amended by section 5501 of the Affordable Care Act, 
would not be included. Section 5501(a) of the Affordable Care Act 
amended the statute to provide for incentive payments for a subset of 
the codes covered by this regulation. The payments are not made as 
increases in fee schedule amounts and are not reflected in the MPFS.
Overarching and Fee for Service Comments
    Comment: Most commenters strongly urged that states not be required 
to recognize Medicare place of service and geographic adjusters since 
Medicaid payment systems do not make these same adjustments. One 
commenter said that the use of geographic adjustments would perpetuate 
geographic inequities in payment that have resulted from the current 
method of specifying payment locales and for calculating geographic 
practice cost indices (GPCIs) in the Medicare program. As alternatives, 
commenters suggested that states be permitted or required to: use only 
one geographic or place of service schedule or to use weighted average 
rates; pay at the highest geographic rate in the state and; use a 
bench-mark statewide Medicare fee schedule or a national fee schedule 
set by CMS or otherwise determined by the state.
    Response: We have considered the comments and the suggestions in 
light of the clear intent of the statute to enhance Medicaid 
beneficiary access to care through higher physician payments. In the 
interests of administrative simplification, the final rule does not 
require that states make site of service adjustments. Many states have 
instituted measures designed to reduce inappropriate use by 
beneficiaries of emergency departments for non-emergent services. We 
believe that the higher payment for primary care services provided for 
in this rule will encourage physician participation and will improve 
beneficiary access to services provided in the community setting. 
Therefore, this rule provides that states may reimburse all codes at 
the Medicare office rate as an alternative to making site of service 
adjustments.
    For geographic adjustments, the final rule additionally permits 
states to either make all appropriate geographic adjustments made by 
Medicare, or to develop rates based on the mean over all counties for 
each of the E&M codes specified in this rule. In identifying this 
alternative, we balanced the desire on the part of states for 
administrative simplicity against the need to ensure that providers are 
reimbursed in accordance with the requirements of the statute. There 
are seventeen states that have multiple Medicare localities and of 
those seventeen, ten have only two localities. We reviewed various 
formulas utilizing the mean and median of rates. Our goal was to most 
closely match the rates that would be generated under the actual 
Medicare locality fee schedules. By using a single fee schedule based 
on the mean over all counties, the majority of states will see a 
reduction of less than two percent. States that will experience a 
larger impact can elect to use the actual Medicare locality adjusted 
fee schedule. The required state plan amendment for these changes must 
describe the methodology the state has chosen.
    Comment: A number of commenters asked that CMS clarify that the 
increased payment to physicians may be made as a lump sum payment 
rather than as an add-on to the rate, pointing out that Medicare's 
primary care payment is paid as a lump sum on a quarterly basis.
    Response: The higher payments may be made as either add-ons to 
existing rates or as lump sum payments. To ensure that physicians 
receive the benefit of higher payments in a timely manner, lump sum 
payments should be made no less frequently than quarterly.
    Comment: One commenter stated that CMS needs to clarify the 
specific procedures and guidelines regarding how states and health 
plans should reprocess claims for supplemental payment to providers if 
the state chooses to provide increased payments retroactively.
    Response: Because MMIS capabilities and payment processes vary by 
state and between health plans, we are permitting flexibility in the 
specifics of how these tasks are accomplished.
    Comment: A number of commenters suggested that the MPFS be defined 
as including the primary care incentive payment authorized for the 
Medicare program by the statute (as amended by section 5501of the 
Affordable Care Act) to make up for the fact that pediatricians, in 
particular, do not receive payments under the Medicare primary care 
incentive program. These commenters disagreed with CMS's interpretation 
that the statute precludes the inclusion of these payments.
    Response: As noted in the proposed rule, payments under section 
5501 of the Affordable Care Act are not made as increases in fee 
schedule amounts and are not reflected in the MPFS. Therefore, this 
final rule requires that those payments be excluded when calculating 
the appropriated 2013 and 2014 Medicare fee schedule rates.
    Comment: Many commenters asked that states be given flexibility to 
implement the program in phases, if necessary, and to make changes to 
rates retrospectively. They pointed out that the Medicare RVUs for the 
subsequent calendar year are not published until November, which does 
not give states enough time to incorporate the Medicare payment rates 
into fee schedules and contracts by January 1, 2013.
    Response: We acknowledge that states will not have information on 
the final 2013 Medicare RVUs and on final regulatory requirements for 
the primary care payments until late in 2012. However, we do not have 
the authority to permit states to implement higher payments ``in 
phases''. The statute requires that higher payment be made for services 
furnished on or after January 1, 2013. However, under

[[Page 66680]]

regulations at Sec.  430.20, states have until March 31, 2013 to submit 
a State Plan Amendment (SPA) that is effective on January 1, 2013. 
Additionally, it is common practice for states changing reimbursement 
rates to make retroactive adjustments to claims after a SPA has been 
approved. This procedure provides additional time for states to make 
system changes to reflect this final rule and the November 2012 
publication of the Medicare 2013 RVUs.
    Comment: One commenter stated that the final rule needs to clarify 
that the billing entity for the primary care provider must receive the 
higher payment. This comment was made in the context of salaried 
physicians working for a county provider.
    Response: If services delivered by the county employed physician 
are actually reimbursed under the Medicaid state plan as physician 
services rather than clinic services, then the physician must receive 
the increased payment. If, as a condition of employment, the physician 
agrees to accept a fixed salary amount then we expect an appropriate 
adjustment to the salary to reflect the increase in payment. We caution 
governmental providers that services of a physician may be delivered 
under a variety of Medicaid benefit categories and that services 
offered by a county run clinic, in general, do not qualify for the 
enhanced federal match.
Comments Specific to Managed Care
    Comment: CMS received many comments on the minimum payment 
requirement, ranging from concern that primary care providers would not 
actually receive higher payment to concern that monitoring payment 
distribution would be unduly burdensome for MCOs, PIHPs and PAHPs. One 
commenter suggested that CMS consider a MCO, PIHP or PAHP's obligation 
to have been met if the health plan's contracts with provider groups 
allowed for the increased payment. Another commenter suggested that 
states should be required to enact contract amendments that allow full 
pass through of the rate increase to primary care providers and 
describe how the MCO, PIHP or PAHP will verify, in the aggregate, the 
delivery of primary care services at the average enhanced rate.
    Response: We recognize that states' managed care contracts with 
MCOs, PIHPs, and PAHPs vary and that, as a consequence, provider 
agreements vary as well. We continue to require that qualified 
providers receive the higher payment but in deference to these varying 
arrangements, we do not specify how this requirement must be met. We 
emphasize that in order for states to gain CMS regional office approval 
of their managed care contracts they must demonstrate that the higher 
payment will actually be passed on for services furnished by the 
primary care physicians designated in statute.
    Comment: Some commenters urged CMS to provide flexibility to the 
states through their contracts with MCOs, PIHPs and PAHPs, to identify 
an appropriate and reasonable approach to passing through the increased 
payment when capitated amounts are inclusive of primary and specialty 
care services. Otherwise, tailoring each physician group increase will 
be administratively complex, costly, and contrary to the intent of the 
rule. Another commenter suggested that no administrative/documentation 
of payment should be required for the following delivery arrangements: 
(1) Health plan with exclusive contract with a single medical group in 
a specific geographic area to provide or arrange for professional 
medical services for the enrollees of the plan; (2) delivery system 
where Medicaid enrollees are not distinguished from others in terms of 
access to the same providers and services; and (3) physicians are paid 
salaries and receive a capitation rate without regard to payment 
source.
    Response: We are sensitive to the issue of administrative burden 
and are providing flexibility to states with respect to the 
identification of the required payment in a managed care environment. 
As specified in Sec.  438.804, the states shall receive approval of two 
methodologies, contract amendments, and rate certifications to 
implement this rule, and CMS will focus on the reasonableness and 
accuracy of the methods proposed by the state.
    Comment: One commenter stated that the rule needs to clearly 
specify that a plan must increase payment to physicians in a managed 
care environment to meet the minimum payment standard even if a state 
is not eligible for 100 percent FFP for some portion of the increase 
(as in the case where a state has reduced payment rates below 2009 
levels).
    Response: We agree that this payment increase must take place 
regardless of whether some portion of the increase is not funded with 
100 percent FFP.
    Comment: A commenter states that the proposed rule fails to ensure 
that CMS or primary care physicians can determine whether or not the 
minimum payment requirement has been met. We were urged to require 
state level transparency in the implementation of the primary care 
payment increase.
    Response: We understand that managed care payment is not 
necessarily transparent with respect to individual payment for certain 
services and require MCOs to supply encounter data to states. We expect 
that encounter data will be sufficient for the states to undertake 
verification activities. Additionally, MCOs, PIHPs and PAHPs are 
required by regulation and contract to ensure that eligible primary 
care providers receive the appropriate rate increase for primary care 
services rendered.
    Comment: A commenter suggested that CMS needs to consider holding 
harmless health plans if the practice with which the primary care 
provider is affiliated fails to pass along the increased reimbursement 
to the affected providers.
    Response: MCOs, PIHPs and PAHPs are required by regulation and 
contract to ensure that eligible primary care providers receive the 
appropriate rate increase for primary care services rendered. The 
structure of the health plan's provider network does not mitigate this 
responsibility.
    Comment: One commenter indicated that, to the extent low income 
health pools (LIHPs) are included in the rule, a specific methodology 
would be required for PIHPs and MCOs to identify payment amounts. The 
data source for paid claims data would be from each individual LIHP 
because the LIHPs are not paid by a particular state's fiscal 
intermediary.
    Response: We will not respond to state-specific comments in this 
rule, but will continue to work with states to address specific issues 
that may arise during the implementation process.
    Comment: A commenter stated that methodologies used to develop 
capitation rates to assure the minimum payment need not be grounded in 
E&M codes, but could be more broadly defined by primary care services 
as currently defined by the state for managed care. The approach 
outlined in the proposed rule is problematic for these reasons: most 
states do not use E&M codes as basis to develop and adjust cap rates; 
and, due to variations in MCO, PIHP and PAHP payment methods, such as 
partial capitation, and the relative completeness of data submitted by 
providers, states do not consistently receive data necessary to affirm 
that specific E&M services have been delivered at the Medicare FFS 
rate. The commenter suggested that an alternative approach would be to 
allow states to define a methodology to estimate: (1) Aggregate volume 
and baseline payment rate of primary care services expected to be 
delivered to all

[[Page 66681]]

managed care beneficiaries by PCPs; and (2) the differential aggregate 
payment associated with increasing payment up to average Medicare 
levels. This methodology, asserts the commenter, would allow for 
existing assumptions and methodologies states use to develop their 
capitation rates. States would pass through associated capitation 
adjustment on a per month basis to their MCOs, PIHPs and PAHPs and use 
the associated financial transaction information to provide the 
necessary CMS 64 documentation for federal match.
    Another commenter suggested the additional Medicare fee schedule 
payments be beyond the scope of the risk portion of the MCO, PIHP or 
PAHP contract. This would allow the amount claimed by the state at 100 
percent FFP to be based on calculations made from retrospective review 
of encounter data.
    Response: We will consider these suggestions during our review of 
states' rate setting documentation and MCO, PIHP and PAHP contracts. As 
stated throughout this rule, we are not prescribing a particular 
approach to delivering the enhanced payment to eligible primary care 
providers but the method must deliver an accurate service payment to 
eligible providers. However, where MCOs, PIHPs or PAHPs pay their 
contracted primary care providers on a fee-for-service basis, it is 
reasonable to expect that they will use the same approach to delivering 
the enhanced payment (that is, modifying their claims systems to 
reflect the 2013 and 2014 Medicare rates for eligible E&M codes for 
eligible providers) as the state will use to pay its fee-for-service 
providers.
    Comment: A commenter stated that MCOs, PIHPs and PAHPs should not 
be required to make enhanced payments on a retroactive basis and 
observed that it is administratively complex to analyze service level 
claims to verify increased payment. Another commenter asked if there 
would be retroactive reconciliation when additional funding in the 
capitation rates differs from the actual cost of providing services.
    Response: We agree that meeting the minimum payment standard set in 
statute can be administratively burdensome but emphasize that states 
must assure that MCOs, PIHPs and PAHPs are reimbursing services 
provided through managed care at the Medicare rate for the specified 
primary care services. This will be accomplished through review and 
approval by the CMS regional offices of states' managed care contracts. 
We believe the second commenter is asking about the effect on 
reconciliation when the actual cost of primary care services differs 
from the projected cost as expressed through the managed care rate. 
This question will be addressed on a case by case basis through our 
review of the managed care contracts and states' methods for 
identifying the rate differential.
    Comment: A commenter stated that CMS should clarify that a 
mandatory payment rate does not equate to a mandatory payment and that 
health plans should retain the ability to deny claims for reasons 
unrelated to payment.
    Response: We agree that a provider should be reimbursed the 
mandatory payment rate only when he or she has delivered services in 
accordance with the managed care contract and Medicaid requirements.
    Comment: Some commenters believe that the proposed rule conflicts 
with Sec.  438.6(c)(3)(i) which requires that actuarially sound rates 
be based on utilization and cost data derived from the Medicaid 
population because the 2009 cost data may not reflect the amount paid 
to the provider since MCO contracts are risk arrangements.
    Response: The rule is not in conflict with the regulation at Sec.  
438.6(c)(3)(i) because the state has flexibility within Sec.  
438.6(c)(3) to use various sources of data to establish base costs and 
utilization trends including FFS data, MCO financial data or a 
combination of both.
    Summary of Final Policy: This final rule removes the proposed 
requirement that states make site of service and geographic adjustments 
in paying at the applicable 2013 and 2014 Medicare rates. In the 
interests of administrative simplification, states need not make site 
of service adjustments but may reimburse all codes at the Medicare 
office rate, as opposed to the facility rate. With respect to 
geographic adjustments, states must either make all appropriate 
geographic adjustments made by Medicare, or may develop a rate based on 
the mean over all counties for each of the E&M codes specified in this 
rule. The required state plan amendment for these changes must describe 
the methodology the state has chosen. These requirements apply to fee 
for service and managed care delivery systems. Payments may be made as 
adjustments to rates or, if on a lump sum basis, no less frequently 
than quarterly. The 2013 and 2014 Medicare ``rate'' is defined as 
excluding payments made under section 5501 of the Affordable Care Act. 
Higher payment must be made for services provided on or after January 
1, 2013, but existing state plan amendment procedures provide states 
with some flexibility in the timing of the payments. Flexibility in 
regard to timing of payment is extended to managed care delivery 
systems.
b. Payment for Services Unique to Medicaid
    For services reimbursed by Medicaid but not Medicare, we proposed 
that payment would be made under a fee schedule developed by CMS and 
issued prior to the beginning of CYs 2013 and 2014. We proposed that 
rates for non-Medicare reimbursed services would be established using 
the Medicare CF in effect in CYs 2013 and 2014 (or the CY 2009 CF, if 
higher) and the RVUs recommended by the American Medical Association's 
(AMA) Specialty Society Relative Value Update Committee (RUC) and 
published by CMS for CYs 2013 and 2014. We solicited comments from 
states and others on the most appropriate way to set payment rates for 
services not reimbursed by Medicare.
    Comment: Most commenters strongly supported CMS's proposed 
methodology for developing rates for codes not reimbursed by Medicare. 
One commenter suggested establishing rates for codes not reimbursed by 
Medicare using the same standards applied in Deficit Reduction Act of 
2005 benchmark state plans (for example, Federal Employee Health 
Benefit Payment rates, State Employee Health Benefit Coverage).
    Response: For purposes of uniformity and to lessen the 
administrative burden on states, this final rule specifies that we will 
develop the rates for E&M codes not reimbursed by Medicare.
    Comment: A commenter requested that CMS make the fee schedule 
available to the states at a minimum of five months prior to January 1, 
2013.
    Response: We will develop this fee schedule and will make it 
publicly available. We are committed to making this information 
available as quickly as possible prior to January 1 of CYs 2013 and 
2014. We understand that states need this and all other information 
timely to be able to administer payments appropriately.
    Comment: One commenter urged that states be given the choice to use 
any Medicare conversion factor that has been in effect for at least 
three months.
    Response: The statute requires that states use the 2013 or 2014 
Medicare rates or, if greater, the rate that would be applicable if the 
conversion factor for the year involved were the conversion factor for 
2009. There is no flexibility with respect to this requirement.
    Summary of Final Policy: We will develop and publish rates for 
eligible E&M codes not reimbursed by Medicare. In determining the 2013 
and 2014 rates, we will use the 2009 conversion factor,

[[Page 66682]]

if that factor in conjunction with the 2013 and 2014 RVUs results in 
rates that are higher than if the 2013 and 2014 conversion factors were 
used. The rates for Medicaid primary care services not reimbursed by 
Medicare must be incorporated into managed care contracts for those 
services covered by the contract.
c. Updates to Medicare Part B Fee Schedule
    We recognized the potential for multiple updates to the MPFS in CYs 
2013 and 2014. Those rates are published by CMS on or before November 
1st of the preceding calendar year, but are subject to periodic 
adjustments or updates throughout the calendar year. In addition, the 
Medicare Part B rates vary by geographic location and site of service.
    We proposed that states have the option of complying with the 
requirements of section 1902(a)(13)(C) of the Act by either adopting 
annual rates or by using a methodology to update rates to reflect 
changes made by Medicare during the year. That is, states could adopt 
the MPFS in effect at the beginning of CYs 2013 and 2014 (or, if the CY 
2009 CF is higher, the CY 2013 or CY 2014 RVUs multiplied by the CY 
2009 MPFS CF), and apply those rates throughout the applicable calendar 
year without adjustments or updates. Using this methodology, mid-year 
updates made to the MPFS during the respective calendar year would not 
be reflected in Medicaid payments. Alternatively, a state could elect 
to adjust Medicaid payments to reflect mid-year updates made to the 
MPFS, but the state's methodology would have to specify the timing for 
such adjustments.
    Comment: Most commenters agreed that states should be given this 
flexibility. One commenter recommended that states be prohibited from 
changing rates throughout the year because this would cause confusion 
and undue burden to providers. Another commenter suggested that states 
should be required to use the fee schedule published in November of the 
preceding calendar year. One commenter suggested that states be 
required to update rates every 6 months, while another suggested that 
states be required to use any rate that had been in effect for at least 
3 months. A number of commenters urged that states be required to make 
all adjustments as the Medicare fee schedule changes, pointing out that 
changes in the SGR after November could result in States using a lower 
fee schedule, thereby avoiding higher physician payments.
    Response: We are sensitive both to concerns that requiring that 
states make multiple changes would be an administrative burden and to 
concerns that changes in the SGR could result in lower payments. We 
believe that the statutory requirement to use the 2009 Medicare 
conversion factor if it would result in higher Medicare rates in 2013 
and 2014 was intended to offset the potential negative impact of 
changes in the SGR. Therefore, this final rule permits states 
flexibility in determining whether to, and how often to, update rates 
to conform to changes in the MPFS.
    Summary of Final Policy: This final rule permits states flexibility 
in determining whether to, and how often to, update rates to conform to 
changes in the MPFS. This applies to fee for service and managed care 
payment.
3. State Plan Requirements (Sec.  447.410)
    We proposed to require that states submit a SPA to reflect the fee 
schedule rate increases for eligible primary care physicians under 
section 1902(a)(13)(A) of the Act. The purpose of this requirement was 
to assure that when states make the increased reimbursement to 
physicians, they have state plan authority to do so and they have 
notified physicians of the change in reimbursement as required by 
federal regulations.
    Comment: Commenters agreed that states should be required to amend 
their state plans. Many commenters asked that CMS develop a SPA 
template or, if not, specify the contents of the required SPA (for 
example, assurances required, specificity regarding use of the MPFS, 
covered codes).
    Response: We will provide states with a SPA template. The template 
will require that states indicate: (1) Whether they will make site of 
service adjustments or reimburse all codes at the Medicare rate 
applicable to the office setting; (2) whether they will make all 
Medicare locality adjustments or develop a statewide rate per code that 
reflects the mean value over all counties of the Medicare rate; (3) 
identify the manner in which the state will make higher payment (that 
is, as a fee schedule or aggregate supplemental payment; and (4) 
describe the codes which will be paid by the state at the higher rates 
and the codes that have been added to the fee schedule since 2009. If 
states do not use HIPAA compliant codes, the SPA must also provide a 
crosswalk to the covered E&M codes.
    Comment: Many commenters asked that CMS clarify that state plan 
rules at Sec.  447.256(c) apply, meaning that the SPA may be effective 
on the first day of the calendar quarter in which it is submitted, 
giving states until March 31, 2013 to submit a SPA.
    Response: Yes, those requirements apply.
    Comment: A number of commenters asked that CMS permit states to 
submit SPAs that will automatically sunset higher payments made 
pursuant to this rule on December 31, 2014.
    Response: We will permit sunset dates. The state and CMS must 
ensure that, in cases where a sunset date is employed, the rates that 
the state will revert to after December 31, 2014 are clearly described 
in the plan and that public notice for the SPA makes it clear that 
higher payments will end as of that date.
    Comment: One commenter asked if states will be permitted to apply 
existing payment limitations, conditions and policies to the selected 
procedure codes.
    Response: All limitations, conditions and policies that applied to 
the code prior to January 1, 2013 can be applied to the code after that 
date.
    Comment: One commenter pointed out that CMS often takes 90 days or 
more to review and approve SPAs and asked whether the state should wait 
to implement the rate increase until the SPA is approved.
    Response: The statute requires that states make higher payments for 
services provided on or after January 1, 2013. Our policy dictates that 
FFP is not available for services provided pursuant to an unapproved 
SPA. Therefore, as is the case with all rate changes, states can either 
make the higher payments to physicians and wait to submit claims for 
FFP until the SPA is approved, or can pay physicians at the 2012 
Medicaid state plan rates and make supplemental payments once the SPA 
is approved.
    Comment: One commenter believes that public access to the SPA is 
important to ensuring provide participation and suggested amending the 
proposed state plan requirement at Sec.  447.410 to indicate that the 
state must make this information accessible to the public through a Web 
site or other reasonable means.
    Response: Public notice of changes in state plan methodologies in 
Medicaid is already required at Sec.  447.205. In addition, copies of 
approved state plan amendments are available through state Medicaid 
agencies.
    Comment: Several commenters recommended that we require states to 
notify health plans and providers within a specified timeframe after 
approval of the SPA. One commenter stated that clarification is needed 
regarding

[[Page 66683]]

obligations and responsibilities for MCOs managing the Medicaid program 
in a state that does not yet have an approved SPA by January 1, 2013.
    Response: The SPA will describe methods and procedures relative to 
fee for service payments. The status of the SPA will not affect a 
state's ability to negotiate with managed care organizations. 
Notification to MCOs and providers of changes necessitated by this rule 
will be handled through normal procedures and processes by the state.
    Summary of Final Policy: We will develop a SPA template for use by 
states in implementing the requirements of this final rule. SPAs should 
be submitted and will be reviewed in accordance with existing federal 
requirements at Sec.  447.256 (and by reference Sec.  430.20). States 
may apply existing payment limitations and policies to services paid 
pursuant to this rule. Managed care payment policies are not affected 
by this provision.
4. Availability of Federal Financial Participation (FFP) (Sec.  
447.415)
    Section 1905(dd) of the Act allows states to receive 100 percent 
FFP for expenditures equal to the difference between the Medicaid state 
plan rate for primary care services in effect on July 1, 2009, and the 
Medicare rates in effect in CYs 2013 and 2014 or, if greater, the 
payment rate that would be applicable using the CY 2009 Medicare CF. To 
claim the enhanced federal match, states must make payments to 
specified physicians at the appropriate MPFS rate and must develop a 
method of identifying both the rate differential and eligible 
physicians for services reimbursed on an FFS for service basis and 
through managed care plans. States must be able to document the 
difference between the July 1, 2009 Medicaid rate and the applicable 
Medicare rate for specified providers that is claimable at the 100 
percent matching rate. This requirement applies also to services 
provided to individuals eligible for both Medicaid and Medicare. This 
means that increased FFP will be available also for higher Medicaid 
payments for Medicare cost sharing for individuals who are eligible for 
both programs.
    Comment: A number of states indicated that they have lowered rates 
since July 1, 2009. Under the provisions of the proposed rule, they 
will not be eligible for 100 percent FFP for the difference between the 
2009 rate and their current, lower, rates and asked for relief in the 
final rule. One commenter suggested that such states be permitted to 
``present the case to CMS for approval of 100 percent funding for the 
total increase when it can be shown that the state did not make such a 
decrease with any expectation or intent that it would be used to 
restore rates''.
    Response: The statute provides for 100 percent FFP for the 
difference between the July 1, 2009 Medicaid state plan rates and the 
appropriate 2013 and 2014 Medicare rates. States that lowered physician 
rates after 2009 will receive FFP at the state's regular FMAP rate for 
the difference between the lowered rates and the Medicaid rates in 
effect as of July 1, 2009. We have no authority to grant requests for 
exemptions from this requirement.
    Comment: One commenter asked that the final rule clarify that 
providers have no less than 12 months from the date of SPA approval to 
file a claim. That commenter also asked that the final rule confirm 
that the state will receive 100 percent FFP for claims for services 
rendered during CYs 2013 and 2014 even if they are adjudicated after 
2014.
    Response: This rule does not change Medicaid timely claims 
submission and payment requirements. Section 447.45 applies to all 
claims submitted under this rule, that is, 100 percent FFP will be 
available for services provided between January 1, 2013 and December 
31, 2014 that are processed in accordance with these requirements.
    Comment: Two commenters indicated that the rule does not address 
system changes that states will need to make. One commenter noted that 
states will not have time to submit Advanced Planning Documents (APDs) 
for CMS prior approval for enhanced FFP for those changes. The 
commenters requested that CMS grant retroactive ``prior approval'' for 
such APDs.
    Response: We do not grant ``retroactive prior approvals'' of APDs. 
However, we will work with states to promptly facilitate system changes 
necessitated by this final rule.
    Comment: One commenter suggested that CMS phase down the increased 
payment to primary care practitioners (PCPs) in the same manner as 
matching for the expansion populations under the Affordable Care Act. 
They believe that ``a precipitous drop in the PCP payment increase 
could create access issues''.
    Response: The statute does not permit such a phase-down.
    Comment: One state asked how services eligible for both regular FFP 
and 100 percent FFP will be reported to CMS.
    Response: We will provide states with reporting instructions before 
the end of the first calendar quarter of 2013. This guidance will be 
provided for both fee for service and managed care delivery systems.
    Comment: One commenter wanted to know if primary care case 
management (PCCM) fees paid in either the baseline period or in 2013 
and 2014 should be included in the calculation of the rate 
differential.
    Response: We clarify that PCCM payment is outside the calculation 
of the rate differential.
    Comment: A number of commenters asked if the 100 percent FFP is 
based on actual, documented expenditures or based on the actuarial per 
member per month (PMPM) assumptions built into adjusted capitation 
rates, including nonclaim components.
    Response: States can claim 100 percent FFP based on the CMS 
approved methodology for identifying the rate differential. Depending 
on the best data available this may result in an imputed payment 
differential that is based on actual claims or actuarial assumptions.
    Comment: One commenter asked whether state and local taxes 
associated with the increased fee schedule would be eligible for the 
enhanced match.
    Response: Enhanced federal matching funds are available only for 
the difference in payment between the Medicaid state plan rate in 
effect July 1, 2009 and the applicable Medicare rates in CYs 2013 and 
2014. If the nonfederal share of the rate in effect during the baseline 
period was funded by state and local taxes then that portion of the 
payment would continue to be matched at the state's regular FFP. This 
applies to FFS and managed care reimbursement.
    Comment: We received a request for clarification as to whether an 
increase in managed care premiums for the following non-claim related 
components would be eligible for 100 percent FFP: the Federal Health 
Insurer Fee, premium related taxes imposed by states, underwriting gain 
and administrative expenses.
    Response: We are clarifying that non-claim related costs are 
excluded for purposes of 100 percent FFP. The statute narrowly defines 
the scope of the enhanced match to the differential between the 
Medicare rate and 2009 baseline rate for the direct provision of 
specified primary care services delivered by eligible primary care 
providers.
    Summary of Final Policy: States will receive 100 percent FFP for 
the difference between the July 1, 2009 Medicaid state plan rates and 
the appropriate CY 2013 and 2014 Medicare rates. States that lowered 
physician rates after 2009 will receive FFP at the state's regular FFP 
rate for the difference between the lowered rates and the

[[Page 66684]]

Medicaid rate in effect as of July 1, 2009. Medicaid timely claims 
submission and payment requirements at Sec.  447.45 apply to all claims 
submitted under this rule, that is 100 percent FFP will be available 
for services provided between January 1, 2013 and December 31, 2014 
that are processed in accordance with these requirements. No phase-down 
of higher payments or FFP is permitted. Enhanced federal match is 
available for the payment differential in managed care.
a. FFP in Payments for Individuals Eligible for Both Medicare and 
Medicaid
    When a service is provided to an individual who is eligible for 
Medicare and Medicaid, Medicare reimburses the physician 80 percent of 
its fee schedule rate while Medicaid covers the cost-sharing amounts. 
Currently, states have two options for such payments consistent with 
section 1902(n) of the Act. A state may pay the provider the full 
amount necessary to result in aggregate payment to the provider equal 
to the MPFS rate (the full Medicare cost sharing amount), or only the 
amount (if any) to result in aggregate payment equal to the state's 
Medicaid rate. For example, under the second option, if the Medicare 
allowed amount is $100 and the Medicaid rate is $75, then Medicare pays 
80 percent of the allowed amount, or $80, and there is no additional 
amount paid by Medicaid. Historically, most states have chosen to pay 
providers only up to the lower Medicaid rate.
    In CYs 2013 and 2014, the Medicaid rate for primary care services 
by the specified physicians will equal the Medicare rate. As a result, 
these physicians should receive payment up to the full Medicare rate 
for primary care services and 100 percent FFP will be available for the 
full amount of the Medicare cost sharing amount that exceeds the amount 
that would have been payable under the state plan in effect on July 1, 
2009.
    Comment: Most commenters were supportive of these provisions of the 
rule. A number of commenters indicated that payment of crossover claims 
poses a significant administrative challenge because not all states' 
enrollment and adjudication processes mirror Medicare's and they may 
have limited ability to capture all details needed on crossover claims 
to limit payment by subspecialty. One commenter suggested that CMS 
require 100 percent of such claims to be paid by Medicare. Another 
commenter noted that the proposed rule does not require states to pay 
cost sharing amounts.
    Response: The Medicaid requirements applicable to claims for 
services for beneficiaries who are dually eligible for Medicaid and 
Medicare are not changed by this rule. States must comply with all 
requirements for payment of claims for services provided to Medicaid 
beneficiaries who are also eligible for Medicare.
    Comment: One commenter recommended that states that enter into 
Duals Special Needs Plans (DSNPs) be required to amend contracts to 
ensure that providers receive the enhanced rate. Currently, these 
contracts provide for $0 cost sharing as they are associated with the 
Medicaid rate.
    Response: DSNPs are Medicare managed care plans and are not subject 
to the requirements of this rule. However, states are responsible for 
ensuring that payments for Medicaid enrollees of DSNPs reflect the 
appropriate payment increase.
    Comment: One commenter recommended that CMS permit states to 
develop a methodology to identify what the difference in the capitation 
rate would be for crossover claims and to claim enhanced FFP for the 
difference, similar to the process proposed for managed care at Sec.  
438.804.
    Response: We agree that a state must have the ability to identify 
the 2009 baseline rate for primary care services and the managed care 
rate differential eligible for 100 percent FFP. We will permit a state 
up to 3 months after January 1 of CY 2013 to submit the methodologies 
for our review and approval as specified in Sec.  438. We expect this 
methodology to account for managed care payment for services delivered 
to all beneficiaries covered by Medicaid, including beneficiaries in 
CHIP Medicaid expansion programs and those beneficiaries also eligible 
for Medicare.
    Summary of Final Policy: This rule does not in any way negate the 
need for states to comply with all Medicaid requirements applicable to 
payment for services provided to Medicaid beneficiaries who are also 
dually eligible for Medicare. In managed care environments, states will 
be granted flexibility in determining the portion of the capitated 
payment that is related to such beneficiaries. However, the methodology 
must be approved by CMS.
b. Identifying the July 1, 2009 Payment Rate
    For the purpose of identifying the differential between the 
Medicaid rate and the Medicare rate, we proposed to define the Medicaid 
``rate'' under the approved Medicaid state plan as the final rate paid 
to a provider inclusive of all supplemental or increased payments paid 
to that provider. For example, many states currently pay physicians 
affiliated with academic medical centers the Medicaid state plan rate 
plus a supplemental amount that together equal the average amount paid 
by commercial third party payers. Therefore, in calculating the rate 
differential, these states would determine the CY 2009 rate inclusive 
of any supplemental payment.
    Comment: The majority of commenters requested that incentive 
payments, bonus payments and performance-based supplemental payments be 
excluded from the definition of the base payment.
    Response: Incentive payments, bonus payments and performance-based 
supplemental payments are only paid to those certain physicians who 
meet specified goals or criteria. They are not part of the statewide 
fee schedule rates and we agree that they should be excluded from the 
determination of the 2009 base rate.
    Comment: Many commenters urged CMS to exclude other supplemental 
payments made on a lump sum basis from the definition of the base rate, 
pointing out the administrative burden of linking those payments to 
individual codes and eligible physicians. In practice, this would 
consist of the supplemental payments up to the average commercial rate 
made to physicians associated with academic medical centers. They 
stated that CMS excluded the Medicare primary care bonus payment, which 
is made as an aggregate payment, from the definition of the MPFS, and 
suggested that Medicaid supplemental payments made as lump sum payments 
be excluded from the 2009 base following the same logic.
    Response: We do not agree that volume-based payments such as those 
made up to the average commercial rate should be excluded from the 
determination of the 2009 base rate. The CMS-approved methodologies for 
determining those supplemental payments are calculated on a code-
specific basis even when payments are aggregated and paid on a lump-sum 
basis. Since the code-specific calculation is performed before the SPA 
methodology is approved, states do have the data necessary to determine 
the rate for each code inclusive of the supplemental payment. In 
addition, the methodologies that have been approved for those payments 
provide that the base Medicaid payment in addition to the supplemental 
payment up to the ACR are equal to or significantly greater than 
Medicare rates. Were the supplemental

[[Page 66685]]

payments to be ignored, physicians in those settings would receive 
disproportionately high compensation with no additional impact on 
access. We do not believe that is in keeping with the intent of the 
statute.
    Comment: One commenter urged that CMS clarify how health plans 
should report to the state the supplemental and increased payment for 
individually billed codes made under the approved state plan in effect 
July 1, 2009. Otherwise, the state will not know what incentive 
payments were made to the impacted providers.
    Response: We understand that the commenter is asking how health 
plans should report ``catch up'' payments to providers for the increase 
in primary care payments to the Medicare rate as specified under this 
final rule. States should specify in encounter data reporting 
requirements how health plans should reflect those payments.
    Summary of Final Policy: This final rule defines the 2009 Medicaid 
base payment as excluding incentive, bonus and performance-based 
supplemental payments. Other volume-based payments, particularly those 
associated with academic medical centers, must be included in 
determining the 2009 base rate. This policy applies to fee for service 
and managed care payment.
c. Federal Funding for Increased Payments for Vaccine Administration
    Prior to CY 2011 vaccine administration, billing codes did not 
permit additional vaccine administration payments for vaccines with 
more than one vaccine/toxoid component. All providers, including those 
participating in the VFC program, received one payment per vaccine 
regardless of the number of vaccine/toxoid components. In the proposed 
rule, we clarified that qualifying physicians, excluding those 
participating in the VFC program, must receive additional payments 
during CYs 2013 and 2014 for vaccines with multiple vaccine/toxoid 
components administered to Medicaid beneficiaries.
    Section 1928(c)(2)(ii) of the Act provides that administration fees 
for vaccines provided under the VFC program cannot exceed the cost of 
administration as determined by the Secretary for that program. An 
additional concern for VFC vaccines is that, under the terms of the VFC 
program, providers can still only bill a flat fee per vaccine given by 
injection or by intranasal or oral routes, regardless of the number of 
vaccines/toxoid components, and must use only code 90460. This is 
consistent with section 1928(c)(2)(C)(ii) which permits the provider to 
impose an administration fee based on the cost of administering a 
qualified pediatric vaccine, and does not authorize different fees 
based on the type of vaccine. To permit providers participating in the 
VFC program to benefit from the provisions of the Affordable Care Act, 
we proposed that States be required to reimburse VFC providers at the 
lesser of the 2013 and 2014 Medicare rates or the maximum regional VFC 
amount in those years. States would qualify for 100 percent FFP for 
these increased reimbursements.
    In the proposed rule, we provided a formula for states to impute 
the 2009 rates due to the coding change that took effect on January 1, 
2011. In addition, we stated that qualifying providers who provide 
vaccines to children enrolled in Medicaid who receive vaccines through 
the VFC program cannot be paid for additional vaccine/toxoid components 
of a combination vaccine.
    Comment: A number of commenters disagreed with CMS' proposal not to 
reimburse providers for additional vaccine/toxoid components of 
combination vaccines using code 90461. One commenter stated that this 
provision falls short of the statutory standard to the extent that it 
allows states to pay less than is required by the 2011 component-based 
code methodology currently used by Medicare. Another commenter said 
that CMS should pay for the additional vaccine/toxoid components in 
combination vaccines because each vaccine/toxoid component protects 
against a different disease. Two commenters also expressed concern that 
proceeding with the proposed policy could result in a disincentive for 
providers to comply with optimal medical practice and result in more 
shots for children.
    Response: We agree with commenters in part. We agree that 
additional payment can be made for additional vaccine/toxoid components 
in combination vaccines using code 90461. But we disagree that this 
methodology is appropriate for vaccines furnished through the VFC 
program. While preparing the proposed rule, we considered a number of 
alternative approaches for enhanced payment for vaccine administration 
within the VFC program. This included paying an increased amount for 
administration of additional vaccine/toxoid components in combination 
vaccines using code 90461. That approach was not selected in part 
because we believe that it was not the intent of the Affordable Care 
Act to supersede the VFC provision, which does not give CMS the 
authority to make multiple payments for a single vaccine 
administration. Therefore, we believe that the requirement that under 
VFC there cannot be multiple payments for a single vaccine applies to 
the Affordable Care Act. As such, we are not changing the policy in the 
final rule from what was published in the proposed rule, and providers 
will be reimbursed at the lesser of the 2013 and 2014 Medicare rates or 
the maximum regional VFC amounts in those years. In making this 
determination, we also considered that the payments at issue are not 
for the vaccine ingredients, but only for vaccine administration. We 
received no information that indicated that administration of multiple 
antigen vaccines was more costly than administration of single antigen 
vaccines.
    We are concerned by the comments that this policy could result in 
additional shots for children if providers were to use single component 
vaccines where a combination vaccine exists. Under the VFC statute at 
section 1928(c)(2)(B)(i) of the Act, VFC providers are required to 
comply with the Advisory Committee for Immunization Practices (ACIP) 
schedule regarding the appropriate periodicity, dosage, and 
contraindications applicable to pediatric vaccines. It is important 
that vaccines are administered following the ACIP recommendations and 
that combination vaccines are used if recommended. If necessary, we 
will work with states to ensure that children receive appropriate 
vaccines and receive as few shots as are necessary following the ACIP 
schedule. As a practical matter, CDC orders and provides few single 
antigen vaccines through the VFC program when combined antigen drugs 
are available. In addition, section 1903(i)(15) of the Act provides 
that no payment shall be made ``with respect to any amount expended for 
a single-antigen vaccine and its administration in any case in which 
the administration of a combined-antigen vaccine was medically 
appropriate (as determined by the Secretary) * * *.'' So we believe 
states will have some incentive to monitor and oversee the appropriate 
use of combined antigen vaccines.
    Comment: CMS received a comment asking if a state could have the 
flexibility to pay at the greater of the 2013 and 2014 Medicare rates 
or the maximum regional VFC rates instead of the lesser of those two 
rates. CMS also received a number of comments expressing confusion as 
to whether this policy applies to qualified providers or to all VFC 
providers.
    Response: We adopted the lesser of the Medicare rates or the 
maximum

[[Page 66686]]

regional VFC amounts because the VFC statute prohibits payment above 
the regional maximum ceiling and because it is consistent with Medicare 
policy which limits provider payment to the lesser of the fee schedule 
amount or provider charges. Therefore states do not have the 
flexibility to pay at the greater of the two amounts instead of the 
lesser of the two. This policy is consistent with the larger intent of 
this provision of the Affordable Care Act to increase payments to 
primary care providers within the framework of the Medicare program.
    This policy applies only to qualified physicians. If a non-
qualified physician provides a vaccine to a VFC-eligible child enrolled 
in Medicaid, the physician will be reimbursed for the administration 
fee at the rate in the corresponding state plan.
    Comment: Three states submitted comments expressing concern that 
the proposal not to recognize additional vaccine/toxoid components 
under the VFC program will create an administrative burden for States 
because providers would be paid at different rates.
    Response: Although the proposed policy will result in variable 
rates for providers, we do not believe there will be an administrative 
burden for states specific to the increased payments. It is correct 
that the policy to not recognize additional vaccine/toxoid components 
only applies to the VFC program. However, because only vaccines given 
to those under age 19 are eligible for payment for additional antigens, 
and all Medicaid enrollees under age 19 qualify for VFC, there will not 
be an administrative burden as there will not be any variation in 
payment rates. We expect that there will be few situations where a 
state would have to establish different payments to providers for 
administration fees for children enrolled in Medicaid, or where a 
payment would be made for code 90461.
    Comment: CMS received one comment that addressed the formula for 
imputing the 2009 rate for code 90460 that was established because of 
the new codes that went into effect in 2011. Specifically, the 
commenter recommended that CMS revise the formula to instead use the 
payment rate for deleted code 90465 for the new code 90460 and the 
payment rate for deleted code 90466 for new code 90461. The commenter 
suggested eliminating the reference to deleted codes 90467 and 90468 
because there is no crosswalk to these codes.
    Response: We agree that code 90465 should be used to determine the 
2009 rate, and that codes 90467 and 90468 should not be used. However, 
code 90465 was only for children younger than 8 years of age and the 
new code 90460 is for children through age 18. Therefore, states need 
to use claims volume for code 90465 and code 90471 to impute the 
payment amount in the base period for the current code 90460. Code 
90471 is also included because prior to January 1, 2011, code 90471 was 
used for children above age 8. This change is demonstrated in the 
following example:

 90465 = $10 x 0.70 service volume = $7.00
 90471 = $10 x 0.30 service volume = $3.00
 Total cost equals $10.00 for the new, single code, 90460.

    Comment: Several commenters expressed concern that their state does 
not currently use the immunization administration code and instead uses 
the product code so that the state has vaccine-specific data.
    Response: This issue was discussed in the proposed rule. States 
that do not currently use the immunization administration code, or did 
not use it in 2009, will need to identify the CY 2009 payment for 
vaccine administration separate from the vaccine itself. We understand 
that using the product code provides vaccine specific data, however, 
since we will only issue additional payment based on the immunization 
administration code, all states will need to submit data using the 
correct codes. We will provide future assistance to states on ways to 
modify the immunization administration codes so that they can be used 
properly but still capture vaccine-specific information.
    Summary of Final Policy: This final rule defines the policy for 
additional payments for qualifying providers under the VFC program and 
how to establish the 2009 Medicaid rate for vaccine administration. 
Because the immunization administration codes changed in 2011, states 
will need to determine the payment amount from other codes based on 
service volume. The service volume of code 90465 and of the pediatric 
claims for code 90471 will need to be imputed to determine the new 
payment amount for code 90460.
    In addition, VFC providers will be reimbursed at the lesser of the 
2013 and 2014 Medicare rates or the maximum regional VFC amount in 
those years.
5. Primary Care Service Payments Made by Managed Care Plans, and 
Enhanced Federal Match (Sec.  438.6 and Sec.  438.804)
    We proposed to implement the managed care requirements through a 
state-by-state review of managed care contracts and applicable 
procedures. We will review managed care contracts to ensure that they--
     Provide for payment at the minimum Medicare primary care 
payment levels;
     Require that eligible physicians receive direct benefit of 
the payment increase for each of the primary care services specified in 
this rule. This requirement must be met regardless of whether a 
physician is salaried, or receives a fee for service or capitated 
payment. We emphasize that increased payment must correspond directly 
to the volume and payment amounts associated with the primary care 
services specified in this rule;
     Require that all information needed to adequately document 
expenditures eligible for 100 percent FFP is reported by MCOs, PIHPs, 
and PAHPs to the states which, in turn, will report these data to CMS; 
and
     Specify that states must receive from MCOs, PIHPs and 
PAHPs data on primary care services which qualify for payment under 
this rule. The managed care reporting requirements would ensure that 
states have data on increased provider payments necessary to justify 
any adjustments to the capitation rates paid by the state under the 
contract.
    We solicited comment on these provisions and additional suggestions 
on how to ensure that managed care plans provide the necessary data to 
the state, as well as how to ensure and monitor that managed care plans 
appropriately pass on to physicians the portion of the increased 
capitation rate that is attributable to the primary care rate increase.
    States have expressed concern about their ability to align 
capitated payment made as of July 1, 2009 to payment made for services 
provided in CYs 2013 and 2014 for the purpose of claiming increased 
FFP. We recognize the particular challenges inherent in identifying the 
payment differential eligible for 100 percent FFP for primary care 
services provided by managed care plans because such payments are not 
necessarily linked to individual services and physicians. We believe 
that the most reasonable way to apply this provision for managed care 
rates is to do the following:
    Step I: Identify the proportion of total capitation linked to 
primary care.
    Step II: Identify the fee schedule amount incorporated into the 
actuarial model for primary care services represented by the proportion 
of payment for primary care services. Here, we assume the visit rate 
equals $25.

[[Page 66687]]

    Step III: Determine the annualized cost built into the actuarial 
model for primary care. Here we assume 8 visits annually. $25 per visit 
rate x 8 visits annually = $200.
    Step IV: Determine the per visit cost discounted for volume. $200/
12 = $16.67 per member per month.
    In this example, $16.67 equals the imputed amount of the monthly 
payment made on a fee for services basis for an individual primary care 
service. The state will compare this amount to the Medicare rate paid 
in CYs 2013 and 2014 to determine the payment differential eligible for 
100 percent federal matching funds.
    Specifically, we proposed that states would be required to submit 
the methodology they intend to use to identify the increment of the 
capitation payment attributable to increased provider rates to CMS for 
approval prior to the beginning of CY 2013. Further, we propose that, 
absent approval of its methodology from CMS, states would not be able 
to claim the enhanced Federal match for capitation payments to managed 
care plans.
    We solicited additional comments on how states might best meet 
these requirements.
    Comment: A number of commenters expressed concern about the short 
timeframe for implementing new managed care contracts, developing 
revised rate certifications, and identifying the rate differential 
eligible for 100 percent FFP, given the obstacles of obtaining historic 
claim and encounter data.
    Response: We are cognizant of the amount of planning and activity 
that must occur at the state, federal, health plan, and provider levels 
to implement the increase in primary care provider payments in CY 2013. 
Therefore, we will extend the deadline for CMS approval of all 
necessary documentation into CY 2013 in accordance with the following 
guidelines. States must submit the methodologies for identifying the 
2009 baseline rate and the rate differential eligible for 100 percent 
federal match to CMS no later than the end of the first quarter of CY 
2013. These requirements are specified in Sec.  438.804 as modified 
from the proposed rule. Implementation of the increased payments for 
eligible primary care services to designated primary care providers is 
contingent upon CMS approval of the aforementioned methodologies, any 
necessary contract amendments, and certification of rates that take 
this rule into account. We will approve all required documents in a 
timely manner. In the interim, the state and contracting MCOs, PIHPs, 
and PAHPs have the option of issuing payment for primary care services 
in accordance with existing contracts for CY 2012 or under contracts 
executed under standard contracting schedules for CY 2013 that do not 
account for the increased payments. Once the state receives CMS 
approval of the methodology for calculating the primary care rate 
differential, certified rates, and contract amendments, the state will 
adjust their rates previously paid to the MCOs, PIHPs and PAHPs to 
reflect the enhanced payment. All eligible claims that were claimed and 
paid in CY 2013 prior to CMS approval will be re-adjudicated and the 
MCO, PIHP or PAHP will direct the full amount of the enhanced payment 
to the eligible provider. The MCO, PIHP or PAHP must remit the enhanced 
payment to eligible primary care providers without any effort from the 
provider. We will review managed care contracts for this assurance.
    Comment: A commenter asked whether certification (of the rate) is 
needed if the methodology is to be submitted separate from the rate 
certification.
    Response: We anticipate that states will first receive CMS approval 
of the baseline and payment differential methodologies, and then 
receive concurrent approval of managed care contracts. Section 
438.804(a)(1) requires that the states submit the methodologies for 
determining the 2009 baseline rate and the payment differential for CMS 
review no later than the end of the first quarter of CY 2013. 
Submission of the above-mentioned methodologies does not negate the 
requirements of Sec.  438.6(c). Again, we emphasize that contracts 
approved after January 1 must be effective for services provided on and 
after January 1 of CYs 2013 and 2014. We have awarded a technical 
assistance contract to a firm with actuarial expertise and experience 
with rate setting activities across the states to develop a framework 
for states in developing the methodologies required under this rule. 
Written guidance and informational calls will be made available before 
CY 2013.
    Comment: A commenter urged that health plans should be provided 
with 90 days notice prior to the implementation of reimbursement 
changes.
    Response: Although we agree that states should notify health plans 
in a timely manner of changes in reimbursement, adding a federal 
notification requirement for the state to the health plan is beyond the 
scope of this rule and exceeds the normal and customary role of the 
federal government in the relationship between the state and the health 
plan.
    Comment: One commenter suggested that CMS should clarify that the 
managed care payment will be based on FFS or base utilization data used 
for rate setting. A commenter also noted that developing a reasonable 
estimate of the increased amount paid for primary care services was 
difficult due to lack of encounter data as of July 1, 2009. Other 
commenters requested guidance on how to develop the baseline 2009 rate 
for primary care services when populations may not have been enrolled 
in MCOs, PIHPs or PAHPs in 2009. Other commenters requested 
clarification as to whether the four-step process provided in the 
proposed rule for identifying the rate differential is a preferred 
approach.
    Response: We acknowledge the variance that exists among the states 
in terms of the types of encounter, claim and pricing information 
available from MCOs, PIHPs and PAHPs for rate setting purposes, and the 
complexity entailed in defining the baseline service rate for 
populations that may not have been in managed care delivery systems in 
2009. We expect that, where feasible, the state will use the same 
methodology for fee-for-service payments through MCOs that is provided 
for direct fee-for-service payments from the state. In cases where this 
is not possible, however, we do not prescribe a uniform approach to 
identifying the 2009 baseline but we have revised Sec.  438.804(a) to 
add the new Sec.  438.804(a)(1)(i) to require states to submit the 
methodology for the 2009 baseline rate in conjunction with the 
methodology used to identify the rate differential as specified in 
Sec.  438.804(a)(1)(ii). The four-step process outlined in the proposed 
rule is one suggested approach for states that would find it produces 
an accurate result based on reasonable and documented data and 
assumptions available. As stated throughout the rule, we will continue 
a dialogue with states on valid and reasonable approaches to defining 
the 2009 baseline rate and identifying the rate differential required 
under Sec.  438.804(a)(1)(i) and (ii). We reserve the right to request 
and inspect the supporting data used by the state and actuaries to 
develop the methodologies required under Sec.  438.804(a)(1)(i) and 
(ii).
    Comment: A commenter urged that CMS should not increase payments 
only to MCOs that had been paying for the Medicaid primary care 
services at less than the Medicare rates as this would result in 
rewarding low paying plans.
    Response: The statute applies equally across all eligible providers 
for all of the services specified in this rule. This may

[[Page 66688]]

result in increased payment to MCOs, PIHPs and PAHPs that previously 
had reimbursed providers less than the Medicare rate. However, we 
expect that physicians--not the MCOs, PIHPs or PAHPs--will receive 
direct benefit of the higher payment.
    Comment: Several commenters requested general guidance if the 
enhanced payment to primary care providers should be disseminated on a 
retroactive or prospective basis and other commenters urged CMS to 
provide overall flexibility in this process. For example, the American 
Academy of Actuaries asked CMS to consider a number of approaches, 
including (1) an add-on payment to the PMPM based on a retrospective 
review of eligible primary care utilization; (2) full risk capitation; 
(3) prospective capitation with some type of risk sharing that 
incorporates retrospective reconciliation to the documented 
expenditures; and (4) non risk payment with retrospective 
reconciliation. Another commenter recommended that CMS impose a 
threshold for enhanced reimbursement that is based on encounter data 
submitted to the states' MMIS.
    Response: We appreciate the amount of feedback and thoughtful 
suggestions received from our request for comment on how the enhanced 
payment is made to eligible primary care physicians. Because claims and 
payment processes vary by state and between health plans, we are 
permitting flexibility in the specifics of how these tasks are 
accomplished. Should a state obtain approval of the required 
methodologies, the MCO, PIHP or PAHP contract amendments, and rate 
certifications after January 1 of 2013 and 2014, the state will need to 
clarify to CMS how it will implement payment retroactively to the 
beginning of the year. We expect to address retroactive claims 
processing as part of CMS's ongoing dialogue with the states.
    Comment: One commenter asked whether a state's adherence to the 
documentation requirements specified in Sec.  438.6(c)(4) were 
sufficient to meet the documentation requirements provided under the 
new Sec.  438.6(c)(5)(vi)(B). Additionally, another commenter queried 
whether the documentation requirement in Sec.  438.6(c)(5)(vi)(B) 
sufficiently described CMS's oversight role to ensure that payments are 
made in accordance with this final rule.
    Response: The documentation requirement in the new Sec.  
438.6(c)(5)(vi)(B) is more expansive, therefore, a state may not assume 
that it has met the new requirements by satisfying those of the 
existing managed care regulation. In deference to the wide variation in 
states' current oversight and reporting mechanisms for health plans, we 
will permit states to specify the documentation needed from health 
plans to substantiate that the enhanced primary care rate was delivered 
to eligible primary care providers. The health plans must make such 
documentation available to the state for verification of payments made 
as well as make such documentation available for audit or 
reconciliation processes. However, in response to the comment about our 
oversight role, we have modified the language in Sec.  
438.6(c)(5)(vi)(B) to require health plans to provide sufficient 
documentation so that the state and CMS can ensure that complaint 
payments have been made in accordance with this rule.
    Comment: One commenter noted that there is no explicit reference in 
the proposed rule to the data certification requirements at Sec.  
438.604.
    Response: We believe that a specific reference to the data 
certification requirements at Sec.  438.604 is not warranted because 
those requirements are not being modified by this rule. Further, we 
believe that the documentation required under this section falls under 
the scope of Sec.  438.604.
    Comment: We received a number of comments expressing concern about 
the projected overall impact of this payment on the future of doing 
business under managed care delivery systems. One commenter stated that 
in CYs 2013 and 2014 MCOs, PIHPs and PAHPs may find contracting with 
specialists more difficult when these providers receive less than the 
Medicare rate. Conversely, providers were concerned that MCOs, PIHPs 
and PAHPs would reduce payment for primary care services after the 2-
year period and believed that states should be mindful of this.
    Response: We expect this rule to have positive effects on payment 
rates for primary care physicians serving Medicaid patients that will 
justify the operational changes required to implement the increased 
rates.
    Comment: A commenter stated that CMS oversight and enforcement of 
actuarial soundness policies should ensure that rate adjustment 
increase to plans do not result in an inappropriate decrease in other 
factors used in rate setting methodology. Plans must provide access to 
all information used to make adjustment for this provision.
    Response: We will exercise oversight and enforcement of appropriate 
policies through our review and approval of managed care contracts and 
certification of the actuarially sound rate.
    Comment: One commenter stressed that health plans must be given the 
right to appeal new health plan capitation rates to an unbiased third 
party if they believe they do not meet actuarial soundness requirement.
    Response: The ability to negotiate capitation rates remains between 
states and health plans and this rule does not affect any established 
process, or create a new process, for a health plan to appeal revised 
capitation rates devised for purposes of implementing this rule.
    Summary of Final Policy: We recognize the implementation challenges 
for identifying the 2009 baseline rate and the payment differential 
eligible for 100 percent federal financial participation, as well as 
appropriate methods for delivering the payment to eligible providers 
contracted with MCOs, PIHPs and PAHPs. To that end, we have extended 
deadlines for states to submit the abovementioned methodologies as 
required by Sec.  438.804(a)(1) into CY 2013 and necessary contract 
amendments and rates may be approved by CMS within that CY. The 
regulations clearly provide that the state has the flexibility in 
determining the 2009 baseline rate and the rate differential to comply 
with this rule, but the approach taken must be based on reasonable and 
documented data sources available to the state to accurately define 
these amounts to the fullest extent possible. We will review and 
approve the methodologies and refer to these methodologies to approve 
MCO, PIHP and PAHP contract amendments and rates necessary to implement 
this rule. This rule does not require a specific method for the MCOs, 
PIHPs or PAHPs to make the enhanced payment for primary care services 
to eligible providers, but the approach taken must ensure that the 
eligible primary care provider receives the full benefit of the 
enhanced payment. In deference to the wide variation in states' current 
oversight and reporting mechanisms for health plans, we will permit 
states to specify the documentation needed from health plans to 
substantiate that the enhanced primary care rate was delivered to 
eligible primary care providers. The health plans must make such 
documentation available to the state for verification of payments made 
as well as make such documentation available for audit or 
reconciliation processes. As stated throughout this rule, we will 
continue a dialogue with the states on implementation challenges that 
may arise.

[[Page 66689]]

B. Vaccine Administration Under the Vaccines for Children (VFC) Program

1. General Statement
    On May 11, 2012, we issued a proposed rule (77 FR 27671) in the 
Federal Register titled ``Medicaid Program; Payments for Services 
Furnished by Certain Primary Care Physicians and Charges for Vaccine 
Administration under the Vaccines for Children Program''. In that 
proposed rule, we specified that we would add 42 CFR part 441 subpart 
K, Sec.  441.500 through Sec.  441.515, to codify the requirements of 
the Vaccines for Children Program. However, on May 7, 2011, we issued a 
final rule (77 FR 26828) in the Federal Register titled ``Medicaid 
Program; Community First Choice Option'', which codified subpart K, 
Sec.  441.500 through Sec.  441.590. Therefore, we are adding the 
provisions to codify the requirements of the Vaccines for Children 
Program as subpart L, Sec.  441.600 through Sec.  441.615.
    This final rule adds 42 CFR part 441 subpart L to codify the 
requirements of the Vaccines for Children Program. CMS is finalizing 
the general requirements of the VFC program in this final rule at Sec.  
441.610. Federally-purchased vaccines under the VFC Program are made 
available to children who are 18 years of age or younger and who are 
any of the following:
     Eligible for Medicaid.
     Not insured.
     Not insured for the vaccine and who are administered 
pediatric vaccines by a federally-qualified health center (FQHC) or 
rural health clinic (RHC).
     An Indian, as defined in section 4 of the Indian Health 
Care Improvement Act.
    Under the VFC program, vaccines must be administered by program-
registered providers. Section 1928(c) of the Act defines a program-
registered provider as any health care provider that--
     Is licensed or authorized to administer pediatric vaccines 
under the law of the state in which the administration occurs without 
regard to whether or not the provider is a Medicaid-participating 
provider.
     Submits to the state an executed provider agreement in the 
form and manner specified by the Secretary.
     Has not been found, by the Secretary or the state to have 
violated the provider agreement or other applicable requirements 
established by the Secretary or the state.
    Section 1928 of the Act requires each state to establish a VFC 
Program (which may be administered by the State Department of Health) 
and include this program in the state plan (Sec.  441.605) under which 
certain specified groups of children are entitled to receive qualified 
pediatric immunizations without charge for the cost of the vaccine.
    In the October 3, 1994 Federal Register, we published a notice with 
comment period entitled, ``Charges for Vaccine Administration Under the 
Vaccines for Children (VFC) Program'' (59 FR 50235) (hereinafter 
referred to as the ``October 1994 VFC notice'') that set forth, by 
state, the interim regional maximum charges for the VFC program. These 
charges represented the maximum amount that a provider in a state could 
charge for the administration of qualified pediatric vaccines to 
federally vaccine-eligible children under the VFC Program. This final 
rule updates those fees.
    In accordance with section 1928(c)(2)(C)(ii) of the Act, Sec.  
441.615(e), we proposed that physicians participating in the VFC 
program can charge federally vaccine-eligible children who are not 
enrolled in Medicaid the maximum administration fee (if that fee 
reflects the provider's cost of administration) regardless of whether 
the state has established a lower administration fee under the Medicaid 
program.
    Section 441.615(e) provides that there will be no federal Medicaid 
matching funds available for administration of vaccines to children not 
enrolled in the Medicaid program. A provider may only bill Medicaid for 
the administration of a vaccine if the child is enrolled in Medicaid.
    Of the 171 comments received in response to the proposed rule, 21 
of them addressed the updated administration fee schedule in the VFC 
program.
    Comment: One comment questioned the codification of the VFC program 
and stated that this represented major changes in the VFC program.
    Response: The intent of this section of the final rule is not to 
create new requirements for states or to change any rules of the VFC 
program, but instead to codify existing rules and update the 
administration fee rates. All states currently have established 
pediatric vaccine distribution programs in place that meet the 
requirements of section 1928 of the Act, and therefore, states are not 
required to change their existing state plan to reflect the 
codification of the VFC program. Submission of a new SPA is only 
necessary if the state chooses to change the amount that it pays 
Medicaid providers for the administration fee.
    Comment: Two commenters discussed the impact of the updated fee 
schedule on the uninsured and underinsured. The first commenter 
recommended that uninsured children be exempt from paying 
administration fees and the second recommended that VFC providers 
continue to have flexibility to provide VFC vaccines at no 
administrative cost or at reduced cost to uninsured children.
    Response: While we acknowledge the commenter's concern, under 
section 1928 of the Act, we do not have the authority to exempt 
uninsured children from administration fees. Providers continue to have 
the flexibility to determine the administration fee they will collect 
from families of uninsured and underinsured children, as long as the 
administration fee does not exceed the state's regional maximum 
administration fee. However, section 1928(c)(2)(C)(iii) of the Act 
provides that providers cannot deny administration of VFC vaccines to a 
vaccine-eligible child due to the inability to pay the administration 
fee.
    Comment: Several comments expressed support of the updated regional 
maximum administration fee schedule. None of the comments were critical 
of the updated fee schedule or the methodology used to update the fee 
schedule, or provided alternative suggestions.
    Response: Based on the support of the methodology used to update 
the fee schedule and the acknowledgement that an updated fee schedule 
is needed, we are finalizing the updated fee schedule as proposed.
    Comment: One commenter suggested that we link the regional maximum 
administration fee to the Medicare Economic Index, and publish the fee 
schedule annually.
    Response: The purpose of this final rule is to update the fee 
schedule, which has not been updated since 1994.
    Comment: Two commenters suggested that CMS consider establishing a 
minimum payment rate for providers.
    Response: The establishment of a minimum payment level for VFC 
providers goes beyond the scope of what was included in the proposed 
rule.
    Comment: Multiple commenters questioned whether states will 
continue to have the authority to set their payment rates under the 
Medicaid program at a rate that is lower than the State's regional 
maximum administration fee.
    Response: Updating the fee schedule will not impact states' ability 
to establish payment rates under the VFC program. States continue to 
have the flexibility to establish their payment rate for the VFC 
program at any level that does not exceed the newly updated

[[Page 66690]]

regional maximum administration fee. If a state wishes to change its 
payment rate, it needs to submit a SPA to CMS. Much of the confusion 
related to state flexibility to establish payment rates is due to the 
requirements in the primary care payment increase section of this rule 
which requires that qualifying providers are paid at the lesser of the 
Medicare rate or the updated state regional maximum administration fee 
in 2013 and 2014. While states do maintain the flexibility to set the 
reimbursement rate for the VFC program, qualifying primary care 
providers who administer vaccines to children enrolled in Medicaid 
under the VFC program are required to be paid at the lesser of the 
Medicare rate or the updated State regional maximum administration fee 
for vaccine administration for those 2 years.
    Summary of Final Policy: We are finalizing the updated regional 
maximum VFC ceilings as proposed, as shown in Table 1.

          Table 1--Regional Maximum Administration Fee by State
------------------------------------------------------------------------
                                              Current         Updated
                  State                      regional        regional
                                            maximum fee     maximum fee
------------------------------------------------------------------------
Alabama.................................          $14.26          $19.79
Alaska..................................           17.54           27.44
Arizona.................................           15.43           21.33
Arkansas................................           13.30           19.54
California..............................           17.55           26.03
Colorado................................           14.74           21.68
Connecticut.............................           16.56           23.41
Delaware................................           16.55           22.07
District of Columbia....................           15.13           24.48
Florida.................................           16.06           24.01
Georgia.................................           14.81           21.93
Guam....................................  ..............           23.11
Hawaii..................................           15.71           23.11
Idaho...................................           14.34           20.13
Illinois................................           16.79           23.87
Indiana.................................           14.47           20.32
Iowa....................................           14.58           19.68
Kansas..................................           14.80           20.26
Kentucky................................           14.17           19.93
Louisiana...............................           15.22           21.30
Maine...................................           14.37           21.58
Maryland................................           15.49           23.28
Massachusetts...........................           15.78           23.29
Michigan................................           16.75           23.03
Minnesota...............................           14.69           21.22
Mississippi.............................           13.92           19.79
Missouri................................           15.07           21.53
Montana.................................           14.13           21.32
Nebraska................................           13.58           19.82
Nevada..................................           16.13           22.57
New Hampshire...........................           14.51           22.02
New Jersey..............................           16.34           24.23
New Mexico..............................           14.28           20.80
New York................................           17.85           25.10
North Carolina..........................           13.71           20.45
North Dakota............................           13.90           20.99
Ohio....................................           14.67           21.25
Oklahoma................................           13.89           19.58
Oregon..................................           15.19           21.96
Pennsylvania............................           15.76           23.14
Puerto Rico.............................           12.24           16.80
Rhode Island............................           14.93           22.69
South Carolina..........................           13.62           20.16
South Dakota............................           13.56           20.73
Tennessee...............................           13.70           20.00
Texas...................................           14.85           22.06
Utah....................................           14.52           20.72
Vermont.................................           13.86           21.22
Virginia................................           14.71           21.24
Virgin Islands..........................           15.09           21.81
Washington..............................           15.60           23.44
West Virginia...........................           14.49           19.85
Wisconsin...............................           15.02           20.83
Wyoming.................................           14.31           21.72
------------------------------------------------------------------------


[[Page 66691]]

III. Provisions of the Final Regulations

    This final rule incorporates many of the provisions of the proposed 
rule. Those provisions of this final rule that differ from the proposed 
rule are as follows:
     Section 438.6(c)(5)(vi)(B) has been modified to clarify 
our oversight role by requiring health plans to provide sufficient 
documentation so that both the state and CMS can ensure that complaint 
payments have been made in accordance with this rule.
     Section 438.804(a)(1) has been changed from a description 
of the 2009 baseline rate to a general statement of the two 
methodologies the states are required to submit to CMS for review and 
approval to implement the payment increase to primary care providers.
     Section 438.804(a)(1)(i) replaces the description of the 
2009 baseline payment as provided in Sec.  438.804(a)(1) in the 
proposed rule to clarify that the states must submit a valid and 
reasonable methodology for identifying the provider payments that would 
have been made by the MCO, PHIP or PAHP for specified primary care 
services furnished as of July 1, 2009. This change is in recognition of 
the varying sources of data available to the states and the challenges 
associated with determining the rate for primary care services in 2009 
for populations that have transitioned from fee-for-service to managed 
care delivery systems after 2009. We will need to review and approve 
the methodology for determining the 2009 baseline rate for specified 
primary care services to ensure that the data sources used are 
reasonable, reliable, and accurate to the fullest extent possible.
     Section 438.804(a)(1)(ii) replaces the description of the 
methodology to identify the rate differential between the amount paid 
as of July 1, 2009 for specified primary care services and the rate 
required under this rule. This requirement was designated as Sec.  
438.804(a)(2) under the proposed rule. The reference to ``managed care 
provider'' was removed and replaced with ``MCO, PIHP or PAHP'' for 
consistency with 42 CFR part 438.
     Section 438.804(a)(3) has been revised and redesignated as 
Sec.  438.804(a)(2) to indicate that the methodology for identifying 
the 2009 baseline rate and the differential in payment between the 
provider payments that would have been made by the MCO, PIHP or PAHP on 
July 1, 2009 and the amount needed to comply with the contractual 
requirement under Sec.  438.6(c)(5)(vi) must be submitted to CMS for 
approval by the end of the first quarter of CY 2013. This is in 
recognition of the amount of planning and activity that must occur at 
the state, federal, health plan and provider levels to implement the 
increase in primary care provider payments in CY 2013.
     A new Sec.  438.804(a)(3) has been added to clarify that 
the methodologies required under the section will be used by CMS in 
reviewing necessary MCO, PIHP and PAHP contract amendments and rates to 
implement the enhanced payment to primary care providers under this 
rule.
     Section 447.400(a) has been revised to permit recognition 
of physician specialties and subspecialties by the American Board of 
Physician Specialties (ABPS) and the American Osteopathic Association 
(AOA) as well as the American Board of Medical Specialties, which was 
the only Board referenced in the proposed rule. This change recognizes 
the fact that these three Boards are the three nationally recognized 
physician certification Boards.
     Section 447.400(a)(2) has been revised to require 
physicians to self-attest that they are appropriately Board certified 
or that 60 percent of their Medicaid claims are for eligible E&M codes. 
This lessens the burden on State Medicaid agencies which, under the 
provisions of the proposed rule, were required to use these measures to 
verify the eligibility for higher payment of all physicians who self-
attested to eligibility.
     A new Sec.  447.400(b) has been added, specifying that, at 
the end of CY 2013 and CY 2014, the Medicaid agency must review a 
statistically valid sample of physicians who received higher payments 
to verify they met the requirements for such payment. Section 
447.400(3) has been deleted because Medicaid agencies need no longer 
verify the self-attested eligibility of the physician.
     A new Sec.  447.400(d) has been added to require that 
states collect and report to CMS data on the impact of the higher rates 
on physician participation. That data will assist Congress in 
determining determine whether or not to extend the provisions of this 
rule beyond the end of CY 2014.
     Section 447.405(a)(1) has been revised to require Medicaid 
agencies to pay eligible providers in CYs 2013 and 2014 at the Medicare 
part B fee schedule rate that is applicable either to the specific site 
of service or to the office setting. States must also either make all 
Medicare locality adjustments or may pay a statewide rate per E&M code 
based on the mean Medicare rate across counties. The final rule makes 
these changes in recognition of the administrative burden to states 
associated with the need to make all site of service and geographic 
adjustments.
     Section 447.410 has been revised to add a new requirement 
that Medicaid agencies identify in the required state plan the eligible 
codes that will be paid at the Medicare rate in CYs 2013 and 2014 that 
were not paid under the state plan as of July 1, 2009. This is to 
assist in ensuring that eligible codes are not added solely for 
purposes of receiving 100 percent FFP. This section also requires that 
the state plan specify the methodology the state will use to identify 
the 2013 and 2014 Medicare rates.
     Section 447.415(b) has been revised to specify that, in 
calculating the 2009 Medicaid base rate, incentive, bonus and 
performance-based payments may be excluded. This is because these 
payments are not part of statewide fee schedule rates, but are paid 
only to physicians who meet specific goals or criteria. However, volume 
based payments, such as those made up to the average commercial rate, 
must be included since those payments, even when paid as aggregate 
payments, are based on code-specific calculations.
     Section 447.410(d) has been revised to clarify that 
bundled payments exclude encounter and per diem rates. This clarifies 
that physician services provided at sites such as clinics or nursing 
homes which are reimbursed as part of the encounter or NF per diem and 
not under a physician fee schedule are not eligible for higher payment.

IV. Collection of Information Requirements

    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the 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.

[[Page 66692]]

    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics for all salary estimates. The salary estimates include the 
cost of fringe benefits, calculated at approximately 35 percent of 
salary, which is based on the Bureau's June 2011 Employer Costs for 
Employee Compensation report.
    In our May 11, 2012, proposed rule, we solicited public comment on 
each of the section 3506(c)(2)(A)-required issues for the following 
information collection requirements (ICRs). PRA-related comments were 
received as indicated below.

A. ICRs Regarding Contract Requirements (Sec.  438.6)

    In Sec.  438.6(c)(3)(v) and (c)(5)(vi), states are required to 
modify managed care contracts and accompanying capitation rates through 
which MCOs, PIHPs or PAHPs will comply with the requirements of the 
Affordable Care Act. There is a one-time burden to the state for 
amending such contracts for the following provisions: (1) To assure 
that the level of payment is consistent with 42 CFR part 447, subpart 
G; (2) to assure that the specified physicians (whether directly or 
through a capitated arrangement) receive an amount at least equal to 
the amount set for and required under part 447; and (3) to assure that 
the state receives sufficient documentation regarding those adjusted 
payments.
    The one-time burden associated with the requirements under Sec.  
438.6(c)(3)(v) and (c)(5)(vi) is the time and effort it would take each 
of the 37 state Medicaid programs with MCOs, PIHPs or PAHPs and the 
District of Columbia (38 total respondents) to amend an average of 
three managed care contracts. The associated requirements and burden 
estimates have been approved by OMB under OCN 0938-0920. Section 
438.6(c)(3)(v) and (c)(5)(vi) would not impose any new or revised 
reporting or recordkeeping requirements and, therefore, does not 
require additional OMB review under the authority of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3501 et seq.).
    The burden estimates approved under OCN 0938-0920 take into account 
the number of modifications required to managed care contracts by the 
states on an annual basis due to changes in federal law and the 
operations of a state's Medicaid program. As the amount of activity 
that would require contract modifications may vary across the states, 
the approved burden estimates accommodate that variation. Therefore, 
the one-time contract modification required by this rule fits within 
the existing estimates.

B. ICRs Regarding Primary Care Provider Payment Increases (Sec.  
438.804(a)(1) and (2))

    In Sec.  438.804(a)(1) and (2), states are required to submit the 
methodologies they intend to use to develop a baseline for primary care 
service payments in 2009 as well as the differential between that 
baseline and the CY 2013 and 2014 rate to CMS for review and approval 
no later than the end of the first quarter of CY 2013. Further, we 
indicate that we will use those approved methodologies to review and 
approve managed care contracts and rates that are compliant with this 
provision.
    The burden associated with the requirements under Sec.  
438.804(a)(1) and (2) is the time and effort it would take each of the 
37 state Medicaid programs and the District of Columbia (38 total 
respondents with managed care delivery systems) to develop both 
methodologies, as well as managed care capitation rates which reflect 
the increased payments to implement this section. We received comments 
maintaining that the proposed rule had significantly underestimated the 
costs of implementing this provision in a managed care delivery system. 
In response, we are revising the burden estimates that were set out in 
the proposed rule. The task of developing both methodologies will 
involve a one-time effort on the part of financial, legal and 
management staff, as well as significant contractual actuarial 
resources. Most of the 38 states use contracted actuarial firms to 
develop managed care capitation methodologies and rates. Since the 
development of the 2009 baseline and CYs 2013-2014 rate differentials 
require actuarial analysis, we have estimated those contractual costs. 
Once the methodologies are developed by each respondent's contracted 
actuary, each respondent will need to review and approve them prior to 
submission to CMS.
    We estimate that it will take approximately 100 hours of 
contractual actuarial services per respondent at a cost of $5,398 to 
complete the data and actuarial analysis to develop these methodologies 
at a total cost of $205,124 (38 x $5,398). It will also take 10 hours 
per respondent at a cost of $482.86 to review and validate these 
methodologies in order to submit them to CMS at a total cost of 
$18,348.68 (38 x $482.86). In deriving these figures, we used the 
following hourly labor rates and estimated the time to complete this 
task: $53.98/hr and 100 hours for contracted actuarial staff; $49.07/hr 
and 2 hours for legal staff to review the methodology for compliance 
with the statute ($98.14); and $48.09/hr and 8 hours for managerial 
staff to review and submit these methodologies to CMS ($384.72). The 
total one-time burden amounts to $223,473 ($205,124 + $18,349).

C. ICRs Regarding General Requirements--Provider Agreements (Sec.  
441.605(b))

    This requirement is exempt from the PRA since we expect to receive 
fewer than 10 submissions (annually) from providers, if any. The 
requirement that providers must have provider agreements in place in 
order to participate in the VFC program has been in effect since the 
program was implemented in 1994. The provision in this regulation is 
merely codifying the requirement and no further action is necessary in 
regard to providers who are currently participating in the VFC program.

D. ICRs Regarding Administrative Fee Requirements (Sec.  441.615(d))

    This requirement is exempt from the PRA since we expect to receive 
fewer than 10 submissions (annually) from states. The requirement that 
a state submit a state plan was a requirement when the VFC program was 
first established in 1994, and all states submitted state plans at that 
time. A state now only submits a state plan amendment related to the 
VFC program when it makes a change to the state's administration fee. 
In 2011, only two states submitted state plans that made changes to the 
state's administration fee under the VFC program. Even with the 
publication of the updated fee schedule, we do not anticipate that many 
states will make changes to their administration fee.

E. ICRs Regarding Primary Care Services Furnished by Physicians With a 
Specified Specialty or Subspeciality (Sec.  447.400(a), (b), and (d))

    In Sec.  447.400(a), physicians are required to self-attest that 
they are Board certified in an eligible specialty or subspecialty or 
that 60 percent of the claims that they submit are for eligible E&M 
codes. In Sec.  447.400(b), at the end of CY 2013 and CY 2014, the 
state must review a statistically valid sample of physicians who 
received higher payments to verify that they meet the one requirement 
to which they attested.
    The burden associated with the requirements under Sec.  447.400(a) 
and (b) is the time and effort it will take each of the 50 Medicaid 
Programs and the District of Columbia (51 total respondents) to 
establish a protocol for physician self-attestation and to conduct

[[Page 66693]]

and review a statistically valid sample of ``eligible'' physicians once 
in each of CYs 2013 and 2014. In the proposed rule we estimated that it 
would take 0.5 hours to determine whether a physician may receive 
payment under the Affordable Care Act. In this final rule, we assess 
the burden based on MSIS data from the fourth quarters of FY 2008 and 
2009 which showed an average of 2,245 physicians per state who 
currently bill, but whose eligibility for increased payment would need 
to be verified by the Medicaid agency. We increased this number by 10 
percent to account for participation by new physicians for a total of 
2,470 physicians. The reported burden, which relies on a review of each 
physician qualifications, represents CMS's best estimate of the cost to 
sample data on physicians who self-attested. We relied on the data 
reported above in the absence of information about how each state plans 
to implement its sampling methodology.
    We used the following hourly labor rates and estimated the time to 
complete each task: 0.5 hours for a state's Medicaid office and support 
staff working in the medical billing area to retrieve and assess claims 
for an individual physician; or 0.5 hours for administrative staff to 
review the Board certification status of a physician. Costs associated 
with these staff are reported at a cost of $14.12 for each half-hour 
derived from $28.24/hr each and 2,470 physicians for an estimated cost 
of $34,876.40 per state ($14.12/hr x 2,470 responses/state) or 
$1,778,696.40 total ($34,876.40 x 51 states).
    While proposed in the proposed rule, this final rule removes the 
provision that would have required states to verify the self-
attestations of all physicians by confirming Board certification or an 
appropriate claims history. In this final rule, states must annually 
sample (in a statistically valid manner) the physicians who receive 
higher payment to ensure that they are either Board certified or that 
60 percent of the codes they bill to Medicaid are those codes 
identified in this rule. We are not able to estimate this burden with 
greater precision due to lack of data about the varying methods states 
will use to fulfill this requirement (see discussion under preamble 
section A. Payments to Physicians for Primary Care Services; 1. Primary 
Care Services Furnished by Physicians with Specified Specialty and 
Subspecialty (Sec.  447.400); a. Specified Specialties and 
Subspecialties). Therefore, we are not modifying our estimate of the 
impact of this section of the rule.
    In Sec.  447.400(d) the state is required to submit to CMS the 
information relating to participation by physicians as well as the E&M 
codes. The form and timeframe for such submission has yet to be 
determined by CMS.

F. ICRs Regarding State Plan Requirements (Sec.  447.410)

    In Sec.  447.410, states will be required to submit a SPA to 
reflect the fee schedule rate increases for eligible primary care 
physicians under section 1902(a)(13)(C) of the Act. They will also be 
required to submit a SPA that reflects the payment increase for vaccine 
administration. The purpose of this requirement is to assure that when 
states make the increased reimbursement to providers, they have state 
plan authority to do so and they have notified providers of the change 
in reimbursement as required by federal regulations. In accordance with 
Sec.  447.205, public notification prior to the effective date of a SPA 
must be made whenever a state proposes a change to its methods and 
standards for setting payment rates for services. Consequently, the 
notification burden is included in the following estimate.
    The burden associated with the one-time requirement under Sec.  
447.410 is the time and effort it would take each of the 50 state 
Medicaid programs and the District of Columbia (51 total respondents) 
to modify the Medicaid state plan to reflect payment consistent with 
the requirements in section 1902(a)(13)(C) of the Act. This will 
require the review, preparation, approval, and submission of a CMS-
provided SPA template. We estimate that it will take state staff 
working 48 hours to complete all of the tasks associated with the 
review, preparation, approval, and submission of the SPA template. The 
estimated cost is $1,606.95 per state ($35.71/hr x 45 hr) or $81,954.45 
total ($1606.95 x 51) for tasks completed by non-management staff 
working on SPA preparation. We estimate that this task will also 
require 3 hour for state-employed legal staff at $49.07/hr or $147.21 
(per response) for a total of $7,507.71 ($147.21 x 51). The combined 
total for cost associated with SPA preparation, including non legal and 
legal staff employed by the state, is $89,462.16 ($81,954.45 + 
$7,507.71).
    The ongoing burden for states is the determination of the updated 
fee for service rate in CY 2014. We estimate that it will take state 
staff working 20 hours to set the new rate in accordance with the 
approved state plan amendment for this payment. The estimated cost is 
$607.07 ($35.71/hr x 17 hr) per state or $30,960.57 total ($607.07 x 
51) for tasks completed by non-management staff working on SPA 
preparation. We estimate that this task will also require 3 hours for 
state-employed legal staff at $49.07/hr or $147.21 (per response) for a 
total of $7,507.71 ($147.21 x 51). The combined total for cost 
associated with SPA preparation, including non legal and legal staff 
employed by the state, is $38,468.28 ($30,960.57 + $7,507.71).

G. Summary of Annual Requirements and Burden Estimates

                              Table 2--Annual Recordkeeping and Reporting Requirements and Associated Burden Estimates \1\
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                      Burden per                                                 Total
      Regulation  section(s)            OMB       Respondents        Responses         response    Total annual  burden      Labor cost of      cost ($)
                                    Control No.                                         (hours)          (hours)             reporting ($)     (rounded)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   438.804(a)(1) and (2)......    0938-1170            38  38 (total)...........      110     4,180................  223,472.68..........    223,473
Sec.   447.400(a) and (b).........    0938-1170            51  2,470 (per state) or          .50  1,235 (per state) or   34,876.40 (per        1,778,696
                                                                125,970 (total).                   62,985 (total).        state) or
                                                                                                                          1,778,696.4 (total).
Sec.   447.410 (SPA amendments)...    0938-1148            51  51 (total)...........       48     2,448................  89,462.16...........     89,462
Sec.   447.410 (amending FFS rate)    0938-1148            51  51 (total)...........       20     1,020................  38,468.28...........     38,468
                                   ---------------------------------------------------------------------------------------------------------------------
    Total.........................  ...........  ............  .....................  ..........  70,633...............  2,130,099.52........  2,130,100
--------------------------------------------------------------------------------------------------------------------------------------------------------
\1\ There are no capital or maintenance costs incurred by any of the collections. Therefore, the capitol cost column has been omitted from the table.


[[Page 66694]]

H. Submission of PRA-Related Comments

    We have submitted a copy of this final rule to OMB for its review 
of the rule's information collection and recordkeeping requirements. 
These requirements are not effective until they have been approved by 
the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access our Web 
site at http://www.cms.hhs.gov/[email protected], or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and 
recordkeeping requirements, please submit your comments to the Office 
of Information and Regulatory Affairs, Office of Management and Budget, 
Attention: CMS Desk Officer, (CMS-2370-F) Fax: (202) 395-6974; or 
Email: [email protected].

V. Regulatory Impact Analysis

A. Introduction

    We have examined the impacts of this final rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980; Pub. L. 96-354) (RFA), section 1102(b) of the Social Security 
Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
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 Orders 12866 and 13563 direct 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). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an ``economically'' 
significant rule, under section 3(f)(1) of Executive Order 12866. 
Accordingly, we have prepared a Regulatory Impact Analysis (RIA) that, 
to the best of our ability, presents the costs and benefits of the 
rulemaking. We solicited comment on the RIA analysis provided. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    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 2012, that 
threshold is approximately $139 million. This rule does not contain 
mandates that will impose spending costs on state governments in the 
aggregate of $139 million. The cost for increasing payment for primary 
care services in CYs 2013 and 2014 will be borne by the federal 
government, which will provide 100 percent matching funds equal to the 
difference between the Medicaid state plan rate in effect July 1, 2009 
and the Medicare rate implemented in CY 2013 and 2014, or the rate 
using the CY 2009 CF, if higher. The Affordable Care Act requires 
higher payment to physicians for primary care services but does not 
impose increased costs on states. For the provisions associated with 
the charges for vaccine administration under the VFC program, the 
proposals will have no consequential effect on state, local, or tribal 
governments or on the private sector.
    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. As indicated, this final rule will not have a substantial 
effect on state and local governments.

B. Statement of Need

    This final rule will implement provisions of the Affordable Care 
Act that require payment by state Medicaid agencies of at least the 
Medicare rates in effect in CYs 2013 and 2014 or, if higher, the rate 
using the CY 2009 CF for primary care services furnished by a physician 
with a specialty designation of family medicine, general internal 
medicine, or pediatric medicine. Also, this final rule will implement 
the statutory payment provisions uniformly across all states, defines, 
for purposes of enhanced federal match, eligible primary care 
physicians, identifies eligible primary care services, and specifies 
how the increased payment should be calculated. Finally, this rule 
provides general guidelines for implementing the increased payment for 
primary care services delivered by managed care plans.

C. Overall Impact

    The aggregate economic impact of this final rule is an estimated 
$5.600 billion in CY 2013 and $5.745 billion in CY 2014 (measured in 
constant 2012 dollars). In CY 2013, the federal cost is approximately 
$5.835 billion with $235 million in state savings. In CY 2014, the 
federal cost is approximately $6.055 billion with $310 million in state 
savings. The state savings are derived from the projected increases in 
reimbursement rates expected to occur between 2009 and 2013 through 
2014, in the absence of the Affordable Care Act, which will now be paid 
for by the federal government. Absent the legislation, the projected 
increases in the reimbursement rates would be split between the federal 
government and states. This aggregate economic impact estimate includes 
the requirement that states reimburse specified physicians for vaccine 
administration at the lesser of the Medicare rate or the VFC regional 
maximum during CYs 2013 and 2014, which is estimated at $975 million in 
federal costs. The federal costs for funding that increase, in State 
payments during CYs 2013 and 2014, are estimated at $495 million and 
$480 million, respectively. This also includes the impact on Medicaid-
expansion CHIP expenditures; total CHIP expenditures are estimated to 
increase by $145 million in CY 2013 and again in CY 2014, reflecting an 
increase in federal CHIP expenditures of $155 million and a decrease in 
state CHIP expenditures of $10 million in each year.
    Overall, there is a net increase of $165 million in the impact 
estimates of the final rule versus the proposed rule. This includes a 
$290 million increase in the estimates due to the inclusion of the 
costs associated with the primary care payment increase for enrollees 
in the Medicaid-expansion CHIP plans. Furthermore, this impact is 
partially offset by a decrease of $130 million as a result of the 
additional flexibility provided to states to determine the scope of the 
geographic adjustment to the MPFS. Lastly, there is a $5 million 
increase in the cost estimate for vaccine administration related to VFC 
provided in the final rule versus the proposed rule.
    Differences in the estimates provided in the final rule, versus 
those in the proposed rule, are mainly attributable to the inclusion of 
the Medicaid-expansion CHIP expenditures, as well as changes to the 
policy that allow states to either use the Medicare physician payment 
locality factors to determine the rates or

[[Page 66695]]

to develop a methodology to calculate mean or median Medicare rates to 
use statewide. The impacts presented in the proposed rule assume that 
states would pay primary care physician service rates that included the 
different Medicare locality factors.
    Overall, the estimated economic impacts are a result of this final 
rule providing states the ability to increase payment for primary care 
services without incurring additional costs (with the exception of 
states that did or would have reduced primary care physician service 
reimbursement rates in their Medicaid programs between 2009 and 2014). 
We anticipate higher payment will result in greater participation by 
primary care physicians, including primary care subspecialists, in 
Medicaid thereby helping to promote overall access to care. At this 
time it is not known whether states will be willing or have the ability 
to sustain this level of payment to providers beyond CY 2014.

D. Detailed Economic Analysis

1. Anticipated Effects on Medicaid Recipients
    We anticipate this final rule will have a positive effect on 
Medicaid beneficiaries by increasing the availability of services 
through financial incentives to primary care physicians. The exact 
number of beneficiaries that will benefit is not known, however, we 
believe it will be substantial because this rule directly affects 
payment for a type of service which is a key component of the Medicaid 
program. Additionally, we believe primary care physicians will be 
encouraged to accept more Medicaid beneficiaries into their practices 
as a result of increased payment.
    We believe that this provision of the regulation will positively 
affect the availability of vaccination services as well. Currently, 
approximately 5 states reimburse the regional maximum for vaccine 
administration set by the VFC program. This final rule will require 
states to reimburse specified physicians for vaccine administration at 
the lesser of the Medicare rate or the VFC regional maximum during CYs 
2013 and 2014.
    Finally, this rule will positively affect people who are dually 
eligible for benefits under the Medicare and Medicaid programs by 
increasing payment to physicians who serve this population. 
Specifically, Medicaid will pay higher amounts to providers. We 
anticipate that increased payment will promote greater access to 
primary care services for dually eligible beneficiaries.
2. Anticipated Effects on Other Providers
    We anticipate this final rule will increase physician participation 
in Medicaid as most states reimburse physicians at well below the 
Medicare rates. Recently, as states have experienced budgetary 
constraints, they have sought to address this by reducing payments to 
providers, including physicians. This final rule will ensure that in 
CYs 2013 and 2014, physicians receive the higher Medicare rate for the 
specified primary care services.
    In addition, this final rule will impact states and providers who 
provide immunizations under the Medicaid program because it will 
require that such providers be reimbursed at the lesser of the 2013 or 
2014 Medicare rate or the Regional Maximum VFC Administration Fee in 
CYs 2013 and 2014. This rule also raises the maximum rate that states 
could pay providers for the administration of vaccines under the VFC 
program in subsequent years. The updated Regional Maximum 
Administration Fees included in this final rule are the maximum amounts 
that a state could choose to reimburse a provider for the 
administration of a vaccine under the VFC program after the provisions 
of the primary care payment increase expire at the end of CY 2014. 
States have the flexibility to set the rate that they will reimburse 
providers, and can therefore choose to set it at the state's regional 
maximum fee or at any other amount below the regional maximum amount. 
It is not expected that all states will choose to implement the 
increase.
    The impact of this final rule on the federal government is 
therefore connected to states' decisions as to whether to increase the 
amount that they pay providers for the administration of vaccines after 
CY 2014. That is, if no states choose to increase the administration 
fee for providers, there will be no additional costs incurred by the 
federal government.
    The same is true for states. There will be no impact of this final 
rule on a state unless the state chooses to increase the amount that it 
reimburses providers for the administration of vaccines under the VFC 
program. It is estimated that if all states were to reimburse providers 
at the maximum administration fee, the total cost to states and the 
federal government would be $75 million. Of this, the federal share is 
estimated to be $45 million.
    Children enrolled in the VFC program who are Medicaid eligible will 
not incur any additional costs as a result of this final rule as there 
are no out-of-pocket expenses related to the VFC program for Medicaid 
eligible children.
    Families of children who are enrolled in the VFC program because 
they are either uninsured or do not have insurance that covers vaccines 
will be impacted by this regulation. Uninsured and underinsured 
individuals receiving vaccines through the VFC program will continue to 
pay a single administration fee for any vaccine provided. The provider 
will also receive a single administration fee for any vaccine provided, 
regardless of the number of vaccine/toxoid components, and will not 
receive the Medicare administration rate for those services. Providers 
can bill the families of those children at the state's regional maximum 
rate for the administration of a vaccine. As a result, if the updated 
rates were to become effective, those families could be billed at the 
published rate for that state. However, section 1928(c)(2)(B)(iii) of 
the Social Security Act says that ``[t]he provider will not deny 
administration of a qualified pediatric vaccine to a vaccine-eligible 
child due to the inability of the child's parent to pay an 
administration fee.''
    Therefore, providers will benefit from the regulation as they can 
charge and receive the state's regional maximum rate for their patients 
who are enrolled in the VFC program because they are either uninsured 
or do not have insurance that covers immunizations. A provider will not 
receive an increased administration fee for Medicaid-eligible children 
unless a state chose to increase the amount that it pays providers 
under the Medicaid program.
3. Anticipated Effects on the Medicaid Program Expenditures
    Table 3 provides estimates of the anticipated Medicaid program 
expenditures associated with increasing payment for primary care 
services. CMS's Office of the Actuary (OACT) developed estimates for 
the impact of this section of the Affordable Care Act, which were 
initially published in April 2010, (https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf). Initially, 
projections of Medicaid spending on primary care physician services by 
FFS Medicaid and Medicaid managed care plans were created. For this, 
OACT developed assumptions of (1) what share of Medicaid physician 
spending was for primary care and (2) what share of managed care 
spending was for physician services, relying on several studies on 
physician service utilization and expenditures. OACT then projected 
spending for 2013 and 2014 based on

[[Page 66696]]

the projections of Medicaid physician spending in the President's 
Fiscal Year 2013 Budget. (The original estimates that appeared in the 
April 2010 estimates were based off of the President's Fiscal Year 2010 
Budget Mid-Session Review.) To determine the impact of using Medicare 
physician payment rates for Medicaid payments, OACT compared the ratio 
of Medicaid rates to Medicare rates, based on a study of Medicare and 
Medicaid physician payment rates across all states. Finally, OACT 
projected growth in Medicaid physician payments and the rates 
prescribed by the Affordable Care Act, based on Medicare payment rates; 
these estimates were revised to incorporate the actual CY 2011 CF (75 
FR 73169). OACT assumed that the volume of physician services covered 
by Medicaid would increase by 5 percent in managed care plans and by 10 
percent in fee-for-service programs over 2013 and 2014 as a result of 
higher payments and expected increases in physician participation in 
Medicaid. Additionally, these changes were estimated to result in a 
slight decrease in projected state spending as future projected 
Medicaid payment rate increases would be covered by increased federal 
matching funds in 2013 and 2014. The studies and data sources used for 
developing these estimates included: S. Zuckerman, ``Trends in Medicaid 
Physician Fees, 2003-2008,'' Health Affairs, 28 April 2009; the 
American Medical Association; the Medical Group Management Association; 
and the Bureau of Labor Statistics.
    As a result of the changes to the policy that allows states to 
either use the Medicare physician payment locality factors to determine 
the rates or to develop a methodology to calculate the mean over all 
counties for each E&M code to use statewide, the estimates have been 
revised since the proposed rule. The estimates in the proposed rule 
reflect the expected impacts of the rule assuming that states would pay 
primary care physician service rates that included the different 
Medicare locality factors. As states now have the option to develop a 
methodology using a mean over all counties based on the different 
locality payment rates within a state, the estimates have changed to 
reflect the different options states might use.
    OACT has reviewed several possible methods states might consider 
using to determine the mean rates. The states' decisions to use the 
rate based on the Medicare locality rate or the mean rate measured over 
all counties may result in impacts ranging from $11.185 billion over CY 
2013 and CY 2014 to $11.495 billion over the two years. It is assumed 
for the purposes of this rule that the expected cost would be equal to 
the median of this range, as no assumptions have been made for which 
states (with multiple Medicare physician payment localities) would 
choose each methodology.

    Table 3--Federal and State Medicaid and CHIP Impacts for Payment
 Increases to Primary Care Providers During Calendar Years 2013 Through
                     2014 (Millions of 2012 Dollars)
------------------------------------------------------------------------
                                              CY 2013         CY 2014
------------------------------------------------------------------------
Federal Share*..........................          $5,835          $6,055
State Share.............................            -235            -310
                                         -------------------------------
Total...................................           5,600           5,745
------------------------------------------------------------------------
(* Federal cost estimates reflect the additional $495 million and $480
  million in CYs 2013 and 2014, respectively, as a result of states
  reimbursing specified physicians for vaccine administration at the
  lesser of the Medicare rate or the VFC regional maximum.)

    The Medicare payment rates used in this estimate were the actual 
2009 MPFS and the current statute projections of the CYs 2013 and 2014 
MPFS.
    In addition, it should be noted that these estimates are based on 
the current statute which includes a significant projected reduction to 
payment rates in the CY 2013 MPFS under the Sustainable Growth Rate 
(SGR) formula. Every year since 2003, the Congress has passed 
legislation overriding projected cuts that otherwise would have 
resulted from the SGR formula. Furthermore, it is possible that the 
Congress may enact legislation that averts the currently projected 
reduction in MPFS rates for 2013 which would affect the CYs 2013, and 
2014 rates that are being used to estimate the payment impacts in this 
rule. Consequently, if the Congress enacts legislation resulting in 
increased payment rates to replace the payment rate reduction called 
for under the SGR formula in CYs 2013, and 2014, and in turn the CYs 
2013 or 2014 rates exceed the rates calculated using the CY 2009 CF, 
then this would result in higher costs for the CYs 2013 and 2014 
Medicaid physician payments presented in this rule. Additionally, other 
changes to the CF in these years may also affect the costs of this 
section. Therefore, currently it is not possible to accurately estimate 
the impact of these potential future changes, since definitive action, 
if any, by the Congress regarding the MPFS CF is unknown.
    Other changes made in the final rule increase the uncertainty 
regarding these estimates. In the final rule, states are no longer 
required to verify the self-attestation of all physicians that they are 
eligible for the higher payment rates. As a result, the review of a 
sample of the self-attesting physicians may find some physicians who 
are ineligible. To the extent that more physicians may self-attest as 
being eligible than would have been determined eligible by the state, 
there may be additional costs; the potential additional costs have not 
been quantified here.
    It is important to note that, consistent with the proposed rule, 
these estimates do not include any impact related to the impact of the 
expansion of Medicaid eligibility beginning in 2014 as provided by the 
Affordable Care Act. It is expected that the costs related to this rule 
would be even greater in 2014 than those listed in Table 3, as Medicaid 
enrollment increases with the new eligibility standards, as well as 
with efforts to simplify Medicaid enrollment and outreach efforts to 
enroll people in Medicaid, CHIP, and the Health Insurance Exchanges. As 
these new enrollees utilize primary care physician services that would 
be eligible for higher reimbursement rates, there would be additional 
costs related to this rule. These costs would dependent upon several 
factors, including: The number of new enrollees in 2014; the amount of 
primary care physician services the new enrollees utilize; the extent 
to which new enrollees participate in managed care Medicaid plans or in 
fee-for-service Medicaid; and the number of new enrollees in each 
state, as the impacts vary widely across the states. Furthermore, the 
cost would be highly dependent on which states elect to expand Medicaid 
eligibility in 2014, which is not known at this time. We further 
emphasize the uncertainties

[[Page 66697]]

associated with this estimate, especially regarding the participation 
of states in the Medicaid eligibility expansion.
4. Anticipated Effects on States
    The federal government will provide 100 percent matching funds for 
the difference between the Medicaid state plan rate in effect July 1, 
2009 and the Medicare rate in CYs 2013 and 2014 or the rate using the 
CY 2009 Medicare CF, if higher. Therefore, we believe this final rule 
will result in a positive effect on states, since it reduces their 
expenditures for primary care services. State savings are estimated at 
$235 million and $310 million in CYs 2013 and 2014, respectively. 
However, for Medicaid state plan rates below the 2009 level, states 
will be required to reimburse the non-federal share of that portion, so 
as to return to the 2009 level of payment. We are unable to accurately 
quantify the impact of this effect on states, since there is not a 
precise relationship between any of the Medicaid state plan rates and 
the Medicare rates.
5. Anticipated Effects on Small Entities
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organization, and small 
governmental jurisdictions. The great majority of hospitals and most 
other health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business and having revenues of less than $7.0 million to $34.5 
million in any 1 year. (For details, see the Small Business 
Administration's Table of Size Standards at http://www.sba.gov/sites/default/files/files/Size_Standards_Table.pdf). For purposes of the 
RFA, approximately 95 percent of physicians are considered to be small 
entities. Individuals and states are not included in the definition of 
a small entity.
    We anticipate that this regulation will primarily impact individual 
physicians and state Medicaid agencies. This final rule requires states 
to increase payment for primary care services without incurring 
additional state cost. As previously noted, we anticipate that this 
higher payment will impact physicians by encouraging greater 
participation by primary care physicians, including primary care 
subspecialists, in Medicaid, thereby helping to promote overall access 
to care. Therefore, the Secretary has determined that this final rule 
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 603 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. This rule will not have a 
significant impact on small rural hospitals because it only affects 
physicians. We are not preparing an analysis for section 1102(b) of the 
Act because the Secretary has determined that none of the provisions in 
this final rule will have a significant impact on the operations of a 
substantial number of small rural hospitals.

E. Alternatives Considered

    This section provides an overview of the issues addressed in the 
final rule and the regulatory alternatives considered. In identifying 
the issues and developing alternatives, we consulted with states and 
other interested stakeholders such as primary care specialists and 
policy makers. We solicited comment on the assumptions and analyses 
presented in the Alternatives Considered section. Detailed analysis on 
the alternatives considered to the provisions in the final rule is 
provided in the responses to comments in section II.
1. Eligible Providers
    The statute specifies that increased payment may be made for 
primary care services furnished by a physician with a primary specialty 
designation of family medicine, general internal medicine or pediatric 
medicine. In the proposed rule, we included related subspecialists and 
used Board certification or subspecialty recognition by the American 
Board of Medical Specialties (ABMS) and a supporting history of codes 
billed in the absence of Board certification as a means of identifying 
eligible primary care physicians. We considered permitting physicians 
to qualify for payment based solely on self-attestation. The final rule 
CMS continues to recognize subspecialists related to the primary care 
specialists specified in the statute as eligible for this payment. We 
accept Board certification by the ABMS, American Osteopathic 
Association and ABPS. We permit payment based on self-attestation alone 
but, to promote program integrity, we are requiring that states, at the 
end of each of CYs 2013 and 2014, review a statistically valid sample 
of providers who received higher payment to verify that they either 
were appropriately Board certified or that 60 percent of their claims 
during that period were for the identified E&M codes. Comments on this 
aspect of the final rule and our responses may be found in section 
II.A.1.a.
2. Payment Made Under the Physician Benefit as a Physician Service
    This rule clarifies physician services to mean any service 
delivered under the physician services benefit at 1905(a)(5)(A) of the 
Act. First, we considered whether the statute limited increased payment 
to services provided only by physicians. In the Medicaid program, a 
significant proportion of primary care services are actually rendered 
by advance practice nurses, and other types of independently practicing 
nonphysicians. We recognize the importance of these nonphysician 
practitioners in the provision of primary care services in many states. 
However, section 1902(a)(13)(C) of the Act limits eligibility for 
higher payment to services provided by physicians. Next we considered 
whether the statute limited increased payment to services provided 
directly by physicians. Medicaid regulations at Sec.  440.50 define 
``physician services'' as services provided by or under the personal 
supervision of a physician. Therefore, we concluded that, in light of 
the important role of these practitioners in delivering primary care to 
Medicaid beneficiaries and the regulatory definition of a ``physician 
service,'' those services delivered under the personal supervision of a 
specified primary care physician could qualify for the increased 
payment. This meant that specified primary care services rendered by 
nonphysicians such as advanced practice nurses and other nonphysician 
professionals qualified for payment when billed under the Medicaid 
enrollment number of any designated primary care specialist or 
subspecialist.
    Due to the limited data available, we are unable to accurately 
estimate the impacts representing the inclusion of services provided by 
practitioners under the supervision of a physician. All such services 
are billed under the supervising physician's billing number and are 
reported as physician services to CMS making it impossible to determine 
the impact of this proposal.
    In the final rule, higher payment is still limited to the qualified 
physicians and advanced practice professionals practicing under their 
personal supervision. However, services no

[[Page 66698]]

longer need to be billed under the physician's billing number, as long 
as the physician has professional responsibility for the services 
provided. The comments we received on this topic and CMS responses are 
found in section II.A.1.b.
    We also considered whether services provided by physicians in 
settings such as FQHCs, RHCs, or clinics would be eligible for 
increased payment. In Medicaid ``physician services'' is a distinct 
benefit from other benefits such as the FQHC, RHC or clinic benefits. 
We estimated that the inclusion of services provided by physicians in 
settings such as FQHCs, RHCs, or clinics for increased payment would 
result in an aggregate federal cost of approximately $755 million for 
CYs 2013 and 2014. In the final rule, we continue to believe that only 
those services reimbursed pursuant to a physician fee schedule and 
through the Medicaid state plan as a physician service are eligible for 
higher payment. In section II.A.1.b. we provide more detail about 
comments and our responses.
3. Eligible E&M Services
    The statute requires enhanced payment for E&M services/codes. The 
proposed rule specified the E&M Codes eligible for the increased 
payment. They include all primary care E&M codes, including some codes 
not recognized for payment by Medicare. Because the statute requires 
payment at the Medicare rate, we considered not extending the 
requirement for increased payment to codes not reimbursed by Medicare. 
However, many of those codes represent services provided to children. 
While Medicare covers relatively few children, payments for services 
provided to children constitute a larger proportion of Medicaid 
expenditures. We therefore included these additional codes because they 
represent core primary care services that are important to the Medicaid 
program.
    We estimated that approximately 6 to 7 percent of all expenditures 
on services eligible for the increased payment rates are for services 
not covered by Medicare. Furthermore, we believed that a corresponding 
amount of the federal costs associated with this final regulation would 
be related to these services, reflecting an impact range of $655 
million to $765 million over CY 2013 and 2014. As a result, the final 
rule specifies that all E&M codes identified in the proposed rule are 
eligible for higher payment. Rates for codes not reimbursed by Medicare 
will be developed by us based on a calculation of the CF and RVUs that 
are published by us. Comments and alternatives considered regarding 
this section of the rule are presented in section II.A.2.b.
4. Eligible Vaccine Administration Services
    The statute specifies payment at the CY 2013 and 2014 Medicare rate 
for certain vaccine administration billing codes or their successor 
codes. A state may receive 100 percent FFP for the difference between 
the Medicaid rate as of July 1, 2009 and the Medicare rates in CYs 2013 
and 2014 or the rate using the CY 2009 CF, if higher. In 2011, the 
coding structure for vaccine administration changed such that two codes 
replaced four of the specified codes. Moreover, the four deleted codes 
represented vaccine administrations by various routes (for example, 
intranasal vs. injectable) to children under 8. However, new code 90460 
represents the initial vaccine/toxoid administered through all routes 
to children through age 18 while code 90461 represents payment for 
additional vaccines/toxoids administered. This rule finalizes a method 
for imputing a vaccine administration rate in 2009 for code 90460. The 
2009 rate would equal the average payment amount weighted by volume of 
codes 90465 and 90471. The 2009 value for code 90461 would be $0, since 
there was no payment for additional vaccines/toxoids prior to 2011. We 
received one comment on this proposed methodology, which led to a 
revision of the formula.
    In 2009, approximately 20 states used a bundled rate to reimburse 
vaccines and vaccine administration, complicating the identification of 
the rate differential. This rule clarifies that, for any bundled rate 
payments such as this, states must correctly identify the rate 
differential for the included primary care service only (in this case, 
vaccine administration). We added this provision in the interest of 
promoting program payment integrity but defer to the states to develop 
a methodology. Also, providers administering vaccines under the VFC 
program will be reimbursed the lesser of the Medicare rates in 2013 or 
2014 or the Regional Maximum Administration Fee per vaccine. This final 
rule does not change the statutory requirement in section 1928(c)(2)(C) 
of the Act that a qualified physician administering a vaccine obtained 
from the VFC program is limited under the VFC provider agreement to 
charging an amount for vaccine administration that is no more than the 
VFC maximum allowable charge. A more detailed analysis of the 
alternatives considered for increased payments for vaccine 
administration under the VFC program is discussed in the response to 
comments in section II.A.4.c.
5. Method of Payment
    Section 1902(a)(13)(C) of the Act requires payment in CYs 2013 and 
2014 of the current Medicare rate, unless the rate set using the CY 
2009 CF was higher. Historically, Medicare has issued multiple updates 
to its MPFS within a single year. This rule continues to permit states 
to either adopt the MPFS in effect at the beginning of CYs 2013 and 
2014 or the rate using the CY 2009 CF, if higher, or a methodology to 
update rates to reflect changes made by Medicare during the year. It 
permits states to either make site of service adjustments or pay at the 
Medicare office rate. It requires states to either make all Medicare 
locality adjustments or to pay a statewide median rate over all 
counties. A discussion of the alternatives considered and comments 
received can be found in sections II.A.2.a. and c.
6. VFC Administration Fee Increase
    We considered a number of options when determining to update the 
average national administration charge portion of the formula used to 
calculate the VFC administration fee. These options included using the 
Medicare Economic Index (MEI), Consumer Price Index (CPI) or the Gross 
Domestic Product Deflator. We determined the best option is to utilize 
the MEI, which is a price index used by CMS to update Medicare 
physician payments. The MEI reflects input price inflation experienced 
by physicians inclusive of the time period when the national average 
was established in 1994. Therefore, we believe that input prices 
associated with this specific type of physician-provided service are 
consistent with overall input prices.
    The economic impact associated with updates to the regional maximum 
charges for the VFC program is estimated at $75 million per year. The 
federal cost of this total is approximately $45 million per year. These 
estimates assume that every state will increase its reimbursement rate 
to the new VFC maximum fee.
7. Implementation of Payment Provision in Managed Care Delivery System
    Section 1932(f) of the Act requires the application of the 
provisions of section 1902(a)(13) of the Act to managed care 
organization contracts and payments. The complexity of such an 
application was reviewed in several different areas--the varied scope 
of primary care providers that operate within managed care plans; 
identifying both the 2009

[[Page 66699]]

baseline payments for affected primary care services to managed care 
organizations as well as the amount of managed care capitation payments 
that would be eligible for 100 percent federal match; and the 
documentation that states must collect from managed care plans to 
verify that the Medicare rate is paid to eligible providers in CY 2013 
and 2014.
    The final rule require states to submit to us two methodologies, 
one for determining the 2009 baseline and the other for identifying 
that proportion of managed care capitation rates that represents the 
difference between the 2009 baseline rates and the applicable CY 2013 
and 2014 Medicare rates. Both methodologies must be valid and 
reasonable and must acknowledge and accommodate each state's current 
rate-setting framework.
    Finally, we considered specifying the documentation that states 
must collect from managed care plans to ensure that primary care 
providers are the beneficiaries of these increased payment rates. 
However, in deference to the wide variation in states' current 
oversight and reporting mechanisms for MCOs, PIHPs, and PAHPs, the 
final rule requires states to specify the documentation needed from 
health plans to substantiate that primary care payment increases were 
made to eligible providers by the managed care plan.
F. Accounting Statement and Table
    As required by OMB's Circular A-4 (available at http://www.whitehouse.gov/omb//circulars_a004_a-4/), in Table 4 we have 
prepared an accounting statement illustrating the classification of the 
federal and state Medicaid and CHIP impacts for the payment increases 
to primary care providers and VFC, as a result of the provisions in the 
final rule.

 Table 4--Accounting Statement: Classification of Estimated Expenditures for Federal and State Medicaid and CHIP
     Impacts for Payment Increases to Primary Care Providers and VFC During Calendar Years 2013 Through 2014
                                           [Millions of 2012 dollars]
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
                 Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
      Annualized monetized transfers        ...........        Discount rate               Period covered
----------------------------------------------------------------------------------------------------------------
                                                     0%           7%           3%  CYs 2013-2014.
----------------------------------------------------------------------------------
Primary Estimate..........................       $5,945       $5,941       $5,943
----------------------------------------------------------------------------------------------------------------
                  From/To                                 Federal Government to Medicaid Providers
----------------------------------------------------------------------------------------------------------------
                 Category                   ...........                         Transfers
----------------------------------------------------------------------------------------------------------------
      Annualized monetized transfers        ...........        Discount rate               Period covered
----------------------------------------------------------------------------------------------------------------
                                                     0%           7%           3%  CYs 2013-2014.
----------------------------------------------------------------------------------
Primary Estimate..........................        -$273        -$271        -$272
----------------------------------------------------------------------------------------------------------------
From/To...................................                 State Governments to Medicaid Providers
----------------------------------------------------------------------------------------------------------------

    In accordance with the provisions of Executive Order 12866, this 
final regulation was reviewed by the Office of Management and Budget.

List of Subjects

42 CFR Part 438

    Grant programs-health, Medicaid, Reporting and recordkeeping 
requirements.

42 CFR Part 441

    Aged, Family planning, Grant programs-health, Infants and children, 
Medicaid, Penalties, Reporting and recordkeeping requirements.

42 CFR Part 447

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

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

PART 438--MANAGED CARE

0
1. The authority citation for part 438 continues to read as follows:

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

0
2. Section 438.6 is amended by adding new paragraphs (c)(3)(v) and 
(c)(5)(vi) to read as follows:


Sec.  438.6  Contract requirements.

* * * * *
    (c) * * *
    (3) * * *
    (v) For rates covering CYs 2013 and 2014, complying with minimum 
payment for physician services under paragraph (c)(5)(vi) of this 
section, and part 447, subpart G, of this chapter.
* * * * *
    (5) * * *
    (vi) For CYs 2013 and 2014, and payments to an MCO, PIHP or PAHP 
for primary care services furnished to enrollees under part 447, 
subpart G, of this chapter, the contract must require that the MCO, 
PIHP or PAHP meet the following requirements:
    (A) Make payments to those specified physicians (whether directly 
or through a capitated arrangement) at least equal to the amounts set 
forth and required under part 447, subpart G, of this chapter.
    (B) Provide documentation to the state, sufficient to enable the 
state and CMS to ensure that provider payments increase as required by 
paragraph (c)(5)(vi)(A) of this section.
* * * * *

0
3. Section 438.804 is added to read as follows:


Sec.  438.804  Primary care provider payment increases.

    (a) For MCO, PIHP or PAHP contracts that cover calendar years 2013 
and 2014, FFP is available at an enhanced rate of 100 percent for the 
portion of the expenditures for capitation payments made under those 
contracts to comply

[[Page 66700]]

with the contractual requirement under Sec.  438.6(c)(5)(vi) only if 
the following requirements are met:
    (1) The state must submit to CMS the following methodologies for 
review and approval.
    (i) The state develops a reasonable methodology, based on rational 
and documented data and assumptions, for identifying the provider 
payments that would have been made by MCO, PIHP or PAHP for specified 
primary care services furnished as of July 1, 2009. This methodology 
can take into consideration the availability of data, and the costs and 
burden of administering the method, but should produce a reliable and 
accurate result to the fullest extent possible.
    (ii) The state develops a reasonable methodology, based on rational 
and documented data and assumptions, for identifying the differential 
in payment between the provider payments that would have been made by 
the MCO, PIHP or PAHP on July 1, 2009 and the amount needed to comply 
with the contractual requirement under Sec.  438.6(c)(5)(vi). This 
methodology can take into consideration the availability of data, and 
the costs and burden of administering the method, but should produce a 
reliable and accurate result to the fullest extent possible.
    (2) The state must submit the methodologies in paragraphs (a)(1)(i) 
and (ii) of this section to CMS for review no later than the end of the 
first quarter of CY 2013.
    (3) CMS will use the approved methodologies required under this 
section in the review and approval of MCO, PIHP or PAHP contracts and 
rates consistent with Sec.  438.6(a).
    (b) [Reserved]

PART 441--SERVICES: REQUIREMENTS AND LIMITS APPLICABLE TO SPECIFIC 
SERVICES

0
4. The authority citation of part 441 is revised to read as follows:

    Authority: Secs. 1102, 1902, and 1928 of the Social Security Act 
(42 U.S.C. 1302).

0
5. Subpart L is added to read as follows:
Subpart L--Vaccines for Children Program
Sec.
441.600 Basis and purpose.
441.605 General requirements.
441.610 State plan requirements.
441.615 Administration fee requirements.

Subpart L--Vaccines for Children Program


Sec.  441.600  Basis and purpose.

    This subpart implements sections 1902(a)(62) and 1928 of the Act by 
requiring states to provide for a program for the purchase and 
distribution of pediatric vaccines to program-registered providers for 
the immunization of vaccine-eligible children.


Sec.  441.605  General requirements.

    (a) Federally-purchased vaccines under the VFC Program are made 
available to children who are 18 years of age or younger and who are 
any of the following:
    (1) Eligible for Medicaid.
    (2) Not insured.
    (3) Not insured with respect to the vaccine and who are 
administered pediatric vaccines by a federally qualified health center 
(FQHC) or rural health clinic.
    (4) An Indian, as defined in section 4 of the Indian Health Care 
Improvement Act.
    (b) Under the VFC program, vaccines must be administered by 
program-registered providers. Section 1928(c) of the Act defines a 
program-registered provider as any health care provider that meets the 
following requirements:
    (1) Is licensed or authorized to administer pediatric vaccines 
under the law of the state in which the administration occurs without 
regard to whether or not the provider is a Medicaid-participating 
provider.
    (2) Submits to the state an executed provider agreement in the form 
and manner specified by the Secretary.
    (3) Has not been found, by the Secretary or the state to have 
violated the provider agreement or other applicable requirements 
established by the Secretary or the state.


Sec.  441.610  State plan requirements.

    A state plan must provide that the Medicaid agency meets the 
requirements of this part.


Sec.  441.615  Administration fee requirements.

    (a) Under the VFC Program, a provider who administers a qualified 
pediatric vaccine to a federally vaccine-eligible child, may not impose 
a charge for the cost of the vaccine.
    (1) A provider can impose a fee for the administration of a 
qualified pediatric vaccine as long as the fee does not exceed the 
costs of the administration (as determined by the Secretary based on 
actual regional costs for the administration).
    (2) A provider may not deny administration of a qualified pediatric 
vaccine to a vaccine-eligible child due to the inability of the child's 
parents or legal guardian to pay the administration fee.
    (b) The Secretary must publish each State's regional maximum charge 
for the VFC program, which represents the maximum amount that a 
provider in a state could charge for the administration of qualified 
pediatric vaccines to federally vaccine-eligible children under the VFC 
program.
    (c) An interim formula has been established for the calculation of 
a state's regional maximum administration fee. That formula is as 
follows: National charge data x updated geographic adjustment factors 
(GAFs) = maximum VFC fee.
    (d) The State Medicaid Agency must submit a state plan amendment 
that identifies the amount that the state will pay providers for the 
administration of a qualified pediatric vaccine to a Medicaid-eligible 
child under the VFC program. The amount identified by the state cannot 
exceed the state's regional maximum administration fee.
    (e) Physicians participating in the VFC program can charge 
federally vaccine-eligible children who are not enrolled in Medicaid 
the maximum administration fee (if that fee reflects the provider's 
cost of administration) regardless of whether the state has established 
a lower administration fee under the Medicaid program. However, there 
would be no federal Medicaid matching funds available for the 
administration since these children are not eligible for Medicaid.

PART 447--PAYMENTS FOR SERVICES

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

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

0
7. Subpart G is added to read as follows:
Subpart G--Payments for Primary Care Services Furnished by Physicians
Sec.
447.400 Primary care services furnished by physicians with a 
specified specialty or subspecialty.
447.405 Amount of required minimum payments.
447.410 State plan requirements.
447.415 Availability of Federal financial participation (FFP).

Subpart G--Payments for Primary Care Services Furnished by 
Physicians


Sec.  447.400  Primary care services furnished by physicians with a 
specified specialty or subspecialty.

    (a) States pay for services furnished by a physician as defined in 
Sec.  440.50 of this chapter, or under the personal supervision of a 
physician who self-attests to a specialty designation of family 
medicine, general internal medicine or pediatric medicine or a

[[Page 66701]]

subspecialty recognized by the American Board of Medical Specialties 
(ABMS), the American Board of Physician Specialties (ABPS) or the 
American Osteopathic Association (AOA). A physician self-attests that 
he/she:
    (1) Is Board certified with such a specialty or subspecialty and/or
    (2) Has furnished evaluation and management services and vaccine 
administration services under codes described in paragraph (b) of this 
section that equal at least 60 percent of the Medicaid codes he or she 
has billed during the most recently completed CY or, for newly eligible 
physicians, the prior month.
    (b) At the end of CY 2013 and 2014 the Medicaid agency must review 
a statistically valid sample of physicians who received higher payments 
to verify that they meet the requirements of paragraph (a)(1) or (2) of 
this section.
    (c) Primary care services designated in the Healthcare Common 
Procedure Coding System (HCPCS) are as follows:
    (1) Evaluation and Management (E&M) codes 99201 through 99499.
    (2) Current Procedural Terminology (CPT) vaccine administration 
codes 90460, 90461, 90471, 90472, 90473 and 90474, or their successor 
codes.
    (d)(1) The state must submit to CMS, in such form and at such time 
as CMS specifies, information relating to participation by physicians 
described in paragraph (a) of this section and the utilization of E&M 
codes described in paragraph (c) of this section (whether furnished by 
or under the supervision of a physician described in paragraph (a)) of 
this section for the following peri--s--
    (i) As of July 1, 2009, and
    (ii) CY 2013
    (2) As soon as practicable after receipt, CMS will post this 
information on www.Medicaid.gov.


Sec.  447.405  Amount of required minimum payments.

    (a) For CYs 2013 and 2014, a state must pay for physician services 
described in Sec.  447.400 based on:
    (1) The Medicare Part B fee schedule rate that is applicable to the 
specific site of service or, at the state's option, the office setting 
and is also adjusted for either the specific geographic location of the 
service or reflects the mean over all counties of the rate for each E&M 
code. If there is no applicable rate, the rate specified in a fee 
schedule established and announced by CMS (that is, the product of 
multiplying the Medicare CF in effect at the beginning of CYs 2013 or 
2014 (or the CY 2009 CF, if higher) and the CY 2013 and 2014 relative 
value units (RVUs).
    (2) The provider's actual billed charge for the service.
    (b) For vaccines provided under the Vaccines for Children Program 
in CYs 2013 and 2014, a State must pay the lesser of:
    (1) The Regional Maximum Administration Fee; or,
    (2) The Medicare fee schedule rate in CY 2013 or 2014 (or, if 
higher, the rate using the 2009 conversion factor and the 2013 and 2014 
RVUs) for code 90460.


Sec.  447.410  State plan requirements.

    The state must amend its state plan to reflect the increase in fee 
schedule payments in CYs 2013 and 2014 unless, for each of the billing 
codes eligible for payment, the state currently reimburses at least as 
much as the higher of the CY 2013 and CY 2014 Medicare rate or the rate 
that would be derived using the CY 2009 conversion factor and the CY 
2013 and 2014 Medicare relative value units (RVUs). The amendment must:
    (a) Identify all eligible codes that the state will reimburse at 
the Medicare rate in CYs 2013 and 2014.
    (b) Identify all codes that were not reimbursed under the Medicaid 
program as of July 1, 2009.
    (c) Specify either that the state will make all adjustments 
applicable to the specific site of service or, at the state's option, 
the office setting and will also either adjust for the specific 
geographic location of the service or pay rates that reflect the mean 
over all counties of the rate for each E&M code. The state must specify 
the formula that the state will use to determine the mean rate for each 
E&M code.


Sec.  447.415  Availability of Federal financial participation (FFP).

    (a) For primary care services furnished by physicians specified in 
Sec.  447.400, FFP will be available at the rate of 100 percent for the 
amount by which the payment required to comply with Sec.  447.405 
exceeds the Medicaid payment that would have been made under the 
approved state plan in effect on July 1, 2009.
    (b) For purposes of calculating the payment that would have been 
made under the approved State plan in effect on July 1, 2009, the state 
must exclude incentive, bonus, and performance-based payments but must 
include supplemental payments for which the approved methodology is 
linked to volume and payment for specific codes.
    (c) For vaccine administration, the state must impute the payment 
that would have been made for code 90460 under the approved Medicaid 
state plan. The imputed rate for July 1, 2009, for code 90460 equals 
the payment rates for codes 90465 and 90471 weighted by service volume.
    (d) For any payment made under a bundled rate methodology, 
including bundled rates for vaccines and vaccine administration, the 
amount directly attributable to the applicable primary care service 
must be isolated for purposes of determining the availability of the 
100 percent FFP rate. Bundled rates, for purposes of this provision, do 
not include encounter and per diem rates.

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

    Dated: September 12, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: October 2, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-26507 Filed 11-1-12; 4:15 pm]
BILLING CODE 4120-01-P