[Federal Register Volume 91, Number 106 (Wednesday, June 3, 2026)]
[Rules and Regulations]
[Pages 33348-33482]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2026-11094]
[[Page 33347]]
Vol. 91
Wednesday,
No. 106
June 3, 2026
Part III
Department of Health and Human Services
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Centers for Medicare & Medicaid Services
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42 Parts 431, 435, 438, et al.
Medicaid Program; Community Engagement Requirement for Certain
Individuals; Final Rule
Federal Register / Vol. 91 , No. 106 / Wednesday, June 3, 2026 /
Rules and Regulations
[[Page 33348]]
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DEPARTMENT OF HEALTH AND HUMAN SERVICES
Centers for Medicare & Medicaid Services
42 CFR Parts 431, 435, 438, 457, and 600
[CMS-2454-IFC]
RIN 0938-AV98
Medicaid Program; Community Engagement Requirement for Certain
Individuals
AGENCY: Centers for Medicare & Medicaid Services (CMS), Department of
Health and Human Services (HHS).
ACTION: Interim final rule with comment period.
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SUMMARY: This interim final rule with comment period (IFC) interprets
and implements the community engagement requirement in Medicaid under
section 1902(xx) of the Social Security Act. States are required to
implement the new requirement no later than January 1, 2027. This IFC
specifies the requirements and expectations for States, including the
Medicaid applicants and beneficiaries who must demonstrate community
engagement as a condition of their eligibility, the types of qualifying
activities that satisfy the community engagement requirement, the
criteria to meet an exception from the requirement (that is, be deemed
compliant), and the criteria to meet a specified exclusion from the
requirement. It also specifies requirements for verification of
qualifying activities, outreach to affected populations, steps States
must take if they determine individuals are noncompliant, and
additional operational considerations for States. Finally, this IFC
specifies implementation timing and establishes new State reporting
requirements.
DATES:
Effective date: These regulations are effective on July 31, 2026.
Comment date: To be assured consideration, comments must be
received at one of the addresses provided below, by July 31, 2026.
ADDRESSES: In commenting, please refer to file code CMS-2454-IFC.
Comments, including mass comment submissions, must be submitted in
one of the following three ways (please choose only one of the ways
listed):
1. Electronically. You may submit electronic comments on this
regulation to https://www.regulations.gov/docket/CMS-2026-2047. Follow
the ``Submit a comment'' instructions.
2. By regular mail. You may mail written comments to the following
address ONLY: Centers for Medicare & Medicaid Services, Department of
Health and Human Services, Attention: CMS-2454-IFC, P.O. Box 8016,
Baltimore, MD 21244-8016.
Please allow sufficient time for mailed comments to be received
before the close of the comment period.
3. By express or overnight mail. You may send written comments to
the following address ONLY: Centers for Medicare & Medicaid Services,
Department of Health and Human Services, Attention: CMS-2454-IFC, Mail
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
For information on viewing public comments, see the beginning of
the SUPPLEMENTARY INFORMATION section.
FOR FURTHER INFORMATION CONTACT: CMS Medicaid Works,
[email protected].
SUPPLEMENTARY INFORMATION:
Inspection of Public Comments: All comments received before the
close of the comment period are available for viewing by the public,
including any personally identifiable or confidential business
information that is included in a comment. We post all comments
received before the close of the comment period on the following
website as soon as possible after they have been received: https://www.regulations.gov. Follow the search instructions on that website to
view public comments. CMS will not post on Regulations.gov public
comments that make threats to individuals or institutions or suggest
that the commenter will take actions to harm an individual. CMS
continues to encourage individuals not to submit duplicative comments.
We will post acceptable comments from multiple unique commenters even
if the content is identical or nearly identical to other comments.
Table of Contents
I. Background
A. Overview
B. Working Families Tax Cut Legislation
C. Severability
II. Provisions of the Interim Final Rule With Comment Period
A. Decision to Revise Certain Eligibility and Enrollment
Regulations To Implement Community Engagement
B. Applicable Individuals
C. Demonstrating Community Engagement
D. Mandatory Exceptions for Certain Individuals
E. Specified Excluded Individuals
F. Mandatory Exceptions vs. Specified Excluded Individuals
G. Short-Term Hardship Exceptions
H. Assessing Compliance With the Community Engagement
Requirement
I. Verification of Compliance With and Exceptions and Exclusions
From the Community Engagement Requirement
J. Noncompliance Procedures
K. Implementation Timing
L. Outreach
M. Managed Care Implications
N. Additional Considerations
O. Monitoring
III. Good Cause for Proceeding With an Interim Final Rule With
Comment Period
IV. Collection of Information Requirements
A. Wage Estimates
B. Adjustment to State Cost Estimates
C. Information Collection Requirements (ICRs)
D. Burden Summary
E. Submission of PRA-Related Comments
V. Regulatory Impact Analysis
A. Statement of Need
B. Overall Impact
C. Detailed Economic Analysis
D. Alternatives Considered
E. Accounting Statement
F. Regulatory Flexibility Act (RFA)
G. Unfunded Mandates Reform Act (UMRA)
H. Federalism
I. E.O. 14192, ``Unleashing Prosperity Through Deregulation''
J. Conclusion
I. Background
A. Overview
Title XIX of the Social Security Act (the Act) authorizes Federal
grants to States for Medicaid programs to provide medical assistance to
people with limited income and resources. While Medicaid programs are
administered by the States, the program is jointly financed by the
Federal and State governments. As such, the Centers for Medicare &
Medicaid Services (CMS) and State agencies share responsibility for
administering and ensuring the overall fiscal and programmatic
integrity and effectiveness of the Medicaid program. This joint
Federal-State partnership is the cornerstone of Medicaid. Enacted in
1965, Medicaid was created to serve and support vulnerable populations,
including: children living in low-income households, caretaker
relatives with dependent children, seniors, and individuals with
disabilities receiving Supplemental Security Income (SSI). In the 1980s
and 1990s, the Medicaid statute was amended to enable coverage of
additional services and populations, for example home and community-
based services, pregnant women and infants (up to 1 year of age), and
higher-income children (aged 6 through 18 under 100 percent of the
Federal poverty level). The Patient Protection and Affordable Care Act
of 2010, (Pub. L. 111-148, enacted March 23, 2010), as amended by the
Health Care and Education Reconciliation Act of 2010
[[Page 33349]]
(Pub. L. 111-152, enacted March 30, 2010), together referred to as the
Affordable Care Act (ACA), expanded Medicaid eligibility to include
non-pregnant adults with income up to 133 percent of the Federal
poverty level (also known as the adult group). Each of these coverage
expansions not only grew the number of eligible beneficiaries Medicaid
serves, but also contributed, along with benefits expansions and rising
health costs generally, to increased Medicaid spending. In fiscal year
(FY) 2025, approximately 82.4 million individuals were enrolled in
Medicaid, roughly 20 million of whom were enrolled in the adult
group.\1\ Total State and Federal combined Medicaid spending for FY
2025 was nearly $1 trillion, with approximately $200 billion
attributable to adult group expenditures.\2\
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\1\ CMS, Fiscal Year 2027; Justification of Estimates for
Appropriations Committees. https://www.cms.gov/files/document/fy-2027-justification-estimates-appropriations-committees.pdf.
\2\ Medicaid Budget and Expenditure System (MBES) data source
updated with FY2025 data as of the June 2026 IFC publication date.
Available at https://data.medicaid.gov/dataset/5b19d1d4-ae43-5fcd-ba14-3cecd99f473f and https://data.medicaid.gov/dataset/00505e90-f8ac-5921-b12f-5e23ba7ffcf3.
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Presently, States are not required to provide coverage to the adult
group.\3\ States that have elected to provide coverage to the adult
group have primarily done so using State plan authority. The adult
group consists of low-income individuals (up to 133 percent of the
Federal poverty level) who are age 19 to 64, not pregnant, not entitled
to or enrolled in Medicare Part A or B, or described in any other
mandatory eligibility groups (for example, parent and caretaker
relatives, children, or individuals eligible based on their receipt of
SSI). Individuals are determined eligible based on income and household
size, State residency, and citizenship and immigration status. Unlike
other Federal means-tested public assistance programs such as
Supplemental Nutrition Assistance Program (SNAP) and Temporary
Assistance for Needy Families (TANF), community engagement or work
requirements have not historically been a condition of eligibility in
the Medicaid program under title XIX of the Act. However, some States
have applied such requirements through a section 1115 demonstration.
The community engagement requirement will apply in States that have
elected the adult group through the State plan or that have a section
1115 demonstration that covers a similar population to which the
requirement applies. To date, 40 States and the District of Columbia
have expanded Medicaid \4\ and will be subject to the new community
engagement requirement. States that have partially expanded Medicaid
through a section 1115 demonstration and additional States that have
applicable individuals (defined later in this rule) eligible to enroll
or enrolled in a section 1115 demonstration will also be subject to the
new community engagement requirement.\5\
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\3\ While the ACA established the adult group as a mandatory
eligibility group, the U.S. Supreme Court decision, National
Federation of Independent Business v. Sebelius, 567 U.S. 519 (2012),
effectively made coverage of this eligibility group voluntary for
States.
\4\ See: CMS, Adult Coverage Expansion (December 1, 2023),
available at https://www.medicaid.gov/medicaid/program-information/downloads/medicaid-expansion-state-map.pdf.
\5\ NOTE: This document contains links to non-United States
Government websites. We are providing these links because they
contain additional information relevant to the topic(s) discussed in
this document or that otherwise may be useful to the reader. We
cannot attest to the accuracy of information provided on the cited
third-party websites or any other linked third-party site. We are
providing these links for reference only; linking to a non-United
States Government website does not constitute an endorsement by CMS,
HHS, or any of their employees of the sponsors or the information
and/or any products presented on the website. Also, please be aware
that the privacy protections generally provided by United States
Government websites do not apply to third-party sites.
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B. Working Families Tax Cut Legislation
Public Law 119-21, which CMS refers to as the Working Families Tax
Cut (WFTC) legislation, was signed into law by President Donald J.
Trump on July 4, 2025. This landmark legislation includes significant
changes in Medicaid and the Children's Health Insurance Program (CHIP)
affecting eligibility, program operations, and oversight capabilities.
It also establishes new accountability measures for Medicaid and CHIP.
Among other changes to Medicaid, section 71119(a) of the WFTC
legislation added section 1902(xx) of the Act to establish a community
engagement requirement for certain adults applying for or enrolled in
Medicaid. This requirement has the potential to empower Medicaid
beneficiaries through employment, education, or volunteer service so
they can escape isolation and dependency, build confidence, and achieve
self-sufficiency and independence. Isolation and loneliness have become
an epidemic in the United States, affecting even able-bodied adults who
can engage with their communities through work and other
activities.6 7 8 9 One study found that lacking social
connection is as harmful as smoking 15 cigarettes per day.\10\
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\6\ Cigna Corporation. The Loneliness Epidemic Persists: A Post-
Pandemic Look at the State of Loneliness among U.S. Adults. 2021.
https://newsroom.thecignagroup.com/all-stories?item=446.
\7\ Bruce LD, Wu JS, Lustig SL, Russell DW, Nemecek DA.
Loneliness in the United States: A 2018 National Panel Survey of
Demographic, Structural, Cognitive, and Behavioral Characteristics.
Am J Health Promot. 2019;33(8):1123-1133. doi: 10.1177/
0890117119856551. Epub 2019 Jun 16. PMID: 31203639; PMCID:
PMC7323762.
\8\ Shovestul B, Han J, Germine L, Dodell-Feder D. Risk factors
for loneliness: The high relative importance of age versus other
factors. PLOS ONE. 2020;15. doi: 10.1371/journal.pone.0229087. PMID:
32045467; PMCID: PMC7012443.
\9\ Buecker S, Mund M, Chwastek S, Sostmann M, Luhmann M. Is
loneliness in emerging adults increasing over time? A preregistered
cross-temporal meta-analysis and systematic review. Psychological
Bulletin. 2021;147(8):787. doi: 10.1037/bul0000332. PMID: 34898234.
\10\ Holt-Lunstad J, Robles TF, Sbarra DA. Advancing social
connection as a public health priority in the United States. Am
Psychol. 2017;72(6):517-530. doi: 10.1037/amp0000103. PMID:
28880099; PMCID: PMC5598785.
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Moreover, employment has been shown to be an important factor
leading to long-term beneficiary health and well-being. Obtaining
stable employment provides individuals with reliable income and
financial stability, which in turn supports access to safe housing,
nutritious food, and other resources necessary for maintaining
health.11 12 Financial stability can lead to improved living
conditions, purchasing healthier foods, and the ability to engage in
healthy behaviors.13 14 Financial stability has also been
linked to reduced chronic conditions, such as cardiovascular
risk.15 16 Beyond its role in income generation, employment
itself has been shown to be an important factor in long-
[[Page 33350]]
term beneficiary health and well-being. Evidence indicates that
obtaining and maintaining stable employment is associated with improved
physical and mental health outcomes and greater overall well-being,
while unemployment and unstable work are linked to poorer health
outcomes.17 18 19 20 Evidence from numerous studies show
that the link between health and work is intrinsic and bi-directional
whereby work is associated with healthier outcomes, and better health
is associated with increased employment. Thus, a well-designed
community engagement requirement may benefit individuals so that they
are not dependent, demoralized, or stuck in situations that hinder
their economic, physical, and mental state.
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\11\ Zafar, Q., M.A. Khan, A.Z. Warsi, and L. Iqbal. (2024).
``Economic Strain and Recovery Trajectories in Mental Health: The
Role of Financial Stability in Mental Health Outcomes.'' Review of
Applied Management and Social Sciences,7(4): 345-358. https://doi.org/10.47067/ramss.v7i4.385.
\12\ R. Gerdes, T.D. Jackson, R. Roberts, et al. (2026).
``Associations Between Employment and Health Outcomes: A Systematic
Review of Reviews.'' Journal of Occupational Rehabilitation. https://doi.org/10.1007/s10926-025-10357-5.
\13\ R. Chetty, M. Stepner, S. Abraham, et al. (2016) ``The
association between income and life expectancy in the United States,
2001-2014.'' JAMA.315(16):1750-1766. https://doi:10.1001/
jama.2016.4226.
\14\ Schoufour, J., E. A.L. de Jonge, J. C. Kiefte-de Jong, et
al. (2018). ``Socio-economic indicators and diet quality in an older
population'' Maturitas, Volume 107: 71-77, ISSN 0378-5122, https://doi.org/10.1016/j.maturitas.2017.10.010.
\15\ Kim, S., B. Lee, M. Park, et al. (2016) ``Prevalence of
chronic disease and its controlled status according to income
level.'' Medicine 95(44):p e5286, https://doi.org/10.1097/MD.0000000000005286.
\16\ Brownell, N., Z. Boback, J. Nicholas, et al. (2024).
``Trends in Income Inequities in Cardiovascular Health Among US
Adults, 1988-2018'' American Heart Association Journals. 17(5).
https://doi.org/10.1161/CIRCOUTCOMES.123.010111.
\17\ Han,W.-J. (2024). ``How longitudinal employment patterns
shape health as individuals approach middle adulthood--US NLSY79
cohort.'' PLOS ONE, 19(4), e0300245. https://doi.org/10.1371/journal.pone.0300245.
\18\ Virtanen M, Kivim[auml]ki M, Joensuu M, Virtanen P,
Elovainio M, Vahtera J. Temporary employment and health: a review.
Int J Epidemiol. 2005 Jun;34(3):610-22. doi: 10.1093/ije/dyi024.
Epub 2005 Feb 28. PMID: 15737968.
\19\ Kim TJ, von dem Knesebeck O. Perceived job insecurity,
unemployment and depressive symptoms: a systematic review and meta-
analysis of prospective observational studies. Int Arch Occup
Environ Health. 2016 May;89(4):561-73. doi: 10.1007/s00420-015-1107-
1. Epub 2015 Dec 29. PMID: 26715495.
\20\ Gerdes R, Jackson TD, Roberts R, Lytvyak E, Deibert D,
Dennett L, Burton AK, Gross DP, Els C, Doroshenko A, Hagtvedt R,
Straube S. Associations Between Employment and Health Outcomes: A
Systematic Review of Reviews. J Occup Rehabil. 2026 Jan 6. doi:
10.1007/s10926-025-10357-5. Epub ahead of print. PMID: 41493509.
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Section 71119(d) of the WFTC legislation directs CMS to publish an
IFC no later than June 1, 2026, for the purpose of implementing the
community engagement requirement. As directed, this IFC implements
section 71119 of the WFTC legislation, including 1902(xx) of the Act.
Demonstrating community engagement as a condition of Medicaid
eligibility is not an entirely new policy for the Medicaid program.
Under President Trump's 2017 to 2021 presidential term, we approved
section 1115 demonstration projects in 13 States \21\ that conditioned
Medicaid eligibility, for certain individuals, on compliance with a
community engagement requirement. These section 1115 demonstrations
were intended to test and evaluate approaches that required work or
community engagement as a condition of eligibility, coverage,
additional or enhanced benefits, or reduced premiums or cost sharing.
The demonstrations aimed to produce improved health and well-being by
increasing the number of beneficiaries who were employed or engaged in
other activities such as volunteering or education. Due to litigation
and the subsequent Administration's withdrawal of approved authority
for those States that had previously approved section 1115
demonstration authority to implement their community engagement
programs, Georgia and Arkansas were the only two States that launched
programs. Georgia is the only State that continues to operate a
community engagement program as a condition of Medicaid eligibility for
certain adults. This early implementation experience provides insight
into operational considerations, indicating that beneficiary awareness,
clarity of requirements, and the accessibility of reporting mechanisms,
as well as overall administrative complexity, can influence
participation and compliance.22 23 24 25
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\21\ Arizona, Arkansas, Georgia, Indiana, Kentucky, Maine,
Michigan, Nebraska, New Hampshire, Ohio, South Carolina (two 1115
demonstrations), Utah, and Wisconsin.
\22\ Centers for Medicare & Medicaid Services (CMS). (2025,
December 8). Requirements for states to establish Medicaid community
engagement requirements for certain individuals (CMCS Informational
Bulletin: Section 71119 of the Working Families Tax Cut Legislation,
P.L. 119-21). https://www.medicaid.gov/federal-policy-guidance/downloads/cib12082025.pdf.
\23\ Medicaid and CHIP Payment and Access Commission (MACPAC).
(2026, April 9). Implementing community engagement requirements in
Medicaid. https://www.macpac.gov/wp-content/uploads/2026/04/01_April-Slides_Implementing-Community-Engagement-Requirements-in-Medicaid.pdf.
\24\ Centers for Medicare & Medicaid Services (CMS). (2021,
March 17). Letter to Arkansas regarding Arkansas Works
demonstration. https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ar-works-ca2.pdf.
\25\ Georgia Department of Community Health. (2025, April 28).
Georgia section 1115 demonstration waiver extension request. https://www.medicaid.gov/medicaid/section-1115-demonstrations/downloads/ga-pathway-pa-04282025.pdf.
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In this IFC, we implement section 1902(xx) of the Act premised on
what we learned from the previously approved section 1115 demonstration
projects, permitting States to retain flexibility for their programs
where possible, balancing the benefits of State flexibility with the
potential costs, such as those associated with systems and operations,
and promoting alignment with other health and social service programs,
such as SNAP, while also adhering to the letter of the law. This IFC
also seeks to increase program integrity by requiring State use of data
and information that can ensure that State Medicaid eligibility
determinations are auditable and that we have the data needed to
exercise appropriate oversight of State implementation of the community
engagement requirement. To help defray operational costs and streamline
operational workflows, this IFC relies and builds upon existing
statutory and regulatory requirements when possible, including existing
requirements for Medicaid, SNAP, TANF, the Internal Revenue Service
(IRS), and Health Insurance Exchanges.
The new requirement at section 1902(xx) of the Act requires
individuals to engage in qualifying community engagement activities
like work or education. The law also requires disenrollment of
noncompliant individuals from Medicaid. This requirement will bring
Medicaid in line with other public benefit programs, like SNAP and
TANF, which have similar work requirements to support beneficiaries on
a path to self-sufficiency. In SNAP and TANF, noncompliance with work
requirements has implications for eligibility in those programs. For
SNAP, noncompliance can result in ineligibility for time-limited
participants after 3 months within a 36-month period. For TANF,
noncompliance can result in the reduction or termination of cash
benefits. As specified in section 1902(xx) of the Act for Medicaid,
noncompliance would result in Medicaid disenrollment from or denial of
eligibility for the adult group or section 1115 demonstrations that
include applicable individuals; however, the individual can re-apply at
any time and will be subject to the procedures for assessing compliance
at application.
Consistent with our understanding of the Congress' directive
through passage of the WFTC legislation, for able-bodied adults
(generally those who enroll in the adult group), Medicaid should be a
short-term hand up, not a lifetime handout. Implementing the community
engagement requirement, we believe, will assist in prioritizing
coverage for Medicaid's most vulnerable populations such as seniors,
individuals with disabilities, pregnant women, and children while
empowering able-bodied individuals through community engagement.
Section 1902(xx) of the Act and this IFC are applicable to all States
and the District of Columbia that elect to provide coverage to the
adult group under the State plan or to certain individuals covered
through certain section 1115 demonstrations as defined in statute and
explained in the preamble of this IFC. Section 1902(xx) of the Act and
this IFC do not apply to the territories. States that provide Medicaid
coverage to applicable individuals as
[[Page 33351]]
defined in section 1902(xx) of the Act generally must comply with the
community engagement requirement no later than January 1, 2027; States
may implement the community engagement requirement earlier, provided
that certain conditions are met.
This IFC implements the statutory definition of applicable
individuals, the statutory term for the Medicaid applicants and
beneficiaries who must demonstrate community engagement as a condition
of their Medicaid eligibility. With certain exclusions specified in the
statute, applicable individuals are those who are eligible for, or
enrolled under, the State plan adult group described in section
1902(a)(10)(A)(i)(VIII) of the Act and Sec. 435.119. In addition,
applicable individuals are those who are eligible to enroll or are
enrolled under a waiver of the State plan authorized under section 1115
of the Act that provides coverage that meets minimum essential coverage
(MEC) requirements described in section 5000A(f)(1)(A) of the Internal
Revenue Code (the Code) and who have attained the age of 19 and are
under 65 years of age, are not pregnant, and not entitled to, or
enrolled, for benefits under part A of title XVIII, or enrolled for
benefits under part B of title XVIII, and are not otherwise eligible to
enroll under such plan.
This IFC specifies the steps States must take when they are unable
to verify whether an applicable individual has met the community
engagement requirement when applying for Medicaid, as part of a renewal
of Medicaid eligibility, and, if elected by the State, during a more
frequent verification. This includes providing the individual with a
notice of noncompliance and 30 calendar days to demonstrate a
satisfactory showing. This IFC specifies that the notice of
noncompliance must inform the individual how they may make a
satisfactory showing to demonstrate compliance or that the individual
should not be subject to the requirement as well as how the individual
can reapply for coverage if they are disenrolled.
The IFC also specifies when and how States must verify an
applicable individual's compliance with the community engagement
requirement and whether an individual meets an exception (that is, will
be deemed compliant) or exclusion from the requirement. This includes
the use of data sources to verify community engagement activity
consistent with section 1902(xx) of the Act and when to request
additional information from the individual.
This IFC specifies outreach and notice requirements for States that
are integral to implementing the community engagement requirement; how
individuals can meet the community engagement requirement, which
require that affected individuals work or engage in other educational
or community service activities for at least 80 hours a month; how
applicants and beneficiaries will be able to demonstrate compliance and
how States will verify compliance; and what steps States must take in
the event of noncompliance. This IFC also specifies when States will
have flexibility in implementing the community engagement requirement.
This IFC addresses additional considerations for States and
implications of the community engagement requirement for other existing
enrollment pathways, such as presumptive eligibility, as well as
eligibility for demonstration projects authorized under section 1115 of
the Act. This IFC also specifies the new State data and reporting
requirements for monitoring purposes. In addition, this IFC outlines
considerations for States that elect to delegate certain functions to
their managed care plans as well as implications of the conflict-of-
interest requirement for managed care plans and other contractors.
Finally, this IFC specifies the situations and steps for a State to
request a temporary good faith effort exemption from compliance with
timely implementation of the community engagement requirement.
C. Severability
In this IFC, CMS and HHS establish multiple policies related to the
implementation of the community engagement requirement described in
section 1902(xx) of the Act. It is our intent that if any provision of
this final rule is held to be invalid or unenforceable by its terms, or
as applied to any person or circumstance, or stayed pending further
action, it shall be severable from this IFC, and from rules and
regulations currently in effect, and not affect the remainder thereof
or the application of the provision to other persons not similarly
situated or to other, dissimilar circumstances. If any provision is
held to be invalid or unenforceable, the remaining provisions which
could function independently should take effect and be given the
maximum effect permitted by law. Through this rule, we adopt provisions
that are intended to and will operate independently of each other, even
if each serves the same general purpose or policy goal. Where a
provision is necessarily dependent on another, the context generally
makes that clear, such as by a cross-reference to apply the same
standards or requirements.
II. Provisions of the Interim Final Rule With Comment Period
Through this IFC, we are adding regulations to Subpart F of part
435 to implement amendments made by section 71119 of the WFTC
legislation, that require certain adults who apply for Medicaid or who
are enrolled in Medicaid to meet the community engagement requirement.
Section 71119(b) of the WFTC legislation made a conforming amendment to
section 1902(a)(10)(A)(i)(VIII) of the Act, which describes the
eligibility requirements for the adult group. We implement this
conforming change by amending Sec. 435.119, which implements Medicaid
adult group eligibility, to specify that this eligibility group is
subject to the community engagement requirement described at Sec. Sec.
435.550 through 435.563. Additionally, we establish a basis and scope
for the community engagement requirement for applicable individuals at
Sec. 435.550, by citing the authority provided by section 1902(xx) of
the Act and specifying that these requirements only apply to Medicaid
programs operated by one of the 50 States or the District of Columbia
(to the extent that a Medicaid program elects to provide coverage to
the adult group under the State plan or to certain individuals through
certain section 1115 demonstrations, as described in section II.B. of
this IFC). Consistent with the definition of State at section
1902(xx)(9)(C) of the Act, the community engagement requirement does
not apply to a U.S. territory, regardless of whether it elects to cover
the adult group or has a section 1115 demonstration with applicable
individuals. We also make additional revisions to certain regulations
that are necessary to implement the community engagement requirement
outlined in this IFC. These revisions are described in more detail in
section II.A. of this.\26\
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\26\ NOTE: This document contains links to non-United States
Government websites. We are providing these links because they
contain additional information relevant to the topic(s) discussed in
this document or that otherwise may be useful to the reader. We
cannot attest to the accuracy of information provided on the cited
third-party websites or any other linked third-party site. We are
providing these links for reference only; linking to a non-United
States Government website does not constitute an endorsement by CMS,
HHS, or any of their employees of the sponsors or the information
and/or any products presented on the website. Also, please be aware
that the privacy protections generally provided by United States
Government websites do not apply to third-party sites.''
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[[Page 33352]]
A. Decision to Revise Certain Eligibility and Enrollment Regulations To
Implement Community Engagement
Under section 71119 of the WFTC legislation, Congress has directed
us to implement a community engagement requirement and directed that
any action taken to implement this requirement not be subject to the
provisions of 5 U.S.C. 553. Implementation of the community engagement
requirement requires ensuring related regulations reflect current and
effective policy. Currently, the regulations do not contain current and
effective policies related to application requirements,
redeterminations of eligibility during periodic renewals,
redeterminations of eligibility in between renewals based on a change
in circumstances, and timeliness standards to process eligibility and
enrollment actions.
Section 71102 of the WFTC legislation precludes CMS from
implementing, administering, or enforcing amendments made by provisions
of the final rule titled ``Medicaid Program; Streamlining the Medicaid,
Children's Health Insurance Program, and Basic Health Program
Application, Eligibility Determination, Enrollment, and Renewal
Processes'' (89 FR 22780) (hereinafter referred to as the 2024
Eligibility and Enrollment final rule) for Federal regulations
specified in section 71102 of the WFTC legislation until after
September 30, 2034. This prohibition renders the amendments made by the
2024 Eligibility and Enrollment final rule to the specified regulatory
provisions unenforceable prior to October 1, 2034, effectively
suspending these provisions during that period (herein referred to as
the section 71102 moratorium).
Many of the regulations amended by the 2024 Eligibility and
Enrollment final rule that are now subject to the section 71102
moratorium are necessary to implement the community engagement
requirement successfully. For example, section 1902(xx) of the Act, as
added by section 71119 of the WFTC legislation, requires States to
verify, at renewal, that individuals satisfy the community engagement
requirement. However, the regulatory provisions governing renewals are
among those suspended by the section 71102 moratorium because the
moratorium suspends amendments made by the 2024 Eligibility and
Enrollment final rule to Sec. 435.916, which establishes requirements
for States to conduct periodic renewals of eligibility. As a result,
there are currently no enforceable regulations in effect governing
renewals of eligibility that CMS could cite in implementing the new
community engagement requirement.
Accordingly, it would not be feasible to establish an enforceable
community engagement requirement where the implementing regulations
would need to rely on suspended eligibility and enrollment policies. In
addition to renewal requirements, the section 71102 moratorium also
suspends regulatory provisions relating to application requirements,
procedures for acting on changes in circumstances that may affect
eligibility, and timeliness standards for processing eligibility and
enrollment actions. Because current and effective Federal regulations
no longer comprehensively address these core eligibility and enrollment
processes, CMS would be significantly constrained in its ability to
implement section 71119 of the WFTC legislation and enforce provisions
of the IFC while the moratorium is in effect.
To implement community engagement while the section 71102
moratorium is in effect, it is therefore necessary to restore, for
regulations impacted by the section 71102 moratorium, the previous
version of the Code of Federal Regulations (CFR) that was in effect
prior to the effective date of the 2024 Eligibility and Enrollment
final rule. The restoration of the previous version of the CFR for
certain provisions will ensure that the regulations reflect current
legal authority and CMS policy to support implementation of community
engagement while the section 71102 moratorium is in effect. For the
period until October 1, 2034, this IFC restores the following
regulations as they existed before the 2024 Eligibility and Enrollment
final rule: Sec. Sec. 431.213(d), 431.231(d), 435.907, 435.911(c),
435.912, 435.916, 435.919, 457.340(d)(1), 457.344, and 457.960. We also
make a corresponding edit to remove a cross-reference at Sec.
435.1200(e)(1), that would no longer exist, with the revisions to
revert to the previous version of the CFR and make conforming changes
to affected CHIP regulations, which cross-reference to Medicaid
regulations. The changes to these provisions are either necessary to
implement the community engagement requirement in this IFC or are
conforming changes to the Medicaid and CHIP regulations because of the
implications of the revisions to restore the previous version of the
CFR. For the period until October 1, 2034, the changes are as follows:
Sec. Sec. 431.213(d) and 431.231(d) concerning
whereabouts unknown based on returned mail are revised to reflect the
version of the CFR for these paragraphs in effect as of June 2, 2024,
as a conforming change to restore regulations that were relocated by
the 2024 Eligibility and Enrollment final rule to Sec. 435.919, which
is removed as noted in this section.
Sec. 435.907(c)(4) concerning modalities for States to
accept non-MAGI (modified adjusted gross income) application forms is
removed, which is affected by the section 71102 moratorium.
Sec. 435.907(d)(1) and (2) concerning the minimum time
for applicants to respond to requests for information, the provision of
a reconsideration period at application, and expansion of the
prohibition on in-person interviews, are removed because they are
affected by the section 71102 moratorium and replaced with Sec.
435.907(d) of the CFR in effect as of June 2, 2024.
Sec. 435.911(c) is revised to reflect the version of the
CFR for this paragraph in effect as of June 2, 2024, to remove cross-
references removed in this IFC, which is affected by the section 71102
moratorium.
Sec. Sec. 435.912 concerning timeliness standards and
435.916 concerning redeterminations of eligibility, which are affected
by the section 71102 moratorium, are replaced in their entirety with
the version of the CFR in effect as of June 2, 2024.
Sec. 435.919 concerning acting on changes in
circumstances and updating contact information, which is affected by
the section 71102 moratorium, is removed.
Sec. 435.1200(e)(1) is amended to remove the phrase
``(regarding regularly-scheduled renewals of eligibility) or Sec.
435.919 (regarding changes in circumstances)'' as a conforming change
because we remove Sec. 435.919 in this IFC.
Sec. 457.340(d)(1) is revised to reflect the version of
the CFR for this paragraph in effect as of June 2, 2024, to conform
with revisions to Sec. 435.912.
Sec. 457.344 is removed to conform with revisions to
restore the previous version of the CFR for Sec. Sec. 435.912 and
435.916 and the removal of Sec. 435.919.
Sec. 457.960 is revised to conform with changes to
reflect the previous version of the CFR because Sec. 457.344 is
removed.
In this IFC, we limit revisions to the regulations: (1) to restore
the previous version of the CFR for requirements affected by the
moratorium, when needed to implement community engagement, and (2) when
conforming changes are needed for consistency. At this time, we are not
updating the CFR
[[Page 33353]]
to restore other regulations \27\ impacted by section 71102 of the WFTC
legislation to their versions in effect prior to the 2024 Eligibility
and Enrollment final rule and are not amending the policies in the
restored regulations because such action falls outside the scope of the
Congress's directive under section 71119 of the WFTC legislation. We do
not permanently restore the CFR as such action also falls outside the
scope of Congress's directive under section 71119 of the WFTC
legislation. Because we modify the CFR to restore the regulations which
are necessary to implement the community engagement requirement and
sunset the provisions on October 1, 2034, we will follow applicable
rulemaking procedures to ensure that policies governing Medicaid and
CHIP eligibility and enrollment are implemented and effective on
October 1, 2034, replacing the policies scheduled to sunset on that
date.
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\27\ For more information on the section 71102 moratorium and
how to interpret regulations that remain impacted, see the November
18, 2025, CMCS Informational Bulletin, `` ``Working Families Tax
Cut'' Legislation, Public Law 119-21: Summary of Medicaid and
Children's Health Insurance Program (CHIP) Related Provisions,''
available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib11182025.pdf.
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Separately, the regulations that we are updating so that they
reflect the versions in effect prior to the 2024 Eligibility and
Enrollment final rule are referenced throughout this IFC. In accordance
with the changes discussed here, the references to the regulations
affected by the section 71102 moratorium in the preamble, regulatory
impact analysis, collection of information, and cross-referenced in
regulatory text should be interpreted as referring to the prior CFR
versions implemented in this IFC.
B. Applicable Individuals
Section 71119(a) of the WFTC legislation amended section 1902 of
the Act to add subsection (xx). Section 1902(xx) of the Act requires
that ``applicable individuals'' demonstrate, as a condition of their
Medicaid eligibility, ``community engagement'' (generally, that they
work, are enrolled in an educational program, complete community
service, participate in a work program, or any combination thereof) for
a minimum period of time preceding their Medicaid application and
during their Medicaid enrollment. Section 1902(xx)(9)(A)(i) of the Act
defines the term ``applicable individual'' to mean an individual who is
not a ``specified excluded individual'' described in section
1902(xx)(9)(A)(ii) of the Act (as further discussed in section II.E. of
this IFC) and who (1) ``. . . is eligible to enroll (or is enrolled)
under the State plan under'' section 1902(a)(10)(A)(i)(VIII) of the
Act; or (2) ``. . . is otherwise eligible to enroll (or is enrolled)
under a waiver of such plan'' and meets the criteria of
1902(xx)(9)(A)(i)(II)(aa) and (bb). In this IFC, we establish a new
Sec. 435.551 to implement this statutory definition of applicable
individual.
For individuals applying for, or enrolled in, coverage under the
State plan, only individuals eligible for or enrolled in the adult
group under section 1902(a)(10)(A)(i)(VIII) of the Act (implemented at
Sec. 435.119 of the regulations) could be applicable individuals.
Individuals eligible for or enrolled in any other mandatory or optional
State plan eligibility groups are not applicable individuals subject to
the community engagement requirement. For example, individuals enrolled
under the State plan in the following groups are not applicable
individuals: the mandatory group for parents and other caretaker
relatives (under section 1931 of the Act and implemented at Sec.
435.110 of the regulations); and the optional group for individuals
under age 65 with incomes exceeding 133 percent of the Federal poverty
level (FPL) (under section 1902(a)(10)(A)(ii)(XX) of the Act and
implemented at Sec. 435.218 of the regulations). This includes
individuals eligible for or enrolled in mandatory and optional State
plan groups that are modified through a waiver authority under section
1115(a)(1) of the Act, as their underlying eligibility authority is
through the State plan.
Regardless of whether a State covers the adult group under the
State plan, a person could still be an applicable individual if that
person is ``otherwise'' eligible for or enrolled in Medicaid under
certain section 1115 demonstrations. Section 1902(xx)(9)(A)(i)(II) of
the Act specifies that an applicable individual includes an individual
``who is otherwise eligible to enroll (or is enrolled) under a waiver
of such plan that provides coverage that is equivalent to minimum
essential coverage [(MEC) \28\]. . .and has attained the age of 19 and
is under 65 years of age, is not pregnant, is not entitled to, or
enrolled for, benefits under part A of title XVIII, or enrolled for
benefits under part B of title XVIII, and is not otherwise eligible to
enroll under such plan.'' To be an applicable individual in this case,
an individual must be (1) eligible for, or enrolled in, coverage that
meets MEC requirements under demonstration expenditure authority under
section 1115(a)(2) of the Act (and not under the State plan), and (2)
at least 19 years of age and under 65 years of age, not pregnant, not
entitled to or enrolled for benefits under Medicare part A or part B,
and not otherwise eligible to enroll under the State plan. If a State
does not cover the adult group under the State plan and does not
otherwise provide coverage to a population described in section
1902(xx)(9)(A)(i)(II) of the Act under section 1115(a)(2) expenditure
authority, the State will not have any applicable individuals who will
be subject to the community engagement requirement. However, States
that cover the State plan adult group might also have a section 1115
demonstration population that meets the criteria described above and,
therefore, also have applicable individuals under the demonstration.
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\28\ MEC is defined in section 1902(xx)(9)(A)(i)(II)(aa) of the
Act as follows: ``as described in section 5000A(f)(1)(A) of the
Internal Revenue Code of 1986 and as determined in accordance with
standards prescribed by the Secretary in regulations.'' CMS does not
read the provision in the statute to in any way change the current
process for determining whether Medicaid coverage in section 1115
demonstrations is MEC.
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We do not consider section 1915(b) waivers or section 1915(c)
waivers to be ``a waiver of such plan'' for purposes of section
1902(xx)(9)(A)(i)(II) of the Act. This is because sections
1902(xx)(9)(A)(i)(I) and (II) of the Act define groups of individuals
who are ``eligible to enroll'' or are ``enrolled'' under either the
State plan or a waiver of the plan, whereas section 1915(b) and (c)
waivers give States the flexibility to waive certain requirements to
utilize managed care and long-term care delivery systems for
individuals enrolled under the State plan, rather than enabling
enrollment in Medicaid coverage for individuals who would not otherwise
be eligible to enroll in Medicaid under the State plan.
Similarly, we do not interpret section 1902(xx)(9)(A)(i)(II) of the
Act to describe section 1115 demonstrations that provide only section
1115(a)(1) waiver authority or that include section 1115(a)(2)
expenditure authority only for specific services (versus eligibility)
for groups covered under the State plan. Individuals whose coverage is
affected by these kinds of section 1115 demonstrations are eligible to
enroll (or are enrolled) in Medicaid through the State plan, not
through demonstration expenditure authority. Individuals who are
eligible to enroll (or are enrolled) in Medicaid under the State plan
would be applicable individuals only if they are eligible for or
enrolled in the State plan under section 1902(a)(10)(A)(i)(VIII) of the
Act (the adult group).
[[Page 33354]]
Due to the complex and often unique nature of section 1115
demonstrations and to support our rulemaking efforts, we are engaged in
a systematic review and analysis of approved section 1115(a)(2)
expenditure authority in demonstrations that create an eligibility
pathway for individuals who are not eligible under the State plan to
determine which demonstrations cover individuals who could be subject
to the community engagement requirement. Based on our review thus far,
many section 1115(a)(2) expenditure authority demonstration populations
do not meet the definition of an applicable individual. For example, a
number of demonstrations provide coverage only of limited Medicaid
benefits, such as only family planning benefits to a group eligible
only under section 1115(a)(2) expenditure authority. This coverage does
not meet MEC requirements, and thus the community engagement
requirement would not apply to individuals applying for or enrolled in
coverage under these demonstrations.
In other instances, a demonstration could cover a population under
section 1115(a)(2) expenditure authority that is not eligible under the
State plan and generally meets the criteria in section
1902(xx)(9)(A)(i)(II) of the Act, but the demonstration also includes
an eligibility criterion under which anyone eligible for the
demonstration coverage would always be a specified excluded individual,
as discussed in section II.E. of this IFC. For example, some section
1115(a)(2) expenditure authority demonstrations create an eligibility
pathway for coverage that is equivalent to MEC for a population of
individuals between age 19 and 64, who are not pregnant, not entitled
to or enrolled for Medicare, and who are not otherwise eligible to
enroll in Medicaid under the State plan, but who meet an institutional
level of care to receive home and community-based services (HCBS)
through the expenditure authority. Any individual in this population
would meet the definition of an applicable individual at section
1902(xx)(9)(A)(i)(II) of the Act, except that they would be a specified
excluded individual because they would be medically frail or otherwise
have special medical needs (under the definition established in this
rule at Sec. 435.554(c)(5)). Therefore, individuals in this
demonstration population would not be subject to the community
engagement requirement.
Additionally, our review identified several demonstrations
providing Medicaid eligibility under section 1115(a)(2) expenditure
authority to populations generally meeting the definition of an
applicable individual in section 1902(xx)(9)(A)(i)(II) of the Act, but
in which not all individuals would always meet the criteria of a
specified excluded individual or a mandatory exception for certain
populations. These demonstration populations could be subject to the
community engagement requirement.
As part of our section 1115 demonstration review and approval
process, we will evaluate proposals which seek to provide Medicaid
eligibility under section 1115(a)(2) expenditure authority to a
population not eligible under the State plan to determine if the
community engagement requirement might apply to the demonstration
population.
C. Demonstrating Community Engagement
Section 1902(xx)(2) of the Act specifies the ways by which an
applicable individual may demonstrate community engagement. See section
II.B. of this IFC for a discussion of the definition of an ``applicable
individual.'' The Secretary is authorized under section 1902(xx)(2) of
the Act to establish criteria for determining whether an applicable
individual has demonstrated community engagement. New Sec. 435.552
implements section 1902(xx)(2) of the Act.
Under section 1902(xx)(2) of the Act, an applicable individual
demonstrates community engagement for a month if, for such month, the
individual:
Works not less than 80 hours;
Completes not less than 80 hours of community service;
Participates in a work program for not less than 80 hours;
Is enrolled in an educational program at least half-time;
Engages in any combination of the aforementioned
activities for a total of not less than 80 hours;
Has a monthly income that is not less than the applicable
minimum wage requirement under section 6 of the Fair Labor Standards
Act of 1938 (Federal minimum wage) multiplied by 80 hours; or
Is a seasonal worker (as described in section 45R(d)(5)(B)
of the Code of 1986) and has an average monthly income over the
preceding 6 months that is not less than the applicable Federal minimum
wage multiplied by 80 hours.
In this section, we describe each of the options for demonstrating
community engagement in further detail, first explaining what
constitutes work, community service, a work program, and an educational
program. To simplify administration, we have endeavored to align our
definitions of the activities and income requirements with existing
statutory or regulatory requirements in Medicaid and in other benefit
programs such as SNAP and the TANF program. Then, we explain what
constitutes enrollment status in an educational program and how hours
across activities can be combined. We conclude this section by
explaining additional ways, as described in the statute, in which an
applicable individual can demonstrate community engagement, including
by computing monthly income or average monthly income for seasonal
workers. We note that the statute requires States to make all of the
options for demonstrating community engagement listed in section
1902(xx)(2) of the Act available. States are not permitted to make only
a subset of these options available, such as by allowing individuals to
demonstrate community engagement through participation in a work
program but not by completing community service. Applicable individuals
must be allowed to demonstrate community engagement by meeting any one
or more of the conditions described at new Sec. 435.552.
1. Work
Under section 1902(xx)(2)(A) of the Act, an applicable individual
demonstrates community engagement if the individual works not less than
80 hours in such month. At new Sec. 435.552(b), we define work to
mean: work in exchange for money, work in exchange for goods or
services (``in-kind'' work), and unpaid work other than community
service (as defined and discussed below). Applicable individuals can
work in one or more ways, separately or combined, to meet the community
engagement requirement. Work in exchange for money can include many
occupations. However, an individual does not need to be an employee of
a company or organization to meet this definition. Section 1902(xx)(2)
of the Act does not specify particular work arrangements; rather, it
requires that individuals engage in meaningful activity in the
community, including working. Many individuals work for themselves by
being self-employed due to starting a business, owning a business, or
as an independent contractor, and these activities meet the definition
of work at Sec. 435.552(b).
In-kind and unpaid work also represent ways in which an individual
can engage in meaningful activity in the community. With a broad
definition of work, we recognize the reality of the wide array of work
arrangements and seek to enable individuals participating
[[Page 33355]]
in such arrangements to demonstrate community engagement. There are
jobs in various sectors, ranging from domestic service to specialized
facility management, where individuals may choose to accept in-kind
compensation in the form of non-monetary benefits like housing, meals,
or utilities. For example, an individual who performs duties as a
property manager or building superintendent may receive compensation in
the form of free or reduced rent. Under our definition of work at Sec.
435.552(b), the hours the individual spends performing these duties
would count toward meeting the 80-hour requirement.
Unpaid and in-kind work are also a way for individuals to obtain
necessary job skills and gain work experience prior to attaining paid
employment. Our definition of work, which does not require that an
individual receive payment for duties or activities performed for the
benefit of another individual or entity, accommodates situations where
individuals engage in unpaid work, including, but not limited to,
unpaid work as part of a trial period when applying for a job, or
unpaid work, such as an internship, to gain experience for a job or
industry. In contrast to community service (discussed in section
II.C.2. of this IFC), unpaid work can benefit an individual or private
entity and does not need to benefit the community. For example, an
individual can intern at a private office to gain experience with
bookkeeping and records management, but this internship would not be
community service.
The unpaid work of a family caregiver as defined at Sec.
435.554(a), who does not qualify as a specified excluded individual,
can also qualify as unpaid work under the definition at Sec.
435.552(b). We recognize that not all people who meet the definition of
a family caregiver will qualify as a specified excluded individual
under section 1902(xx)(9)(A)(ii)(III) of the Act, which this IFC
implements at Sec. 435.554. Caregiving hours that are below the 80-
hour caregiving threshold in Sec. 435.554(c)(3)(i)(C) and are provided
by a family caregiver as defined at Sec. 435.554(a) to a dependent
child 13 years of age and under or a disabled individual, with whom he
or she does not reside and is not related to, would count toward
demonstrating community engagement. For additional details about
implementation of the family caregiver definition and the criteria to
qualify as a specified excluded individual, see sections II.E.3.d. and
h. of this IFC.
Including in-kind and unpaid work in the definition of work
generally aligns with the Food and Nutrition Service's (FNS) regulatory
definition of working for SNAP at 7 CFR 273.24, which implements the
work requirement in title VIII of the Personal Responsibility and Work
Opportunity Reconciliation Act of 1996 (Pub. L. 104-193) enacted on
August 22, 1996 (PRWORA). Similar to section 1902(xx)(2)(A) of the Act,
PRWORA also does not define work. FNS developed the definition to
include in-kind and unpaid work.\29\ We are adopting a similar
definition for purposes of Medicaid community engagement, in keeping
with our principle of aligning with other existing public benefit work
requirements to the extent possible.
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\29\ FNS's definition of unpaid work states that the unpaid work
must be verified under standards established by the State agency.
Our definition does not include this verification language because
Medicaid has its own specific verification requirements that must be
followed for community engagement. Section II.I.6.a. of this IFC
includes information about verification requirements for unpaid
work.
---------------------------------------------------------------------------
States will need to verify work hours when determining compliance
under Sec. 435.552(a). Additional information about verification is
discussed in section II.I.6.a. of this IFC.
2. Community Service
Under section 1902(xx)(2)(B) of the Act, an applicable individual
demonstrates community engagement if the individual completes not less
than 80 hours of community service in such month. SNAP does not
specifically include the term ``community service'' in its work
requirements (SNAP general work requirements are defined in section
6(d)(1) of the Food and Nutrition Act of 2008 and SNAP time limit work
requirements, formerly known as the for Able-Bodied Adults without
Dependents work requirements, are defined in section 6(o)(2) of such
Act). However, TANF defines community service programs at 45 CFR
261.2(h), as structured programs and embedded activities in which
individuals perform work for the direct benefit of the community under
the auspices of public or nonprofit organizations.\30\ In keeping with
our principle of aligning Medicaid community engagement definitions
with other benefit programs, we similarly define community service at
new Sec. 435.552(b) to mean unpaid work with a structured program that
is completed for the direct benefit of the community under the auspices
of public or nonprofit organizations (including embedded activities of
the program that allow an individual to develop skills necessary to
complete community service). While community service under this
definition is a type of unpaid work, it counts separately as a
qualifying activity and thus is not counted as work.
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\30\ While the Administration for Children and Families (ACF)
definition of community service program uses the term ``work'', ACF
states in the preamble of the 2006 Reauthorization of the Temporary
Assistance for Needy Families Program Interim final rule with
request for comments, that community service programs are an unpaid
work activity when discussing documentation requirements for unpaid
work activities: ``[o]ther unpaid work activities, including work
experience, community service programs. . .''. See: Reauthorization
of the Temporary Assistance for Needy Families Program, Medicaid
Program; Premiums and Cost Sharing 71 FR 37468 (June 29, 2006).
https://www.federalregister.gov/d/06-5743.
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The TANF definition of community service is more extensive than our
definition as it lists examples of fields (such as health, social
service, and environmental protection) in which community service
activities can be completed. It also includes a supervision
requirement. We do not include a list of specific fields in our
definition because we do not wish to inadvertently limit States or
individuals from seeking community service in emerging fields. For
example, technology is a field in which community service could be
completed, but it is not included in TANF's definition. In addition,
although our definition does not expressly require that qualifying
community service activities be supervised, our requirement that
community service be completed with a structured program under the
auspices of public or nonprofit organizations ensures that the
community service activities are monitored and operated with sufficient
oversight. This means that an individual cannot complete a community
service activity independently of an organization that fits the
description in the definition. In addition, in order to meet our
requirement that community service must be completed with a structured
program, the public or nonprofit organization must provide oversight of
the activity and have a process in place to track the community service
completed by individuals, including the type of community service
activity, dates and hours the community service is completed, and a
point of contact who can confirm the hours completed.
Consistent with the TANF definition at 45 CFR 261.2(h), while
community service should serve a useful community purpose, we also
acknowledge that when completing community service, there can be other
activities embedded within the community service work that an
individual performs under the auspices
[[Page 33356]]
of a public or nonprofit organization. These embedded activities allow
an individual to develop necessary skills so that they can complete the
community service. Because these activities help an individual complete
the community service, we have included them in the definition of
community service. For example, such embedded activities could include
attending training as part of the community service program, such as
attending a computer training class to learn a certain computer skill
to provide tech tutoring for seniors. Such training would count towards
an individual's community service hours because it is an integral part
of the community service that is being provided to the community and it
allows the individual to develop the skills needed to complete the
community service.
We recognize that community service needs and opportunities vary by
State and locality due to different local challenges. States are
responsible for determining which activities qualify as community
service under the definition at Sec. 435.552(b). In doing so, States
will need to assess whether the activity is with a structured program
and if the activity directly benefits the community by addressing a
community/civic or public need. The activity must also not serve a
partisan purpose. For example, community service activities could
include volunteering at a food bank, mentoring or tutoring youth,
supporting seniors through meal delivery, or cleaning public parks or
grounds. Community service activities would not include activities that
directly benefit only specific individuals (as opposed to being part of
an effort that directly benefits the broader community) or activities
that are purely recreational in nature. Examples of activities that do
not fall within the definition would include: helping to complete a
task for a specific individual that is not performed as part of a wider
effort benefiting the broader community (for example, helping a friend
move or helping an individual with yard work, versus providing
assistance with moving or yard work for an organization that provides
that assistance broadly to various members in the community), attending
a child's parent teacher conference or school events, or joining a
community recreational club (for example, dance or sports club).
Campaigning or volunteering for a partisan political candidate or
committee would also be excluded activities.
Under the definition at Sec. 435.552(b), community service must be
completed with a structured program under the auspices of public or
nonprofit organizations. However, a State must not restrict community
service to activities with an organization described in section
501(c)(3) of the Code as tax exempt. Such a narrow interpretation of
organizations in which community service can be completed ignores the
reality that there are various community organizations that operate
structured programs which provide services to benefit the community,
but which may not be a 501(c)(3) organization, such as local government
agencies, religious nonprofits (such as non-denominational ministries),
and smaller social service providers.
We also note that the statute at section 1902(xx)(2)(B) of the Act
does not require individuals to volunteer for community service.
Whether community service is completed voluntarily or because of a
mandate, such as court-ordered community service, the community service
still benefits the community. Thus, we believe it is appropriate to use
community service activities completed to fulfill a court order or
other mandate as countable hours towards meeting the Medicaid community
engagement requirement.
States will need to establish processes to verify an individual's
community service activities and hours. Additional information about
verification is discussed in section II.I.6.b. of this IFC.
3. Work Program
Under section 1902(xx)(2)(C) of the Act, an applicable individual
demonstrates community engagement if the individual participates in a
work program for not less than 80 hours in such month. Section
1902(xx)(9)(D) of the Act defines work program to have the meaning
given such term in section 6(o)(1) of the Food and Nutrition Act of
2008. Section 6(o)(1) in turn defines work program as: (1) a program
under title I of the Workforce Innovation and Opportunity Act (WIOA);
(2) a program under section 236 of the Trade Act of 1974; (3) a program
of employment and training operated or supervised by a State or
political subdivision of a State that meets standards approved by the
Governor of the State, including an employment and training program
under subsection (d)(4) of section 6 of the Food and Nutrition Act of
2008, other than a supervised job search program or job search training
program; (4) a program of employment and training for veterans operated
by the U.S. Department of Labor or the U.S. Department of Veterans
Affairs (VA), and approved by the Secretary of the U.S. Department of
Agriculture (USDA); and (5) a workforce partnership under subsection
(d)(4)(N) of section 6 of the Food and Nutrition Act of 2008. We
incorporate this definition into our regulation at Sec. 435.552(b)
with one modification as described further in this section. We
separately note that programs outside of these aforementioned work
programs, such as those operated by health providers that do not
qualify under the part of the definition related to programs operated
or supervised by a State, are not included in this definition. Also,
while some States partner with managed care plans to provide a range of
supported employment services to individuals receiving home and
community-based services under section 1915(c) waivers or as part of
section 1915(i) State plan services, these Medicaid-covered employment
services are different from work programs as defined at Sec.
435.552(b) and do not independently satisfy the work program community
engagement requirement. However, as discussed in section II.M. of this
IFC, managed care plans can provide valuable services to help their
enrollees meet community engagement obligations, such as referring
managed care enrollees to qualified work programs.
We note that the definition at section 6(o)(1) of the Food and
Nutrition Act of 2008 includes a program of employment and training
operated or supervised by a State or political subdivision of a State
that meets standards approved by the Governor of the State, including a
program under subsection (d)(4) of the Food and Nutrition Act of 2008
(SNAP Employment and Training (E&T) program), other than a supervised
job search program or job search training program. However, limited
supervised job search and job search training activities are allowable
SNAP E&T program components for the purposes of fulfilling the time
limit requirements. To align with SNAP regulations at 7 CFR
273.24(a)(3)(iii), we will permit a program of employment and training
that meets the definition of work program under Sec. 435.552(b) to
include supervised job search or job search training as a subsidiary
activity, as long as the job search activity is less than half of the
required hours. We recognize that there are employment and training
programs that may require or include some job search activity, such as
resume writing or mock interviews. However, we want to make sure that
the supervised job search or job search activity is not the primary
component of the employment and training program because we believe
that the focus
[[Page 33357]]
should be on obtaining skills to enable long-term self-sufficiency.\31\
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\31\ Wroblewska K, Steigelman C, J, et al. (2022). ``The Use of
Supervised Job Search, Job Search Training, and Integrated Job
Search in SNAP E&T: Three Cases Studies.'' U.S. Department of
Agriculture, Food and Nutrition Service. Prepared by Insight Policy
Research, Inc. https://fns-prod.azureedge.us/sites/default/files/resource-files/SNAPETJobSearch.pdf.
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Also, we have received questions regarding whether job search
activities that are conducted to receive unemployment insurance will
count toward meeting the community engagement requirement. If the
unemployment insurance job search activities are conducted in a manner
that is consistent with the requirements of the work program, then they
will count towards meeting the community engagement requirement. We
encourage States to work with their State workforce agencies to
establish data sharing and align job search activities and
requirements.
We recognize the work programs under section 1902(xx)(9)(D) of the
Act include SNAP E&T programs, as provided under subsection (d)(4) of
section 6 of the Food and Nutrition Act of 2008 and implementing
regulations at 7 CFR 273.24(3)(iii) and 273.7(d) and (e). Since the
work program requirements that we are adopting here align with those in
SNAP under section 6 of the Food and Nutrition Act of 2008, the same
operational requirements for States' SNAP E&T programs would apply for
purposes of the Medicaid community engagement requirement, such as SNAP
State agencies being responsible for referring eligible SNAP
participants to SNAP E&T services and submitting an annual SNAP E&T
plan to FNS.
We are not requiring States to establish new work programs but are
also not prohibiting States from doing so. We also do not have the
authority to change oversight or operational requirements for existing
work programs meeting the definition at 1902(xx)(9)(D). States must,
however, provide information about work programs that meet these
requirements as part of the outreach sent to certain individuals about
how to comply with the community engagement requirement that is
required under section 1902(xx)(8)(A)(i) of the Act and as discussed in
section II.L. of this IFC.
States will need to verify work program activities and hours.
Information about verification is discussed in section II.I.6.c. of
this IFC.
4. Educational Program
Under section 1902(xx)(2)(D) of the Act, an applicable individual
demonstrates community engagement if the individual is enrolled in an
educational program at least half-time. We discuss what it means to be
enrolled ``at least half-time'' in section II.C.5. of this IFC. Section
1902(xx)(9)(B) of the Act defines the term educational program to
include: (1) an institution of higher education as defined in section
101 of the Higher Education Act of 1965; and (2) a program of career
and technical education as defined in section 3 of the Carl D. Perkins
Career and Technical Education Act of 2006. We incorporate these
definitions into our regulation at Sec. 435.552(b).
We also note that the definition of ``educational program'' at
section 1902(xx)(9)(B) of the Act is not exclusive, and we believe
additional educational activities such as high school and high school
equivalency programs should count toward demonstrating community
engagement. Although section 3(5) of the Carl D. Perkins Career and
Technical Education Act of 2006 includes public secondary school
programs, that law's definition of career and technical education (the
definition to which section 1902(xx)(9)(B)(ii) cross-references)
includes only secondary education programs that provide technical
skills proficiency. While there are some specialized secondary schools
(high schools) that meet this definition, many high schools do not
specialize in career and technical education. We recognize that even
though only persons aged 19 or older can be applicable individuals,
some applicable individuals may be enrolled in a high school or high
school program that does not provide technical skills proficiency. For
example, an individual's graduation from high school might be delayed
for various reasons, including starting school late, repeating a grade,
or returning to school after having to take a break. Additionally, we
recognize that applicable individuals will likely include individuals
who are age 19 or older and are studying to obtain a high school
equivalency certificate through a General Educational Development (GED)
program or other high school equivalency program. Completing high
school or earning a high school equivalency certificate is commonly a
prerequisite for employment and higher education and supports Medicaid
beneficiaries in achieving self-sufficiency. Moreover, in TANF,
satisfactory attendance at secondary school or in a course of study
leading to a certificate of general equivalence is included in the
definition of work activities at 45 CFR 261.2(l).
Thus, in defining an educational program, we adopt at Sec.
435.552(b) the definitions from section 1902(xx)(9)(B) of the Act: an
institution of higher education as defined in section 101 of the Higher
Education Act, or a program of career and technical education as
defined in section 3(5) of the Carl D. Perkins Career and Technical
Education Act of 2006. We are also including two additional types of
educational activity. First, we include in our definition of
educational program a high school as defined in title VIII of the
Elementary and Secondary Education Act (20 U.S.C. 7801et seq.). The
definition of high school at 20 U.S.C. 7801(28) is a secondary school
\32\ that grants a diploma, as defined by the State and includes, at
least, grade 12. Second, we include in our definition of educational
program a State-approved program of study leading to a certificate of
high school equivalence for an applicable individual who has not
received a high school diploma. We have included a State-approved
program in this definition (such as a GED program offered at a
community college) because we understand that there are various ways to
prepare for the high school equivalency test. However, independent
study and self-paced online preparation outside of a State-approved
program do not provide sufficient structure to qualify as an activity
for the purposes of community engagement. In addition, if the program
is not in-person, the State-approved program must be able to monitor
and document the program hours. These oversight methods will help with
counting hours for this activity if the individual is enrolled less
than half-time, and the program does not use credit hours. Information
about counting hours when an individual is enrolled less than half-time
is discussed further in section II.C.6. of this IFC.
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\32\ A secondary school is further defined at 20 U.S.C. 7801(45)
as a nonprofit institutional day or residential school, including a
public secondary charter school, that provides secondary education,
as determined under State law, except that the term does not include
any education beyond grade 12.
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5. Enrollment in an Educational Program at Least Half-Time
Under section 1902(xx)(2)(D) of the Act, an applicable individual
demonstrates community engagement if the individual is enrolled in an
educational program at least half-time. New Sec. 435.552(b) defines
educational program. At new Sec. 435.552(c), we specify how ``at least
half-time'' enrollment is determined.
[[Page 33358]]
We considered whether the State or the relevant educational
institution should determine a student's enrollment status (that is,
whether the student is enrolled at least half-time). The U.S.
Department of Education's (ED) definition of half-time status defers to
the institution to make its own determination as to whether an enrolled
student is carrying a half-time academic workload (see definition of
``half-time student'' in 34 CFR 668.2(b)). Additionally, in SNAP
regulations related to student eligibility, the institution of higher
education determines enrollment status (see 7 CFR 273.5(b)(10)
specifying the enrollment status of a single parent ``as determined by
the institution''). For consistency with existing standards in SNAP and
those of ED, we provide at Sec. 435.552(c) that the State shall use
the enrollment status determined by the school or institution (that is,
full-time, half-time, less than half-time). This standard applies to
all educational programs under new Sec. 435.552(b). We believe that
the school or institution is best able to determine enrollment status
because whether an individual is enrolled full-time, half-time, or less
than half-time is generally dependent on the type of school and the
curriculum. In addition, a student's enrollment status determined by
the institution is reported to the National Student Clearinghouse,
which is a data source that States can use to verify student enrollment
(see section II.I.6.d. of this IFC for additional information).
For consistency with SNAP regulations related to students, we are
adopting enrollment status requirements similar to those at 7 CFR
273.5(c). These requirements address when student enrollment starts and
ends and provide standards to follow during school recess. These
standards are necessary because there are periods when school may not
be in session due to scheduled breaks (for example, winter and summer
recess), and due to the short duration of the scheduled breaks, an
individual might not be able to complete another community engagement
activity. For example, if a student is enrolled in an institution of
higher education full-time and the institution has a 1-month winter
break, it is not reasonable to condition Medicaid eligibility on the
individual applying, interviewing, starting a job, and working for not
less than 80 hours in that 1-month period before going back to school.
Thus, at new Sec. 435.552(c)(1), the enrollment status of an
applicable individual begins on the first day of the school term.
At new Sec. 435.552(c)(2), the enrollment will continue through
normal periods of attendance, vacation and recess. The determination of
enrollment status during vacation and recess shall be based on the
student's status just prior to the school break. Per Sec.
435.552(c)(3), the enrollment status ends at the end of the month that
the student is expelled, withdraws, completes the school term and is
not registered for the next school term (excluding optional terms such
as winter or summer sessions), or graduates (unless the student is
enrolled in another educational program). For example, a full-time high
school student graduates from high school on May 15 and has enrolled
full-time in a community college, and the community college term starts
on August 21. The individual applies for Medicaid on July 1 in a State
that has a 1-month review period (as described in section II.H.2. of
this IFC) for community engagement at application. The State determines
that the individual is otherwise eligible in the adult group and is an
applicable individual subject to the community engagement requirement.
Because the individual is enrolled in community college with a start
date of August 21, the individual has applied for Medicaid during a
school recess period (school break). The enrollment status will be
based on the individual's enrollment status prior to the school break.
Prior to the school break, the individual was enrolled full-time as a
high school student, so the individual has met the community engagement
requirement.
For information about verifying enrollment in an educational
program, please see section II.I.6.d. of this IFC.
6. Enrollment in an Educational Program Less Than Half-Time
Under section 1902(xx)(2)(D) of the Act, an applicable individual
demonstrates community engagement if the individual is enrolled in an
educational program at least half-time. As noted in section II.C.4. of
this IFC, new Sec. 435.552(b) explains the meaning of educational
program, and Sec. 435.552(c) describes that full-time, half-time, or
less than half-time enrollment is to be determined by the institution
or school. However, consistent with section 1902(xx)(2)(E) of the Act,
education hours accrued by an individual enrolled in an educational
program less than half-time may be combined with hours performed for
other community engagement activities to count towards demonstrating
community engagement. Next, we discuss how educational program hours
should be counted when an individual is enrolled less than half-time.
As stated in new Sec. 435.552(d), when a school determines that an
applicable individual is enrolled less than half-time in an educational
program that uses credit hours, then 1 credit hour counts as 3
education hours per week during the individual's enrollment. For
example, 1 credit hour equals 1 hour of instruction, and we expect
students to spend 2 hours on out-of-class work for a total of 3 hours
of time spent in the educational program for the week. To calculate the
time spent in the educational program for a 1 credit hour course during
a 1-month period, this would be 3 hours a week multiplied by 4.33 weeks
(in a month) \33\ for a total of 12.99 hours in a month. This new
standard is based on the Carnegie Unit, which defines 1 unit of credit
as equal to 3 hours of student work per week (1 hour of lecture plus 2
hours of homework).\34\ The Carnegie Unit is used in the credit hour
definition at 34 CFR 600.2. As noted in ED guidance provided to
institutions and accrediting agencies regarding the credit hour, ``A
credit hour for Federal purposes is an institutionally established
equivalency that reasonably approximates some minimum amount of student
work reflective of the amount of work expected in a Carnegie unit: key
phrases being ``institutionally established,'' ``equivalency,''
``reasonably approximates,'' and ``minimum amount.'' \35\ Under the
definitions at 34 CFR 600.2, a credit hour must reasonably approximate
not less than 1 hour of classroom or direct faculty instruction and a
minimum of 2 hours of out-of-class student work each week, or at least
an equivalent amount of work for other academic activities as
established by the institution.\36\
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\33\ On average, there are 4.33 weeks in a month. This is
calculated by dividing the total number of weeks in a year (52), by
the total number of months (12).
\34\ Adler KM (2020). ``Determining Carnegie Units: Student
Engagement in Online Courses without a Residential Equivalent.''
Online Journal of Distance Learning Administration, 23(1). https://ojdla.com/articles/determining-carnegie-units-student-engagement-in-online-courses-without-a-residential-equivalent.
\35\ United States Department of Education, Office of
Postsecondary Education, ``Guidance to Institutions and Accrediting
Agencies Regarding a Credit Hour as Defined in the Final Regulations
Published on October 29, 2010,'' (March 18, 2011). https://fsapartners.ed.gov/sites/default/files/attachments/dpcletters/GEN1106.pdf.
\36\ The regulation further provides that this is for
``approximately fifteen weeks for one semester or trimester hour of
credit, or 10 to 12 weeks for one quarter hour of credit, or the
equivalent amount of work over a different period of time.''
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We decided upon this credit hour standard because it allows for
consistency across schools and programs and provides a straightforward
way to account for instructional time and student work. This standard
is also
[[Page 33359]]
consistent with the ED standards described here. For example, ED
provides standards that institutions can use to determine full-time and
half-time student status for purposes of participation in financial
assistance programs. The following ED standards are illustrative. The
full-time student standard for a program that measures progress in
credit hours is 12 semester hours for an academic term (see full-time
student definition at 34 CFR 668.2(b)). A half-time student should have
a workload, as determined by the institution, that amounts to half of
the workload of the applicable minimum requirement of a full-time
student (see half-time student definition at 34 CFR 668.2(b)). This
means that, as determined by the institution, 6 semester hours for an
academic term could be sufficient for half-time enrollment, and would
suffice to demonstrate community engagement under Sec. 435.552(a)(4).
However, if an individual's institution determines that 6 credit/
semester hours is insufficient for half-time enrollment, a State would
use our standard to convert that 6 credit/semester hours to monthly
hours of educational activity. Under our standard, 6 credit hours
converts to 77.94 hours of monthly activity for community engagement (6
credit hours x 3 x 4.33 = 77.94), which is close to, but slightly less
than, the 80 hours of activity needed to demonstrate community
engagement for a month. This would be an appropriate outcome for a
student with a less than half-time course load. We therefore believe
that our standard is reasonable and is a fair measurement of time spent
on instruction and independent study hours. This standard applies to
all educational programs that use credit hours included in the
definition at Sec. 435.552(b). We considered adopting a different
standard for high school and high school equivalency programs. However,
we believe doing so would introduce additional administrative
complexity without meaningful benefits for States or individuals. High
school and high school equivalency students are developing academic
skills for independent learning, and counting the hours they need to do
so towards their community engagement hours is consistent with the
purpose of the community engagement requirement.
To summarize the standard introduced in this IFC, in cases where
the educational institution considers 6 credit/semester hours or fewer
to be less than half-time enrollment, multiplying the number of credit
hours by 3 to provide the weekly number of hours of educational
activity, and then by 4.33 to determine an average monthly number
produces the following:
[GRAPHIC] [TIFF OMITTED] TR03JN26.019
For educational programs that do not use credit hours, if an
individual is enrolled less than half-time, then the hours spent
attending class and participating in educational activities will count
towards meeting the requirement. For example, 1 hour of instruction
will count as 1 hour of activity, 2 hours of hands-on training will
count as 2 hours of activity, 3 hours of lab work will count as 3 hours
of activity, 4 hours of clinical activity will count as 4 hours of
activity, and so forth. We believe that this standard will primarily
apply to educational programs that train individuals for industry
certifications and require individuals to learn and practice technical
skills, such as welding, phlebotomy, cosmetology, and precision
machining. We decided upon this standard because these types of
educational programs generally require a specific number of training
hours for certification, so the time spent training is an appropriate
way to count the educational program hours. Also, SNAP and TANF use
similar standards under their respective work requirements.\37\ SNAP's
time limit work requirements specify at 7 CFR 273.24(a)(1) that
fulfilling the work requirement can mean participating in and complying
with the requirements of a work program for 20 hours per week. A work
program at 7 CFR 273.24(a)(3) includes an employment and training
program under 7 CFR 273.7(e), which includes allowable educational
program activities such as courses or programs of study. According to 7
CFR 273.7(e)(4)(i), the time spent in an employment and training
program component is determined by the State agency. States can specify
participation hours in their FNS SNAP E&T State Plan, for example
specifying for an educational component that participants engage in a
5-day training, for 4 hours per day.\38\
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\37\ Under SNAP or TANF, individuals receiving benefits may be
enrolled in educational programs that use credit hours but still
have their time counted based on hours in class or participation. As
explained above, we developed the credit hour standard for
educational programs that use credit hours to account more fully for
the educational process typical in such programs.
\38\ This example is from California's FNS SNAP E&T State Plan
submission for FY26.
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TANF's definitions at 45 CFR 261.2(i) through (l) include hours
spent participating in vocational educational training, job skills
training directly related to employment, education directly related to
employment, and satisfactory attendance at a secondary school or course
of study leading to a certificate of general equivalence. For TANF,
States submit a Work Verification Plan detailing how they verify and
document work participation hours and activities. TANF's Work
Verification Plan Guide \39\ also includes examples of work activity
descriptions that would be approved for each countable work activity.
For example, for vocational educational training, the
[[Page 33360]]
Work Verification Plan Guide specifies that ``Actual hours spent in
class as well as time spent performing clinical requirements, lab work
or other ancillary activities required for approved vocational
educational training programs are considered to be a part of the
primary activity for which it is required and is countable.'' \40\
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\39\ Office of Management and Budget (OMB) #0970-0338, ``Work
Verification Plan Guide,'' expires 10/31/2026. Available at: https://acf.gov/sites/default/files/documents/ofa/Work-verification-plan-guidance-valid-thru-2026-10.pdf.
\40\ Ibid.
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To be clear, when individuals are enrolled less than half-time in
an educational program that uses credit hours, States should apply the
credit hour standard. However, if the educational program does not use
credit hours, then the hours spent attending class and participating in
educational activities count towards meeting community engagement. We
considered having States convert attendance and participation into
credit hours so that there would only be one way to count hours for
less than half-time enrollment. However, this would be more burdensome
for States, with little meaningful difference for individuals. We
welcome comments on any other reasonable approaches.
7. Combination of Activities
Under section 1902(xx)(2)(E) of the Act, an applicable individual
demonstrates community engagement if the individual engages in any
combination of work, community service, participation in a work
program, and enrollment in an educational program less than half-time.
The combined hours for the activities must be a total of not less than
80 hours for such month.
As specified at new Sec. 435.552(e)(1), a State would only need to
combine an individual's educational program hours with hours spent
performing other activities if the individual is enrolled in the
educational program less than half-time. If the applicable individual
were enrolled in an educational program at least half-time, then that
individual would already have demonstrated community engagement as
specified at Sec. 435.552(a)(4). At new Sec. 435.552(e)(2), we
specify that the hours for work, community service, and participating
in a work program must be determined separately and based on the time
spent performing those activities in such month. As specified at new
Sec. 435.552(e)(3), States must calculate the hours for less than
half-time enrollment in an educational program as described in Sec.
435.552(d).
New Sec. 435.552(e)(4) specifies that once the State determines an
individual's hours for work, completing community service,
participating in a work program, and less than half-time enrollment in
an educational program in such month, the State must add these hours
together to obtain the total hours for all activities. The combined
time for all activities must be a total of not less than 80 hours for
an applicable individual to meet the community engagement requirement
as described at Sec. 435.552(e). However, the State might not need to
determine an applicable individual's total number of hours for all
types of community engagement activity if the applicable individual
demonstrates they met the 80-hour requirement through any combination
of activities. For example, consider an applicable individual who is
enrolled in community college for 4 credit hours, which converts to
51.96 hours of activity, works for pay for 30 hours, and participates
in community service. Because the individual's education and work
activity totals 81.96 hours for the month, in the interest of
efficiency, we encourage a State to conclude that the individual has
met their community engagement requirement for the month and not
consider the individual's community service activity, as it is not
necessary to meet the community engagement requirement.
8. Monthly Income and Average Monthly Income for Seasonal Workers
Under section 1902(xx)(2)(F) of the Act, an applicable individual
demonstrates community engagement for a month if ``the individual has a
monthly income that is not less than the applicable minimum wage
requirement under section 6 of the Fair Labor Standards Act of 1938
(FLSA), multiplied by 80 hours.'' We implement this provision at new
Sec. 435.552(f)(1). In 2026, the Federal minimum wage is $7.25 per
hour,\41\ which multiplied by 80 equals $580. We interpret the
``applicable'' minimum wage to mean the Federal minimum wage under
section 6 of the FLSA (29 U.S.C. 206(a)(1)(C)) that is in effect at the
time a State applies the monthly income threshold to assess compliance
with the community engagement requirement in case of future amendments
to section 6 of the FLSA. As discussed further below, we do not use
alternative minimum wage amounts in the FLSA for the purpose of
identifying the monthly income threshold for demonstrating compliance
with the community engagement requirement. Under section 3(m) of the
FLSA,\42\ employers may pay certain ``tipped employee[s]'' a lower
wage, provided the wage plus earned tips is at least equal to the
minimum wage under section 6 of such Act. This provision is outside of
section 6 of the FLSA, and thus States may not use a tipped wage
(regardless of the industry or type of work) to identify the income
threshold for demonstrating community engagement based on monthly
income.
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\41\ 29 U.S.C. 206(a)(1)(C).
\42\ 29 U.S.C. 203(m).
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Another lower wage that is in section 6(g) of the FLSA is a minimum
wage of $4.25 per hour for individuals under age 20 who are in their
first 90 consecutive calendar days of employment, which could be
relevant to a 19-year-old applicable individual. However, to the extent
that employers avail themselves of this lower introductory wage, we
believe it would be extremely difficult in practice for a State
Medicaid agency to identify to whom this lower wage requirement would
apply and to adjust the monthly income threshold only for those
individuals. Moreover, this lower introductory wage is temporary--for
only the first 90 calendar days of employment--making it even less
likely that a State will encounter an affected individual at the point
of evaluating compliance with community engagement. Therefore, for
simplicity of administration of this provision, we interpret the
Federal minimum wage to be the single, general minimum wage at section
6(a)(1)(C) of the FLSA for all applicable individuals. In addition, as
discussed in section II.I.6. of this IFC, States must first attempt to
verify community engagement on an ex parte basis, including hours
worked, regardless of the existence of a lower introductory wage in a
State.
We further recognize that individual States may have a generally
applicable State minimum wage that is higher than the Federal minimum
wage (or in limited circumstances lower or no minimum wage). Because
section 1902(xx)(2)(F) of the Act references only section 6 of the FLSA
(that is, the Federal minimum wage) and does not provide for the use of
alternative State minimum wages, States may not use such State-specific
minimum wages in place of the applicable Federal minimum wage to
calculate the monthly income threshold for individuals to demonstrate
compliance with community engagement under Sec. 435.552(f)(1).
Under section 1902(xx)(2)(G) of the Act, an applicable individual
demonstrates compliance with community engagement for a month if the
individual is a seasonal worker as described in section 45R(d)(5)(B) of
the Code and has an average monthly income over the preceding 6 months
that is not less than the applicable
[[Page 33361]]
Federal minimum wage requirement under section 6 of the FLSA multiplied
by 80 hours. Section 45R(d)(5)(B) of the Code defines a seasonal worker
as a worker who performs labor or services on a seasonal basis as
defined by the Secretary of Labor, including workers whose ``employment
pertains to or is of the kind exclusively performed at certain seasons
or periods of the year and which, from its nature, may not be
continuous or carried on throughout the year'' (29 CFR 500.20(s)(1))
and retail workers employed exclusively during holiday seasons. We
implement these provisions at new Sec. 435.552(g)(1) and (2). As with
monthly income under Sec. 435.552(f), States must use the Federal
minimum wage in making this calculation.
The statute at section 1902(xx)(2)(F) and (G) of the Act refers to
an individual's ``monthly income'' and ``average monthly income,'' but
does not further define how States should calculate monthly income for
these purposes. For the calculation of an applicable individual's
monthly income under new Sec. 435.552(f) and average monthly income
under new Sec. 435.552(g), we define ``monthly income'' to be the same
as the individual's household income used for financial eligibility for
Medicaid. Most applicable individuals are eligible for or enrolled in
the adult group under Sec. 435.119, which is a group that has an
income standard based on MAGI using the MAGI-based methodologies at
Sec. 435.603. Similarly, most section 1115 demonstrations that have
applicable individuals (as discussed in section II.B. of this IFC) have
an income standard based on MAGI and use MAGI-based methodologies for
the relevant demonstration population.
We considered using different interpretations of ``monthly income''
for the calculation. For example, we considered counting only earned
income because it could align with the other work-related ways to
demonstrate compliance. However, using only earned income for this
purpose would be inconsistent with how ``income'' is defined elsewhere
in the Medicaid statute. Specifically, section 1902(e)(14)(A) of the
Act dictates that ``[n]otwithstanding. . .any other provision of this
title, except as provided in subparagraph (D), for purposes of
determining income eligibility for medical assistance under the State
plan or under any waiver of such plan and for any other purpose
applicable under the plan or waiver for which a determination of income
is required . . . , a State shall use the modified adjusted gross
income of an individual and, in the case of an individual in a family
greater than one, the household income of such family.'' (Emphasis
added.) Section 1902(e)(14)(D) of the Act, which lists the exceptions
to the mandatory use of MAGI-based household income, does not include
an exception relating to the determination of income for applicable
individuals for the purposes of assessing community engagement.
Additionally, neither section 1902(xx) of the Act nor section 71119 of
the WFTC legislation specifies that section 1902(xx) supersedes section
1902(e)(14) of the Act, nor does section 1902(xx) of the Act contain
its own definition of ``monthly income'' or mandate that a particular
methodology be used to calculate ``monthly income.'' Nothing in section
1902(xx) of the Act or section 71119 of the WFTC legislation suggests
that section 1902(e)(14) of the Act should not apply when determining
income for purposes of section 1902(xx).
Under new Sec. 435.552(f)(2) and (g)(3), we establish that States
must use the MAGI-based methodologies at Sec. 435.603 when making
income determinations for demonstrating community engagement. A
contrary reading of the statute would require that States, after
determining an individual income-eligible for the adult group, apply a
separate and distinct income determination for such individuals in
evaluating their demonstration of community engagement. There is no
indication in section 1902(xx)(2) of the Act or elsewhere that the
MAGI-based income provisions of section 1902(e)(14)(A) of the Act
should not apply to the calculations under section 1902(xx)(2)(F) and
(G) of the Act. Therefore, under Sec. 435.552, we are interpreting
section 1902(xx)(2)(F) and (G) of the Act in a manner that is
consistent with section 1902(e)(14) of the Act. We specify that States
must use the individual's MAGI-based income as defined at Sec. 435.603
in assessing an individual's monthly income for the purpose of
determining if an individual demonstrates community engagement under
Sec. 435.552(f) or (g).
The use of MAGI-based methodologies is required under Sec.
435.552(f) and (g) for all applicable individuals, including those
whose eligibility or enrollment is under a section 1115 demonstration
rather than the State plan. Even if a State does not have an income
test or uses a non-MAGI methodology for determining financial
eligibility for a population of applicable individuals eligible only
under section 1115 demonstration authority, we nevertheless require
States to use MAGI-based methodologies for the purpose of determining
income under Sec. 435.552(f) and (g). We believe that establishing a
uniform methodology is necessary for the consistent and fair treatment
of all applicable individuals across States, regardless of whether they
are eligible for or enrolled in the State plan or a section 1115
demonstration. We recognize that requiring the use of MAGI-based
methodologies for section 1115 demonstration populations that do not
use such methodologies for underlying financial eligibility could
present an administrative burden for affected States. However, sections
1902(xx)(2)(F) and (G) of the Act require income counting, and we
believe any additional State burden from using MAGI-based methodologies
in these situations is outweighed by the benefits of requiring
consistent methodologies within and across States, rather than creating
different methodologies to count income for the community engagement
requirement for each of the implicated section 1115 demonstrations.
Thus, States must use the individual's MAGI-based income, as
defined under Sec. 435.603(e), for their MAGI-based household as
defined under Sec. 435.603(d) and (f), for purposes of Sec.
435.552(f) and (g). The countable income under Sec. 435.603(e)
generally includes earned income as well as countable unearned income,
meaning that States must take into account all of this income for
purposes of Sec. 435.552(f) and (g). Under Sec. 435.603(d) and (f),
household income is the total income of everyone in the individual's
household. Although sections 1902(xx)(2)(F) and (G) of the Act refer to
the income of ``the individual,'' all Medicaid applicants and
beneficiaries have their eligibility determined on an individual basis,
and, under Sec. 435.603(d), States must determine individuals'
Medicaid financial eligibility using household income, which includes
the income of every individual included in the individual's household.
Finally, under Sec. 435.603(h), Medicaid financial eligibility is
generally based on the current month at the point when eligibility for
Medicaid is being determined, with certain options available to States
(including the use of a reasonably predictable changes methodology
under Sec. 435.603(h)(3), as discussed further in this IFC). For the
purposes of demonstrating community engagement under Sec. 435.552(f)
and (g), we decided to apply the requirement to use ``current monthly
household income and family size'' in Sec. 435.603(h) to the month
that the State is evaluating for the purpose of community engagement,
rather than to the month of application or renewal. That is, States
generally
[[Page 33362]]
must evaluate the monthly income for the month or months of the review
period, as defined in section II.H. of this IFC, to determine whether
an applicable individual is demonstrating community engagement in that
month. We believe this is the most appropriate and logical application
of the income counting methodology for States to use for the community
engagement requirement. We implement this requirement at Sec.
435.552(f)(2) and (g)(2).
As a general example, if the State conducts financial eligibility
for an applicant and determines that the individual appears to be an
applicable individual eligible for the State plan adult group and has a
monthly household MAGI-based income of $650 (which is verified through
information available to the State) in the required number of months of
the review period, as defined in section II.H. of this IFC, then the
State would use the verified $650 income, which is greater than $580
(applicable Federal minimum wage multiplied by 80), to determine that
the individual demonstrated community engagement under Sec.
435.552(f).
In addition, our intent is for States to use data sources and
programming logic readily available to them rather than create new
methodologies and systems specific to community engagement. We believe
it will be more efficient for States to implement calculations based on
existing methodologies, rather than applying one income methodology for
determining financial eligibility and a different methodology to
determine monthly or average monthly income as a condition of
eligibility under community engagement.
We have received questions regarding States' options when averaging
seasonal workers' monthly income under section 1902(xx)(2)(G) of the
Act. States have an existing option to use a ``reasonably predictable
changes'' methodology when using MAGI-based methodologies to determine
household income, which, as discussed earlier in this section of this
IFC, is the income used for demonstrating compliance under Sec.
435.552(f) and (g). Specifically, Sec. 435.603(h)(3) permits States to
adopt (through a State plan election) a reasonable method to account
for reasonably predictable increases or decreases (or both) in future
income to determine monthly income. This option can help make income
determinations for applicants and beneficiaries more accurate over a
period of time and is particularly useful for averaging seasonal worker
income over a period of up to 12 months. A reasonably predictable
changes methodology takes predictable future changes into account by
including a prorated portion of reasonably predictable future income in
the individual's monthly income to smooth out predictable fluctuations
in income.
For example, suppose an individual in a State with a 12-month
reasonably predictable changes in income methodology expects to have
steady monthly income of $500 and expects (based on the previous year)
to have $400 per month in additional countable income in the months of
October through December, for a total of $1,200 of additional countable
income. Suppose further that the State is determining monthly income
for August for the purpose of the community engagement requirement. The
State prorates the total seasonal income to equal $100 ($1,200/12 =
$100) in additional monthly income for August (and in each of the 12
months). The monthly income is determined to be $600 ($500 steady
income plus $100 prorated seasonal income). Note that because the State
uses a 12-month methodology, this calculation would be the same in any
month of the year. Thus, while the prorated amount is based on expected
future income, the methodology is used to determine the monthly income
for each month in that 12-month period, including the month(s) of the
review period (as defined in section II.H. of this IFC) the State is
assessing to determine community engagement compliance. Such a
reasonably predictable changes methodology, in States that elect it, is
an integral part of their MAGI-based methodologies, and therefore
States must use their reasonably predictable changes methodology to
determine monthly income when an individual has fluctuating income that
is subject to the State's methodology.
For the purpose of the community engagement requirement, States
with a MAGI-based reasonably predictable changes methodology for
seasonal workers include a prorated portion of reasonably predictable
future income in monthly income added to stable or non-fluctuating
income (if any), and this total average monthly income will effectively
be the monthly income used to assess community engagement under section
1902(xx)(2)(G) of the Act. As another example, consider an individual
who is employed from April through September, earning $1,500 per month,
and unemployed with no income for the remaining 6 months of the year.
If the individual applies for Medicaid in December, and the State has
elected reasonably predictable increases and decreases in income over
12 months, the State will use the prorated MAGI-based monthly income to
determine financial eligibility and also to determine compliance with
the community engagement requirement. In this case, the individual's
calculated monthly income is $750 ($1,500 multiplied by 6, then divided
by 12) in December for financial eligibility and $750 in November (or
in the months of the relevant review period, as defined in section
II.H. of this IFC) for demonstrating community engagement. The average
monthly income over the previous 6 months would also be $750.
Alternatively, if the individual applies in July when earning income,
and the other facts were the same (including that the State takes into
consideration reasonably predictable future decreases in income), the
outcome would still be a calculated monthly income of $750 for
financial eligibility and for demonstrating community engagement using
average monthly income.
Most States currently elect the option to use a reasonable method
to account for reasonably predictable changes, and among those States,
most elect both reasonably predictable increases and decreases in
future income. Some States only account for reasonably predictable
future decreases. Because accounting only for reasonably predictable
future decreases generally decreases countable household income, it may
result in some seasonal workers not reaching the $580 per month
(Federal minimum wage multiplied by 80) threshold under section
1902(xx)(2)(G) of the Act. We further note that a MAGI-based reasonably
predictable changes methodology applies broadly to all MAGI-based
eligibility determinations, including for the adult group and
applicable section 1115 demonstrations, and must be used consistently
and in the same manner for financial eligibility and for compliance
with the community engagement requirement for applicable individuals.
If a State does not use a reasonably predictable changes
methodology, then for the purpose of demonstrating community engagement
for seasonal workers, the State would use the individual's average
income over the preceding 6 months, as provided at section
1902(xx)(2)(G) of the Act. The ``preceding 6 months'' verified by the
State would be the 6 months preceding a month of the review period for
which the State is assessing compliance with the community engagement
requirement. Consider the facts of the previous example, except that
the State does not elect a reasonably predictable changes methodology,
and the State requires an applicable individual to demonstrate
community engagement for
[[Page 33363]]
1 month at application. The seasonal worker applies in July and is an
applicable individual, so the relevant review period to demonstrate
community engagement is the month of June. The State will average the
income from December through May to determine if the individual
demonstrates community engagement in June, the month before
application. In this case, the individual has 2 months of seasonal
employment, which averaged over 6 months equals $500 (2 months at
$1,500 per month, then divided by 6). Because $500 is below $580, this
individual is not considered to be demonstrating community engagement
in June based on the 6-month average monthly income for seasonal
workers. This outcome contrasts with the prior example using an income
counting methodology that accounts for reasonably predictable changes.
Similarly, at renewal, the State will average the income for the 6
months preceding the month being assessed for compliance. Thus, if a
seasonal worker who is an applicable individual has a review period
that spans from July through December, the average income from January
to June is used to assess compliance in July, from February to July to
assess compliance in August, from March to August to assess compliance
in September, etc. The State will continue assessing each month in the
review period until the State either verifies compliance for the
required number of months (including verifying if the applicable
individual demonstrated community engagement on a different basis, that
is, through an activity or combination of activities, or is deemed to
have demonstrated community engagement because of an exception) or has
assessed all the months in the review period.
We have also received several questions regarding situations in
which an individual's monthly income falls short of the amount required
to meet the community engagement requirement under the monthly or
average monthly income criteria. For example, we have been asked
whether, if the State verifies $380 in monthly income for the
individual (which is short of the $580/month requirements at Sec.
435.552(f) and (g) assuming a minimum wage of $7.25/hour), the State
could use that income towards meeting an individual's community
engagement requirement. Section 1902(xx)(2) of the Act does not address
this scenario but does provide the Secretary with the authority to
establish criteria for determining whether an applicable individual
meets the conditions for demonstrating community engagement. Section
1902(xx)(2)(A) of the Act includes work as a community engagement
activity. Consistent with our statutory authority to establish the
criteria for demonstrating community engagement, at new Sec.
435.552(e)(2)(i) and (ii) we permit income to be used as a proxy for
calculating work hours because many income verification data sources,
such as quarterly wage data, include individual earned income and thus
can be used to derive the number of hours worked under Sec.
435.552(a)(1). If the individual's verified income is below the Federal
minimum wage multiplied by 80 hours, and if the State does not have
information regarding the number of hours worked, then it would be
reasonable for States to have the option to use income to calculate a
number of hours worked by dividing the income for the month by the
applicable Federal minimum wage. Thus, if the State verifies $380 in
monthly income, then using the current Federal minimum wage of $7.25,
the individual can be credited with having worked 52 hours for the
month ($380 divided by $7.25). The individual would then need to
participate in an additional 28 hours (80-52 = 28) of community
engagement activities to meet the requirement for the month.
We recognize that States will be using the individual's MAGI-based
income for their MAGI-based household when converting monthly income to
hours worked. While we are providing States with the option to use
income to determine hours worked, this option must only be used when
the monthly income is less than the applicable Federal minimum wage
multiplied by 80 hours and the State does not have information
regarding the number of hours worked. In these circumstances, the State
must use a reasonable method to allocate hours, between members of the
household. Providing States flexibility to convert monthly income to
hours worked for purposes of calculating an applicable individual's
work hours is reasonable because the concept underlying the monthly
income and average monthly income criteria at sections 1902(xx)(2)(F)
and (G) of the Act is that monthly income can be a proxy for hours
worked. We do not see a basis for prohibiting States from using a
similar methodology to determine hours worked if an individual has
monthly income below the amount that equates to 80 hours at minimum
wage, the State has no documentation regarding number of hours worked
and uses a reasonable methodology to allocate hours, as necessary.
Additionally, some States already use monthly income to determine self-
employment work hours when verifying compliance with SNAP work
requirements. We reiterate that when this proxy approach results in the
work hours calculated as less than 80, those hours would then have to
be combined with hours from another activity to meet the community
engagement requirement.
Please see section II.I.6.f. of this IFC for information about
verification of the monthly income and average monthly income
requirements.
D. Mandatory Exceptions for Certain Individuals
Section 1902(xx)(3)(A) of the Act establishes mandatory exceptions
from demonstrating community engagement via the pathways described in
Sec. 435.552(a) (see section II.C. of this IFC for more information
regarding demonstrating compliance) for certain applicable individuals.
States must deem an applicable individual compliant for a month if the
individual meets the mandatory exception criteria (which are further
described in this section of this IFC). New Sec. 435.553 implements
and interprets the mandatory exceptions in section 1902(xx)(3)(A) of
the Act.
New Sec. 435.553(a) implements section 1902(xx)(3)(A)(i) of the
Act, which establishes mandatory exceptions for applicable individuals
if, for part or all of a month, the individual was: (1) under the age
of 19; (2) entitled to, or enrolled for benefits under Medicare part A,
or enrolled for benefits under Medicare part B; (3) described in any of
the mandatory eligibility groups in section 1902(a)(10)(A)(i)(I)
through (VII) of the Act; or (4) a specified excluded individual as
defined in section 1902(xx)(9)(A)(ii) of the Act (see section II.E. of
this IFC for an explanation of specified excluded individuals, and
section II.F. of this IFC for a discussion of the similarities and
differences between mandatory exceptions and specified excluded
individuals). States must determine whether an applicable individual
met exception criteria for part or all of a relevant month. We
interpret the statutory references to ``a month'' and ``such month'' to
refer to any month in the State's review period (described further in
section II.H. of this IFC). This could be a month during the State's
review period when determining eligibility at application, a month
during an individual's eligibility period at renewal, and, at State
option, a month during the relevant alternative review period during
which the State elects to conduct more frequent verifications of
[[Page 33364]]
community engagement compliance (as described in section II.H. of this
IFC).
Because compliance with community engagement is assessed for a time
period that predates an individual's application or renewal date (as
described in more detail in section II.H.1 of this IFC), the mandatory
exceptions provide protections, for example, for beneficiaries who were
previously excluded from the requirement to demonstrate community
engagement but whose exclusion ends, or who were enrolled in another
eligibility group and, following a redetermination, transition to an
eligibility group consisting of applicable individuals. These
exceptions can allow such beneficiaries time to understand their rights
and responsibilities and demonstrate compliance with community
engagement as it was not a condition of their Medicaid eligibility
previously.
For example, a beneficiary enrolled in the adult group has been
excluded from the community engagement requirement because they have a
dependent child who is age 13, but their child turns 14 during the
individual's eligibility period. During the beneficiary's renewal, the
State determines the individual is now an applicable individual subject
to the community engagement requirement. The State requires
beneficiaries to demonstrate 1 month of community engagement activity
at renewal. Because the beneficiary was a specified excluded individual
as a result of having a dependent child under the age of 14 for part or
all of at least 1 month during the review period, which aligns with the
eligibility period in this scenario, they meet the mandatory exception
criteria for at least 1 month during the review period (see section
II.H.3. of this IFC) and thus are deemed compliant with community
engagement during the review period at renewal. Their eligibility would
be renewed with proper notice of the determination consistent with
Sec. 435.917(b)(1); this notice would be accompanied by the outreach
notice content described at new Sec. 435.561(c) which includes
information on how to comply with the requirement to demonstrate
community engagement and the consequences of noncompliance, consistent
with Sec. 435.561(b) (described in section II.L. of this IFC). Going
forward, the individual would be subject to the community engagement
requirement.
New Sec. 435.553(b) implements section 1902(xx)(3)(A)(ii) of the
Act, which establishes an exception for incarcerated individuals.\43\
Under the exception, an applicable individual is deemed compliant with
community engagement for a month if ``at any point during the 3-month
period ending on the first day of such month, the individual was an
inmate of a public institution.'' Unlike the other mandatory
exceptions, which require the State to deem an applicable individual as
demonstrating community engagement in a month if the individual meets
the exception in that month, the exception for individuals who were
previously inmates of a public institution applies to a 3-month period
prior to the month in which the State reviews the individual for
compliance with community engagement. We believe that the 3-month
timeframe for this exception reflects the significance of the
transition from a public institution to a community setting. This
policy aligns with Congress' recent efforts to support individuals in
attaining self-sufficiency during the transition period following
incarceration.\44\ In addition to this mandatory exception, inmates of
a public institution are defined as ``specified excluded individuals''
at section 1902(xx)(9)(A)(ii)(VIII) of the Act, discussed further in
section II.E.8. of this IFC.
---------------------------------------------------------------------------
\43\ For purposes of this discussion, ``incarcerated'' has the
same meaning as ``inmate of a public institution'' as defined at
Sec. 435.1010.
\44\ Section 1902(a)(84)(A), as amended by Division G, Title I,
Section 205 of the CAA, 2024 requires States to suspend rather than
terminate Medicaid eligibility during periods of incarceration for
all Medicaid-eligible individuals; Section 1002 of the SUPPORT Act
directed the Secretary of HHS to develop guidance on how section
1115 demonstrations can be used to support incarcerated individuals
transitioning to the community.
---------------------------------------------------------------------------
When a State assesses whether it can deem compliance with community
engagement for a month for someone who was previously incarcerated, it
will need to determine when an individual's incarceration ended in
relation to the month(s) for which the State is determining compliance.
For example, an individual was an inmate of a public institution and
was released on March 15. The individual applies for Medicaid on June 1
in a State that has a 1-month review period for community engagement at
application (see section II.H.1. of this IFC for further discussion of
the review period). The State determines the individual is eligible in
the adult group and is an applicable individual, so must assess whether
the individual met or is deemed to have met the community engagement
requirement in May (the month prior to the month of application). To
apply the exception for incarcerated individuals, the State would
assess whether the individual was an inmate at any point in the 3-month
period prior to May 1. Accordingly, the State would determine whether
the individual was an inmate in February, March, or April. Because the
individual was an inmate in March, the State would deem the individual
to have met the community engagement requirement and would enroll the
individual in the adult group.
We note that an applicable individual can be deemed compliant only
for the month(s) in which the individual meets the mandatory exception
criteria. States that require applicable individuals to demonstrate
compliance with community engagement for more than 1 month during the
review period will need to verify that an applicable individual is
excepted, demonstrates community engagement, or meets a combination of
these community engagement criteria for the total number of months
specified by the State in the review period.
E. Specified Excluded Individuals
Section 1902(xx)(9)(A)(ii) of the Act lists nine categories of
individuals meeting the definition of a ``specified excluded
individual.'' These individuals are excluded from the definition of
``applicable individual'' at section 1902(xx)(9)(A)(i) of the Act;
therefore, for the nine categories of specified excluded individuals,
community engagement is not a condition of eligibility, and such
individuals do not need to demonstrate community engagement to qualify
for the State plan adult group or for eligibility under an applicable
section 1115 demonstration. New Sec. 435.554 implements the statutory
definition of specified excluded individuals, as further discussed in
this section. If a State determines someone to be a specified excluded
individual at application, renewal, or, if elected by the State, at the
time of a more frequent verification of community engagement
compliance, it must not determine whether that person met the community
engagement requirement during the applicable community engagement
review period (see section II.H.1. of this IFC for more information).
Similarly, while States must deem an applicable individual compliant
with the community engagement requirement for a month if during any
part of that month that person was a specified excluded individual,
this deeming requirement does not apply if a State has already
determined that the person is a specified excluded individual at
application, renewal, or at the time of a more frequent verification,
because only an applicable individual must
[[Page 33365]]
demonstrate community engagement. Therefore, States must not deem
specified excluded individuals compliant with the community engagement
requirement. We explain the distinction between mandatory exceptions
and specified excluded individuals in more detail in section II.F. of
this IFC.
Several groups of specified excluded individuals are, by
definition, not usually eligible under the State plan adult group,
described at section 1902(a)(10)(A)(i)(VIII) of the Act, and many may
be eligible through a separate eligibility group (for example, the
pregnant women group, described at Sec. 435.116) for which community
engagement does not apply. However, these exclusions are necessary for
individuals who may be eligible to enroll or are enrolled in the State
plan adult group or an applicable section 1115 demonstration, as
described in section II.B. of this IFC, but still meet the exclusion
criteria.
New Sec. 435.554 implements and interprets section
1902(xx)(9)(A)(ii) of the Act. We intend to apply existing Medicaid
definitions where possible to align with existing eligibility systems
and structures. Where terms used to describe specified excluded
individuals do not have precedent in Medicaid, or our interpretation of
the statutory language differs from existing Medicaid definitions, we
establish definitions through this IFC. Section II.I.7. of this IFC
addresses verification requirements regarding specified excluded
individuals.
1. Former Foster Care Children
Section 1902(xx)(9)(A)(ii)(I) of the Act provides that an
individual ``who is described in'' section 1902(a)(10)(A)(i)(IX) of the
Act, which refers to the eligibility group serving former foster care
children (FFCC group), is a specified excluded individual. The FFCC
group generally serves individuals who were enrolled in Medicaid while
in foster care, then exited foster care (or ``aged out'') without an
adoption or other permanency, and are under age 26. The FFCC group was
originally limited to individuals who had been in foster care in the
State in which they subsequently sought Medicaid coverage and were not
described in any other mandatory eligibility groups under section
1902(a)(10)(A)(i)(I) through (VII) of the Act. Section 1002(a) of the
Substance Use Disorder Prevention that Promotes Opioid Recovery and
Treatment for Patients and Communities Act (SUPPORT Act; Pub. L. 115-
271) modified the original eligibility criteria for the FFCC group in
section 1902(a)(10)(A)(i)(IX) of the Act to expand eligibility in the
group to individuals who had been in foster care in other States and
who may be otherwise described in a separate mandatory eligibility
group under section 1902(a)(10)(A)(i)(I) through (VII) of the Act (so
long as they are not enrolled in such other group). However, the
amendment was effective exclusively for those individuals who turn age
18 on or after January 1, 2023. This means that, under the State plan
requirements, slightly different eligibility criteria for the FFCC
group apply to individuals under age 26 who turned age 18 on or before
December 31, 2022, and those who turn age 18 on or after January 1,
2023.\45\
---------------------------------------------------------------------------
\45\ CMCS State Health Official (SHO) letter #22-003, ``Coverage
of Youth Formerly in Foster Care in Medicaid.'' (December 16, 2022).
Available at: https://www.medicaid.gov/federal-policy-guidance/downloads/sho22003.pdf.
---------------------------------------------------------------------------
We have considered whether the reference in section
1902(xx)(9)(A)(ii)(I) of the Act to the FFCC group encompasses both the
original version and SUPPORT Act version of section
1902(a)(10)(A)(i)(IX) of the Act, or if it is specific only to the
latter one. We are interpreting section 1902(xx)(9)(A)(ii)(I) of the
Act to apply the exclusion to individuals who meet the eligibility
criteria under the SUPPORT Act, regardless of when they turned age 18,
for the following reasons.
The phrase ``described in'' could be read to exactly mirror the
phased-in implementation of the eligibility criteria in section
1902(a)(10)(A)(i)(IX) of the Act and apply the relevant criteria to
individuals based on when they turned age 18 for the purpose of the
specified excluded individual category. That means, in reference to
youth formerly in foster care, an individual under age 26 who turned
age 18 before January 1, 2023, would only be a specified excluded
individual if he or she meets the original criteria for the FFCC group
(specifically: in the same State and not eligible for another group).
Someone under age 26 who turned age 18 on or after January 1, 2023,
would be a specified excluded individual if he or she meets the
expanded criteria for the FFCC group under the SUPPORT Act.
However, we do not believe this is the best reading of section
1902(xx)(9)(A)(ii)(I) of the Act, because the Act directs an
eligibility hierarchy for the FFCC group. That means that a strict
reading of the exclusion is likely to create an empty exclusion
category. Clause (XVII) in the language following section
1902(a)(10)(G) of the Act provides that, ``. . . if an individual is
described in subclause (IX) of subparagraph (A)(i) and is also
described in subclause (VIII) of that subparagraph, the medical
assistance shall be made available to the individual through subclause
(IX) instead of through subclause (VIII).'' This language means that
individuals eligible for both the adult group and the FFCC group must
be enrolled in the FFCC group. This eligibility hierarchy means that a
strict reading of ``described in'' in section 1902(xx)(9)(A)(ii)(I) of
the Act that is equivalent to ``eligible for'' the FFCC group per the
SUPPORT Act phase-in of the eligibility criteria by age would render
the exclusion meaningless as a null set of individuals. Under that
reading, by operation of the language following section 1902(a)(10)(G)
of the Act, all the individuals who are eligible for the FFCC group
would by definition not be in the adult group and thus never would be
applicable individuals to whom the exclusion category might apply.
Because a strict reading of the reference to section
1902(a)(10)(A)(i)(IX) of the Act in section 1902(xx)(9)(A)(ii)(I) would
render that exclusion category a nullity, we interpret the exclusion to
apply to persons meeting the current SUPPORT Act definition of the FFCC
group, even in circumstances where they would not qualify for
eligibility under section 1902(a)(10)(A)(i)(IX) of the Act due to when
they turned 18.
This interpretation also furthers administrative simplicity. The
population of individuals formerly in foster care is relatively small;
and the population of individuals formerly in foster care who do not
meet the State plan requirements is even smaller. For example, some
States operating section 1115 demonstrations to apply the SUPPORT Act
criteria to eligible individuals who turned 18 before January 1, 2023,
report very low enrollment numbers (sometimes in the single digits).
The administrative work for States to identify and apply the correct
eligibility criteria to the population is high compared to the small
size of the population. We implement this definition at new Sec.
435.554(c)(1).
This policy means that States must use a single set of eligibility
criteria, under the SUPPORT Act changes to the FFCC group, for this
category of specified excluded individual, regardless of whether the
individual turned age 18 on or after January 1, 2023. Thus, an
individual in the adult group or an applicable section 1115
demonstration may be a specified excluded individual as long as he or
she meets the criteria for an individual
[[Page 33366]]
described in the FFCC group: (1) is under age 26; (2) is not enrolled
in an eligibility group described in section 1902(a)(10)(A)(i)(I)
through (VII) of the Act, even if they meet the eligibility
requirements for such group; (3) was in foster care under the
responsibility of any State upon attaining age 18 (or such higher age
as the State has elected in its title IV-E plan); and (4) was enrolled
in Medicaid in any State while in such foster care. For example,
suppose an individual ages out of foster care (while enrolled in
Medicaid) at age 21 in State A in 2024 and subsequently moves to State
B. Because this individual turned age 18 in 2021, the SUPPORT Act rules
for the FFCC group do not apply to the individual. State B covers the
adult group but does not have a section 1115 demonstration to cover
former foster care youth from other States. When the individual applies
for Medicaid in State B, he meets the eligibility requirements for the
adult group, and the State enrolls him in that group. In 2027, the
individual is in the adult group and still under age 26. Because the
individual meets the current description of the FFCC group, despite not
being enrolled in the group, the individual is a specified excluded
individual and not subject to the community engagement requirement.
2. American Indians
Section 1902(xx)(9)(A)(ii)(II) of the Act defines as specified
excluded individuals an individual ``who: (aa) is an Indian or Urban
Indian (as such terms are defined in paragraphs (13) and (28) of
section 4 of the Indian Health Care Improvement Act; (bb) is a
California Indian described in section 809(a) of such Act; or (cc) has
otherwise been determined eligible as an Indian for the Indian Health
Service under regulations issued by the Secretary.'' CMS has previously
issued regulations that define ``Indian'' to implement various
protections for individual Indians, Indian tribes, and tribal
organizations as it relates to Medicaid premiums and cost sharing, as
required by sections 1916(j), 1916A(b)(3)(A)(vii), and
1916A(b)(3)(B)(x) of the Act.\46\ The existing definition at Sec.
447.51 incorporates each of the specific groups listed in section
1902(xx)(9)(A)(ii)(II)(aa) through (cc) of the Act; therefore, we adopt
the existing definition of ``Indian'' at Sec. 447.51 for the community
engagement exclusion at the new Sec. 435.554(c)(2). In other places
throughout this IFC, we refer to this population as American Indians.
We believe adopting this definition will promote alignment with
existing Medicaid protections for American Indians and will allow
States to use existing data used for cost sharing to effectuate this
community engagement exclusion. Notably, unlike other exclusions which
may change from month to month or be time-limited, States will not be
required to (and may not) reverify someone's status as an American
Indian for exclusion from the community engagement requirement.
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\46\ Medicaid Program; Premiums and Cost Sharing 75 FR 30243
(May 28, 2010). https://www.federalregister.gov/d/2010-12954.
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3. Parent, Guardian, Caretaker Relative, or Family Caregiver of a
Dependent Child 13 Years of Age and Under or a Disabled Individual
Section 1902(xx)(9)(A)(ii)(III) of the Act establishes an exclusion
for parents, guardians, caretaker relatives, and family caregivers (as
defined in section 2 of the Recognize, Assist, Include, Support, and
Engage Family Caregivers Act of 2017 (RAISE Family Caregivers Act; Pub.
L. 115-119), of a dependent child 13 years of age and under or a
disabled individual. The terms ``caretaker relative'' and ``dependent
child'' are existing Medicaid terms defined in regulation that we are
building upon for purposes of this exclusion. The terms parent,
guardian, family caregiver, and disabled individual are either new to
Medicaid, or are not defined in regulation to determine Medicaid
eligibility. Each category of excluded individuals established by
section 1902(xx)(9)(A)(ii)(III) of the Act is defined in relation to a
dependent child aged 13 and under or a disabled individual. We define
the terms caretaker relative, dependent child, disabled individual,
family caregiver, guardian and parent at Sec. 435.554(a). For example,
as we describe in more detail below, for purposes of the exclusion at
1902(xx)(9)(A)(ii)(III) of the Act, we are defining dependent child at
Sec. 435.554(a) to mean ``a child 13 years of age or under who relies
on another individual for care'' and all specified excluded individual-
related references to dependent child throughout the remainder of this
preamble reflect this regulatory definition. Additionally, to qualify
as a specified excluded individual, those meeting the definition of
family caregiver at Sec. 435.554(a) must also meet certain criteria
specified at new Sec. 435.554(c)(3)(i).
a. Definition of Caretaker Relative
Current CMS regulations define a caretaker relative at Sec. 435.4.
The ``caretaker relative'' definition generally implements section
1905(a)(ii) of the Act (``relatives specified in section 406(b)(1) with
whom a child is living if such child is (or would, if needy, be) a
dependent child under part A of title IV.''). Such references to title
IV-A of the Act are to the former Aid to Families with Dependent
Children (AFDC) program, as it existed on July 16, 1996. AFDC was
replaced with the TANF block grant by PRWORA. In de-linking receipt of
cash assistance from Medicaid, PRWORA also established categorical
eligibility for low-income families under section 1931 of the Act. The
definition of caretaker relative is used for the population of
categorically needy parents and other caretaker relatives that is now
implemented in regulations at Sec. 435.110. Section 435.4 defines a
caretaker relative as a parent or other relative (related by blood,
adoption, or marriage) living with a dependent child, who assumes
primary responsibility for the dependent child's care. Section 435.4
specifies who qualifies as a relative for such purposes, and includes a
child's father, mother, grandfather, grandmother, brother, sister,
stepfather, stepmother, stepbrother, stepsister, aunt, uncle, first
cousin, nephew, niece, or the spouse of such parent or relative, even
after the marriage is terminated by death or divorce. The definition
also provides States the option to include other adults: additional
relatives of the child by blood (including those of half-blood),
adoption, or marriage; a domestic partner of the parent or other
caretaker relative; or any adult with whom the child is living and who
assumes primary responsibility for the child's care.
Use of the term ``caretaker relative'' in our regulations describes
a specific relationship with a child that defines the categorical
Medicaid eligibility group at Sec. 435.110.\47\ Because States have
experience implementing the Sec. 435.110 eligibility group and
associated policies based on the existing definition in Sec. 435.4, we
believe it is appropriate to align the definition of ``caretaker
relative'' in section 1902(xx)(9)(A)(ii)(II) of the Act with that
definition. However, we acknowledge that, in addition to a dependent
child age 13 or under, the exclusion also applies to caretaker
relatives of a ``disabled individual'' (defined later in this section).
Therefore, if we were to use the existing definition at Sec. 435.4
without any changes, the definition would not align with the exclusion
in
[[Page 33367]]
the statute. As such, for purposes of this exclusion from the community
engagement requirement, at a new Sec. 435.554(a) we establish a
definition of caretaker relative, based on the relationships listed in
the existing definition at Sec. 435.4, to apply the definition to
caretaker relatives of both dependent children and disabled
individuals, as established in section 1902(xx)(9)(A)(ii)(III) of the
Act. We also specify additional relationships (husband, wife, son,
daughter, stepson, stepdaughter, grandson, granddaughter) under which
individuals could qualify as a caretaker relative of a disabled
individual (these additional relationships are not relevant for
dependent children age 13 and under because of their age). Like the
definition in Sec. 435.4, the new definition requires that the
caretaker relative assume primary responsibility for the dependent
child's or disabled individual's care and live with the dependent child
or disabled individual who is receiving the care.
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\47\ Medicaid Program; Eligibility Changes Under the Affordable
Care Act of 2010 77 FR 17144 (March 23, 2012). https://www.federalregister.gov/d/2012-6560.
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If a State has elected to expand the definition of ``caretaker
relative'' to additional relatives under paragraph (3) of the caretaker
relative definition at Sec. 435.4, the State must apply the same
elections when determining whether an individual is a ``caretaker
relative'' of a dependent child or a disabled individual for purposes
of the exclusion described at section 1902(xx)(9)(A)(ii)(III) of the
Act. We believe that aligning the elections of additional relatives
across the eligibility group for parents and other caretaker relatives
at Sec. 435.110 and this community engagement exclusion would prevent
beneficiary confusion and potential disruption of coverage for certain
caretakers who transition between the parent and caretaker relative
group and a group consisting of applicable individuals. We also believe
alignment will create administrative simplicity for States and better
understanding of the policy for beneficiaries.
For example, suppose a beneficiary is the second cousin of, and
lives with, a 10-year-old child who is dependent on the beneficiary for
care. Because their State elected the option under paragraph (3) of the
caretaker relative definition at Sec. 435.4, the beneficiary is
eligible for the ``parents and other caretaker relatives'' eligibility
group. The beneficiary subsequently experiences an increase in unearned
income and is determined ineligible for the ``parents and other
caretaker relatives'' group and is then determined eligible for the
adult group. If the State uses a consistent definition of relationships
for caretaker relative, the State would determine the individual to be
a specified excluded individual under the exclusion described at
section 1902(xx)(9)(A)(ii)(III) of the Act. The beneficiary would not
be subject to the community engagement requirement, and the State would
not need to determine whether the individual demonstrated compliance,
which is consistent with the beneficiary's previous status as a
caretaker relative. However, if the State used a different relationship
election for the exclusion, the State would need to conduct a separate
analysis of the relationship between the adult and the dependent child,
adding to the complexity of the redetermination process for the State
and potentially resulting in confusion or a disruption of coverage for
the caretaker relative.
b. Definition of Parent
Because the statute separately lists ``parent'' in addition to
``caretaker relative'' in section 1902(xx)(9)(A)(ii)(III) of the Act,
we interpret ``parent'' to mean something different from a ``caretaker
relative.'' Section 1902(xx)(9)(A)(ii)(III) of the Act does not define
``parent,'' and parenthood is generally governed by State law.
Therefore, at new Sec. 435.554(a), we define for purposes of section
1902(xx)(9)(A)(ii)(III) of the Act to mean an individual with the legal
status of a mother or father, including by adoption, in accordance with
applicable State law, to another individual, which is consistent with
common definitions of the term.\48\ Consistent with other groups listed
in the exclusion established at section 1902(xx)(9)(A)(ii)(III) of the
Act, the parent must provide some level of care to the dependent child
or disabled individual for whom they are a parent. For example, an
estranged parent without a relationship with their child would not be
considered a specified excluded individual under the category of
parent. We recognize that many parents who live with and are primarily
responsible for their dependent child or adult disabled child will also
meet the definition in this regulation of ``caretaker relative.'' This
definition of parent provides for parents who do not meet the
definition of ``caretaker relative'' but who meet this definition of
``parent'' to be considered a specified excluded individual.
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\48\ Black's Law Dictionary (12th ed. 2024) s.v. ``Parent,''
accessed May 1, 2026.
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c. Definition of Guardian
Section 1902(xx)(9)(A)(ii)(III) of the Act also separately lists a
``guardian,'' which is not defined under section 1902(xx) of the Act or
defined elsewhere in the Act or CMS regulations. At Sec. 435.554(a),
we define ``guardian'' for purposes of section 1902(xx)(9)(A)(ii)(III)
of the Act to mean an adult appointed by a court to care for and make
personal decisions on behalf of an individual who cannot care for
themselves, which is consistent with the common meaning of the
term.\49\
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\49\ Merriam-Webster Dictionary Online, s.v. ``Guardian,''
accessed March 21, 2026, https://www.merriam-webster.com/dictionary/guardian.
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Because guardianship is governed by State law, we considered how
other Federal agencies refer to or define guardianship when developing
our definition. The Department of Justice (DOJ) describes guardianship
as the appointment by a court of a person or entity to make personal,
property decisions, or both for an individual whom the court finds
cannot make decisions for themselves.\50\ DOJ also explains that each
State has its own set of guardianship laws, and terminology may
vary.\51\
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\50\ ``Guardianship'' U.S. Department of Justice, accessed on
March 3, 2026. https://www.justice.gov/elderjustice/guardianship.
\51\ ``Guardianship: Key Concepts and Resources.'' U.S.
Department of Justice, last modified on February 18, 2026. https://www.justice.gov/elderjustice/guardianship-key-concepts-and-
resources.
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In the definition of ``guardian'' we establish in Sec. 435.554(a),
an individual has the legal status of a ``guardian'' when the
individual is appointed by a court. DOJ's description also refers to
personal and/or financial responsibilities. For the definition
established at Sec. 435.554(a), we specify that a guardian has been
appointed by a court to care for and make personal decisions for an
individual who cannot care for themselves. We believe that guardianship
as it relates to the responsibility for another person's care, rather
than financial responsibilities, is more aligned with the purposes of
the exclusion.
d. Definition of Family Caregiver
Section 1902(xx)(9)(A)(ii)(III) of the Act includes a ``family
caregiver (as defined in section 2 of the RAISE Family Caregivers Act)
of a dependent child 13 years of age and under or a disabled
individual'' as a specified excluded individual.
The RAISE Family Caregivers Act directed the Secretary of the U.S.
Department of Health and Human Services (HHS) to develop and make
[[Page 33368]]
publicly available a family caregiving strategy that identified
recommended actions for recognizing and supporting family caregivers.
To guide the development of this strategy, Section 2 of the RAISE
Family Caregivers Act defined ``family caregiver'' as an adult family
member or other individual who has a significant relationship with, and
who provides a broad range of assistance to, an individual with a
chronic or other health condition, disability, or functional
limitation. This definition encompasses a broad range of caregiver
relationships and assistance provided to capture the full landscape of
caregiving in the U.S. to inform the national caregiving strategy.
Section 1902(xx)(9)(A)(ii)(III) of the Act requires CMS to use the
RAISE Family Caregivers Act definition of family caregiver when
determining whether an individual qualifies as a specified excluded
individual, but it also limits care recipients to ``a dependent child
13 years of age and under or a disabled individual'' (both of which are
defined later in this section). Because the care recipients specified
in section 1902(xx)(9)(A)(ii)(III) of the Act differ from those
referenced in the RAISE Family Caregivers Act definition, it is
necessary to establish a definition of ``family caregiver'' for
purposes of identifying specified excluded individuals that
incorporates applicable components of the RAISE Family Caregivers Act
definition while aligning with the care recipients specified in
1902(xx)(9)(A)(ii)(III) of the Act. As such, at new Sec. 435.554(a),
we define family caregiver as an adult family member or other
individual who has a significant relationship with, and who provides
care within a broad range of assistance to, a dependent child or a
disabled individual. This definition of family caregiver largely aligns
with the RAISE Family Caregivers Act definition but includes
modifications to support implementation of section
1902(xx)(9)(A)(ii)(III) of the Act, as further discussed below.
We are generally incorporating the significant relationship and
activity-based components of the RAISE Family Caregivers Act definition
into the definition of family caregiver at Sec. 435.554(a),
recognizing that a family caregiver is not limited to legally
recognized relatives or members of the same household and that
providing a ``broad range of assistance'' (as specified in the RAISE
Family Caregivers Act definition) to an individual may consist of any
number of activities necessitated by individual health status. However,
the RAISE Family Caregivers Act definition encompasses caregiving for a
broad range of individuals including those with a chronic health
condition, disability, or functional limitation while section
1902(xx)(9)(A)(ii)(III) of the Act expressly limits the exclusion to
family caregivers ``of a dependent child age 13 years and under or a
disabled individual.'' We do not interpret the statutory cross-
reference to the RAISE Family Caregivers Act definition of family
caregiver in section 1902(xx)(9)(A)(ii)(III) of the Act as authorizing
expansion of the community engagement exclusion beyond the care
recipient populations expressly specified in that section of the Act.
In addition, because ``a dependent child 13 years of age and under'' is
specified in section 1902(xx)(9)(A)(ii)(III) but is not referenced in
the RAISE Family Caregivers Act definition, we are adding this cohort
of individual to the set of care recipients included in our definition
of family caregiver at Sec. 435.554(a).
Together, these modifications appropriately harmonize the RAISE
Family Caregivers Act definition of family caregiver with the scope of
care recipients specified at section 1902(xx)(9)(A)(ii)(III) of the Act
and ensure that the exclusion is applied only to family caregivers who
provide assistance to a dependent child or a disabled individual.
(Notably, as outlined further in this section, there is no upper age
limit for the ``disabled individual'' referenced in section
1902(xx)(9)(A)(ii)(III) of the Act, meaning that individuals of any age
with a disability would qualify under that term.)
Additionally, to reflect the varied and individualized nature of
caregiving arrangements, we opted to modify the RAISE Family Caregivers
Act definition slightly in Sec. 435.554(a) to refer to ``care within a
broad range of assistance'' to ensure that States do not require that a
family caregiver provide multiple forms of assistance to a dependent
child or a disabled individual to qualify as a specified excluded
individual. For additional details about the criteria a family
caregiver must meet to qualify as a specific excluded individual, see
section II.E.3.h. of this IFC.
e. Definition of Dependent Child
Section 1902(xx)(9)(A)(ii)(III) of the Act provides an exclusion
from the community engagement requirement for an individual who is a
parent, guardian, caretaker relative, or family caregiver of a
``dependent child 13 years of age and under.'' In Sec. 435.554(a), we
define dependent child to mean a child 13 years of age or under who
relies on another individual for care.
``Dependent child'' already has a specific Medicaid definition; in
developing definitions for this community engagement exclusion, we
considered whether it is appropriate to apply the existing definition
of dependent child, and decided it is not, for the reasons discussed
below.
In 2012, we established a definition of a ``dependent child'' in
Sec. 435.4,\52\ noting that our definition was grounded in section
1931 of the Act. (``Consistent with section 1931 of the Act, we propose
Medicaid definitions of `caretaker relative' and `dependent child' at
Sec. 435.4'').\53\ In implementing the mandate under subsections (a)
and (b) of section 1931 of the Act to apply the eligibility
requirements of the former AFDC program (as it existed on July 16,
1996) to low-income families, the definition of ``dependent child'' in
Sec. 435.4 incorporates each State's choice with regard to the AFDC
``deprivation'' requirement. A dependent child under Sec. 435.4 must
be ``deprived of parental support by reason of the death, absence from
the home, physical or mental incapacity, or unemployment of at least
one parent, unless the State has elected in its State plan to eliminate
such deprivation requirement.'' When we implemented the final rule
defining ``caretaker relative'' in 2012, we noted that many States had
elected to eliminate the deprivation requirement from their definition
of ``dependent child,'' applying only an age standard to the term. In
addition, section 1902(xx)(9)(A)(ii)(III) of the Act provides an
exclusion from the community engagement requirement for an individual
who is a parent of a dependent child 13 years of age and under, which
is in conflict with the deprivation requirement. Because section
1902(xx)(9)(A)(ii)(III) of the Act does not refer to section 1931 of
the Act and is in conflict with the deprivation requirement in Sec.
435.4, and because most States have eliminated the deprivation
requirement, we decided against adopting the existing definition of
dependent child at Sec. 435.4 for purposes of section
1902(xx)(9)(A)(ii)(III) of the Act.
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\52\ Medicaid Program; Eligibility Changes Under the Affordable
Care Act of 2010. 77 FR 17144 (March 23, 2012). https://www.federalregister.gov/d/2012-6560.
\53\ Medicaid Program; Eligibility Changes Under the Affordable
Care Act of 2010. 76 FR 51148 (August 17, 2011). https://www.federalregister.gov/d/2011-20756.
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In establishing a definition of dependent child for purposes of
exclusion from the community
[[Page 33369]]
engagement requirement, we also considered how ``dependent'' is defined
as it relates to the work requirements in the SNAP program. Notably,
the WFTC legislation made changes to the exemptions for the SNAP time
limit work requirement that align with the exclusion established at
section 1902(xx)(9)(A)(ii)(III) of the Act. Section 10102 of the WFTC
legislation amended section 6(o) of the Food and Nutrition Act of 2008
to apply an exemption from the time limit work requirement to ``a
parent or other member of a household with responsibility for a
dependent child under 14 years of age'' (the exemption previously
applied to those responsible for a dependent under 18 years of age).
Unlike the existing definition in Medicaid, SNAP does not apply a
deprivation requirement for a child 13 years of age and under to be
considered a dependent.
While we determined it was not appropriate to apply the deprivation
requirement to the new definition of ``dependent child'' at Sec.
435.554(a) for the reasons we discuss in the preceding paragraphs, we
recognize that dependent children still rely on adults for care (for
example, housing, food, medical care, education, etc.). Therefore, we
include a child's reliance on another individual for care in the new
definition. Because most States have removed their deprivation
requirement for dependent children under Medicaid and to align policy
with SNAP (as was done in the WFTC legislation that aligned the age
limits for dependent children for community engagement exclusions in
Medicaid and time-limit work requirement exemptions in SNAP), we
establish a new definition of ``dependent child'' at Sec. 435.554(a)
to mean a child 13 years of age or under who relies on another
individual for care, and only for the purpose of determining if a
person is a specified excluded individual under section
1902(xx)(9)(A)(ii)(III) of the Act.
f. Definition of Disabled Individual
Section 1902(xx)(9)(A)(ii)(III) of the Act provides an exclusion
from the community engagement requirement for an individual who is a
parent, guardian, caretaker relative, or family caregiver of a disabled
individual. The statute does not define the term ``disabled'' or
``disabled individual,'' nor does it include a cross-reference to an
existing statutory or regulatory definition of disability. Instead,
Section 1902(xx)(9)(A)(ii)(III) of the Act focuses on the caregiver and
that person's relationship to the care recipient, not on whether the
care recipient has previously been determined disabled by the Social
Security Administration (SSA) or been identified as disabled within the
Medicaid program or by other eligibility criteria established by
Federal law.
In developing a regulatory definition, we considered several
possible approaches. First, we considered adopting the SSA definition
of disability used for purposes of Supplemental Security Income (SSI)
and Social Security Disability Insurance (SSDI). That definition
generally requires that a person be unable to engage in substantial
gainful activity due to a medically determinable impairment expected to
last at least 12 months or result in death. We determined that this
standard is closely tied to cash assistance eligibility and work
incapacity determinations and may not be well aligned with the
structure or purpose of this caregiver exclusion. Section
1902(xx)(9)(A)(ii)(III) of the Act does not require that the disabled
individual be unable to work, nor does it condition the exclusion on
the disabled individual's receipt of SSI or SSDI. Limiting the
exclusion to disabled individuals with a formal SSA disability
determination could exclude individuals who provide assistance to
disabled individuals with a broad range of functional limitations whom
the statute appears to encompass.
Second, we considered other disability definitions used in Federal
statutes and programs, including the definition of ``individual with a
disability'' under the Rehabilitation Act of 1973 and the Americans
with Disabilities Act (ADA). These statutes are generally aligned in
that an individual has a disability if the individual has a physical or
mental impairment that substantially limits one or more major life
activities, has a record of such an impairment, or is regarded as
having such an impairment. These definitions are not tied to work
incapacity or eligibility for cash assistance and instead focus on
functional limitation. The ADA definition is also a well-established
Federal standard that applies across a wide range of programs and
contexts and is familiar to States and interested parties.
Finally, we considered permitting States to define ``disabled
individual'' for purposes of the exclusion. However, the absence of a
Federal standard could lead to inconsistent application across States
and uncertainty for beneficiaries.
After considering these options, we are adopting a definition of
disabled individual at new Sec. 435.554(a) that aligns with the ADA
definition of ``disability'' at 28 CFR 35.108. Under this definition,
disabled individual means an individual who meets the ADA definition of
disability at 28 CFR 35.108. An individual need not be eligible for
Medicaid or other Federal programs on the basis of a disability to be a
disabled individual under this definition.
As previously stated, section 1902(xx)(9)(A)(ii)(III) of the Act
does not specify an upper age limit when referencing a ``disabled
individual.'' This term could, therefore, include an older adult who
requires assistance of varying scope in performing activities of daily
living (ADLs) (bathing, dressing, toileting, eating, etc.) or other
activities that keep older adults living at home and participating in
community life. We encourage States to ensure that educational
materials on this community engagement exclusion are sufficiently clear
so that individuals providing supports to older adults understand that
they could qualify as a specified excluded individual through the
family caregiver component at section 1902(xx)(9)(A)(ii)(III) of the
Act. We also acknowledge that there is no lower age limit to ``disabled
individual,'' meaning that the term could apply to individuals from
birth, although we note that there is overlap through the age of 13
with references in this same exclusion category to ``dependent child 13
years of age and under.''
g. Applicability of Parent, Caretaker Relative, Guardian, or Family
Caregiver Exclusion to Multiple Individuals in a Residence
Interested parties requested that we explain how the exclusion
under section 1902(xx)(9)(A)(ii)(III) of the Act will apply in homes
with multiple individuals who may be a parent, caretaker relative,
guardian, or family caregiver. We considered limiting the exclusion to
one person per residence or allowing multiple individuals who reside
together to qualify for the exclusion. In Medicaid, there is no
precedent for limiting the number of individuals who reside together
and are eligible for an exclusion to the application of a policy (for
example, cost sharing exemptions, outlined at Sec. 447.56), as most
existing exclusions/exceptions in Medicaid are established based on an
individual's eligibility factors, not (like this exclusion) their
relation to another individual. Further, the statutory language at
section 1902(xx)(9)(A)(ii)(III) does not specify that to qualify as a
specified excluded individual there must be a one-to-one ratio of the
individual to the person receiving care.
[[Page 33370]]
We also considered how FNS within USDA implements similar
exemptions for SNAP work requirements. The time limit work requirement
under SNAP exempts individuals who have someone under age 14 in their
SNAP household.\54\ In SNAP, a household is defined as everyone who
lives together and purchases and prepares meals together.\55\ Although
the SNAP terminology for a household is slightly different from the
Medicaid terminology we describe in this section, FNS does not limit
these exemptions from SNAP work requirements to a single person in a
household. Instead, the time limit exemption applies to everyone living
in the SNAP household with someone 13 years of age and under. This
approach does not require SNAP programs to determine if there are other
caregivers caring for the same dependent child when determining
exemptions from the time limit work requirement.
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\54\ SNAP Work Requirements. U.S. Department of Agriculture Food
and Nutrition Services, last updated August 29, 2025, https://www.fns.usda.gov/snap/work-requirements.
\55\ 7 CFR 273.1.
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We acknowledge that multiple individuals who could qualify for this
exclusion may reside together. Consistent with our interpretation of
the statute and existing SNAP policy, we are promulgating at new Sec.
435.554(c)(3)(ii) a policy that allows multiple parents, caretaker
relatives, guardians, and/or family caregivers in a single residence to
qualify for the exclusion, provided that they meet the definitions and
criteria discussed in this section. CMS believes that this policy
closely aligns with what is allowed under SNAP and is consistent with
section 1902(xx) of the Act, while minimizing administrative burden for
States and beneficiaries.
h. Criteria for the Family Caregiver Exclusion
We interpret the inclusion of family caregivers as a component of
the exclusions at section 1902(xx)(9)(A)(ii)(III) of the Act as
recognizing not only the critical role family caregivers play, but also
that these caregiving responsibilities, when regularly occurring and
not solely incidental in nature, meaningfully limit a family
caregiver's ability to participate in work or other community
engagement activities. This interpretation is supported by the cross-
reference to the RAISE Family Caregivers Act's definition of family
caregiver, which emphasizes the significant relationship between the
caregiver and the care recipient and recognizes that caregiving
involves the provision of a broad range of assistance.
In implementing this provision, we considered whether to adopt a
specific, uniform definition of ``significant relationship'' but opted
not to do so as we recognize that caregiving relationships and the
assistance provided varies widely. However, to give practical effect to
the significant relationship element of the RAISE Family Caregivers Act
definition of family caregiver while avoiding an overbroad application
of the exclusion, we are establishing criteria to ensure the caregiving
relationship is significant enough to justify exclusion from the
community engagement requirement. States must apply these criteria to
identify caregiving relationships that are sufficiently significant to
qualify the family caregiver as a specified excluded individual through
section 1902(xx)(9)(A)(ii)(III) of the Act. These criteria do not
redefine who a family caregiver is but instead should be applied when
States determine if an individual who meets the family caregiver
definition at Sec. 435.554(a) qualifies as a specified excluded
individual. These criteria apply to all family caregivers regardless of
whether the individual is a paid or an unpaid family caregiver, as the
purpose of the exclusion is to recognize the time and responsibility
associated with being a family caregiver, regardless of compensation.
To simplify State administration and reduce beneficiary confusion,
the criteria that pertain to a ``relative,'' as described below, are
structured to align with the relationships recognized under the
caretaker relative definition as discussed earlier in this section and
defined at Sec. 435.554(a). Given that section 1902(xx)(9)(A)(ii)(III)
of the Act lists family caregivers and caretaker relatives as separate
and distinct groups subject to the exclusion, we are not requiring that
a family caregiver reside with or assume primary responsibility for the
care of the dependent child or disabled individual. This reflects the
varied and individualized nature of family caregiving arrangements and
ensures the family caregiver exclusion operates separately and apart
from the caretaker relative exclusion while allowing States to build on
existing administrative infrastructure and relationship determinations.
As implemented at a new Sec. 435.554(c)(3)(i), an individual who
is a family caregiver as defined at Sec. 435.554(a) is a specified
excluded individual if he or she meets one of the following criteria:
1. The individual primarily resides with a dependent child or
disabled individual, as these terms are defined earlier, for whom he or
she provides assistance that occurs on a regular basis and is not
solely incidental in nature;
2. The individual is a relative (as specified in the ``caretaker
relative'' definition at Sec. 435.554(a) without regard to the
requirements to live with and to assume primary responsibility) of a
dependent child or disabled individual, as these terms are defined
earlier, for whom he or she provides assistance that occurs on a
regular basis and is not solely incidental in nature, and with whom he
or she does not reside; or
3. The individual does not reside with and is not a relative (as
specified in the ``caretaker relative'' definition at Sec. 435.554(a)
without regard to the requirements to live with and to assume primary
responsibility) of a dependent child or disabled individual, as these
terms are defined earlier, for whom he or she provides not less than 80
hours of assistance that is not solely incidental in nature per month.
We view shared residence with the care recipient and familial
relationship to the care recipient as consistent with ongoing
caregiving responsibility and as strong evidence of the ``significant
relationship'' specified in the RAISE Family Caregivers Act definition
of family caregiver. According to Pew Research Center, 10 percent of
all U.S. adults say they are a caregiver for a parent age 65 or
older.\56\ The full extent of the care provided by family caregivers to
individuals with whom they live or to whom they are related is
difficult to fully quantify, as often this care and support is
unrecognized and unpaid. Family caregivers who live with the recipient
of that care are more likely to be involved in daily, more intensive,
round-the-clock care, assistance, or supervision. Relatives of care
recipients are also often called upon to provide extensive support at
all hours, particularly if they live close to the care recipient.
Caring for relatives occurs both within and across households, and with
more older adults choosing to remain in their own homes and
communities, the prevalence of long-distance caregivers has increased
to approximately 15 percent (5 to 7 million) of all family
caregivers.\57\
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\56\ Parker, K. ``Family Caregiving in an Aging America.'' Pew
Research Center, February 2026. https://www.pewresearch.org/wp-content/uploads/sites/20/2026/02/ST_2026.2.26_family-caregivers_report.pdf.
\57\ Sadick, B. ``How to Provide Long-Distance Caregiving.''
U.S. News, June 3, 2025. https://health.usnews.com/senior-care/articles/how-to-provide-long-distance-caregiving.
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[[Page 33371]]
For these reasons, we believe that co-residence and familial
relationship are sufficient indicators to establish an ongoing
significant caregiving relationship, particularly given the often
personal and intense nature of the care provided by family caregivers
who live with or are related to the care recipient, the regularly
occurring provision of that care, and the impact of that care to the
care recipient. As such, family caregivers who live with or are related
to a dependent child or a disabled individual for whom they provide
assistance that occurs on a regular basis and is not solely incidental
in nature are not required to demonstrate provision of a minimum number
of caregiving hours under this regulation. As described in section
II.I.7.c. of this IFC, States are required to obtain sufficient
information, including documentation when applicable, to verify an
individual's status as a specified excluded individual through the
family caregiver component of section 1902(xx)(9)(A)(ii)(III) of the
Act.
We also recognize that some individuals provide caregiving supports
to non-relatives with whom they do not reside. While the majority of
family caregivers provide care for a relative, 11 percent care for a
friend, neighbor, or other nonrelative.\58\ The intensity of care
provided in these situations varies widely from limited, episodic, or
incidental assistance to substantial, ongoing hands-on support. While
we recognize that even limited assistance may help an individual with a
disability remain in their own home, as noted at the beginning of this
section, we interpret the inclusion of family caregivers as a component
of the exclusions at section 1902(xx)(9)(A)(ii)(III) of the Act as
recognizing individuals whose caregiving responsibilities meaningfully
limit their ability to participate in work or other community
engagement activities. As such, we believe it is necessary to establish
a clear and practical standard for family caregivers who do not live
with, and are not related to, the recipient of the care he or she
provides.
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\58\ AARP and National Alliance for Caregiving. (2025).
``Caregiving in the U.S.'' https://www.aarp.org/content/dam/aarp/ppi/topics/ltss/family-caregiving/caregiving-in-us-2025.doi.10.26419-2fppi.00373.001.pdf.
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The 80-hour per month threshold reflects a sustained and regular
commitment of time providing care, roughly equivalent to an average of
20 hours per week. This level of caregiving demonstrates a significant
relationship with the care recipient and indicates an active caregiving
role comparable to part-time employment, job training, or other
community activities that would otherwise satisfy the community
engagement requirement. The threshold also serves a program integrity
function by reducing the likelihood that an individual will qualify as
a specified excluded individual under the family caregiver component at
section 1902(xx)(9)(A)(ii)(III) of the Act based on informal or
sporadic assistance, helping ensure the exclusion is reserved for
individuals with caregiving responsibilities that are significant
enough to justify exclusion from the community engagement requirement.
We also considered State administration of these requirements, and
the 80-hour threshold also provides a clear, objective benchmark that
States can administer consistently. Without a defined minimum threshold
of caregiving, States would be required to make subjective judgements
about the sufficiency of caregiving activities, increasing the risk of
inconsistent decisions and uneven application across States. This
standard reduces subjectivity, supports more uniform implementation
across States, and promotes more predictable outcomes for States and
beneficiaries.
We recognize that a person who meets the family caregiver
definition in Sec. 435.554(a) might provide significant and meaningful
caregiving to a dependent child or a disabled individual to whom he or
she is neither related nor resides with, but that he or she might not
qualify as a specified excluded individual because the hours of
assistance provided do not reach the 80-hour per month threshold. Such
a person would be an applicable individual unless eligible for other
exclusions. However, as noted earlier in section II.C.1. of this IFC,
the hours of assistance provided by such an individual would count as
unpaid work under Sec. 435.552(b) and the individual would only need
to engage in additional activities sufficient to reach the 80-hour
threshold to comply with the community engagement requirement. For
example, if an individual provides 55 hours per month of assistance to
a non-relative who he or she does not live with, those 55 hours would
count towards compliance with the community engagement requirement, and
the family caregiver would need 25 additional hours a month of the
activities listed in section 1902(xx)(2) of the Act, such as community
service or participation in an educational program, to demonstrate
compliance.
To summarize, we are implementing at new Sec. 435.554(c)(3)(i) the
family caregiver component of the exclusion at section
1902(xx)(9)(A)(ii)(III) of the Act by considering the following to be
specified excluded individuals: individuals who meet the definition of
a family caregiver at Sec. 435.554(a) who reside with or are a
relative (as specified in the caretaker relative definition at Sec.
435.554(a) without regard to the requirements to live with or to assume
primary responsibility) of a dependent child or a disabled individual
for whom he or she provides assistance that occurs on a regular basis
and is not solely incidental in nature, or who provide not less than 80
hours of assistance that is not solely incidental in nature per month
to a dependent child or a disabled individual to whom they are not
related and with whom they do not reside. We believe this approach
allows us to give practical effect to the ``significant relationship''
element of the RAISE Family Caregivers Act without constraining States
to a single definition and that the criteria are reliable indicators
that a caregiving relationship is ongoing, meaningful, and not merely
incidental or episodic. Co-residency and familial relationship
generally reflect an inherent level of connection and responsibility,
while the minimum hours threshold for family caregivers who do not live
with and are not related to a dependent child or disabled individual
ensures that the family caregiver exclusion applies where there is a
demonstrable and sustained caregiving role. The criteria also provide
clear standards while recognizing and preserving the varied and
individualized nature of caregiving arrangements.
Finally, as States implement the family caregiver component of the
exclusion at section 1902(xx)(9)(A)(ii)(III) of the Act, they must
ensure that they are conducting outreach consistent with the Medicaid
outreach requirements at Sec. 435.561. We also encourage States to
consider general public outreach efforts to complement the required
outreach so the public can clearly understand which individuals may
qualify as a specified excluded individual under the family caregiver
component. Individuals who are family caregivers may not realize that
they qualify for an exclusion to the community engagement requirement
and will need clear, consumer friendly information to help them
understand whether they are excluded. For more information on Medicaid
outreach requirements, see Sec. 435.561 and the related discussion in
section II.L. of this IFC.
[[Page 33372]]
4. Veteran With a Disability Rated as Total
Section 1902(xx)(9)(A)(ii)(IV) of the Act creates an exclusion for
veterans with a total disability rating. The statute references 38
U.S.C. 1155, which provides VA the authority to create a schedule for
rating disabilities. VA assigns disability ratings based on the
severity of a veteran's service-connected condition(s), which is stated
as a percentage. For purposes of community engagement, a total, or 100
percent, disability rating from VA is necessary to qualify for the
exclusion. VA may assign total disability ratings that are permanent or
temporary; either would qualify an individual for the exclusion, if
rated at 100 percent. New Sec. 435.554(c)(4) adopts this ``veteran
with a disability rated as total'' definition for purposes of the
community engagement exclusion at section 1902(xx)(9)(A)(ii)(IV) of the
Act.
Some veterans receive total disability based on individual
unemployability (TDIU), which allows veterans with service-connected
disabilities to receive 100 percent compensation if they cannot secure
or maintain ``substantial gainful employment,'' even if their combined
rating is below 100 percent. These veterans, due to receipt of 100
percent compensation, must be treated by States in the same manner as
all other veterans who have a combined disability rating of 100
percent, thus meeting the exclusion.
Some veterans will receive a permanent and total (P&T) disability
which means that a veteran has a 100 percent (total) disability rating,
and their condition is considered static (permanent) with no
expectation of improvement. While a veteran only needs a total (100
percent) VA disability rating to meet the exclusion, States are not
permitted to reverify a permanent disability determination. Conversely,
temporary disabilities assigned by the VA, which are sometimes time-
limited or are expected to improve over time, will require
reverification at least once every 12 months. For more information
about verification requirements and recommended data sources for
veterans with total disability ratings, see section II.I.7.d. of this
IFC.
5. An Individual Who is Medically Frail or Otherwise has Special
Medical Needs
a. Background
The definition of a specified excluded individual at section
1902(xx)(9)(A)(ii)(V) of the Act includes an individual who is
medically frail or otherwise has special medical needs (henceforth
referred to as medically frail). Specifically, section
1902(xx)(9)(A)(ii)(V) of the Act provides that specified excluded
individuals must include an individual, ``(V) who is medically frail or
otherwise has special medical needs (as defined by the Secretary),
including an individual--(aa) who is blind or disabled (as defined in
section 1614 of the Act); (bb) with a substance use disorder (SUD);
(cc) with a disabling mental disorder; (dd) with a physical,
intellectual or developmental disability that significantly impairs
their ability to perform 1 or more ADLs; or (ee) with a serious or
complex medical condition.'' We are defining medically frail
individuals as individuals who meet one or more of the five categories
identified at section 1902(xx)(9)(A)(ii)(V) of the Act. As described in
more detail in section II.E.5.b. of this IFC, at Sec. 435.554(c)(5) we
define medically frail individuals for the purposes of the community
engagement exclusion.
The community engagement requirement has the potential to empower
Medicaid beneficiaries through employment, education, or volunteer
service so they can escape isolation and dependency, build confidence,
achieve self-sufficiency and prosperity, and improve health. However,
this mandatory exclusion from the community engagement requirement
protects access to necessary health care services for individuals who
are medically frail and may have physical or behavioral health
conditions that significantly impair their ability to consistently work
or participate in other community engagement activities defined at
Sec. 435.552.
Section 1937(a)(2)(B)(vi) of the Act exempts individuals who are
medically frail, including individuals eligible under the State plan
adult group, from mandatory enrollment in a benchmark or benchmark-
equivalent benefit package (which we refer to as an alternative benefit
plan (ABP)), that does not offer all services at the same or higher
amount, duration, and scope covered under the State's traditional
Medicaid State plan. We are not adopting the ABP medically frail
definition for purposes of the community engagement medically frail
exclusion for the reasons stated in this section of the preamble. While
the medically frail exclusions for purposes of ABP and community
engagement both apply to individuals eligible under the adult group,
they are distinct from each other in that they are in two different
sections of the statute that apply to different aspects of the Medicaid
program. The medically frail exclusion for the ABP only impacts an
individual's Medicaid benefit package selection, while the medically
frail exclusion under the community engagement requirement determines
if an individual needs to demonstrate community engagement to maintain
Medicaid eligibility.
Section 1937(a)(2)(B)(vi) of the Act provides that individuals who
are medically frail should be identified in accordance with regulations
issued by the Secretary. That regulation, Sec. 440.315(f), provides
that States must identify individuals who are medically frail for
purposes of the ABP requirements, and that the State's definition for
that purpose must at least include those individuals described in Sec.
438.50(d)(3), individuals with disabling mental disorders (including
children with serious emotional disturbances and adults with serious
mental illness), individuals with chronic SUDs, individuals with
serious and complex medical conditions, individuals with a physical,
intellectual or developmental disability that significantly impairs
their ability to perform one or more ADLs, or individuals with a
disability determination based on Social Security criteria or in States
that apply more restrictive criteria than the SSI \59\ program, the
State plan criteria.\60\
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\60\ The community engagement requirement does not apply to
children under the age of 19 and therefore is not applicable to the
individuals described in Sec. 438.50(d)(3) or children with serious
emotional disturbances. The regulation at Sec. 438.50(d)(3)
includes children under the age of 19 eligible for SSI under Title
XVI of the Act; eligible under section 1902(e)(3) of the Act; in
foster care or other out-of-home placement; receiving foster care or
adoption assistance; or receiving services through a family-
centered, community-based, coordinated care system that receives
grant funds under section 501(a)(1)(D) of Title V of the Act, and is
defined by the State in terms of either program participation or
special health care needs.
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The ABP definition of medically frail at Sec. 440.315(f) is very
similar to the community engagement medically frail definition at
section 1902(xx)(9)(A)(ii)(V) of the Act. However, unlike the
definition at Sec. 440.315(f), the community engagement medically
frail definition specifically includes blind individuals; uses the term
``or'' instead of ``and'' for individuals with serious or complex
medical conditions; does not include children under the age of 19
described at Sec. 438.50(d)(3); does not make reference to children
with serious emotional disturbances and adults with serious mental
illness to further describe individuals with disabling mental
disorders; does not use the term ``chronic'' for individuals with SUDs;
and does not include individuals with a disability determination based
on
[[Page 33373]]
more restrictive criteria than the SSI program under a State plan.
We are not changing the ABP definition of medically frail and are
specifying at Sec. 435.554(c)(5) a separate but similar definition of
medically frail for community engagement purposes in this IFC. States
continue to have the discretion to include categories of individuals
who are not described at Sec. 440.315(f) in their definition of
medically frail for purposes of benefit package selection.
Section 1902(xx)(9)(A)(ii)(V) of the Act provides the Secretary
with the authority to define the term medically frail for community
engagement purposes (as long as the definition includes the five
categories specified at section 1902(xx)(9)(A)(ii)(V) of the Act). We
are not using our authority at section 1902(xx)(9)(A)(ii)(V) of the Act
to add additional categories to the definition of medically frail, as
we have not identified any other populations that we believe could
reasonably be considered medically frail outside of the five categories
identified at section 1902(xx)(9)(A)(ii)(V) of the Act.
Further, unlike medical frailty implemented in ABPs, we are not
providing States with the option to add additional categories of people
to the definition of medical frailty for community engagement purposes.
We considered doing so; however, as we state in the prior paragraph, we
are not aware of a category of people that could not reasonably fall
under one of the five categories identified at section
1902(xx)(9)(A)(ii)(V) of the Act. We are concerned that there may be
more of an incentive for some States to include individuals who would
not reasonably be considered medically frail, if we provided States
with the option to add additional categories of people to the community
engagement medically frail definition. For example, we do not believe
it would be reasonable for States to consider an individual who is
homeless as medically frail solely on the basis that the individual is
homeless, as that circumstance is not a medical condition. However,
individuals who are homeless may have a medical condition, such as an
SUD or disabling mental disorder, that could qualify them for the
medically frail exclusion. Furthermore, we believe that having a
standard medically frail definition provides States with a more
streamlined approach to medical frailty that will be easier to
implement. If we permitted States to add additional categories to the
definition of medically frail beyond those identified in the statute,
then we would need to establish a process for review and approval of
such categories, which would create burden for both CMS and States. We
therefore do not believe limiting the definition of medically frail for
community engagement purposes to the five categories identified in the
statute will lead to a meaningful difference in the number of
individuals who are subject to the community engagement requirement
that cannot also meet such requirements.
b. Medically Frail Definition
As noted in section II.E.5.a. of this IFC, consistent with our
statutory authority at section 1902(xx)(9)(A)(ii)(V) of the Act, we are
defining a medically frail individual at Sec. 435.554(c)(5) as an
individual whose physical, mental, or other behavioral health condition
significantly impairs the individual's ability to comply with the
community engagement requirement in this subpart and who is blind or
disabled (as defined at section 1614 of the Act); with an SUD; with a
disabling mental disorder; with a physical, intellectual, or
developmental disability that significantly impairs their ability to
perform one or more ADLs; or with a serious or complex medical
condition. Individuals only need to fit within one of these categories
to qualify for the medically frail exclusion to the community
engagement requirement.
The best reading of the statutory phrase ``medically frail or
otherwise has special medical needs'' is one that considers not only
the presence of a particular diagnosis or condition, but also the
extent to which the condition impairs an individual's ability to engage
in community engagement activities (including but not limited to work)
or otherwise comply with the statutory requirements in section 1902(xx)
of the Act. Reading the statute to require automatic classification as
medically frail or otherwise having special medical needs based solely
on diagnosis or condition would risk sweeping in individuals whose
conditions do not significantly impair their functional capacity,
meaning that they are able to perform 80 hours per month of qualifying
activities, and thus would fail to give full meaning to the term
``medically frail or who otherwise has special medical needs.'' The
phrase ``medically frail or who otherwise has special medical needs''
connotes diminished functional capacity that significantly impairs an
individual's ability to meet ordinary demands. In this context, the
relevant demand is meeting the community engagement requirement.
Accordingly, we interpret the statute to require consideration of the
severity of an individual's condition as relevant to whether that
individual is capable of meeting the community engagement requirement.
An individual who lacks the capacity to meet the community engagement
requirement may properly be determined to be medically frail or
otherwise to have special medical needs. But, if a person is able to
demonstrate community engagement by performing 80 hours per month of
qualifying community engagement activities, notwithstanding their
physical, mental, or other behavioral health condition, they would not
qualify as medically frail and would not be a specified excluded
individual.
The statute also expressly delegates definitional authority to the
Secretary by providing that individuals who are ``medically frail'' or
``otherwise ha[ve] special medical needs'' are those ``as defined by
the Secretary.'' This language demonstrates Congress's intent to afford
the Secretary discretion to establish standards governing the scope and
application of this term in the context of administering the statute.
Of note, section 1902(xx)(9)(A)(ii)(V), setting forth the exclusion for
individuals who are medically frail or otherwise have special medical
needs, is the only item in the statutory list of specified excluded
individual categories that includes this express grant of definitional
authority, which indicates that Congress specifically intended to
authorize the Secretary to place parameters around which individuals
will qualify for this exclusion.
Additionally, we are not aligning the definition of the medically
frail categories for an individual who is disabled; with a disabling
mental disorder; or with a physical, intellectual, or developmental
disability that significantly impairs their ability to perform one or
more ADL, with our definition of a disabled individual at Sec.
435.554(a) or the veteran disability standard we describe in section
II.E.4. of this IFC. We do not believe it would be appropriate to apply
these definitions to these medically frail exclusion categories as the
exclusion at section 1902(xx)(9)(A)(ii)(V)(aa) of the Act is expressly
tied to the definition of a disabled individual at section 1614 of the
Act, and it would be difficult to set one standard that appropriately
defines individuals with disabling mental disorders or with a physical,
intellectual, or developmental disability that significantly impairs
their ability to perform one or more ADLs.
For the first medically frail exclusion, we are specifying at Sec.
435.554(c)(5)(i)(A) that an individual who is blind or disabled (as
defined in section 1614 of the Act) and who otherwise meets the
[[Page 33374]]
criteria at Sec. 435.554(c)(5)(i) is medically frail, consistent with
section 1902(xx)(9)(A)(ii)(V)(aa) of the Act. Under section 1614 of the
Act, a person is blind if they have central visual acuity of 20/200 or
less in the better eye with use of a correcting lens. Under section
1614 of the Act, a person is disabled if they are unable to engage in
any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to
result in death or which has lasted or can be expected to last for a
continuous period of not less than twelve months.
For the second medically frail exclusion, we are specifying at
Sec. 435.554(c)(5)(i)(B) that an individual with an SUD and who
otherwise meets the criteria at Sec. 435.554(c)(5)(i) is medically
frail, consistent with section 1902(xx)(9)(A)(ii)(V)(bb) of the Act,
excluding individuals who are in stable recovery (which means, in
recovery for 5 or more years). As we describe in more detail in the
paragraph after next, we are excluding individuals in stable recovery
from this definition since their SUDs are unlikely to significantly
impair their ability to comply with the community engagement
requirement. We decline to further define the term SUD in regulation,
with the exception of excluding individuals who are in stable recovery,
as there are numerous definitions of an SUD. While we are not further
defining the term SUD, except for excluding individuals who are in
stable recovery, it is our understanding that the Diagnostic and
Statistical Manual of Mental Disorders (DSM-5) \61\ and International
Classification of Diseases and Related Health Problems, Tenth Revision
(ICD-10) \62\ are most commonly used to define and classify SUDs, and
States may find the DSM-5 and ICD-10 to be useful resources for setting
criteria to identify individuals with SUDs. We also believe it would be
reasonable for States to consider certain conditions as SUDs, including
alcohol use disorder, opioid use disorder, and stimulant use disorder
provided an individual's SUD significantly impairs their ability to
comply with the community engagement requirement. We note that this is
a list of examples, and not an exhaustive list.
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\61\ ``Diagnostic and Statistical Manual of Mental Disorders
(DSM-5-TR),'' American Psychiatric Association, accessed February
27, 2026, https://www.psychiatry.org/psychiatrists/practice/dsm.
\62\ ``International Statistical Classification of Diseases and
Related Health Problems 10th Revision,'' World Health Organization,
accessed February 27, 2026, https://icd.who.int/browse10/2019/en.
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SUDs are characterized by cognitive, behavioral, and physiological
symptoms indicating that an individual continues using a substance (for
example, alcohol, opioids, hallucinogens, etc.) despite significant
substance-related problems that impact the individual's life.\63\ In
addition, SUDs have different clinical levels: mild, moderate, and
severe. It is our understanding that under current clinical standards
SUDs are chronic diseases and that individuals in recovery are
considered to have an SUD.\64\ However, there are stages of recovery
that are generally based on the length of recovery: early recovery,
sustained recovery, and stable recovery. Generally, individuals in
early recovery have been in recovery for less than 12 months,
individuals in sustained recovery have been in recovery for 1 to less
than 5 years, and individuals in stable recovery have been in recovery
for 5 years or longer.\65\
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\63\ ``Treatment of Substance Use Disorders,'' Centers for
Disease Control and Prevention, last modified April 25, 2024,
https://www.cdc.gov/overdose-prevention/treatment/.
\64\ ``Treatment and Recovery,'' National Institute on Drug
Abuse, last modified July 2020, https://nida.nih.gov/publications/drugs-brains-behavior-science-addiction/treatment-recovery.
\65\ Frone MR, Chosewood LC, Osborne JC, and Howard JJ. (2022).
``Workplace Supported Recovery from Substance Use Disorders:
Defining the Construct, Developing a Model, and Proposing an Agenda
for Future Research.'' Occupational Health Science 6(4): 475-511.
https://doi.org/10.1007/s41542-022-00123-x.
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We interpret the statutory reference to this medically frail
category to apply to individuals with an SUD regardless of whether they
are in an active treatment program. We believe our interpretation is
supported by the statute, which does not include language limiting this
exclusion only to individuals in an active treatment program. We also
interpret the statutory reference to individuals with an SUD to include
individuals who are in recovery from an SUD, including individuals who
are in early or sustained recovery. However, we believe that it is
inappropriate to include individuals with an SUD who are in stable
recovery (which means individuals who are in recovery for 5 or more
years) in the medically frail exclusion. The risk of SUD recurrence for
an individual in stable recovery is approximately the same as the
general population.\66\ Therefore, we believe that such individuals are
better able to participate in community engagement activities than an
individual who is in active treatment or early or sustained recovery.
In addition, we believe that participating in community engagement
activities, such as employment, has the potential to help these
individuals maintain their recovery by helping them escape isolation
and dependency, build confidence, achieve self-sufficiency and
prosperity, and improve health. As noted in section II.E.5.a. and
preceding paragraphs in this section of this IFC, section
1902(xx)(9)(A)(ii)(V) of the Act provides the Secretary with the
authority to define an individual who is medically frail, so we believe
it is consistent with our statutory authority to exclude individuals
who are in stable recovery from the definition of an individual with an
SUD as we are defining the term. States must ensure that they have
reasonable processes and criteria in place for individuals to identify
themselves as meeting the SUD medically frail exclusion, including for
individuals who have a relapse.
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\66\ Ibid.
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We note that for community engagement purposes the medically frail
exclusion for individuals with an SUD is a distinct exclusion from the
exclusion at section 1902(xx)(9)(A)(ii)(VII) of the Act for individuals
participating in a drug addiction or alcoholic treatment and
rehabilitation program (as defined in section 3(h) of the Food and
Nutrition Act of 2008), described further in section II.E.7. of this
IFC. While we acknowledge that individuals participating in a drug
addiction or alcoholic treatment and rehabilitation program generally
have SUDs, as we stated in the previous paragraph, we interpret the
medically frail exclusion for individuals with SUDs at section
1902(xx)(9)(A)(ii)(V)(bb) of the Act as not limited to individuals in
an active treatment program.
For the third medically frail exclusion, we are specifying in our
regulation at Sec. 435.554(c)(5)(i)(C) that an individual with a
disabling mental disorder and who otherwise meets the criteria at Sec.
435.554(c)(5)(i) is medically frail, consistent with section
1902(xx)(9)(A)(ii)(V)(cc) of the Act. There are numerous definitions of
disabling mental disorders. The American Psychiatric Association
defines mental disorders as conditions that impact an individual's
thinking, emotion, or behavior and may impact an individual's
functioning.\67\ Further, a disabling mental disorder may significantly
impair an individual's ability to complete major life activities, such
as their ability to work or
[[Page 33375]]
volunteer \68\ and can be either permanent or temporary.\69\
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\67\ ``What is Mental Illness?,'' American Psychiatric
Association, last modified July 2025, https://www.psychiatry.org/patients-families/what-is-mental-illness.
\68\ Ibid.
\69\ Ibid.
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The statute specifically requires the mental disorder to be
disabling, so an individual with a non-disabling mental disorder would
not qualify for this exclusion. We decline to further define disabling
mental disorder in our regulation, as it would be incredibly difficult
to set one standard that appropriately defines individuals with
disabling mental disorders, and we instead direct States to consider
whether the disabling mental disorder significantly impairs an
individual's ability to comply with the community engagement
requirement. However, it is our understanding that the
Interdepartmental Serious Mental Illness Coordinating Committee
(ISMICC), DSM-5, and ICD-10 criteria for serious mental illness (SMIs)
are commonly used to define and classify disabling mental disorders,
and States may find the ISMICC, DSM-5, and ICD-10 to be useful
resources for setting criteria to identify individuals with disabling
mental disorders. We also believe it would be reasonable for States to
consider certain conditions, when such conditions are disabling and
significantly impair an individual's ability to comply with the
community engagement requirement, as disabling mental disorders,
including schizophrenia, schizotypal disorder, delusional disorder,
other non-mood psychotic disorders, moderate or severe bipolar
disorder, major depressive disorder, and panic disorder. We note that
this is a list of examples, not an exhaustive list.
For the fourth medically frail exclusion, we are specifying in our
regulation at Sec. 435.554(c)(5)(i)(D) that an individual with a
physical, intellectual, or developmental disability that significantly
impairs their ability to perform one or more ADLs and who otherwise
meets the criteria at Sec. 435.554(c)(5)(i) is medically frail,
consistent with section 1902(xx)(9)(A)(ii)(V)(dd) of the Act. There are
numerous definitions of a physical, intellectual, or developmental
disability. Processes used to determine that an individual has a
physical, intellectual, or developmental disability are also generally
dependent on an individual's functional status and the severity of
their condition, which is consistent with our criteria at Sec.
435.554(c)(5)(i) that an individual's physical, mental, or behavioral
health condition must significantly impair their ability to comply with
the community engagement requirement. The Eunice Kennedy Shriver
National Institute for Child Health and Human Development has indicated
that physical disabilities either temporarily or permanently impact an
individual's physical function, intellectual disabilities generally
permanent and impact an individual's intellectual functioning and
adaptive behavior, and developmental disabilities are generally
permanent and can impair physical or intellectual functioning, or
both.\70\ ADLs are activities related to personal care including
bathing or showering, dressing, getting in and out of bed or a chair,
walking, using the toilet, and eating. Instrumental activities of daily
living (IADLs) are activities that allow an individual to live
independently in the community (for example, shopping, meal
preparation, etc.).\71\
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\70\ ``About Intellectual and Developmental Disabilities
(IDDs),'' Eunice Kennedy Shriver National Institute of Child Health
and Human Development, last modified November 9, 2021, https://www.nichd.nih.gov/health/topics/idds/conditioninfo.
\71\ ``CMS Waiver Applications,'' Centers for Medicare &
Medicaid Services, last accessed February 27, 2026, https://wms-mmdl.cms.gov/WMS/faces/portal.jsp.
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The statute specifically requires that the individual's physical,
intellectual, or developmental disability significantly impair their
ability to perform one or more ADLs. An individual with such a
disability that does not significantly impair their ability to perform
one or more ADLs would not qualify for this exclusion. We interpret the
statute as requiring an individual's physical, intellectual, or
developmental disability to significantly impair their ability to
perform one or more ADLs, but not IADLs, as IADLs are different from
ADLs and the statute makes no reference to IADLs. We decline to further
define a physical, intellectual, or developmental disability that
significantly impairs an individual's ability to perform one or more
ADLs in our regulation, as it would be incredibly difficult to set one
standard that appropriately defines individuals who would qualify for
such an exclusion, and instead direct States to consider the effect of
the physical, intellectual, or developmental disability on an
individual's ability to comply with the community engagement
requirement. We believe it would be reasonable for States to consider
certain conditions as physical, intellectual, or developmental
disabilities for purposes of this exclusion, when such disabilities
significantly impair an individual's ability to perform one or more
ADLs and comply with the community engagement requirement, including
muscular dystrophy, cerebral palsy, cystic fibrosis, spina bifida,
impairments resulting from injuries (for example, spinal cord injury,
brain injury, and amputation), Down syndrome, Fragile X syndrome, and
Prader-Willi syndrome. We note that this is a list of examples, not an
exhaustive list.
For the final medically frail exclusion, we are specifying at Sec.
435.554(c)(5)(i)(E) that an individual with a serious or complex
medical condition who otherwise meets the criteria in Sec.
435.554(c)(5)(i) is medically frail, consistent with section
1902(xx)(9)(A)(ii)(V)(ee) of the Act. Since the statute uses the term
``or,'' we interpret this exclusion as applying to individuals with a
serious medical condition, a complex medical condition, or a medical
condition that is both serious and complex. We considered including
specific conditions within our definition of a serious or complex
medical condition, including human immunodeficiency virus and acquired
immunodeficiency syndrome (HIV/AIDS), end stage renal disease (ESRD),
cancer, and sickle cell disease (SCD) but, for reasons stated in a
later paragraph, we do not believe it is reasonable to categorically
consider conditions as serious or complex without factoring in criteria
such as the severity of the condition.
In 1999, the Institute of Medicine,\72\ in response to a request
from the Health Care Financing Administration (now CMS), authored the
report ``Definition of Serious and Complex Medical Conditions.'' \73\
The report detailed difficulties with defining patient populations with
``serious and complex'' medical conditions but included the following
criteria that could be used to describe medical conditions as serious
and complex'': conditions that are life threatening, conditions that
cause serious disability without necessarily being life threatening,
conditions that cause significant pain or discomfort that can cause
serious interruptions to life activities, conditions that require major
commitments of time and effort from caregivers for a substantial period
of time, conditions that may require frequent monitoring, conditions
that predict or are associated with severe
[[Page 33376]]
consequences, conditions associated with negative consequences for
someone else, conditions that affect multiple organ systems, conditions
that require management to tight physiological parameters, conditions
whose management requires coordination of multiple specialties,
conditions whose treatment carries a risk of serious complications, and
conditions requiring adjustment in a nonmedical environment.\74\
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\72\ The Institute of Medicine is now known as the National
Academy of Medicine.
\73\ CMS notes that the term used in this report is different
from the ``serious or complex'' medical condition used in the
community engagement statute but has determined the framework in the
report to be sufficiently broad to implement this medical frailty
exclusion.
\74\ Chrvala CA, Sharfstein SS, Institute of Medicine (U.S.).
Committee On Serious and Complex Medical Conditions, and Inc
Netlibrary. 1999. Definition of Serious and Complex Medical
Conditions. Washington, DC: National Academy Press. https://www.ncbi.nlm.nih.gov/books/NBK224968/.
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As the Institute of Medicine's report states: ``It is important to
recognize that these conditions may be serious and complex for some
patients at some points during the course of their disease or
disability. The conditions will not necessarily be serious and complex
for all patients at all times.'' This approach is relevant to our
criteria at Sec. 435.554(c)(5)(i), as an individual with a serious or
complex condition must have their ability to comply with the community
engagement requirement significantly impaired by their condition to be
determined medically frail. We understand that, as discussed in the
Institute of Medicine's report, the acuity of patients with serious or
complex medical conditions can, and does, improve. An individual with a
well-managed serious or complex medical condition that does not
significantly impair their ability to meet the community engagement
requirement should not be determined medically frail. We therefore
expect States to evaluate an individual's serious or complex medical
condition according to the serious or complex medical condition's
impact on the individual's ability to comply with the community
engagement requirement.
Based on the Institute of Medicine's list of possible criteria that
could be used to identify a ``serious and complex medical condition,''
we are specifying at Sec. 435.554(c)(5)(i)(E) that a serious or
complex medical condition is a medical condition that is life
threatening, seriously disabling without necessarily being life
threatening, causing significant pain or discomfort that can cause
serious interruptions to life activities, requiring a major time or
effort commitment from caregivers for a substantial period of time,
requiring frequent monitoring, associated with severe consequences or
negative consequences for someone else, affecting multiple organ
systems, requiring management to tight physiological parameters,
requiring coordination of multiple specialties, requiring treatment
that carries a risk of serious complications, or requiring adjustment
in non-medical environments. States will need to ensure fidelity to the
definition at Sec. 435.554(c)(5)(i)(E) and our criteria at Sec.
435.554(c)(5)(i) that an individual's physical, mental, or other
behavioral health condition significantly impair their ability to
comply with the community engagement requirement, when determining if
an individual has a serious or complex medical condition for purposes
of the community engagement exclusion.
We do not believe it would be appropriate to include an exhaustive
list of conditions in regulation. However, we believe it would be
reasonable for States to consider certain conditions as serious or
complex, when such conditions significantly impair an individual's
ability to comply with the community engagement requirement, including
cancer, ESRD, viral hepatitis, SCD, chronic obstructive pulmonary
disease, HIV/AIDS, sarcoidosis, cognitive impairment, heart disease,
amyotrophic lateral sclerosis, Parkinson's disease, Huntington's
disease, cystic fibrosis, multiple sclerosis, spinocerebellar ataxias,
muscular dystrophy, hemophilia, trauma disorders, and Thalassemia
major. Examples of conditions that we would not typically expect to
significantly impair an individual's ability to meet the community
engagement requirement include asthma, hypertension, anemia,
generalized pain, pre-diabetes, Type I or II diabetes, obesity,
psoriasis, headaches, and Attention-Deficit/Hyperactivity Disorder.
We note that these are not exhaustive lists. As previously stated,
according to the Institute of Medicine's report, ``It is important to
recognize that these conditions may be serious and complex for some
patients at some points during their disease or disability. The
conditions will not necessarily be serious and complex for all patients
at all times.'' \75\ We further note that, in line with our approach to
defining an individual who is medically frail at Sec.
435.554(c)(5)(i), as discussed in a preceding paragraph, we do not
believe that it is reasonable for States to categorically exclude
individuals with certain serious or complex medical conditions from the
community engagement requirement without considering whether their
condition significantly impairs their ability to comply with the
community engagement requirement. Whether a person with a serious or
complex medical condition qualifies as a specified excluded individual
on the basis of medical frailty will depend on the condition
significantly impairing their ability to comply with the community
engagement requirement. For example, individuals with HIV/AIDS are
medically frail if they are determined to have a serious or complex
medical condition that significantly impairs the individual's ability
to comply with the community engagement requirement, which is less
likely to be the case if the acuity of their condition is not severe.
We recognize that the acuity may change over time. For example,
individuals with pressure ulcers, pneumonia, or fractures that heal
would likely be able to comply with the community engagement
requirement in relatively short order as their condition would likely
no longer be determined as a serious or complex medical condition that
significantly impairs their ability to do so. In addition, we believe
that if individuals with a serious or complex medical condition do not
have significantly impaired ability to comply with the community
engagement requirement participating in community engagement
activities, such as employment, could potentially help them escape
isolation and dependency, build confidence, achieve self-sufficiency
and prosperity, and improve health.
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\75\ Ibid, pg. 19.
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Except as discussed in the preceding paragraphs, we decline to
further define in regulation an individual with an SUD; with a
disabling mental disorder; with a physical, intellectual or
developmental disability that significantly impairs their ability to
perform one or more ADLs; or with a serious or complex medical
condition. As we specify at Sec. 435.554(c)(5)(ii), States must use
lists of diseases, diagnoses, disorders, or other health conditions to
help define these categories and identify individuals who might
potentially qualify as medically frail if they also meet the standard
in Sec. 435.554(c)(5)(i). The lists must be auditable, justifiable,
and consistent with the definitions established at Sec.
435.554(c)(5)(i)(A) through (E). We anticipate these lists will
generally take the form of health care code sets (for example, ICD-10
codes, etc.). Further, such lists must be revised on a regular basis to
add or remove diseases, diagnoses, disorders, or health conditions (as
applicable) based on States' implementation experiences. For
[[Page 33377]]
example, States may determine that health conditions no longer need to
be included on their lists because of advancements in treatment or that
health conditions need to be added that are rare and were missed during
their initial implementation of the community engagement requirement.
In addition, if an individual does not have a disease, diagnosis,
disorder, or health condition on the State's list, the State must have
reasonable processes and criteria in place for such individuals to
request consideration for the medically frail exclusion. We expect that
individuals will request consideration on an infrequent basis as we
believe such lists are likely to capture the breadth of diseases,
diagnoses, disorders, or other health conditions that could be
reasonably considered to meet the definitions at Sec.
435.554(c)(5)(i)(A) through (E).
We note that any lists of diseases, diagnoses, disorders, or health
conditions or other processes that States use to identify medically
frail individuals must be shared with us upon request as part of our
oversight and data monitoring activities. If through Payment Error Rate
Measurement Program (PERM) audits and reporting, or any other CMS
audits, we determine that States determined that an individual is
medically frail in a manner inconsistent with Sec. 435.554(c)(5)(i)
(meaning there is frequent approval of individuals as medically frail
with little to no support for the conclusion that their physical,
mental, or other behavioral health condition significantly impairs
their ability to comply with the community engagement requirement),
States would not be in compliance with the regulation. Over time and
with advances in treatment, we expect that the number of individuals
who are determined to be medically frail by States will decline and
then stabilize.
As States develop their lists and implement the medically frail
exclusion, they must ensure that they are conducting outreach
consistent with the Medicaid outreach requirements at Sec. 435.561. We
also encourage States to consider general public outreach efforts to
complement the outreach required at Sec. 435.561, so the public can
clearly understand in which circumstances individuals might qualify as
medically frail. In particular, individuals who are medically frail
might not realize that they qualify for an exclusion from the community
engagement requirement and will need clear, consumer-friendly
information to help them understand if they are excluded. Additional
information on Medicaid outreach requirements is found in section II.L.
of this IFC.
6. Individuals Compliant With TANF Work Requirements and Individuals
Not Exempt From SNAP Work Requirements
Section 1902(xx)(9)(A)(ii)(VI) of the Act creates an exclusion that
references existing work requirements in other jointly administered
Federal-State programs. Specifically, clause (ii)(VI)(aa) references
the TANF block grants, and clause (ii)(VI)(bb) references SNAP. While
the TANF \76\ and SNAP \77\ statutes both use the terminology ``work
requirements,'' the term is inclusive of work and activities other than
work, such as education, job training, community service, volunteering,
etc.
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\76\ Section 407 of the Social Security Act.
\77\ Sections 6(d)(1) and 6(o) of the Food and Nutrition Act of
2008.
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Section 1902(xx)(9)(A)(ii)(VI)(aa) of the Act excludes individuals
who are ``in compliance with any requirements imposed by the State
under section 407 of the Act'' from having to meet the Medicaid
community engagement requirement. Section 407 of the Act establishes
mandatory work requirements and performance standards for the TANF
program. Unlike other work requirements that apply to individuals,
these Federal requirements establish performance standards that States
must achieve; States have flexibility in how they implement work
requirements placed on individuals to meet the performance standards
outlined in section 407 of the Act.\78\ We adopt the language of
section 1902(xx)(9)(A)(ii)(VI)(aa) of the Act in new regulation at
Sec. 435.554(c)(6). Because States may define compliance with TANF
work requirements differently, we are not prescribing a uniform
definition of compliance with TANF work requirements for the purposes
of this exclusion. Instead, when determining whether an individual is
eligible for the TANF exclusion from the Medicaid community engagement
requirement, the State Medicaid agency should assess whether the
individual is compliant with the specific TANF work requirements
established by the State. Consistent with section II.I.7.f. of this
IFC, State Medicaid agencies should work closely with the State agency
that administers TANF to determine which individuals are eligible for
this TANF-based exclusion. To implement this exclusion, States should
not rely on or require reporting from the individual. We also note that
most potentially applicable individuals who receive TANF will fall
under other exclusions, such as those for parent, guardian, or
caretaker relative of a child age 13 or younger, described at
435.554(c)(3).
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\78\ Falk G. (2026). ``Temporary Assistance for Needy Families
(TANF) Block Grant: A Primer.'' U.S. Library of Congress.
Congressional Research Service, R48413. https://www.congress.gov/crs-product/R48413.
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Section 1902(xx)(9)(A)(ii)(VI)(bb) of the Act, implemented at new
Sec. 435.554(c)(7), creates an exclusion for an individual who ``is a
member of a household that receives [SNAP] benefits . . . and is not
exempt from a work requirement under the Food and Nutrition Act of
2008.'' Based on the plain language of the statute, we interpret the
use of ``not exempt from'' in this provision to mean ``subject to'' a
work requirement under the Food and Nutrition Act of 2008. If an
individual is in a household that receives SNAP benefits and is subject
to a work requirement under the SNAP program, they meet the definition
of a specified excluded individual and are therefore not an applicable
individual subject to the Medicaid community engagement requirement.
Unlike the TANF exclusion from community engagement, which requires
the State to ensure the individual is compliant with TANF work
requirements to meet the definition for the exclusion, for the SNAP
exclusion, States only need to determine that the individual is not
exempt from SNAP work requirements and is in a household that receives
SNAP benefits; the State does not need to confirm that the individual
is in fact compliant with SNAP work requirements. CMS is aware that
SNAP has two types of work requirements: general work requirements,
defined in section (6)(d)(1) of the Food and Nutrition Act of 2008, and
the time limit work requirement, defined in section (6)(o) of such Act.
Because section 1902(xx) of the Act does not specify which SNAP work
requirements apply to this exclusion, we interpret the statute to mean
that both requirements apply. Therefore, an individual would be
considered a specified excluded individual if they were a member of a
household receiving SNAP benefits, and were not exempt from the general
work requirement, time limit work requirement, or both--meaning they
were subject to at least one of the SNAP work requirements. Consistent
with section II.I.7.f. of this IFC, State Medicaid agencies should work
closely with the State agency that administers SNAP to determine which
individuals are eligible for this exclusion.
Both TANF and SNAP have long-standing work requirements for adults,
with some exceptions, as a condition of
[[Page 33378]]
receiving benefits. Using national data from 2019, the Office of the
Assistant Secretary for Planning and Evaluation in HHS, estimated that
approximately 40 percent of Medicaid beneficiaries nationally were also
enrolled in SNAP, and 4 percent were also enrolled in TANF.\79\ This
exclusion ensures that Medicaid beneficiaries do not need to also meet
the Medicaid community engagement requirement if they are already
subject to SNAP and/or meeting TANF requirements. Because of the
population overlap between these programs, this exclusion can reduce
the burden on beneficiaries who may be eligible for and receiving
benefits from multiple programs and allows States to use information
regarding an individual from these programs to verify their exclusion
or need to demonstrate Medicaid community engagement.
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\79\ Macartney S and Ghertner R. (2023). ``How Many People that
Receive One Safety Net Benefit Also Receive Others?.'' Office of
Human Services Policy, Assistant Secretary for Planning and
Evaluation. https://aspe.hhs.gov/sites/default/files/documents/340f9d2586febc3cdc1510f793403d0c/program-overlap-datapoint.pdf.
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7. Participant in a Drug or Alcohol Rehabilitation or Treatment Program
Section 1902(xx)(9)(A)(ii)(VII) of the Act establishes an exclusion
for individuals ``participating in a drug addiction or alcoholic
treatment and rehabilitation program (as defined in section 3(h) of the
Food and Nutrition Act of 2008).'' Section 3(h) of such Act defines
``drug addiction or alcoholic treatment and rehabilitation program'' to
mean any such program conducted by a private non-profit organization or
institution, or a publicly operated community mental health center
under part B of title XIX of the Public Health Service Act to provide
treatment that can lead to the rehabilitation of drug addicts or
alcoholics. States will need to determine which rehabilitation and
treatment programs meet this definition for purposes of this exclusion.
To qualify for this exclusion, the statute requires an individual to
``participate'' in a rehabilitation or treatment program. We are not
establishing a minimum time commitment requirement, such as a minimum
number of hours or days of services, that would qualify as
participation for this exclusion; instead, States may establish a
minimum standard for participation for such purposes, consistent with
appropriate clinical guidelines. We implement this definition of
``participating in a drug addiction or alcoholic treatment and
rehabilitation program'' for the community engagement exclusion at the
new Sec. 435.554(c)(8).
We acknowledge that individuals participating in an addiction
treatment or rehabilitation program will, by definition, have an SUD.
The statutory definition of medical frailty at section
1902(xx)(9)(A)(ii)(V) of the Act (discussed in more detail in section
II.E.5. of this IFC) includes individuals with an SUD. Additionally,
States must ensure that any data sharing used to implement both SUD-
related exclusions is aligned with 42 CFR part 2, the Federal
regulation protecting the confidentiality of SUD treatment records.
This is addressed in more detail in section II.I.7.e. of this IFC.
8. Inmate of a Public Institution
Section 1902(xx)(9)(A)(ii)(VIII) of the Act provides an exclusion
from the community engagement requirement for individuals who are
inmates of a public institution. Medicaid has a long-standing
definition of ``inmate of a public institution'' and ``public
institution'' at Sec. 435.1010, which we reference in new Sec.
435.554(c)(9). We consider an individual to be an inmate of a public
institution if the individual is in custody and held involuntarily
through operation of law enforcement.\80\ Public institutions do not
include educational or vocational training institutions; child care
institutions; or medical institutions, including institutions for
mental diseases (IMDs). Inmates of public institutions include
individuals in correctional institutions such as State or Federal
prisons, local jails, detention facilities, or other penal settings.
Recent legislative changes \81\ and CMS guidance have required or
provided flexibility to States to provide certain Medicaid-covered
services to eligible individuals during periods of incarceration.
Because States are required to suspend rather than terminate
eligibility during periods of incarceration,\82\ States should have
systems and processes already in place to identify this population,
including an individual's date of release. We believe that applying the
existing Medicaid definitions to this exclusion ensures consistency and
will promote administrative efficiency, as States will be able to use
information from existing eligibility and data systems when
effectuating this exclusion. We adopt the existing definition of
``inmate of a public institution'' at Sec. 435.1010 for the community
engagement exclusion at the new Sec. 435.554(c)(9).
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\80\ CMCS SHO letter #16-007, ``To Facilitate Successful Re-
entry for Individuals Transitioning from Incarceration to their
Communities.'' (April 28, 2016)., Available at: https://www.medicaid.gov/federal-policy-guidance/downloads/sho16007.pdf.
\81\ Including, but not limited to, section 1001 of the SUPPORT
Act (Pub. L. 115-271), Section 5121 of the Consolidated
Appropriations Act, 2023 (Pub. L. 117-328), and Section 205 of the
Consolidated Appropriations Act, 2024 (Pub. L. 118-24). These
legislative changes established, and then further amended section
1902(a)(84) of the Act.
\82\ CMCS Informational Bulletin, ``Prohibition on Termination
of Enrollment Due to Incarceration (Division G, Title I, Section
205, of the Consolidated Appropriations Act, 2024).'' (December 23,
2025). Available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib122325.pdf.
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9. Pregnant or Entitled to Postpartum Coverage
Section 1902(xx)(9)(A)(ii)(IX) of the Act establishes an exclusion
for pregnant and postpartum women who are entitled to medical
assistance under section 1902(e)(5) or (16) of the Act. While pregnant
women are generally not eligible for the adult group under Sec.
435.119, and so most often would not be subject to community
engagement, we also recognize that individuals enrolled in the adult
group can become pregnant and remain in the adult group.\83\ Also, it
is possible that a section 1115(a)(2) demonstration population
determined to include applicable individuals may have pregnant women
enrolled in it. Therefore, it is important to specify that a pregnant
woman is a specified excluded individual.
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\83\ The Office of the Assistant Secretary for Planning and
Evaluation found that, in 2018, 8.2% of enrollees with Medicaid/CHIP
financed births were enrolled in the adult group. Gordon SH, Whitman
A, Buchmueller T, et al., ``Medicaid Eligibility Category Among
Enrollees with Medicaid-Paid Births in 2018,'' Health Services
Research 61(1) (2026): e70053, https://doi.org/10.1111/1475-6773.70053.
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Section 1902(e)(5) of the Act, implemented at Sec. 435.170,
establishes mandatory State plan continuous eligibility during
pregnancy and through the end of the month in which the 60-day
postpartum period following the end of pregnancy concludes, regardless
of a change in income. Section 1902(e)(16) of the Act provides the
State option, effective beginning April 1, 2022, for continuous and
extended coverage for women during pregnancy and for 12 months after
the end of the pregnancy.\84\ As of May 2026, 48 States, the District
of Columbia, and U.S. Virgin Islands have elected the option to provide
12-month extended postpartum coverage in Medicaid (and CHIP). This
State plan option means that a pregnant woman enrolled in Medicaid is
continuously eligible for 12 months after the end of pregnancy,
[[Page 33379]]
regardless of the eligibility group in which she is enrolled. As a
result, any woman who is receiving Medicaid under either the mandatory
postpartum period (Sec. 435.170) or the 12-month postpartum extension
while in the State plan adult group or a relevant section 1115(a)(2)
demonstration population is a specified excluded individual during the
relevant postpartum period. We implement this definition at the new
Sec. 435.554(c)(10).
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\84\ For more information, see CMCS SHO Letter #21-007,
``Improving Maternal Health and Extending Postpartum Coverage in
Medicaid and the Children's Health Insurance Program (CHIP).''
(December 7, 2021). Available at https://www.medicaid.gov/federal-policy-guidance/downloads/sho21007.pdf.
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F. Mandatory Exceptions vs. Specified Excluded Individuals
In describing individuals who are not required to meet the
community engagement requirement at section 1902(xx)(2), section
1902(xx)(3)(A) of the Act establishes the term ``mandatory exceptions
for certain individuals'' and section 1902(xx)(9)(A)(ii) of the Act
establishes the term ``specified excluded individual.'' The difference
between these terms stems from the definition of ``applicable
individual'' at section 1902(xx)(9)(A)(i) of the Act, which defines
applicable individual as individuals ``other than specified excluded
individuals (as defined in clause (ii)).'' As discussed in section
II.B. of this IFC, section 1902(xx)(1) of the Act establishes community
engagement as a condition of eligibility for ``applicable
individuals,'' and section 1902(xx)(9)(A)(i) of the Act expressly
excludes ``specified excluded individuals'' from the definition of
``applicable individuals.'' Therefore, community engagement is not a
condition of eligibility for specified excluded individuals.
Conversely, the mandatory exceptions described at section
1902(xx)(3)(A) of the Act apply to ``applicable individuals'' who are
otherwise subject to the community engagement requirement in a given
month, but who meet criteria for a mandatory exception for part or all
of that month, which results in the State deeming them compliant.
Therefore, individuals who meet the criteria for a mandatory exception
are still, by definition, considered applicable individuals, while
specified excluded individuals are not.
This distinction becomes important when determining whether someone
is subject to the community engagement requirement. The threshold
question for States when they begin to process an application or a
renewal is whether someone is an applicable individual or a specified
excluded individual. If the State determines that the individual is a
specified excluded individual in the month of application or when the
State processes the renewal, it must not determine whether the
individual met the community engagement requirement or met criteria for
one of the mandatory exceptions in the prior month(s), as required at
Sec. 435.556(c); accordingly, States are prohibited from requiring
specified excluded individuals to demonstrate community engagement or
be deemed to have demonstrated community engagement as a condition of
eligibility. If the individual is an applicable individual in the month
of application or when the State processes the renewal, the State would
need to continue to analyze whether the individual meets criteria for
any of the mandatory exceptions and deem compliance, or, if they are
not excepted, determine whether the individual is compliant with the
community engagement requirement during the appropriate timeframe. We
further describe how States assess compliance, including when they
determine if someone is a specified excluded individual or applicable
individual, in section II.H. of this IFC.
We explain the distinction between mandatory exceptions and
specified excluded individuals because of the reference to ``specified
excluded individuals'' in the list of mandatory exceptions at section
1902(xx)(3)(A)(i)(I) of the Act. A State that is assessing compliance
in a review period, as defined in section II.H.3. of this IFC, must
have first determined that the individual is not a specified excluded
individual. However, a State may find that this individual, although no
longer a specified excluded individual, previously was a specified
excluded individual in part or all of 1 or more months during the
review period. If so, the individual would meet the criteria for the
mandatory exception in those months.
For example, for a renewal that is due in September, a State that
requires individuals to demonstrate community engagement in 2 months
considers whether an individual met any of the mandatory exception
criteria during the review period of April through September (the
individual's 6-month eligibility period in this example). For part of
this review period, the State's records show that the individual met
the exclusion criteria as a parent of a dependent child 13 years of age
or under. However, their child (who does not have a disability) turned
14 years old in June. Thus, at the time of the renewal due in
September, the parent is no longer a specified excluded individual but
is now an applicable individual subject to the community engagement
requirement. In this scenario, the parent would be ``deemed'' to
demonstrate community engagement in 3 of the 6 months in the review
period (April, May, and June), because the individual met the exclusion
criteria as a parent of a dependent child who was under age 14 for part
or all of those months; this meets the State's requirement for the
individual to be compliant for 2 months since their last renewal.
As previously discussed, community engagement is not a condition of
eligibility for specified excluded individuals, so such individuals are
not subject to the community engagement requirement. Conversely,
compliance with the community engagement requirement is a condition of
eligibility for applicable individuals. Applicable individuals who meet
a mandatory exception are subject to the community engagement
requirement, but they are deemed to demonstrate community engagement
for any month the exception applies during the review period.
G. Short-Term Hardship Exceptions
States have the option under section 1902(xx)(3)(B) of the Act to
include in their State plans a ``short-term hardship'' exception to the
community engagement requirement for applicable individuals. States
electing this option must, under procedures established by the State,
in accordance with standards specified by the Secretary, deem
applicable individuals to have demonstrated community engagement during
a month in which they meet the criteria for one of the circumstances
described in the statute's definition of a ``short-term hardship
event.'' A ``short-term hardship event'' exists under section
1902(xx)(3)(B) of the Act when the criteria for any of the following
circumstances are met for all or part of a month:
As described in section 1902(xx)(3)(B)(ii)(I) of the Act,
an applicable individual receives inpatient hospital services, nursing
facility services, services in an intermediate care facility for
individuals with intellectual disabilities (ICF/IID), inpatient
psychiatric hospital services, or such other services of similar acuity
(including outpatient care relating to the preceding institutional
services) as the Secretary determines appropriate;
An applicable individual resides in a county (or
equivalent unit of local government) in which, as described in section
1902(xx)(3)(B)(ii)(II)(aa) of the Act, there exists an emergency or
disaster declared by the President under the National Emergencies Act
(NEA) or the Robert T. Stafford Disaster Relief and Emergency
Assistance Act (the Stafford Act); or, as described in section
[[Page 33380]]
1902(xx)(3)(B)(ii)(II)(bb) of the Act, the unemployment rate is at or
above the lesser of 8 percent or 1.5 times the national unemployment
rate; or
As described in section 1902(xx)(3)(B)(ii)(III) of the
Act, an applicable individual, or the dependent of the applicable
individual, must travel outside of their community for an extended
period of time to receive medical services necessary to treat a serious
or complex medical condition (as described in section
1902(xx)(9)(A)(ii)(V)(ee) of the Act) that are not available within
their community of residence.
For the circumstance described in section
1902(xx)(3)(B)(ii)(II)(bb) of the Act (relating to an area with a
particular unemployment rate percentage), the State must make a request
to the Secretary, in such form, at such time, and containing such
information as the Secretary may require, for the short-term hardship
to be available. Under section 1902(xx)(3)(B)(i) of the Act, the
applicable individual must request of the State a short-term hardship
exception for the circumstances described in section
1902(xx)(3)(B)(ii)(I) or (III) of the Act (relating, respectively, to
the receipt of certain institutional services or services of similar
acuity or where the individual or individual's dependent must travel
outside their community for necessary medical treatment for an extended
period of time).
We are implementing this State option at new Sec. 435.555.
1. Scope of the Election and Certain Notice Requirements
While the short-term hardship exception in section 1902(xx)(3)(B)
of the Act is optional for States, the statute does not offer States an
option to select one or only some of the circumstances described in
section 1902(xx)(3)(B)(ii) of the Act to be the exclusive basis for
granting a short-term hardship exception. For example, a State may not
limit the short-term hardship exception only to individuals who reside
in a county (or equivalent unit of local government) in which there
exists an emergency or disaster declared by the President under the NEA
or the Stafford Act. We therefore specify at Sec. 435.555(a) that
States electing the short-term hardship exception must deem an
applicable individual to have demonstrated community engagement when
the individual experiences any one of the short-term hardship events
described in section 1902(xx)(3)(B)(ii) of the Act and implemented at
new Sec. 435.555(d). (We note, however, that certain short-term
hardship events include in their criteria a State request to effectuate
them, as described below.)
States that elect the short-term hardship option must confirm that
they are doing so in their State plans. We expect that States will be
able to make the election in the initial material, currently under
development, that they will be required to submit to CMS confirming
their compliance with section 1902(xx) of the Act. If a State does not
initially elect the short-term hardship option, it may do so through a
State plan amendment at a later time. A State that elects the short-
term hardship option will be permitted to deselect the option through a
State plan amendment.
New Sec. 435.561(b)(3)(ii) and (iii) require the State to conduct
outreach as implemented at new Sec. 435.561 whenever a State: (a)
elects the short-term hardship exception in its State plan under Sec.
435.555(a); and (b) on each occasion in which a short-term hardship
exception relating to an event described in Sec. 435.555(d)(2) (for
NEA-declared or Stafford Act-declared emergencies or disaster) becomes
available to applicable individuals, or the State effectuates the
short-term hardship event described in Sec. 435.555(d)(3) (relating to
a county or equivalent unit of local government having an unemployment
rate at or above a certain level). It is possible that a State, upon
electing the short-term hardship exception through a State plan
amendment, will simultaneously submit a request to CMS to effectuate
the short-term hardship circumstance relating to a county or other
locality experiencing a certain level of unemployment (the procedure
for this request is described below and would be separate from the
State plan amendment). The State's request to CMS to effectuate the
unemployment-related short-term hardship circumstance would not be a
component of the State plan amendment, and it would necessarily be
approved by CMS after approval of the State plan amendment proposing to
elect the short-term hardship exception, although the approval of the
former may closely follow in time the approval of the letter. The State
would still be required to conduct outreach upon both occasions,
consistent with Sec. 435.561(b)(3)(ii) and (iii).
We consider both deselection of the short-term hardship exception
option from a State plan and the expiration of a short-term hardship
event to be an ``action'' under Sec. 431.201, because the former
reduces eligibility by removing the availability of an exception from
the State plan while the latter ends the availability of an exception
currently in use. Therefore, whenever a State deselects the short-term
hardship option from the State plan or upon an anticipated expiration
of a short-term hardship event, the State must provide all impacted
beneficiaries with a minimum of 10 days advance notice with fair
hearing rights consistent with Sec. Sec. 435.917 through 435.918 and
42 CFR part 431 subpart E. Consistent with new Sec.
435.561(b)(3)(iv)(A) and (B), the advance notice in these circumstances
must include the outreach content in new Sec. 435.561(c).
2. Procedures for Implementing Short-Term Hardship Exceptions
Section 1902(xx)(3)(B)(i) of the Act directs that State
determinations of short-term hardship be made ``under procedures
established by the State (in accordance with standards specified by the
Secretary).'' This language is nearly identical to the ``undue
hardship'' language in section 1917(b)(3)(A) of the Act (relating to
the estate-recovery rules), section 1917(c)(2)(D) of the Act (relating
to the asset-transfer rules), and section 1917(d)(5) of the Act
(relating to the trust rules).\85\ We consider our policies
implementing these other provisions of the Act to provide a familiar
model for implementing the short-term hardship procedures for community
engagement.
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\85\ Section 1917(b)(3)(A) of the Act reads: ``The State shall
establish procedures (in accordance with standards specified by the
Secretary) under which the agency shall waive the application of
this subsection . . . if such application would work an undue
hardship as determined on the basis of criteria established by the
Secretary.'' Section 1917(c)(2) of the Act reads: ``An individual
shall not be ineligible for medical assistance by reason of [the
asset transfer rules] to the extent that--(D) the State determines,
under procedures established by the State (in accordance with
standards specified by the Secretary) that the denial of eligibility
would work an undue hardship as determined on the basis of criteria
established by the Secretary.'' Section 1917(d)(5) of the Act reads:
``The State shall establish procedures (in accordance with standards
specified by the Secretary) under which the agency waives the
application of this subsection for an individual if the individual
establishes that such application would work an undue hardship on
the individual as determined on the basis of criteria established by
the Secretary.''
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For the procedures relating to the estate recovery undue hardship
provision, we have instructed States as follows: ``These procedures
must, at a minimum, provide for advance notice of any proposed
recovery. They must also specify the method for applying for a[n]
[undue hardship] waiver, the hearing and appeal rights, and the time
frames involved.'' CMS State Medicaid Manual, Section 3810(D).
For the procedures relating to the asset transfer and trust undue
hardship provisions, CMS has historically
[[Page 33381]]
instructed States as follows: ``[Y]our undue hardship provision must,
at a minimum, provide for: Notice to recipients that an undue hardship
exception exists; A timely process for determining whether an undue
hardship waiver will be granted; [and] A process under which an adverse
determination can be appealed.'' CMS State Medicaid Manual, Section
3258.10(C)(5) and 3259.8(C).86 87
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\86\ The CMS State Medicaid Manual is available at https://www.cms.gov/regulations-and-guidance/guidance/manuals/paper-based-manuals-items/cms021927.
\87\ We note the very slight difference in the prefatory
language to the notice requirements described in Section
3258.10(C)(5) (relating to asset-transfers) and Section 3259.8, in
that Section 3258.10(C)(5) instructs that a State's undue hardship
procedure must ``provide for and discuss the following
administrative requirements.'' (Emphasis added.) The notice
requirement elements described above, however, are identical, and
CMS does not consider the distinction in the prefatory language in
these two provisions to be meaningful.
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Sections 1917(b)(3)(A), (c)(2)(D), and (d)(5) of the Act are
mandatory, and CMS established the policies implementing them in
1994.\88\ We expect that States are experienced in applying hardship-
related exceptions consistent with these standards. Thus, given the
similarities in the statutory language, and the authority in section
1902(xx)(3)(B)(i) of the Act for the Secretary to specify the
procedural standards for the short-term hardship exception, we are
generally adopting in regulation for the short-term hardship exception
the policies that apply under the undue hardship provisions, except for
one difference discussed below.
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\88\ After CMS established its policy for the undue hardship-
related notice, request process, and appeal requirements for asset-
transfers, the Deficit Reduction Act of 2005, Public Law 109-171, at
section 6011(d)(2), incorporated them into Federal law. See 42
U.S.C. 1396p note.
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One significant difference between the evaluation of undue hardship
in the various provisions described in section 1917 of the Act and
short-term hardship under section 1902(xx)(3)(B) of the Act is that, in
the latter circumstance, the hardship will generally have an end date.
For example, a short-term hardship exception for an inpatient hospital
stay (which is a short-term hardship circumstance under section
1902(xx)(3)(B)(ii)(I) of the Act) will generally last through the end
of the month in which the inpatient hospitalization of an applicable
individual ends (as such an applicable individual would be deemed to
meet community engagement under section 1902(xx)(3)(B) of the Act if
the individual is only hospitalized for a part of a month). By
contrast, an individual who, for example, transfers an asset for less
than fair market value during the period described in section
1917(c)(B)(i) of the Act but who establishes undue hardship per section
1917(c)(2)(D) of the Act will not be ineligible (that is, not subject
to a ``penalty period'') for medical assistance for nursing facility
services or other services (as described in section 1917(c)(1)(C) of
the Act). The exception to the penalty period will not have a beginning
or end date; the penalty will simply not apply to the asset transfer.
Our policies relating to the undue hardship provisions of section
1917 of the Act have not had to account for a fixed duration of the
exceptions. For the community engagement requirement, we address this
by requiring that States notify applicable individuals of their
determination that a short-term hardship exception will or will not
apply, and, if determining that it will, the date on which the
exception will end. We understand that the actual calendar date may not
be known to the State at the time of its determination that the
exception will apply. It would be sufficient for a State to advise the
applicable individual of the event that would result in the end of the
exception. In the example of an applicable individual who requests a
short-term hardship exception on the basis of inpatient
hospitalization, it would be sufficient for the State to notify the
individual, upon informing the individual that the exception will
apply, that it will end on the last day of the month in which the
applicable individual's inpatient hospitalization ends. Once the
specific date on which the State intends to end the hardship exception
for an individual or individuals is known, the State must, as explained
above, provide advance notice to the individual(s) consistent with
Sec. Sec. 435.917 through 435.918 and 42 CFR part 431 subpart E.
We thus direct at Sec. 435.555(c) that States electing the short-
term hardship exception must provide notice informing applicable
individuals that a short-term hardship exception exists and its
anticipated end date for circumstances in which an applicable
individual need not request an exception. For circumstances in which
the applicable individual or an individual acting on their behalf must
request an exception, the State must also provide: notice of the method
by which an applicable individual (or individual acting on their
behalf) may request a short-term hardship exception; notice of the
timeframe for requesting the exception; a timely process for
determining whether a short-term hardship exception will be granted;
notice to an applicable individual of the State's determination that a
short-term hardship exception will or will not apply, and, if the State
determines that the exception will apply, the anticipated end date of
the exception; and a process under which an adverse determination can
be appealed.
States must comply with the notice requirement, described in Sec.
435.555(c)(1), as part of their conformity with the noncompliance
procedures in this rule. Under Sec. 435.558(c)(1)(vii), relating to
the mandatory content of a notice of noncompliance with the community
engagement requirement, such a notice must include, in States that have
adopted the short-term hardship exception, ``the information about
short-term hardships described in Sec. 435.555(c).'' We note that
States electing the short-term hardship option will also provide
notification of the availability of the exception when they comply with
Sec. 435.561 (relating to State outreach requirements for community
engagement). Under Sec. 435.561, States must notify individuals of the
community engagement requirement, including an explanation of the
exceptions to the requirement, when the State provides an individual
enrolled in the adult group at Sec. 435.119 or an applicable section
1115 demonstration an eligibility determination notice at application
or renewal of eligibility, or when moving into one of these groups
based on a change in circumstances. Under Sec. 435.561(c)(1)(i), the
outreach notice must include an ``explanation of the exceptions to such
requirement under Sec. 435.553, including short-term hardship
exceptions under Sec. 435.555, if elected by the State[.]'' In States
that have elected the short-term hardship exception, such notices would
therefore necessarily include information on the existence of the
short-term hardship exception. Additionally, as explained previously,
Sec. 435.561(b)(3)(ii) and (iii) require that States notify applicable
individuals when the State elects the short-term hardship exception and
when certain short-term hardship circumstances become available or are
effectuated.
In circumstances in which an applicable individual must request an
exception based on a short-term hardship event (as described in section
II.G.4. and II.G.7. of this IFC), States must accept the request from
any of the individuals described in Sec. 435.907(a): the applicable
individual; an adult in the applicable individual's household, as
defined in Sec. 435.603(f), or family, as defined in section 36B(d)(1)
of the Code; an authorized representative of the applicable individual;
or, if the
[[Page 33382]]
applicable individual is a minor (in a State in which an individual 19
or older is a minor) or incapacitated, someone acting responsibly on
the applicable individual's behalf. Section 435.907(a) requires that
States accept from the particular individuals described in that
regulation ``any documentation required to establish eligibility.'' As
described above, compliance with community engagement is a condition of
eligibility, which means that a request for a short-term hardship
exception to the community engagement requirement helps an applicable
individual establish or maintain Medicaid eligibility. We therefore
believe that States must accept requests for short-term hardship
exceptions from the individuals described in Sec. 435.907(a), which we
specify at Sec. 435.555(b)(2), (c), and (d).
3. Definition of a Short-Term Hardship Event
Section 1902(xx)(3)(B)(ii) of the Act defines a ``short-term
hardship event'' to be, in summary, one of the following circumstances:
an applicable individual receives certain institutional (or comparable)
services; an applicable individual resides in an area in which an
emergency or disaster under certain Federal authorities has been
declared or in an area of comparatively high unemployment; or an
applicable individual, or the dependent of the applicable individual,
must travel outside of their community for an extended period of time
for necessary medical care for certain conditions. An applicable
individual will be deemed to have met community engagement if the
individual meets the criteria for any of these circumstances for all or
part of a month. We implement the definition of a short-term hardship
event at Sec. 435.555(d). We address each of the circumstances in the
following sections.
4. Applicable Individuals in Certain Medical Institutions or Receiving
Outpatient Services
The first short-term hardship event is described in section
1902(xx)(3)(B)(ii)(I) of the Act and pertains to applicable individuals
who are receiving inpatient hospital services, nursing facility
services, services in an ICF/IID, inpatient psychiatric hospital
services, or such other services of similar acuity (including
outpatient care relating to other services specified in this subclause)
as the Secretary determines appropriate.
We note first that an individual who receives any of the services
described in section 1902(xx)(3)(B)(ii)(I) of the Act may be a
specified excluded individual based on being medically frail or
otherwise having special medical needs under Sec. 435.554(c)(5). For
example, an individual who for all or part of a month receives services
in an ICF/IID may be medically frail under Sec. 435.554(c)(5)(i)(A)
(relating to individuals who are blind or disabled as defined in
section 1614 of the Act) or Sec. 435.554(c)(5)(i)(D) (relating to
individuals with a physical, intellectual, or developmental disability
that significantly impairs their ability to perform one or more ADLs)
if their physical, mental, or behavioral health condition significantly
impair their ability to comply with the community engagement
requirement. As we explain in II.F. of this IFC, if a State determines
that an individual is a specified excluded individual in the month of
application or when the State processes the renewal, it must not
determine whether the individual meets the community engagement
requirement or meets the criteria for a mandatory exception. The same
outcomes described in II.F. of this IFC would apply in the context of
the optional short-term hardship exception; that is, if a State that
has elected the short-term hardship exception determines an individual
to be a specified excluded individual in the month of application or
when the State processes the renewal, it must not determine whether the
individual met the community engagement requirement or met the optional
short-term hardship exception. We implement this requirement at Sec.
435.555(f).
``Inpatient hospital services'' are defined for purposes of
Medicaid State plan coverage in section 1905(a)(1) of the Act and Sec.
440.10, and this definition specifically excludes services in an
institution for mental diseases (IMD). Similarly, section 1905(a)(4)(A)
of the Act and Sec. 440.155 define ``nursing facility services'' for
purposes of Medicaid State plan coverage and this definition excludes
services in an IMD. In addition, services in an ICF/IID are defined for
purposes of State plan coverage in section 1905(a)(15) of the Act and
Sec. 440.150 and this definition also excludes services in an IMD.
IMDs are defined in section 1905(i) of the Act to mean ``a hospital,
nursing facility, or other institution of more than 16 beds, that is
primarily engaged in providing diagnosis, treatment, or care of persons
with mental diseases, including medical attention, nursing care, and
related services.''
Because section 1905(a) of the Act and our implementing regulations
define ``inpatient hospital services,'' ``nursing facility services,''
and ``ICF/IID services'' States must recognize services meeting the
``inpatient hospital services,'' ``nursing facility services,'' and
``ICF/IID services'' definitions at Sec. Sec. 440.10, 440.155, and
440.150, respectively, for purposes of the short-term hardship
exception at section 1902(xx)(3)(B)(ii)(I) of the Act. Applicable
individuals who receive ``inpatient hospital services'' as defined at
Sec. 440.10, ``nursing facility services'' as defined at Sec.
440.155, and ``ICF/IID services'' as defined at Sec. 440.150 for part
or all of a month must be deemed to have met the community engagement
requirement for such month if the individual's State has adopted the
short-term hardship exception. We have included receipt of ``inpatient
hospital services'' as defined at Sec. 440.10, ``nursing facility
services'' as defined at Sec. 440.155, and ``ICF/IID services'' as
defined at Sec. 440.150 as a short-term hardship event in our
regulation at Sec. 435.555(d)(1)(i).
We do not define ``inpatient psychiatric hospital services'' for
all age groups. However, ``inpatient psychiatric hospital services
under age 21'' are defined for purposes of Medicaid State plan coverage
in section 1905(a)(16) of the Act and at Sec. 440.160. In the absence
of a definition of ``inpatient psychiatric hospital services'' for
individuals of all ages in title XIX of the Act, we believe it is
reasonable for States to consider our ``inpatient psychiatric hospital
services under age 21'' definition at Sec. 440.160 in the context of
defining ``inpatient psychiatric hospital services'' for purposes of
the short-term hardship exception. However, given that our definition
at Sec. 440.160 does not apply to all age groups, we do not believe it
would be reasonable for States to solely use that definition in the
context of section 1902(xx)(3)(B)(ii)(I) of the Act. It is also our
understanding that some States define ``inpatient psychiatric hospital
services'' under State law or follow ``inpatient psychiatric hospital
services'' definitions used in universal coding constructs. In
addition, many ``inpatient psychiatric hospital services'' are not
coverable in Medicaid due to the IMD payment exclusion even though it
would be reasonable for a State to consider such services as
``inpatient psychiatric hospital services.'' We believe it would be
reasonable for States to follow definitions of ``inpatient psychiatric
hospital services'' described in State law or universal coding even for
services that are not otherwise coverable under the State plan. For
these reasons we are defining ``inpatient psychiatric hospital
services'' at Sec. 435.555(d)(1)(i) as ``inpatient psychiatric
hospital services including the services defined at
[[Page 33383]]
Sec. 440.160 for individuals under the age of 21 without regard to
whether such services are in an institution for mental diseases'' for
purposes of the short-term hardship exception at section
1902(xx)(3)(B)(ii)(I) of the Act.
As previously noted, section 1902(xx)(3)(B)(ii)(I) of the Act also
references ``such other services of similar acuity (including
outpatient care relating to other services specified in this subclause)
as the Secretary determines appropriate.'' We are interpreting and
implementing this language at Sec. 435.555(d)(1)(ii), as described
below.
We recognize that individuals may receive inpatient services that
do not meet our benefit definitions for ``inpatient hospital
services,'' ``nursing facility services,'' ``ICF/IID services,'' and
``inpatient psychiatric hospital services.'' Specifically, an
individual may receive Medicaid-covered inpatient services in a
critical access hospital (CAH) consistent with Sec. 440.170(g) or an
emergency hospital consistent with Sec. 440.170(e), respectively, in
States that cover such services. Further, an individual may receive
inpatient services in an IMD or in other facilities that are not
covered under section 1905(a) of the Act as inpatient services. We
believe an exception would be warranted for an individual receiving
inpatient services furnished in a CAH consistent with Sec. 440.170(g),
inpatient services furnished in an emergency hospital consistent with
Sec. 440.170(e), services in an IMD, and inpatient services furnished
by other facilities that are not covered under Medicaid but are
otherwise recognized by the State as ``other services of similar
acuity'' for purposes of this short-term hardship exception. We believe
that this is warranted, because an individual that is an inpatient in
such facilities would be equally unable to meet the community
engagement requirement as an individual receiving services in one of
the facilities identified in section 1902(xx)(3)(B)(ii)(I) of the Act.
Further, the inpatient services furnished by such facilities can be
nearly identical to the services furnished by an inpatient hospital,
nursing facility, ICD/IID, or inpatient psychiatric hospital.
For example, inpatient services provided by a VA medical facility
do not meet the ``inpatient hospital services'' definition at Sec.
440.10, as such facilities are not certified as a hospital under the
Medicare Conditions of Participation requirements at 42 CFR part 482
and do not participate in Medicaid, but the services provided by such
facilities can be nearly identical to Medicaid-covered ``inpatient
hospital services.'' We note that under section 1905(a) of the Act
there is a general prohibition on Medicaid payment for any services
provided to an individual in an IMD. While Medicaid payment cannot
generally be made for services provided to an individual in an IMD, we
believe it is reasonable to consider such services as ``other services
of similar acuity,'' when the services are provided to an inpatient,
since such an individual's Medicaid eligibility is not terminated on
the basis that they receive inpatient services in an IMD, they are
unable to meet the community engagement requirement while receiving
such services, and the inpatient services provided by an IMD can be
nearly identical to ``inpatient hospital services,'' ``nursing facility
services,'' or ``ICF/IID services.'' We are specifying at Sec.
435.555(d)(1)(ii)(A) through (D) that ``other services of similar
acuity'' includes inpatient services furnished in a CAH consistent with
Sec. 440.170(g), inpatient services furnished in an emergency hospital
consistent with Sec. 440.170(e), inpatient services furnished in an
IMD, and inpatient services furnished by other facilities that are not
covered under Medicaid but are otherwise recognized by the State in an
IMD, and inpatient services furnished by other facilities that are not
covered under Medicaid but are otherwise recognized by the State.
Regulations at Sec. 440.2 define an ``inpatient'' for purposes of
coverage of services under the State plan to be, among other things, an
individual who ``(1) Receives room, board and professional services in
the institution for a 24 hour period or longer, or (2) Is expected by
the institution to receive room, board and professional services in the
institution for a 24 hour period or longer even though it later
develops that the patient dies, is discharged or is transferred to
another facility and does not actually stay in the institution for 24
hours.'' States would use this definition when an applicable individual
qualifies for a section 1902(xx)(3)(B)(ii)(I) exception because they
are receiving the types of Medicaid-covered services to which this
exception applies. States must also use the inpatient definition at
Sec. 440.2 when an applicable individual has an exception under
section 1902(xx)(3)(B)(ii)(I) of the Act based on ``inpatient''
services that are not Medicaid-covered services. We recognize that
States might not follow our ``inpatient'' definition at Sec. 440.2
with respect to non-Medicaid-covered inpatient services. However, we
believe that the ``inpatient'' definition at Sec. 440.2 is a standard
that non-Medicaid-covered inpatient services should reasonably be able
to meet and that for purposes of this short-term hardship exception it
would be more administratively simple to apply one definition of
``inpatient'' services. For these reasons, we are providing at Sec.
435.555(d)(1)(iii) that States must use the definition of ``inpatient''
at Sec. 440.2 for any of the inpatient services described in the
preceding paragraphs for purposes of the short-term hardship exception
at section 1902(xx)(3)(B)(ii)(I) of the Act.
The statutory language addressing other services of similar acuity
also specifies that those services include ``outpatient care relating
to other services specified'' in section 1902(xx)(3)(B)(ii)(I) of the
Act. We noted that the services specifically identified in section
1902(xx)(3)(B)(ii)(I) of the Act, and the ones we are adding to Sec.
435.555(d)(1)(ii)(A) through (D), as described above, are exclusively
provided in institution-based settings. We want to acknowledge the
growing availability of services provided in the community as an
alternative to institutional placement. When appropriate, such services
have the potential to divert the need for the higher-cost institutional
based services by treating certain conditions in a community setting or
in an individual's home. There are a wide range of medical and non-
available in non-institutional settings.\89\ Indeed, States have
actively increased and continue to increase the availability of
community that individuals have the choice to receive services in
settings other than institutions.\90\
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\89\ See for example, Carpenter AC, Stepanczuk, C, Murray, et
al. (2025). ``Trends in Users and Expenditures for Home and
Community-Based Services as a Share of Total Medicaid Long-Term
Services and Supports Users and Expenditures, 2023.'' https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-brief-2023.pdf.
\90\ ``The Centers for Medicare & Medicaid Services (CMS) is
committed to supporting States with strengthening and enhancing
their LTSS systems and helping to ensure that Medicaid beneficiaries
receive high quality, cost-effective, person-centered services in
the setting of their choice.'' CMS. (2020). ``Long Term Services and
Supports Rebalancing Toolkit,'' pg. 3. https://www.medicaid.gov/medicaid/long-term-services-supports/downloads/ltss-rebalancing-toolkit.pdf.
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Thus, we believe that limiting the short-term hardship exception
described in section 1902(xx)(3)(B)(ii)(I) of the Act to individuals
receiving services in institutions and not allowing it to be available
to individuals receiving services of similar acuity outside of
institutions would fail to account for the realities of current service
delivery methods and place favor on institutional-based care in a way
that is
[[Page 33384]]
inconsistent with our efforts and policies with regard to individual
choice. We also believe that individuals with service needs similar in
acuity to an institutional stay, but who choose to receive their
services in the community, would be similarly challenged in their
ability to demonstrate community engagement compared to individuals
receiving services in institutions. Therefore, we are interpreting
``other services of similar acuity'' to include certain
noninstitutional services.
We have considered which noninstitutional services may qualify as
``other services of similar acuity'' as compared to the specific
institutional-based services described in section 1902(xx)(3)(B)(ii)(I)
of the Act. We believe it is clear that section 1902(xx)(3)(B)(ii)(I)
of the Act requires that there be a connection between the specific
institutional services described therein and any ``services of similar
acuity'' included as part of this short-term hardship event. Section
1902(xx)(3)(B)(ii)(I) also refers to ``outpatient care'' relating to
the other services specified in that subclause. In light of this
language in section 1902(xx)(3)(B)(ii)(I) of the Act and in alignment
with our position that the short-term hardship authorized under this
provision should allow for noninstitutional services, at Sec.
435.555(d)(1)(ii)(E) we are adding to the definition of this short-term
hardship event noninstitutional services that an applicable individual
receives that, but for the receipt of such services, would likely
result in the individual receiving services provided in an inpatient
hospital, nursing facility, ICF/IID, inpatient psychiatric hospital or
other inpatient institutional settings of similar acuity (that is,
services specified in section 1902 (xx)(3)(B)(ii)(I) of the Act and
Sec. 435.555(d)(1)(i) and (ii)(A) through (D)).
We believe it may sometimes be possible for States to identify
these noninstitutional services on a categorical basis. We considered
whether there are noninstitutional services that in all circumstances
are delivered to an individual who has an acuity level similar to that
of an individual who receives services from one of the specified
institutions. We concluded that it is difficult to identify a complete
list of such services, as many services, for example, that are
authorized for section 1915(c) waivers (which serve individuals who,
but for the receipt of such authorized services, would be treated in
hospitals, nursing facilities, or ICF-IIDs) are also available under
Medicaid to people who do not have such a clinical need.
However, a scenario that could meet the specified criteria would be
an individual whose hospital discharge care plan prescribes services
that could be provided in either one of the institutions specified or
in the individual's home or other noninstitutional setting and who
elects the noninstitutional services. In this circumstance, the
prescribed institutional services would clearly reflect that the
individual would likely need such services in the absence of the
individual's election of the noninstitutional services. While the
individual would still have to request the exception, the State could
make the categorical determination of the individual's need for ``other
services of similar acuity'' without additional review of the
individual's acuity.
States could identify other circumstances in which an individual
receives certain noninstitutional services that, matched with discrete
circumstances, could lead to the categorical determination that, but
for the individual's noninstitutional services, the individual would
likely require services in one of the institutions specified in Sec.
435.555(d)(1)(i) and (ii)(A) through (D). Under Sec.
435.555(d)(1)(ii)(E), a State could provide the short-term hardship
exception for noninstitutional services in these circumstances.
States could also make individual evaluations for all applicable
individuals who assert having services needs that, but for their
receipt of noninstitutional services, would likely require that they be
in one of the institutions specified in Sec. 435.555(d)(1)(i) and
(ii)(A) through (D). When making such individualized determinations,
the State would have to identify the particular noninstitutional
services that the individual receives that help the individual avoid
the likelihood of requiring one of the institutional services described
in Sec. 435.555(d)(1)(i) and (ii)(A) through (D), as the provision is
limited to individuals who, if not receiving one of the specified
services, receive ``other services of similar acuity.''
5. Emergency and Disaster Areas
The definition of a ``short-term hardship event'' includes the
circumstance of an individual residing in a county or equivalent unit
of local government in which there exists an emergency or disaster that
has been declared by the President under the NEA or the Stafford Act.
We implement these parts of the short-term hardship exception at Sec.
435.555(d)(2).
The National Emergencies Act (NEA) (Pub. L. 94-412), codified at 50
U.S.C. 1621 et seq., authorizes the President to proclaim a national
emergency. Such a Presidential Declaration must be immediately
transmitted to Congress and published in the Federal Register. Various
provisions of Federal law authorize special presidential powers when a
national emergency has been proclaimed by the President. Unlike
declared disasters, national emergencies are generally not declared for
discrete areas of the country and are at times declared for situations
that, while affecting the United States, are external to its borders.
For example, recent emergency declarations have been declared for the
``southern border'' and ``northern border,'' in which neither specific
States nor discrete areas of the States are identified,\91\ while, a
separate 2022 emergency is still in effect regarding United States
nationals held hostage abroad.\92\ Additionally, such emergencies
typically do not contain a specific calendar end date.\93\ Emergencies
or disaster declared by the President pursuant to the NEA, however, are
included in section 1902(xx)(3)(B)(ii)(II)(aa) of the Act.
---------------------------------------------------------------------------
\91\ ``Declaring a National Emergency at the Southern Border of
the United States,'' Proclamation 10886, January 20, 2025, 90 FR
8327 (January 29, 2025). https://www.whitehouse.gov/presidential-actions/2025/01/declaring-a-national-emergency-at-the-southern-border-of-the-united-states; ``Imposing Duties to Address the Flow
of Illicit Drugs Across Our Northern Border,'' Executive Order
14193, February 1, 2025, 90 FR 9113 (February 7, 2025). https://www.whitehouse.gov/presidential-actions/2025/02/imposing-duties-to-address-the-flow-of-illicit-drugs-across-our-national-border.
\92\ ``Bolstering Efforts to Bring Hostages and Wrongfully
Detained Unites States Nationals Home,'' Executive Order 14078, July
19, 2022, 87 FR 43389 (July 21, 2022). https://www.federalregister.gov/documents/2022/07/21/2022-15743/bolstering-efforts-to-bring-hostages-and-wrongfully-detained-united-states-nationals-home.
\93\ Ibid.
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Using the example of the emergencies declared under the NEA for the
``southern border'' and ``northern border,'' we have considered that
one possible interpretation of section 1902(xx)(3)(B)(ii)(II)(aa) of
the Act would be that all States that border Canada and Mexico are, in
their entireties, subject to a national emergency (given that the
declarations pertaining to them did not specify discrete localities in
those States), and that any such State that adopts the short-term
hardship exception will have its entire applicable individual
population excepted from community engagement unless and until such
disaster is declared over.
[[Page 33385]]
We are concerned, however, that this interpretation would in effect
nullify the community engagement requirement for an indefinite period
of time in such States, and would be inconsistent with the concept of a
short-term hardship. Section 1902(xx)(3)(B)(ii)(II) of the Act lists
three short-term hardship circumstances that, generally, relate to
emergencies, disasters, and comparatively high unemployment. Because
applicable individuals in States that elect the short-term hardship
option are deemed to be in compliance with community engagement when
residing in one of the areas described in section
1902(xx)(3)(B)(ii)(II) of the Act, we believe it is reasonable to
interpret section 1902(xx)(3)(B)(ii)(II) of the Act as describing
circumstances that affect an individual's ability to demonstrate
community engagement.
This interpretation is also supported by the example of other
emergencies declared pursuant to the NEA. For example, in ``Declaring a
National Energy Emergency,'' Executive Order 14156, Section 1, January
20, 2025, 90 FR 8433 (January 29, 2025), it is declared that ``[t]he
energy and critical minerals (``energy'') identification, leasing,
development, production, transportation, refining, and generation
capacity of the United States are all far too inadequate to meet our
Nation's needs,'' and that the problems giving rise to this issue are
``most pronounced in our Nation's Northeast and West Coast.'' For
purposes of the short-term hardship exception, it is unclear whether
this means that these areas may be properly classified as areas in
which ``there exists an emergency,'' as required by section
1902(xx)(3)(B)(ii)(II)(aa) of the Act, or if this national emergency is
based on a sum total of energy-related problems throughout the country
in which the Northeast and West Coast weigh heaviest but which are not
themselves experiencing an emergency.
For these reasons, we therefore believe that it is appropriate to
further define the scope of a short-term hardship exception in NEA-
related circumstances. Consistent with our authority to specify
standards for the procedures established by States for short-term
hardship under section 1902(xx)(3)(B)(i) of the Act, we specify at
Sec. 435.555(d)(2)(i) that a short-term hardship based on an NEA-
declared emergency exists when the emergency affects the ability of
applicable individuals to demonstrate community engagement in a
particular county (or equivalent unit of local government), multiple
counties, or statewide. Information that will be relevant to
determining whether this is the case would be the barriers to
demonstrating community engagement that the NEA-declared emergency
presents, how businesses are impacted by the NEA-declared emergency,
and other information tending to show an adverse impact on the ability
of applicable individuals to demonstrate community engagement. To
ensure compliance with this definition, we are also requiring at Sec.
435.555(d)(2)(iii) that a State notify CMS timely of its plan to
effectuate a short-term hardship exception based on an emergency
declared pursuant to the National Emergencies Act, and are providing at
Sec. 435.555(d)(2)(iv) that CMS will review States' use and
implementation of these exceptions.
Section 1902(xx)(3)(B)(ii)(II)(aa) also includes a reference to
emergencies and disasters declared by the President pursuant to the
Stafford Act. The Stafford Act (Pub. L. 100-707), codified at 42 U.S.C.
5122, is intended to ``provide an orderly and continuing means of
assistance by the Federal Government to State and local governments in
carrying out their responsibilities to alleviate the suffering and
damage which result from . . . disasters.'' The assistance is triggered
by a presidential declaration and applies in cases of hurricanes,
tornados, earthquakes, floods, fires, and other circumstances.
Presidential declarations made under the Stafford Act are published
in the Federal Register. Ordinarily, the declaration identifies the
State in which the emergency or disaster has occurred, the particular
areas adversely affected by the event, and the ``incident period''
during which the disaster-causing event occurred. Typically, the
duration of the incident period has expired at the time of the
declaration, sometimes by several months (for example, ``Presidential
Declaration of a Major Disaster for Public Assistance Only for the
State of Alaska,'' 89 FR 91866, November 20, 2024 (relating to
landslides), identifying the incident date as August 25, 2024, and the
presidential declaration November 13, 2024). The declaration itself
then initiates the authority for assistance intended to alleviate
damages and losses sustained as a result of the disaster or emergency.
The declarations, however, do not expire, nor do the statutory or
regulatory authorities for the assistance dictate an established
duration. ``For example, Federal Emergency Management Agency (FEMA) may
designate a hurricane's incident period as the sequence of 5 days
during which winds and flooding caused injuries and damages. FEMA may
then provide assistance (often over the course of months or years) to
cover the costs of losses, damages, and injuries sustained during those
5 days.'' \94\ This means that at the time of a Stafford Act
declaration, the incident giving rise to the declaration may be over,
and the assistance thus authorized by the declaration will be
indefinite. Because section 1902(xx)(3)(B)(ii)(II)(aa) of the Act
requires that applicable individuals be deemed to have met community
engagement in a month in which ``there exists an emergency or disaster
declared by the President under . . . [the Stafford Act],'' we have
considered when such an emergency or disaster ``exists'' for purposes
of the Stafford Act-related exception and address this topic at Sec.
435.555(d)(2)(iv).
---------------------------------------------------------------------------
\94\ Horn DP, Lee E, Webster E. (2023). ``Closing the Incident
Period for the Stafford Act Declaration for the COVID-19 Pandemic,''
Congressional Research Service, pg. 1. https://www.congress.gov/crs-product/IN12106.
---------------------------------------------------------------------------
We have determined that at a minimum, applicable individuals
residing in the designated area identified in a Stafford Act
declaration must be deemed to have demonstrated community engagement
for the month (or months) during which the identified incident period
occurred. For example, if the President issues a Stafford Act
declaration on May 1st and identifies March 25th through March 30th as
the incident period, applicable individuals residing in the area in
which the disaster or emergency occurred must be deemed to have met
community engagement for at least the month of March (in States that
have elected the option for a short-term hardship exception).
For purposes of the months following the end of the month in which
the incident period occurred (in the prior example, the months of April
and beyond), we note that section 1902(xx)(3)(B)(ii)(II)(aa) of the Act
does not limit the duration of the exception for a Stafford Act
disaster to its incident period. Thus, we would consider it reasonable
for a State to extend the exception, given that the effects of a
disaster invariably extend in time beyond the discrete time period in
which a disaster actually occurred.
We therefore grant States the option to seek CMS approval for an
exception period beyond the incident period, based on submission of
information showing that barriers to demonstrating the community
engagement requirement in Sec. 435.552 in the relevant area persist.
In these circumstances, we anticipate that States will regularly
communicate with CMS. The information we would expect of States that
would support the continued applicability of the exception due to
ongoing barriers to demonstrating
[[Page 33386]]
the community engagement requirement in Sec. 435.552 in the relevant
area might, for example, relate to the extent to which businesses have
not reopened, transportation has been hampered, or temporary housing or
relocation of individuals in the community has become necessary. Other
information could also be relevant to support a State's request. We
implement the short-term hardship event for emergencies and disasters
declared by the President pursuant to the Stafford Act definition at
Sec. 435.555(d)(2)(iv).
6. Areas With Certain Levels of Unemployment
Section 1902(xx)(3)(ii)(II) of the Act also includes in the
definition of a ``short-term hardship'' event the circumstance of an
applicable individual residing in a county or equivalent unit of local
government that has an unemployment rate that is at or above the lesser
of 8 percent or 1.5 times the national unemployment rate. To implement
a short-term hardship exception in this circumstance a State first must
seek CMS approval. We implement this component of the short-term
hardship event definition at Sec. 435.555(d)(3).
Notably, Section 1902(xx)(3)(B)(ii)(II)(bb) of the Act does not
specify a source that States or CMS must use to determine whether a
county or equivalent unit of local government has an unemployment rate
that has reached one of the thresholds described therein. The U.S.
Bureau of Labor Statistics (BLS) is the Federal government's primary
source for unemployment information \95\ and maintains statistics for
7,500 different areas in the U.S., including, but not limited to,
States, small labor market areas, and counties and county
equivalents.\96\ The ``Local Area Unemployment Statistics'' program
(``LAUS'' program) that is maintained by the BLS is a Federal-State
cooperative effort, and both Federal programs and State and local
governments use LAUS information for various purposes.\97\ (References
herein to ``BLS information'' include the LAUS information.)
---------------------------------------------------------------------------
\96\ See generally, ``About the U.S. Bureau of Labor
Statistics,'' U.S. Bureau of Labor Statistics, last modified
February 28, 2025, https://www.bls.gov/bls/about-bls.htm.
\97\ ``Local Area Unemployment Statistics,'' U.S. Bureau of
Labor Statistics, https://www.bls.gov/lau/ lau/.
---------------------------------------------------------------------------
Because the BLS information is well-known and utilized by both
States and the Federal government, CMS considers it appropriate to make
the BLS information the standard for evaluating whether a State's
request to apply the short-term hardship exception in this circumstance
is consistent with Sec. 435.555(d)(3); for example, if a State
requests the unemployment-related undue hardship exception on the basis
that an unemployment rate in a particular county (or counties) is at or
above 8 percent, we will consult the unemployment rate in the county or
counties using the BLS statistics, presume the accuracy of such
information, and use it to determine (subject to a State's rebuttal, as
described below) whether the particular county's (or counties')
unemployment rate is at or above 8 percent.
We understand, however, that a State might believe that the
available BLS information does not reflect the actual circumstances in
a particular county or other unit of local government For example, as
available BLS data is commonly based on data from previous months, the
BLS adjustment of a county's unemployment rate in a county that
experiences widespread layoffs from a major employer may take multiple
months. To account for such a situation, for any month for which the
available BLS data is based on data from previous months, a State may
submit preliminary data from a reliable source (such as a State labor
department) reflecting the unemployment rate in a county pending the
BLS adjustment (if an adjustment is necessary) of the county's figure.
We will review the preliminary data and will approve a State's request
to implement this exception if we determine its data persuasive. If we
determine the State's preliminary data persuasive and the BLS data,
when updated, conflicts with the State's data and indicates an
unemployment rate below the thresholds in section
1902(xx)(3)(B)(ii)(II)(bb) of the Act, we will not require revision of
short-term hardship exceptions that were applied based on our approval
of the State's preliminary data but will take the updated data into
consideration.
As noted in section 1902(xx)(3)(B)(ii)(II)(bb) of the Act, the
unemployment-related short-term hardship exception is subject to a
State submitting a request to the Secretary ``made in such form, at
such time, and containing such information as the Secretary may
require.'' We will consider it sufficient if a State submits a request
to CMS, in either electronic or hard-copy form, to apply the
unemployment-related short-term hardship exception and identifies the
particular county or counties, or equivalent unit(s) of local
government, in which the State alleges the unemployment rate to have
reached the lesser of the two thresholds described in Sec.
435.555(d)(3). The State must also provide information from BLS or
another reliable source to demonstrate that the unemployment rate has
reached the appropriate threshold. We note that while the unemployment-
related short-term hardship exception is contingent on a State
submitting a request to the Secretary, section 1902(xx)(3)(B) of the
Act does not mandate that a State make the request even if it believes
one of the relevant unemployment thresholds has been reached; that is,
a State that has elected the short-term hardship exception is not
required to implement the unemployment-related exception when
conditions are present in the State that would support it. In effect,
implementing the unemployment-related short-term hardship event is
optional for States that elect the short-term hardship exception.
We further note that, distinct from the short-term hardship events
relating to applicable individuals who receive services in certain
medical institutions (or receiving services of similar acuity) or
needing to travel outside of their community for an extended period of
time to receive medical services (as described in section II.G.7. of
this IFC), section 1902(xx)(3)(B) of the Act does not require an
applicable individual (or individual acting on the applicable
individual's behalf) to request a short-term hardship exception in the
circumstances described in section 1902(xx)(3)(B)(ii)(II) of the Act.
The events described in section 1902(xx)(3)(B)(ii)(II) of the Act are
broadly impactful in their nature and, especially in the case of
disasters and emergencies, can hamper the ability of both local
governments and individuals to function in a routine manner. We
consider it reasonable to require that, for applicable individuals in
States that have elected the short-term hardship exception and who are
residing in areas in which a disaster has been declared under the
Stafford Act or an emergency under the NEA (and in which, in the latter
circumstance, CMS has approved the designation of a short-term
hardship, as described previously), or in areas that are experiencing
comparatively high unemployment, a State agency must apply an automatic
short-term hardship exception to such applicable individuals for the
duration of the particular circumstances; that is, a State would deem
all applicable individuals residing in the affected areas to have
demonstrated community engagement for the relevant months, without
requiring applicable individuals to make such a request,
[[Page 33387]]
requesting any verification relating to these events from such
individuals, or conducting any evaluation of the extent to which any
such applicable individuals are affected by the circumstances.
7. Applicable Individual or Dependent Must Travel Outside of Their
Community for an Extended Period of Time To Receive Medical Services
Necessary for a Serious or Complex Medical Condition
Section 1902(xx)(3)(B)(ii)(III) of the Act provides that, in States
that adopt the short-term hardship exception, applicable individuals
are excepted from demonstrating community engagement when, for all or
part of a month, they or their dependent must travel outside of their
community for an extended period of time to receive medical services
necessary to treat a serious or complex medical condition (as described
in section 1902(xx)(9)(A)(ii)(V)(ee) of the Act) that are not available
within their community of residence. We implement this component of the
short-term hardship event definition at Sec. 435.555(d)(4). We provide
the following explanation for its elements.
Section 1902(xx) of the Act does not define ``dependent.'' Section
1902(xx)(9)(ii)(III) of the Act refers to a ``dependent child'' within
the definition of a ``specified excluded individual,'' and we define
``dependent child'' for that purpose at Sec. 435.554(a). Because the
``dependent'' reference in section 1902(xx)(3)(B)(ii)(III) of the Act
is not similarly limited to a ``child,'' we do not believe our analysis
above (section II.E.3.e. of this IFC), relating to specified excluded
individuals who are parents, guardians, caretaker relatives, or family
caregivers to dependent children, is warranted here.
We are defining a ``dependent'' at Sec. 435.555(b)(1), for the
purposes of the short-term hardship circumstance described in section
1902(xx)(3)(B)(ii)(III) of the Act, as: a minor (as defined under State
law) child of the applicable individual who is living with the
applicable individual; a tax dependent of the applicable individual
(whether or not the tax dependent is a minor child of the individual or
residing with the applicable individual); or an individual for whom the
applicable individual has been appointed a guardian by a court. We
believe that the dependent relationship in each of these cases can be
reasonably considered categorical and represents common uses of the
term ``dependent.'' \98\
---------------------------------------------------------------------------
\98\ See, for example, https://www.merriam-webster.com/dictionary/dependent.
---------------------------------------------------------------------------
We note that the statute does not require that the applicable
individual travel with the dependent for purposes of the exception.
We have considered, however, that the circumstance described in
section 1902(xx)(3)(B)(ii)(III) of the Act is that of an applicable
individual being deemed to have demonstrated community engagement when
a dependent of that individual must travel outside of their community
for necessary medical care, and we believe it is reasonable to conclude
that the statute contemplates that the need for the dependent to travel
for necessary medical care will significantly impact the applicable
individual. If the applicable individual is not actually traveling with
their dependent, we believe that the applicable individual could be
impacted by the dependent's need to travel for medical care by needing
to take leave from employment or to be absent from other scheduled
community engagement activities for reasons related to the dependent's
condition or travel, being responsible for managing the logistics of
the medical appointment or the travel, needing to take the dependent to
local medical appointments related to the condition that requires the
travel, or needing to be available to communicate with medical
providers.
Even though we are not interpreting section 1902(xx)(3)(B)(ii)(III)
of the Act to impose a travel requirement on the applicable individual
when it is the dependent of such individual who must travel for the
relevant medical care, we recognize that this circumstance offers the
applicable individual a short-term hardship exception to the community
engagement requirement. To reflect the absence of a co-travel
requirement in section 1902(xx)(3)(B)(ii)(III) of the Act while giving
meaning to the statutory reference to a hardship that an applicable
individual will sustain in the absence of actually traveling with their
dependent, we believe it is reasonable for an applicable individual who
is not traveling with the dependent to verify that they have
experienced a short-term hardship in order to qualify for the
exception.
Accordingly, at Sec. 435.555(d)(4)(i), we require an applicable
individual who does not travel with their dependent for the necessary
medical treatment to verify their efforts on behalf of the dependent
that are directly related to the dependent's travel or medical
condition that gives rise to the need for the travel. Specifically, the
applicable individual must demonstrate having to take leave from
employment or having to absent themselves from other community
engagement activities for reasons related to the dependent's condition
or travel. Examples of reasons related to the dependent's condition or
travel could be taking the dependent to local medical appointments
related to or in preparation for the medical appointment that requires
the travel; conducting logistical activities relating to the travel;
and maintaining primary responsibility for communicating with the
dependent's medical providers.
Under section 1902(xx)(3)(B)(ii) of the Act, the short-term
hardship exception only applies during a month in which, for part or
all of such month, the applicable individual, or the applicable
individual's dependent, must travel outside of their community. This
means that, whether the applicable individual travels with the
dependent or not, the exception only applies in the month in which the
dependent travels. Thus, if an applicable individual must take leave
from work or leave or be absent from other community engagement
activities in the month preceding the dependent's travel, a short-term
hardship exception will not apply because the dependent is not
traveling. Additionally, the leave from employment or leave or absence
from other community engagement activities must occur in the month in
which the dependent travels in order for the applicable individual who
is not traveling with the dependent to receive the exception.
The definition at Sec. 435.554(c)(5)(i)(E) of a ``serious or
complex medical condition'' would also apply to the short-term hardship
event for travel outside of the community to receive medical services
necessary to treat a serious or complex medical condition.
We have considered whether and how other terms and phrases in
section 1902(xx)(3)(B)(ii)(III) of the Act should be defined where
section 1902(xx) of the Act does not define them. We consider the
phrase ``community'' to be subject to several different
interpretations. While numerous uses of ``community'' exist in title
XIX of the Act, the term is generally not defined by itself within it
(``home and community-based services'' are described in section 1915(c)
and (i) of the Act, for example, and section 1924 of the Act
essentially defines a ``community spouse'' as an individual who is not
in a medical institution or nursing facility).
What is considered a ``community'' will typically vary from one
State to another, such as between predominantly rural States and others
with numerous
[[Page 33388]]
urban areas, or even within a State. Therefore, we are not defining
this term for purposes of this rule and are instead providing States
with the discretion to determine what would count as a ``community''
for purposes of the short-term hardship exception. A State could
reasonably define ``community'' to align with political subdivisions;
that is, that when an applicable individual (or the dependent of such
individual) must leave their political subdivision, they will have left
their ``community.'' Alternatively, a State could reasonably define
community based on proximity to the individual's residence; for
example, that an individual leaves their community when needing to
travel more than 25 miles or a certain number of hours (or has to stay
overnight). Other definitions of ``community'' may be reasonable,
although we remind States that the exception is for a short-term
hardship. As we have instructed States in the context of the undue
hardship exceptions to the application of the asset-transfer and trust
rules (as described in section II.G.2. of this IFC), the mere causation
of inconvenience is insufficient to establish a hardship.\99\ States
should therefore develop standards for a ``community'' that make
leaving it pose some measurable complication for applicable individuals
and their dependents while at the same time not creating a standard
that is too onerous. (For example, a State should not define a
``community'' to be an entire State such that only when applicable
individuals or their dependents have to leave the State does the short-
term hardship apply.)
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\99\ Section 3258.11, 3259.8(A) of the State Medicaid Manual.
---------------------------------------------------------------------------
``Period of time'' is also used in title XIX of the Act as a
general, undefined phrase (for example, in section 1902(a)(44), (v),
and (ee)(3)(A)(iii) of the Act)) and these other uses do not contain a
modifier such as ``extended,'' as is used in section
1902(xx)(3)(B)(ii)(III) of the Act. We are not defining ``extended
period of time'' in this rule and are thus providing States discretion
to create a definition and standard for ``extended period of time,''
consistent with the nature of the short-term hardship exception.
Section 1902(xx)(3)(B)(ii) of the Act directs that the short-term
hardship circumstances described therein exist when, for ``part or all
of [a] month,'' all of the criteria for one of the circumstances is
met. ``Part'' of a month is therefore sufficient for purposes of any of
the short-term hardship circumstances, which means that ``extended
period of time'' could be less than a full month, and States are not
permitted to require that it be at least a full month or longer.
Finally, under section 1902(xx)(3)(B)(ii)(III) of the Act, the
medical services requiring the travel described in that section must be
ones that ``are not available within'' the applicable individual's or
dependent's ``community of residence.'' We do not interpret ``community
of residence'' to have a distinct meaning from ``community'' within
section 1902(xx)(3)(B)(ii)(III) of the Act. For purposes of evaluating
the unavailability of the services within such community, we again
believe that States should have the discretion to develop the standards
to evaluate this, subject again to the ``hardship'' concept that is
central to this exception.
States may find helpful their processes for determining if a
Medicaid eligible individual needs related travel expenses \100\ (in
particular meals, lodging, and attendants) for non-emergency medical
transportation (NEMT) or out-of-State services as described at Sec.
431.52, when designing a process to determine if an individual must
travel outside of their community under the short-term hardship
exception at section 1902(xx)(3)(B)(ii)(III) of the Act. State
processes for NEMT-related travel expenses and out-of-State services
are often different, so States could look to one or both processes in
implementing this short-term hardship exception. While States must pay
for NEMT-related travel expenses when it is necessary for a beneficiary
to secure covered services, States have flexibility to determine the
processes to determine if a beneficiary requires NEMT to secure covered
services and if related travel expenses are necessary for that NEMT
trip. Under Sec. 431.52 States must cover out-of-State services when
medical services are needed because of a medical emergency; medical
services are needed and the beneficiary's health would be endangered if
they were required to travel to their State of residence; the State
determines, on the basis of medical advice, that the needed medical
services, or necessary supplementary resources, are more readily
available in the other State; or it is general practice for
beneficiaries in a particular locality to use medical resources in
another State. However, States have the flexibility to establish the
process to determine if an out-of-State service meets one of the
required criteria under Sec. 431.52. It is our understanding that the
State processes for determining the necessity of NEMT-related travel
expenses and out-of-State services typically factor in an individual's
medical condition, their need for medical services, the availability of
a medical service in the individual's geographic area (for example,
number of providers in their particular geographic area who accept
Medicaid and can furnish the relevant medical services, time and
distance to providers who are able to furnish services if closer
providers are unavailable, provider acceptance of new patients, that
the medical services are more readily available in a different
geographic area, etc.), and the impact a lack of the medical services
would have on the individual. Thus, either of these State-established
processes might be used by a State as a starting point for identifying
when an applicable individual can receive this exception.
---------------------------------------------------------------------------
\100\ CMCS State Medicaid Director letter #23-005, ``Assurance
of Transportation: A Medicaid Transportation Coverage Guide.''
(September 28, 2023), pg. 30. Available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd23006.pdf.
---------------------------------------------------------------------------
H. Assessing Compliance With the Community Engagement Requirement
This section of the IFC discusses how States must assess compliance
with the community engagement requirement in the context of
applications, renewals, certain redeterminations in connection with
changes in circumstances, and, at State option, more frequent
verifications between renewals.
Section 1902(xx)(1) of the Act, as implemented in new Sec.
435.556, provides that States must require applicable individuals to
demonstrate community engagement as a condition of eligibility for
medical assistance at application and renewal. Section 1902(xx)(4) of
the Act provides States the option to conduct more frequent
verifications of compliance with the community engagement requirement.
Section II.K. of this IFC describes when States must first implement
the community engagement requirement.
Subject to certain limitations, section 1902(xx)(1) of the Act
allows States to determine the number of months for which applicable
individuals must demonstrate community engagement. Generally, the
specific months for which an applicable individual must demonstrate
community engagement differ for those who are applying for medical
assistance under the State plan (or a waiver of such plan) and those
who are already enrolled and receiving medical assistance under the
State plan (or a waiver of such plan). However, in both cases, we use
the term ``review period'' to reference the time period under
consideration, during which an applicable individual must demonstrate
the required number of months of
[[Page 33389]]
community engagement (or be deemed to being doing so through an
exception) to fulfill the requirement.
1. Assessing Applicability of the Community Engagement Requirement
As a threshold matter, the State must first confirm whether an
applicant or beneficiary is an applicable individual as defined at
Sec. 435.551. This means the State must determine whether the
applicant or beneficiary is a specified excluded individual as defined
at Sec. 435.554 before determining whether they have demonstrated or
are deemed to have demonstrated community engagement. Because a
specified excluded individual, as described at Sec. 435.554, is not an
applicable individual who must demonstrate or be deemed to demonstrate
community engagement during the review period, the State determines if
someone is a specified excluded individual or an applicable individual
at application based on the month of application, as a State does when
evaluating other factors of Medicaid eligibility. At renewal, this
means the State determines if someone is a specified excluded
individual or an applicable individual when processing the renewal. As
further described in section II.E. of this IFC, specified excluded
individuals are not applicable individuals and are therefore not
required to demonstrate community engagement as a condition of
eligibility. Thus, the general process for assessing compliance as
described in this section would not apply to a specified excluded
individual. See section II.H.3.d. ``Processing Certain Changes in
Circumstance,'' at the end of this section for a discussion of how to
address an individual who becomes an applicable individual after being
a specified excluded individual or when moving from an eligibility
group that does not include applicable individuals to the adult group
or a section 1115 demonstration that does.
2. Assessing Compliance for Applicants
At new Sec. 435.556(a)(1), we implement the requirement under
section 1902(xx)(1)(A) of the Act that, for an applicable individual,
the State must require the individual to demonstrate community
engagement as a condition of eligibility at application. Specifically,
the State must require an applicable individual who files an
application for medical assistance under the State plan (or a waiver of
such plan) to demonstrate community engagement for at least 1 but not
more than 3 consecutive months, as specified by the State, immediately
preceding the month of application. At application, the review period
is the State-specified number of months prior to the month of
application for which someone must demonstrate community engagement. We
interpret the requirement to mean that at a minimum, States must
require applicable individuals to demonstrate community engagement in
the 1 month prior to the month of application. However, States may
elect to extend this review period to 2 or 3 consecutive months prior
to the month of application. An applicable individual who files an
application is considered to have successfully met the requirement if
they demonstrate community engagement for all of the months elected by
the State. States must specify the number of consecutive months for
which an applicable individual must demonstrate community engagement
prior to the month of application in the State plan.
We acknowledge that assessing compliance with the community
engagement requirement will necessitate changes to existing application
processes and procedures. As States consider the changes that are
necessary to implement this requirement, States may need to consider
how these changes affect the application process, including the paper
and online applications, overall timelines, and workflows. States will
need to make the necessary adjustments to ensure efficient eligibility
and enrollment operations and compliance with processes for all
Medicaid populations.
3. Assessing Compliance for Enrolled Beneficiaries
At new Sec. 435.556(a)(2), we implement the requirement under
section 1902(xx)(1)(B) of the Act that the State must require an
applicable individual who is enrolled and receiving medical assistance
to demonstrate community engagement as a condition of eligibility.
Section 1902(xx)(1)(B) of the Act specifies that States must
require an applicable individual who is enrolled and receiving medical
assistance to demonstrate community engagement ``for 1 or more months,
as specified by the State, whether or not consecutive'' at renewal or,
at State option, more frequently. We interpret this to mean that a
State must specify the number of months for which the enrolled
applicable individual must demonstrate community engagement either
between renewals or, if elected by the State, between more frequent
verifications of community engagement. The State must specify a minimum
of 1 month and may elect to require that individuals demonstrate more
than 1 month of compliance with the community engagement requirement
during the review period. The State must consider a beneficiary who is
an applicable individual to have successfully met the requirement if
during any part of the review period under consideration (either
between renewals or between more frequent verifications, if elected by
the State), the beneficiary demonstrates or is deemed to demonstrate
community engagement for the number of months specified by the State.
The statute does not specify the maximum length of the review period.
To ensure that a State does not require an individual to demonstrate
community engagement outside of the review period, at Sec. 435.556(b),
we prohibit States from requiring an applicable individual to
demonstrate community engagement for a number of months that exceeds
the applicable review period.
Section 1902(xx)(a)(1)(B) of the Act provides that, at renewal or
at more frequent verification, if elected by the State, an applicable
individual must demonstrate community engagement for 1 or more months
``whether or not consecutive.'' Although the statute leaves to the
State's discretion the number of months for which a beneficiary who is
an applicable individual must demonstrate community engagement, the
clause, ``whether or not consecutive'' is not modified by a grant of
discretion to the State. We therefore interpret it not to permit the
State to require a beneficiary to demonstrate community engagement for
consecutive months, if the State elects to require more than 1 month,
or to dictate the specific month(s) for which an applicable individual
must demonstrate community engagement during the review period between
renewals or more frequent verifications, if elected by the State.
We will discuss next how the review period is defined for
beneficiaries and how States must assess compliance at renewal or at
more frequent verifications. We also address requirements for States
that elect to conduct more frequent verifications of community
engagement, beyond the minimum required verification as part of a
beneficiary's regular renewal.
a. Assessing Compliance at Renewal if the State Does Not Elect To
Conduct More Frequent Verifications of Compliance With the Community
Engagement Requirement
To implement section 1902(xx)(a)(1)(B)(i) of the Act, at Sec.
435.556(a)(2)(i), we require States that do not opt to conduct more
frequent verifications of compliance with the
[[Page 33390]]
community engagement requirement to assess an applicable individual's
compliance during the period between such individual's most recent
determination or redetermination of eligibility and the date the
individual's renewal is due, consistent with section 1902(e)(14)(L) of
the Act and Sec. 435.916. The period of time between the effective
date of the individual's last determination or redetermination of
eligibility and the date the renewal is due is also referred to as the
individual's ``eligibility period.'' For beneficiaries, their
eligibility period is the ``review period'' at renewal when States do
not conduct more frequent verifications of compliance with the
community engagement requirement. As part of the renewal process, a
State must verify that a beneficiary who is an applicable individual
demonstrated or is deemed to have demonstrated community engagement for
the required number of months during the review period (which is the
same period of time as the eligibility period).
In this context, we interpret ``redetermination of eligibility'' to
mean the redetermination conducted during the individual's periodic
renewal of eligibility under section 1902(e)(14)(L) of the Act and
Sec. 435.916(a), rather than as a result of a change in circumstances
following the redetermination procedures at Sec. 435.916(d). We
considered whether to interpret ``redetermination of eligibility'' to
also include redeterminations based on instances when the State only
evaluates the eligibility factor for which the individual experienced a
change in accordance with Sec. 435.916(d)(1)(i). However, we did not
choose to include such redeterminations because they are limited in
nature and could shorten an individual's review period based on a
change unrelated to community engagement.
At renewal, States must require a beneficiary who is an applicable
individual to demonstrate at least 1 month of community engagement
during the review period. When considering whether to require
applicable individuals to demonstrate more than 1 month of community
engagement at renewal, a State should consider how long its renewal
process currently takes in relation to the length of the eligibility
period. We remind States that most individuals required to demonstrate
community engagement are also subject to the new 6-month renewal
requirement under section 1902(e)(14)(L) of the Act. Because most
States currently take between 60 and 90 days to complete all steps in
the renewal process for a cohort, an individual subject to renewals
once every 6 months may only have been enrolled in their current
eligibility period for approximately 3 months when the State initiates
the next renewal and begins checking reliable information available to
the State. As such, in electing the number of months during the review
period for which a beneficiary must demonstrate community engagement at
renewal, a State should consider its ability to access timely data to
verify compliance with community engagement and otherwise renew
eligibility, consistent with the community engagement ex parte
verification requirements in section 1902(xx)(5) of the Act, this IFC,
and existing Federal renewal requirements at Sec. 435.916(a).
b. Assessing Compliance When the State Conducts More Frequent
Verifications of Compliance With the Community Engagement Requirement
To implement section 1902(xx)(a)(1)(B)(ii) of the Act, at Sec.
435.556(a)(2)(ii), we specify that, if a State elects to verify
compliance more frequently than at a beneficiary's renewal, the State
must require a beneficiary who is an applicable individual to
demonstrate community engagement during the period between the most
recent verification of community engagement and the date the next
verification is due, consistent with Sec. 435.557(d). As such, States
must evaluate whether an applicable individual demonstrated or is
deemed to have demonstrated community engagement for the number of
months specified under Sec. 435.556(a)(2), during the period between
the date of the beneficiary's last verification of community engagement
and the date the next scheduled verification of community engagement is
due. The next scheduled verification of community engagement may be
either the next more frequent verification of compliance with community
engagement that occurs during the eligibility period or the
verification that occurs during the individual's next renewal. In the
context of a State that elects more frequent verifications, the review
period is the time between each verification of community engagement,
including the verification that occurs as part of the regular renewal.
As an illustrative example, consider a State that elects to verify
community engagement more frequently than at regularly scheduled
renewals and does so in the third month of a 6-month eligibility
period. The State requires an applicable individual to demonstrate
community engagement for 1 month at each verification of community
engagement. Prior to assessing compliance, the State must first confirm
the beneficiary is still an applicable individual and is not a
specified excluded individual, as defined at Sec. 435.554. If the
beneficiary remains an applicable individual, then, to conduct a
verification of community engagement in the third month of eligibility,
the State will check information available, including information from
data sources, to determine whether the applicable individual
demonstrated community engagement, including by meeting an exception
under Sec. 435.553 or, if applicable, Sec. 435.555, for at least 1
month since the last verification of community engagement. In this
specific scenario, the review period would consist of the first,
second, and third months of the eligibility period, and the applicable
individual could meet the requirement by demonstrating community
engagement (including by being deemed as demonstrating community
engagement) in any one of these 3 months. If the State is unable to
verify the applicable individual's demonstration of community
engagement, then the State would follow the noncompliance procedures
described in section II.J. of this IFC and Sec. 435.558. If the State
is able to verify the applicable individual's demonstration of
community engagement, the individual's eligibility period continues.
Then, at renewal, the State will again verify whether the individual is
a specified excluded individual and, if not, verify whether the
applicable individual demonstrated 1 month of community engagement
between the fourth month of the eligibility period and the end of the
eligibility period.
States that verify community engagement more frequently than at
each renewal will need to consider the timing of the additional
verifications, the frequency of renewals for applicable individuals,
and the time it takes the State to process renewals for a cohort. Doing
so will help minimize concurrent verifications that create additional
administrative burden for the State and individual, which could occur
when conducting a more frequent verification overlaps with the time
period the individual's renewal is in progress. For example, if a State
conducts the more frequent verification of community engagement in
month 3 of a 6-month eligibility period, it is possible the State is
still processing the verification, including following applicable
noncompliance procedures, into month 4 of an individual's eligibility
period,
[[Page 33391]]
while at the same time the State's system is initiating the
individual's renewal that must be completed by the end of the 6-month
eligibility period.
Additionally, we remind States of the requirement at Sec.
435.916(d) to promptly redetermine eligibility if they receive
information about a change in a beneficiary's circumstances that may
affect eligibility. States that elect to conduct more frequent
verifications of community engagement compliance may receive
information that may affect other factors of eligibility, such as
changes in income, and the State must take prompt action to redetermine
eligibility based on such information when it is received.
c. Prohibition on Assessing Compliance With Community Engagement for
Specified Excluded Individuals
At new Sec. 435.556(c), we specify that States may not apply the
requirements under Sec. 435.556(a) to specified excluded individuals
defined at Sec. 435.554. Because specified excluded individuals are
not applicable individuals, States may not require such individuals to
demonstrate or be deemed as demonstrating community engagement for the
otherwise applicable number of months at application, renewal, or, if
applicable, more frequent verification. If a State identifies that an
applicable individual meets an exclusion, the person becomes a
specified excluded individual and is no longer subject to the
requirements at Sec. 435.556(a). This could be identified during the
renewal process, as part of a more frequent verification of community
engagement (if elected by the State), identified through information
that becomes available to the State, or due to the individual reporting
a change in their status to the Medicaid agency. Section II.I.7. of
this IFC addresses how States must verify whether an individual is a
specified excluded individual.
d. Processing Certain Changes in Circumstances
As a reminder, States are required to have procedures in place to
ensure individuals make timely and accurate reports of any changes that
may affect eligibility, in accordance with Sec. 435.916(c). As
described in section II.L. of this IFC, individuals who are enrolled in
an eligibility group subject to the community engagement requirement
must receive outreach about the community engagement requirement,
including information on how to report changes. In accordance with
Sec. 435.916(d), the State must promptly act on any changes in
circumstances that may affect eligibility, and if a State has
information about anticipated changes in a beneficiary's circumstances
that may affect their eligibility, the State must redetermine
eligibility at the appropriate time based on such changes. We note that
not all changes related to an individual's status as a specified
excluded individual or demonstration or deemed demonstration of
community engagement will affect a person's Medicaid eligibility. State
decisions on how many months individuals must demonstrate compliance
with community engagement in the review period and the individual's
circumstances will influence whether a change related to community
engagement is material to the individual's Medicaid eligibility.
However, States should ensure they have procedures for beneficiaries to
report such changes, as the individual may not know whether a change
may affect their eligibility. In addition, States have an obligation to
notify individuals of changes to eligibility requirements and rights
and responsibilities, such as losing their specified excluded status,
which is described further in this section of the IFC.
(1) Changes in Circumstances for Beneficiaries Enrolled on Another
Basis Who Become Eligible for a Group Subject to the Community
Engagement Requirement
States will encounter instances when a beneficiary enrolled in an
eligibility group that is not subject to the community engagement
requirement experiences a change in circumstance and becomes
potentially eligible for an eligibility group for which community
engagement is a factor of eligibility, such as the adult group or an
applicable section 1115 demonstration described at Sec. 435.551. When
redetermining eligibility based on the change and considering
eligibility on other bases, a State must evaluate whether the
beneficiary is potentially eligible in the adult group or in an
applicable section 1115 demonstration. If so, the State must evaluate
whether the beneficiary would be an applicable individual. If the
beneficiary is determined to be an applicable individual, the State
must then determine whether the beneficiary meets or is deemed to meet
the community engagement requirement. Only after these steps may the
State complete its determination of eligibility and, if appropriate,
move the beneficiary into the new eligibility group or applicable
section 1115 demonstration.
Section 1902(xx)(3)(A) of the Act provides that anyone described in
section 1902(a)(10)(A)(i)(I) through (VII) of the Act for part or all
of a month is deemed to have demonstrated community engagement for that
month. At Sec. 435.556(a)(2)(iii), we specify that in the case of a
beneficiary who becomes an applicable individual during their
eligibility period, the review period is the period between the
effective date of such individual's most recent determination or
redetermination at renewal, as applicable, and the end of the month
prior to the month in which the individual enrolls in coverage in a
group or an applicable section 1115 demonstration subject to community
engagement. The end date of this review period ensures that the
beneficiary's compliance is not assessed for any month for which the
beneficiary did not have the entire month to demonstrate community
engagement. In assessing compliance within this review period, the
State would need to determine whether the beneficiary demonstrated or
is deemed to have demonstrated community engagement for the lesser of
the number of months the State elects under Sec. 435.556(a)(2) or,
consistent with the requirement at Sec. 435.556(b), the number of
months in the review period. This means the State will assess
compliance with community engagement during a change in circumstances
for the same number of months it requires at renewal except in
situations when the number of months the State assesses compliance at
renewal exceeds the number of months in the review period.
We note that most beneficiaries enrolled on another basis who
become applicable individuals when the State acts on a change in
circumstances will be deemed to have demonstrated community engagement
for all months in the relevant review period because they meet one or
more mandatory exceptions (as described in section II.D. of this IFC).
There may be limited circumstances in which such deeming is not
applicable, depending on the optional groups a State elects to cover
and/or the section 1115 demonstrations a State has implemented.
(2) Changes in an Individual's Status as a Specified Excluded
Individual
States will also encounter instances in which an individual who was
previously determined to be a specified excluded individual loses that
status during their eligibility period. The change in status may be
identified outside of the regularly scheduled renewal process and could
be a beneficiary-reported change in status, a change identified by the
State, or an anticipated change, such as when a
[[Page 33392]]
parent's dependent child turns age 14, causing the parent to no longer
be a specified excluded individual on the basis of being the parent of
a dependent child as defined at Sec. 435.554(a). Unless the individual
is a specified excluded individual on another basis specified at Sec.
435.554, the individual becomes an applicable individual who is subject
to the community engagement requirement.
As with the case of someone previously enrolled in an eligibility
group or section 1115 demonstration not subject to community engagement
newly becoming an applicable individual, when a State determines that
an individual is no longer a specified excluded individual and has
become an applicable individual, the State must ensure the individual
demonstrates community engagement or is deemed to have demonstrated
community engagement during the period specified at Sec.
435.556(a)(2)(iii). In assessing compliance within this review period,
a State must consider an applicable individual compliant with the
community engagement requirement if they demonstrated or are deemed to
have demonstrated community engagement for the lesser of the number of
months the State elects under Sec. 435.556(a)(2) or, consistent with
the requirement in Sec. 435.556(b), the number of months in the review
period.
It is important to note that having been a specified excluded
individual is a mandatory exception, as specified at Sec.
435.553(a)(4), that results in the applicable individual being deemed
to have demonstrated community engagement in a month for which the
applicable individual was a specified excluded individual for all or
part of the month. As such, the State must deem an applicable
individual to have demonstrated community engagement in all month(s) of
the review period in which they were a specified excluded individual.
Because of this deeming, in most cases, a person will continue to be
eligible for Medicaid at the time they lose their status as a specified
excluded individual.
e. Notifying Individuals About Eligibility Decisions and Changes in
Eligibility Requirements
States are required to provide all applicants and beneficiaries
with ``timely and adequate written notice of any decision affecting
their eligibility'' (Sec. 435.917(a)), which includes eligibility
approvals, denials, and terminations. In the case of eligibility
terminations, such notice must be provided at least 10 days in advance
of the date of action (Sec. Sec. 431.201, 431.211). Further, States
must provide individuals with information on their eligibility
requirements and rights and responsibilities (Sec. 435.905).
Eligibility determination notices must include a clear statement of the
basis of eligibility, consistent with Sec. 435.917(b)(1)(i), or a
statement of the State's intended action and the specific reasons for
the action, consistent with Sec. 431.210(a) and (b), as applicable.
In the context of eligibility under Sec. 435.119 or a section 1115
demonstration that includes applicable individuals as specified at
Sec. 435.556(d), the State must inform applicants and beneficiaries of
the State's eligibility determination. The notice must address whether
the individual meets the criteria as a specified excluded individual as
defined at Sec. 435.554. If the individual does not meet the criteria
for a specified excluded individual and is an applicable individual as
defined at Sec. 435.551, the notice must also address if the
individual demonstrates community engagement under Sec. 435.552,
including if the individual meets the criteria for an exception under
Sec. 435.553 or, if applicable, Sec. 435.555, to be deemed as
demonstrating community engagement, for the month(s) specified under
Sec. 435.556(a). Applicants and beneficiaries have the right to
request a fair hearing to appeal the State's decision that an
individual meets the criteria to be a specified excluded individual and
their compliance with the community engagement requirement (including
meeting the criteria for an exception), consistent with Sec.
431.220(a)(1).
We also consider the loss of a beneficiary's status as a specified
excluded individual and becoming an applicable individual to be an
``action'' under Sec. 431.201. This change reduces eligibility because
it adds new eligibility requirement that the individual must meet to
maintain their eligibility. Therefore, the State must provide a
beneficiary who is losing their specified excluded individual status
with a minimum of 10 days advance notice and fair hearing rights
consistent with Sec. Sec. 435.917 through 435.918 and part 431 subpart
E. The advance notice must include the outreach material at Sec.
435.561(c), consistent with Sec. 435.561(b)(3)(iv)(C).
I. Verification of Compliance With and Exceptions and Exclusions From
the Community Engagement Requirement
In this section, we discuss requirements and State options we are
implementing at new Sec. 435.557 for States to verify: (1) that an
applicable individual is compliant with the community engagement
requirement in section 1902(xx)(2) of the Act; (2) that an applicable
individual is deemed compliant for a month in which the individual was,
for part or all of the month, in a mandatory or optional excepted
status described in section 1902(xx)(3) of the Act, and (3) that an
individual is a ``specified excluded individual'' defined in section
1902(xx)(9)(A)(ii) of the Act to whom the community engagement
requirement does not apply. We also discuss the requirement in section
1902(xx)(5) of the Act that States conduct ex parte verifications by
maximizing reliance on electronic data sources when verifying
compliance with the community engagement requirement, including deemed
compliance, or when determining that an individual is a specified
excluded individual. Additionally, we address the circumstances under
which States may require individuals to provide documentation or other
additional information. In this section, we discuss the data sources
that States will be required to use and considerations regarding use of
other data sources. We also discuss verification options when there is
no data source available to verify an individual's compliance, deemed
compliance, or status as a specified excluded individual, or when the
data available are not reasonably compatible with information provided
by, or on behalf of, an individual.
1. Requirement To Conduct Ex Parte Verification
Section 1902(xx)(5) of the Act, implemented at Sec. 435.557(b),
requires States to conduct ex parte verification of compliance and
deemed compliance with the community engagement requirement, and
qualification as a specified excluded individual. In the context of
community engagement, ex parte verification is not specific to the
renewal process but instead refers to the requirement that States first
attempt to verify compliance with, or exception or exclusion from, the
community engagement requirement using reliable information available
to the State, without requiring additional information from an
applicant or beneficiary. Specifically, the statute requires that
``[f]or purposes of verifying that an applicable individual has met the
requirement to demonstrate community engagement under [section
1902(xx)(1)], or determining such individual to be deemed to have
demonstrated community engagement under [section 1902(xx)(3)], or that
an individual is a specified excluded individual under [section
[[Page 33393]]
1902(xx)(9)(A)(ii)], the State shall . . . establish processes and use
reliable information available to the State . . . without requiring,
where possible, the applicable individual to submit additional
information.'' The language in the statute neither limits the
information the State must attempt to obtain (beyond that it be
reliable and available to the State) nor the points in the process when
the State must seek these data (for example, the ex parte verification
requirements are not limited to renewals). Thus, we interpret section
1902(xx)(5) to require that States attempt to verify on an ex parte
basis that an individual is a specified excluded individual or meets
the community engagement requirement (either via compliance or deemed
compliance via an exception) every time the State verifies compliance.
We also remind States that, as further discussed in section II.H.1.
of this IFC, before assessing compliance, the State must first attempt
to confirm that the individual is an applicable individual as defined
at Sec. 435.551. This means that the State must first attempt, where
possible, to determine whether the applicant or beneficiary is a
specified excluded individual defined at Sec. 435.554, because
specified excluded individuals are not applicable individuals and are
therefore not subject to the community engagement requirement. As such,
to the extent possible, the State must first attempt to verify an
individual's specified excluded individual status based on reliable
information available to the State and, if the State cannot verify that
the individual is a specified excluded individual, proceed to check
reliable information available to the State to verify the individual
has demonstrated community engagement or was deemed to have
demonstrated community engagement based on a mandatory or optional
exception (if applicable). However, we recognize that, depending on the
State's procedures for checking reliable information available to the
State, the State may practically collect all reliable information
available to the State at once. In addition, the State may be able to
more quickly obtain reliable information about certain criteria (such
as income) than other criteria (for example, regarding an individual's
specified excluded individual status based on medical frailty). In
general, we are not requiring States to change their existing
procedures for verifying other factors of eligibility not related to
community engagement in order to implement the community engagement
verification requirements or to implement a specific hierarchy when
checking reliable information available to the State to verify an
individual's specified excluded individual status or compliance or
deemed compliance with the community engagement requirement. However,
we note that States must make every effort to ensure they do not seek
information to verify compliance or deemed compliance with community
engagement for a specified excluded individual.
We remind States that in implementing ex parte processes for
obtaining and using reliable information available to the State for the
purposes of verifying community engagement, States must comply with all
applicable data sharing and privacy laws. States must also ensure they
do not violate the civil rights protections under the ADA, section 504
of the Rehabilitation Act (section 504), section 1557 of the Affordable
Care Act (section 1557), or any other applicable Federal or State civil
rights laws.
2. Requirement To Use Reliable Information Available to the State
At Sec. 435.557(a), we define reliable information available to
the State for the purpose of verifying an individual's status as a
specified excluded individual or an individual's compliance or deemed
compliance with the community engagement requirement. We explain that
reliable information available to the State means information necessary
for determining eligibility to which the State has access or should
have access. This includes information from electronic data sources
that the agency has determined effective consistent with Sec.
435.557(b)(1)(ii), and as documented in the agency's verification plan
in accordance with Sec. 435.557(b)(1)(iii); information from other
State or local agencies; information related to community engagement
from Federal agencies or other data sources provided through the
electronic service established by the Secretary (The Federal Data
Services Hub, ``the Hub''); information in the State's eligibility
system; information in the individual's case record; payroll data;
claims(s) relevant to the individual that have been adjudicated in the
preceding 12 months, including those that have been paid, pended or
denied (hereinafter referred to as ``adjudicated claims''); and
encounter data, as relevant to the individual, from the preceding 12
months. States must have a process to obtain the information defined as
reliable information available to the State without seeking information
from the individual. The process may be automated, such as through an
Application Programming Interface (API) or other electronic interface
or could require a worker to manually obtain the information from its
source.
We further specify that reliable information available to the State
includes information from electronic data sources that States have
determined to be effective, consistent with Sec. 435.557(b)(1)(ii), as
documented in the State's verification plan in accordance with Sec.
435.557(b)(1)(iii). Accordingly, wherever possible, States must use
existing data sources the State relies upon to verify other eligibility
criteria (for example, income data sources) to verify compliance with
the community engagement requirement and connect to other data sources
(in addition to those specifically enumerated) when doing so is
effective, as described in further detail later in this section. We
also consider data from other State and local agencies that is needed
to determine eligibility to be reliable information available to the
State for the purpose of verifying compliance or deemed compliance with
the community engagement requirement or that an individual is a
specified excluded individual, and, as such, are requiring States to
obtain and use information from other State agencies. For example,
States must require information from SNAP and TANF agencies and
incarceration data from State, county or other local correctional
facilities to verify if an individual meets certain specified excluded
individual criteria or the mandatory exception for individuals who were
inmates of a public institution. To the extent allowable under
applicable data sharing and privacy laws, States must also use
education information from State colleges or other educational
institutions such as community colleges, high school equivalency
programs, and high schools, among others, to verify if an individual is
meeting the community engagement requirement based on at least half-
time enrollment status in an educational program. States must use all
available information from other State and local agencies to the extent
such information is relevant to verifying compliance or deemed
compliance with the community engagement requirement or an individual's
specified excluded individual status and may need to establish
connections to these sources or implement manual procedures to access
and use the reliable information contained in other State and local
agencies' systems.
We additionally specify that reliable information available to the
State includes information from Federal
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agencies and other data sources related to community engagement
provided through the Federal Data Services Hub (the Hub). As discussed
in detail later in this section, we expect to provide States
information related to community engagement through the Hub and/or
another Federally operated electronic service. Once those data sources
are established, States will be required to access that information
through the Hub or another Federal service, unless the State has
approval to use an alternative mechanism.
In addition, we specify that information in the State's eligibility
system and an individual's case record is reliable information
available to the State. As described throughout this section, States
are required to obtain information that may be relevant to verifying
compliance or deemed compliance with the community engagement
requirement or status as a specified excluded individual for other
purposes, such as verifying other factors of eligibility. For example,
States collect information pertaining to pregnancy to determine whether
continuous eligibility applies and collect an individual's American
Indian status to determine exemptions from cost sharing requirements.
When possible, States must use this information collected and stored in
an individual's record or other information available in the State's
eligibility system to verify an individual demonstrated or was deemed
to demonstrate community engagement, or their status a specified
excluded individual.
States are also required to use payroll data available to the
State, such as payments for caregiver services or other State employee
payroll information. Additionally, States must use adjudicated claims
data relevant to an individual's medical condition from the last 12
months. Because reimbursement is not provided for all claims submitted
for payment, we have included a broader category of adjudicated claims
data as reliable information available to the State to also account for
pended or denied claims data, in addition to paid claims, from within
the last 12 months, so long as the underlying claims data are useful in
verifying an exclusion or exception to the community engagement
requirement. Additionally, States must use encounter data from the last
12 months as relevant to the individual as a source of reliable
information available to the State. Adjudicated claims and encounter
data are State Medicaid agency records and are useful verification
sources in establishing qualification for certain exceptions to the
community engagement requirement and certain specified exclusions,
including medical frailty or otherwise having special medical needs,
participation in a drug addiction or alcoholic treatment and
rehabilitation program, or other criteria such as hospitalization.
Because such adjudicated claims and encounter data are records
contained in State Medicaid agency systems, we have determined these
data are available to the State, and States are required to access this
information, even if this requires system builds or other process
enhancements to obtain or translate the data for verifying compliance
with or exception or exclusion from the community engagement
requirement.
States must also request and use data from other sources that
provide reliable information that is relevant to determining
eligibility, to the extent that establishing a connection or process to
obtain information from the source would be effective. Section
1902(xx)(5) of the Act requires States to use reliable information
available to the State without requiring information from an
individual, where possible, to verify compliance or deemed compliance
with the community engagement requirement or an individual's specified
excluded status. As such, to comply with the statutory requirement,
States must identify data sources (in addition to those specifically
enumerated at Sec. 435.557(a)) that provide reliable information and
request and use information from such data sources to the extent that
establishing a connection or process to obtain the information would be
effective. The regulation at Sec. 435.557(b)(1)(ii) provides that in
determining whether connecting to and obtaining and using information
from a data source would be effective, the State must consider such
factors as the administrative costs associated with establishing and
using the data match compared with the administrative costs associated
with relying on documentation, and on program integrity in terms of the
potential for ineligible individuals to be enrolled and for eligible
individuals to be denied coverage. States should exercise reasonable
judgment in determining that establishing a data match with a data
source would not be effective, considering such factors as the accuracy
of the information, the timeliness of the information returned, the
complexity of accessing the data or data source, the age of the
records, the comprehensiveness of the data, any limitations imposed by
the owner of the data on its use, as well as other relevant factors,
including the impact on program integrity.
The regulation at Sec. 435.945(j) requires States to ``develop,
and update as modified, and submit to the Secretary, upon request, a
verification plan describing the verification policies and procedures
adopted by the State agency to implement the provisions set forth in
Sec. Sec. 435.940 through 435.956,'' which relate to the verification
of income, assets and citizenship status, amongst other eligibility
criteria. At Sec. 435.557(b)(1)(iii), we incorporate this requirement
for the purpose of verifying that an individual has met, is deemed to
have met, or is excluded from the community engagement requirement. As
such, we have updated the MAGI verification plan to include a
supplement specific to community engagement. Each State must document
in its verification plan supplement the policies and procedures the
State will implement to verify compliance or deemed compliance with the
community engagement requirement or an individual's specified excluded
status. In addition to data sources included in the definition of
``reliable information available to the State,'' States must also
document any other data sources the State has determined to be
effective (in accordance with factors described at Sec.
435.557(b)(1)(ii)) and will use for community engagement verification
as well as when the identified data sources will be used (for example,
at application, renewal or both). To effectuate this requirement, we
are also making a technical amendment to Sec. 435.945(j) to cross-
reference the community engagement verification requirements set forth
in Sec. 435.557.
We recognize that State systems evolve over time, and as new data
sources become available to verify compliance with the community
engagement requirement, or exception or exclusion from it, we may
require States to use additional data sources in the future. While this
IFC includes the requirement that States obtain and use reliable
information available to the State and connect to new data sources that
may become available through the Hub within 12 months of the new data
source's first availability through that service, subject to the waiver
process under Sec. 435.945(k), any other new requirement to connect to
additional electronic data sources would be proposed through notice and
comment rulemaking.
[[Page 33395]]
3. Requesting Additional Information From Applicants and Beneficiaries
To Verify Compliance With, and Exceptions and Exclusions From, the
Community Engagement Requirement
At Sec. 435.557(b)(2) and (3), we describe the State's obligations
when the State is unable to verify an applicant's or beneficiary's
compliance or deemed compliance with the community engagement
requirement or status as a specified excluded individual using reliable
information available to the State. In general, when there is no
reliable information available to the State, or the reliable
information available to the State is not reasonably compatible with
the information provided by or on behalf the individual, the State must
seek additional information from the individual to verify compliance or
deemed compliance with the community engagement requirement or the
individual's status as a specified excluded individual. In this
section, we describe the requirements States must implement by January
1, 2028, and the options for States leading up to that date.
Community engagement is an entirely new factor of eligibility, and
as such, States must consider criteria that were not previously
applicable to Medicaid eligibility and establish new policies and
procedures for verifying whether an individual meets those criteria. In
addition, there are myriad ways in which an applicant or beneficiary
may be excluded from or meet or be deemed to meet the community
engagement requirement. Thus, States do not need to establish policies
and procedures for verifying one piece of information as is the case
for some other factors of eligibility (for example, income), but rather
for all the ways in which an individual may qualify as a specified
excluded individual, demonstrate community engagement, or be deemed to
demonstrate community engagement, most of which do not currently exist
in the context of Medicaid eligibility. As such, we have detailed
sources of reliable information available to the State that States must
use in verifying compliance or deemed compliance with the community
engagement requirement or an individual's specified excluded individual
status. However, we recognize there will be instances in which there is
no reliable information available to the State. We anticipate that, for
the new community engagement criteria, there will generally be
documentation reasonably available for individuals to verify their
compliance or deemed compliance or status as a specified excluded
individual. Examples of reasonably available documentation include
paystubs to verify work hours or income, a document from a community
service organization that demonstrates the number of hours an
individual volunteered, transcripts or class schedules as proof of
half-time enrollment in an educational program, a document from VA
showing disability status and approval notices from SNAP or TANF, to
name a few. Accordingly, we expect that seeking documentation to verify
eligibility generally should impose minimal burden while also
furthering our goal of ensuring only eligible individuals are
determined eligible and/or remain enrolled.
Thus, beginning on January 1, 2028, when there is no reliable
information available to the State, or the reliable information
available to the State is not reasonably compatible with the
information provided by or on behalf of the individual, the State must
generally require documentation to verify that an individual
demonstrated community engagement, is deemed to have demonstrated
community engagement, or is a specified excluded individual, if such
documentation is reasonably available. We implement this requirement at
Sec. 435.557(b)(2)(ii). However, there will be circumstances in which
no documentation exists, or documentation is not reasonably available.
For example, an individual who lives with and provides regular
assistance to their disabled parents may qualify for an exclusion on
the basis of being a family caregiver. Because of the personal nature
of this type of assistance, it often occurs outside of an employer/
employee or other contractual relationship. As such, an individual is
unlikely to have documentation to provide that demonstrates
qualification for the exclusion. Individuals may also experience
exceptional circumstances that prevent them from accessing or result in
the loss of documentation, such as a housefire or flood.
States may not deny or terminate eligibility based on reliable
information available to the State without first providing the
individual with the opportunity to dispute the information available to
the State and furnish information to verify their eligibility. Thus, as
implemented at Sec. 435.557(b)(2)(iii), States must accept other
information when no documentation is reasonably available to verify
that an individual demonstrated community engagement, is deemed to have
demonstrated community engagement or is a specified excluded
individual. States must determine what information is considered
sufficient to verify a given activity or other basis for demonstrating
community engagement or exception or exclusion when such cannot be
verified using reliable information available to the State and
documentation is not reasonably available. States should document their
policies regarding what documentation is required and what information
is sufficient in the absence of reasonably available documentation in
policy manuals, standard operating procedures, or other relevant
documents internal to the State for training and audit purposes.
While most States require documentation for other factors of
eligibility when there is no reliable information available to the
State or the information is not reasonably compatible with the
information provided by or on behalf of the individual, we recognize
that some States may need to make system and process changes to
implement these documentation requirements for community engagement.
Accordingly, as provided in Sec. 435.557(b)(2)(i), States may require
documentation or accept other information (even if documentation is
reasonably available) to verify an individual's compliance or deemed
compliance with the community engagement requirement or status as a
specified excluded individual through December 31, 2027.
Finally, there are two exceptions to the policies described in this
section. The first exception applies to verifying an individual's
specified excluded individual status on the basis of being medically
frail or otherwise having special medical needs and the second
exception applies to mandatory exceptions. Refer to section II.I.7.e.
of this IFC for further information about verifying medical frailty and
section II.I.8. of this IFC for further information about verifying
mandatory exceptions.
a. Requirement To Accept Information From Applicants and Beneficiaries
The regulation at Sec. 435.557(b)(3) specifies that the State must
comply with the requirements at Sec. Sec. 435.558 and 435.952(d) and
provide individuals the opportunity to furnish information and
documentation required to verify that the individual has demonstrated
community engagement or is deemed to have demonstrated community
engagement for a required month, or is a specified excluded individual,
before terminating or denying eligibility based on reliable information
available to the State. We also provide at Sec. 435.557(b)(4) that the
State must allow the individual, an adult who is in the individual's
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household, as defined in Sec. 435.603(f), or family, as defined in
section 36B(d)(1) of the Code, an authorized representative, or, if the
individual is incapacitated, someone acting responsibly for the
individual to submit any required information using any of the
modalities through which States are required to accept applications,
including online, by phone, by mail, in person, or via other commonly
available electronic means, in accordance with Sec. 435.907(a).
4. Verifying Community Engagement at Application, Renewal and More
Frequent Verifications
At Sec. 435.557(c), we implement the requirement that the State
verify an applicable individual has demonstrated or is to deemed to
have demonstrated community engagement for the period specified at
Sec. 435.556(a) and described in section II.H. of this IFC. The State
must first attempt to complete the verification on an ex parte basis
and, as described at Sec. 435.557(c)(1), may not limit the reliable
information available to the State that is checked to specific
activities or other means of demonstrating community engagement or
being deemed to have demonstrated community engagement, or to specific
excluded statuses. As specified at Sec. 435.557(c)(1)(i), the State
must attempt to verify an individual's specified excluded individual
status or that the individual demonstrated or was deemed to have
demonstrated community engagement using all reliable information
available to the State for all relevant months and may only request
additional information or initiate noncompliance procedures under Sec.
435.558 if, after reviewing the reliable information available to the
State, the State lacks sufficient information to confirm that the
individual is a specified excluded individual or that the applicable
individual demonstrated or was deemed to have demonstrated community
engagement based on a mandatory or optional exception (if applicable)
for the required number of months during the review period.
As an example, consider an enrolled, applicable individual who
demonstrated community engagement at application on the basis of
working 80 hours per month. At renewal, after confirming the individual
is not a specified excluded individual, the State checks the data
sources relied upon to verify work hours but does not locate
information in the data sources sufficient to verify continued
compliance on this basis. Before requesting information from the
individual, the State must also check available information to
determine if the individual meets an exception under Sec. Sec. 435.553
or 435.555, if applicable, and to verify whether the individual met the
community engagement requirement in another way provided at Sec.
435.552 (for example, participation in an educational program,
participation in a work program, community service, or income
sufficient to meet the standard at Sec. 435.552(a)(6) or (7)). Only
after completing these steps, if still unable to verify that the
individual has demonstrated community engagement, is deemed to have
demonstrated community engagement, or is a specified excluded
individual, may the State send the renewal form to request information
from the individual or initiate the noncompliance process concurrently
with the renewal form, consistent with Sec. 435.558(b).
We note that, as provided at Sec. 435.557(c)(1)(ii), the State is
not generally required to check additional sources of reliable
information available to the State after the State verifies compliance,
deemed compliance, or that the individual is a specified excluded
individual. For example, if the State confirms an applicable individual
has a monthly income equal to the Federal minimum wage multiplied by 80
hours for the required number of months in the review period, the State
does not need to check any additional reliable information available to
the State to verify other qualifying activities or exceptions, because
the State has already confirmed the individual demonstrated community
engagement. The only exception is when the State has information (for
example, information provided on the application) indicating the
individual may also qualify for an exclusion. As implemented at Sec.
435.557(c)(2), the State must always determine an individual to be a
specified excluded individual when the State has sufficient information
to make such determination. This requirement stems from the fact that
specified excluded individuals are not applicable individuals and
therefore not required to demonstrate community engagement as a
condition of eligibility. Thus, as described throughout this IFC,
States must confirm an individual is subject to the community
engagement requirement prior to assessing their compliance. As a
result, the exclusion takes precedence even if the State has also
verified an individual demonstrates community engagement or meets the
criteria for an exception.
However, we recognize that in some cases, it may appear that an
individual could qualify for an exclusion, but the State may need more
information to verify the individual's specified excluded individual
status. If the State has enough information to determine that the
individual demonstrates compliance or meets the criteria for an
exception without requesting additional information, the State may not
delay the individual's enrollment solely to complete the verification
of the individual's qualification for the exclusion. As implemented at
Sec. 435.557(c)(3), the State must enroll the individual promptly
based on the information available (for example, income verifying
compliance), provided all other eligibility criteria are satisfied, and
then proceed to verify post-enrollment whether the individual meets the
criteria for the exclusion (for example, an exclusion based on the
individual's status as a veteran with a total disability rating)
consistent with the requirements at Sec. 435.557(b)(2).
We also encourage States to design their process in such a manner
to reduce administrative burden. States should consider prioritizing
categories under which an individual may be excluded or, in the case of
applicable individuals, excepted for a longer period of time over those
that require more frequent verification based on the State's
verification policies. For example, if an individual qualifies for an
exclusion on the basis of being an American Indian as well as being a
parent to a dependent child 13 years of age or under, we encourage the
State to apply the exclusion based on their American Indian status
because American Indian status is not subject to change and therefore
does not need to be reverified. In developing their process, States may
also wish to consider factors such as the availability of reliable
information and reasonably available documentation in the absence of
reliable information available to the State, as well as how the number
of months for which an individual must demonstrate or be deemed to
demonstrate community engagement and the State's election with respect
to conducting more frequent verifications may impact the level of
administrative burden.
a. Verifying Community Engagement Information Provided on an
Application, Renewal Form, or Reported Between Regular Renewals
States must include questions on their applications and renewal and
other supplemental forms allowing applicants and beneficiaries an
opportunity to provide information demonstrating compliance with the
community engagement requirement, deemed compliance, and status as a
specified
[[Page 33397]]
excluded individual. When States receive this information at
application, renewal, or based on a reported change between regular
renewals, States must begin the verification process by checking the
reliable information available to the State, including information
obtained electronically, to verify the information. If there is no
reliable information available to the State, or the information
provided by or on behalf of the individual is not reasonably compatible
with reliable information available to the State, the State must seek
additional information from the individual, in accordance with Sec.
435.557(b)(2), or other additional information relevant to verifying
compliance or deemed compliance with the community engagement
requirement or an individual's specified excluded status that cannot be
verified using reliable information available to the State. As
specified at Sec. 435.557(c)(1)(i)(B), an individual must not be
required to provide documentation or other additional information
unless information needed by the agency could not be verified using
reliable information available to the State, including when there is no
reliable information available to the State or the reliable information
is not reasonably compatible with the information provided by or on
behalf of the individual.
b. Verifying Community Engagement When Conducting More Frequent
Verifications Between Regularly Scheduled Redeterminations
Importantly, States that elect to verify compliance between regular
renewals as provided at Sec. 435.557(d) must comply with all ex parte
verification requirements under section 1902(xx)(5) of the Act, as
implemented in this IFC. As specified at Sec. 435.557(d)(1), States
that elect this option may not conduct a more limited verification
between renewals but must instead comply with all the requirements
described in this section. In accordance with Sec. 435.557(d)(2), the
State must first check all reliable information available to the State
to confirm the individual is not a specified excluded individual. After
verifying the individual is not excluded, Sec. 435.557(d)(3) requires
that the State must attempt to verify that the individual demonstrated
community engagement or was deemed to have demonstrated community
engagement using all reliable information available to the State for
all relevant months before requesting initiating noncompliance
procedures. In other words, the agency must attempt to verify
compliance or deemed compliance in the same manner that it would when
verifying eligibility at application or renewal, regardless of the
basis on which the individual was determined to be in compliance with
the community engagement requirement at enrollment or the last
verification, before requesting information from the individual or
initiating noncompliance procedures in accordance with Sec. 435.558.
We also stress that, while the State must confirm whether an individual
is a specified excluded individual as part of the more frequent
verification process, more frequent verifications are specific to
applicable individuals. Thus, consistent with Sec. 435.557(d)(4),
individuals identified as specified excluded individuals during their
most recent verification are not subject to more frequent
verifications, unless the State has information indicating the
individual is no longer a specified excluded individual, or that the
individual may be losing their status as a specified excluded
individual due to an anticipated change, such as turning age 19, as
further discussed in section II.H.d.2. of this IFC.
When a State cannot verify that an applicable individual has
demonstrated or is deemed to have demonstrated community engagement for
a required month using reliable information available to the State, the
State must comply with the requirements at Sec. 435.557(b)(2) and seek
additional information from the individual to verify their continued
eligibility.
5. The Federal Data Services Hub or Other Electronic Service
The Federal Data Services Hub, operated by CMS, is an electronic
service through which States can access a number of data sources for
use in verifying Medicaid eligibility. Existing regulations in Sec.
435.949 require that to the extent that information related to
eligibility for Medicaid is available through the Hub, States must
access the information through that service to obtain information from
Federal agencies and other data sources, including the SSA, the
Department of the Treasury, and the Department of Homeland Security,
except as provided in Sec. 435.945(k). We expect to establish
connections to additional data sources and provide States information
through the Hub and/or another Federally operated electronic service to
verify certain factors that could impact whether someone is subject to
the community engagement requirement, and if so, whether they
demonstrate or are deemed to have demonstrated community engagement,
including additional sources related to qualifying activities under
Sec. 435.552, mandatory exceptions under Sec. 435.553, optional
short-term hardship exceptions under Sec. 435.555, and specified
excluded individual criteria under Sec. 435.554. Examples of these
additional data sources include the National Student Clearinghouse and
the VA. We are also establishing other Federal services, such as the
Eligibility Made Easy (Emmy) tool, through which States can access
information specific to community engagement. Once those data sources
are established and reliable information relevant to verifying
compliance with the community engagement requirement becomes available
through the Hub, Sec. 435.557(e) requires States to access the data
available via connection to the Hub as soon as practicable, but no
later than 12 months after their initial availability through the Hub.
We are also establishing other Federal services, such as the
Eligibility Made Easy (Emmy) tool, through which States can access
information specific to community engagement.
A State may obtain approval under Sec. 435.945(k) to establish a
direct connection to access information available through the Hub
through an alternative source or mechanism as soon as practicable, but
no later than 12 months after the information relevant to verifying
compliance with the community engagement requirement becomes available
through the Hub. The 12-month period allows States time for planning
and implementation, including the system development and changes States
will need to make for their eligibility systems to ingest and use
information from newly available electronic data sources. Section
435.557(e)(1) provides that we may determine a Hub waiver as described
at Sec. 435.945(k) is not required if the State establishes a
connection to access information available through the Hub from certain
alternative Federal electronic services, such as the Emmy API, should
such services become available, that provide reliable and relevant
information. We would make such a determination that a waiver is not
required in circumstances where it is likely that a direct connection
to or alternative mechanism for accessing information from the new data
source would be likely to satisfy the criteria in Sec. 435.945(k).
6. Verifying Compliance With Community Engagement Activities
As implemented at Sec. 435.552 and discussed in detail in section
II.C. of this IFC, applicable individuals subject to the community
engagement requirement can meet the requirement
[[Page 33398]]
through engaging in a minimum of 80 hours per month of work, community
service, or participation in a work program; being enrolled in an
educational program at least half-time; or a combination thereof.
Individuals also can demonstrate community engagement by having a
monthly income that is not less than the applicable Federal minimum
wage multiplied by 80 hours. Seasonal workers may demonstrate community
engagement by having an average monthly income over the preceding 6
months that is not less than the applicable Federal minimum wage
multiplied by 80 hours.
Section 1902(xx)(1)(A) of the Act and implementing regulations at
Sec. 435.556 provide that States must require applicable individuals
who are applying for Medicaid to demonstrate that they meet the
community engagement requirement for the 1 month (or, at State option,
the 2 or 3 consecutive months) preceding the month of application.
Section 1902(xx)(1)(B)(i) of the Act provides that States must require
applicable individuals who are enrolled beneficiaries to demonstrate
that they meet the community engagement requirement for 1 or, at State
option, more months between the individual's most recent eligibility
determination and their next renewal. Where demonstrating community
engagement for more than 1 month is required, the State may not require
that the months be consecutive under section 1902(xx)(1)(B) of the Act
(for example, a State that requires 2 months may not require that those
2 months be consecutive). See section II.H. of this IFC for more
information about assessing compliance.
Section 1902(xx)(4) of the Act provides States with the option to
verify compliance with the community engagement requirement between an
applicable individual's regular renewals. States that elect this option
have the option to determine the frequency with which to verify
compliance. In States that elect to conduct more frequent verification
of compliance with the community engagement requirement, under section
1902(xx)(1)(B)(ii) of the Act, the State must verify that applicable
individuals met the community engagement requirement for 1 or more
months (at State option), whether or not consecutive, between the most
recent verification of compliance and the current verification. As
described in section II.H.1. of this IFC, prior to verifying compliance
with the community engagement requirement, the State must first confirm
the individual is an applicable individual subject to the community
engagement requirement and not a specified excluded individual.
We remind States that effective January 1, 2027, most of the
population required to demonstrate community engagement is also subject
to a new 6-month renewal requirement for the adult group under section
1902(e)(14)(L) of the Act. The 6-month renewal requirement does not
apply to American Indians or to individuals enrolled in section 1115
demonstrations (except for those that cover certain adults eligible
under a section 1115 demonstration that provides MEC to all individuals
who would be eligible if the State provided coverage to the adult group
under the State plan); for these individuals, eligibility must be
renewed every 12 months. States are advised to consider the more
frequent renewal requirement when determining whether to verify
community engagement compliance between renewals (in general, that is,
more frequently than every 6 months) and when determining the number of
months for which an applicable individual must demonstrate compliance
between verifications. Specifically, if electing more frequent
verification, States may wish to consider the timing of the renewal
process, particularly how far in advance the State initiates the
renewals in relation to the end of the eligibility period, and the
State's ability to access timely data to verify compliance and
otherwise renew eligibility when determining the verification frequency
and number of months.
Later in this section, we discuss verification requirements and
options for verifying that an individual has demonstrated or is deemed
as having demonstrated community engagement for the required month(s)
at application, renewal, or between renewals (if applicable). As noted
in section II.I.1. of this IFC, under section 1902(xx)(5) of the Act
and Sec. 435.557(b), States must first attempt to verify that
applicable individuals who are applicants or beneficiaries have met the
community engagement requirement using reliable information available
to the State before requesting additional information from the
individual, in accordance with requirements at Sec. 435.557(b)(2), or
initiating noncompliance procedures as discussed in section II.J.2. of
this IFC and implemented at Sec. 435.558. States may request
documentation or additional information only if there is no reliable
information available to the State to verify compliance or the reliable
information is not reasonably compatible with information provided by
or on behalf of the individual.
a. Verifying Hours of Work
As further discussed in section II.C. of this IFC, and specified in
section 1902(xx)(2)(A) of the Act and Sec. 435.552(a)(1), an
applicable individual demonstrates community engagement for a month if
the individual works for not less than 80 hours in that month, which
includes work in exchange for money, work in exchange for goods or
services (``in-kind'' work), unpaid work other than community service,
and any combination of the three. Under the requirement in section
1902(xx)(5) of the Act, States must attempt to verify community
engagement compliance on an ex parte basis. To comply with this
requirement, States must, at a minimum, attempt to verify compliance
using the reliable information available to the State that the State
relies upon to verify income to the extent these data sources provide
information about hours worked. However, not all types of work can be
verified using currently available financial data sources and, in some
instances, the data returned may not include information regarding the
number of hours worked. As such, States should also consider whether
there are other available data sources that provide information
pertaining to hours worked, including paid, unpaid, or in-kind hours
and, if so, establish a connection with said data source(s) (unless
doing so is not effective) in accordance with Sec. 435.557(b)(1).
As explained in section II.C.8. of this IFC, if the monthly income
is less than the applicable Federal minimum wage multiplied by 80 hours
and the State does not have information regarding the number of hours
worked, States have the option to apply an equivalency standard that
allows the State to calculate the number of work hours for a month by
dividing the individual's monthly income by the Federal minimum wage.
For example, where the State is not able to verify that the applicable
individual worked for at least 80 hours during the relevant month or
had monthly income equivalent to working at least that number of hours
for the month, the State may derive the number of hours worked from the
monthly income and use the calculated estimate to combine with other
qualifying hours to demonstrate community engagement under section
1902(xx)(2)(E) of the Act and Sec. 435.552(e). We recognize that
States will be using the individual's MAGI-based income for their MAGI-
based household when converting monthly income to hours worked. In
these
[[Page 33399]]
circumstances, the State must use a reasonable method to allocate hours
between members of the household. In addition, this option must only be
used when the monthly income is less than the applicable Federal
minimum wage multiplied by 80 hours and the State does not have
information regarding the number of hours worked by an applicable
individual.
If the State cannot verify work hours using reliable information
available to the State (including, at State option, using the
equivalency standard described in the preceding paragraph) or the
reliable information available to the State is not reasonably
compatible with the information provided by an applicable individual,
the State must seek information from the individual to verify work
hours. Beginning on January 1, 2028, when States are unable to verify
work hours using reliable information available to the State, States
must require documentation when such documentation is reasonably
available, and must establish a process to accept other information
when there is no reasonably available documentation, as described in
section II.I.3. of this IFC.
(1) Verifying Hours for Certain Caregivers
States will also need to consider how to verify hours for certain
caregivers who provide assistance to a dependent child or disabled
individual. (Please refer to Sec. 435.554(a) and sections II.E.3.e.
and f. of this IFC for the definitions of dependent child and disabled
individual for the purpose of community engagement.) Consistent with
section 1902(xx)(9)(A)(ii)(III) of the Act, as implemented at Sec.
435.554(c)(3), a family caregiver as defined at Sec. 435.554(a) is a
specified excluded individual if he or she meets one of the following
implementing criteria established at Sec. 435.554(c)(3)(i)(A) through
(C): (1) the individual primarily resides with a dependent child or
disabled individual for whom he or she provides assistance that occurs
on a regular basis and is not solely incidental in nature, (2) the
individual is a relative (as specified in the ``caretaker relative''
definition at Sec. 435.554(a), without regard to the requirements to
live with or to assume primary responsibility) of a dependent child or
disabled individual for whom he or she provides assistance that occurs
on a regular basis and is not solely incidental in nature, or (3) the
individual does not reside with and is not a relative (as specified in
the ``caretaker relative'' definition at Sec. 435.554(a), without
regard to the requirements to live with and to assume primary
responsibility) of a dependent child or disabled individual for whom he
or she provides not less than 80 hours of assistance that is not solely
incidental in nature per month. This means that States must verify the
number of hours of care provided if the family caregiver does not
reside with and is not related to the dependent child or disabled
individual for whom he or she provides assistance to determine whether
that individual is a specified excluded individual under the family
caregiver component of section 1902(xx)(9)(A)(ii)(III) of the Act.
If the family caregiver does not live with and is not related to
the dependent child or the disabled individual for whom he or she
provides assistance, and provides less than 80 hours of care per month,
the family caregiver does not meet the criteria for the exclusion and
must demonstrate or be deemed to demonstrate community engagement
(provided they are not a specified excluded individual on another
basis). However, the hours of assistance by such an individual would
count as unpaid work under Sec. 435.552(b) and the individual would
only need to engage in additional activities sufficient to reach the
80-hour threshold to demonstrate community engagement, as permitted
under Sec. 435.552(a)(5). For example, if the family caregiver
provides 55 hours per month of assistance to a non-relative whom he or
she does not live with, those 55 hours would count towards compliance
with the community engagement requirement, and the caregiver would need
25 additional hours of engagement in the activities listed at Sec.
435.552(a)(1) through (4), including but not limited to other paid,
unpaid, or in-kind work, to demonstrate community engagement. The
applicable individual could also demonstrate community engagement on
the basis of income, as specified at Sec. 435.552(a)(6) and (7). See
section II.I.6.e. of this IFC and Sec. 435.552(e) for further details
about the requirement to aggregate hours of engagement in different
qualifying activities.
Where possible, States must use reliable information available to
the State to verify hours of assistance provided by a family caregiver.
(See section II.I.7.c. of this IFC for more discussion about using
reliable information available to the State to verify an individual's
status as a specified excluded individual under the family caregiver
component of the exclusion at section 1902(xx)(9)(A)(ii)(III) of the
Act.) However, we recognize that caregiving of this nature is unique
and unlikely to be reflected in reliable information available to the
State. In the absence of reliable information available to the State,
the State must seek information from the individual to verify
caregiving hours, including the number of hours of assistance provided
by a family caregiver and any other information needed to substantiate
the State's determination regarding the individual's status as a family
caregiver, status as a specified excluded individual under the family
caregiver exclusion, or number of caregiving hours counted as work.
Beginning on January 1, 2028, when States are unable to verify family
caregiver status or hours using reliable information available to the
State, or the reliable information is not reasonably compatible with
the information provided by or on behalf of the individual, States must
require documentation if documentation is reasonably available. In the
absence of reasonably available documentation, the State must accept
other information that is sufficient to verify eligibility, as
described in section II.I.3. of this IFC.
b. Verifying Community Service
An applicable individual may also demonstrate community engagement
by completing not less than 80 hours of community service through a
structured program that is completed for the direct benefit of the
community under the auspices of a public or nonprofit organization in a
month, consistent with section 1902(xx)(2)(B) of the Act and Sec.
435.552(a)(2) and (b). In addition, section II.C.2. of this IFC
explains that, because community service needs vary by State and
locality, the types of activities considered qualifying community
service may also differ between States. As such, we believe States are
in the best position to identify sources of reliable information
available to the State that will be effective in verifying community
service hours. Where possible, we recommend that States work with
organizations through which an individual may participate in qualifying
community service to establish data exchanges that will assist with
this verification.
We also understand that there will be many instances in which there
is no reliable information available to the State, and developing a
process to exchange or obtain information electronically from potential
data sources would be ineffective or infeasible. In the absence of
reliable information available to the State, or when the reliable
information available to the State is not reasonably compatible with
the information provided by or on behalf of an applicable individual,
the State must have procedures in place to verify hours of community
service in an
[[Page 33400]]
auditable manner (that is, a manner that yields records that can be
produced for audit or other review purposes). States must ensure the
individual's case record contains sufficient information (including
documentation when applicable) to support the State's determination of
eligibility, including with respect to community engagement. For the
purpose of verifying community service hours, examples of the
information that would support a determination may include
documentation containing details about the general nature of the
program; the dates and hours of community service completed; a
description of the community service activity; the organization's name
and address; and the name and contact information (such as phone number
and/or email address) of a point of contact at the organization who can
confirm the hours completed. As described in section II.I.3. of this
IFC, beginning on January 1, 2028, the State must require documentation
if documentation is reasonably available when there is no reliable
information available to the State or the reliable information is not
reasonably compatible with the information provided by or on behalf of
the individual. If documentation demonstrating participation in
community service is not reasonably available, the State must have a
process to accept other information sufficient (as determined by the
State) to verify community service participation.
c. Verifying Participation in a Work Program
In addition, as specified in section 1902(xx)(2)(C) of the Act, an
applicable individual may demonstrate community engagement for a month
by participating in a work program for at least 80 hours in such month,
which we implement at Sec. 435.552(a)(3). The definition of work
program as defined at Sec. 435.552(b) includes different types of work
programs, as discussed in section II.C.3. of this IFC; thus, the
specific qualifying work programs available to applicable individuals
will vary by State. Because of this variance, we believe States are
best positioned to identify available sources of reliable information
about work program participation. However, we note that section
1902(xx)(9)(D) specifies that ``work program'' has the same meaning
given to such term in section 6(o)(1) of the Food and Nutrition Act of
2008 and therefore aligns with SNAP work program requirements. We
encourage State Medicaid agencies to consult the SNAP program in their
State to identify any data sources SNAP relies on to verify
participation in a work program and leverage those data sources where
possible. For instances in which the State is unable to verify 80 hours
of participation in a work program using reliable information available
to the State, the State must seek information from the individual to
verify hours that the individual participated in a work program.
Beginning on January 1, 2028, if States are unable to verify 80 hours
of participation in a work program using reliable information available
to the State, States must require documentation when such documentation
is reasonably available and must establish a process to accept other
information when documentation is not reasonably available, as
described in section II.I.3. of this IFC. States must also ensure the
procedures implemented to verify work program participation hours
produce an auditable record supporting the State's eligibility
determination.
d. Verifying Enrollment in an Educational Program
As detailed in sections II.C.4. and II.C.5. of this IFC and
specified in section 1902(xx)(2)(D) of the Act and Sec. 435.552(a)(4),
(b), and (c), an applicable individual demonstrates community
engagement if the individual is enrolled in an educational program at
least half-time, as determined by the school or institution. States may
consider establishing data exchanges with their State university system
and/or other educational settings, and/or they may purchase data from a
third-party entity such as the National Student Clearinghouse, provided
the State complies with all applicable privacy and data sharing laws.
We are exploring options to make educational data available through the
Hub. When such data become available through the Hub, States will need
to access that information through the relevant service in accordance
with Sec. Sec. 435.949 and 435.557(e),except as provided at Sec. Sec.
435.945(k) and 435.557(e)(1) and (2) (for example, if the State wishes
to establish a direct connection with the National Student
Clearinghouse or other data source provided through the Hub, or use an
alternate data source or mechanism to obtain educational program
participation information). As with the other activities discussed in
this section, States must also identify and establish connections to
other sources of reliable information to verify educational status and
request and use information from those sources, unless doing so would
not be effective, as provided at Sec. 435.557(b)(1)(ii). The
identification of additional sources of reliable information is
particularly important for educational programs that might not be
reflected in the National Student Clearinghouse data, such as community
colleges, high school equivalency programs, high schools, and technical
or vocational schools.
Additionally, as further discussed in section II.C.7. of this IFC,
an applicable individual may satisfy the community engagement
requirement using hours from a combination of activities. Accordingly,
States must have procedures to calculate the number of hours an
applicable individual who is enrolled for less than half-time
participates in an educational program, as specified at Sec.
435.552(d). If the State does not have a data source that provides
credit hours or participation hours for students enrolled for less than
half-time, the State must seek information from the individual to
determine the number of hours the individual participated in the
educational program based on the number of credit or instruction hours.
As discussed in section II.C.6. of this IFC, we are using the Carnegie
Unit standard to calculate the time spent in an educational program for
a 1-month period. This means that 1 credit hour equals 1 hour of
instruction plus 2 hours of out-of-class work per week. Thus, using
this methodology, 1 credit hour equates to 3 hours of student work for
the week. The total number of hours for a given month is calculated by
multiplying the number of credit hours by 3 to provide the weekly hours
spent in the educational activity and then multiplying this number by
4.33 to determine the monthly hours (see section II.C.6. of this IFC
for an example of this calculation). For educational programs that do
not use credit hours, if an individual is enrolled less than half-time
as defined by the school or institution, then the hours spent attending
class and participating in educational activities will count towards
meeting the requirement. See section II.C.6. of this IFC for further
information about calculating hours of participation in an educational
program for individuals enrolled less than half-time.
States must attempt to verify an applicable individual's half-time
enrollment status or, if the individual is enrolled less than half-
time, the number of hours or participation in an education program,
using reliable information available to the State. If there is no
reliable information available to the State, or the reliable
information is not reasonably compatible with the information provided
by or on behalf of the individual, the State must seek
[[Page 33401]]
information from the individual to verify compliance. Beginning on
January 1, 2028, when there is no reliable information available to the
State or the reliable information is not reasonably compatible with the
information provided by or on behalf of the individual, the State must
require documentation to verify half-time enrollment status or
educational hours if documentation is reasonably available. In the
absence of reasonably available documentation, the State must comply
with the requirement at Sec. 435.557(b)(2)(iii) to accept information
other than documentation.
e. Verifying Compliance Using a Combination of Activities
In accordance with section 1902(xx)(2)(E) of the Act, implemented
at Sec. 435.552(a)(5), an applicable individual may demonstrate
compliance by completing a combination of work, community service,
participation in a work program, or participation in an educational
program. To verify compliance using a combination of activities, States
must verify hours for each activity separately, as described in
sections II.C.1. through II.C.3. and II.C.6. of this IFC, and then add
the number of hours for each of the four activities to calculate the
total number of qualifying community engagement hours for the month.
As noted in section II.C.6. of this IFC, States may have to
calculate the number of hours an applicable individual who is enrolled
less than half-time participated in an educational program by
multiplying each credit hour by three to get the weekly total and then
multiplying the weekly total by 4.33 for the monthly total. In
addition, as discussed in section II.C.8. and II.I.6.a. of this IFC,
when the monthly income is less than the applicable Federal minimum
wage multiplied by 80 hours and the State does not have information
regarding the number of hours worked. States may divide the verified
monthly income by the Federal minimum wage to determine the number of
work hours. For example, if the State verifies an individual has $380
in monthly income, the State may divide the monthly income by the
current Federal minimum wage of $7.25 and credit the individual with
having worked 52 hours for the month ($380 divided by $7.25). We also
remind States that some individuals who meet the definition of a family
caregiver will not qualify as a specified excluded individual under the
family caregiver component of section 1902(xx)(9)(A)(ii)(III) of the
Act, because they are not related to and do not live with the
individual for whom they provide assistance, and they provide such
assistance for fewer than 80 hours per month. States must ensure any
hours of assistance provided by these applicable individuals are
accounted for in the individual's monthly work hour total prior to
combining those hours with all hours of other qualifying activities.
See section II.I.6.a. of this IFC for more information about
calculating work hours for family caregivers who do not qualify as
specified excluded individuals.
After determining the number of hours an individual spent engaging
in work, community service, a work program, and/or an educational
program in a given month, the State must have procedures in place to
aggregate those hours and must not request that the applicable
individual provide documentation or other information when the sum of
the hours of qualifying activities as reflected in reliable information
available to the State is sufficient to verify the individual
demonstrated community engagement for the relevant month. The State
must also make sure that, when additional information is required for
one or more categories of qualifying activity hours, the State
considers the total number of hours across these activities, as
reflected in the reliable information available to the State combined
with the hours verified by documentation or other information provided
by the applicable individual.
For example, an individual reports on their application that they
worked and volunteered for 40 hours each in the prior month, for a
total of 80 qualifying hours. The State verifies the individual worked
for 40 hours in prior month using reliable information available to the
State but needs more information to verify the community service hours.
The State sends a request for information seeking documentation
regarding the individual's participation in community service. In
response, the individual submits documents that demonstrate the
individual completed 42 hours of community service in the prior month.
The State must combine the 40 hours of work that was verified using the
reliable information available to the State with the 42 hours of
community service reflected in the documentation for a total of 82
qualifying hours and determine the individual demonstrated community
engagement in that month.
f. Verifying Compliance Based on Monthly Income
The statute provides two additional pathways for an individual to
demonstrate community engagement: (1) Section 1902(xx)(2)(F) of the Act
specifies that an applicable individual demonstrates community
engagement if they have a monthly income that is not less than the
applicable Federal minimum wage requirement under section 6 of the FLSA
multiplied by 80 hours, and (2) Section 1902(xx)(2)(G) of the Act
specifies that a seasonal worker described in section 45R(d)(5)(B) of
the Code demonstrates community engagement if they have an average
monthly income over the preceding 6 months that is not less than the
applicable Federal minimum wage requirement multiplied by 80 hours. See
section II.C.8. of this IFC for further details about who qualifies as
a seasonal worker.
As described in section II.C.8. of this IFC and implemented at
Sec. 435.552(f), the determination of ``monthly income'' for the
purpose of demonstrating community engagement refers to the same MAGI-
based methodologies used for financial eligibility under Sec. 435.603.
States generally do not need to establish separate data sources to
verify that an applicable individual demonstrated community engagement
based on their monthly income or average monthly income. Rather, to
verify community engagement on this basis, States should use the same
data sources they use to verify financial eligibility. We note that,
for seasonal workers, an average income for the preceding 6 months must
be calculated for each month in which an applicable individual is
required to demonstrate community engagement, if the State does not
elect to use a reasonable predictable changes methodology. Please see
section II.C.8. of this IFC for more information about averaging income
for seasonal workers, including an example of how the 6-month average
is constructed for a given month of the review period.
For a State that has elected a reasonably predictable changes
methodology as part of its MAGI-based methodologies (as discussed
earlier in section II.C.8. of this IFC), we expect the monthly income
in each of the preceding 6 months to be relatively stable because the
income determination will have considered a prorated portion of the
household's fluctuating income.
7. Verifying Status as a Specified Excluded Individual
Specified excluded individuals, defined in Section
1902(xx)(9)(A)(ii) of the Act and implemented at Sec. 435.554, are
carved out from the definition of an applicable individual, as defined
in section 1902(xx)(9)(A)(i) of the Act and implemented at Sec.
435.551. As such, specified excluded individuals are not
[[Page 33402]]
subject to the requirement to demonstrate community engagement.
Consistent with section 1902(xx)(5) of the Act, States must establish
processes and use reliable information available to the State without
requiring, where possible, additional information to verify that an
individual meets the definition of a specified excluded individual at
application and renewal. We note that, because specified excluded
individuals are not applicable individuals, the requirement in section
1902(xx)(1) of the Act to verify an applicable individual met the
requirement in the 1 or more months prior to the month of application,
or 1 or more months during the review period assessed at the regular
renewal or when redetermining eligibility based on a change in
circumstances, does not apply to specified excluded individuals. In
other words, there is no requirement that an individual who is a
specified excluded individual meet that definition for the required
number of months during the review period (as defined in section II.H.
of this IFC). Rather, as is discussed in greater detail in this
section, States will verify if an individual meets the definition of a
specified excluded individual at the time of application or renewal or
if the State receives information indicating a change in circumstances
for the individual that may affect eligibility, similar to when States
verify other factors of eligibility (for example, income).
In addition, the option in section 1902(xx)(4) of the Act to verify
applicable individuals' compliance with the community engagement
requirement more frequently than at each regular renewal does not apply
to specified excluded individuals. Thus, States may not reverify a
specified excluded individual's status as such between regular
scheduled renewals as part of the more frequent verification process
(if elected by the State), unless the State has information indicating
the individual's status has changed. However, we remind States that
when assessing compliance, including when conducting a more frequent
verification, the State must first confirm the individual is an
applicable individual and is not a specified excluded individual using
reliable information available to the State. In other words, when
conducting more frequent verifications, the State must not conduct a
more frequent verification for a specified excluded individual but must
begin the verification process by confirming that beneficiaries who
have been applicable individuals have not become specified excluded
individuals.
Section 1902(xx)(9)(A)(ii) of the Act identifies nine categories of
specified excluded individuals: individuals who are described in
section 1902(a)(10)(A)(i)(IX) of the Act (the FFCC group); certain
American Indians; parents, guardians, caretaker relatives, or family
caregivers of a dependent child or a disabled individual; veterans with
a permanent or temporary total disability; individuals who are
medically frail or otherwise have special medical needs (as defined by
the Secretary); individuals who are compliant with TANF work
requirements and individuals who are members of a household that
receives SNAP benefits and must comply with SNAP work requirements;
individuals who are participating in a drug addiction or alcoholic
treatment and rehabilitation program; inmates of a public institution;
and individuals who are pregnant or entitled to postpartum medical
assistance under section 1902(e)(5) or (16) of the Act. See section
II.E. of this IFC and the implementing regulations at Sec. 435.554 for
additional discussion of the definition of specified excluded
individuals. The verification process a State implements when verifying
if an individual is a specified excluded individual will depend on the
reliable information available to the State. We note that in some
instances, the process will differ at application and renewal based on
available data and that there will likely be some categories of
specified excluded individuals for which there is no reliable
information available to the State for verification.
For many of the categories of specified excluded individuals,
States may have information available to verify the status; for
example, from the State's own records, claims, payment, and encounter
data to verify medical frailty or participation in a drug addiction or
alcoholic treatment and rehabilitation program. States may also have
information from the records of another Federal, State, or local
agency, that can be used, for example, to verify veteran disability
status, that an individual is meeting TANF work requirements, or that
an individual is or recently was in a county carceral facility.
Additionally, for certain categories of specified excluded individuals,
information needed to verify the individual's status may already have
been verified as part of determining other factors of eligibility in
Medicaid; therefore, no additional verification would be needed, such
as for pregnancy or American Indian status. There are certain
categories of specified excluded individuals for which no reliable
information may be available to the State. Beginning on January 1,
2028, when there is no reliable information available to the State or
the reliable information is not reasonably compatible with the
information provided by or on behalf of the individual, States must
generally require that the individual provide documentation when such
documentation is reasonably available to verify that the individual
meets the definition of a specified excluded individual under the
relevant category. We discuss the requirements for States in verifying
the different specified excluded individual statuses based on reliable
information available to the State; the available reliable information;
and the requirements when no reliable information is available to the
State to verify an individual's qualification as a specified excluded
individual.
a. Former Foster Care Children
As further described in section II.E.1. of this IFC, section
1902(xx)(9)(A)(ii)(I) of the Act provides that an individual ``who is
described in'' section 1902(a)(10)(A)(i)(IX) of the Act, which refers
to the eligibility group serving the FFCC group, is a specified
excluded individual. Collecting information to determine if an
individual is excluded based on eligibility for the FFCC group
described at Sec. 435.150 is part of a State's eligibility screening
and determination process. This means that State Medicaid applications
include questions to determine if an individual (1) is under age 26;
(2) is not enrolled in an eligibility group described in section
1902(a)(10)(A)(i)(I) through (VII) of the Act, even if they meet the
eligibility requirements for such group; (3) was in foster care under
the responsibility of any State upon attaining age 18 (or such higher
age as the State has elected in its title IV-E plan); and (4) was
enrolled in Medicaid in any State while in such foster care. State
Medicaid applications contain questions related to FFCC status to
determine eligibility for this group and States should use these
existing data in the State's eligibility system to verify an
individual's status as a specified excluded individual under this
category. Because States screen for eligibility in the FFCC group as a
part of eligibility and enrollment processes, we expect States to find
only a small number of FFCC in the adult group, and it is possible that
some individuals described in the FFCC group will be enrolled in a
section 1115 demonstration that provides MEC. States should identify if
individuals in the adult group or in a section 1115 demonstration that
provides MEC meet
[[Page 33403]]
the criteria for eligibility in the FFCC group, and if so, move them to
the FFCC group, if eligible, or determine that they are specified
excluded individuals under this category. Consistent with existing
verification policy with respect to information not subject to change,
States do not have to reverify someone's status as an FFCC for
exclusion from the community engagement requirement until the
individual turns age 26, which is an anticipated change in
circumstances known to the State.
b. American Indians
Section 1902(xx)(9)(A)(ii)(II) of the Act establishes a broad
exclusion for American Indians. For purposes of this exclusion, we are
adopting the existing definition of ``Indian'' at Sec. 447.51 for the
specified excluded individual category at Sec. 435.554(c)(2). Under
existing eligibility rules, certain American Indians are exempt from
cost sharing in Medicaid and CHIP and may receive special types of
income that are not included in the MAGI calculation. They may also be
eligible for special enrollment periods and cost sharing reductions for
qualified health plans purchased on the Health Insurance Exchange.
State Medicaid applications ask questions to identify who might be
eligible for these protections (that is, cost sharing exemptions and
deductions from income for Medicaid and CHIP and special enrollment
periods and cost sharing reductions on the Health Insurance Exchange).
The application also requests information about American Indian status
as part of the race question, which is optional.
States should use these existing data collected on the application
and follow their existing verification policies to verify that an
individual qualifies as a specified excluded individual in this
category. Notably, unlike some other exclusions which may be time
limited or based on conditions that are subject to change, once
verified, States do not need to reverify someone's status as an
American Indian or qualification as a specified excluded individual on
this basis, consistent with existing verification policy related to
information not subject to change.
c. Parent, Guardian, Caretaker Relative, or Family Caregiver of a
Dependent Child or a Disabled Individual
Section 1902(xx)(9)(A)(ii)(III) of the Act (implemented at Sec.
435.554(c)(3)) establishes a category of specified excluded individuals
for ``parents, guardians, caretaker relatives, and family caregivers
(as defined in section 2 of the RAISE Family Caregivers Act) of a
dependent child 13 years of age and under or a disabled individual.''
Because each of these subcategories of individuals has different
definitions and requirements, the information needed to verify an
individual's status as a parent, a guardian, a caretaker relative, or a
family caregiver for the purpose of this exclusion, and the reliable
information available to the State to do so, varies. For all
subcategories, States must design reasonable procedures and use
reliable information available to the State to ensure qualifying
parents, guardians, caretaker relatives, and family caregivers are
identified promptly and determined to be specified excluded individuals
excluded from the community engagement requirement. If there is no
reliable information available to the State, or the reliable
information is not reasonably compatible with the information provided
by or on behalf of the individual, the State must seek information from
the individual to verify their specified excluded status. Beginning on
January 1, 2028, when the State is unable to verify the specified
excluded status using reliable information available to the State, or
the reliable information is not reasonably compatible with the
information provided by or on behalf of the individual, the State must
require documentation if documentation is reasonably available. If
there is no reasonably available documentation, the State must accept
other information sufficient (as determined by the State) to verify
eligibility, consistent with Sec. 435.557(b)(2)(iii).
In all instances, the State must verify that the individual
receiving care is either a dependent child or a disabled individual, as
both of these terms are defined at Sec. 435.554(a) (Please refer to
sections II.E.3.e. and f. of this IFC for further information regarding
the who is considered a dependent child or disabled individual for the
purpose of community engagement and Sec. 435.554(a) for the definition
of those terms as they apply to community engagement.) To verify the
child's age, States should rely to the greatest extent possible on the
household composition data available in their eligibility system. If
the age of the individual receiving care is not available in the case
record or eligibility system, the State must obtain that information
from the applicant or beneficiary.
To verify the disability status of the individual receiving
assistance as further discussed in section II.E.3.f. of this IFC,
States must attempt to use reliable information available to the State,
to the extent the State has consent to access the information of the
individual receiving care. Where there is no reliable information
available to the State, including if the State does not have consent to
access the information of the individual receiving care and the
information is therefore unavailable, the State must seek information
from the applicant or beneficiary to verify the disability status of
the individual receiving care. The State must collect sufficient
information to substantiate that the individual receiving care meets
the definition of a disabled individual at Sec. 435.554(a). We note
that while the State may require that the applicant or beneficiary
provide a minimum amount of information necessary to determine that the
individual to whom the applicant or beneficiary provides assistance
meets the definition of a disabled individual, the State may not
require the name of the individual receiving care or other identifying
information, and may not determine that an individual does not qualify
for the exclusion only because the applicant or beneficiary declines to
identify the disabled individual to whom the applicant or beneficiary
is providing assistance. If the applicant or beneficiary does not have
the disabled individual's consent to release their identifying
information to the State, the State must require information from the
applicant or beneficiary in the form of a statement or screening tool
sufficient to verify the person receiving care meets the definition of
a disabled individual.
As described in further detail in this section, States may also
need to obtain other information to verify an applicant's or
beneficiary's specified excluded individual status, such as the number
of hours of care provided. States may use screening questions to
identify individuals who may qualify as a specified excluded individual
based on their caregiver status and follow up with those who are
identified through the screening process to obtain additional
information, including documentation (if applicable). However, whenever
States have information indicating the individual may qualify for this
exclusion, States should attempt to obtain all additional information
needed to sufficiently verify an individual's caregiver status in a
single request, rather than requiring the individual to fill out
numerous forms or respond to multiple requests for additional
information. For example, if the State needs information to verify the
number of hours of assistance the family caregiver provided in a given
month and that the individual to whom the family caregiver provided
assistance is disabled, the State should send one request for
information seeking
[[Page 33404]]
documentation (or other needed information in the absence of reasonably
available documentation) to verify both criteria whenever possible.
The State must also verify the individual's relationship to the
dependent child or disabled individual to confirm the individual is the
dependent child's or disabled individual's parent, guardian, caretaker
relative, or family caregiver (as defined at Sec. 435.554(a) and
implemented at Sec. 435.554(c)(3)). We define guardian to mean an
adult appointed by a court to care for and make personal decisions on
behalf of an individual who cannot care for themselves, as further
detailed in II.E.3.c. of this IFC. Because the definition is dependent
on the legal status as determined by a court, the State must require a
court order or other legal instrument in accordance with applicable
State law to verify an individual's status as a guardian. States should
rely on household composition information collected at application and
available in their eligibility system to verify an individual is a
parent or a caretaker relative whenever possible. However, States
should be mindful that the terms ``parent'' and ``caretaker relative''
assume a slightly different meaning (defined at Sec. 435.554(a)) for
purposes of community engagement than they do for general Medicaid
eligibility purposes.
Family caregiver as defined at Sec. 435.554(a) means an adult
family member or other individual who has a significant relationship
with, and who provides care within a broad range of assistance, to a
dependent child or a disabled individual. An individual who is a family
caregiver as defined at Sec. 435.554(a) is a specified excluded
individual if he or she meets one of the following implementing
criteria established at Sec. 435.554(c)(3)(i)(A) through (C): (1) the
individual primarily resides with a dependent child or disabled
individual, as these terms are defined in section II.E.3. of this IFC,
for whom he or she provides assistance that occurs on a regular basis
and is not solely incidental in nature, (2) the individual is a
relative (as specified in the ``caretaker relative'' definition at
Sec. 435.554(a), without regard to the requirements to live with and
to assume primary responsibility requirement) of a dependent child or
disabled individual as defined earlier for whom he or she provides
assistance that occurs on a regular basis and is not solely incidental
in nature, and with whom he or she does not reside, or (3) the
individual does not reside with and is not a relative (as specified in
the ``caretaker relative'' definition at Sec. 435.554(a), without
regard to the requirements to live with or to assume primary
responsibility requirement) of the dependent child or the disabled
individual, as defined earlier, for whom he or she provides not less
than 80 hours of assistance that is not solely incidental in nature per
month. We explain in section II.E.3. of this IFC that we view shared
residence with or familial relationship to the care recipient as
consistent with ongoing caregiving responsibility and as strong
evidence of the ``significant relationship'' specified in the RAISE
Family Caregivers Act definition of family caregiver. Thus, individuals
meeting either of those criteria are not required to demonstrate
provision of a minimum number of caregiving hours but are required to
demonstrate that they provide assistance that occurs on a regular basis
that is not solely incidental in nature (as described in section
II.E.3.h. of this IFC). As such, verifying whether an individual
resides with or is related to the dependent child or disabled
individual for whom he or she provides assistance is critical to
determining if an individual meets the definition of a family caregiver
at Sec. 435.554(a) and qualifies as a specified excluded individual
under the family caregiver component of section 1902(xx)(9)(A)(ii)(III)
of the Act as implemented at Sec. 435.554(c)(3)(i). States should rely
on household composition and relationship data collected during the
application process and stored in the eligibility system to verify the
shared residence or familial relationship when possible. States should
only seek additional information from the applicant or beneficiary to
verify relationship to or co-residence with the dependent child or
disabled individual if the information is not available in the State's
system. If the applicant or beneficiary meets the definition of a
family caregiver at Sec. 435.554(a) and resides with or is related to
the dependent child or disabled individual to whom he or she provides
assistance, the State must collect information necessary to verify that
the assistance provided by the applicant or beneficiary is provided on
a regular basis and is not solely incidental in nature. If the State
determines an individual meets the definition of a family caregiver at
Sec. 435.554(a) and does not live with and is not related to a
dependent child or disabled individual for whom they are providing
assistance that is not solely incidental in nature, the State is
required also to verify the number of hours of assistance provided and
may only determine the individual is a specified excluded individual
under the family caregiver component of the exclusion at section
1902(xx)(9)(A)(ii)(III) of the Act if the individual provides no less
than 80 hours of assistance in a month. For individuals whose family
caregiver status and specified excluded individual status cannot be
automatically established through reliable information available to the
State, States must obtain sufficient information from the applicant or
beneficiary to verify their status as a specified excluded individual
under the family caregiver component of the exclusion at section
1902(xx)(9)(A)(ii)(III) of the Act. States must determine what
information is sufficient to verify an individual is a family
caregiver, but the information must substantiate the State's
determination that an individual does or does not satisfy the criteria
to be a specified excluded individual on this basis. We also note that,
if the individual is ineligible for the exclusion because they provided
care for less than the required number of hours, the hours spent
providing care are considered unpaid work and must count as such toward
the 80 hours required to demonstrate community engagement on the basis
of work or a combination of qualifying hour types. See section
II.I.6.a. of this IFC for more information about verifying work hours.
In addition to using reliable information available to the State to
identify family caregivers who could be specified excluded individuals,
screening questions and tools can reduce administrative barriers and
speed identification and processing for applicants and beneficiaries
who may be specified excluded individuals. States should consider
incorporating plain language screening questions in Medicaid
applications and other program applications and forms to help identify
family caregivers and to help family caregivers identify themselves as
being a family caregiver. Many family caregivers do not automatically
identify themselves as caregivers or recognize themselves in the role
of a family caregiver for a variety of reasons. As such, States will
need to craft plain language questions that are understandable and help
individuals see themselves in that role, as appropriate. The questions
must be sufficiently detailed for the State to determine eligibility
based on an individual's responses. The report ``Caregiving in the US''
(2025) \101\
[[Page 33405]]
includes examples of screening questions used to identify those caring
for a child with disabilities or a serious medical condition, and
unpaid caregivers of adults. Additional examples are included in a free
Caregiver Communications and Marketing Toolkit created by the National
Academy of State Health Policy (NASHP) \102\ and the Centers for
Disease Control and Prevention's Behavioral Risk Factor Surveillance
System (BRFSS) Caregiver Module \103\ used by several States to gather
information about family caregivers.
---------------------------------------------------------------------------
\101\ AARP and National Alliance for Caregiving. (2025).
``Caregiving in the U.S.'' https://www.aarp.org/content/dam/aarp/ppi/topics/ltss/family-caregiving/caregiving-in-us-2025.doi.10.26419-2fppi.00373.001.pdf.
\102\ ``Caregivers Communications and Marketing Toolkit,''
Support Caregiving, https://supportcaregiving.org/caregivers-communications-and-marketing-toolkit/.
\103\ ``2019 Caregiving Module,'' Centers for Disease Control
and Prevention. https://www.cdc.gov/healthy-aging-data/media/pdfs/2024/07/2019-caregiver-module-5081.pdf.
---------------------------------------------------------------------------
d. Veterans with a Disability Rating as Total
Section 1902(xx)(9)(A)(ii)(IV) of the Act and implementing
regulations at Sec. 435.554(c)(4) create a specified excluded
individual status for veterans with a total disability rating. VA
assigns disability ratings, which can be permanent or temporary, based
on the severity of a veteran's service-connected condition(s), which is
stated as a percentage. For purposes of community engagement, a total,
or 100 percent, disability rating--either temporary or permanent--from
VA is necessary to qualify for the exclusion. An exception to this
exists for veterans with a total disability based on individual
unemployability (TDIU) which allows veterans with service-connected
disabilities to receive 100 percent disability compensation if they
cannot secure or maintain ``substantial gainful employment,'' even if
their combined disability rating is below 100 percent. We believe it is
reasonable to regard these veterans, who receive 100 percent disability
compensation, as having a total disability, in the same manner as all
other veterans who have a combined disability rating of 100 percent and
also receive 100 percent disability compensation.
Accordingly, to verify that an individual qualifies as a specified
excluded individual as a veteran with a total disability rating, if the
State does not have an established data connection to VA to verify an
individual's status, the State must request documentation from the
individual demonstrating the veteran's permanent or temporary
disability rating of 100 percent (or the veteran's status as TDIU even
if their combined disability rating is below 100 percent). We
understand that documentation of a disabled veteran's disability rating
is readily available through the VA and that veterans may access
information related to their disability designation through the VA
website at https://www.va.gov/. States must reverify a veteran's
temporary total disability status at least once every 12 months because
the VA's determination of temporary conditions indicates they are
subject to change and likely to improve. States may reverify temporary
total disability status as determined by the VA at each renewal, but
they may not verify more frequently than each renewal. For permanent
disability status determinations, States must rely on the VA's
determination that the condition is not likely to improve and, once
such status has been verified, States must not reverify an individual's
permanent disability status.
We are assessing the availability of data from VA and whether we
can make it available through the Hub to verify a veteran's total
disability rating (100 percent and/or TDIU). If this data source
becomes available to States, we will require States to establish a
connection to the Hub to verify this information or request a waiver
requesting authority to establish connections to data sources or
mechanisms as provided at Sec. Sec. 435.945(k) and 435.557(e) within
12 months of their first availability through the Hub to verify veteran
disability status.
e. Individuals Who Are Medically Frail or Otherwise Have Special
Medical Needs
The statute establishes a specified excluded individual status for
individuals who are medically frail or otherwise have special medical
needs in section 1902(xx)(9)(A)(ii)(V) of the Act. Section
435.554(c)(5)(i) defines medical frailty to include an individual: who
is blind or disabled (as defined in section 1614 of the Act); with an
SUD, with a disabling mental disorder; with a physical, intellectual,
or developmental disability that significantly impairs their ability to
perform one or more ADL; or with a serious or complex medical condition
(which is defined at Sec. 435.554(c)(5)(i)(E)). We are further
defining a medically frail individual at Sec. 435.554(c)(5)(i) as an
individual whose physical, mental, or other behavioral health condition
significantly impairs the individual's ability to comply with the
community engagement requirement in this subpart. Accordingly, when
determining whether an individual qualifies as a specified excluded
individual on the basis of being medically frail or having other
special medical needs, the State must verify both the presence of a
condition or diagnosis that meets the criteria described at Sec.
435.554(c)(5)(i)(A) through (E) and that the condition or diagnosis
significantly impairs the individual's ability to comply with the
community engagement requirement.
In accordance with requirements in section 1902(xx)(5) of the Act,
States must, where possible, verify medical frailty or other special
medical needs on an ex parte basis using reliable information available
to the State without requiring the individual to submit additional
information. To comply with this requirement, at Sec. 435.557(f)(1),
we provide that the State must attempt to verify that an individual is
a specified excluded individual on the basis that the individual is
medically frail or has other special medical needs as defined at Sec.
435.554(c)(5) using reliable information available to the State,
including adjudicated claims or encounter data, as relevant to the
individual, from the preceding 12 months. States may not consider
information older than 12 months when verifying medical frailty or
other special medical needs, because older information may not reflect
the individual's current condition.
States must identify individuals who are medically frail or who
otherwise have special medical needs and exclude them from the
community engagement requirement. States should consider incorporating
plain language screening questions in Medicaid applications and other
program applications and forms for use at application and renewal to
identify individuals who may be medically frail or otherwise have
special medical needs, including to identify beneficiaries who were
previously applicable individuals and who may newly qualify for an
exclusion on the basis of medical frailty or otherwise having other
special medical needs. The questions should be as concise as reasonably
possible and presented in plain language. If an individual is
identified as potentially medically frail or otherwise having other
special medical needs based on the initial screening questions, the
State must attempt to verify medical frailty using reliable information
available to the State prior to seeking documentation or other
information from the individual to determine whether the individual is
a specified excluded individual on this basis, as specified in Sec.
435.557(f).
Information gathered by States to verify medical frailty or
otherwise
[[Page 33406]]
having special medical needs should include multiple domains to be
effective in identifying individuals who meet this exclusion, including
their condition(s), utilization of services (for example, inpatient
hospital services, intensive outpatient services, SUD services, etc.),
and their level of impairment (for example, need for assistance with
one or more ADLs, etc.). We have also reviewed examples of State
processes for identifying individuals who are medically frail or
otherwise have special medical needs through algorithms using
administrative claims data that assign acuity scores to individuals,
which potentially could be used to make a determination of medical
frailty or otherwise having special medical needs (for example, a score
over a specified threshold could be used to determine an individual is
medically frail). States may use an approach that relies on lists of
qualifying diagnosis codes combined with utilization data and other
factors, such as severity of conditions, to determine medical frailty
or otherwise having other special medical needs. However, in some
cases, reliable claims information may not be available to the State
for individuals who are medically frail or otherwise have other special
medical needs, particularly in cases where an individual recently
obtained a diagnosis and medical services, but the claims data are
lagging. For this reason, the absence of adjudicated claims or
encounter data altogether, as well as the absence of particular claims
or types of claims in available adjudicated claims data, may not be
used to determine ineligibility for the exclusion based on medical
frailty or other special medical needs. For example, an individual may
not be determined not to be medically frail only because their
condition or utilization relates to one or more non-listed diagnosis
codes. States must provide an individual with the opportunity to
provide documentation or other information demonstrating medical
frailty or otherwise having other special medical needs status when the
State is unable to verify the excluded status using information
available to the State, as provided in Sec. 435.557(f).
Some individuals may not identify themselves as having a condition
that could qualify them as a specified excluded individual on this
basis for several reasons, even upon completing a screener, but their
status as medically frail or otherwise having special medical needs may
be apparent based on other documentation or information provided by the
individual. States may accept provider documentation from many types of
practitioners, including physicians, nurse practitioners, physician
assistants, psychologists, counselors and therapists, clinical social
workers, and other practitioners credentialed by the State, that are
qualified to determine that an individual's condition qualifies them as
medically frail or having other special medical needs under State scope
of practice laws. We note that States' lists of practitioners qualified
to determine that an individual's condition qualifies them as medically
frail or having other special medical needs must be shared with us upon
request as part of our oversight and data monitoring activities.
We recognize that for individuals who are newly applying for
Medicaid, and for enrolled beneficiaries who are newly attesting to
specified excluded individual status based on medical frailty or
otherwise having special medical needs, there may not be reliable
information available to the State. This may be especially true if the
individual has not received medical services due to prior lack of
health coverage, or for enrolled beneficiaries, because the condition
is new and the individual has not yet received medical care for the new
condition. For beneficiaries who have received medical care, the
services received may not yet be reflected in reliable information
available to the State due to claims lag. For such individuals, the
State would not have reliable information, such as adjudicated claims
or encounter data from the last 12 months, to verify that an individual
qualifies as a specified excluded individual on this basis.
At Sec. 435.557(f)(1)(ii), we explain the verification
requirements when no reliable information is available to the State to
verify medical frailty, or when the reliable information available is
not reasonably compatible with the information provided by or on behalf
of the individual. Beginning on January 1, 2028, States may only use a
statement or other information provided under penalty of perjury one
time during an individual's period of enrollment,) to verify
eligibility as a specified excluded individual on the basis of medical
frailty or having other special medical needs. We define an
individual's period of enrollment defined at Sec. 435.557(a) as a
continuous period of enrollment in coverage under the State plan or
waiver without the individual being disenrolled, regardless of the
number of consecutive eligibility periods, of redeterminations or
renewals, or of transitions between eligibility groups). Once a
statement or other information provided under penalty of perjury has
been used on or after January 1, 2028, to verify eligibility for an
exclusion based on being medically frail or having other special
medical needs, at the next regularly scheduled renewal, in the absence
of available information, the State must require the individual provide
documentation demonstrating the individual's current medical frailty
status.
For example, if the State accepts a statement provided under
penalty of perjury to verify a new applicant is medically frail because
there is no reliable information available to the State in February
2028, the State must verify that person's medical frailty status using
reliable information available to the State or documentation submitted
by or on behalf of the individual when renewing their eligibility in
August. If the individual remains continuously enrolled and later
declares medical frailty status on another basis, the State may not
accept the individual's statement or other information of provided
under penalty of perjury as verification that the individual is
medically frail since the individual's prior status was verified using
a statement provided under penalty of perjury. To verify the
individual's medical frailty status on this new basis, the State must
use reliable information available to the State or documentation
submitted by or on behalf of the individual.
We believe that requiring verification of medical frailty to
confirm an individual's specified excluded status using data or other
documentation after the State has verified that exclusion using a
statement or other information provided under penalty of perjury (such
as a screening tool) will motivate individuals to access care.
Requiring States to verify an individual's medically frail status using
reliable information available to the State or, beginning on January 1,
2028, documentation after the State has verified that exclusion using a
statement or other information provided under penalty of perjury (such
as using a screening tool) is reasonable, because once an individual is
enrolled in coverage or once an enrolled beneficiary experiences a new
or worsening condition that could result in qualifying for the medical
frailty exclusion, the beneficiary is able to receive covered services
to address their health condition. We encourage beneficiaries in this
situation to access appropriate services for which they are entitled to
coverage, which is in beneficiaries' best interest and may lower
future, downstream costs to Medicaid that could result from delaying
receipt of necessary care. When beneficiaries
[[Page 33407]]
access covered services, their receipt of services will appear (with
some degree of lag) in adjudicated claims or encounter data (as
applicable), which constitutes reliable information available to the
State. Thus, once a beneficiary has enrolled in coverage and started
receiving covered services to address their health condition, we expect
States will be able to reverify their continued qualification for the
medical frailty exclusion (as applicable) on an ex parte basis using
information contained in State systems.
While we believe requiring documentation when there is no reliable
information available after previously verifying an individual's
medical frailty status using a statement or other information provided
under penalty is reasonable, we recognize that some States may need to
make system and process changes to implement these documentation
requirements. As such, as provided in Sec. 435.557(f)(1)(i), States
may require documentation or accept other information (even if
documentation is reasonably available) to verify an individual's
medical frailty status through December 31, 2027.
States must reverify that an individual is medically frail or
otherwise has other special medical needs at least every 12 months,
although States may reverify more frequently, such as at each renewal..
For individuals who were enrolled or last verified based on information
provided under penalty of perjury, such as responses to questions in a
screening tool, without additional verification (such as reliable
information available to the State or documentation provided by the
individual), Sec. 435.557(f)(1)(ii)(A) requires, beginning January 1,
2028, that the individual's medical frailty status must be reverified
at the next regular renewal, which could be 6 months from the
individual's last verification even in a State that otherwise elects to
reverify medical frailty status every 12 months. States must attempt
this verification and each verification thereafter using adjudicated
claims or encounter data as relevant to the individual for the
preceding 12 months, before requesting documentation from the
individual. We expect that after individuals are enrolled and gain
access to coverage, States generally will be able to reverify on an ex
parte basis using reliable information available to the State. We
therefore believe requiring reverification at least once every 12
months balances the goal of promoting continued coverage for vulnerable
populations with the importance of community engagement in achieving
the program's goals, as well as the need to maintain program integrity.
Moreover, standardizing the timeframe simplifies the administration of
the requirement.
Finally, CMS recognizes that processes for the identification and
verification of individuals who may be medically frail or otherwise
have special medical needs intersect with Federal privacy requirements;
in particular, we recognize the intersection of 42 CFR part 2 and the
medically frail exclusion for individuals with SUDs. It is critical
that Federal civil rights requirements for individuals with
disabilities, as well as Federal privacy protections, be observed in
this and all contexts related to the implementation of the community
engagement requirement. States must ensure that they take appropriate
steps to safeguard Medicaid beneficiary and applicant information used
in the specified excluded individual identification and verification
processes discussed in this section of the rule, and that the
information is accessed, stored, and handled consistent with all
applicable Federal requirements, including section 1902(a)(7) of the
Act; 42 CFR 431, subpart F; the Health Insurance Portability and
Accountability Act of 1996 (HIPAA); 42 CFR part 2; \104\ and any other
applicable Federal privacy laws, as well as applicable State laws. The
Department of Health and Human Services Office for Civil Rights (OCR)
enforces the requirements of 42 CFR part 2. We will work with OCR to
provide States with technical assistance on the intersection of 42 CFR
part 2 and the community engagement requirement. Further, applicable
individuals who meet the definition of a person with a disability under
section 504, section 1557, or the ADA but do not qualify for an
exclusion or exception may require reasonable modifications to comply
with the community engagement requirement. We remind States that they
are required to provide such reasonable modifications in implementing
the community engagement requirement where necessary to avoid
discrimination on the basis of disability under section 504, section
1557, and the ADA. In addition, States must comply with notice
requirements at Sec. 435.917(a) and must provide assistance to
individuals seeking help with the application or renewal process in
accordance with Sec. 435.908(a).
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\104\ For more information about the 42 CFR part 2 requirements
regarding confidentiality of SUD patient records, see:
``Understanding Confidentiality of Substance Use Disorder (SUD)
Patient Records or ``Part 2'','' OCR, last updated February 13,
2026, https://www.hhs.gov/hipaa/part-2/index.html.
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f. Individuals Compliant With TANF Work Requirements and Individuals
Not Exempt From SNAP Work Requirements
Section 1902(xx)(9)(A)(ii)(VI) of the Act and implementing
regulations at Sec. 435.554(c)(6) and (7) describe categories of
specified excluded individuals that reference existing work
requirements in other jointly administered Federal-State programs.
Specifically, clause (ii)(VI)(aa) references TANF and clause
(ii)(VI)(bb) references SNAP. Section 1902(xx)(9)(A)(ii)(VI)(aa) of the
Act and implementing regulations at Sec. 435.554(c)(6) create an
exclusion from the community engagement requirement for individuals who
comply with the work requirements imposed by the State under section
407 of the Act as a condition of eligibility for TANF. Section
1902(xx)(9)(A)(ii)(VI)(bb) of the Act and the implementing regulations
in Sec. 435.554(c)(7) create an exclusion for an individual who is a
member of a household that receives SNAP benefits and is not exempt
from a work requirement under the Food and Nutrition Act of 2008.
As such, States must have a process to obtain information from the
TANF agency and from the SNAP agency to determine whether an individual
meets either of these criteria. If so, then the individual meets the
definition of a specified excluded individual and therefore is not an
applicable individual subject to the Medicaid community engagement
requirement.
Our understanding is that many States already use TANF or SNAP (or
both) agency systems as reliable sources of information available to
the State for purposes of verifying other factors of eligibility or
maintain shared eligibility systems with those programs. These States
already have access to information to verify that an individual is a
specified excluded individual under these categories based on the
individual's most recent TANF work requirement compliance status or
SNAP household eligibility and work requirement exemption and exception
status. However, if the State does not yet have means to obtain these
data from the TANF and the SNAP agency, the State must establish a
process to obtain all the information needed from both programs to
determine if an individual is a specified excluded individual under
either of these categories to comply with the requirement at Sec.
435.557(b)(1).
If there is no reliable information available to the State (for
example, no information about the individual is returned from SNAP or
TANF), or the reliable information is not reasonably
[[Page 33408]]
compatible with the information provided by or on behalf of the
individual, the State must seek information from the individual to
verify their specified excluded status. Beginning on January 1, 2028,
when there is no reliable information available to the State or the
reliable information is not reasonably compatible with the information
provided by or on behalf of the individual, the State must require
documentation if documentation is reasonably available. If there is no
reasonably available documentation, the State must have a process to
accept other information to verify eligibility, consistent with Sec.
435.557(b)(2)(iii).
g. Participants in Drug Addiction or Alcoholic Treatment and
Rehabilitation Programs
Section 1902(xx)(9)(A)(ii)(VII) of the Act establishes an exclusion
for individuals ``participating in a drug addiction or alcoholic
treatment and rehabilitation program (as defined in section 3(h) of the
Food and Nutrition Act of 2008).'' The statute establishes an exclusion
for active participants in certain drug addiction or alcoholic
treatment and rehabilitation programs, which we implement at Sec.
435.554(c)(8). In accordance with requirements under section
1902(xx)(5) of the Act to verify an individual is a specified excluded
individual on an ex parte basis using reliable information available to
the State without requiring the individual to submit additional
information, States must attempt to verify participation in drug
addiction or alcoholic treatment and rehabilitation programs using
adjudicated claims, payment and encounter data, and other relevant
information available to the State to attempt to verify an individual's
qualification for the exclusion.
In the absence of reliable information available to the State or if
the reliable information available to the State is not reasonably
compatible with the information provided by or on behalf of the
individual, States must obtain sufficient to verify the individual's
current participation in a drug addiction or alcoholic treatment and
rehabilitation program. Beginning on January 1, 2028, when there is no
reliable information available to the State or the reliable information
is not reasonably compatible with the information provided by or on
behalf of the individual, the State must require documentation if
documentation is reasonably available. If there is no reasonably
available documentation, Sec. 435.557(b)(2)(iii) requires that the
State accept other information sufficient (as determined by the State)
to verify eligibility.
h. Inmate of a Public Institution
Section 1902(xx)(9)(A)(ii)(VIII) of the Act provides an exclusion
from the community engagement requirement for individuals who are
inmates of a public institution. As implemented at Sec. 435.554(c)(9),
``inmate of a public institution'' has the meaning given the term at
Sec. 435.1010 and includes individuals in correctional institutions
such as State or Federal prisons, county or local jails, detention
facilities, or other carceral settings. States must ensure they have
procedures to obtain data showing whether an individual is an inmate of
a public institution to determine if the individual is a specified
excluded individual on this basis. States must use reliable information
available to the State to the extent possible to determine whether an
individual is (or was at any point in the prior 3 months for the
purpose of verifying the exception at Sec. 435.553(b)) an inmate of a
public institution. To access these data, including from jails and
prisons, States should use existing connections with other State
agencies and local governments that were established to implement
requirements under division G, title I, section 205 of the Consolidated
Appropriations Act, 2024 (CAA, 2024; Pub. L. 118-42) (concerning the
prohibition on termination of enrollment due to incarceration). States
may also wish to consider employing processes developed through section
1115 demonstrations serving incarcerated or formerly incarcerated
populations reentering the community to support verification of
qualification as a specified excluded individual on this basis. If the
State does not have a process to obtain reliable information
identifying an individual as a current or recent former inmate, the
State must establish a process to obtain this information to comply
with the requirement at Sec. 435.557(b)(1). When there is no reliable
information available to the State, including prior to establishing a
process to obtain data showing whether an individual is or recently was
an inmate of a public institution, or the reliable information is not
reasonably compatible with the information provided by or on behalf of
the individual, the State must obtain sufficient documentation (if it
is reasonably available) or other information from the individual to
verify qualification as a specified excluded individual on this basis.
As specified at Sec. 435.557(b)(2), beginning on January 1, 2028, when
there is no reliable information available to the State or the reliable
information is not reasonably compatible with the information provided
by or on behalf of the individual, the State must require documentation
if reasonably available and may accept other information only in the
absence of reasonably available documentation (and must have a process
to do so in cases where documentation does not exist or is not
reasonably available).
i. Pregnant or Eligible for Postpartum Coverage
Section 1902(xx)(9)(A)(ii)(IX) of the Act establishes an exclusion
for pregnant and postpartum women who are entitled to medical
assistance under section 1902(e)(5) or (16) of the Act. Consistent with
existing requirements under Sec. 435.956(e), the State must accept an
attestation of pregnancy or entitlement to postpartum medical
assistance unless the State has information that is not reasonably
compatible with such attestation. Individuals may report pregnancy at
application, post-enrollment as a change in circumstance (including in
connection with a verification of compliance with the community
engagement requirement more frequently than at renewal, if elected by
the State), or at renewal. States should use this information from
their eligibility system or the individual's case record, including
their application forms, to verify qualification as a specified
excluded individual on this basis. In addition, when checking data
sources to determine whether a beneficiary who was previously
identified as an applicable individual is now newly excluded during a
more frequent verification or at renewal. States may identify pregnancy
or postpartum status based on claims data, encounter data, health
records, or other reliable information available to the State.
Consistent with the requirement at section 1902(xx)(5) of the Act to
use reliable information available to the State to verify an
individual's specified excluded status, the State must use such
information to determine whether an individual qualifies as a specified
excluded individual on the basis of pregnancy or eligibility for
postpartum coverage without requiring information from the individual.
8. Mandatory Exceptions
States must deem applicable individuals as having demonstrated
community engagement for a month if, for all or part of a month, they
fall into a mandatory exception specified in
[[Page 33409]]
section 1902(xx)(3)(A) of the Act and implemented at Sec. 435.553.
Mandatorily excepted individuals are: specified excluded
individuals as defined at Sec. 435.554 and discussed in section II.E.
of this IFC, individuals under age 19, individuals entitled to or
enrolled in Medicare part A or enrolled in Medicare part B, individuals
described in a mandatory eligibility group under section
1902(a)(10)(A)(i)(I) through (VII) of the Act, and individuals who were
an inmate of a public institution at any point during the prior 3
months ending on the first day of a month in which the individual is
otherwise subject to the requirement to demonstrate community
engagement.
Many of the mandatory exceptions include individuals for whom the
State's eligibility system is likely to have existing information on
which the State must rely to verify that an applicable individual
qualifies for a mandatory exception. For example, as part of the
eligibility determination, a State would generally screen for and have
information on individuals who were under the age of 19, entitled to or
enrolled for Medicare benefits under part A or B, or described in any
mandatory eligibility group in section 1902(a)(10)(A)(i)(I) through
(VII) of the Act. Because States are already required to obtain this
information as a part of the eligibility determination, we believe the
verification of these elements should be straightforward based on
information already contained and readily available in the State's
enrollment and eligibility system. In addition, States must establish
connections with other State or local agencies that provide reliable
information relevant to an individual's status as an inmate of a public
institution at any point during the 3-month period before any month for
which the applicable individual otherwise would be required to
demonstrate community engagement, as discussed in preamble section
II.I.7.h. of this IFC.
When verifying an applicable individual qualifies for a mandatory
exception, the requirement to use reliable information available to the
State applies, as implemented at Sec. 435.557(g)(1). Section
1902(xx)(3)(A) of the Act permits the State to deem an individual to
have demonstrated community engagement for a month without further
verification ``of the information resulting in such deeming'' if the
individual meets the criteria for a mandatory exception for all or part
of that month. We interpret this requirement to allow a State to deem
an applicable individual to have demonstrated community engagement
without requiring documentation or other information in the absence of
reasonably available documentation only if the individual provided
information on an application, renewal or other State form, or when
reporting a change in circumstances in accordance with Sec.
435.557(b)(4) indicating they qualify for an exception and there is no
reliable information available to the State to verify the information
the individual provided. If reliable information available to the State
is inconsistent with information provided by the applicable individual,
beginning on January 1, 2028, the State must require documentation or
other information if documentation is not reasonably available. This
documentation or other information is not required for the purpose of
verifying the underlying information resulting in the deeming of
compliance but rather to resolve the inconsistency. We also stress that
not requiring documentation or other information to verify an
applicable individual meets the criteria for an exception is a State
option under the statute but States may require documentation (if it is
reasonably available) in the absence of reliable information available
to the State and are encouraged to do so in the interest of program
integrity.
9. Verifying Optional Short-Term Exceptions
Section 1902(xx)(3)(B) of the Act, implemented at Sec. 435.555 and
discussed in section II.G. of this IFC, provides States with the option
to implement exceptions from the community engagement requirement for
specific short-term hardship events. States that elect to implement
these optional exceptions must deem applicable individuals experiencing
a short-term hardship event for a given month as having demonstrated
community engagement for that month.
a. Applicable Individuals in Certain Medical Institutions or Receiving
Outpatient Services
As specified at Sec. 435.555(d)(1), in a State that elects to
offer exceptions for short-term hardships, an applicable individual
experiences a short-term hardship if they receive inpatient hospital
services, nursing facility services, services in an ICF/IID, inpatient
psychiatric hospital services, or such other services of similar acuity
as discussed in section II.G.4. of this IFC. Consistent with existing
verification policy and Sec. 435.557(g)(2)(i), the State must attempt
to verify that an applicable individual has received these services
using reliable information available to the State before requesting
information from the individual. As defined at Sec. 435.557(a),
reliable information available to the State includes, but is not
limited to, adjudicated claims and encounter data as relevant to the
individual for the preceding 12 months (as applicable). However, States
may not have these data available, or there may be a lag in receipt of
such data. In the absence of reliable information available to the
State, States must seek additional information to verify qualification
for the short-term hardship exception. Beginning on January 1, 2028,
when there is no reliable information available to the State or the
reliable information is not reasonably compatible with the information
provided by or on behalf of the individual, the State must require
documentation (for example, from a provider, a medical bill or
admission or discharge paperwork) if documentation is reasonably
available, or other information, as required at Sec. 435.557(b)(2) if
no documentation exists or is reasonably available. The State must
ensure that the eligibility record includes sufficient information to
substantiate the State's eligibility determination for the short-term
hardship exception.
b. Applicable Individual or Dependent Must Travel Outside of Their
Community for an Extended Period of Time To Receive Medical Services
Necessary for a Serious or Complex Medical Condition
As specified at Sec. 435.555(d)(4), an applicable individual
experiences a short-term hardship if the applicable individual or their
dependent must travel outside of their community of residence for an
extended period of time to receive medical services necessary to treat
a serious or complex medical condition, as defined at Sec.
435.554(c)(5)(i)(E), that are not available within their community of
residence. States must first attempt to verify the serious or complex
condition and receipt of medical services, including the location where
and the date(s) on which the services were received, using reliable
information available to the State, including adjudicated claims or
encounter data as relevant to the individual for the preceding 12
months and information from other electronic data sources (as
applicable) However, we anticipate there will be instances in which no
reliable information is available to the State, particularly when the
applicable individual's dependent, and not the applicable individual,
needed to travel outside of their community of residence
[[Page 33410]]
to receive care. Beginning on January 1, 2028, when no reliable
information is available to the State, the State must require
documentation if documentation is reasonably available, such as medical
records providing the dates and location of services. The State must
also establish procedures to accept other information in the absence or
reasonably available documentation.
In addition, the State must verify the relationship to the
individual who received care, if that individual was the applicable
individual's dependent. To the extent possible, the State must use
information available in the applicable individual's case record or the
State's eligibility system, such as household composition data
collected at application, to verify the relationship. If the
information is not available in the case record or eligibility system
or using other reliable information available to the State, the State
must seek additional information to verify the relationship. Beginning
January 1, 2028, the State must obtain documentation if such is
reasonably available. If documentation is not reasonably available, the
State must have procedures in place to accept other information
sufficient to verify the individual's eligibility (as determined by the
State). We note that the latitude described in section II.I.3. of this
IFC allowing States to accept other information even if documentation
is reasonably available through January 31, 2027, does not apply to
verifying guardianship status. If the applicable individual is the
dependent's legal guardian, a court order or other legal instrument is
required to verify the relationship.
While an applicable individual is not required to travel with their
dependent for necessary medical treatment, for such an applicable
individual to receive this short-term hardship exception, the State
must verify that the applicable individual had to take leave from
employment or had to absent themselves from other community engagement
activities for reasons related to the dependent's condition or travel.
Section II.G.7. of this IFC provides examples of reasons related to the
dependent's condition or travel.
c. Emergency and Disaster Declarations and High Unemployment Rate
As specified at Sec. 435.555(d)(2) and further described in
section II.G.5. of this IFC, an applicable individual residing in a
county or equivalent unit of local government in which an emergency or
disaster exists as declared by the President under the Stafford Act or
the NEA, meets the short-term hardship exception, if their State elects
to offer short-term hardship exceptions. Similarly, an applicable
individual meets the criteria for a short-term hardship if they reside
in a county or equivalent unit of local government in which the
unemployment rate is at or above 8 percent or 1.5 times the national
unemployment rate (whichever is less) provided the State demonstrates
the unemployment rate meets the threshold in a request to CMS,
consistent with requirements described in section II.G.6. of this IFC.
At Sec. 435.557(g)(2)(ii), we implement the requirement that States
electing to offer short-term hardship exceptions apply an automatic
short-term hardship exception to applicable individuals residing in
these affected locations without requesting any verification relating
to these circumstances from such individuals. States must store and be
able to produce records supporting verification of such emergency,
disaster, or high unemployment rate upon request, for an audit or other
review.
J. Noncompliance Procedures
Section 1902(xx)(6) of the Act, which we implement at Sec.
435.558, specifies the requirements for States when they are unable to
verify that an applicable individual has demonstrated community
engagement or is deemed to have demonstrated community engagement under
Sec. 435.553, or if applicable, Sec. 435.555, during the review
period specified at Sec. 435.556(a). When a State is unable to verify
compliance, section 1902(xx)(6)(A)(i) and (ii) of the Act requires the
State to provide the applicant or beneficiary with a notice of
noncompliance and 30 calendar days from the date the notice is received
for the individual to make a satisfactory showing that they met the
community engagement requirement or that such requirement does not
apply. Section 1902(xx)(6)(A)(ii)(II) of the Act requires the State to
continue to provide coverage to beneficiaries during the 30-calendar
day period, and the regulations at Sec. 435.930(b) require that a
State maintain coverage for beneficiaries unless and until they are
determined ineligible for medical assistance. If the individual fails
to make a satisfactory showing during the 30-calendar day period,
section 1902(xx)(6)(A)(iii) requires the State to deny the application,
or if applicable, disenroll the beneficiary from coverage no later than
the end of the month following the month in which the 30-calendar day
period ends. Section 1902(xx)(6)(A)(iii)(I) of the Act and regulations
in Sec. Sec. 435.911(c)(2) and 435.916(f) require the State to first
consider if there is another basis of eligibility for which the
individual qualifies before denying the application for coverage or
disenrolling the beneficiary from coverage.
Sections 1902(a)(3) and 1902(xx)(6)(A)(iii)(II) of the Act and
Sec. Sec. 435.917 through 435.918 and 42 CFR part 431, subpart E
require States to provide written notice of an eligibility
determination (including at least 10 days advance notice in the case of
an eligibility termination or reduction) and the opportunity for a fair
hearing to applicants and beneficiaries.
Section 1902(xx)(6)(B) of the Act requires the notice of
noncompliance to include information on how the individual may make a
satisfactory showing and how the individual may reapply for coverage.
While the statute uses the word ``noncompliance'' to describe the
procedures that States must follow when they are unable to verify an
individual's compliance with the community engagement requirement, the
notice of noncompliance serves a similar purpose to that of a request
for information in States' existing eligibility verification processes.
The initiation of the noncompliance procedures described in section
1902(xx)(6) of the Act does not mean the State has made a final
determination of noncompliance with the community engagement
requirement or a determination of ineligibility for Medicaid. Rather,
these procedures must be initiated when the State is unable to confirm,
based on available information, that the individual has demonstrated
community engagement, is deemed to have demonstrated community
engagement, or is not an applicable individual (including those who
meet the criteria for a specified excluded individual). Only after the
individual receives the 30-calendar day opportunity to make a
satisfactory showing can the State determine if the individual
demonstrated or is deemed to have demonstrated community engagement or
is excluded from the requirement and make a final determination of
Medicaid eligibility.
1. Providing a Notice of Noncompliance
At Sec. 435.558(a)(1), we implement the requirement in section
1902(xx)(6)(A)(i) of the Act that a State must provide applicable
individuals with a notice of noncompliance when it is unable to verify
that an individual has met the requirement to demonstrate community
engagement prior to determining the individual is ineligible. At Sec.
435.558(a)(2), we implement the requirement that the State provide such
individuals with 30 calendar days
[[Page 33411]]
beginning on the date such notice is received to make a satisfactory
showing of their compliance with the community engagement requirement
or that such requirement does not apply. Because individuals are
provided a notice of noncompliance when the State is unable to verify
their compliance with community engagement, we interpret the phrase
``satisfactory showing'' of compliance to mean the individual provides
sufficient information or documentation to allow the State to verify
compliance with the community engagement requirement for the review
period in accordance with the verification procedures discussed in
section II.I. of this IFC.
At Sec. 435.558(a)(3), we specify that States must continue to
furnish Medicaid to enrolled beneficiaries until an individual is
determined ineligible consistent with long-standing regulations at
Sec. 435.930(b). As such, States are not permitted to terminate
coverage for an individual who is sent a notice of noncompliance during
the 30-calendar day response period as required under section
1902(xx)(6)(A)(ii)(II) of the Act or until the State determines the
individual is ineligible (including because the individual has failed
to provide information or documentation necessary to verify compliance
with the community engagement requirement), whichever is later.
2. Defining ``Unable To Verify'' Compliance With the Community
Engagement Requirement
We specify in Sec. 435.558(b) when a State is considered to be
unable to verify that an applicable individual has met the requirement
to demonstrate community engagement at application and renewal.
a. Defining ``Unable To Verify'' at Application
At Sec. 435.558(b)(1), we specify when a State is considered to be
unable to verify that an applicant has met the requirement to
demonstrate community engagement at application. Specifically, a State
is considered unable to verify compliance when after reviewing the
information provided on the application and any reliable information
available to the State as defined at Sec. 435.557(a), the State still
lacks sufficient information to determine whether the individual has
demonstrated or is deemed to have demonstrated community engagement for
the number of months required under the State plan. A State is
considered to have insufficient information at application if: (1) the
information provided by the applicant is not reasonably compatible with
the reliable information available to the State, or (2) the individual
did not provide the additional information or documentation requested
by the State to verify that they met or are deemed to have met the
community engagement requirement in accordance with the processes
described in section II.I. of this IFC. States may follow long-standing
policy to accept an applicant's declaration under penalty of perjury on
the application that demonstrates they do not meet eligibility criteria
without conducting additional verification to refute the information
provided by the applicant. As such, a State may accept the declaration
on the application without further verification and be considered to
have verified the applicant's noncompliance with the community
engagement requirement when an applicable individual provides
information on the application that they do not meet the requirement
during the review period under Sec. 435.556(a)(1).
b. Defining ``Unable To Verify'' at Renewal
In Sec. 435.558(b)(2), we provide States with two options to
determine when they are unable to verify that a beneficiary has met the
requirement to demonstrate community engagement during a renewal of
eligibility. The State must document its selected option in the State
plan.
Option 1
Under the option defined at Sec. 435.558(b)(2)(i), a State must
consider that it is unable to verify an applicable individual's
compliance with the community engagement requirement when the reliable
information available to the State accessed at renewal, consistent with
Sec. 435.916(a)(2), is not sufficient to verify compliance with the
community engagement requirement. This situation could arise when
sources of reliable information available to the State either: (1) do
not return information to indicate the individual demonstrated
community engagement or qualified for an exception to the community
engagement requirement, or that the individual is a specified excluded
individual; or (2) return information that suggests that the individual
did not demonstrate compliance with or an exception to the community
engagement requirement for the number of months considered under the
review period defined under Sec. 435.556(a)(2) (for example, the
reliable information indicates the individual worked less than 80 hours
and no other information is identified about other qualifying
activities for a required month). When this occurs, the State is
considered unable to verify compliance with the community engagement
requirement and must provide the beneficiary the notice of
noncompliance under Sec. 435.558(c) concurrently with the pre-
populated renewal form provided under Sec. 435.916(a)(3).
We note that the regulations at Sec. 435.916(a)(3)(B) require the
State to provide MAGI beneficiaries with a minimum of 30 days to
respond to a renewal form, but States are permitted to provide more
time. Under this option, States that provide beneficiaries more than 30
days to return their renewal form may want to consider adjusting their
response timeframe so it aligns with the 30-calendar day period to
respond to a notice of noncompliance under section 1902(xx)(6)(A) of
the Act. The 30-calendar day timeframe for the notice of noncompliance
cannot be extended to align with a longer period for beneficiaries to
return their renewal form. Aligning the response timeframe for the
renewal form and notice of noncompliance can help a State gather as
much information as possible if it needs to consider eligibility on
other bases or for other insurance affordability programs timely. A
State may also avoid sending beneficiaries multiple requests for
information with different deadlines, which could be potentially
confusing to beneficiaries.
Option 2
Under the second option we define at Sec. 435.558(b)(2)(ii), a
State is unable to verify an applicable individual's compliance with
the community engagement requirement only after providing the pre-
populated renewal form in accordance with Sec. 435.916(a)(3) to a
beneficiary whose eligibility cannot be renewed based on reliable
information in accordance with Sec. 435.916(a)(2). Specifically, a
State would consider that it is ``unable to verify'' an individual's
compliance if either: (1) the returned renewal form does not provide
sufficient information to demonstrate the beneficiary's compliance with
or exception from the community engagement requirement, or to
demonstrate that the requirement does not apply; or (2) the beneficiary
does not return their renewal form when the only information needed to
redetermine eligibility is related to demonstrating compliance with the
community engagement requirement. The State is then considered unable
to verify compliance with the community engagement requirement and must
provide the beneficiary the notice of noncompliance under Sec.
435.558(c).
[[Page 33412]]
This option differs from option 1 because the State would send the
notice of noncompliance to the beneficiary after the time allotted by
the State under Sec. 435.916(a)(3) to return the renewal form or, if
earlier, after the individual has returned their renewal form without
sufficient information to verify that the individual demonstrated
community engagement, met an exception, or is excluded from the
requirement.
We note that under this second option, the State is only required
to send the notice of noncompliance if compliance with the community
engagement requirement is the only factor of eligibility that remains
to be verified after the time allotted for the beneficiary to return
the renewal form has elapsed. A State does not need to send the
noncompliance notice in instances where the State must request
information on the pre-populated renewal form related to multiple
factors of eligibility, and the individual does not return their form
or returns their form without all the necessary information for
eligibility criteria other than community engagement. In this case, the
State must provide notice and fair hearing rights consistent with Sec.
435.917(b) and part 431 Subpart E before disenrolling the individual
for procedural reasons. States should also inform such individuals
that, if they later return their renewal form, during the
reconsideration period under Sec. 435.916(a)(3)(iii), their
eligibility may be reconsidered and how the individual may demonstrate
community engagement during the reconsideration period.
We outline two scenarios under Option 2 when an individual does not
return the renewal form to illustrate when the State needs to send the
notice of noncompliance.
Option 2--Scenario 1: After checking reliable information available
to the State during the ex parte process, the State has reliable
information available to verify continued eligibility for all factors
of eligibility for an applicable individual except community
engagement. The State sends the applicable individual a pre-populated
renewal form that requests information related to community engagement.
If the applicable individual does not return their renewal form
requesting information related to community engagement, the State must
follow the community engagement noncompliance procedures at Sec.
435.558(a), beginning with sending the noncompliance notice.
Option 2--Scenario 2: After checking reliable information available
to the State during the ex parte process, the State does not have
sufficient reliable information to complete the renewal for State
residency or community engagement and sends the applicable individual a
pre-populated renewal form that requests information needed to complete
the renewal. If the applicable individual does not return the renewal
form with requested information on residency, the community engagement
noncompliance procedures at Sec. 435.558(a) do not apply in this
scenario because the State does not have sufficient information to
determine the individual's continued eligibility for Medicaid. The
State must provide notice and fair hearing rights consistent with Sec.
435.917(b) and Part 431 Subpart E and disenroll the individual from
coverage for procedural reasons at the end of the individual's
eligibility period.
The second option could result in the State needing to send the
notice of noncompliance to fewer individuals, as States are expected to
collect the information needed to renew eligibility on the renewal
form, including information related to community engagement. However, a
State selecting this option would need to account for the additional
time it would take to complete renewals, because the State is providing
two separate periods of at least 30-calendar days for the individual to
provide information with the pre-populated renewal form and the
noncompliance notice. States must complete the entire renewal process,
including the noncompliance procedures, by the end of the beneficiary's
eligibility period.
We believe that providing States with these two options allows them
the ability to operationalize the noncompliance procedures within the
context of the existing renewal process, without creating unnecessary
confusion for the beneficiary or disruptions to State operations, in
the manner the State determines most appropriate for its circumstances.
If a State receives a completed renewal form and any requested
information or documentation after the timeframe provided by the State,
but prior to the end of an individual's eligibility period, the State
must act on this information by promptly redetermining eligibility and
must have a mechanism in place to ensure that eligibility and coverage
continue, consistent with Sec. 435.930(b), until the information
received is evaluated and a final redetermination is made.\105\
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\105\ CMCS Informational Bulletin, ``Medicaid and Children's
Health Insurance Program (CHIP) Renewal Requirements,'' (December 4,
2020), pg. 5, available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib120420.pdf.
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c. Defining ``Unable To Verify'' During More Frequent Verifications of
Compliance With Community Engagement
At Sec. 435.558(b)(3), we specify that, for States electing to
conduct more frequent verifications of community engagement for
applicable individuals under Sec. 435.557(d), the State may select one
of two options, similar to those provided at renewal, to determine when
it is considered unable to verify that an applicable individual has
satisfied the requirement to demonstrate community engagement during a
renewal of eligibility.
Option 1
Under the option we define at Sec. 435.558(b)(3)(i), a State is
considered unable to verify compliance with the community engagement
requirement when, at the time of the more frequent verification, the
reliable information available to the State is insufficient to
determine that the individual is a specified excluded individual or
that the individual has demonstrated or is deemed to have demonstrated
community engagement for the number of months required under the State
plan. When this occurs, the State is considered unable to verify
compliance with the community engagement requirement and must provide
the beneficiary the notice of noncompliance under Sec. 435.558(c). The
associated 30-calendar day period for the beneficiary to make a
satisfactory showing of compliance with the community engagement
requirement fulfills the requirement in Sec. 435.952(d) to seek
additional information from an individual before terminating
eligibility on the basis of reliable information received by the State.
The State does not need to send a separate request for information
prior to sending the notice of noncompliance under this option.
Option 2
Under the second option we define at Sec. 435.558(b)(3)(ii), a
State may only be considered unable to verify an applicable
individual's compliance with the community engagement requirement after
determining that reliable information available to the State is
insufficient to verify compliance and following the State's existing
procedures under Sec. 435.952(d) to request information from the
individual. If the beneficiary does not respond to this request for
information or does not provide sufficient information to demonstrate
compliance with community engagement, the State must send the notice of
noncompliance to the
[[Page 33413]]
beneficiary and provide the associated 30-calendar period for the
beneficiary to make a satisfactory showing.
At application, renewal, or, if applicable, during a more frequent
verification of compliance, verifying compliance with the community
engagement requirement and the associated noncompliance procedures
represent significant changes to existing eligibility and enrollment
processes. States may wish to consider how these changes affect overall
timelines and associated workflows at application and at renewal for
all beneficiaries and make the necessary adjustments to ensure
efficient eligibility and enrollment operations.
3. Content and Timing of the Noncompliance Notice
In Sec. 435.558(c), we specify the content States must include in
the notice of noncompliance. Section 1902(xx)(6)(B) of the Act
specifies that the notice of noncompliance must include information on
how an applicable individual may make a satisfactory showing of
compliance with the community engagement requirement or that such
requirement does not apply and how the individual may reapply for
Medicaid if eligibility is denied or the individual is disenrolled from
coverage. In implementing these notice requirements, we are also
specifying additional content that must be included in the
noncompliance notice to ensure that the individual fully understands
the noncompliance process and the consequences of failure to respond.
We specify in Sec. 435.558(c)(1)(i) through (vii) that the notice of
noncompliance must include clear statements containing the following
information:
How to make a satisfactory showing of compliance with the
community engagement requirement, including:
Which month(s) will be assessed by the State in accordance
with Sec. 435.556(a);
How to show the individual demonstrated community
engagement under Sec. 435.552; and
How to show the individual should be deemed to have
demonstrated community engagement as specified in Sec. 435.553 or, if
applicable, Sec. 435.555;
How to make a satisfactory showing that the community
engagement requirement does not apply to the individual on the basis
that the individual does not meet the definition of an applicable
individual in Sec. 435.551, including because the individual meets the
criteria for one or more of the categories of a specified excluded
individual under Sec. 435.554;
The deadline for providing the information under
Sec. Sec. 435.558(c)(1)(i) or (c)(1)(ii) to the State;
A description of how the information under Sec. Sec.
435.558(c)(1)(i) or (c)(1)(ii) may be submitted to the State through
any of the modalities described in Sec. 435.907(a);
A description of the consequences of noncompliance with
the community engagement requirement and failure to respond to the
notice of noncompliance for Medicaid eligibility and eligibility for
advance payments of the premium tax credit (APTC) and the premium tax
credit (PTC) used to pay for coverage through a Health Insurance
Exchange, as provided in section 1903(xx)(7)(B) of the Act;
How such individual may reapply for medical assistance
under the State plan (or a waiver of such plan) if the individual's
application is denied or the individual is disenrolled from coverage
under the State plan or waiver, as applicable; and
For States that have elected to provide the short-term
hardship exception under Sec. 435.555, the information about short-
term hardships described in Sec. 435.555(c).
For consistency with other eligibility-related notices and forms,
we specify that the notice of noncompliance must be provided consistent
with Sec. 435.905(b) in Sec. 435.558(c)(2), and we further specify
that, if provided in electronic format, the notice must comply with
Sec. 435.918(b) in Sec. 435.558(c)(3).
In Sec. 435.558(c)(4), we specify when an individual is considered
to have received notice of noncompliance for the purpose of determining
when the 30-calendar day period begins. We recognize that many
individuals receive notices from the Medicaid agency via mail through
the U.S. Postal Service, and States may not know when an individual
receives a notice as mail delivery times vary or circumstances may
prevent an individual from receiving their delivered mail. We consider
the notice of noncompliance to be received 5 days after the date on the
notice, unless the applicant or beneficiary shows that he or she did
not receive the notice within the 5-day period. For example, an
individual might not receive the notice in this timeframe if the
individual is hospitalized, the individual's mail is on hold, or the
individual was away from home. This is consistent with established
timelines for receipt of a notice of action (in Sec. 431.231(c)(2))
and of an adverse local evidentiary hearing decision (in Sec.
431.232(b)).
4. State Responsibilities When There Is No Satisfactory Showing of
Compliance
In Sec. 435.558(d), we describe States' responsibilities when an
applicable individual does not make a satisfactory showing of
compliance with the community engagement requirement after receiving
the notice of noncompliance, consistent with section
1902(xx)(6)(A)(iii)(I) of the Act. We specify at Sec. 435.558(d)(1)
that the State must consider all bases of eligibility prior to
determining an applicable individual is ineligible consistent with
Sec. Sec. 435.911 and 435.916(f). Federal regulations in Sec.
435.911(c)(2) and (d)(1), in turn, require that if a State has any
information that indicates the individual is potentially eligible for a
non-MAGI eligibility group, the State must collect the needed
additional information to determine eligibility for Medicaid on any
non-MAGI basis. If the State determines the individual is eligible on
another basis, the State must enroll the individual in such group.
Thus, consistent with these existing requirements, as part of the
community engagement noncompliance procedures, States must evaluate an
individual's eligibility for Medicaid on all bases before making a
determination that an individual is ineligible for Medicaid.
At Sec. 435.558(d)(2), we specify that States must deny
eligibility or disenroll an applicable individual from coverage when
the individual does not make a satisfactory showing to demonstrate
compliance with the community engagement requirement. As with other
decisions affecting an individual's eligibility, the State must provide
written notice (including at least 10 days advance notice in the case
of an eligibility termination or reduction) and grant the individual an
opportunity for a fair hearing in accordance with Sec. Sec. 435.917
through 435.918 and 42 CFR part 431, subpart E. For applicants, we
specify at Sec. 435.558(d)(2)(i) that States must deny the
individual's application and provide written notice and fair hearing
rights consistent with Sec. Sec. 435.917 through 435.918 and 42 CFR
part 431, subpart E. For beneficiaries, at Sec. 435.558(d)(2)(ii), we
implement the requirement in section 1902(xx)(6)(A) of the Act to
disenroll individuals from coverage who are determined ineligible under
the State plan (or waiver of such plan) on all bases not later than the
end of the month following the month in which the 30-calendar day
period ends and after the provision of advance notice and fair hearing
rights consistent with Sec. Sec. 435.917 through 435.918 and 42 CFR
part 431, subpart E. While Sec. 435.558(d)(2)(ii) sets an outer bound
[[Page 33414]]
for when an individual who does not make a satisfactory showing must be
disenrolled, it does not change the requirement for States to conduct
periodic renewals of eligibility consistent with section 1902(e)(14)(L)
of the Act and Sec. 435.916, and therefore, the time frame to complete
the disenrollment should not be used as a waiting period to provide
coverage beyond the end of an individual's eligibility period.
In Sec. 435.558(d)(2)(iii), we require that the notice under Sec.
435.558(d)(2)(i) and (ii) must include a clear statement of the
specific reasons supporting the denial or disenrollment, as
appropriate, which explains that the applicant or beneficiary failed
to:
Make a satisfactory showing of compliance with the
community engagement requirement under Sec. 435.552, including by
meeting the criteria for an exception to be deemed as demonstrating
community engagement under Sec. 435.553 or, if applicable, Sec.
435.555, for the month(s) specified in accordance with Sec.
435.556(a); and
Make a satisfactory showing that the community engagement
requirement does not apply to the individual on the basis that the
individual does not meet the definition of applicable individual in
Sec. 435.551, including failure to demonstrate the individual meets
the criteria for one or more of the categories of a specified excluded
individual under Sec. 435.554.
For both applicants whose application is denied and beneficiaries
who are disenrolled from coverage, we specify in Sec.
435.558(d)(2)(iv) that the State must determine the individual's
potential eligibility for other insurance affordability programs in
accordance with Sec. 435.1200(e).
5. Reenrollment and Reconsideration Periods
Section 1902(xx)(6) of the Act does not change the requirements
related to an individual's ability to reapply for coverage or the steps
States must take when processing applications under Sec. 435.907 and
renewals under Sec. 435.916. As such, in Sec. 435.558(e), we provide
that States must not impose any restriction on an applicable
individual's ability to re-apply for coverage or their ability to
receive coverage if determined eligible upon reapplication based on the
applicable individual's prior denial of eligibility or disenrollment
for noncompliance under Sec. 435.558. Consistent with sections
1902(a)(8) and (a)(10) of the Act, States must also furnish benefits to
eligible applicable individuals with reasonable promptness and in
accordance with the State plan (or waiver of such plan), regardless of
a prior denial of eligibility or disenrollment for noncompliance under
Sec. 435.558. States must not impose a ``waiting period'' or ``lock-
out period'' following the denial or disenrollment for noncompliance
with the community engagement requirement, as such practices would
impermissibly prevent applicable individuals from applying for coverage
or from receiving coverage for which they are eligible, and therefore
violate these statutory requirements.
We also recognize that, as with the renewal form, some
beneficiaries may not return information requested in the notice of
noncompliance. We specify in Sec. 435.558(f) that States must provide
a reconsideration period consistent with Sec. 435.916(a)(3)(iii) for
individuals enrolled on a MAGI basis who were disenrolled for failure
to submit information requested in the notice of noncompliance and
subsequently submit the requested information during the
reconsideration period. States have the option to provide a
reconsideration period to individuals enrolled on a basis other than
MAGI. During the reconsideration period, the information or
documentation requested in the notice of noncompliance is treated as an
application, and the date on which the individual returns the requested
information or documentation is considered the date of
application.\106\ For individuals subject to community engagement who
return their renewal form or information requested in the notice of
noncompliance during the reconsideration period, States must follow
procedures for assessing compliance with community engagement at
application, as provided in Sec. 435.556(a)(1). Such applicable
individuals are required to have demonstrated or be deemed to have
demonstrated community engagement in the month prior to the date of the
application, or additional consecutive months, as elected by the State
under Sec. 435.556(a)(1).
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\106\ CMCS Informational Bulletin, ``Medicaid and Children's
Health Insurance Program (CHIP) Renewal Requirements,'' (December 4,
2020), pg. 7, available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib120420.pdf.
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6. Noncompliance Procedures and Ensuring Timely Eligibility
Determinations at Application
Federal regulations in Sec. 435.912 require States to complete
eligibility determinations for Medicaid promptly and without undue
delay. In general, the determination of eligibility for any individual
may not exceed 90 days for applicants who apply on the basis of
disability and 45 days for all other applicants, which includes
individuals whose eligibility is being determined based on MAGI. The
regulations specify that the timeliness standards cover the period from
the date of application or transfer from another insurance
affordability program to the date the State notifies the applicant of
its decision.
New Sec. 435.558(a) imposes an additional requirement on States to
provide notice of noncompliance to an applicable individual who the
State is unable to verify as being compliant with the community
engagement requirement and to afford such individual 30 calendar days
from the date they receive the notice to demonstrate community
engagement or that they should be deemed to demonstrate community
engagement, or establish that they do not meet the definition of an
applicable individual, which States must account for when making
determinations of eligibility.
We believe the 45-day timeliness standard under Sec. 435.912 for
MAGI beneficiaries is necessary to prevent delays in applicants'
eligibility determinations. We also recognize that the 30-calendar day
period that must be provided to individuals who receive a notice of
noncompliance may make it difficult for States to comply with such
timeliness standard requirements. For example, instances may arise
where the 30-calendar day period that must be provided to applicable
individuals following the receipt of a notice of noncompliance at
application extends beyond the 45-day timeframe even if the State acts
promptly to process the application. Based on anecdotal information
through our work with States, we believe States ordinarily provide less
than 30 days for the applicant to respond to any requests for
information in order to meet the 45-day timeliness standard to make
determinations of eligibility for applicants. Therefore, we are adding
Sec. 435.912(e)(3) to provide a new exception to the timeliness
standard at Sec. 435.912(c)(3)(ii) for applicants who receive the
notice of noncompliance under Sec. 435.558(a) and when the State is
unable to meet the 45-day timeliness standard due to the required 30-
calendar day period discussed in this section of this IFC. When a State
uses this exception, it must do so on a case-by-case basis and document
the reason for the delay in the applicant's case record as required by
Sec. 435.912(f).
We acknowledge that depending on States' systems and operational
capacities, as well as the timing of an individual's response, the
required 30-
[[Page 33415]]
calendar day period for applicants to return information related to
community engagement will not always result in a delay in completing a
determination of eligibility for an applicable individual who is sent a
notice of noncompliance at application. States that can make a timely
determination of eligibility for applicants who are sent a notice of
noncompliance must do so within the timeliness standards. However, we
understand that not all applicants will respond to the notice early in
the 30-calendar day period, and that when the applicant has not
responded to verify compliance with the community engagement
requirement until the end of the 30-calendar day period, States may be
unable to notify the applicant of an eligibility decision within the
45-day timeliness standard. We believe the exception at Sec.
435.912(e)(3) is necessary to prevent States from being subject to
compliance action for failure to meet the regulatory timeliness
standard as a result of complying with section 1902(xx) of the Act. We
also seek to ensure that States take necessary steps to continue to
make timely and accurate determinations of eligibility to the greatest
extent possible.
Consistent with existing requirements in Sec. 435.912(g)(1), we
expect States to complete their initial eligibility determinations as
quickly as possible and not use the maximum period available under the
timeliness standard to delay the initiation of coverage for individuals
who would otherwise be determined eligible and enrolled more quickly.
We expect States to use the new exception in those cases where the
State would have made the determination within the timeliness standard
at Sec. 435.912(c)(3)(ii) but was unable to do so because the State
was required to give the individual the full 30-calendar day period at
Sec. 435.558(a)(2), and the individual did not respond to the notice
sufficiently early in this 30-calendar day period to enable the State
to meet the timeliness standard.
The new exception is only available if a State is unable to process
an application timely for applicants to whom the State is required to
send the notice of noncompliance because the State is unable to verify
whether such individual is a specified excluded individual or whether
the individual demonstrated or should be deemed to demonstrate
community engagement. The exception may not be used when a State sends
a request for information that is not related to the notice of
noncompliance, such as for Medicaid applications for applicants who are
not applicable individuals or for CHIP or BHP applications. As such, we
make corresponding revisions to Sec. Sec. 457.340(d)(1) and 600.320(b)
to specify that the exception added by this IFC in Sec. 435.912(e)(3)
does not apply to CHIP and BHP applications.
7. Impact of Noncompliance and Eligibility for Financial Assistance for
Coverage on a Health Insurance Exchange
Section 1902(xx)(7)(B) of the Act specifies the effect of
noncompliance with the community engagement requirement as it relates
to eligibility for financial assistance for coverage on a Health
Insurance Exchange. An individual who is eligible for Medicaid coverage
that provides MEC is generally not eligible for advance payments of the
premium tax credits (APTC) and the premium tax credit (PTC) used to pay
for coverage through a Health Insurance Exchange. Under section
1902(xx)(7)(B) of the Act, for purposes of section 36B(c)(2)(B) of the
Code, an individual is deemed to be eligible for MEC for a month if the
individual would have been eligible for Medicaid but for their failure
to meet the community engagement requirement. As such, an applicable
individual who does not demonstrate community engagement or is not
deemed to have done so, who would otherwise be eligible for Medicaid
coverage under the State plan (or waiver), is precluded from
eligibility for APTC and PTC. We expect to issue operational guidance
regarding how States should coordinate with exchanges, to ensure proper
implementation of this provision.
K. Implementation Timing
Section 1902(xx) of the Act requires States to establish a
community engagement requirement for certain individuals enrolled in or
applying for Medicaid. Section 1902(xx)(1) of the Act requires that
beginning no later than January 1, 2027, unless granted a good faith
effort exemption under section 1902(xx)(11) of the Act and Sec.
435.560, State Medicaid agencies must require ``applicable
individuals,'' defined in detail in section II.B. of this IFC and Sec.
435.551, to demonstrate community engagement or be deemed to have
demonstrated community engagement as a condition of eligibility. A
State has the option to implement the community engagement requirement
before January 1, 2027, either under the State plan or a section 1115
demonstration. These requirements apply to both individuals applying
for Medicaid and individuals enrolled in Medicaid, as discussed in
section II.H of this IFC. This section of the preamble discusses what
is required for States to successfully implement the community
engagement requirement in a timely manner, including the systems and
capabilities needed to operationalize the community engagement
requirement. New Sec. 435.559 implements and interprets the
implementation timing of section 1902(xx)(1) of the Act.
1. Implementation Date
We consider a State's ``implementation date'' to be the date on
which fulfilling the community engagement requirement becomes a
condition of eligibility for applicable individuals. As such,
applicable individuals who submit an application for medical assistance
on or after the implementation date must be required to demonstrate or
be deemed to demonstrate community engagement as a condition of
eligibility. Beginning on the implementation date, enrolled
beneficiaries must demonstrate or be deemed to have demonstrated
community engagement as part of periodic renewals of eligibility, or
more frequently, if elected by the State. As required at Sec.
435.561(b)(1), States must notify certain individuals of the
requirement to demonstrate community engagement before the State's
implementation date. See Table 2 in section II.L of this IFC for a
visual representation of outreach timing relative to the implementation
date and discussion of the requirement for States to provide certain
individuals with notice of the community engagement requirement prior
to requiring their compliance therewith.
2. Special Considerations at Implementation
a. Pending Applications and Implementation of the Community Engagement
Requirement
Upon implementation, a State will have applications that were
submitted before implementation of the community engagement requirement
and for which eligibility determinations have not yet been made. These
pending applications must be adjudicated according to the policies in
place on the date the application was submitted, consistent with Sec.
435.915, which provides that the effective date of Medicaid coverage is
based on the date an application is submitted. If applicable
individuals included on such an application are determined eligible and
enrolled, the State must then apply the new community engagement
requirement to these individuals in accordance with requirements for
[[Page 33416]]
enrolled beneficiaries discussed in the next section.
As an illustrative example, consider a State that has an
implementation date of January 1, 2027. The State requires that an
applicable individual demonstrate community engagement in the month
before the month of application and does not elect to conduct more
frequent verifications of community engagement. An application for
medical assistance that is submitted on December 15, 2026, must be
adjudicated based on the eligibility rules in place on December 15,
2026, even if an eligibility determination is not made until January
15, 2027 (after the implementation date). Since the community
engagement requirement was not in place at the time of application, the
State must not evaluate whether the individual is an applicable
individual and whether the individual demonstrated community engagement
in November 2026, the month before the month of application. If the
person is determined eligible and enrolled in Medicaid, then the
applicability of the community engagement requirement and the
individual's compliance with the requirement will be evaluated as part
of the person's next scheduled periodic renewal of eligibility.
However, the individual must be notified of the community engagement
requirement when they enroll in coverage, in accordance with the
outreach requirements in section II.L. of this IFC and Sec. 435.561.
b. Community Engagement Requirement for Enrolled Beneficiaries at
Implementation
The requirement for States to consider community engagement
compliance as a condition of eligibility no later than January 1, 2027,
applies to applicable individuals already enrolled in the State's
Medicaid program as of that date, as well as to those newly applying on
or after that date who enroll. Further, section 1902(xx)(1)(B) of the
Act provides that States must require applicable individuals enrolled
in Medicaid to demonstrate community engagement for 1 or more months
during the period between the individual's most recent determination of
eligibility and their next regularly scheduled redetermination of
eligibility. However, the statute does not explicitly state when States
must first verify compliance with the community engagement requirement
for individuals already enrolled in the State's Medicaid program as of
January 1, 2027 (or the earlier implementation date selected by the
State). On any given date, a portion of the State's Medicaid population
will be in the process of having their eligibility redetermined as part
of required periodic renewals of Medicaid eligibility. As such, all
States will have some renewals in progress on the State's community
engagement implementation date.
Section 1902(xx)(a)(1) of the Act requires that States ``provide,
as a condition of eligibility for medical assistance for an applicable
individual, that such individual is required to demonstrate community
engagement . . . as part of such regularly scheduled redetermination.''
The language in the statute is ambiguous for eligibility periods that
began prior to a State's implementation date and for which the renewal
process is under way on the State's community engagement implementation
date. Consistent with other guidance provided to States when applying a
change in policy that affects renewals,\107\ we interpret section
1902(xx)(a)(1)(B) of the Act to allow States to begin verifying an
applicable individual's compliance with community engagement at the
first renewal initiated on or after the State's implementation date. A
renewal is considered initiated when the State begins reviewing
reliable information available to the State in an effort to complete a
beneficiary's renewal without requiring a renewal form or other
information from the beneficiary in accordance with Sec. 435.916(a)(2)
(ex parte renewal). We considered whether States should be required to
first assess compliance with the community engagement requirement based
on the end date of the beneficiary's eligibility period, rather than
when the renewal process is initiated; that is; first verifying
compliance with community engagement if the end date of the eligibility
period occurs on or after the State's implementation date. However,
based on discussion with State systems and operational staff, many
States have a renewal process that takes between 60 to 90 days. As
such, if a State were required to begin verifying compliance for
applicable individuals with a renewal due on January 31, 2027, many
States would be required to apply the community engagement requirement
at renewals initiated as early as November 2026. This would require
States to request information about community engagement activity prior
to the State's implementation date. We conclude it is a reasonable
approach to base the first required verification of an enrolled
beneficiary's compliance with the community engagement requirement on
when a renewal is initiated in relation to the State's implementation
date.
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\107\ CMCS, State Medicaid Director Letter 26-001,
Implementation of ``Eligibility Redeterminations,'' Section 71107 of
the ``Working Families Tax Cut'' Legislation (Pub. L. 119-21), March
6, 2026, available at https://www.medicaid.gov/federal-policy-guidance/downloads/smd26001.pdf.
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3. Systems Changes Needed To Implement Community Engagement
To successfully meet the community engagement requirement, States
will need to implement multiple interrelated changes to their Medicaid
Enterprise Systems (MES), including but not limited to the eligibility
and enrollment (E&E) systems (as defined in Sec. 433.111(b)(2)). CMS
expects States to continue to enhance their systems after the State's
implementation date by expanding the use of electronic data sources to
verify qualifying activities, exceptions, and exclusions, automating
manual processes, and incorporating operational lessons learned from
initial implementation. Additionally, we will engage with States
through regular implementation oversight processes, which will include
review of monthly project status reports, milestone tracking, technical
assistance discussions, regular demonstrations of functionality, and
other monitoring activities designed to assess progress toward timely
implementation. In particular, we will focus on whether States are
making meaningful progress towards systems readiness, identifying and
escalating implementation risks in a timely manner, and seeking
technical assistance to ensure operational readiness. We will use
information obtained through these oversight activities to inform our
understanding of State progress, implementation challenges, and whether
a State is making continued good-faith efforts toward compliance. We
intend to publish more detailed expectations for the features and
functionalities, testing, systems demonstrations, and reporting of CMS-
required outcomes and metrics in separate forthcoming guidance, as well
as discuss monitoring of State progress in implementing the systems
changes needed to operationalize the community engagement requirement.
Enhancements, as defined at 45 CFR 95.605,\108\ to existing E&E
systems and the addition of new connections to electronic data sources
to implement the community engagement requirement may trigger periodic
review and systems approval or reapproval. In the May 24,
[[Page 33417]]
2023, CMCS Informational Bulletin,\109\ we explained that the
streamlined modular certification framework for MES is structured
around conditions for enhanced funding, outcomes, and metrics, and
expressly described outcomes and metrics as applying to ``a new module
or enhancement to an existing module.'' In the context of community
engagement implementation, States will need to enhance existing
eligibility and enrollment functionality, which may include the need to
incorporate connections to additional electronic data sources into the
existing system.
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\108\ Under 45 CFR 95.605, enhancements are defined as
``modifications which change the functions of software and hardware
beyond their original purposes, not just to correct errors or
deficiencies which may have been present in the software or
hardware, or to improve the operational performance of the software
or hardware.''
\109\ CMCS Informational Bulletin, ``Medicaid Enterprise Systems
Compliance and Reapproval Process for State Systems with Operational
Costs Claimed at the 75 Percent Federal Match Rate,'' (May 24,
2023), available at https://www.medicaid.gov/federal-policy-guidance/downloads/cib052423.pdf.
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Under Sec. 433.119, we established a periodic review and
reapproval framework focused on continued compliance of the operational
system \110\ initially approved under Sec. Sec. 433.114 and 433.116
for 75 percent FFP for ongoing operations. Continued compliance refers
to confirmation that the system in operation continues to meet
applicable Federal requirements and the conditions for enhanced Federal
matching rates, as evidenced through operational reports, metric data,
and other supporting documentation. We use this framework to assess
ongoing system performance and compliance, which does not necessitate a
reapproval each time a State enhances an existing CMS-approved system,
adds an interface, or incorporates a new data source.\111\ However,
based on our assessment of ongoing system performance and compliance,
we may determine a need to review and reapprove a State's entire MES, a
particular module or solution, or discrete components of a system to
validate whether the system is operating in alignment with applicable
Federal requirements.\112\ As a result, CMS does not require systems to
be reapproved because they were modified or enhanced unless indicated
by declines in system performance.
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\110\ Ibid.
\111\ Ibid.
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Accordingly, where a State modifies an already approved operational
system to implement the community engagement requirement, the relevant
question for purposes of 75 percent FFP for operations is whether the
system, as modified, continues to satisfy the applicable conditions for
enhanced operational funding and remains compliant with Federal
requirements. Such changes do not, by themselves, require a separate
reapproval solely because existing approved functionality has been
enhanced. At the same time, the system remains subject to CMS's
periodic review and reapproval authority under Sec. 433.119, and we
may review the system, module, or discrete components, as appropriate,
to assess continued compliance. We interpret this framework to apply to
enhancements like the incorporation of additional electronic data
sources, interfaces, and exchanges that support implementation of the
community engagement requirement within an already-approved MES.
Under Sec. 433.116, 75 percent FFP is available for operation of
an approved MES module or component when the system meets the
applicable operational conditions. Those conditions include, through
Sec. 433.116(i), the reporting condition incorporated from Sec.
433.112(b)(15), which requires the production of transaction data,
reports, and performance information that contribute to program
evaluation, continuous improvement in business operations, and
transparency and accountability. CMS explained in the 2023 CIB \113\
that States must submit operational reports containing metric data,
verification of compliance with the conditions for enhanced Federal
matching rates required under Sec. Sec. 433.112 and 433.116, and other
evidence that MES modules meet all applicable requirements for the
State's claimed Federal matching funds. CMS further explained that
operational reporting enables monitoring of system performance and
functionality and provides ongoing demonstration of continuous
achievement of required outcomes.
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\113\ Ibid.
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CMS applies this same requirement to community engagement-related
systems changes. In many cases, implementation of community engagement
will require States to adjust existing system logic, add reporting and
tracking functions, support new beneficiary-facing processes, and
establish or refine data exchanges with other entities. Where those
changes are made within an existing approved MES module or solution, we
interpret the applicable regulations to require the State to continue
its operational reporting and metrics in a manner that demonstrates
that the system, as modified, remains compliant with the conditions for
enhanced funding and continues to operate successfully. We remind
States that FFP may be available for systems changes necessary to
implement the community engagement requirement, in addition to the
funding provided under the government efficiency grants authorized
under WFTC legislation. Accordingly, to the extent a State must design,
develop, or install new or enhanced E&E systems (as defined at Sec.
433.111(b)(2)) to implement the community engagement requirement, such
activities may be eligible for 90 percent FFP, consistent with Sec.
433.112. To receive enhanced FFP, the State must obtain CMS approval of
the applicable advance planning document (APD) prior to incurring
expenditures, and the project must meet the conditions of 42 CFR part
433, subpart C and other applicable Federal requirements.
Lastly, we remind States and their vendors to pursue implementation
of community engagement-related systems changes in a manner that is
timely, operationally practical, and cost-effective in alignment with
Sec. 433.112(b)(1). Vendors supporting these efforts should provide
best possible pricing, facilitate robust coordination with States,
support integration with existing Medicaid Enterprise Systems, and
avoid unnecessary customization or other practices that could result in
avoidable cost increases or implementation delays. We expect solutions
to be scalable, transparent, and designed to promote efficient
implementation. States remain responsible for ensuring that procured
systems solutions are appropriately scoped, reasonably priced, and
aligned with applicable Federal requirements.
4. Good Faith Effort Exemption
As described in section II.K.1. and 2. of this IFC and Sec.
435.559, States must implement the community engagement requirement
beginning January 1, 2027, although States may elect an earlier
implementation date via a section 1115 demonstration or through a State
plan amendment. Section 1902(xx)(11)(A) of the Act provides the
Secretary of HHS with the authority to grant States a temporary good
faith effort exemption from compliance with timely implementation of
the community engagement requirement. Section 1902(xx)(11)(B) of the
Act outlines the process for determining whether a State has
demonstrated a good faith effort towards compliance with timely
implementation, including the criteria that must be considered in the
evaluation. Section 1902(xx)(11)(C) of the Act describes the duration
of the good faith effort exemption, if granted, along with conditions
that may warrant early termination. Section 1902(xx)(11)(D) of the Act
includes reporting requirements associated with
[[Page 33418]]
an approved good faith effort exemption.
This section of this IFC discusses how a State may request a good
faith effort exemption, the criteria by which CMS will evaluate such
requests, and the duration and reporting requirements of such
exemptions, if granted. New Sec. 435.560 implements and interprets
section 1902(xx)(11) of the Act.
a. Process and Timing of Requests
Section 1902(xx)(11)(A)(i) of the Act provides CMS with the ability
to specify the form and timing of States' requests for a good faith
effort exemption. We expect to issue a template for States to use to
submit such requests.
b. Criteria for Good Faith Effort Determination
Section 1902(xx)(11)(B) of the Act outlines the criteria CMS will
consider when determining whether a State has demonstrated a good faith
effort towards implementing the community engagement requirement. These
criteria, which must be addressed in the State's request, include:
1. Any actions taken by the State toward compliance with the
requirements of implementing community engagement;
2. Any significant barriers to, or challenges in, meeting such
requirements, including related to funding, design, development,
procurement, or installation of necessary systems or resources;
3. The State's detailed plan and timeline for achieving full
compliance with such requirements, including any milestones of such
plan (as defined by the Secretary); and
4. Any other criteria determined appropriate by the Secretary.
Generally, when addressing these criteria, we encourage States to
demonstrate the use of standardized and industry accepted project
management principles and accountability.
At Sec. 435.560(b)(1), we implement the first criterion, which
requires the State to provide any actions it has taken to date towards
compliance with timely implementation of the community engagement
requirement. We are primarily interested in actions that demonstrate
consistent effort and progress towards implementation across multiple
overarching domains, such as procurement, policy development, and
operational preparations. Examples of actions that fall under these
domains may include, but are not limited to, efforts towards: securing
funding not already available to the State; passage of State
legislation necessary to implement community engagement; developing
necessary State-level guidance, regulations, policies, and procedures;
procuring vendors for necessary system and operational changes, as
described in section II.K.3 of this IFC (Systems Changes Needed to
Implement Community Engagement); making preparations to ensure
sufficient staffing and training for such staff; establishing a
communication plan for beneficiaries and other external interested
parties; and engaging in and making use of technical assistance
opportunities and resources. We encourage States to provide data on or
otherwise quantify the scope of their actions.
In addition to these aforementioned domains and examples, it is
also important for a State to identify any actions it has already taken
towards identifying risks, notifying CMS of such risks and seeking
technical assistance from CMS, if needed, as soon as practicable,
developing a risk mitigation plan, and implementing such mitigations.
At Sec. 435.560(b)(2), we implement the second criterion, which
requires the State to identify significant barriers or challenges the
State has faced towards implementing the community engagement
requirement. We recognize the timeframe for implementing the community
engagement requirement is limited. Section 1902(xx)(11)(B)(ii) of the
Act specifically notes an interest in ``significant barriers or
challenges related to the funding, design, development, procurement, or
installation of necessary systems or resources.'' In describing
barriers or challenges related to necessary systems or resources, a
State should reference specific elements in section II.K.3 of this IFC
(Systems Changes Needed to Implement Community Engagement). To support
our understanding of the scope of the barriers and challenges, a State
should, where possible, provide data or otherwise quantify the noted
barriers and challenges.
At Sec. 435.560(b)(3), we implement the third criterion, which
requires the State to provide a detailed plan and timeline for fully
implementing the community engagement requirement. The plan and
timeline must, at a minimum, include key milestones towards full
compliance and planned steps to address any challenges identified by
the State as part of its request. The plan and timeline must also
provide sufficient detail to allow CMS to meaningfully assess the
State's progress over time.
The statute's fourth criterion permits CMS to identify additional
criteria for assessing whether a State has demonstrated a good faith
effort to implement the community engagement requirement. At Sec.
435.560(b)(4), we add an additional criterion, that permits CMS to take
into consideration any exigent circumstances that States might
encounter, such as when there is an administrative or other emergency
beyond the State's control, like a cybersecurity incident or natural
disaster.
Good faith effort exemptions will be considered on a case-by-case
basis and will be approved for States that demonstrate they have a
detailed work plan and have been diligently making demonstrable
progress on that work plan throughout 2026. In general, as part of any
request for a good faith effort exemption, we anticipate providing
technical assistance on a State's detailed plan and timeline for
achieving full compliance. Additionally, we expect that approvals of
good faith effort exemptions will be limited to States that demonstrate
meaningful effort towards implementation and experience extraordinary,
severe, or unexpected issues that hinder their progress.
c. Duration of Exemption
At Sec. 435.560(c), we implement section 1902(xx)(11)(C), which
requires that good faith effort exemptions expire no later than
December 31, 2028.
CMS will evaluate each request individually, and if an exemption is
granted, determine an appropriate end date for the exemption based on
the specific circumstances of the State, as reflected in the State's
request and subsequent communication between CMS and the State. The
duration of a good faith effort exemption is intended to be short-term
in nature, as we expect States to have already made good faith efforts
towards timely implementation of community engagement by the time a
State submits a request for a good faith effort exemption. Reflecting
these considerations, at Sec. 435.560(c)(1), we note that CMS expects
to approve initial requests for no longer than 6 months. However, we
may grant extensions, until no later than December 31, 2028, provided
that the State continues to demonstrate a good faith effort to meet all
applicable requirements. We will rely on information reported in
accordance with Sec. 435.560(d) to determine if the duration of the
good faith effort exemption warrants an extension.
At Sec. 435.560(c)(4), we emphasize that CMS may end an exemption
if a State does not meet reporting requirements described at Sec.
435.560(d) or the State no longer demonstrates a good faith effort
towards implementing the community engagement requirement.
[[Page 33419]]
For the duration of the good faith effort exemption, if granted,
CMS will not deem a State to be noncompliant with the requirements of
section 1902(xx) of the Act, nor subject the State to corrective
actions under section 1904 of the Act, as long as the State meets the
reporting requirements and continues to make good faith efforts towards
compliance, including by demonstrating continued and consistent
progress towards implementation.
d. Reporting Requirements for States Granted Good Faith Effort
Exemptions
As a condition of receiving a good faith effort exemption, States
must meet reporting requirements described at Sec. 435.560(d), which
implements section 1902(xx)(11)(D) of the Act. These reporting
requirements have two components: (1) quarterly reports on the status
of the milestones the State provided on the detailed plan and timeline
for achieving full compliance, per Sec. 435.560(b)(3); and (2)
information on specific risks or newly identified barriers or
challenges to full compliance, including the State's plan to mitigate
such risks, barriers, and challenges. For the first component, we
anticipate establishing a deadline for quarterly reporting submissions
in future guidance. We interpret that the second reporting component
encompasses information the State wishes to make CMS aware of as well
as information that CMS requests. The details, form, and cadence of
these information requests will be specific to the State's
circumstances, and could include requests for data, operational
details, and reporting on a more frequent basis. If a State that
receives a good faith effort exemption fails to meet these reporting
requirements, CMS may end the exemption in accordance with Sec.
435.560(c)(4), and the State may be subject to corrective action under
section 1904 of the Act, based on findings that the State failed to
comply substantially with section 1902 of the Act in the administration
of the State plan.
L. Outreach
Section 1902(xx)(8) of the Act, which we implement at new Sec.
435.561 of the regulation, requires States, to notify enrolled
applicable individuals of the requirement to demonstrate community
engagement in accordance with standards specified by the Secretary.
States must begin this outreach ``not later than the date that precedes
December 31, 2026, or, if the State elects to specify an earlier date,
such earlier date, by the number of months specified by the State at
section 1902(xx)(1)(A) of the Act plus 3 months, and periodically
thereafter.'' Such notices must include information on: (1) how to
comply with the community engagement requirement, including an
explanation of the exceptions under section 1902(xx)(3) of the Act and
the definition of the term ``applicable individual'' under section
1902(xx)(9)(A)(i) of the Act; (2) the consequences of noncompliance;
and (3) how to report to the State any changes to the individual's
status that could result in the applicability or end the applicability
of an exception under section 1902(xx)(3) of the Act or the individual
qualifying as a specified excluded individual defined at section
1902(xx)(9)(A)(ii) of the Act. The outreach notice must be provided
through at least two modalities: regular mail (or, if elected by the
individual, in an electronic format) and in one or more additional
modalities, which may include telephone, text message, an internet
website, other commonly available electronic means, and other forms as
the Secretary determines appropriate.
The regulations at Sec. 435.905(a) require States to furnish
information to all applicants and other individuals who request it
about the eligibility requirements, available Medicaid services, and
the rights and responsibilities of applicants and beneficiaries. States
must furnish this program information in electronic and paper formats,
and orally as appropriate. The regulations at Sec. 435.1200(f) also
require States to make available to current and prospective Medicaid
applicants and beneficiaries a website that supports applicant and
beneficiary activities, including accessing information on insurance
programs available in the State.
In this section, we establish new Sec. 435.561 to implement
section 1902(xx)(8) of the Act. We discuss which individuals the State
must notify of the community engagement requirement, how frequently
States must conduct outreach, the modalities States must use to provide
outreach notices, and how States may coordinate the outreach notice
with other notices.
We require States at Sec. 435.561 to notify individuals who are
eligible to enroll or are enrolled under Sec. 435.119 of the
requirements to demonstrate or be deemed to demonstrate community
engagement as required under section 1902(xx) of the Act. In addition
to such individuals, States must also notify individuals who otherwise
are eligible to enroll or are enrolled in coverage under an applicable
section 1115 demonstration. While section 1902(xx)(8)(A) of the Act
requires States to notify enrolled applicable individuals of the
community engagement requirement, we believe it is necessary and
appropriate to require that the initial and periodic outreach
notification be provided to all individuals enrolled in the adult group
described at Sec. 435.119 or in an applicable section 1115
demonstration, rather than only to applicable individuals defined at
Sec. 435.551, since the status of an individual can change and render
one subject to the community engagement requirement. We believe that
the required outreach notification and the content of the outreach
notification required by section 1902(xx)(8) of the Act contains
information relevant to applicable individuals described at Sec.
435.551 and specified excluded individuals described at Sec. 435.554.
In addition, we believe States would not be able to determine which
enrolled beneficiaries meet the definition of an ``applicable
individual'' at section 1902(xx)(9)(A)(i) of the Act to target the
initial outreach notices to such individuals prior to the effective
date of the community engagement requirement in the State. We,
therefore, did not limit the outreach requirements at Sec. 435.561 to
applicable individuals described at Sec. 435.551. However, as we
explain below in our discussion of the content of the outreach notice,
not every individual who receives an outreach notice will be required
to comply with the community engagement requirement. States will need
to include clear, consumer-friendly information in the outreach notice
to help individuals understand who qualifies for an exception or is a
specified excluded individual and that additional actions would not be
needed by such individuals to demonstrate compliance.
Under Sec. 435.905(a), States must provide applicants and all
other individuals who request it, information on eligibility
requirements and the rights and responsibilities of applicants and
beneficiaries, which will now include information on complying with the
community engagement requirement as a component of the eligibility
information. To satisfy this requirement, we also interpret the
community engagement outreach requirement at Sec. 435.561(a) to
require outreach notices be provided to the affected individual.
Section 1902(xx)(8)(A) of the Act states that ``the State shall notify
applicable individuals enrolled under a State plan (or waiver) under
this title of the requirement to demonstrate community engagement.'' We
interpret such requirements to mean that States must
[[Page 33420]]
direct the content in the outreach notice specifically to the
individuals who must receive the notice rather than to the general
public. A general, public notice, such as a web page about the
community engagement requirement, would not satisfy the outreach
requirement at Sec. 435.561. This targeted approach ensures that
affected individuals are aware of the applicability of the community
engagement requirement. States must also provide information on
eligibility requirements, including community engagement, to all other
individuals who request it per Sec. 435.905(a).
We recognize that the general public may not be aware of the
forthcoming community engagement requirement in Medicaid, which may
affect eligibility for future applicants. States must make program
information available on their public website described at Sec.
435.1200(f), which must include information related to community
engagement. While we are not requiring States to engage in additional
public outreach efforts, we encourage States to consider general public
outreach as part of their efforts to implement the community engagement
requirement. These additional public outreach efforts can complement
the required outreach notices and raise broader community awareness of
the new community engagement requirement. We also encourage States to
use existing tools and to partner with interested parties and networks
to disseminate resources and offer multiple channels to individuals to
learn about and navigate the requirement. These may include but are not
limited to aging and disability networks, hospitals, Federally
qualified health centers, rural health clinics, provider networks,
schools, churches and other religious institutions, managed care plans,
and other community-based organizations.
We require States at Sec. 435.561(b)(1) to conduct outreach prior
to January 1, 2027, or an earlier implementation date specified by the
State in accordance with Sec. 435.559. States that later elect to
implement the adult group under Sec. 435.119 must also conduct
outreach about the community engagement requirement prior to the
effective date of the adult group in the State plan. Similarly, States
that implement the community engagement requirement in a section
1115(a)(2) demonstration project under section 1902(xx)(9)(A)(i)(II) of
the Act must conduct outreach prior to the implementation date of the
demonstration project expenditure authority. We interpret the statute
to require outreach notices to be provided 3 months prior to the date
the community engagement requirement becomes effective in the State
plus the number of months specified by the State for applicants to
demonstrate compliance with the community engagement requirement under
Sec. 435.556(a)(1). This will result in States needing to send
outreach notices to beneficiaries in the fourth, fifth, or sixth month
prior to the date in which the community engagement requirement becomes
effective. For example, in States with effective dates of January 1,
2027, States will need to send initial outreach notices in July 2026,
August 2026, or September 2026, depending on whether the State elects
for applicants to demonstrate they meet the community engagement
requirement in the 3 months before, 2 months before, or 1 month before
the month in which application is made. Table 2 depicts this and
additional examples.
[GRAPHIC] [TIFF OMITTED] TR03JN26.020
New Sec. 435.561(b)(1) and (b)(2) require States to send notices
to beneficiaries 4, 5, or 6 months prior to the community engagement
requirement becoming effective in the State and to send the notices to
beneficiaries who apply and enroll after the initial outreach notice is
sent but before the community engagement requirement becomes effective
in the State. This will ensure beneficiaries who newly enroll in the
adult group described at Sec. 435.119 or an applicable section 1115
demonstration will be made aware of the requirement. We also require
States to notify all individuals described at Sec. 435.561(a) on a
periodic basis thereafter and outline when States must provide outreach
notices through at least two modalities on an ongoing basis at Sec.
435.561(d). Under the authority given to the Secretary to specify
standards for outreach notices, we define ``periodic basis thereafter''
to mean that for individuals described at Sec. 435.561(a), outreach
notices must be provided: (1) following a determination or
redetermination of eligibility at application, at renewal described at
section 1902(e)(14)(L) of the Act and Sec. 435.916, and based on a
change in circumstances; (2) when the State elects the short-term
hardship exception in the State plan under Sec. 435.555(a); (3) each
time a short-term hardship exception relating to an event described at
Sec. 435.555(d)(2) becomes available to applicable individuals or the
State effectuates the short-term hardship event described at Sec.
435.555(d)(3); (4) when the State reduces a beneficiary's eligibility
and sends advance notice for: the deselection of the short-term
hardship exception under Sec. 435.555(a); the anticipated expiration
of a short-term hardship event described at Sec. 435.555(d)(2) and
(3); and the loss of a beneficiary's specified excluded individual
status under Sec. 435.554; and (6) upon request by CMS, if State-
reported monitoring data described at Sec. 435.562 or other
information indicates a need for increased outreach or a potential
compliance issue with Sec. Sec. 435.550 through 435.562, consistent
with Sec. 435.562(e). We believe this will allow States to align
outreach notices with eligibility determination notices under Sec.
435.917, since States must already provide information to individuals
about their eligibility and rights and responsibilities. For example,
States may align such notices by
[[Page 33421]]
combining the content of the outreach notice with the eligibility
determination notice or send a separate outreach notice when an
eligibility determination notice is issued. We also believe this
approach will allow States to keep individuals updated about changes in
the State's short-term hardship exception policy with less burden by
utilizing the outreach process already required by section 1902(xx)(8)
of the Act. Finally, we believe that this will allow States to provide
additional outreach, if requested by us, when States' community
engagement monitoring data indicate potential problems or concerning
trends, such as if a State is experiencing large shifts in month-over-
month determination and redetermination outcomes, or greater
disenrollments for procedural denials compared to other States. For
more information about the monitoring data States must submit and about
our approach to identifying potential compliance issues that could
result in additional outreach, see section II.O. of this IFC. While we
are requiring States to conduct ongoing, periodic outreach each time an
individual described at Sec. 435.561(a) is provided an eligibility
determination notice, States may choose to conduct additional outreach
to individuals on an ad hoc or routine basis.
We considered defining outreach on a ``periodic basis thereafter''
to mean that States must conduct outreach upon enrollment for
applicants determined eligible and at least every 6 or every 12 months
thereafter for beneficiaries described at Sec. 435.561(a) to provide a
consistent time frame for all beneficiaries to receive outreach. While
such a definition would provide consistency for all individuals and
across all States, we recognize this could result in outreach that may
not be meaningful as it was not necessarily aligned with the timing of
the eligibility information that must already be provided when someone
receives an eligibility determination notice. We also considered
specifying when States should conduct periodic outreach in 2027 and
2028 or the first two years of implementation and then later permitting
States to determine how frequently periodic outreach should occur after
the first few years of implementation. While this would allow States to
determine when it would be most effective to conduct outreach, we were
concerned that this may increase the likelihood that CMS would need to
request additional outreach based on monitoring data if States did not
conduct outreach frequently enough. We seek public comment on whether
CMS should establish a different frequency for periodic outreach. We
also seek public comment on whether we should allow States to define
what it means to conduct outreach on a ``periodic basis'' in the
future.
At Sec. 435.561(c), we require that outreach notices must be
provided in a manner consistent with Sec. 435.905(b), to align with
requirements for all other program information and notices. To align
with section 1902(xx)(8)(A) of the Act and ensure that individuals are
notified of their rights and responsibilities in accordance with Sec.
435.905(a), we also specify that the notice content must inform
individuals of the following three types of information:
1. How to comply with the requirement to demonstrate community
engagement as described at Sec. 435.561(c)(1). This includes: (1) an
explanation of the exceptions, including short-term hardship
exceptions, if elected by the State; (2) who is an applicable
individual, including an explanation of exclusions from such definition
under Sec. 435.554; (3) the number of months an applicable individual
is required to demonstrate community engagement during the review
period at renewal; and (4) if elected by the State, how frequently the
State will periodically verify community engagement in between
renewals.
2. The consequences of noncompliance with the community engagement
requirement on eligibility for Medicaid and for APTC and PTC used to
pay for coverage on a Health Insurance Exchange.
3. How to report to the State any change in the individual's status
that could result in someone qualifying or no longer qualifying for an
exception, short-term hardship, or being considered a specified
excluded individual described at Sec. 435.554.
As part of describing how to comply with the community engagement
requirement, States must include information about how an applicable
individual may demonstrate compliance with community engagement as
required under Section 1902(xx)(2) of the Act and described further in
section II.C. of this IFC. This includes providing information on the
types of activities that demonstrate community engagement, such as
types of community service activities that count towards the community
engagement requirement. The outreach notices must provide clear,
consumer-friendly information to help individuals understand if they
qualify for an exception to the community engagement requirement (which
means they will be deemed compliant) or if they are a specified
excluded individual (in which case, they would not be required to
demonstrate compliance). Some individuals, particularly family
caregivers or those who are medically frail, may not identify
themselves as meeting an exception or exclusion if the State does not
provide clear communication about how the exceptions and exclusions are
defined. For individuals who qualify as specified excluded individuals,
States will also need to clearly communicate that for such individuals,
additional actions to demonstrate compliance are not required at that
time.
Additionally, we remind States that while the outreach notice must
inform individuals how to report changes in their status, a change is
not necessarily a change in circumstances that may affect the
individual's eligibility, as discussed in section II.H.3.d. of this
IFC. States must accept updated information from beneficiaries the same
way they would accept other information reported by the beneficiary
even if it does not impact eligibility, such as a change of an in-State
address.
We require States at Sec. 435.561(d)(1) to provide the outreach
notice by regular mail or, if elected by the individual, in an
electronic format consistent with Sec. 435.918. If an individual has
elected to receive notices and communications electronically, the State
must post the outreach notice described at Sec. 435.561(d)(1) via the
individual's preferred electronic format. We specify at Sec.
435.561(d)(2) that outreach notices must also be provided in at least
one or more additional modalities, which means the individual must
receive their outreach notification via at least two different
modalities, including via the individual's electronic account, by
telephone, by text message, or through other commonly available
electronic means. For an individual who elected to receive electronic
notices and communications consistent with Sec. 435.918, the State
cannot use that same electronic modality as the additional modality to
satisfy the requirement at Sec. 435.561(d)(2). For example, if a State
posts the outreach notice to an individual's electronic account
consistent with Sec. 435.561(d)(1) and as elected by the individual,
the additional modality for the additional notice at Sec.
435.561(d)(2) cannot also be the individual's electronic account. At
this time, we have not identified any specific commonly available
electronic means through which States may send
[[Page 33422]]
an outreach notice, nor do we prescribe any additional modalities for
States in this IFC.
We interpret the ``internet website'' modality at section
1902(xx)(8)(B)(ii) to mean the individual's electronic account
available through an internet website, as opposed to the State agency's
public facing website. As stated earlier in this section, we interpret
that the outreach notices required by section 1902(xx)(8) of the Act
must be targeted to the individual rather than the general public. For
individuals who do not have an electronic account, the State must use a
different modality to satisfy the requirement at Sec. 435.561(d)(2),
which may include telephone, text message, or other commonly available
electronic means. States are reminded that general program information,
including the community engagement requirement, must be separately
posted to the State agency's websites in accordance with Sec.
435.905(a).
Section 1902(xx)(8) of the Act does not preclude States from
including the outreach notice described in this section or
incorporating the content of the outreach notice in another notice or
communication that the State provides to the individual. For example,
States may include the outreach notice content with the eligibility
determination notice provided when an individual is redetermined
eligible at renewal. This would meet the State's requirement for
periodically notifying an individual of the community engagement
requirement when an individual redetermined eligible at renewal. As
such, we specify at Sec. 435.561(e)(1) that States may include the
outreach notice required at Sec. 435.561(a) with an eligibility
determination notice described at Sec. 435.917 or with other
communication from the State to the individual.
Section 1902(xx)(8) of the Act does not limit State flexibility to
use managed care plans \114\ to assist in the administrative activity
of providing an outreach notice ``in one or more additional forms.'' In
2024, over 80 percent of all Medicaid beneficiaries received some or
all of their covered services through a managed care plan.\115\ To
ensure that the outreach notices are provided timely and consistently,
we believe that States may find it beneficial to utilize their managed
care plans to assist with providing the periodic outreach notices in
one or more of the additional modalities specified at Sec.
435.561(d)(2). We permit States at Sec. 435.561(e)(2) to utilize
managed care plans to provide the outreach notice periodically,
consistent with Sec. 435.561, through one or more of the modalities
described in paragraph Sec. 435.561(d)(2). States that elect to do
this are expected to direct their managed care plans on which
individuals must receive the outreach notice, how frequently such
individuals must receive such notice, and the exact content of such
notice as required under Sec. 435.561. Section II.M. of this IFC
provides additional information about the roles managed care plans can
play in helping States accurately implement and ensure compliance with
the community engagement requirement, as well as the activities that
managed care plans are prohibited from participating in.
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\114\ As used in this document, ``managed care plan'' means a
managed care organization (MCO), prepaid inpatient health plan
(PIHP), or prepaid ambulatory health plan (PAHP), as defined in
Sec. 438.2.
\115\ ``Medicaid Managed Care Enrollment and Program
Characteristics, 2024.'' CMS https://www.medicaid.gov/medicaid/managed-care/downloads/2024-medicaid-managed-care-enrollment-report.pdf.
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M. Managed Care Implications
As discussed in section II.L. of this IFC, managed care plans can
play an important role in helping States accurately implement and
ensure compliance with the community engagement requirement. States may
elect to utilize their managed care plans to provide or enhance certain
activities that leverage their plans' relationship with their enrollees
to maximize the effectiveness and timeliness of the activity. For
example, States could use their managed care plans to conduct outreach
and educate Medicaid managed care enrollees on the community engagement
requirement or to share data they possess about enrollees with the
State to inform States' determination of the applicability of the
community engagement requirement to specific enrollees. We believe data
sharing will be particularly critical for ensuring that States have the
most current information on enrollees' circumstances such as medically
frail status or drug addiction or alcoholic treatment and
rehabilitation program participation.
States can also allow managed care plans to refer or provide
Medicaid managed care enrollees with additional services and
assistance, although many such services and assistance (including all
the examples included in this paragraph) cannot be considered in the
development of capitation rates. For example, managed care plans could
refer managed care enrollees to work programs sponsored by States or
Federal government agencies that are administered at American Job
Centers. As discussed in section II.C.3. of this preamble, our
regulation at Sec. 435.552(b) defines a ``work program'' as one that
meets the definition in section 6(o)(1) of the Food and Nutrition Act
of 2008. Foror an employment and training program under subsection
(d)(4) of the Food and Nutrition Act of 2008, supervised job search or
job search training is permitted as a subsidiary activity, as long as
the job search activity is less than half of the required hours.
Generally, Medicaid-covered employment services are not work programs
that meet this definition. We believe that some managed care plans may
undertake a variety of enrollee outreach and education processes. For
example, managed care plans could provide education on work program
appointment preparation and document collection, establish feedback
loops with work programs to enable managed care plans to follow up with
enrollees. We encourage managed care plans to ensure that any
activities or services provided align with the community engagement
requirement and meaningfully help enrollees who are applicable
individuals meet the community engagement requirement. While the costs
for these types of activities cannot be included in the development of
capitation rates nor counted as value-added services, if plans
voluntarily elect to provide services that meet the definition of a
value-added service under Sec. 438.3(e)(1), the services could be
included in the medical loss ratio (MLR) numerator as incurred
claims.\116\
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\116\ 42 CFR 438.8(e)(2)(i)(A).
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Many States may expand existing work programs or develop new ones
that comply with our definition at Sec. 435.552(b), which incorporates
the definition in section 6(o)(1) of the Food and Nutrition Act of
2008, to help enrollees meet the community engagement requirement. Many
States may also be working with institutions of higher education to
develop new, high-quality, short-term training programs that may be
eligible for Pell grants under the newly expanded program pursuant to
title VIII, subtitle D of the WFTC legislation. We encourage managed
care plans to collaborate with States to determine what role they could
play to support States' efforts. At a minimum, managed care plans
should ensure that any activities or services that they implement
related to community engagement are consistent with and promote work
programs that comply with our definition at Sec. 435.552(b).
While partnering with managed care plans to enhance a State's
[[Page 33423]]
implementation of the community engagement requirement may be an
effective mechanism, certain Federal requirements (including Sec.
438.5(e)) limit what can be included in the non-benefit component of
capitation rates. When costs for administrative activities are included
within a capitation payment, expenditures are matched at the Federal
Medical Assistance Percentage (FMAP),\117\ which is typically higher
than the Federal match rate for State administrative activities in
support of the State plan. States cannot delegate activities to managed
care plans that are unrelated to the provision of Medicaid-covered
services, in accordance with the contract established between the State
and managed care plan that is reviewed and approved by CMS under Sec.
438.3(a), or other activities that would be unreasonable to include in
capitation rates that are eligible for FMAP. For example, States cannot
delegate activities to conduct tracking or information gathering that
are not related to the provision of Medicaid-covered services, such as
the collection of information on work, community service, or education
activities. States would also not be able to use their managed care
plans to issue formal notifications to Medicaid beneficiaries regarding
noncompliance with the community engagement requirement. States and
their actuaries must ensure that any costs associated with the non-
benefit component of a capitation rate complies with all Federal
requirements, including Sec. Sec. 438.4 and 438.5.
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\117\ 42 CFR 438.812.
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Section 71119(c) of the WFTC legislation provides a conflict-of-
interest safeguard that explicitly prohibits States from using certain
entities, including Medicaid managed care entities,\118\ to determine
enrollee compliance with the community engagement requirement. To
implement this prohibition, we are amending Sec. 438.58. We
redesignate the current text at Sec. 438.58 as paragraph (a) and add a
new paragraph (b). In new paragraph (b), we specify that a State may
not use an MCO, PIHP, PAHP, or other contractor to determine
beneficiary compliance with the community engagement requirement in
part 435, subpart F of this title, unless the entity is not, and has no
direct or indirect financial relationship with, an MCO, PIHP, or PAHP
that is responsible for providing or arranging for covered services for
individuals enrolled with it under its contract with the State. This
provision is consistent with conflict-of-interest protections applied
to enrollment brokers and their subcontractors as specified at Sec.
438.810(b)(2)(i). We believe this prohibition is an important safeguard
to prevent program integrity concerns in the implementation of the
community engagement requirement. Additionally, we remind States that
under sections 1902(a)(4) and (a)(5) of the Act and implementing
regulations in Sec. 431.10, determining Medicaid eligibility may be
delegated only to governmental agencies that maintain personnel
standards on a merit basis.
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\118\ Section 1903(m)(9)(D) of the Act.
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N. Additional Considerations
1. Implications of Community Engagement on Presumptive Eligibility and
Presumptive Eligibility Determined by Hospitals
Sections 1920, 1920A, 1920B, and 1920C of the Act provide States
with the option to designate ``qualified entities'' who are able to
make presumptive eligibility (PE) determinations for pregnant women,
children, certain breast and cervical cancer patients, and family
planning services. States that have adopted this policy for children or
pregnant women have the option to extend it to certain other groups
covered under the State plan, including the adult group, under section
1920(e) of the Act (implemented at Sec. 435.1103(b)).
Section 1902(a)(47)(B) of the Act provides that all hospitals
enrolled as a Medicaid provider may elect to be a qualified entity able
to determine PE for Medicaid, subject to the same procedures and
requirements as are applied to determinations by qualified entities of
PE for pregnant women, children, or certain breast and cervical cancer
patients, whether or not the State has elected to designate qualified
entities to make PE determinations for any such individuals. We refer
to the option provided to hospitals as ``hospital presumptive
eligibility'' (HPE). States that cover the adult group in the State
plan must allow HPE for this group (Sec. 435.1110(c)(1)).\119\ States
may allow hospitals to determine PE for other groups approved under the
State plan, or those whose eligibility is established by section 1115
demonstration authority (Sec. 435.1110(c)(2)).
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\119\ States may allow hospitals to determine presumptive
eligibility for other groups, such as those whose eligibility is
established by section 1115 demonstration authority. If the
population in the section 1115 demonstration includes applicable
individuals and the State elects to cover PE/HPE for this
demonstration population in the State plan; the State must follow
the same guidance as laid out in this section as it relates to the
adult expansion population and PE/HPE.
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Section 1902(xx)(1) of the Act establishes a new condition of
eligibility for applicable individuals in the State plan adult group or
those eligible for or enrolled under a waiver of such plan.
Specifically, a State shall provide, as a condition of eligibility for
medical assistance for an applicable individual, that such individual
is required to demonstrate or be deemed as demonstrating community
engagement. Section 1902(xx)(2) of the Act, implemented at Sec.
435.552, sets out the qualifying activities that an applicable
individual can use to meet the community engagement requirement.
Section 1902(xx)(3)(A) of the Act establishes mandatory exceptions for
certain applicable individuals implemented at Sec. 435.553. Section
1902(xx)(3)(B) of the Act provides States the option to offer short-
term hardship exceptions, implemented at Sec. 435.555. Both mandatory
and optional short-term hardship exceptions would deem an applicable
individual as demonstrating community engagement. Section 1902(xx)(9)
of the Act defines specified excluded individuals, who are not
applicable individuals and are not subject to the community engagement
requirement, implemented at Sec. 435.554.
The community engagement requirement applies when an individual
completes a full Medicaid application and when an individual applies
for PE and HPE and appears to be eligible in the adult group. If a
State has elected to cover a section 1115 demonstration population in
HPE, and that population includes applicable individuals, the community
engagement requirement applies to those HPE determinations as well.
Therefore, all HPE programs in States that have adopted the adult
group, that have elected the option to cover a section 1115
demonstration population that includes applicable individuals, and that
have elected optional PE programs for the adult group will need to
include the community engagement requirement as a factor of eligibility
in the PE determination. For those individuals who appear to be
eligible in the adult group or in an applicable section 1115
demonstration population, qualified entities must assess and obtain an
attestation as to whether the individual appears to be a specified
excluded individual (at Sec. 435.554), an applicable individual, or
meets a mandatory or optional exception (at Sec. Sec. 435.553 or
435.555, respectively). The State determines if someone is a specified
excluded individual or an applicable individual based on the month of
application, as a State does when evaluating other factors of
eligibility (Sec. 435.554). If the applicant is an
[[Page 33424]]
applicable individual (thus does not meet any specified excluded
individual criteria) and does not qualify for a mandatory or, if
applicable, optional exception, the qualified entity must assess
whether the applicant demonstrated community engagement prior to the
month of application for the number of months elected by the State, as
specified in the State plan and defined at Sec. 435.556.
The new requirement to condition Medicaid eligibility on
demonstrating community engagement or being deemed as demonstrating
community engagement because of an exception only applies to applicable
individuals, and not to those who are specified excluded individuals.
As described in detail at Sec. 435.556, applicable individuals must
demonstrate or be deemed as demonstrating community engagement at least
1 but not more than 3 consecutive months, as specified by the State,
immediately preceding the month of application. Therefore, an
applicable individual who applies for PE or HPE must attest they
demonstrate community engagement, at a minimum for the month prior to
the PE or HPE application, and up to 3 consecutive months prior at
State option or qualify for an exception for those month(s) which deems
them as demonstrating community engagement. Those that meet the
criteria to be a specified excluded individual are demonstrated in the
month of application.
Due to the new requirement, States will need to update PE and HPE
training materials, train qualified entities on the requirement, and
update PE and HPE application materials, including eligibility
determination notices, to capture this information. These updates
should include information on how providers can assess who is an
applicable individual and who is a specified excluded individual. Once
that is determined, providers will need to determine if an applicable
individual meets exception criteria. In addition, applicable
individuals who do not qualify for an exception must then be screened
to identify the ways in which they may have demonstrated community
engagement. The new questions should only be requested of those who
appear eligible in the adult group or, if applicable, a section 1115
demonstration population that includes applicable individuals in a
State that has elected to cover that group in HPE, and who could be
considered an applicable individual. Determinations of PE and HPE,
including whether an individual is a specified excluded individual or
demonstrates or is deemed to have demonstrated the community engagement
requirement, must continue to be based on attested information from the
applicant per sections 1920, 1920A, 1920B, 1920C, and 1902(a)(47)(B) of
the Act.
2. Additional Considerations for Section 1115 Demonstrations
As further described in section II.B. of this IFC, populations
eligible for or enrolled in specific demonstration coverage authorized
by an expenditure authority under section 1115(a)(2) of the Act that
provides MEC to individuals who are at least 19 and under 65 years of
age, are not pregnant, are not entitled to or enrolled for benefits
under Medicare part A or part B, and are not otherwise eligible to
enroll under the State plan, may qualify as applicable individuals and
would be subject to the community engagement requirement (unless they
are specified excluded individuals). Section 1902(xx)(10) of the Act
further specifies that waiving the community engagement requirement
under section 1115(a) of the Act is prohibited. We will not approve a
section 1115 demonstration project that waives, in whole or in part,
the new community engagement provisions of section 1902(xx) of the Act.
Furthermore, any State seeking to implement the community engagement
provisions of section 1902(xx) of the Act through section 1115
demonstration authority must ensure compliance with each of the
requirements of section 1902(xx) of the Act. These limitations are
implemented at Sec. 435.563.
O. Monitoring
Section 1902(a)(6) of the Act and implementing regulations at Sec.
431.16 require States to submit all reports required by the Secretary,
in such form and containing such information as instructed by the
Secretary, and to comply with provisions necessary to assure the
correctness and verification of such reports. In addition, section
1902(a)(75) of the Act requires States to submit a report that contains
any other data reporting determined necessary by the Secretary to
monitor enrollment and retention of individuals eligible for medical
assistance under the State plan or under a waiver of the plan. Under
section 1904 of the Act, the Secretary may take corrective action to
limit Federal payments, after reasonable notice and opportunity for
hearing, based on findings that the State failed to comply
substantially with section 1902 of the Act in the administration of the
plan. We interpret the statutory requirements in sections 1902(a)(6)
and (a)(75) of the Act to provide authority to require States to submit
data that allow for monitoring of their eligibility and enrollment
processes. Under these authorities, States already routinely submit
eligibility and enrollment data to CMS on a monthly, basis through
three established data collection efforts: the Medicaid and CHIP
Performance Indicator (PI) data, the Medicaid and CHIP Eligibility
Processing (EP) data, and the Transformed Medicaid Statistical
Information System (T-MSIS) data. These data sets provide CMS, States,
and the public increased insight and transparency into State Medicaid
and CHIP eligibility and enrollment operations, and the data allow CMS
to identify potential compliance or program integrity issues to rapidly
engage with State agencies.
As described in this IFC, the community engagement requirement
under section 1902(xx) of the Act will impact eligibility and
enrollment for those subject to it, and we believe that States'
processing of eligibility and enrollment actions for all other
applicants and beneficiaries may be indirectly impacted as States
implement requirements in this IFC to verify that an individual
demonstrates or is deemed as demonstrating community engagement or is a
specified excluded individual. Under authority in sections 1902(a)(6)
and (a)(75) of the Act, we are requiring in this IFC at Sec. 435.562
that States submit timely, complete, and accurate data (data of
sufficient quality) to support monitoring of State eligibility and
enrollment operations concerning the implementation and impact of the
community engagement requirement. This data reporting will assist CMS
to maintain high levels of program integrity to ensure States implement
the community engagement requirement under section 1902(xx) of the Act
and maintain timely and accurate determinations and redeterminations of
eligibility for all applicants and beneficiaries.
To the extent possible, we will develop a community engagement
report using existing data elements reported by States through the PI,
EP, and T-MSIS data collection efforts, and States will use the same
submission portals currently used for any modified or new data
collection gathered through the PI, EP, and T-MSIS data sets. We
anticipate that there will be a need to modify existing data elements
in these data sets or create new, additional data elements in key
categories described further in this section to capture data that
reflect activities associated with implementation of and the impact of
the community engagement requirement. While this IFC outlines the
requirement for States to submit data for monitoring
[[Page 33425]]
of the community engagement requirement, we will notify States of any
specific updates to existing data elements or new data elements through
existing PI, EP, and T-MSIS communications for these data collection
efforts and related data dictionaries or technical specifications
documents. In addition, any modified or new data elements to these
existing data collection efforts will be subject to public review and
comment processes established under the Paperwork Reduction Act.
We expect States to report timely, complete, and accurate data to
monitor community engagement, and in this IFC at Sec. 435.562(b), we
define terms that describe how States must submit data and ensure the
quality of data collected that will be used to monitor community
engagement under section 1902(xx) of the Act. We define the term
``timely,'' at Sec. 435.562(b)(1) to mean that all data for community
engagement monitoring are submitted according to the cadence and not
later than the deadline specified by CMS. We define the term
``complete'' at Sec. 435.562(b)(2) to mean that all required community
engagement data are reported by the State. We define the term
``sufficient quality'' at Sec. 435.562(b)(3) to mean that all required
data elements are reported in a form and manner that adheres to
specifications prescribed by CMS.
In Sec. 435.562(c), we establish that States must provide timely
and complete data that is of sufficient quality to monitor enrollment,
retention and eligibility processes for community engagement activities
that begin January 1, 2027, (or earlier date specified by the State).
In Sec. 435.562(d), we require that States submit data elements for
applicants and beneficiaries applying for and receiving medical
assistance, including individuals subject to the requirements of
section 1902(xx) of the Act through five specified categories. These
five specified categories are: (1) enrollment totals of individuals
applying for and receiving medical assistance; (2) application and
renewal processing, timeliness, and backlogs; (3) outcomes of
determinations and redeterminations eligibility; (4) populations
subject to and their compliance with the requirements of section
1902(xx) of the Act; and (5) other such data specified by CMS in
regulation, guidance, or technical specifications to monitor
implementation and the impact of community engagement.
We also notify States in Sec. 435.562(e) that failure to submit
data or submission of data that indicate compliance issues may result
in corrective action under section 1904 of the Act, additional data
collection, or additional outreach noticing as described at Sec.
435.561(b). In Sec. 435.562(e)(1) and (2), States may be subject to
such actions if reported data are not timely, complete, or of
sufficient quality (as defined in this section), if reported monitoring
data indicate a failure to comply substantially with section 1902(xx)
of the Act, or determination and redetermination outcomes indicate a
need for increased outreach. This includes when data indicate program
integrity issues, such as determination outcomes in a State that would
make them an outlier, like large percentages of individuals who are
excluded or meet a particular exclusion or exception. When reviewing
data for evidence of compliance issues, we will review data trends
within a State month-over-month as well as how a State's data compare
to analogous data from other States to determine whether additional
information from the State is needed to understand and interpret the
data. We will assess whether further outreach or compliance action may
be necessary based on findings identified through this data-driven,
interactive process with the State and will provide reasonable notice
and opportunity for hearing before any financial withholding is taken
under section 1904 of the Act. We will also assess the monitoring data
and determine if additional beneficiary outreach is necessary in a
State that reports outcome data, such as higher numbers of procedural
terminations at renewal compared to other States, that suggest such
action may be needed to ensure beneficiaries understand how to
demonstrate community engagement.
III. Good Cause for Proceeding With an Interim Final Rule With Comment
Period
For the reasons described in this section, we have determined that
an IFC is the appropriate mechanism to implement section 1902(xx) of
the Act. Although this IFC is effective in 60 days, comments are
solicited from interested members of the public on all aspects of the
IFC. We will consider these comments in deciding the next steps
following this IFC.
Under the Administrative Procedure Act (APA) (5 U.S.C. 553(b)(B)),
CMS may forgo notice-and-comment rulemaking when it finds, for good
cause, that such procedures are impracticable, unnecessary, or contrary
to the public interest.
Section 71119(d) of the WFTC legislation directs that not later
than June 1, 2026, the Secretary of HHS shall issue an interim final
rule for purposes of implementing section 71119 of the WFTC
legislation, related to community engagement for certain adults. It
also explicitly notes that any action taken to implement section 71119
of the WFTC legislation is not subject to the provisions of 5 U.S.C.
533, which generally requires Federal agencies to follow notice and
comment of proposed rulemaking procedures. We also recognize that
States must implement the community engagement requirement no later
than January 1, 2027, and therefore need time to understand the
requirements and expectations and build systems and operations to
ensure timely compliance. We find that there is good cause based on the
totality of these circumstances to forgo notice-and-comment rulemaking.
The express exemption from the provisions of 5 U.S.C. 553 and the need
to provide States with time to implement the community engagement
requirement by January 1, 2027, demonstrate that undergoing notice-and-
comment rulemaking is impracticable, unnecessary, and would be contrary
to the public interest. Restoring the regulations affected by the
section 71102 moratorium until October 1, 2034, also aligns with the
directive in section 71119(d) of the WFTC legislation, which explicitly
notes that any action taken to implement section 71119 of the WFTC
legislation is not subject to the provisions of 5 U.S.C. 533. As noted
in section II.A. of this IFC, the restoration of the regulations in
this IFC while the moratorium is in effect is necessary to establish an
enforceable community engagement requirement. As such, notice-and-
comment rulemaking is impracticable and unnecessary simply to restore
eligibility and enrollment policies relied on by the regulations
implementing section 71119 for the duration of the moratorium.
While under these specific circumstances we find good cause for
issuing this IFC prior to a public comment period, we are committed to
considering public input. We invite comments on this IFC and future
rulemaking. Comments received by the date specified in the DATES
section of this IFC will be considered.
IV. Collection of Information Requirements
Under the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501-
3521, we are required to provide 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. The term, collection of information, is
[[Page 33426]]
defined under 5 CFR 1320.3(c) of the PRA's implementing regulations. To
fairly evaluate whether an information collection should be approved by
OMB, 44 U.S.C. 3506(c)(2)(A) requires that we solicit comment on the
following issues:
The need for the information collection and its usefulness
in carrying out the proper functions of our agency.
The accuracy of our estimate of the information collection
burden.
The quality, utility, and clarity of the information to be
collected.
Recommendations to minimize the information collection
burden on the affected public, including automated collection
techniques.
We are soliciting public comment on each of these issues for the
following sections of this rule that contain confirmed or potential
information collection requirements.
A. Wage Estimates
1. States and the Private Sector
To derive average costs, we used data from BLS' May 2024 National
Occupational Employment and Wage Estimates for all salary estimates
(https://www.bls.gov/oes/tables.htm). In this regard, Table 3 presents
BLS' mean hourly wage, our estimated cost of fringe benefits and other
indirect costs (calculated at 100 percent of salary), and our adjusted
hourly wage.
[GRAPHIC] [TIFF OMITTED] TR03JN26.021
For States and the private sector, the employee hourly wage
estimates have been adjusted by a factor of 100 percent. This is a
rough adjustment, because both fringe benefits and other indirect costs
vary significantly across all employers, and because methods of
estimating these costs vary widely across studies. Nonetheless, we
believe that doubling the hourly wage to estimate the total cost is a
reasonably accurate method.
2. Beneficiaries
To calculate the costs for beneficiaries undertaking administrative
and other tasks on their own time we use the opportunity cost of time.
Following the White House Council of Economic Advisers (2019) \120\, we
estimate the gap between the marginal product of labor (MPL) and the
opportunity cost of time as 48 percent of the MPL. That is, we use an
opportunity cost of time of $12.92 per hour (= $24.84 * (1 - 0.48)). We
adopt this as our estimate of the hourly value of time for changes in
time use for unpaid activities. Unlike our State and private sector
wage adjustments, we are not adjusting beneficiary costs for fringe
benefits and other indirect costs since the individuals' activities, if
any, would occur outside the scope of their employment.
---------------------------------------------------------------------------
\120\ White House Council of Economic Advisers. (March 2019)
Economic Report of the President, 2019, p. 423. https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019.pdf. See also
https://www.nber.org/papers/w18088, as discussed in more detail near
Table 46 in this regulatory preamble.
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B. Adjustment to State Cost Estimates
To estimate the financial burden on States, it was important to
consider the Federal government's contribution to the cost of
administering the Medicaid program. For Medicaid, all States receive a
50 percent Federal matching rate for most administration expenditures.
States also receive higher Federal Financial Participation (FFP) rates
of 90 percent for the design, development, and implementation and 75
percent for the operations and maintenance of Medicaid IT systems.
After taking into account the Federal contribution to the costs of
administering the Medicaid programs for purposes of estimating State
burden for the collection of information, we are estimating that States
will contribute 25 percent of the costs for Medicaid Information
Technology (IT) system updates and 50 percent of all other costs, even
though the burden will likely be smaller.
C. Information Collection Requirements (ICRs)
The implementation of section 1902(xx) of the Act through this IFC
will require States (and, where applicable, their contractors, in
compliance with statutory single State agency requirements and
conflict-of-interest limitations) to collect, verify, maintain, and
report information to administer the community engagement requirement
for ``applicable individuals,'' including the operation of exceptions
and exclusions,
[[Page 33427]]
ex parte verification processes, notices, and noncompliance procedures.
CMS and States will use the collected information to:
Determine whether an individual is a specified excluded
individual as defined in 1902(xx)(9)(A)(ii) of the Act, has
demonstrated compliance with the community engagement requirement in
the month as required by section 1902(xx)(1) and (2) of the Act, or is
deemed to have demonstrated compliance in the month under a mandatory
or optional exception in section 1902(xx)(3) of the Act.
Conduct required verifications at application and
redetermination and, at State option, more frequently, as permitted by
section 1902(xx)(4) of the Act.
Support required ex parte verification processes using
reliable information available to the State (for example, payroll or
other administrative data) and minimize requests to individuals,
consistent with section 1902(xx)(5) of the Act.
Implement procedural protections when compliance cannot be
verified, including issuance of notices, the 30-day response period,
continued coverage during the response period for enrolled individuals,
and fair hearing rights, consistent with section 1902(xx)(6) of the
Act.
Conduct required outreach and periodic notifications to
inform enrolled individuals about requirements, exceptions, exclusions,
consequences of noncompliance, and how to report changes, consistent
with section 1902(xx)(8) of the Act.
Oversee State implementation and, where applicable,
monitor progress under any statutory implementation exemption through
quarterly progress reports and risk/mitigation updates, consistent with
section 1902(xx)(11)(D) of the Act.
1. ICRs Regarding State Requirements To Submit Data for Monitoring
Community Engagement (Sec. 435.562)
The following changes will be submitted to OMB for approval under
control numbers 0938-1148 (CMS-10398 #35), 0938-1188 (CMS-10434 #66),
and 0938-0345 (CMS-R-284).
Sections 1902(a)(6) and (a)(75) of the Act provide CMS with the
authority to require States to submit data that allows CMS to monitor
State eligibility and enrollment processes. Under these existing
statutory authorities, States submit monthly Medicaid and CHIP
eligibility and enrollment information to CMS through the Medicaid and
CHIP Performance Indicator data via CMS-10398 #35, the Medicaid and
CHIP Eligibility Processing data via CMS-10434 #66, and T-MSIS data
submissions via CMS-R-284. These established data collections support
program transparency and oversight by enabling CMS, States, and the
public to monitor eligibility and enrollment operations and by allowing
CMS to identify potential compliance and program integrity concerns and
to initiate timely engagement with State agencies.
As discussed in section II.O. of this IFC preamble and codified at
Sec. 435.562, CMS will require State submissions of monitoring and
program operations data related to community engagement implementation
and outcomes according to the cadence and not later than the deadline
specified by us, including (as applicable) reporting through existing
Medicaid data systems identified above and below in Table 5. Under CMS-
10398 #35, CMS-10434 #66, and CMS-R-284, States must submit data for
the following data elements for applicants and beneficiaries applying
for and receiving medical assistance, including individuals subject to
the requirements of section 1902(xx) of the Act or Sec. 435.562, or
must make system and reporting changes to enable the collection of
these data elements:
Enrollment totals of individuals applying for and
receiving medical assistance.
Application and renewal processing timeliness, and
backlogs.
Outcomes determinations and redeterminations of
eligibility.
Population counts of individuals subject to and their
compliance with the requirements of section 1902(xx) of the Act (or
Sec. Sec. 435.550 through 435.563).
Any other data specified by CMS to monitor State
implementation of Sec. Sec. 435.550 through 435.563.
For reporting community engagement monitoring data, a State is
defined as any of the 50 States and the District of Columbia that
provides medical assistance that is subject to the requirements at
section 1902(xx) of the Act. We estimate that 44 jurisdictions meet
this definition (43 States and the District of Columbia) and that they
will need to assess their inputs and develop the necessary data outputs
for submission to CMS to support compliance with the community
engagement reporting requirements. For the purpose of estimating
burden, we assume these jurisdictions will need to submit the community
engagement data to CMS monthly. However, CMS may specify a different,
less frequent cadence, at a later date.
a. Performance Indicator Data (Annual Reporting for Monitoring
Community Engagement)
The burden associated with the performance indicator (PI) data
report consists of the initial, one-time system and process changes by
jurisdictions to the PI data reporting to be able to pull the new data
collection and report to CMS. The burden also consists of the time and
effort for the State to pull and analyze data for accuracy and
completeness and to submit data through the designated reporting
mechanism. CMS estimates that 44 jurisdictions will need to report six
new data metrics and update the data of a previously submitted PI data
report on an ongoing monthly basis.
For the one-time system and process updates, CMS estimates 44
jurisdictions will spend 162 hours to make changes for a total of 7,128
hours (44 jurisdictions x 162 hr = 7,128 hr). CMS estimates it will
take a Computer and Information Analyst 160 hours at $111.66/hr to
review existing eligibility and enrollment data and organize these data
appropriately to submit to CMS to meet the PI reporting requirements of
Sec. 435.562. In addition, we estimate it will take a General and
Operations Manager 2 hours at $128.00/hr to review the data and approve
the submission of the data to CMS. In total, we estimate a total one-
time cost of $797,350 [44 x (160 hr x $111.66/hr) + (2 hr x $128.00/
hr)]. Assuming a Federal administrative match of 75 percent, the
estimated State share is $199,338 ($797,350 x 0.25).
For the ongoing monthly reporting and updates of PI data, CMS
estimates 44 jurisdictions will submit 2 reports each with existing
metrics and new community engagement metrics on up to a monthly basis
or, 1056 responses on an annual basis (44 jurisdictions x 2 reports x
12 months = 1056 responses/year). CMS estimates it will take a Computer
and Information Analyst 3 hours (0.50 hours each for 6 metrics) at
$111.66/hr to conduct the ongoing monthly reporting and updates for new
community engagement measures. In addition, we estimate it will take a
General and Operations Manager 1 hour (10 minutes each for six metrics)
at $128.00/hr to review the data and approve the submission of the
community engagement data to CMS. The corresponding total annual cost
is $488,907 [1,056 x (3 hr x $111.66/hr) + (1 hr x $128.00/hr)].
Assuming a Federal administrative match of 75 percent, the estimated
State share is $122,227 ($488,907 x 0.25).
[[Page 33428]]
b. Eligibility Processing Data (Annual Reporting for Monitoring
Community Engagement)
For the one-time system and process updates, CMS estimates 44
jurisdictions will spend 162 hours to make changes for a total of 7,128
hours (44 jurisdictions x 162 hr = 7,128 hours). CMS estimates it will
take a Computer and Information Analyst 160 hr at $111.66/hr to review
existing eligibility and enrollment data and organize these data
appropriately to submit to CMS to meet the Eligibility Processing (EP)
reporting requirements of Sec. 435.562. In addition, we estimate it
will take a General and Operations Manager 2 hours at $128.00/hr to
review the data and approve the submission of the data to CMS. In
total, we estimate a total one-time cost of $797,350 [44 x (160 hr x
$111.66/hr) + (2 hr x $128.00/hr)]. Assuming a Federal administrative
match of 75 percent, the estimated State share is $199,338 ($797,350 x
0.25).
For the ongoing monthly reporting and updates of EP data, CMS
estimates 44 jurisdictions will submit 2 reports each with existing
metrics and new community engagement metrics on up to a monthly basis
or, 1056 responses on an annual basis (44 jurisdictions x 2 reports x
12 months = 1056 responses/year). CMS estimates it will take a Computer
and Information Analyst 3 hours (0.60 hours each for 5 metrics) at
$111.66/hr to conduct the ongoing monthly reporting and updates for new
community engagement measures. In addition, we estimate it will take a
General and Operations Manager 1 hour (0.20 hours each for five
metrics) at $128.00/hr to review the data and approve the submission of
the community engagement data to CMS. The corresponding total annual
cost is $488,907 [1,056 x (3 hr x $111.66/hr) + (1 hr x $128.00/hr)].
Assuming a Federal administrative match of 75 percent, the estimated
State share is $122,227 ($488,907 x 0.25).
c. T-MSIS Data
For one-time system and process changes, CMS estimates 44
jurisdictions will spend 250 to 500 hours to implement the T-MSIS
reporting changes for a total of 11,000 and 22,000 hours (250-500 hr x
44 respondents). CMS estimates it will take a Medical and Health
Services Manager 250 to 500 hours at $132.44/hr. to implement the
changes. The corresponding total annual cost is between $1,456,840 and
$2,913,680 (11,000-22,000 hr x $132.44/hr). Assuming a Federal
administrative match of 75 percent, the State share is between $364,210
and $728,420. To avoid underestimating our burden analysis, we use the
high end of our burden estimate to score the PRA-related impact related
to the one-time system and process changes required to implement these
T-MSIS reporting changes.
Annual operational costs are not expected to increase above current
T-MSIS reporting burden once the one-time T-MSIS file changes are
implemented due to the automated nature of T-MSIS file submissions. The
one-time implementation costs will allow the States to automate and
integrate community engagement data collection into their ongoing T-
MSIS file submissions.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR03JN26.022
[[Page 33429]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.023
BILLING CODE 4120-01-C
2. ICRs Regarding Good Faith Effort Exemptions and Quarterly Reporting
(Sec. 435.560)
The following changes will be submitted to OMB for approval under
control number 0938-1148 (CMS-10398 #100).
As stated in section II.K. of this IFC, States must implement the
community engagement requirement (such as the demonstration or deemed
demonstration of community engagement by certain individuals) beginning
January 1, 2027, although States may elect an earlier implementation
date.
Section 1902(xx)(11) of the Act provides the Secretary of HHS with
the authority to provide States with a temporary good faith effort
exemption from timely implementation of the community engagement
requirement and outlines the criteria that must be considered when
evaluating whether a State has demonstrated a good faith effort towards
implementation.
Section 1902(xx)(11)(B) of the Act, codified at Sec. 435.560,
outlines the criteria CMS must consider when determining whether a
State has demonstrated a good faith effort towards implementing the
community engagement requirement. Section 1902(xx)(11)(A)(i) of the Act
provides CMS with the ability to specify the form and timing of States'
requests for a good faith effort exemption. Good faith effort
exemptions will be considered on a case-by-case basis and will be
approved only for States that demonstrate they have a work plan, have
been diligently making progress on the work plan every month in 2026,
and were only limited by circumstances beyond the control of the State.
States that cannot meet the statutory effective date and seek
additional time will be required to submit a good faith effort
exemption request, and, if granted an exemption, submit quarterly
progress reports. Collections include:
Exemption request submission, including milestones and
plan to implement the requirement.
Quarterly reports on progress toward milestones.
Quarterly (or as-needed) reporting on newly identified
risks/barriers and mitigation plans.
As of May 2026, 43 States and the District of Columbia (44
jurisdictions) cover populations subject to the community engagement
requirement at section 1902(xx) of the Act. To date, several of the 44
jurisdictions have been preparing for, or have previously implemented,
a similar community engagement requirement, thus reducing the need for
a potential good faith exemption request. CMS will work with each State
to support compliance by the January 1, 2027, statutory effective date
to reduce the need for a good faith exemption and to assist States in
addressing any unforeseen challenges. Ultimately, we estimate that
approximately 10 States will need to prepare and submit a good faith
exemption request.
For the development and submission of the good faith effort
exemptions, we estimate that it will take approximately 24 hours at
$87.52/hr for a Business Operations Specialist to develop the exemption
request, which includes documenting the State's efforts to date,
challenges and barriers the State faces, and a work plan to document
progress toward fully implementing the community engagement
requirement. We also estimate that it will take 4 hours at $128.00/hr
for General and Operations Managers to review and provide oversight
prior to submission to CMS. In aggregate, we estimate a one-time burden
of 280 hours (28 hr x 10 States) at a cost of $26,125 [(240 hr x
$87.52/hr) + (40 hr x $128.00/hr)]. Accounting for the Federal
administrative match of 50 percent, the requirement will cost States
$13,063 ($26,125 x 0.50).
[[Page 33430]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.024
Each good faith effort exemption request will be reviewed and
adjudicated on its own merits. For the purposes of this burden estimate
we estimate that of the approximately 10 States that we expect to
apply, we will approve approximately 2 States for a good faith effort
exemption. These estimated two States will need to develop and submit
quarterly reports to document their implementation progress. States
will be eligible to submit quarterly reports for a maximum of 2 years;
for burden purposes, we assume both States will submit quarterly
reports in the first year, but that only 1 State will require an
ongoing exemption and will continue to submit quarterly reports in the
second year. In total we estimate that 12 quarterly reports will be
submitted [(2 States x 4 reports in year 1) + (1 State x 4 reports in
year 2)]. We estimate that each quarterly report will take
approximately 12 hours at $87.52/hr for a Business Operations
Specialist to prepare. The burden relates to the quarterly reports on:
(1) the status of the milestones the State provided on the detailed
plan and timeline for achieving full compliance, per Sec.
435.560(b)(3); and (2) information on specific risks or newly
identified barriers or challenges to full compliance, including the
State's plan to mitigate such risks, barriers, and challenges. We also
estimate that it would take General and Operations Managers 0.5 hours
at $128.00/hr to review and provide oversight prior to submission to
CMS. In aggregate, we estimate a total burden of 150 hours (12.5 hr/
report x 12 quarterly reports) at a cost of $13,371 [(144 hr x $87.52/
hr) + (6 hr x $128.00/hr)]. Accounting for the Federal administrative
match of 50 percent, the requirement will cost States $6,686 ($13,371 x
0.50).
[GRAPHIC] [TIFF OMITTED] TR03JN26.025
We have summarized the total burden associated with good faith
effort exemptions under Sec. 435.560 in Table 8.
[[Page 33431]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.026
3. ICRs Regarding State Plan Amendment (SPA) Submissions To Implement
and Confirm Compliance (Sec. 430.10)
The following changes will be submitted to OMB for approval under
control number 0938-1188 (CMS-10434 #15).
Section 1902(a) of the Act requires that States have a State plan
for medical assistance that meets certain Federal requirements that set
forth a framework for the State program. States will be required to
submit a SPA (and any associated attachments) using a new, CMS-provided
template to implement the community engagement requirement consistent
with section 1902(xx) and CMS implementing regulations at Sec. 430.10.
SPA submissions will describe State policies and operational
approaches, including notices, exceptions, exclusions, and compliance
procedures, and will be updated as needed when State approaches change.
As noted in section H.2. of this IFC, States must specify the number of
consecutive months an applicable individual must demonstrate community
engagement prior to the month of application in the State plan.
To develop the SPA, States will need to describe the process they
are using to implement community engagement standards, including the
processes to confirm and document an applicant's or beneficiary's
compliance with the community engagement requirement.
We estimate that it will take approximately 44 hours per
jurisdiction for this one-time activity. States will have to document
their processes, identify and compile all necessary information, and
amend their State Plans. Of the 44 hours, we estimate that it will take
40 hours at $87.52/hr for a Business Operations Specialist to prepare
and submit the SPA and 4 hours at $128.00/hr for a General and
Operations Manager to review the data and submit the SPA. In aggregate,
we estimate a one-time burden of 1,936 hours (44 hr x 44 jurisdictions)
at a cost of $176,563 ((44 jurisdictions x (40 hr x $87.52/hr) + (4 hr
x $128.00/hr)). Accounting for the Federal administrative match of 50
percent, we estimate a State cost of $88,282 ($176,563 x 0.50). We have
summarized the total burden in Table 9.
[GRAPHIC] [TIFF OMITTED] TR03JN26.027
4. ICRs Regarding Verification Plan Submission and Updates (Sec.
435.557)
The following changes will be submitted to OMB for approval under
control number 0938-1148 (CMS-10398 #11).
In section II.I. of this IFC, States are required to verify
compliance, deemed compliance or status as a specified excluded
individual for certain adults who are eligible for, or are enrolled in,
Medicaid. Specifically, States must verify whether an applicant or
beneficiary demonstrated community engagement, is deemed to have
demonstrated community engagement for all or part of a month that the
individual was in a mandatory or optional excepted status, or is a
``specified excluded individual'' to whom the community engagement
requirement does not apply. Additionally, States are required to
conduct ex parte verifications by maximizing reliance on electronic
data sources in verifying compliance with the community engagement
requirement, including deemed compliance, or that an individual is a
``specified excluded individual'' and in
[[Page 33432]]
what circumstances States may require individuals to provide additional
information.
The regulation in Sec. 435.945(j) requires States to ``develop,
and update as modified, and submit to the Secretary, upon request, a
verification plan describing the verification policies and procedures
adopted by the State agency to implement the provisions set forth in
Sec. Sec. 435.940 through 435.956,'' which relate to the verification
of income, assets and citizenship status, amongst other eligibility
criteria. In this IFC, we incorporate this requirement for the purpose
of verifying that an individual has met or is excluded from the
community engagement requirement. As such, CMS has updated the MAGI
verification plan to include a supplement specific to community
engagement. States will be required to document and submit to CMS their
verification plans describing how, consistent with Federal standards,
the State will determine and verify:
Demonstration of compliance with the community engagement
requirement.
Mandatory exceptions for deemed compliance.
Status as a specified excluded individual.
Optional exceptions for short-term hardship events for
deemed compliance.
Use of ex parte processes and use of reliable data sources
at both application and renewal, and more frequently at State option,
including when the State will request information from individuals.
Controls to ensure consistency, timeliness, and proper
documentation of determinations.
Section 1902(xx)(5) of the Act requires States to conduct ex parte
verification of the community engagement requirement, directing States
to verify compliance with, or exception (for deemed compliance) or
exclusion from, the community engagement requirement using reliable
information available to the State, including information in the
individual's record and more recent information obtained from
electronic data sources without requiring additional information from
an applicant or a beneficiary. States must use reliable information
available to the State to verify compliance with the community
engagement requirement, which includes, but is not limited to, their
existing data sources, the Federal Data Services Hub, or other data
sources to determine income and other eligibility criteria. A State's
own case records, claims systems or payments, or encounter data are
also reliable information available to the State for purposes of
verification requirements under Section 1902(xx)(5) of the Act.
To comply with the requirements for the verification plan, we
estimate that each of the 43 States and the District of Columbia have a
one-time burden of 124 hours to develop the verification plan. Of the
124 hours, we estimate that it will take 60 hours at $87.52/hr for a
Business Operations Specialists to prepare the verification plan, 60
hours at $95.32/hr for an Operations Research Analyst to prepare and
review the data, and 4 hours at $128.00/hr for a General and Operations
Manager to review the data and submit the verification plan. In
aggregate, we estimate a one-time burden of 5,456 hours (124 hr x 44
jurisdictions) at a cost of $505,226 (44 x [(60 hr x $87.52/hr) + (60
hr x $95.32/hr) + (4 hr x $128.00/hr)]). Accounting for the Federal
administrative match of 50 percent, the requirement will cost States
$252,613 ($505,226 x 0.50). We have summarized the total burden in
Table 10.
[GRAPHIC] [TIFF OMITTED] TR03JN26.028
Additionally, we assume recurring burden associated with updating
and maintaining the initial verification plan supplement submission. We
estimate 5 States per year will make verification plan updates. For
each of these States, we estimate it will take 5 hours at $87.52/hr for
a Business Operations Specialist and 5 hours at $95.32/hr for an
Operations Research Analyst to update their verification plan. We also
estimate that it will take 1 hour at $128.00/hr for General and
Operations Managers to review the data and submit the verification
plan. In aggregate, we estimate an annual burden of 55 hours (11 hr/
response x 5 jurisdictions) at a cost of $5,211 (5 x [(5 hr x $87.52/
hr) + (5 hr x $95.32/hr) + (1 hr x $128.00/hr)]). Accounting for the
Federal administrative match of 50 percent, the requirement will cost
States $2,606 ($5,211 x 0.50). We have summarized the total burden in
Table 11.
[GRAPHIC] [TIFF OMITTED] TR03JN26.029
[[Page 33433]]
We have summarized the total burden for the verification plan
submission and annual updates in Table 12.
[GRAPHIC] [TIFF OMITTED] TR03JN26.030
5. ICRs Regarding Beneficiary Application Updates (Single Streamlined
and Presumptive Eligibility Applications) (Sec. Sec. 435.912, 435.556,
and 435.557)
The following changes will be submitted to OMB for approval under
control number 0938-1147 (CMS-10410).
Section 1902(xx) of the Act requires that ``applicable
individuals'' demonstrate as a condition of their Medicaid eligibility,
``community engagement'' for a minimum period of time preceding their
application month and during their enrollment. Section
1902(xx)(9)(A)(i) of the Act defines the term ``applicable individual''
to mean ``an individual . . . who is eligible to enroll (or is
enrolled) under the State plan under subsection (a)(10)(A)(i)(VIII), or
who is otherwise eligible to enroll (or is enrolled) under a waiver of
such plan . . .'' and is not a ``specified excluded individual.'' These
requirements will necessitate updates by States to their single,
streamlined application; alternative single, streamlined application;
associated instructions; and/or renewal-related materials, as
applicable, to reflect community engagement-related information that
must be communicated and collected consistent with section 1902(xx) of
the Act and implementing regulations.
For these updates, we estimate that each of the 43 States and the
District of Columbia will need to implement changes to their websites,
required at Sec. 435.1200(f), including updates to the online and
electronic versions of their applications, instructions, forms,
notices, templates, and postings. We estimate a one-time burden of 116
hours per State to accomplish these tasks. States will need to
incorporate the requirements of the terms ``applicable individuals''
and ``specified excluded individuals'' into their eligibility processes
and documents. Of the 116 hours, we estimate it will take 80 hours at
$90.08/hr for a Business and Financial Operations Occupation to perform
this task, 32 hours at $99.66/hr for a Computer Programmer to implement
the technical changes to the associated website, and 4 hours at
$128.00/hr for a General and Operations Manager to review and provide
oversight prior to submission and implementation. In aggregate, we
estimate a one-time burden of 5,104 hours (116 hr x 44 jurisdictions)
at a cost of $479,931 (44 x [(80 hr x $90.08/hr) + (32 hr x $99.66/hr)
+ (4 hr x $128.00/hr)]). Accounting for the Federal administrative
match of 75 percent, the requirement will cost States $119,983
($479,931 x 0.25). We have summarized the total burden in Table 13.
[GRAPHIC] [TIFF OMITTED] TR03JN26.031
In addition to the single, streamlined applications and associated
instructions and renewal-related material updates, States will need to
make updates to their hospital presumptive eligibility and/or
presumptive eligibility applications and provider training materials,
including eligibility determination notices. The updates to hospital
presumptive eligibility materials are applicable to those States that
cover the adult group in their State plan, and for optional presumptive
eligibility, to those States that have elected to provide presumptive
eligibility to the adult group. For the updates to presumptive
eligibility and hospital presumptive eligibility, we estimate that 38
States and the District of Columbia (39 jurisdictions) will need to
incorporate the regulatory requirements into their provider training
materials, eligibility notices, and application materials.
For these updates, we estimate that each of the 39 jurisdictions
will need to incorporate the regulatory requirements into their
application process and make updates to their hospital presumptive
eligibility and/or presumptive eligibility
[[Page 33434]]
applications and provider training materials. States will also need to
update any electronic hospital presumptive eligibility and/or
presumptive eligibility forms, templates, and notice-generation
artifacts, as applicable. We estimate a one-time burden of 64 hours per
State consisting of 36 hours at $90.08/hr for a Business and Financial
Operations Occupation to perform this task, 24 hours at $99.66/hr for a
Computer Programmer to conduct the technical tasks, and 4 hours at
$128.00/hr for a General and Operations Manager to review and provide
oversight prior to submission. In aggregate, we estimate a one-time
burden of 2,496 hours (64 hr x 39 jurisdictions) at a cost of $239,722
(39 x [(36 hr x $90.08/hr) + (24 hr x $99.66/hr) + (4 hr x $128.00/
hr)]. Accounting for the Federal administrative match of 75 percent,
the requirement will cost States $59,931 ($239,722 x 0.25). We have
summarized the total burden in Table 14.
[GRAPHIC] [TIFF OMITTED] TR03JN26.032
In addition, Medicaid applicants and beneficiaries may be required
to provide additional information or documentation to verify their
status as excepted or excluded from the community engagement
requirement, including their status as an individual that is medically
frail or has other special medical needs as defined at Sec.
435.554(c)(5), or to provide information to the State to demonstrate
how they satisfied the community engagement requirement. Beneficiaries
will have to submit documentation or other information if the State
cannot verify compliance based on available information, including data
sources.
Based on State-reported renewal data from calendar year 2025, we
estimate that approximately 56 percent of the approximately 20 million
total applicable individuals that will be due for renewal will have
their compliance with, or exception or exclusion from, the community
engagement requirement verified ex parte, and that the remaining 44
percent, or 8.8 million beneficiaries, will need to provide information
to the State.\121\ We also estimate, on average, it will take 2 hours
at $12.92/hr for a beneficiary to document and submit their information
or documentation regarding community engagement to the State every 6
months. We acknowledge the options at Sec. 435.557(d) for States to
conduct more frequent verifications for applicable individuals. We also
note that some applicable individuals enrolled in Medicaid under an
1115 demonstration will continue to have their eligibility renewed once
every 12 months instead of every 6 months. Further, as described at
Sec. 435.557(f)(1)(iii), States may elect to reverify continued
medical frailty status once every 12 months for individuals whose
specified excluded status on the basis of being medically frail or
otherwise have special medical needs was initially verified based on
available information or documentation. However, on balance, we believe
that for the purpose of estimating burden, the vast majority of States
will verify compliance with, or exception or exclusion from, the
community engagement requirement, and that certain adults may be
required to submit information to verify their compliance, every 6
months.
---------------------------------------------------------------------------
\121\ State Medicaid and CHIP Eligibility Processing Data,
updated April 24, 2026. State Medicaid and CHIP Eligibility
Processing Data.
---------------------------------------------------------------------------
In aggregate, we estimate an annual burden of 35.2 million hours
(8.8 million beneficiaries providing information to the State x 2 hr/
response x 2 responses/year) at a cost of $454,784,000 (35.2 million hr
x $12.92/hr). We have summarized the total burden in Table 15.
[GRAPHIC] [TIFF OMITTED] TR03JN26.033
Additionally, we estimate that 3.75 million new applicants will
have to submit their information to the State to demonstrate compliance
with the requirements. This estimate of new applicants is an
approximation. State-reported data published by CMS shows that 30.6
million applications for Medicaid and CHIP were received in 2025.\122\
If we assume 10 percent are CHIP applications, that would leave
approximately 27.5 million Medicaid applications. However, this same
dataset notes that many of the data reported by States include renewals
and/or redeterminations, the burden for which is captured in Table 15.
Therefore, we assume that only 15 million of these will be new Medicaid
applications, of which 25 percent, or 3.75 million, will be subject to
the community engagement requirement and required to submit information
to demonstrate their compliance. We
[[Page 33435]]
estimate, on average, it will take 2 hours at $12.92/hr for a new
applicant to document and submit their information or documentation
regarding community engagement to the State at the time of application.
In aggregate, we estimate an annual burden of 7,500,000 hours
(3,750,000 beneficiaries providing information to the State x 2 hr/
response) at a cost of $96,900,000 (7,500,000 hr x $12.92/hr).
---------------------------------------------------------------------------
\122\ January 2026: Medicaid and CHIP Eligibility Operations and
Enrollment Snapshot, slide 13. https://www.medicaid.gov/resources-for-states/downloads/eligib-oper-and-enrol-snap-jan2026.pdf.
---------------------------------------------------------------------------
We have summarized the annual burden for applicants in Table 16,
and the total burden associated with beneficiary applications (single
streamlined applications, presumptive eligibility applications, and
hospital presumptive eligibility applications) in Table 17.
[GRAPHIC] [TIFF OMITTED] TR03JN26.034
[GRAPHIC] [TIFF OMITTED] TR03JN26.035
6. ICRs Regarding Short-Term Hardship Exception Requests (Sec.
435.555)
The following changes will be submitted to OMB for approval under
control number 0938-1148 (CMS-10398 #101).
Section II.G. of this IFC discusses the State option to deem an
individual to have demonstrated community engagement for a month when
the individual experiences one of the short-term hardship circumstances
described in section 1902(xx)(3)(B)(ii) of the Act and codified at
Sec. 435.555(d) during such month. As exceptions at Sec. 435.555 are
optional, we acknowledge that not all States may elect to grant them.
However, given uncertainty at this time and so as not to underestimate,
our burden estimations described below assume that all 44 jurisdictions
subject to the community engagement requirement will elect to make
short-term hardship exceptions available under circumstances described
at section 1902(xx)(3)(B)(ii) of the Act and Sec. 435.555(d).
Generally, these circumstances are as follows: an individual receives
for all or part of a month certain hospital or institutional services
(or other services of ``similar acuity'' as the Secretary determines
appropriate); subject to a request by the State, an individual resides
in a county or equivalent unit of local government in which there has
been declared by the President a Federal emergency or disaster, or, in
which the unemployment rate is equal or greater than a particular
threshold; or the individual or the individual's dependent must travel
outside of their community for an extended period of time for treatment
of a serious or complex medical condition.
Section 1902(xx)(3)(B)(i) of the Act and Sec. 435.555(c) direct
that determinations of short-term hardship be made under procedures
established by the State. States electing to allow short-term hardship
exceptions will be required to establish and document processes and
procedures and make any corresponding technical edits to relevant
systems (for example, eligibility and enrollment systems) necessary to
effectuate short-term hardship exceptions described at Sec.
435.555(d). Required processes and procedures include the method and
timeframe by which an applicable individual or an individual acting on
behalf of the
[[Page 33436]]
applicable individual may request a short-term hardship exception under
Sec. 435.555(d)(1) and (4) and the timely process by which the State
will determine whether such requests will be granted. We estimate a
one-time burden of 116 hours per jurisdiction to accomplish these
tasks. Of the 116 hours, we estimate it will take 80 hours at $90.08/hr
for a Business and Financial Operations analyst to perform this task,
32 hours at $99.66/hr for a Computer Programmer to implement the
technical changes to the associated system, and 4 hours at $128.00/hr
for a General and Operations Manager to review and provide oversight.
In aggregate we estimate a one-time burden of 5,104 hours (116 hours x
44 jurisdictions) at a cost of $479,931 (44 x [(80 hr x $90.08/hr) +
(32 hr x $99.66/hr) + (4 hr x $128.00/hr)]). Accounting for the Federal
administrative match of 75 percent, the requirement will cost States
$119,983 ($479,931 x 0.25). We have summarized the burden associated
with establishing and documenting short-term hardship exceptions in
Table 18.
[GRAPHIC] [TIFF OMITTED] TR03JN26.036
As directed at Sec. 435.555(c)(1), States electing the option for
short-term hardship requests must provide notice informing applicable
individuals that the State offers short-term hardship exceptions
available under the circumstances described at Sec. 435.555(d)(2) and
(3), and the anticipated end date of the exception. Separately, Sec.
435.555(c)(2) directs States to provide notice informing applicable
individuals of short-term hardship exceptions available under the
circumstances described at Sec. 435.555(d)(1) and (4) and the method
by which such exceptions may be requested.
States electing to allow short-term hardship exception requests
will need to develop notices, as described above, to inform
beneficiaries of the various circumstances under which short-term
hardship exceptions are available under Sec. 435.555(d), and to
describe associated processes. These States will also need to establish
or update the associated operational workflows to ensure individuals
are notified about short-term hardships and to support required
delivery modalities to individuals who receive paper notices, which is
the default modality for agency communications to applicants and
beneficiaries unless an individual elects to receive electronic notices
as described in Sec. 435.918 and cross-referenced in Sec. Sec.
435.561(d) and 435.555(c) for communications related to community
engagement. Because the mailing of paper notices is the default
modality, we estimate that 75 percent of beneficiaries do not currently
elect to receive electronic notices.
To comply with these requirements, we estimate that it will take a
one-time burden of 80 hours at $87.52/hr for a Business Operations
Specialist to develop or update the notice templates and update the
associated workflows as necessary, 8 hours at $128.00/hr for a General
and Operations Manager to review and approve the updated notice
templates and workflows, and 24 hours at $99.66/hr for a Computer
Programmer to conduct the technical changes to the associated State
systems required to generate electronic notices. In aggregate, we
estimate a one-time burden of 4,928 hours (112 hr x 44 jurisdictions)
at a cost of $458,367 (44 x [(80 hr x $87.52/hr) + (24 hr x $99.66/hr)
+ (8 hr x $128.00/hr)]). Accounting for the Federal administrative
match of 75 percent, the requirement will cost States $114,592
($458,367 x 0.25). We have summarized the initial burden associated
with developing short-term hardship exception notices in Table 19.
[GRAPHIC] [TIFF OMITTED] TR03JN26.037
We also estimate it will take 1 minute (0.017 hr) at $38.66/hr for
a Mail Clerk to mail each of the 2 short-term hardship exception
notices to 75 percent of the applicable beneficiaries (20 million total
applicable beneficiaries). This results in 30 million outreach notices
(20,000,000 applicable beneficiaries x 0.75 that will not elect
electronic delivery x 2 notices) in the initial year. In aggregate, we
estimate a one-time burden of 510,000 hours (30,000,000 total mailings
x 0.017 hr per mailing) for Mail Clerks to complete all mailings at a
cost of $19,716,600 (510,000 x $38.66/hr). Accounting for the Federal
administrative match of 50 percent, the labor burden of this
requirement will cost States $9,858,300 ($19,716,600 x 0.50).
In addition, the mailing of the initial notices will add ancillary
non-labor costs. We assume these costs include paper, toner, envelopes,
and postage (envelope weight is normally considered negligible when
citing these rates and is not included) for hard-copy mailings:
Paper: $3.50 for a ream of 500 sheets. The cost for one
page is $0.007 ($3.50/500 sheets).
[[Page 33437]]
Toner: $70 for 10,000 pages. The toner cost per page is
$0.007 ($70/10,000 pages).
Envelope: Bulk envelope costs are $440 for 10,000
envelopes or $0.044 per envelope.
Postage: The cost of first-class metered mail is $0.73 per
letter up to 1 ounce. We estimate that a sheet of paper weighs 0.16
ounces (10.0 lb/1,000 sheets x 16 oz/lb), and do not anticipate
additional postage for mailings in excess of 1 ounce.
We estimate the aggregate cost per mailed notice is $0.802 [($0.007
for paper * 2 pages) + ($0.007 for toner * 2 pages) + $0.73 for postage
+ $0.044 per envelope]. Assuming 30 million initial mailings in the
initial year, we assume non-labor ancillary costs of $24,060,000
(30,000,000 x $0.802). Accounting for the Federal administrative match
of 50 percent, the non-labor burden of this requirement will cost
States $12,030,000 ($24,060,000 x 0.50). We have summarized the initial
burden associated with mailing short-term hardship exception notices in
Table 20.
[GRAPHIC] [TIFF OMITTED] TR03JN26.038
States will also need to conduct ongoing annual maintenance of
short-term hardship exception notice templates and the associated
operational workflows to ensure continued compliance with required
delivery modalities and timing. We estimate this ongoing annual
activity will require approximately 28 hours per State (one-quarter of
the 112-hour one-time effort) to review, update, and implement minor
policy, operational, and technical changes to notices and delivery
workflows. Of the 28 hours, this includes 20 hours at $87.52/hr for a
Business Operations Specialist to update notices and workflows, 2 hours
at $128.00/hr for a General and Operations Manager to review and
approve updates, and 6 hours at $99.66/hr for a Computer Programmer to
make necessary technical adjustments to the State's electronic data
collection methods.
In aggregate, we estimate an annual burden of 1,232 hours (28 hr x
44 jurisdictions) at a cost of $114,592 (44 x [(20 hr x $87.52/hr) + (6
hr x $99.66/hr) + (2 hr x $128.00/hr)]). Accounting for the Federal
administrative match of 75 percent, the requirement will cost States
$28,648 ($114,592 x 0.25). We have summarized the ongoing burden
associated with maintaining short-term hardship exception notices in
Table 21.
[GRAPHIC] [TIFF OMITTED] TR03JN26.039
In addition, we continue to estimate 1 minute (0.017 hr) at $38.66/
hr for a Mail Clerk to process and mail each beneficiary notice. We
assume that the initial estimate of 15 million beneficiaries that
receive paper notices will be moderately reduced in subsequent years as
more beneficiaries opt to receive their notices electronically. On an
ongoing basis we assume that 11.25 million beneficiaries (0.75 x
11,250,000) will need to be mailed 2 paper short-term hardship
exception notices. For the combined 22.5 million beneficiary notices
(11,250,000 x 2), this equals 382,500 hours annually (22,500,000
mailings x 0.017 mailings/hr) at an annual cost of $14,787,450 (382,500
hours x $38.66/hr). Accounting for the Federal administrative match of
50 percent, the annual labor cost to States is $7,393,725 ($14,787,450
x 0.50).
In addition, the ongoing mailing of the notices will add ancillary
annual non-labor costs associated with paper, toner, envelopes, and
postage. Assuming 22.5 million mailings annually at a cost of $0.802
[($0.007 for paper x 2 pages) + ($0.007 for toner x 2 pages) + $0.73
for postage + $0.044 per envelope], we estimate an additional
[[Page 33438]]
aggregate annual non-labor cost of $18,045,000 (22,500,000 x $0.802).
Accounting for the Federal administrative match of 50 percent, the non-
labor burden of this requirement will cost States $9,022,500
($18,045,000 x 0.50). We have summarized the ongoing State burden
associated with mailing short-term hardship exception notices in Table
22.
[GRAPHIC] [TIFF OMITTED] TR03JN26.040
Beyond notices, States will also have additional burden associated
with requesting short-term hardships as described at Sec.
435.555(d)(2) and (3).
Emergency or Disaster Exception: The emergency or disaster-related
exception, codified at Sec. 435.555(d)(2) exists when an emergency or
disaster is declared by the President under the National Emergencies
Act or the Robert T. Stafford Disaster and Emergency Assistance Act.
For emergencies declared under the National Emergencies Act (NEA),
States must notify CMS timely of its plan to effectuate a short-term
hardship exception at Sec. 435.555(d)(2)(ii) in which the State
identifies its inclusion in the scope of an NEA-declared emergency, how
the emergency affects the ability of applicable individuals to
demonstrate community engagement, either in a particular county (or
equivalent unit of local government), multiple counties, or statewide,
and the anticipated duration of this effect on applicable individuals.
Moreover, for Robert T. Stafford Disaster and Emergency Assistance Act
(Stafford Act)-related declarations, in the event States would like
extension of the exception beyond the duration described at Sec.
435.555(d)(2)(iv), States must submit a notification to provide
information in support of such extension.
In 2025, the 44 jurisdictions with populations subject to community
engagement experienced nine NEA declarations and 44 Stafford Act Major
Disaster or Emergency declarations.123 124 Of the 44
Stafford Act declarations, we estimate that approximately 11, or 25
percent, may result in a State requesting an extension of the short-
term hardship exception. In total, we estimate that there will be 20
emergency or disaster declarations (nine NEA declarations + 11 Stafford
Act declarations) annually that would require a State to submit a
request to CMS for either an exception or an extension.
---------------------------------------------------------------------------
\123\ FEMA, Disaster Declarations Summaries--v2: https://www.fema.gov/openfema-data-page/disaster-declarations-summaries-v2.
\124\ Brennan Center for Justice, Declared National Emergencies
Under the National Emergencies Act: https://www.brennancenter.org/our-work/research-reports/declared-national-emergencies-under-national-emergencies-act.
---------------------------------------------------------------------------
We estimate it will require 22 hours annually to compile the
necessary information and to request each emergency or disaster-related
short-term hardship exception or exception extension to CMS. We
estimate that it will take 20 hours at $87.52/hr for a Business
Operations Specialist to perform the task and 2 hours at $128.00/hr for
a General and Operations Manager to review the data and submit the
short-term hardship requests. We estimate a total burden of 440 hours
(22 hr/response x 20 responses) at a cost of $40,128 (20 responses x
[(20 hr/response x $87.52/hr) + (2 hr/response x $128.00/hr)]).
Accounting for the Federal administrative match of 50 percent, we
estimate that this requirement will cost States $20,064 ($40,128 x
0.50). We have summarized the total burden in Table 23.
[[Page 33439]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.041
Unemployment Hardship Exception: The unemployment-related short-
term hardship exception, implemented at Sec. 435.555(d)(3), exists
when the unemployment rate in a county or equivalent unit of local
government is at or above the lesser of 8 percent or 1.5 times the
national unemployment rate. As noted, this short-term hardship
exception is contingent on a State first making a request of CMS
relating to this circumstance.
To submit the necessary documentation to support the unemployment-
related short-term hardship exception, we expect that a State will have
to assess the circumstances within a county or equivalent unit of local
government and then compile the necessary information to submit to CMS.
Based on an analysis of 2024 county-level unemployment statistics, and
by using BLS' 2024 average unemployment rate of 4.0 percent, we assume
that around 23 of the applicable States will have at least one county
that.125 126 Not all potentially eligible States will decide
to request such an exception from CMS, whereas some States with
multiple counties meeting an unemployment threshold may submit more. In
total, we estimate that annually there would be 40 unemployment-related
short-term hardship exception requests across 20 State respondents.
---------------------------------------------------------------------------
\125\ US Bureau of Labor Statistics LAUS 2024 Annual Averages.
Released April 18, 2025. Accessed February 2026. https://www.bls.gov/lau/laucnty24.xlsx.
\126\ US Bureau of Labor Statistics Regional & State
Unemployment 2024 Annual Averages (USDL-25-0294): Accessed February
2026. https://www.bls.gov/news.release/srgune.nr0.htm.
---------------------------------------------------------------------------
It will require between 84 and 104 hours annually to compile the
necessary information and to report each unemployment-related short-
term hardship exception to CMS. Of that range, we estimate that it will
take between 80 and 100 hours at $87.52/hr for a Business Operations
Specialist to perform the task and 4 hours at $128.00/hr for a General
and Operations Manager to review the data and submit the short-term
hardship requests. To avoid underestimating our burden analysis, we are
using the high end of our estimates to score the PRA-related impact of
the reporting requirements. In this regard we estimate a total burden
of 4,160 hours (104 hr/response x 40 responses) at a cost of $370,560
(40 responses x [(100 hr/response x $87.52/hr) + (4 hr/response x
$128.00/hr)]). Accounting for the Federal administrative match of 50
percent, we estimate that this requirement will cost States $185,280
($370,560 x 0.50). We have summarized the total burden in Table 24.
[GRAPHIC] [TIFF OMITTED] TR03JN26.042
[[Page 33440]]
Other Hardship Exceptions: For short-term hardship exceptions
related to circumstances in which the individual alleges hardship due
to the receipt of institutional/hospital services or other services, or
in cases in which an individual alleges he or she (or a dependent) must
travel outside of the individual's community for treatment of a medical
condition, CMS directs under Sec. 435.555(c)(2) that States electing
the short-term hardship exception must notify applicable individuals of
the method by which a short-term hardship exception may be requested.
These methods will be variable across States, but we estimate, on
average, it would take 1 hour at $12.92/hr for an applicable
individual, or an individual acting on behalf of an applicable
individual, to document and submit their short-term hardship exception
request to a State. Calculating the burden for the applicable
individuals that will request short-term hardship exceptions available
under Sec. 435.555(d)(1) and (4) is subject to significant
approximation. In 2022 there were approximately 8.8 million non-COVID
acute inpatient or ICU stays in Medicaid expansion States.\127\ We
assume that approximately 25 percent or 2.2 million (8.8 million x .25)
of those stays were for Medicaid expansion adults subject to community
engagement. Further, using Healthcare Cost and Utilization Project
data, we see that the mean Medicaid length of stay (LOS) in 2023 was 5
days.\128\ Hospital LOS data is typically right-skewed,\129\ meaning
that fewer than half of stays have an LOS longer than the mean.
Therefore, we assume that only 25 percent of stays for applicable
individuals, or 550,000 (2.2 million x .25) will be of a duration that
may lead an applicable individual to consider requesting a short-term
hardship exception. Of those 550,000 stays, we estimate that 300,000
will result in a short-term hardship exception being requested. We
further assume this number includes those individuals that may need to
travel outside their community for treatment of a medical condition. In
aggregate, we estimate an annual burden of 300,000 hours (300,000
short-term hardship exception requests x 1 hr per request) at a cost of
$3,876,000 (300,000 hr x $12.92/hr) for an applicable individual, or an
individual acting on behalf of an applicable individual, to request
short-term hardship exception requests. We have summarized the total
burden in Table 25.
---------------------------------------------------------------------------
\127\ Acute Care Services Provided to the Medicaid and CHIP
Population, January 5, 2024. Acute Care Services Provided to the
Medicaid and CHIP Population.
\128\ Agency for Healthcare Research and Quality (AHRQ),
Healthcare Cost and Utilization Project (HCUP) Fast Stats, National
Hospital Utilization & Costs, 2023. HCUP Fast Stats Data Tools--
Healthcare Cost and Utilization Project (HCUP) Fast Stats.
[GRAPHIC] [TIFF OMITTED] TR03JN26.043
As required at Sec. Sec. 435.561(b)(3)(iv)(A)-(B), States will
also need to send periodic outreach notices to beneficiaries when a
hardship exception under Sec. 435.555(a) is deselected and to provide
notice of the anticipated expiration of a short-term hardship event
described at Sec. 435.555(d)(2) and (3). We previously estimated in
this ICR that all 44 jurisdictions will elect to include in their SPAs
the short-term hardship exception to the community engagement
requirement. Because we have no reliable way of estimating how many
jurisdictions will deselect the hardship exception in a given year and
thus will need to send notices to beneficiaries informing them of the
deselection of the hardship exception, we are not estimating burden for
this requirement. To estimate the number of jurisdictions that will
need to provide notice of the anticipated expiration of a short-term
hardship event described at Sec. 435.555(d)(2) and (3), we rely on our
previous estimate earlier in this ICR that 20 jurisdictions will
request an emergency or disaster exception and 20 jurisdictions will
request a high unemployment exception.
For the purpose of burden estimation, we estimate that there will
be no overlap in the jurisdictions that request an emergency or
disaster exception and a high unemployment exception, although it is
possible that the same jurisdiction could request both exceptions. As
such, we estimate 40 jurisdictions will need to send notices to
beneficiaries to inform them of the anticipated expiration of a short-
term hardship event described at Sec. 435.555(d)(2) and (3). We
estimate that the 20 million beneficiaries that will receive notices of
the potential availability of a short-term hardship exception cited
earlier in this ICR are equally divided amongst the jurisdictions, and
thus 18.2 million beneficiaries ((20 million beneficiaries/44
jurisdictions) x 40 jurisdictions) will reside in the 40 jurisdictions
that will need to send notices of the anticipated expiration of a
short-term hardship event described at Sec. 435.555(d)(2) and (3). We
estimate it will take 1 minute (0.017 hr) at $38.66/hr for a Mail Clerk
to mail the notice of anticipated expiration of a short-term hardship
event described at Sec. 435.555(d)(2) and (3) to 18.2 million
beneficiaries. In aggregate, we estimate an annual burden of 309,400
hours (18,200,000 notices x 0.017 hr per mailing) for Mail Clerks to
complete all mailings at a cost of $11,961,404 (309,400 hr x $38.66/
hr). Accounting for the Federal administrative match of 50 percent, the
labor burden of this requirement will cost States $5,980,702
($11,961,404 x 0.50).
In addition, the mailing of notices about the anticipated
expiration of a short-term hardship event described at Sec.
435.555(d)(2) and (3), will add ancillary annual non-labor costs
associated with paper, toner, envelopes, and postage. Assuming 18.2
million mailings annually at a cost of $0.802 [($0.007 for paper x 2
pages) + ($0.007 for toner x 2 pages) + $0.73 for postage + $0.044 per
envelope], we estimate an additional aggregate annual non-labor cost of
$14,596,400 (18,200,000 mailings
[[Page 33441]]
x $0.802). Accounting for the Federal administrative match of 50
percent, the non-labor burden of this requirement will cost States
$7,298,200 ($14,596,400 x 0.50). We have summarized the ongoing State
burden associated with mailing notices about the anticipated expiration
of a short-term hardship event described at Sec. 435.555(d)(2) and (3)
in Table 26.
[GRAPHIC] [TIFF OMITTED] TR03JN26.044
7. ICRs Regarding State Requirements for Outreach (Sec. 435.561) and
Noncompliance (Sec. 435.558).
The following changes will be submitted to OMB for approval under
control number 0938-1147 (CMS-10410).
As discussed in section II.L. of this IFC, State Medicaid agencies
are required to develop (or update) and disseminate standardized,
targeted communications notices to certain individuals about the
requirement to demonstrate community engagement under section 1902(xx)
of the Act. States must also implement the operational processes needed
to deliver those communications in a timely manner. Among the
communications, under new Sec. 435.561, States must provide outreach
notices to individuals eligible for or enrolled under Sec. 435.119 and
to certain individuals covered through specified section 1115
demonstrations. While CMS will not be providing States with templates
for these notices, States must send outreach at the times specified at
Sec. 435.561(b), include the content required by Sec. 435.561(c), and
deliver outreach notices through at least two modalities as required by
Sec. 435.561(d) (regular mail or, if elected by the individual,
electronic delivery consistent with Sec. 435.918, plus at least one
additional modality such as an electronic account, telephone, text
message, or other commonly available electronic means), consistent with
the plain language and accessibility standards at Sec. 435.905(b).
States may also coordinate outreach with other beneficiary
communications, such as eligibility determination notices under Sec.
435.917.
In addition, under new Sec. 435.558, when a State cannot verify
compliance with, or an exception (for deemed compliance), or exclusion
from the community engagement requirement, the State must issue a
notice of noncompliance, in the form and manner outlined at Sec.
435.558(c), that provides at least 30 calendar days for the individual
to demonstrate compliance or an exception/exclusion. This requirement
will likely create additional information collection activities related
to preparing and sending the notice, tracking the response period, and
documenting outcomes prior to any denial or disenrollment, including
advance notice and fair hearing rights. At renewal, States may choose
when to send the noncompliance notice relative to the pre-populated
renewal form but must still generate and issue the notice and track
responses.
These requirements also leverage existing State communication
infrastructure, including online accounts and portals. In particular,
Sec. 435.561(d)(2)(i) (delivery through the individual's electronic
account) extends State's Medicaid website obligations under Sec.
435.1200(f), including accessibility consistent with Sec. 435.905(b).
States will need to develop or update outreach and noncompliance
notice templates and establish or update the associated operational
workflows to support required delivery modalities and timing. For both
outreach and noncompliance notices, these operational workflows will
include mailing paper copies to the subset of individuals who receive
paper notices. Since mailing paper notices is the default modality
under Sec. 435.561(d), we estimate that 75 percent of beneficiaries do
not elect to use electronic notices.
To comply with these requirements, we estimate that it will take a
one-time burden of 80 hours at $87.52/hr for a Business Operations
Specialist to develop or update the notice templates and update the
associated workflows as necessary, 8 hours at $128.00/hr for a General
and Operations Manager to review and approve the updated notice
templates and workflows, and 24 hours at $99.66/hr for a Computer
Programmer to conduct the technical changes to the State electronic
data collection means. In aggregate, we estimate a one-time burden of
4,928 hours (112 hr x 44 jurisdictions) at a cost of $458,367 (44 x
[(80 hr x $87.52/hr) + (24 hr x $99.66/hr) + (8 hr x $128.00/hr)]).
Accounting for the Federal administrative match of 75 percent, the
requirement will cost States $114,592 ($458,367 x 0.25). We have
summarized the initial State outreach and noncompliance notice burden
in Table 27.
[[Page 33442]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.045
We also estimate it will take 1 minute (0.017 hr) at $38.66/hr for
a Mail Clerk to mail paper materials to 75 percent of the applicable
beneficiaries (20 million total applicable beneficiaries). This results
in 15 million outreach notices (20,000,000 applicable beneficiaries x
0.75 that will not elect electronic delivery), as well as 6 million
noncompliance notices (0.75 x the 8,000,000 applicable individuals
whose eligibility could not be verified ex parte), or 21 million
mailings in the initial year. In aggregate, we estimate a one-time
burden of 357,000 hours (21,000,000 total mailings x 0.017 hr per
mailing) for Mail Clerks to complete all mailings at a cost of
$13,801,620 (357,000 hr x $38.66/hr). Accounting for the Federal
administrative match of 50 percent, the labor burden of this
requirement will cost States $6,900,810 ($13,801,620 x 0.50).
In addition, the mailing of the initial notices will add ancillary
non-labor costs. We assume these costs include paper, toner, envelopes,
and postage (envelope weight is normally considered negligible when
citing these rates and is not included) for hard-copy mailings. Using
the same assumptions as described for mailing short-term hardship
request notices in ICR 6, we estimate the aggregate cost per mailed
notice is $0.802 [($0.007 for paper x 2 pages) + ($0.007 for toner x 2
pages) + $0.73 for postage + $0.044 per envelope]. Assuming 21 million
initial mailings in the initial year, we assume non-labor ancillary
costs of $16,842,000 (21,000,000 x $0.802). Accounting for the Federal
administrative match of 50 percent, the non-labor burden of this
requirement will cost States $8,421,000 ($16,842,000 x 0.50). We have
summarized the ongoing, total State outreach and noncompliance notice
burden in Table 28.
[GRAPHIC] [TIFF OMITTED] TR03JN26.046
States will also need to conduct ongoing annual maintenance of
outreach and noncompliance notice templates and the associated
operational workflows to ensure continued compliance with required
outreach delivery modalities and timing. We estimate this ongoing
annual activity will require approximately 28 hours per State (one-
quarter of the 112-hour one-time effort) to review, update, and
implement minor policy, operational, and technical changes to notices
and delivery workflows. Of the 28 hours, this includes 20 hours at
$87.52/hr for a Business Operations Specialist to update notices and
workflows, 2 hours at $128.00/hr for a General and Operations Manager
to review and approve updates, and 6 hours at $99.66/hr for a Computer
Programmer to make necessary technical adjustments to the State's
electronic data collection methods.
In aggregate, we estimate an annual burden of 1,232 hours (28 hr x
44 jurisdictions) at a cost of $114,592 (44 x [(20 hr x $87.52/hr) + (6
hr x $99.66/hr) + (2 hr x $128.00/hr)]). Accounting for the Federal
administrative match of 75 percent, the requirement will cost States
$28,648 ($114,592 x 0.25). We have summarized the ongoing burden for
State maintenance of outreach and noncompliance notices in Table 29.
[GRAPHIC] [TIFF OMITTED] TR03JN26.047
[[Page 33443]]
In addition, we continue to estimate 1 minute (0.017 hr) at $38.66/
hr for a Mail Clerk to process and mail each beneficiary notice. We
assume that the initial estimate of 15 million beneficiaries that
receive paper notices will be moderately reduced in subsequent years as
more beneficiaries opt to receive their notices electronically. On an
ongoing basis we assume that 11.25 million beneficiaries (0.75 x
15,000,000) will need to be mailed paper outreach notices, and that
4.50 million beneficiaries (0.75 x 6,000,000) will need to be mailed
noncompliance notices on an ongoing basis. For the combined 15.750
million beneficiary notices (11,250,000 + 4,500,000), this equals
267,750hours annually (15,750,000 mailings x 0.017 mailings/hr) at an
annual cost of $10,351,215 (267,750 hours x $38.66/hr). Accounting for
the Federal administrative match of 50 percent, the annual labor cost
to States is $5,175,608.
In addition, the ongoing mailing of the notices will add ancillary
annual non-labor costs associated with paper, toner, envelopes, and
postage. Assuming 15.75 million mailings annually at a cost of $0.802
[($0.007 for paper x 2 pages) + ($0.007 for toner x 2 pages) + $0.73
for postage + $0.044 per envelope], we estimate an additional aggregate
annual non-labor cost of $12,631,500. Accounting for the Federal
administrative match of 50 percent, the non-labor burden of this
requirement will cost States $6,315,750 ($12,631,500 x 0.50). We have
summarized the ongoing, annual State outreach burden in Table 30.
[GRAPHIC] [TIFF OMITTED] TR03JN26.048
States will also need to send notices to beneficiaries to inform
them of the loss of a beneficiary's status as a specified excluded
individual under Sec. 435.554. We estimate 44 jurisdictions will need
to send notices to beneficiaries to inform them of the loss of a
beneficiary's status as a specified excluded individual under Sec.
435.554. Per data from our ``Medicaid and CHIP Leavers and Coverage
Transitions'' report, 3.02 million adult non-expansion beneficiaries
left Medicaid between March 31, 2023, and December 31, 2023.\130\ We
therefore use 3.02 million beneficiaries as a proxy for the number of
beneficiaries that will need to be informed of the loss of a
beneficiary's status as a specified excluded individual under Sec.
435.554 in a given year, but acknowledge that this number may be higher
than the actual number of adult beneficiaries who may lose their status
as a specified excluded individual in a given year, given the
population differences between these two groups. We estimate it will
take 1 minute (0.017 hr) at $38.66/hr for a Mail Clerk to mail the
notice of the loss of a beneficiary's status as a specified excluded
individual under Sec. 435.554 to 3.02 million beneficiaries. In
aggregate, we estimate an annual burden of 51,340 hours (3,020,000
notices x 0.017 hr per mailing) for Mail Clerks to complete all
mailings at a cost of $1,984,804 (51,340 hr x $38.66/hr). Accounting
for the Federal administrative match of 50 percent, the labor burden of
this requirement will cost States $992,402 ($1,984,804 x 0.50).
---------------------------------------------------------------------------
\130\ See ``Leavers, excluding death and moving to Medicaid/CHIP
in another state: Count'' column in chart on page 7. ``Medicaid &
CHIP Leavers and Coverage Transitions: By Eligibility Category and
Home & Community-Based Services (HCBS) 1915(c) Waiver Enrollment,
March 31, 2023-December 31, 2023.'' CMS. November 2024. https://www.medicaid.gov/resources-for-states/downloads/eligibility-group-leavers-transitions-novmbr-2024-release.pdf.
---------------------------------------------------------------------------
In addition, the mailing of notices to beneficiaries to inform them
of the loss of a beneficiary's status as a specified excluded
individual under Sec. 435.554 will add ancillary annual non-labor
costs associated with paper, toner, envelopes, and postage. Assuming
3.02 million mailings annually at a cost of $0.802 [($0.007 for paper x
2 pages) + ($0.007 for toner x 2 pages) + $0.73 for postage + $0.044
per envelope], we estimate an additional aggregate annual non-labor
cost of $2,422,040 (3,020,000 mailings x $0.802). Accounting for the
Federal administrative match of 50 percent, the non-labor burden of
this requirement will cost States $1,211,020 ($2,422,040 x 0.50). We
have summarized the ongoing State burden associated with mailing
notices to beneficiaries to inform them of the loss of a beneficiary's
status as a specified excluded individual under Sec. 435.554 in Table
31.
[[Page 33444]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.049
D. Burden Summary
Table 32 summarizes the PRA-related burden associated with this
rule's community engagement requirement.
BILLING CODE 4120-01-P
[[Page 33445]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.050
[[Page 33446]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.051
[[Page 33447]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.052
[[Page 33448]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.053
[[Page 33449]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.054
BILLING CODE 4120-01-C
E. Submission of PRA-Related Comments
We have submitted a copy of this IFC to OMB for its review of the
rule's information collection requirements. The requirements are not
effective until they have been approved by OMB.
To obtain copies of the supporting statement and any related forms
for the proposed collections discussed previously, please visit the CMS
website at (https://www.cms.gov/regulations-and-guidance/legislation/paperworkreductionactof1995/pra-listing), or call the Reports Clearance
Office at 410-786-1326.
We invite public comments on these potential information collection
requirements. If you wish to comment, please submit your comments
electronically as specified in the DATES and ADDRESSES sections of this
IFC and identify the rule (CMS-2454-IFC), the ICR's CFR citation, and
OMB control number.
V. Regulatory Impact Analysis
A. Statement of Need
The changes in this IFC are necessary to align the Code of Federal
Regulations (CFR) with statutory requirements set forth by section
1902(xx) of the Act as added by section 71119 (Requirement For States
To Establish Medicaid Community Engagement Requirements For Certain
Individuals) of the WFTC legislation, which adds a new community
engagement requirement for certain adults in Medicaid.
[[Page 33450]]
The community engagement requirement has the potential to empower
Medicaid beneficiaries through employment, education, or community
service so they can escape isolation and dependency, build confidence,
and achieve self-sufficiency and independence. States will be
responsible for implementing and administering the new requirement in a
manner that complies with this rule. CMS will provide oversight and
monitor States' implementation of the new requirement, as well as
outcomes related to community engagement.
This IFC specifies and explains:
Changes to the CFR to revert certain eligibility and
enrollment regulatory provisions that were suspended due to the section
71102 moratorium and are needed to implement community engagement until
October 1, 2034, with the provisions in effect prior to the 2024
Eligibility and Enrollment final rule as well as conforming amendments
due to the restoration of the previous CFR;
Requirements for Medicaid applicants and beneficiaries who
must demonstrate community engagement as a condition of their
eligibility;
The types of qualifying activities that satisfy the
community engagement requirement and the criteria to meet an exception
(be deemed compliant) or specified exclusion from the requirement;
The steps States must take when they are unable to verify
an applicable individual has met the community engagement requirement
at application, renewal, or a more frequent periodic verification of
compliance;
The notice of noncompliance States must use to inform the
individual how they may make a satisfactory showing to demonstrate or
be deemed as demonstrating compliance or that the individual should not
be subject to the requirement, as well as how the individual can
reapply for coverage if they are disenrolled;
When and how States must verify an applicable individual's
compliance with the community engagement requirement and whether an
individual meets an exception (for deemed compliance) or exclusion from
the requirements, and the outreach and notice requirements for States;
Where States will have options in implementing the
community engagement requirement; and,
Additional considerations for States and implications of
the community engagement requirement for other existing ways that
enable enrollment, such as presumptive eligibility, as well as
demonstration projects authorized under section 1115 of the Act.
The IFC also describes implementation timing and establishes new
State reporting requirements.
B. Overall Impact
We have examined the impacts of this rule as required by Executive
Order (E.O.) 12866, ``Regulatory Planning and Review''; E.O. 13132,
``Federalism''; E.O 13563, ``Improving Regulation and Regulatory
Review''; E.O. 14192, ``Unleashing Prosperity Through Deregulation'';
the Regulatory Flexibility Act (RFA) (Pub. L. 96354); section 1102(b)
of the Act; section 202 of the Unfunded Mandates Reform Act of 1995
(Pub. L. 104-4); and the Congressional Review Act (5 U.S.C. 804(2)).
E.O. 12866 and E.O. 13563 direct agencies to assess all costs and
benefits of available regulatory alternatives and, if regulation is
necessary, to select those regulatory approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages; distributive impacts.). Section 3(f)
of E.O. 12866 defines a ``significant regulatory action'' as any
regulatory action that is likely to result in a rule that may: (1) have
an annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities; (2)
create a serious inconsistency or otherwise interfere with an action
taken or planned by another agency; (3) materially alter the budgetary
impact of entitlements, grants, user fees, or loan programs or the
rights and obligations of recipients thereof; or (4) raise novel legal
or policy issues arising out of legal mandates, or the President's
priorities.
A regulatory impact analysis (RIA) must be prepared for a
regulatory action that is significant under section 3(f)(1) of E.O.
12866. Based on our estimates, this IFC does meet that criterion as the
aggregate amount of benefits and costs may exceed the $100 million
threshold in at least 1 year. OIRA has determined this rulemaking is
significant per section 3(f)(1). Pursuant to Subtitle E of the Small
Business Regulatory Enforcement Fairness Act of 1996 (also known as the
Congressional Review Act), OIRA has also determined that this rule is
major as it meets the criteria set forth in 5 U.S.C. 804(2).
C. Detailed Economic Analysis
1. Benefits
We are specifying regulatory changes at 42 CFR parts 431, 435, 438,
457, and 600 to establish a community engagement requirement for
certain adults applying for or enrolled in Medicaid, and corresponding
requirements added by the WFTC legislation. This IFC provides a
regulatory framework that specifies the requirements for States to
implement the new community engagement requirement in an efficient,
feasible, and cost-effective manner.
We believe the new community engagement requirement could have the
potential to produce a range of benefits across multiple stakeholders.
This section examines the anticipated benefits for three principal
parties implicated by the new requirement: Medicaid applicants and
beneficiaries subject to the community engagement requirement, States,
and the Federal government.
The bulk of the benefits and costs are associated with the change
in time allocation of program participants. The White House Council of
Economic Advisers (2025) found that, among able-bodied adults aged 19-
64 participating in Medicaid in 2024, 49.6 percent did no work for pay
at any time during the calendar year.\134\ CMS invites comment on the
estimation of the number of adults moved to engagement as a result of
the IFC. If those with zero work are more likely to participate in
Medicaid for the full calendar year than the other able-bodied adults
aged 19-64, then more than 49.6 percent of able-bodied adults aged 19-
64 on Medicaid in any given month did no work for pay at all during the
calendar year, and even more did no work during that month. Under this
IFC, such adults would either (a) not participate in Medicaid, (b) work
to earn at least $580 per month (= $7.25 x 80 hours), (c) satisfy
community engagement in another way, or (d) a combination of each. In
the benefits and costs subsections of this economic analysis, we
quantify benefits and costs per additional hour of work. The aggregate
time allocation section multiplies dollar amounts per hour by our
estimates of aggregate hours of time allocated to work as a result of
the IFC.
---------------------------------------------------------------------------
\134\ The White House Council of Economic Advisers. (June 2025).
``Medicaid Community Engagement Requirements and the Value of
Work.'' https://www.whitehouse.gov/wp-content/uploads/2025/03/Medicaid-Community-Engagement-Requirements-and-the-Value-of-Work.pdf. As noted later in the RIA, the 49.6 fits into the
quantitative framework as support for estimates of the number adults
moved to employment as a result of the IFC.
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[[Page 33451]]
a. Medicaid Applicants and Beneficiaries Subject to the Community
Engagement Requirement
Employment is recognized as an important factor in long-term
beneficiary health and welfare. Existing research indicates obtaining
and maintaining stable employment provides individuals with reliable
income and financial stability, which in turn supports access to safe
housing, nutritious food, and other resources necessary for maintaining
health.135 136Additionally, research suggests the
relationship between health and employment is intrinsic--and
bidirectional in nature, so negative benefits may be experienced by
some coverage-losing individuals--as mentioned earlier in section
I.B.137 138 139 140
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\135\ Zafar, Q., M.A. Khan, A.Z. Warsi, and L. Iqbal. (2024).
``Economic Strain and Recovery Trajectories in Mental Health: The
Role of Financial Stability in Mental Health Outcomes.'' Review of
Applied Management and Social Sciences,7(4): 345-358. https://doi.org/10.47067/ramss.v7i4.385.
\136\ R. Gerdes, T.D. Jackson, R. Roberts, et al. (2026).
``Associations Between Employment and Health Outcomes: A Systematic
Review of Reviews.'' Journal of Occupational Rehabilitation. https://doi.org/10.1007/s10926-025-10357-5.
\137\ Han, W.J. (2024). ``How longitudinal employment patterns
shape health as individuals approach middle adulthood--US NLSY79
cohort.'' PLOS ONE, 19(4), e0300245. https://doi.org/10.1371/journal.pone.0300245.
\138\ Virtanen M, Kivim[auml]ki M, Joensuu M, Virtanen P,
Elovainio M, Vahtera J. Temporary employment and health: a review.
Int J Epidemiol. 2005 Jun;34(3):610-22. doi: 10.1093/ije/dyi024.
Epub 2005 Feb 28. PMID: 15737968.
\139\ Kim TJ von dem Knesebeck O. Perceived job insecurity,
unemployment and depressive symptoms: a systematic review and meta-
analysis of prospective observational studies. Int Arch Occup
Environ Health. 2016 May; 89(4):561-73. doi: 10.1007/s00420-015-
1107-1. Epub 2015 Dec 29. PMID: 26715495.
\140\ Gerdes R. Jackson T.D. Roberts R. Lytvyak E. Deibert D,
Dennett L, Burton AK, Gross DP, Els C, Doroshenko A, Hagtvedt R,
Straube S. Associations Between Employment and Health Outcomes: A
Systematic Review of Reviews. J Occup Rehabil. 2026 Jan 6. doi:
10.1007/s10926-025-10357-5. Epub ahead of print. PMID: 41493509.
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We believe a well-designed community engagement requirement may
benefit individuals so that they are not dependent, demoralized, or
stuck in situations that hinder their economic, physical, and mental
state.
Work also creates value in the marketplace by adding to the
aggregate production of goods and services, which is why employers pay
for it. On an hourly basis, the value is described as the hourly
marginal product of labor (MPL). MPL is often proxied by average hourly
worker compensation before taxes and fringe benefits are subtracted,
although MPL can exceed hourly compensation to the extent that labor or
product markets are not competitive. That is, average hourly
compensation has a tendency toward underestimating the expected benefit
of an additional hour of work in the form of valuable goods and
services produced.
Recognizing that most adults do not participate in Medicaid, and
that Medicaid participants likely have earning potential below the
population average and median, our estimate begins with measurement of
the 25th percentile weekly earnings of full-time wage and salary
workers of $838 in the first quarter of 2026.141 142 We
divide this weekly rate by 40 hours to calculate an hourly pre-tax pre-
benefit wage rate of $20.95. We then scale up by a factor of 1.186 to
account for fringe benefits not already included in the $838, arriving
at an hourly MPL of $24.84.\143\ This is intended to represent the
productivity of the average Medicaid beneficiary induced to work,
rather than the average or median worker working for a company, non-
profit, or government agency that may spend time on clerical aspects of
this rule.
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\141\ Baxter JR, Robinson LA, and Hammitt JK. (June 2017).
``Valuing Time in U.S. Department of Health and Human Services
Regulatory Impact Analyses: Conceptual Framework and Best
Practices.'' Department of Health and Human Services, Office of the
Assistant Secretary for Planning and Evaluation (ASPE). https://aspe.hhs.gov/sites/default/files/migrated_legacy_files//176806/VOT.pdf.
\142\ ``Quartiles and selected deciles of usual weekly earnings
of full-time wage and salary workers by selected characteristics,''
US Bureau of Labor Statistics, last modified April 16, 2026. https://www.bls.gov/news.release/wkyeng.t05.htm..
\143\ ASPE estimates that fringe benefits are 45.6 percent of
wages. We assume that the $838 from BLS reflects half of the fringe
benefits, so that the scaling factor is 0.5 * 0.456/(1+0.5 * 0.456)
+ 1 = 1.186.
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Some of the beneficiaries are expected to fulfill the community
engagement requirement by community service, work program
participation, or an educational program (often expected to enhance pay
in the future) rather than paid work. The fact that such activities may
not be paid does not negate their social benefit. Indeed, they could be
more valuable than work for those who select them. This RIA values each
hour of non-paid community engagement activities at the same $24.84 as
paid work.
2. Costs
The following discussion builds on costs to States, the Federal
government, and Medicaid applicants and beneficiaries that are
summarized in Table 32. Costs associated with the collection of
information are described in detail under section IV. of this IFC. As
outlined in section IV. of this IFC, the provisions in this IFC are
expected to impose additional costs given the significant eligibility
changes to Medicaid. Demonstrating community engagement as a condition
of Medicaid eligibility is not an entirely new policy for the Medicaid
program; however, the scope and structure in this rule represents a
significant expansion of such requirements. Given the expedited
effective date of this rule following the passage of the WFTC
legislation, we focus the cost analysis on three central parties to
these changes: the Federal government, States, and Medicaid applicants
and beneficiaries. We acknowledge that as these provisions are
implemented and additional data become available, further cost
implications may be identified that are not fully captured in this
analysis. Moreover, the estimated costs of these provisions are not
expected to be uniform. We expect these costs will vary based on
differences among States' existing State Medicaid agency program
operations and systems infrastructure, including payment delivery
structures, State-specific policies, and the demographic composition of
each State's Medicaid population. Additionally, these costs are
expected to evolve over time as States gain implementation experience,
applicant and beneficiary compliance patterns emerge, and the broader
effects of the community engagement requirement become better
understood.
a. State and Federal Costs
States will need to make changes to their Medicaid eligibility
systems to comply with the new community engagement requirement, and we
expect that this will result in costs to the Federal government and
States. Section 71119(e) of the WFTC legislation provides $200 million
for States to establish systems necessary to carry section 71119 and
other sections of the WFTC legislation, title VII, subtitle B, chapter
1 related to conducting eligibility determinations or redeterminations,
which is expected to be spent in 2026. We expect States may have
additional costs to upgrade their Medicaid eligibility systems to
comply with this section; however, there is limited information on how
much States will invest in these systems. To estimate State costs, we
reviewed State-submitted Advanced Planning Documents (APDs) from 21
States that contain information on expected spending on eligibility
system changes related to community engagement. For these 21 States, we
estimate that the average cost reported in the APD is $12.2 million,
ranging from $1 million to $47 million. Additionally, based on
[[Page 33452]]
discussions with the States on their estimated systems costs, we
estimate the average cost is between $9 million and $21 million.
Additionally, we estimate that a one-time cost for States to upgrade
eligibility systems would be $15 million per State, which results in a
total estimate of $660 million ($15 million multiplied by 44 States).
We expect these costs to occur in 2026. We also project that there will
be annual costs to maintain these systems, and we assume that those
costs will be 10 percent of implementation costs ($66 million
annually). In our estimates, we assume that FFP is available at a 90
percent match rate for design, development, and implementation costs
States would be responsible for the remaining 10 percent, consistent
with 42 CFR part 433, subpart C; for ongoing maintenance, the Federal
government would pay 75 percent of costs, and the States would pay 25
percent.\144\
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\144\ 42 CFR part 433 Subpart C, https://www.ecfr.gov/current/title-42/part-433/subpart-C.
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We project that total spending on systems upgrades will be $1.52
billion from 2026 through 2036, with the Federal government paying
$1.289 billion and the States paying $231 million. The estimated annual
impacts are shown in Table 33.
[GRAPHIC] [TIFF OMITTED] TR03JN26.055
We note that actual costs may differ from these estimates. Data are
very limited and there is a wide range of expected costs across States.
Additionally, roughly half of all States have not reported any
community engagement system costs in their APDs. States may have
additional costs beyond those already requested in the APDs. Moreover,
we do not have data on how much States expect to spend beyond
implementation. Thus, actual costs may be higher or lower than we
estimated.
We also estimate the costs for State systems updates to comply with
the new community engagement requirement. We estimate that States'
costs will be $231 million from 2026 through 2036, as shown in Table
33. Additionally, this IFC outlines requirements for States (and, where
applicable, their contractors, in compliance with statutory single
State agency requirements and conflict-of-interest limitations) to
collect, verify, maintain, and, in certain instances, report specified
information to CMS on the community engagement requirement. Included in
this list are requirements related to applicable individuals
(Sec. Sec. 435.551, 435.552), exceptions and specified exclusions
(Sec. Sec. 435.553, 435.554, 435.555), assessing and verifying
compliance and noncompliance procedures (Sec. Sec. 435.556, 435.557,
435.558, 435.912), ex parte verification processes (Sec. 435.557), and
outreach to beneficiaries (Sec. 435.561). The quantitative costs are
reflected in section IV. of this IFC. For ease of reference, and for
projection purposes, we include a summary of total costs for the
Federal government and States in Table 34 and note that the FFP match
rate varies by row. For additional details, see section IV. of this
IFC.
BILLING CODE 4120-01-P
[[Page 33453]]
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[[Page 33454]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.057
BILLING CODE 4120-01-C
b. Costs to Medicaid Beneficiaries
The reallocation of the time of Medicaid participants toward work
also has an opportunity cost according to the value of the activities
foregone while working, such as leisure time or work done in the home.
Labor market participants are expected to supply labor up to the point
where their marginal opportunity cost equals the benefit of work net of
taxes (including income, payroll, sales and excise taxes) and forgone
government assistance. For consistency with the benefit section of this
economic analysis, we take the hourly benefit before subtracting taxes
to be the MPL of $24.84. For individuals potentially eligible for
Medicaid, the foregone government assistance (including State and local
assistance) can be substantial, and sometimes exceeds the MPL.
Following the White House Council of Economic Advisers (2019), we
estimate the gap between the MPL and the opportunity cost of time as 48
percent of the MPL.\145\ That is, we use an opportunity cost of time of
$12.92 per hour (= $24.84 * (1-0.48)).
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\145\ White House Council of Economic Advisers. (March 2019)
Economic Report of the President, 2019, p. 423. https://www.govinfo.gov/content/pkg/ERP-2019/pdf/ERP-2019.pdf. See also
https://www.nber.org/papers/w18088, as discussed in more detail near
Table 46 in this regulatory preamble.
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Some of the beneficiaries are expected to fulfill the community
engagement requirement by community service, work program
participation, or an educational program rather than paid work. This
RIA estimates the hourly opportunity cost of these non-paid community
engagement activities at the same $12.92 as paid work.
Notably, the MPL exceeds the opportunity cost of work for the
economy as a whole, even when they are equal from the worker's
perspective. This is known in labor economics, public economics, and
macroeconomics as ``the labor wedge'' and is one of the most
quantitatively significant features of labor markets.146 147
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\146\ Hall RE. (1997) ``Macroeconomic Fluctuations and the
Allocation of Time,'' Journal of Labor Economics 15, no. 1, Part 2:
S223-S250. https://doi.org/10.1086/209862.
\147\ Hall RE. (2009). ``Reconciling Cyclical Movements in the
Marginal Value of Time and the Marginal Product of Labor,'' Journal
of Political Economy 117, no. 2: 281-323. https://doi.org/10.1086/599022.
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The increase in the nation's labor supply due to this IFC may
affect the wages and employment decisions of workers and employers that
are not part of the Medicaid program. These market equilibrium effects
are reasonably approximated as neither aggregate costs nor benefits and
do not need to be assessed here.\148\
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\148\ Induced changes in wages and employer profits are
sometimes known as ``pecuniary externalities,'' which are transfers
rather than an externality in the usual sense.
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As specified at Sec. 435.552, an applicable individual
demonstrates community engagement for a month if they work, complete
community service, or participate in a work program for not less than
80 hours; enroll in an educational program at least half-time; or have
monthly income, or average monthly income over the preceding 6 months
as a seasonal worker, that is not less than the Federal minimum wage
multiplied by 80 hours. Individuals can also demonstrate community
engagement through a combination of qualifying activities. The combined
time
[[Page 33455]]
for all activities must be a total of not less than 80 hours per month.
At Sec. 435.553, we specify that States must deem any individual for a
month as having demonstrated community engagement, if: (1) for all or
part of a month, the individual was under the age of 19, entitled to or
enrolled for Medicare benefits under Part A or enrolled for benefits
under Part B, described in any of the mandatory eligibility groups in
subclauses (I) through (VII) of section 1902(a)(10)(A)(i) of the Act,
or a specified excluded individual; or (2) at any point during the 3
months prior to the month in question, the individual was an inmate of
a public institution. Moreover, we specify that specified excluded
individuals defined at Sec. 435.554 are excluded from the definition
of applicable individual; therefore, community engagement is not a
condition of their eligibility. Additionally, section 1902(xx)(3)(A) of
the Act establishes mandatory exceptions from demonstrating community
engagement via the pathways described in Sec. 435.552(a) (see section
II.C. of this IFC for more information regarding demonstrating
compliance) for certain applicable individuals. States must deem an
applicable individual compliant for a month if the individual meets the
mandatory exception criteria (which are further described in this
section of this IFC). New Sec. 435.553 implements and interprets the
mandatory exceptions in section 1902(xx)(3)(A) of the Act.
We anticipate some Medicaid beneficiaries and applicants will be
required to provide additional information or documentation to verify
that they demonstrated community engagement, should be deemed as having
demonstrated community engagement through an exception, or be excluded
from the community engagement requirement as a specified excluded
individual. Applicants and beneficiaries may have to submit
documentation if the State cannot verify compliance or deem compliance
with the community engagement requirement or an individual's specified
excluded status based on data sources or other available information to
the State. Applicable beneficiaries may also need to document, track,
and submit information to a State about their short-term hardship
exception related to receipt of institutional or inpatient services or
other services of similar acuity or when they or a dependent must
travel outside of their community to receive certain medical services.
These quantified costs align with and are reflected in section IV.
of this IFC. For ease of reference, and for projection purposes, we
include a summary of total costs for new Medicaid applicants and
Medicaid beneficiaries in Table 35.
[GRAPHIC] [TIFF OMITTED] TR03JN26.058
3. Transfers
a. Impacts on Medicaid Enrollment and Benefit Expenditures
This IFC implements the statutory definition of applicable
individuals at Sec. Sec. 435.119 and 435.551 to describe Medicaid
applicants and beneficiaries who must demonstrate community engagement
as a condition of their Medicaid eligibility. With certain exclusions
specified at Sec. 435.554, applicable individuals include those who
are eligible for, or enrolled under, the State plan adult group
described in section 1902(a)(10)(A)(i)(VIII) of the Act and Sec.
435.119, and individuals eligible for or enrolled in coverage under
section 1115(a)(2) expenditure authority providing MEC who meet the
other criteria in statute.
This IFC specifies the steps States must take to assess and verify
compliance, established at Sec. Sec. 435.556 and 435.557, with the
community engagement requirement at application and renewal; renewals
for most beneficiaries who are subject to the community engagement
requirement occur once every 6 months. At Sec. 435.556, the IFC
describes the statutory requirement that, as a condition of eligibility
at renewal, States must require applicable individuals to demonstrate
or be deemed to demonstrate community engagement for at least 1 month
since the individual's most recent eligibility determination or
redetermination, though States may elect to conduct more frequent
verifications and/or require more than 1 month of compliance or deemed
compliance.
To assess the impact of the new community engagement requirement on
Medicaid enrollment and benefit expenditures, we estimate these impacts
based on the President's Fiscal Year 2027 Budget (PB 2027) Medicaid
enrollment and expenditure projections, with FY 2023 as the base year
for actual observed data and exclude the impact of any Medicaid
provisions of the WFTC legislation. Several provisions of the
[[Page 33456]]
WFTC legislation are expected to have effects on Medicaid enrollment
and expenditures. We have excluded those other effects from this
analysis to present clearly the anticipated impacts of the community
engagement requirement on Medicaid. Projected national total Medicaid
enrollment and expenditures for the adult group, which includes both
newly eligible and not-newly eligible subgroups, are as follows in
Table 36. We project enrollment will increase at an average rate of 0.7
percent per year and expenditures will increase at an average rate of
6.6 percent per year.
[GRAPHIC] [TIFF OMITTED] TR03JN26.059
The community engagement requirement established by section 71119
of the WFTC legislation has not previously been implemented as a
condition of receiving coverage under the Medicaid State plan. Prior to
this IFC, States could only impose such requirements through section
1115 demonstrations. The limited section 1115 demonstration experience
that exists involved different implementation patterns, including
reinstatements following terminations of eligibility and self-selected
enrollment populations, that are not directly applicable to estimating
the impact of mandatory requirements applied to an existing State plan
enrollment. We have not relied on these previous demonstrations for
data or assumptions used in this analysis. Accordingly, there is no
direct historical experience from which to derive empirical estimates
of how many enrollees will not meet the requirement, the community
engagement implementation policies States will adopt, or how
verification systems will perform in practice.
The primary data challenge in developing these estimates is that
the characteristics most relevant to this analysis--work status,
educational enrollment, disability status, caretaker responsibilities,
and incarceration history--are not currently captured in Medicaid
administrative data. As a result, we relied on a combination of
external survey data, Medicaid administrative data, and published
research to develop the key assumptions underlying these estimates.
Each of these sources has limitations that are discussed further in the
limitations and caveats section below.
A second source of uncertainty is that the estimates depend heavily
on State implementation choices that are not yet known. For example,
the statute establishes minimum requirements for compliance checks at
application and renewal, with at least 1 month of demonstrated
compliance between redeterminations, but it gives States discretion to
require more frequent verifications and more months for beneficiaries
to demonstrate compliance. These choices will affect both the
noncompliance and procedural disenrollment rates. Similarly, States
have discretion over whether to adopt the option to consider short-term
hardship events, described at Sec. 435.555, and the extent of adoption
will affect the share of enrollees subject to the requirement at a
given time. We model a range of scenarios to reflect this uncertainty,
but the actual distribution of State choices is unknown.
Finally, the estimates in this section do not capture potential
behavioral responses, such as increased workforce participation or
educational enrollment in response to the requirements, or the extent
to which individuals who lose Medicaid coverage may obtain alternative
coverage. Both factors could partially offset the projected coverage
losses, but neither is quantifiable with available data.
Enrollment and per-enrollee expenditure projections are drawn from
PB 2027, as described previously. Total computable and Federal per-
enrollee expenditures are trended separately. Federal per-enrollee
figures reflect current law FMAP rates throughout the
[[Page 33457]]
projection period. For purposes of the underlying cost model, the adult
group is separated into newly eligible and non-newly eligible
subgroups. The FMAP differs for these subgroups; projecting
expenditures separately allows the projections to apply the appropriate
average FMAP to each subgroup. The distinction between newly eligible
and non-newly eligible adult group drives the Federal and State cost
split. All other assumptions in the analysis are identical for newly
eligible and non-newly eligible adult group.
We do not assume any change to the average per-enrollee costs for
the remaining enrolled population relative to current projections.
There are some reasons per-enrollee costs for the remaining population
may be lower than for those that lose coverage. Individuals meeting the
community engagement requirement may be healthier on average than those
that lose coverage, as individuals not working or active in community
engagement may have poorer health, making it harder to participate. In
addition, younger individuals are more likely to meet the requirement
based on already established activities, such as being enrolled in a
full-time education program. If a higher proportion of younger
individuals meet the community engagement requirement and, as a result,
remain enrolled than the proportion of older individuals that maintain
coverage, that may contribute to lower average costs per enrollee.
However, there are also some reasons that the costs of those remaining
could be higher. Most notably, individuals experiencing a short-term
medical hardship (including inpatient hospital or nursing facility
care) and those determined medically frail likely have substantially
higher health care costs than others in this eligibility group, and
they would remain covered in Medicaid under this new requirement. Given
the factors that could lead to lower or higher per-enrollee costs, and
the uncertainty of their relative magnitude, we made no adjustment to
the average per enrollee cost for those losing coverage or retaining
coverage under section 71119 of the WFTC legislation.
To develop this analysis, we started by determining how many
enrollees may be subject to the community engagement requirement under
this rule. We started with the projection of the number of enrollees
who would be: (1) a newly eligible adult made eligible under
1902(a)(10)(A)(i)(VIII); (2) a non-newly eligible adult otherwise not
eligible under 1902(a)(10)(A)(i)(I) through (VII); and (3) an adult
eligible under a section 1115 demonstration who would otherwise be
eligible under 1902(a)(10)(A)(VIII). Those projections are shown in
Table 34.
Several groups of enrollees would have mandatory exceptions from
the community engagement requirement, which include individuals under
age 19, individuals also entitled to or enrolled in Medicare Part A
and/or Part B, and those described in another mandatory categorically
needy eligibility group in sections 1902(a)(10)(A)(i)(I) through (VII).
Those individuals are not included in our analysis.
For the purposes of these estimates, we estimated how many people
would be excluded from or meet the community engagement requirement in
two steps. In the first step, we developed assumptions for the
percentage of individuals that would not be subject to the community
engagement requirement because they qualify for certain specified
exclusions. In the second step, we made assumptions for the percentage
of remaining individuals who would meet the community engagement
requirement. This group would also include individuals who would be
eligible for other specific exclusions, including those currently
enrolled in TANF and/or SNAP and meeting the work requirements for
those programs. Generally, we assumed that if an individual would meet
the Medicaid community engagement requirement (for example, by meeting
the employment or education requirements described in this IFC), then
they were also likely to meet those requirements for TANF and/or SNAP
(if they were enrolled in those programs). Therefore, we did not
separately estimate how many individuals would qualify as specified
excluded individuals on the basis of meeting or not being exempt from
the work requirements of other programs.
There are also several categories under which an individual may
qualify as a specified excluded individual and as such would not be
subject to the community engagement requirement. As described in the
preceding paragraph, in the first step we developed assumptions about
how many people would qualify as a specified excluded individual under
a subset of the exclusions in the statute. This subset includes:
American Indians and Alaska Natives; pregnant women or individuals
entitled to postpartum medical assistance; a parent, guardian,
caretaker relative, or family caregiver of a dependent child 13 years
of age and under or a disabled individual; inmates of a public
institution; and individuals who are medically frail or otherwise have
special medical needs. Individuals who have been an inmate at any point
in the previous 3 months are mandatorily excepted from the community
engagement requirement and are deemed to have demonstrated community
engagement in each of the 3 months following their release. We have
combined the impact of the mandatory exception and the specific
exclusion for current inmates together in this analysis. We estimate
that about 24 percent of applicable individuals would be specifically
excluded under one or more of these categories and therefore not
subject to the community engagement requirement. This estimate is
derived by applying these exclusions and reflects the combined effect
of removing American Indian and Alaska Native specified excluded
individuals (2.5 percent) and applying the other 4 listed exclusion
categories additively (21.7 percent combined). (There may be some
overlap between these categories--for example, someone could be both
pregnant and a parent of a child under age 13. Calculating the impact
of these exclusions multiplicatively instead of additively to account
for potential overlap could lead to a lower percentage of those
estimated to receive specific exclusions; however, we believe the
differences would be small (less than 1 percent) and that the 21.7
percent assumption is a reasonable estimate of the percentage of
individuals who would be specifically excluded under one of these
criteria.)
The combined impact of these 5 specific exclusions is 24 percent;
that is, we estimate 24 percent of applicable individuals would meet
one or more of these 5 specific exclusions. The assumptions for each
specific exclusion and sources for those assumptions are shown in the
following Table 37.
BILLING CODE 4120-01-P
[[Page 33458]]
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We also estimated the effect of short-term hardship exceptions,
which we estimate would be equal to 3.45 percent of applicable
individuals. States electing the optional exception must adopt all
qualifying circumstances listed as short-term hardship events. We
assume that 75 percent of States will adopt the optional exception for
short-term hardship events. The assumptions for the short-term hardship
exceptions are described in Table 38.
[[Page 33459]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.061
Combining the impacts of the subgroup of specified exclusions and
the short-term exceptions, we estimate that 26 percent of applicable
individuals would either have a specific exclusion (as listed in Table
37) or a short-term hardship exception (as listed in Table 38), and the
other 74 percent of applicable individuals would either need to
demonstrate compliance or be deemed to demonstrate compliance (via a
mandatory exception) with the community engagement requirement or
receive one of the other specified exclusions.
States are required to implement the community engagement
requirement on or before January 1, 2027. States may elect to implement
early, and the statute provides for delayed implementation for States
demonstrating good-faith compliance efforts. We assume that the
majority of States will implement the requirements effective January 1,
2027. Nebraska began implementing the community engagement requirement
on May 1, 2026, and other States may also start later in 2026.
Because enrollment impacts depend heavily on State implementation
choices that are not yet known, we modeled four scenarios representing
a range of possible State policies. The scenarios vary by verification
frequency (semi-annual or quarterly) and the number of months within
each review period during which an applicable individual must
demonstrate compliance.
We assigned scenario weights based on our actuarial judgment about
the distribution of likely State implementation approaches, with 50
percent of enrollees assumed to be in States adopting the minimum
statutory requirement of semi-annual verification with 1 month of
compliance required between verifications, and the remaining 50 percent
in States adopting more frequent verifications and/or longer compliance
periods.
[GRAPHIC] [TIFF OMITTED] TR03JN26.062
[[Page 33460]]
From these scenarios, we derive two distinct disenrollment rates.
First, we estimate that 12 percent of applicable individuals subject to
the requirement will not meet them and lose coverage. This estimate
reflects a scenario-weighted average. Scenario-specific noncompliance
rates are derived from KFF work status data for Medicaid adults,\149\
reflecting the share of enrollees who are not working, not in school,
and do not otherwise meet the community engagement threshold under each
scenario's compliance rules. We assume that all individuals who report
working full time would meet the community engagement requirement in
each of the four scenarios. The portion of individuals that report
working or attending school part-time who are assumed to meet the
community engagement requirement varies from 100 percent to 75 percent
depending on the scenario. This is because part-time work or school
attendance may be subject to seasonal variation or other variations in
either the number of work (or school) hours that are offered or that
the individual is able to work (or attend school), and these variations
may mean that the individual is not able to meet the community
engagement requirement in every month of the year. Individuals who
report not working for reasons other than caretaking, illness, or
disability are assumed not to meet the community engagement requirement
in any scenario. Taken together, these assumptions result in 81 percent
of enrollees meeting the community engagement requirement in the lowest
impact scenario and 75 percent of enrollees meeting the community
engagement requirement in the highest impact scenario.
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\149\ Tolbert J., Cervantes S., Rudowitz R., Burns A. (2025).
``Understanding the Intersection of Medicaid and Work: An Update,''
KFF. https://www.kff.org/medicaid/issue-brief/understanding-the-intersection-of-medicaid-and-work-an-update/.
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In addition, we estimate that 7 percent of applicable individuals
who may be working, enrolled in school, or otherwise performing
activities in line with community engagement requirement, or qualify
for a mandatory exception or short-term hardship exception that deems
them as demonstrating community engagement, would lose coverage due to
administrative or procedural reasons (or in the case of a new
applicant, may have their application denied and thus not enroll).
These potential reasons for loss of coverage include, for example, not
responding to verification requests or submitting insufficient
documentation. The reasons individuals may not respond or submit
insufficient documentation are manifold. This could include scenarios
in which the required documentation was not received by the individual
in a timely manner due to mail delivery delays or the individual had
difficulty understanding or completing the required paperwork. Those
fraudulently or improperly enrolled in the program or attempting to
enroll in the program are unlikely to furnish documentation or respond
to verification requests. Additionally, individuals with access to
employer coverage or other forms of coverage may not complete
documentation or respond to verification requests. Coverage losses may
also be attributable, in part, to procedural processing errors at the
State level. The gross procedural disenrollment rate is a scenario-
weighted average anchored to post-unwinding (of the continuous
enrollment condition related to the COVID-19 Public Health Emergency)
Medicaid renewal data, which shows an average procedural disenrollment
rate of about 12 percent for annual redeterminations over the most
recent 12 months.\150\ The procedural disenrollment rate may include
non-responses by individuals who no longer meet requirements to qualify
for Medicaid, documentation errors or non-responses by individuals who
do meet requirements to qualify for Medicaid, or other factors. We
assume that about half of those with procedural disenrollments (about
5.5 percent) are due to documentation errors or non-responses by
individuals who do meet program requirements, a population which is
more closely related to applicable individuals who either demonstrate
community engagement or are deemed to demonstrate community engagement
via an exception. Where redeterminations take place more than once a
year, we assume that this procedural disenrollment rate applies at each
redetermination, resulting in a 12 percent procedural disenrollment
rate for scenarios with semi-annual renewals and a 20 percent rate for
scenarios with quarterly verifications. The gross rate is then reduced
by 50 percent to exclude baseline renewal attrition that would occur
regardless of the community engagement requirement. The reduction
accounts for the share of procedural disenrollments that would occur at
routine renewal regardless of the community engagement requirement,
which should not be attributed to this policy.
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\150\ ``January 2026: Medicaid and CHIP Eligibility Operations
and Enrollment Snapshot.'' (April 24, 2025). https://www.medicaid.gov/resources-for-states/downloads/eligib-oper-and-enrol-snap-jan2026.pdf.
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The 12 percent noncompliance rate is applied to the 74 percent of
adult group enrollees estimated to be applicable individuals who are
not receiving a specific exclusion nor excepted under a short-term
hardship. The 7 percent net procedural disenrollment rate is applied to
both the applicable individuals deemed compliant due to a mandatory
exception or short-term hardship exception and to the applicable
individuals subject to and meeting the requirements. Together, they
yield a combined estimated disenrollment rate of approximately 15
percent of total adult group enrollment.
[GRAPHIC] [TIFF OMITTED] TR03JN26.063
[[Page 33461]]
These rates are applied as full annual rates beginning in FY 2027,
the first year of implementation. Because we assume implementation is
effective January 1, 2027, the impacts in FY 2027 reflect 75 percent of
the full-year impact.
The estimated enrollment impact is the estimated number of
enrollees (1) who would be subject to the community engagement
requirement and not meet the requirement, or (2) would meet the
requirement or qualify for an exception, and would not successfully
demonstrate their compliance or exception, developed based on the
assumptions described above. The estimated impact on expenditures is
the enrollment impact multiplied by the average per-enrollee
expenditures.
We project that enrollment would be reduced by 2.3 million
individuals in FY 2027 (accounting for implementation occurring in the
second quarter of the fiscal year) and by between 3.1 to 3.3 million
individuals in subsequent years. We project Federal Medicaid spending
would be reduced by $350.3 billion over the next 10 years and State
Medicaid spending would be reduced by $41.6 billion over the same time
period. The impacts are shown in Table 41.
[GRAPHIC] [TIFF OMITTED] TR03JN26.064
These estimates are subject to uncertainty. The disenrollment
estimates reflect a weighted average of four implementation scenarios,
and the actual distribution of State choices regarding verification
frequency, compliance period length, adoption of short-term hardship
exceptions, and implementation timing is unknown and could produce
outcomes materially different from the central estimate. Additionally,
assumptions are based on annual or average annual data; the timing of
an enrollee's work or school hours relative to the timing of their
redetermination may cause individual-level variation not captured in
the aggregate estimates. The estimate for the incarceration mandatory
exception is based on November 2025 Eligibility Operations and
Enrollment Snapshot data \151\ and does not capture individuals
recently released from incarceration who remain covered by the 3-month
review provision.
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\151\ ``November 2025: Medicaid and CHIP Eligibility Operations
and Enrollment Snapshot.'' (February 27, 2026). https://www.medicaid.gov/resources-for-states/downloads/eligib-oper-and-enrol-snap-nov2025.pdf.
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This analysis does none of the following: (1) estimate the extent
to which individuals who lose Medicaid coverage may obtain alternative
coverage, and (2) model interactions with other provisions of Public
Law 119-21. We assume both of these factors could partially offset or
modify the projected coverage losses. Per-enrollee cost projections
extend 10 years into the future and are subject to uncertainty inherent
in long-range medical cost forecasting.
4. Aggregate Time Allocation and Additional Effects on the Federal
Deficit
The estimates in this section do not introduce an independent
forecast of induced work; they monetize the time-allocation
implications of the scenario assumptions in Table 39. As noted, at
least 50 percent of able-bodied adults enrolled in Medicaid did not
work. If, say, 80 percent are to work when the IFC is in effect (see
Table 39), then at least 30 percent of those who would participate
absent the IFC must have their time allocation affected by the IFC. An
applicable individual demonstrates community engagement through
employment by either working not less than 80 hours or the income
alternative
[[Page 33462]]
of having a monthly income not less than $580 (applicable Federal
minimum wage multiplied by 80). Table 42 shows this bound separately
for the four scenarios introduced in Table 39.
[GRAPHIC] [TIFF OMITTED] TR03JN26.065
Table 43 shows the annual hours added to the labor market for each
scenario, assuming baseline adult group enrollment of 20.4 million, 75
percent of which are subject to the community engagement requirement.
The high-impact scenario (scenario 2 requires $580 dollars of earnings,
which would be about 27 hours per month for a worker with hourly wage
at the 25th percentile. CMS expects, in that scenario, 3.8 million to
meet such a requirement who would not have worked. Another 0.6 million
would be in unpaid community engagement, for a total of 4.4 million
moving to engagement, as shown in the table. As shown in the low-impact
scenario, a weaker requirement of just 1 of the past 6 months is
expected to be met by an additional 1.0 million beneficiaries. The
table's first aggregate hours row shows what the added hours would be
if all 5.4 million met the requirement only at the minimum. The next
``additional months'' row assumes that the 4.4 million in scenario 2,
who would meet the ``maximum'' requirement (all months at $580 income),
instead would work at a level halfway between the minimum and maximum
while they are enrolled in Medicaid. An accurate forecast requires an
``additional months row'' because working in 1 month involves the
acquisition of knowledge, relationships, and other experiences that
increase the net benefit to work in adjacent months.
[GRAPHIC] [TIFF OMITTED] TR03JN26.066
Note that Table 43 otherwise has a tendency toward underestimation
in that it (a) it ignores those who work due to exiting the Medicaid
program, (b) it assumes that all those exempt or noncompliant are
neither working under the IFC nor in the baseline, and (c) that workers
meet the requirement by earning $580 for the month rather than working
80 hours.\152\ Additional underestimation of Table 43's cost entries
(thus generating a tendency toward overestimation of net benefits) is
possible if $12.92 were a lower bound on affected individuals'
opportunity cost of time.
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\152\ Regarding possible effects of Medicaid participation on
work, see Garthwaite C., Gross T., and Notowidigdo M.J. ``Public
Health Insurance, Labor Supply, and Employment Lock,'' Quarterly
Journal of Economics 129, no. 2 (2014): 653-696. https://doi.org/10.1093/qje/qju005.
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Tables 44 and 45 show the costs and benefits associated with the
IFC's change in time allocation using annual discount rates of 7
percent and 3 percent, respectively. The dollar
[[Page 33463]]
amounts in the top part of the tables are annualized. For beneficiary
engagement, aggregate dollar amounts are obtained by multiplying the
aggregate annual hours of Medicaid beneficiaries from Table 43,
including the bare-minimum hours as well as the additional hours, by
the hourly MPL of $24.84 or the opportunity cost of $12.92.
BILLING CODE 4120-01-P
[GRAPHIC] [TIFF OMITTED] TR03JN26.067
[GRAPHIC] [TIFF OMITTED] TR03JN26.068
[[Page 33464]]
BILLING CODE 4120-01-C
A substantial fraction of adults on Medicaid during 1 calendar year
would no longer be enrolled in Medicaid the following year. Individuals
who move to work and satisfy the community engagement requirement while
participating in Medicaid acquire knowledge, relationships, habits, and
health increase the net benefit to work even after they leave Medicaid.
In other words, working encourages human capital investment, which
itself feeds back to encourage additional work hours. The human capital
perspective suggests that some fraction of beneficiaries would continue
to work in months after the requirement ended. Based on (a) Card and
Hyslop's (2005) finding that the additional earnings resulting from
participation in a welfare demonstration project persisted over time
but decayed at 3 percent per month after exit from the program, (b) an
able-bodied engagement-compliant adult Medicaid annual exit rate of 43
percent, and (c) a 29 percent annual reentry rate of former
beneficiaries, we estimate the effect of the community engagement
requirement on engagement after Medicaid exit.153 154 155
Because these are effects in the future, the corresponding ``ex-
beneficiary'' benefit and cost rows in Tables 44 and 45 depend on the
assumed discount rate for future benefits and costs. The ex-beneficiary
rows are about 45 percent of, and in addition to, the current
beneficiary rows.
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\153\ Card D. and Hyslop D.R. (2005). ``Estimating the Effects
of a Time-Limited Earnings Subsidy for Welfare-Leavers.''
Econometrica 73, no. 6: 1723-1770. https://doi.org/10.1111/j.1468-
0262.2005.00637.x.\.
\154\ Sommers B.D. (2009). ``Loss of Health Insurance Among Non-
Elderly Adults in Medicaid.'' Journal of General Internal Medicine
24, no.1: 1-7. https://doi.org/10.1007/s11606-008-0792-9 estimates a
43 percent annual exit rate.
\155\ A 29 percent reentry rate is required for the steady-state
number of ex-beneficiaries to outnumber current beneficiaries by a
factor of 1.5-to-1. Other studies have demonstrated that
interventions designed to increase employment and earnings among
populations eligible for or receiving welfare benefits can persist
over time. For example, a large-scale randomized control study of
the Subsidized and Transitional Employment Demonstration, launched
by HHS in 2010, found that earnings improved more than three years
after enrollment, with earnings increases for three of the seven
interventions maintained for six years after enrollment. HHS's
Health Profession Opportunity Grants Program (HPOG)--the original
1.0 study launched in 2010, and the 2.0 study launched in 2015--
found persistent increases in employment in the health care
profession, though the interventions did not identify earnings
increases. In particular, HPOG 1.0 found employment gains in health
care by 5 percentage points six years after enrollment. The Pathways
for Advancing Careers and Education project studied a number of
interventions and found that one resulted in large earnings (around
$1,900) gains after six years.
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The total annual expected net benefit (averaging across scenarios)
from the time reallocation effects of the IFC is about $52 billion. The
final entry in each table is the net present value (NPV) of time
allocation benefits minus time allocation costs, calculated as an
expectation by weighting each scenario value according to the scenario
weight. The NPV is $459 billion at a 3 percent annual discount rate and
$388 billion at a 7 percent rate.
An important reason for the labor wedge-adjacent societal welfare
gain--the gap between the aggregate benefit of an hour of market work
and the worker's opportunity cost at the margin--is that work (and the
spending it enables) generates revenue for government treasuries in the
form of taxes on income, payroll, sales, and excise.\156\ (Work also
tends to move workers off safety net programs, or at least phase out
some of their benefits. Either way, the work reduces deficits.)
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\156\ Harberger, A.C. 1971. ``Three Basic Postulates for Applied
Welfare Economics: An Interpretive Essay.'' Journal of Economic
Literature, 9(3), 785-797.
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Table 46 uses the most recent marginal tax rate calculations posted
at the National Bureau of Economic Research website in The
Redistribution Recession that focuses on measuring the labor wedge and
its fiscal components.\157\ The components include Federal revenue
items, such as payroll taxes, State tax items, as well as Federal and
State safety-net spending items. The Federal savings as additional work
results in Medicaid exits is excluded from Table 46 in order to avoid
double-counting savings calculated in previous tables. The Table's
marginal tax rate (MTR) column is the part of the 48.0 percent labor
wedge that reflects the contributions to the indicated segment of
society to which the benefits accrue.\158\
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\157\ Mulligan C.B. (2012). ``Do Welfare Policies Matter for
Labor Market Aggregates? Quantifying Safety Net Work Incentives
since 2007,'' National Bureau of Economic Research. https://www.nber.org/papers/w18088. Data available at https://data.nber.org/data-appendix/w18088/StatutoryIndices.nber.xlsx.
\158\ The MTR column adds to less than 48.0 percent because the
48.0 includes private sector markups and Medicaid.
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[[Page 33465]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.069
After the MTR column, each entry in Table 46 is in billions of
dollars. Each is calculated in two steps. First, we refer to the
scenario-specific time allocation aggregate benefits from Table 44 (7
percent discount rate) or Table 45 (3 percent discount rate) but
eliminate unpaid volunteer time because that does not generate tax
revenue. We estimate the unpaid volunteer time from Table 33 as half of
the non-work part of community engagement. The remaining aggregate
benefits can be understood as the MPL applied to non-volunteer
community engagement hours. These remaining aggregate benefits are
multiplied by the corresponding MTR from Table 46. The final column of
Table 46combines the four scenarios into a single weighted average
using the weights from Table 39.
Overall, the time-reallocation effects of the IFC are expected to
reduce annual government deficits by about $35 billion. This is
economically substantial, although somewhat less than the fiscal
effects of reducing enrollment in Medicaid.
5. Regulatory Review Cost Estimation
If regulations impose administrative costs on private entities,
such as the time needed to read and interpret this IFC, we should
estimate the cost associated with regulatory review. There is
uncertainty involved with accurately quantifying the number of entities
that will review the IFC. However, for the purposes of this IFC we
assume that on average, each of the 44 affected jurisdictions will have
two contractors per State to review this IFC. This average assumes that
some State Medicaid agencies may use the same contractor, others may
use multiple contractors to address the various provisions within this
IFC, and some State Medicaid agencies may perform the review in-house.
We also assume that each of the affected managed care plans (estimated
to be 417 managed care plans) will review the IFC. Lastly, we assume
that an average of two advocacy or interest group representatives from
each State will review this IFC. In total, we estimate that 593
entities (88 State Contractors + 417 Managed Care Plans + 88 Advocacy
and Interest Groups) will review this IFC. We acknowledge that this
assumption may understate or overstate the costs of reviewing this IFC.
Using the wage information from BLS for medical and health service
managers (Code 11-9111), we estimate that the cost of reviewing this
IFC is $113.42 per hour, including overhead and fringe benefits
(https://www.bls.gov/oes/current/oes_nat.htm). Assuming the average
reading speed of 250 words per minute, we estimate that it would take
approximately 3.1 hours for staff to review half of this IFC ([93,000
words x 0.5]/250 words per minute/60 minutes per hour). For each entity
that reviews the rule, the estimated cost is $351.60 (3.1 hours x
$113.42). Therefore, we estimate that the total cost of reviewing this
regulation is $208,498.80 ($351.60 per individual review x 593
reviewers).
D. Alternatives Considered
When considering alternatives, we reviewed existing statutory and
regulatory definitions and frameworks from Medicaid and other Federal
benefit programs, adopting them to the extent possible, where we
determined additional information in this IFC was necessary.
Recognizing that States vary considerably in their administrative
capacity, eligibility system infrastructure, and prior experience with
the community engagement requirement, we provide targeted
flexibilities, where permitted by the WFTC legislation, to allow States
to implement these requirements in a manner tailored to their specific
needs. Given the detail and breadth of the provisions in this IFC, we
present illustrative examples of alternatives considered, organized
under three categories: Compliance and Verification Provisions, State
Implementation, and Monitoring and Reporting.
1. Compliance and Verification Provisions
Section 1902(xx) of the Act prescribes specific requirements for
how applicable individuals demonstrate compliance with the community
engagement requirement (section 1902(xx)(2) of the Act). We aligned
definitions of compliance activities as closely as possible with
existing statutory and regulatory requirements across Medicaid and/or
other Federal benefit programs to minimize disruption of States'
existing eligibility systems and operational capacities. For instance,
the
[[Page 33466]]
statute at section 1902(xx)(2)(F) and (G) of the Act refers to an
individual's ``monthly income'' and ``average monthly income,'' but
does not further define how States should calculate monthly income for
these purposes. For the calculation of an applicable individual's
monthly income under new Sec. 435.552(f) and average monthly income
under new Sec. 435.552(g), we define ``monthly income'' to have the
same meaning as the individual's household income used for financial
eligibility for Medicaid. Most applicable individuals are eligible for
or enrolled in the adult group under Sec. 435.119, which is a group
that has an income standard based on MAGI using MAGI-based
methodologies, as described in Sec. 435.603. Similarly, most section
1115 demonstrations that have applicable individuals (as discussed in
section II.B. of this IFC) have an income standard based on MAGI and
use MAGI-based methodologies for the relevant demonstration population.
In some instances, we considered alternative approaches for
operationalizing a new requirement in light of existing Medicaid
eligibility and enrollment rules. For example, timeliness standards for
Medicaid eligibility determinations at Sec. 435.912 \159\ as
implemented in this IFC require States to complete Medicaid eligibility
determinations promptly and without undue delay. In general, the
determination of eligibility for any individual may not exceed 90 days
for applicants who apply on the basis of disability and 45 days for all
other applicants, which includes individuals whose eligibility is being
determined based on MAGI.
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\159\ While Sec. 435.912 is subject to the section 71102
moratorium, the requirements for states to make eligibility
determinations promptly and without undue delay and to process
applications within 45 or 90 days was not amended by the 2024
Eligibility and Enrollment final rule.
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While we believe the 45-day timeliness standard under Sec. 435.912
for MAGI beneficiaries is necessary to prevent delays in applicants'
eligibility determinations and access to coverage, we recognized that
the new provision may impose an additional requirement on States.
Specifically, Sec. 435.558(a) would require States to provide notice
of noncompliance to an applicable individual whom the State is unable
to verify as being compliant with the community engagement requirement.
Upon receiving such notice, the individual would have 30 calendar days
from the date they receive the notice to demonstrate community
engagement, establish that they should be deemed to have demonstrated
community engagement, or show that they do not meet the definition of
an applicable individual. States must account for this process when
making eligibility determinations.
We considered taking no action in this IFC since depending on
States' existing eligibility systems and operational capacities, the
required 30-calendar day period for applicants to return information
will not always result in a delay in completing a determination of
eligibility for an applicable individual who receives notice of
noncompliance at application. States that can make an eligibility
determination for applicants who receive a notice of noncompliance must
do so within the timeliness standard. However, we considered that not
all applicants will respond to the notice early in the 30-calendar day
period, and States are unable to notify the individual of an
eligibility decision for failure to respond prior to the 30-calendar
day period. We believe an exception is necessary to prevent States from
being subject to compliance action for failure to meet the regulatory
timeliness standard as a result of complying with section 1902(xx) of
the Act. Therefore, we are adding Sec. 435.912(e)(3) to provide a new
exception to the timeliness standard at Sec. 435.912(c)(3)(ii) for
applicants who receive the notice of noncompliance under Sec.
435.558(a) and when the State is unable to meet the 45-day timeliness
standard due to the required 30-calendar day period discussed in this
section of this IFC. When a State uses this exception, it must do so on
a case-by-case basis and document the reason for the delay in the
applicant's case record as required by Sec. 435.912(f).
2. State Implementation
The WFTC legislation establishes specific requirements for State
implementation of community engagement. These requirements include
addressing the timing and standards for the implementation date,
outreach processes, demonstration of good-faith effort, and conflict of
interest safeguards with manage care plans. While this IFC aligns
accordingly with these requirements, we believe that additional
explanation is necessary for certain provisions to assist States in
implementing them more efficiently.
Section 435.561(b)(1) and (2) newly requires States to send notices
to beneficiaries 4, 5, or 6 months prior to the community engagement
requirement becoming effective in the State and to beneficiaries who
apply and enroll after the initial outreach notice is sent, but before
the community engagement requirement becomes effective in the State.
This will ensure beneficiaries who newly enroll in the adult group
described at Sec. 435.119 or an applicable section 1115 demonstration
will be made aware of the requirement.
We also require States to notify all individuals described in Sec.
435.561(a) on a periodic basis thereafter and outline when States must
provide outreach notices through at least two modalities on an ongoing
basis at Sec. 435.561(d). Under the authority given to the Secretary
to specify standards for outreach notices, we define ``periodic basis
thereafter'' to mean that for individuals described in Sec. 435.561(a)
outreach notices must be provided: (1) following a determination or
redetermination of eligibility at application, at renewal described at
section 1902(e)(14)(L) of the Act and Sec. 435.916, and based on a
change in circumstances; (2) when the State elects the short-term
hardship exception in the State plan under Sec. 435.555(a) and each
time the State effectuates a short-term hardship event described in
Sec. 435.555(d)(2) and (3) (except for an occasion included as part of
the State plan election) and (3) upon request by CMS, if State reported
monitoring data described at Sec. 435.562 or other information
indicate a potential compliance issue with Sec. Sec. 435.550 through
435.562. We believe this will allow States to align outreach notices
with eligibility determination notices under Sec. 435.917, since
States must already provide information to individuals about their
eligibility and rights and responsibilities. For example, States may
align such notices by combining the content of the outreach notice with
the eligibility determination notice or send a separate outreach notice
when an eligibility determination notice is issued. We also believe
this approach will allow States to keep individuals updated about
changes in the State's short-term hardship exception policy with less
burden by utilizing the outreach process already required by section
1902(xx)(8) of the Act. Finally, we believe that this will allow States
to provide additional outreach, if requested by CMS, when States'
community engagement monitoring data indicate potential problems or
concerning trends, such as if a State is experiencing large shifts in
month-over-month determination and redetermination outcomes, or greater
disenrollments for procedural denials compared to other States. For
more information about monitoring data States must submit and our
approach to identify potential compliance issues
[[Page 33467]]
that could result in additional outreach, see section II.O. of this
IFC. While we are requiring States to conduct ongoing, periodic
outreach each time an individual described at Sec. 435.561(a) is
provided an eligibility determination notice, States may choose to
conduct additional outreach to individuals on an ad hoc or routine
basis.
We considered defining outreach on a ``periodic basis thereafter''
to mean that States must conduct outreach upon enrollment for
applicants determined eligible and at least every 6 or every 12 months
thereafter for beneficiaries described at Sec. 435.561(a) to provide a
consistent time frame for all beneficiaries to receive outreach. While
such a definition would provide consistency for all individuals and
across all States, we recognize this could result in outreach that may
not be meaningful as it was not necessarily aligned with the timing of
the eligibility information that must already be provided when someone
receives an eligibility determination notice. We also considered
specifying when States should conduct periodic outreach in 2027 and
2028 or the first 2 years of implementation and then later permitting
States to determine how frequently periodic outreach should occur after
the first few years of implementation. While this would allow States to
determine when it would be most effective to conduct outreach, we were
concerned that this may increase the likelihood that CMS would need to
request additional outreach based on monitoring data if States did not
conduct outreach frequently enough.
3. Monitoring and Reporting
We considered not including State data reporting requirements since
section 71119 of the WFTC legislation does not prescribe new State
reporting requirements specific to community engagement. However, we
decided to require at Sec. 435.562 that States submit data that is
timely, complete, and of sufficient quality to support monitoring of
State eligibility and enrollment operations concerning the
implementation and impact of the community engagement requirement.
While States already submit a considerable amount of data to CMS for
monitoring and oversight of State eligibility operations and
enrollment, these new data will assist CMS to maintain high levels of
program integrity to ensure States implement the community engagement
requirement under section 1902(xx) of the Act and maintain timely and
accurate determinations and redeterminations of eligibility for all
applicants and beneficiaries. As a result, at Sec. 435.562(d), we
require that States submit data elements for applicants and
beneficiaries applying for and receiving medical assistance, including
individuals subject to the requirements of section 1902(xx) of the Act
through five specified categories. We also outline at Sec. 435.562(e)
that failure to submit data or data that indicate compliance issues may
be subject to corrective action under section 1904 of the Act,
additional data collection, or additional outreach noticing as
described at Sec. 435.561(b). We believe these additional reporting
requirements will support the agency's oversight obligations, public
transparency, and accountability of the State Medicaid agencies.
E. Accounting Statement
Consistent with the Office of Management and Budget (OMB) Circular
A-4 (available at https://www.whitehouse.gov/wp-content/uploads/2025/08/CircularA-4.pdf), we have prepared an accounting statement (Table
47) showing the classification of the impact associated with the
provisions of this IFC. The costs displayed in Table 47 include the
one-time regulatory review costs, as well as the aggregate savings,
costs, and transfers, adjusted for inflation through 2036 and then
discounted to the base year (2026) at 3 percent and 7 percent,
respectively. The costs in the accounting statement include both the
one-time and annual estimates.
BILLING CODE 4120-01-P
[[Page 33468]]
[GRAPHIC] [TIFF OMITTED] TR03JN26.070
BILLING CODE 4120-01-C
F. Regulatory Flexibility Act (RFA)
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. Section 71119(d) of the WFTC legislation
directs that not later than June 1, 2026, the Secretary of HHS shall
promulgate an IFC for purposes of implementing section 1902(xx)(11)(d)
of the Act, related to community engagement for certain adults. It also
explicitly notes that any action taken to implement this section of the
Act is not subject to section 533 of the Administrative Procedures Act
(5 U.S. Code 553), which generally requires Federal agencies to follow
notice of proposed rulemaking procedures. Because this IFC is not
preceded by a general notice of proposed rulemaking, the Regulatory
Flexibility Act (RFA) does not apply to this IFC.
G. Unfunded Mandates Reform Act (UMRA)
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 2026, that
threshold is approximately $193 million. Because this IFC is not
proceeded by a general notice of proposed rulemaking, the UMRA does not
apply to this IFC.
We have not calculated an additional financial impact on States,
local or Tribal governments beyond what is reflected in the Collection
of Information (section IV.) and the Regulatory Impact Analysis (this
section, section V. of the IFC.)
[[Page 33469]]
H. Federalism
E.O. 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.
The provisions in this IFC impose substantial direct requirement
costs on States. As mentioned in previous sections of this rule, the
additional costs to States are attributable to necessary administrative
and technical activities that will ensure high levels of program
integrity in eligibility operations and data verification systems, in
keeping with the cooperative Federalism that is central to the Medicaid
program.
I. E.O. 14192, ``Unleashing Prosperity Through Deregulation''
E.O. 14192, entitled ``Unleashing Prosperity Through Deregulation''
was issued on January 31, 2025, and requires that ``any new incremental
costs associated with new regulations shall, to the extent permitted by
law, be offset by the elimination of existing costs associated with at
least 10 prior regulations.'' This rule, as finalized, is expected to
be exempt from otherwise applicable requirements under E.O. 14192, per
footnote 1 of OMB's Accounting Methods.\160\
---------------------------------------------------------------------------
\160\ See Accounting Methods under E.O. 14192. https://www.reginfo.gov/public/pdf/eo14192/Accounting_Methods_under_EO_14192.pdf.
---------------------------------------------------------------------------
This final regulation is subject to the Congressional Review Act
provisions of the Small Business Regulatory Enforcement Fairness Act of
1996 (5 U.S.C. 801 et seq.) and has been transmitted to the Congress
and the Comptroller General for review.
J. Conclusion
The policies in this IFC are expected to enable more efficient and
cost-effective implementation of Public Law 119-21.
Mehmet Oz, Administrator of CMS, approved this document on May 27,
2026.
List of Subjects
42 CFR Part 431
Grant programs-health, Health facilities, Medicare, Privacy,
Reporting and recordkeeping requirements.
42 CFR Part 435
Aid to families with dependent children, Grant programs-health,
Medicaid, Reporting and recordkeeping requirements, Supplemental
Security Income (SSI), Wages.
42 CFR Part 438
Citizenship and naturalization, Civil rights, Grant programs-
health, Individuals with disabilities, Medicaid, Reporting and
recordkeeping requirements, Sex discrimination.
42 CFR Part 457
Administrative practice and procedure, Grant programs-health,
Health insurance, Reporting and recordkeeping requirements.
42 CFR Part 600
Administrative practice and procedure, Health care, Health
insurance, Intergovernmental relations, Penalties, Reporting and
recordkeeping requirements.
For the reasons set forth in the preamble, the Centers for Medicare
& Medicaid Services amends 42 CFR chapter IV as set forth below:
PART 431--STATE ORGANIZATION AND GENERAL ADMINISTRATION
0
1. The authority citation for part 431 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
2. Section 431.213 is amended by revising paragraph (d) to read as
follows:
Sec. 431.213 Exceptions from advance notice.
* * * * *
(d) The beneficiary's whereabouts are unknown and the post office
returns agency mail directed to him indicating no forwarding address
(see Sec. 431.231(d) for procedure if the beneficiary's whereabouts
become known). The provisions of this paragraph (d) sunset on October
1, 2034. CMS will follow applicable rulemaking procedures to ensure
that policies governing whereabouts unknown are implemented and
effective on October 1, 2034, replacing the policies scheduled to
sunset on that date;
* * * * *
0
3. Section 431.231 is amended by adding paragraph (d) to read as
follows:
Sec. 431.231 Reinstating services.
* * * * *
(d) If a beneficiary's whereabouts are unknown, as indicated by the
return of unforwardable agency mail directed to him, any discontinued
services must be reinstated if his whereabouts become known during the
time he is eligible for services. The provisions of this paragraph (d)
sunset on October 1, 2034. CMS will follow applicable rulemaking
procedures to ensure that policies governing when a beneficiary's
whereabouts become known are implemented and effective on October 1,
2034, replacing the policies scheduled to sunset on that date.
PART 435--ELIGIBILITY IN THE STATES, DISTRICT OF COLUMBIA, THE
NORTHERN MARIANA ISLANDS, AND AMERICAN SAMOA
0
4. The authority citation for part 435 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
5. Section 435.3 is amended in paragraph (a) by adding an entry for
``1902(xx)'' in sequential order to read as follows:
Sec. 435.3 Basis.
(a) * * *
1902(xx) Requirement for States to Establish Medicaid Community
Engagement Requirement for Certain Individuals.
* * * * *
0
6. Section 435.119 is amended by adding paragraph (d) to read as
follows:
Sec. 435.119 Coverage for individuals age 19 or older and under age
65 at or below 133 percent FPL.
* * * * *
(d) Community engagement. As of the implementation date in
accordance with Sec. 435.559, the 50 States and the District of
Columbia must provide that eligibility under this section is subject to
the community engagement requirement described at Sec. Sec. 435.550
through 435.563.
0
7. Add Sec. Sec. 435.550 through 435.563 under the undesignated center
heading ``Community Engagement Requirement'' to read as follows:
* * * * *
Community Engagement Requirement
Sec.
435.550 Basis and scope.
435.551 Applicable individual.
435.552 Demonstrating community engagement.
435.553 Mandatory exceptions for certain applicable individuals.
435.554 Specified excluded individuals.
435.555 Optional exception for short-term hardship events.
435.556 Assessing compliance with the community engagement
requirement.
435.557 Verifying compliance with or exception or exclusion from the
community engagement requirement.
435.558 Noncompliance procedures.
435.559 Implementation timing for the community engagement
requirement.
435.560 Good faith effort exemption.
435.561 State requirements for outreach.
435.562 Requirements for States to submit data for monitoring
community engagement.
[[Page 33470]]
435.563 Prohibition of waivers of the community engagement
requirement.
* * * * *
Community Engagement Requirement
Sec. 435.550 Basis and scope.
Sections 435.550 through 435.563 implement section 1902(xx) of the
Act and apply to the 50 States and the District of Columbia. These
sections do not apply to the territories.
Sec. 435.551 Applicable individual.
An applicable individual is an individual who is not a specified
excluded individual as defined at Sec. 435.554 and who is--
(a) Eligible to enroll or is enrolled under the State plan under
Sec. 435.119; or
(b) Otherwise eligible to enroll or is enrolled in a demonstration
project under section 1115(a)(2) of the Act that provides coverage that
meets minimum essential coverage requirements as defined under Sec.
435.4, and who is:
(1) At least 19 and under 65 years of age;
(2) Not pregnant;
(3) Not entitled to or enrolled for benefits under part A of title
XVIII or enrolled for benefits under part B of title XVIII; and
(4) Not otherwise eligible to enroll under the State plan.
Sec. 435.552 Demonstrating community engagement.
(a) General rule. An applicable individual demonstrates community
engagement for a month if the individual meets one or more of the
following conditions:
(1) The individual works not less than 80 hours.
(2) The individual completes not less than 80 hours of community
service.
(3) The individual participates in a work program for not less than
80 hours.
(4) The individual is enrolled in an educational program at least
half-time.
(5) The individual engages in any combination of the activities
described in paragraphs (a)(1) through (4) of this section, for a total
of not less than 80 hours; however, States are not permitted to combine
educational program hours with another activity if the individual is
enrolled in an educational program at least half-time.
(6) The individual has a monthly income that is not less than the
applicable minimum wage requirement under section 6 of the Fair Labor
Standards Act of 1938 (29 U.S.C. 206(a)(1)(C)), multiplied by 80 hours.
(7) The individual had an average monthly income over the preceding
6 months that is not less than the applicable minimum wage requirement
under 29 U.S.C. 206(a)(1)(C) multiplied by 80 hours, and is a seasonal
worker, as described in section 45R(d)(5)(B) of the Internal Revenue
Code of 1986 (26 U.S.C. 45R(d)(5)(B)).
(b) Definitions. For purposes of this section--
Community service means unpaid work, completed voluntarily or
because of a mandate by court order, with a structured program that is
completed for the direct benefit of the community under the auspices of
public or nonprofit organizations (including embedded activities of the
program that allow an individual to develop skills necessary to
complete community service). The public or nonprofit organizations:
(i) Include organizations described in section 501(c)(3) of the
Internal Revenue Code of 1986 (26 U.S.C. 501(c)(3)) and other
organizations.
(ii) Must provide oversight of the activity, which must not serve a
partisan purpose, and have a process in place to track the community
service completed by individuals, including the type of community
service activity, dates and hours the community service is completed,
and a point of contact who can confirm the hours completed.
Educational program means a program that is one of the following:
(i) An institution of higher education as defined in section 101 of
the Higher Education Act of 1965 (20 U.S.C. 1001);
(ii) A program of career and technical education as defined in
section 3(5) of the Carl D. Perkins Career and Technical Education Act
of 2006 (20 U.S.C. 2302(5));
(iii) A high school as defined in title VIII of the Elementary and
Secondary Education Act (20 U.S.C. 7801 et seq.); and
(iv) A State-approved program of study leading to a certificate of
high school equivalence for an applicable individual who has not
received a high school diploma.
Work means:
(i) Work in exchange for money;
(ii) Work in exchange for goods or services (``in-kind'' work); and
(iii) Unpaid work (other than community service as defined in this
paragraph (b)).
Work program means a program that is one of the following:
(i) A program under title I of the Workforce Innovation and
Opportunity Act (WIOA) (Pub. L. 113-128) (29 U.S.C. 3111 et seq.);
(ii) A program under section 236 of the Trade Act of 1974 (19
U.S.C. 2296);
(iii) A program of employment and training operated or supervised
by a State or political subdivision of a State that meets standards
approved by the Governor of the State, including a program under
subsection (d)(4) of section 6 of the Food and Nutrition Act of 2008 (7
U.S.C. 2015(d)(4)), other than a supervised job search program or job
search training program. However, a program under this subsection may
include supervised job search or job search training as subsidiary
activities as long as such activity is less than half the required
hours of the program;
(iv) A program of employment and training for veterans operated by
the Department of Labor or the Department of Veterans Affairs. For the
purposes of this paragraph, any employment and training program of the
Department of Labor or Veterans Affairs that serves veterans must be an
approved work program; and
(v) A workforce partnership under subsection (d)(4)(N) of section 6
of the Food and Nutrition Act of 2008 (7 U.S.C. 2015(d)(4)(N)).
(c) Enrollment in an educational program. An applicable
individual's enrollment status in an educational program (full-time,
half-time, less than half-time) is determined by the school or
institution.
(1) The enrollment status of the individual begins on the first day
of the school term for the educational program.
(2) The enrollment status will continue through normal periods of
attendance, vacation, and recess. During periods of vacation and
recess, the enrollment status shall be based on the individual's status
just prior to the school break.
(3) The enrollment status will end at the end of the month that the
student is expelled, withdraws, completes the school term and is not
registered for the next school term (excluding optional terms such as
winter or summer sessions), or graduates (unless the student is
enrolled in another educational program).
(d) Less than half-time enrollment in an educational program. If an
applicable individual is enrolled in an educational program for less
than half-time as determined by the school, the educational program
hours shall be the following:
(1) For educational programs that use credit hours:
(i) Multiply the number of each one credit hour of instruction by 3
to get the total of education hours in a week.
(ii) Multiply the weekly total as determined under paragraph
(d)(1)(i) of this section by 4.33 weeks to get total hours in a 1-month
period.
(2) For educational programs that do not use credit hours, the
hours spent
[[Page 33471]]
attending class and participating in educational activities will count
towards meeting this requirement.
(e) Combination of activities. An applicable individual may
demonstrate community engagement for a month if the individual engages
in any combination of activities described in paragraphs (a)(1) through
(4) of this section for a total of not less than 80 hours.
(1) The hours for work under paragraph (a)(1) of this section,
community service under paragraph (a)(2) of this section, and
participating in a work program under paragraph (a)(3) of this section,
need only be combined with educational program hours if the individual
is enrolled in an educational program less than half-time.
(2) The hours for work under paragraph (a)(1) of this section,
community service under paragraph (a)(2) of this section, and
participating in a work program under paragraph (a)(3) of this section
must be determined separately and based on the time spent on the
specific activity in such month.
(i) If the monthly income is less than the applicable Federal
minimum wage requirement under 29 U.S.C. 206(a)(1)(C) multiplied by 80
hours, and the agency does not have documentation regarding the number
of hours worked, the agency may calculate the hours for work under
paragraph (a)(1) of this section based on the monthly income as
determined under paragraph (f)(2) of this section provided that the
agency must use a reasonable method to allocate work hours between
members of the household.
(ii) If the agency uses the option under paragraph (e)(2)(i) of
this section, the agency must calculate the hours for work by dividing
the monthly income as determined under paragraph (f)(2) of this section
by the applicable Federal minimum wage requirement under 29 U.S.C.
206(a)(1)(C).
(3) The hours for less than half-time enrollment in an educational
program must be calculated as provided in paragraph (d) of this
section.
(4) After the agency determines an applicable individual's hours
for work, completing community service, participating in a work
program, and less than half-time enrollment in an educational program,
the hours must be added together. Adding the hours will provide the
total hours for the combined activities.
(f) Monthly income. (1) An applicable individual demonstrates
community engagement for a month if the individual has a monthly income
that is not less than the applicable Federal minimum wage requirement
under 29 U.S.C. 206(a)(1)(C) multiplied by 80 hours.
(2) The agency must determine the monthly income based on the
individual's MAGI-based income, for their MAGI-based household, as
defined at Sec. 435.603, and applied to a month in the period under
Sec. 435.556(a), as applicable for demonstrating community engagement.
(g) Average monthly income for seasonal workers. (1) An applicable
individual demonstrates community engagement for a month if the
individual is a seasonal worker as described in 26 U.S.C. 45R(d)(5)(B)
and had an average monthly income over the preceding six months that is
not less than the applicable Federal minimum wage requirement under 29
U.S.C. 206(a)(1)(C) multiplied by 80 hours.
(2) The agency must determine the average monthly income based on
the individual's MAGI-based income, for their MAGI-based household, as
defined at Sec. 435.603, and applied to a month in the period under
Sec. 435.556(a), as applicable for demonstrating community engagement.
Sec. 435.553 Mandatory exceptions for certain applicable individuals.
A State must deem an applicable individual to have demonstrated
community engagement under Sec. 435.552 for a month if--
(a) For part or all of that month, the individual was:
(1) Under the age of 19 years;
(2) Entitled to or enrolled for Medicare benefits under part A or
enrolled for benefits under part B of title XVIII of the Act;
(3) Described in any mandatory coverage groups in subclauses (I)
through (VII) of section 1902(a)(10)(A)(i) of the Act under the
Medicaid State plan; or,
(4) A specified excluded individual as defined at Sec. 435.554.
(b) At any point during the 3-month period ending on the first day
of that month, the individual was an inmate of a public institution.
Sec. 435.554 Specified excluded individuals.
(a) For purposes of this section--
Caretaker relative means a relative of a dependent child or a
disabled individual, as those terms are defined in this section, by
blood, adoption, or marriage with whom the child or disabled individual
is living, who assumes primary responsibility for the dependent child's
or disabled individual's care, and who is one of the following--
(i) The dependent child's or disabled individual's father, mother,
grandfather, grandmother, brother, sister, stepfather, stepmother,
stepbrother, stepsister, uncle, aunt, first cousin, nephew, or niece.
(ii) The disabled individual's husband, wife, son, daughter,
stepson, stepdaughter, grandson, or granddaughter.
(iii) The spouse of such parent or relative, even after the
marriage is terminated by death or divorce.
(iv) At State option, another relative of the dependent child or
disabled individual based on blood (including those of half-blood),
adoption, or marriage; the domestic partner of the parent or other
caretaker relative; or an adult with whom the dependent child or
disabled individual is living and who assumes the primary
responsibility for the dependent child or disabled individual's care.
To the extent a State has elected to include any of these relationships
for the purpose of eligibility for the group at Sec. 435.110, the same
elections shall apply for this definition for such State.
Dependent child means a child 13 years of age or under who relies
on another individual for care.
Disabled individual means an individual who meets the Americans
with Disabilities Act definition of disability at 28 CFR 35.108. An
individual need not be eligible for Medicaid or other Federal programs
on the basis of a disability to be a disabled individual under this
definition.
Family caregiver means an adult family member or other individual
who has a significant relationship with, and who provides care within a
broad range of assistance to, a dependent child or a disabled
individual as both terms are defined in this section.
Guardian means an adult appointed by a court to care for and make
personal decisions for a dependent child or disabled individual, as
defined in this section, who cannot care for themselves, in accordance
with applicable State law.
Parent means an individual with the legal status of a mother or
father, including by adoption, in accordance with applicable State law,
who provides some level of care to a dependent child or disabled
individual, as defined in this section.
(b) An individual who meets the criteria for one or more of the
categories described in paragraph (c) of this section is excluded from
the definition of an applicable individual as defined at Sec. 435.551.
Community engagement is not a condition of eligibility for specified
excluded individuals.
(c) An individual is a specified excluded individual if he or she
meets one of the following:
[[Page 33472]]
(1) The individual meets the definition of the eligibility group
serving former foster care children, described at section
1902(a)(10)(A)(i)(IX) of the Act as amended by Public Law 115-271,
regardless of whether the individual turned age 18 on or after January
1, 2023.
(2) The individual meets the definition of Indian at Sec. 447.51
of this subchapter.
(3) The individual is a parent, guardian, caretaker relative, or
family caregiver, as each is defined in this section, and for family
caregivers, meets one of the criteria identified at paragraphs
(c)(1)(i)(A) through (C) of this section. For purposes of this
exclusion:
(i) An individual who is a family caregiver as defined in this
section is a specified excluded individual if he or she meets one of
the following criteria:
(A) The individual primarily resides with a dependent child or
disabled individual, as these terms are defined in this section, for
whom he or she provides assistance that occurs on a regular basis and
is not solely incidental in nature.
(B) The individual is a relative (as specified in the ``caretaker
relative'' definition in this section, without regard to the
requirements to live with and to assume primary responsibility) of a
dependent child or disabled individual, as these terms are defined in
this section, for whom he or she provides assistance that occurs on a
regular basis and is not solely incidental in nature, and with whom he
or she does not reside.
(C) The individual does not reside with and is not a relative (as
specified in the ``caretaker relative'' definition in this section,
without regard to the requirements to live with and to assume primary
responsibility) of a dependent child or disabled individual, as these
terms are defined in this section, for whom he or she provides not less
than 80 hours of assistance that is not solely incidental in nature per
month.
(ii) In residences with more than one parent, guardian, caretaker
relative, or family caregiver, multiple individuals who meet the
relevant definitions at paragraph (a) of this section may qualify as a
specified excluded individual as described in this section.
(4) The individual is a veteran with a temporary or permanent
disability from the Department of Veterans Affairs, rated as 100
percent (total) under 38 U.S.C. 1155.
(5) The individual is medically frail or otherwise has special
medical needs. For purposes of this exclusion:
(i) An individual who is medically frail or otherwise has special
medical needs is defined as an individual whose physical, mental, or
other behavioral health condition significantly impairs the
individual's ability to comply with the community engagement
requirement in this subpart and is an individual:
(A) Who is blind or disabled (as defined in section 1614 of the
Social Security Act);
(B) With a substance use disorder, excluding an individual in
stable recovery (which means, an individual who is in recovery for 5 or
more years);
(C) With a disabling mental disorder;
(D) With a physical, intellectual, or developmental disability that
significantly impairs their ability to perform one or more activities
of daily living; or
(E) With a serious or complex medical condition which is a medical
condition that is life threatening, seriously disabling without
necessarily being life threatening, causing significant pain or
discomfort that can cause serious interruptions to life activities,
requiring a major time or effort commitment from caregivers for a
substantial period of time, requiring frequent monitoring, associated
with severe consequences or negative consequences for someone else,
affecting multiple organ systems, requiring management to tight
physiological parameters, requiring coordination of multiple
specialties, requiring treatment that carries a risk of serious
complications, or requiring adjustment in non-medical environments.
(ii) The State must develop a list of diseases, diagnoses,
disorders, or other health conditions to identify individuals who meet
the criteria in paragraphs (a)(5)(i)(A) through (E) of this section.
(A) The list must be auditable, justifiable, and consistent with
the definitions established in paragraphs (a)(5)(i)(A) through (E) of
this section.
(B) The State must revise this list on a regular basis to add or
remove diseases, diagnoses, disorders, or health conditions based on
the State's experience applying this exclusion.
(C) If an individual does not have a disease, diagnosis, disorder,
or health condition on this list, the State must have reasonable
processes and criteria in place for such individual to request
consideration for the exclusion for individuals who are medically frail
or otherwise have special medical needs.
(6) The individual is compliant with any requirements imposed by
the State, in accordance with section 407 of the Act.
(7) The individual is a member of a household that receives
Supplemental Nutrition Assistance Program (SNAP) benefits under 7
U.S.C. 2015 and is not exempt from a work requirement under such Act.
(8) The individual is participating in a drug addiction or
alcoholic treatment and rehabilitation program, as defined in section
3(h) of the Food and Nutrition Act of 2008 (7 U.S.C. 2012(h)). States
may establish a minimum time commitment, consistent with appropriate
clinical guidelines, for participation in such a program.
(9) The individual is an inmate of a public institution, as defined
at Sec. 435.1010.
(10) The individual is pregnant or entitled to postpartum medical
assistance under section 1902(e)(5) or (16) of the Act.
Sec. 435.555 Optional exception for short-term hardship events.
(a) Scope. At State option, the agency may provide that an
applicable individual, as defined at Sec. 435.551, is deemed to have
demonstrated community engagement, as defined at Sec. 435.552, for a
month in which, for all or part of such month, the individual
experiences any one of the short-term hardship events described in
paragraph (d) of this section.
(b) Definitions. For purposes of this section--
(1) Dependent means an individual who is:
(i) The minor (as defined under State law) child of an applicable
individual who is living with the applicable individual;
(ii) The tax dependent of an applicable individual (whether or not
the tax dependent is a minor child of the applicable individual or
residing with the applicable individual); or
(iii) An individual for whom the applicable individual has been
appointed a guardian by a court.
(2) Individual acting on behalf of the applicable individual means
any individual from whom a State is required to accept an application
under Sec. 435.907(a).
(c) Procedures. If the agency elects the option described in
paragraph (a) of this section, it must provide, including as part of
the noncompliance procedures at Sec. 435.558(c)(1):
(1) Notice, as described under Sec. 435.561(b)(3)(ii), informing
applicable individuals that the State offers a short-term hardship
exception from the community engagement requirement, and, for the
circumstances in paragraphs (d)(2) and (3) of this section, the
anticipated end date of the exception;
(2) For the circumstances in paragraphs (d)(1) and (4) of this
section, the State must also provide:
[[Page 33473]]
(i) Notice of the method by which an applicable individual or an
individual acting on behalf of the applicable individual may request a
short-term hardship exception;
(ii) Notice of the timeframe for requesting a short-term hardship
exception;
(iii) A timely process for determining whether a request for a
short-term hardship exception will be granted;
(iv) Notice to the applicable individual of the State's
determination, which shall include the anticipated end date of the
exception (if granted); and
(v) A process under which the applicable individual or an
individual acting on behalf of the applicable individual can appeal an
adverse determination.
(d) Short-term hardship event. A short-term hardship event exists
when, for all or part of a month, and subject to a request in the
circumstances described in paragraphs (d)(1) and (4) of this section by
an applicable individual or an individual acting on behalf of the
applicable individual, the criteria for any of the following
circumstances are met:
(1) The applicable individual receives:
(i) Inpatient hospital services as defined at Sec. 440.10 of this
subchapter, nursing facility services as defined at Sec. 440.155 of
this subchapter, services in an intermediate care facility for
individuals with intellectual disabilities as defined at Sec. 440.150
of this subchapter, or inpatient psychiatric hospital services
including the services defined at Sec. 440.160 of this subchapter for
individuals under the age of 21 without regard to whether such services
are in an institution for mental diseases; or
(ii) Other services of similar acuity, including:
(A) Inpatient services furnished in a critical access hospital
consistent with Sec. 440.170(g) of this subchapter;
(B) Inpatient services furnished in an emergency hospital
consistent with Sec. 440.170(e) of this subchapter;
(C) Inpatient services furnished in an institution for mental
diseases;
(D) Inpatient services furnished by other facilities that are not
covered under Medicaid but are otherwise recognized by the State; and,
(E) Noninstitutional services that an applicable individual
receives that, but for the receipt of such services, would likely
result in the applicable individual receiving services specified in
paragraphs (d)(1)(i) and (d)(1)(ii)(A) through (D) of this section,
regardless of whether they are received in an institutional setting.
(iii) States must use the definition of ``inpatient'' at Sec.
440.2 of this subchapter for any inpatient services described in
paragraphs (d)(1)(i) and (ii) of this section.
(2) The applicable individual resides in a county or equivalent
unit of local government in which there exists an emergency or disaster
declared by the President pursuant to the National Emergencies Act (50
U.S.C. 1601 et seq.) or the Robert T. Stafford Disaster and Emergency
Assistance Act (42 U.S.C. 5121 et seq.).
(i) A short-term hardship exception based on an emergency declared
pursuant to the National Emergencies Act (50 U.S.C. 1601 et seq.)
exists when the emergency affects the ability of applicable individuals
to demonstrate community engagement in a particular county or other
equivalent unit of local government, or multiple counties, or
statewide.
(ii) A State must timely notify CMS of its plan to effectuate a
short-term hardship exception based on an emergency declared pursuant
to the National Emergencies Act.
(iii) CMS will review States' use and implementation of a short-
term hardship exception based on an emergency declared pursuant to the
National Emergencies Act to ensure compliance with paragraph (d)(2)(i)
of this section.
(iv) The duration of an exception for an emergency or disaster
declared by the President pursuant to the Robert T. Stafford Disaster
and Emergency Assistance Act (42 U.S.C. 5121 et seq.) will be the first
month in which the incident period begins and through at least the end
of the month in which the incident period ends, and may extend beyond
such month if approved by CMS upon request of the State, based on
information the State provides in support of an extended period. The
State must base its request for a longer duration on information
showing that barriers to demonstrating the community engagement
requirement under Sec. 435.552 in the relevant area persist.
(3) Through a request from the State to CMS made in an electronic
or hard-copy format, the State demonstrates and CMS determines, based
on data from the U.S. Bureau of Labor Statistics or another reliable
source such as a State labor department, that the applicable individual
resides in a county or equivalent unit of local government in which the
unemployment rate is at or above the lesser of--
(i) 8 percent; or
(ii) 1.5 times the national unemployment rate.
(4) The applicable individual, or the dependent of such individual,
must travel outside of their community of residence for an extended
period of time (which could be for part or all of a month or longer) to
receive medical services necessary to treat a serious or complex
medical condition, as defined at Sec. 435.554(c)(5)(i)(E), that are
not available within their community of residence.
(i) If the applicable individual does not travel with the
dependent, then, during the month or months in which the dependent must
travel, the applicable individual must demonstrate having taken leave
from employment or having absented themselves from other community
engagement activities for reasons related to the dependent's condition
or travel, such as, but not limited to:
(A) Taking the dependent to local medical appointments related to
or in preparation for the medical appointment that requires the travel;
(B) Conducting logistical activities relating to the travel;
(C) Maintaining primary responsibility for communicating with the
dependent's medical providers.
(ii) [Reserved]
(e) Request from applicable individual not required. A State must
not require an applicable individual, or an individual acting on behalf
of the applicable individual, to make a request for the circumstances
described in paragraphs (d)(2) and (3) of this section.
(f) Excluded individuals. A State must not apply paragraph (a) of
this section to a specified excluded individual defined at Sec.
435.554.
Sec. 435.556 Assessing compliance with the community engagement
requirement.
(a) A State must require applicable individuals, as defined at
Sec. 435.551, to demonstrate community engagement under Sec. 435.552,
or be deemed to demonstrate community engagement under Sec. 435.553
or, if applicable, Sec. 435.555, as a condition of eligibility for
medical assistance. The State must require--
(1) For an applicable individual who files an application for
medical assistance under a State plan, or a waiver of such plan,
demonstration of community engagement for at least one, but not more
than 3 consecutive months, as specified in the State plan, immediately
preceding the month of application.
(2) For an applicable individual who is enrolled and receiving
medical assistance under a State plan, or waiver of such plan,
demonstration of community engagement for 1 or more
[[Page 33474]]
months, as specified in the State plan and subject to paragraph (b) of
this section, whether or not consecutive--
(i) During the period between the effective date of such
individual's most recent determination or redetermination at renewal,
as applicable, and the date the individual's renewal is due, consistent
with section 1902(e)(14)(L) of the Act and Sec. 435.916, as
applicable, if the State has not opted to conduct more frequent
verifications of community engagement compliance under Sec.
435.557(d);
(ii) During the period between the most recent demonstration of
community engagement and the date the individual's next demonstration
of community engagement is due, consistent with Sec. 435.557(d), if
the State has opted to conduct more frequent verifications of community
engagement compliance as provided in Sec. 435.557(d); or
(iii) During the period between the effective date of such
individual's most recent determination or redetermination at renewal,
as applicable, and the end of the month prior to the month in which the
individual becomes an applicable individual as a result of a
redetermination based on a change in circumstances in accordance with
Sec. 435.916(d).
(b) A State must not require an applicable individual to
demonstrate community engagement for a period that exceeds the period
specified in paragraph (a)(2)(i), (ii), or (iii) of this section, as
applicable.
(c) A State may not apply the requirements in paragraph (a) of this
section to a specified excluded individual defined at Sec. 435.554.
(d) A State must inform applicants and beneficiaries of the State's
eligibility determination consistent with Sec. Sec. 435.917 and
435.918 and part 431, subpart E of this subchapter, which includes a
clear statement of the basis of eligibility consistent with Sec.
435.917(b)(1)(i), or a statement of the State's intended action and the
specific reasons for the action consistent with Sec. 431.210(a) and
(b) of this subchapter, as applicable, which must specify whether the
individual:
(1) Meets the criteria as a specified excluded individual as
defined in Sec. 435.554; or
(2) Is determined to be an applicable individual as defined at
Sec. 435.551, and whether the individual demonstrates community
engagement under Sec. 435.552 or is deemed to have demonstrated
community engagement under Sec. 435.553 or, if applicable, Sec.
435.555, for the month(s) specified in accordance with paragraph (a) of
this section.
Sec. 435.557 Verifying compliance with or exception or exclusion
from the community engagement requirement.
(a) Definitions. For purposes of this section--
Period of enrollment means a continuous period of enrollment in
coverage under the State plan or waiver without the individual being
disenrolled, regardless of the number of consecutive eligibility
periods, of redeterminations or renewals, or of transitions between
eligibility groups.
Reliable information available to the State means, for purposes of
verifying compliance, deemed compliance or exclusion from the community
engagement requirement in accordance with Sec. Sec. 435.550 through
435.563, information necessary for determining eligibility to which the
agency has access or should have access including, but not limited to:
(i) Information from electronic data sources that the agency has
determined to be effective consistent with paragraph (b)(1)(ii) of this
section, as documented in the agency's verification plan in accordance
with paragraph (b)(1)(iii) of this section;
(ii) Information from other State or local agencies;
(iii) Information related to community engagement from Federal
agencies and other data sources provided through the electronic service
established by the Secretary, in accordance with Sec. 435.949;
(iv) Information in the State's eligibility system;
(v) Information in the individual's case record;
(vi) Payroll data;
(vii) Claim(s) relevant to the individual that have been
adjudicated in the preceding 12 months, including those that have been
paid, pended or denied; and
(viii) Encounter data, as relevant to the individual, for the
preceding 12 months.
(b) Requirement to verify eligibility. The agency must establish
processes to use reliable information available to the State to verify
that an applicable individual has demonstrated community engagement in
accordance with Sec. Sec. 435.552 and 435.556, or was deemed to have
demonstrated community engagement under Sec. 435.553 or, if
applicable, Sec. 435.555, or that an individual is a specified
excluded individual under Sec. 435.554, before requesting additional
information from the individual.
(1) The agency--
(i) Must identify data sources that provide reliable information
relevant to verifying that that an applicable individual demonstrated
or is deemed to have demonstrated community engagement or that an
individual is a specified excluded individual.
(ii) May determine that establishing a connection to or process to
obtain information from a data source would not be effective, but the
agency must consider such factors as the administrative costs
associated with establishing and using the data match compared with the
administrative costs associated with relying on documentation and the
impact on program integrity in terms of the potential for ineligible
individuals to be enrolled and for eligible individuals to be denied
coverage.
(iii) Must document in its verification plan under Sec. 435.945(j)
its policies and procedures for verifying compliance with the community
engagement requirement under this subpart, including an identification
of the electronic data sources that the agency uses consistent with
paragraph (b)(1)(i) of this section.
(iv) Must request and use information from the data sources
identified and documented in its verification plan consistent with
paragraphs (b)(1)(i) and (iii) of this section.
(2) Except with respect to verifying an individual is a specified
excluded individual on the basis of being medically frail or otherwise
having special medical needs as defined at Sec. 435.554(c)(5), subject
to paragraph (g)(1) of this section, when there is no reliable
information available to the State or the reliable information
available to the State is not reasonably compatible with the
information provided by or on behalf of the individual, the agency must
seek additional information from the individual to verify the
individual has demonstrated or is deemed to have demonstrated community
engagement or that the individual is a specified excluded individual,
in accordance with the following rules:
(i) Before January 1, 2028, the agency may require documentation or
accept other information as provided in Sec. 435.952(c) when there is
no reliable information available to the State or the reliable
information is not reasonably compatible with the information provided
by or on behalf of the individual.
(ii) Beginning on January 1, 2028, when there is no reliable
information available to the State or the reliable information is not
reasonably compatible with the information provided by or on behalf of
the individual, the agency must require documentation whenever
documentation is reasonably available.
[[Page 33475]]
(iii) The agency must:
(A) Accept information other than documentation to verify an
individual's eligibility when there is no reasonably available
documentation; and
(B) May not deny or terminate eligibility solely because the
individual is unable to produce documentation where none exists or is
reasonably available but may establish criteria for requiring the
individual to provide specific information considered sufficient to
verify the individual's eligibility in the absence of reasonably
available documentation.
(3) The agency must comply with the requirements at Sec. Sec.
435.558 and 435.952(d) and provide individuals with the opportunity to
furnish information and documentation required to verify that the
individual has demonstrated community engagement or is deemed to have
demonstrated community engagement in accordance with Sec. Sec. 435.552
and 435.556, or Sec. 435.553 or, if applicable, Sec. 435.555, or is a
specified excluded individual as defined at Sec. 435.554, before
terminating or denying eligibility based on reliable information
available to the State.
(4) The agency must accept information and documentation related to
the community engagement requirement under this subpart from the
individuals and via the modalities specified at Sec. 435.907(a).
(c) Verification at application and renewal. The State must verify
that an applicable individual has demonstrated or is deemed to have
demonstrated community engagement for the period specified at Sec.
435.556.
(1) Requirement to check all reliable information available to the
State. The State may not limit the reliable information available to
the State that is checked to specific activities or other means of
demonstrating community engagement under Sec. 435.552, or to specific
means of being deemed to have demonstrated community engagement under
Sec. 435.553 or, if applicable, Sec. 435.555, or to specific
specified excluded individual statuses under Sec. 435.554, but must
continue to check reliable information available to the State until the
agency verifies whether an individual who appears to be an applicable
individual has demonstrated community engagement, is deemed to have
demonstrated community engagement, or is not an applicable individual
because they are a specified excluded individual.
(i) The agency must attempt to verify the individual's specified
excluded individual status or that the individual demonstrated
community engagement or was deemed to have demonstrated community
engagement using all reliable information available to the State for
all relevant months before requesting additional information from the
individual.
(A) Only after checking all reliable information available to the
State without successfully verifying compliance, deemed compliance, or
specified excluded individual status may the agency request additional
information from the individual and initiate the noncompliance
procedures under Sec. 435.558, as appropriate.
(B) An individual must not be required to provide documentation or
other additional information unless information needed by the agency
could not be verified using reliable information available to the
State, including when there is no reliable information available to the
State or the reliable information is not reasonably compatible with the
information provided by or on behalf of the individual.
(ii) The agency is not required to continue checking reliable
information available to the State after the agency verifies
compliance, deemed compliance, or status as a specified excluded
individual, unless the agency has information indicating an individual
whom the agency verified demonstrated or is deemed to have demonstrated
community engagement may qualify as a specified excluded individual, as
described in paragraph (c)(2) of this section.
(2) Requirement to apply exclusions. The agency must determine that
an individual is a specified excluded individual whenever the agency
has sufficient information to determine the individual qualifies as
such, regardless of whether the individual also demonstrates community
engagement in accordance with Sec. Sec. 435.552 and 435.556 or meets
the criteria for an exception under Sec. 435.553 or, if applicable,
Sec. 435.555.
(3) Requirement to enroll eligible individuals and verify potential
exclusion post-enrollment. If the agency has sufficient information to
verify an individual meets or is deemed to meet the community
engagement requirement and has information that suggests, but needs
more information to verify that the individual is a specified excluded
individual, the agency must enroll the individual promptly using the
verified information and attempt to verify eligibility for the
exclusion post-enrollment or, if the individual is already enrolled,
following the redetermination of eligibility.
(d) State option to conduct more frequent verifications. States may
verify that an applicable individual has met the requirement to
demonstrate community engagement more frequently than each regularly
scheduled redetermination, consistent with Sec. 435.556(a)(2)(ii).
(1) States electing to verify that an applicable individual has met
the requirement to demonstrate community engagement between regularly
scheduled redeterminations must comply with the requirements of this
subpart to verify, consistent with this section, that an applicable
individual met the requirement to demonstrate community engagement in
accordance with Sec. Sec. 435.552 and 435.556 or was deemed to have
demonstrated community engagement under Sec. 435.553 or, if
applicable, Sec. 435.555.
(2) For beneficiaries who were determined to be applicable
individuals at their last determination or redetermination of
eligibility, the agency must check all reliable information available
to the State to determine if the individual newly qualifies as a
specified excluded individual prior to assessing compliance or deemed
compliance with the community engagement requirement each time the
state conducts a more frequent verification.
(3) If the individual continues to be an applicable individual, the
agency must attempt to verify that the individual demonstrated
community engagement in accordance with Sec. Sec. 435.552 and 435.556,
or was deemed to have demonstrated community engagement, under Sec.
435.553 or, if applicable, Sec. 435.555, using all reliable
information available to the State for all relevant months, before
requesting additional information and documentation from the individual
consistent with this section and initiating the noncompliance
procedures under Sec. 435.558.
(4) The agency may not reverify the specified excluded status of an
individual between regularly scheduled redeterminations if the
individual was determined to be a specified excluded individual at
their last determination or redetermination of eligibility or during a
more frequent verification of community engagement under this section
unless the agency has information indicating the individual's specified
excluded individual status has changed.
(e) Requirement to use the electronic service established by the
Secretary. The agency must obtain information regarding compliance with
or exception or exclusion from the community engagement requirement
through the electronic data service established by
[[Page 33476]]
the Secretary to the extent the information is available through such
service, consistent with Sec. Sec. 435.945 and 435.949, except as
provided for in Sec. 435.945(k) and paragraph (e)(2) of this section.
(1) If information from a new data source becomes available through
the electronic data service established by the Secretary that contains
reliable information relevant to verifying the community engagement
requirement in this subpart, the State must establish a connection
though such service, or establish a direct connection to or implement
an alternative data source or mechanism if approved for flexibility
under Sec. 435.945(k), to obtain such information from that data
source as soon as practicable, but no later than 12 months after
information from the data source first becomes available through the
service established by the Secretary.
(2) For the purposes of verifying compliance or deemed compliance
with, or exclusion from, the community engagement requirement, the
Secretary may determine a waiver as described in Sec. 435.945(k) is
not required for the State to establish a direct connection or use an
alternative mechanism to access information available from a Federal
data source that is accessible through the service established by the
Secretary, if the Secretary determines that such direct connection or
alternative mechanism is likely to satisfy the criteria in Sec.
435.945(k). In the event the State does not access the Federal data
source through the service established by the Secretary and the
Secretary determines that a waiver as described in Sec. 435.945(k) is
not necessary, the State must establish a direct connection or
alternative mechanism within the timeframe specified in paragraph
(e)(1) of this section.
(f) Verification of medical frailty and privacy requirements for
certain populations. (1) The agency must attempt to verify that an
individual is a specified excluded individual on the basis that the
individual is medically frail or otherwise has special medical needs as
defined at Sec. 435.554(c)(5) using reliable information available to
the State, including claim(s) relevant to the individual that have been
adjudicated in the preceding 12 months, including those that have been
paid, pended or denied, and encounter data, as relevant to the
individual.
(i) Before January 1, 2028, when there is no reliable information
available to the State or the reliable information is not reasonably
compatible with the information provided by or on behalf of the
individual, the agency may require documentation or accept a statement
or other information under penalty of perjury that provides sufficient
information, as determined by the State, to verify an applicant or
beneficiary is medically frail or otherwise has special medical needs,
each time the State verifies an individual's medical frailty.
(ii) Beginning on January 1, 2028, the agency may accept a
statement or other information provided under penalty of perjury that
provides sufficient information, as determined by the State, to verify
qualification for the exclusion only once during the beneficiary's
period of enrollment defined at paragraph (a) of this section when
there is no reliable information available to the State or the reliable
information available to the State is not reasonably compatible with
the information provided by or on behalf of the individual.
(A) At the individual's first regularly scheduled redetermination
after such status was determined using the individual's statement
provided under penalty of perjury or other information as described in
this paragraph (f)(1)(ii), the agency must verify that the individual
is medically frail or otherwise has special medical needs using
reliable information available to the State, or, if reliable
information available to the State is not sufficient for verification,
using documentation submitted by or on behalf of the individual.
(2) States that elect to provide an optional exception for short-
term hardships under Sec. 435.555 must--
(i) Attempt to use reliable information available to the State
before seeking additional information from the individual to verify
whether, for part or all of a month for which an applicable individual
is required to demonstrate community engagement, the applicable
individual received care specified at Sec. 435.555(d)(1) or the
applicable individual or their dependent had to travel outside of their
community of residence for an extended period of time to receive
medical services specified at Sec. 435.555(d)(4).
(ii) Apply an automatic short-term hardship exception to applicable
individuals if, for part or all of a month for which such applicable
individuals are required to demonstrate community engagement, the
individuals reside in a county or equivalent unit of local government
in which there exists an emergency or disaster as specified at Sec.
435.555(d)(2) or for which the Secretary has approved an unemployment-
based short-term hardship exception as specified at Sec.
435.555(d)(3), without requesting any additional information from such
applicable individuals.
Sec. 435.558 Noncompliance procedures.
(a) Provision of notice of noncompliance. If a State is unable to
verify that an applicable individual has met the requirement to
demonstrate community engagement under Sec. Sec. 435.552 and 435.556,
or is deemed compliant under Sec. 435.553 or, if applicable, Sec.
435.555, as specified in paragraph (b) of this section, the State must:
(1) Provide such individual with the notice of noncompliance
described in paragraph (c) of this section;
(2) Provide such individual with a period of 30 calendar days
beginning on the date on which such notice of noncompliance is received
by the individual consistent with paragraph (c)(4) of this section, to
make a satisfactory showing to the agency--
(i) Of compliance with such requirement (including, as applicable,
by showing that such medically frail or otherwise has special medical
needs using reliable information available to the State, or, if
reliable information available to the State is not sufficient for
vertification, using documentation submitted by or on behalf of the
individual.
(B) If an enrollee declares specified excluded individual status on
the basis of being medically frail or otherwise having special medical
needs after having sought such status on or after January 1, 2028, on
the basis of a statement provided under penalty of perjury or other
information described in this paragraph (f)(1)(ii) during the same
period of enrollment defined at paragraph (a) of this section, the
agency must verify that status using reliable information available to
the State, or, if reliable information available to the State is not
sufficient for verification, using documentation submitted by or on
behalf of the individual.
(iii) After verifying an individual's specified excluded individual
status on the basis of being medically frail or otherwise having
special medical needs using reliable information available to the State
or documentation submitted by or on behalf of the individual, the
agency must reverify this status at least every 12 months.
(2) The agency must comply with all applicable Federal privacy
requirements including section 1902(a)(7) of the Act; part 431, subpart
F of this subchapter; the Health Insurance Portability and
Accountability Act of 1996 (42 U.S.C. 1320d et seq.); part 2 of this
title; and any other applicable Federal privacy laws when accessing,
storing, and
[[Page 33477]]
handling data obtained to verify that an individual is medically frail
or otherwise has special medical needs or is participating in a drug
addiction or alcoholic treatment and rehabilitation program.
(g) Verification of mandatory and optional exceptions. (1) States
must comply with the requirements in paragraph (b)(2) of this section
when verifying qualification for a mandatory exception under Sec.
435.553 except that if the individual provided information on an
application, renewal or other State form, or when reporting a change in
circumstances in accordance with paragraph (b)(4) of this section
indicating they qualify for an exception and there is no reliable
information available to the State, the State may elect the option
under section 1902(xx)(3)(A) of the Act not to seek further information
from the applicable individualdemonstrated or should be deemed to have
demonstrated community engagement under Sec. 435.553 or, if
applicable, Sec. 435.555, for each month required under the State
plan); or
(ii) That such requirement does not apply to such individual on the
basis that such individual does not meet the definition of applicable
individual under Sec. 435.551, including by meeting the criteria for
one or more of the categories of a specified excluded individual as
defined at Sec. 435.554.
(3) Continue to furnish Medicaid for an enrolled beneficiary until
the individual is determined ineligible consistent with Sec.
435.930(b).
(b) Defining ``unable to verify'' community engagement. The agency
is considered to be unable to verify that an applicable individual is
compliant with the requirement to demonstrate community engagement as
follows:
(1) At application, the agency is unable to verify compliance with
community engagement when it does not have sufficient information after
reviewing the information provided by the individual at application and
the reliable information available to the State to determine that the
individual has demonstrated or is deemed to have demonstrated community
engagement for the number of months required under the State plan.
(2) As part of a renewal under section 1902(e)(14)(L) of the Act
and Sec. 435.916, the agency is unable to verify compliance with
community engagement when it does not have sufficient information to
determine that the individual has demonstrated or is deemed to have
demonstrated community engagement for the number of months required
under the State plan, after--
(i) Reliable information available to the State accessed at renewal
consistent with Sec. 435.916(a)(2) are not sufficient to verify
compliance with the community engagement requirement; or
(ii) The renewal form provided to the beneficiary in accordance
with Sec. 435.916(a)(3) for those whose eligibility cannot be renewed
based on reliable information under Sec. 435.916(a)(2) is not returned
or the information returned on the renewal form is not sufficient to
verify compliance with community engagement.
(3) If applicable, as part of the more frequent verification of
compliance under Sec. 435.557(d), the agency is unable to verify
compliance with the community engagement requirement when it does not
have sufficient information to determine that the individual has
demonstrated or is deemed to have demonstrated community engagement for
the number of months required under the State plan after--
(i) Accessing reliable information in accordance with Sec.
435.557(d) and information is not sufficient; or
(ii) Accessing reliable information in accordance with Sec.
435.557(d) and following the State's procedures under Sec. 435.952(d)
to request information from the individual, when the requested
information is not returned or the information returned is not
sufficient.
(c) Content and form of noncompliance notice. A notice of
noncompliance--
(1) Must include clear statements containing the following
information--
(i) How to make a satisfactory showing of compliance with the
community engagement requirement, including:
(A) Which month(s) will be assessed by the State in accordance with
Sec. 435.556(a);
(B) How to show the individual demonstrated community engagement
under Sec. 435.552; and
(C) How to show the individual should be deemed to have
demonstrated community engagement as specified at Sec. 435.553 or, if
applicable, Sec. 435.555;
(ii) How to make a satisfactory showing that the community
engagement requirement does not apply to the individual on the basis
that the individual does not meet the definition of an applicable
individual at Sec. 435.551, including because the individual meets the
criteria for one or more of the categories of a specified excluded
individual under Sec. 435.554;
(iii) The deadline for providing the information under paragraph
(c)(1)(i) or (ii) of this section to the State;
(iv) A description of how the information under paragraph (c)(1)(i)
or (ii) of this section may be submitted to the State through any of
the modalities described in Sec. 435.907(a);
(v) A description of the consequences of noncompliance with the
community engagement requirement and failure to respond to the notice
of noncompliance for Medicaid eligibility and eligibility for advance
payments of the premium tax credit (APTC) and the premium tax credit
(PTC) used to pay for coverage through a Health Insurance Exchange;
(vi) How such individual may reapply for medical assistance under
the State plan (or a waiver of such plan) if the individual's
application is denied or the individual is disenrolled from coverage
under the State plan or waiver, as applicable; and
(vii) For States that have elected to provide the short-term
hardship exception under Sec. 435.555, the information about short-
term hardship events described in Sec. 435.555(c).
(2) Must be provided in a manner consistent with Sec. 435.905(b).
(3) Must, if provided in electronic format, comply with Sec.
435.918(b).
(4) Is considered to be received 5 days after the date on the
notice, unless the applicant or beneficiary shows that he or she did
not receive the notice within the 5-day period.
(d) State responsibilities in the event of no satisfactory showing.
If no satisfactory showing is made after the 30-calendar day period
consistent with paragraph (a)(2) of this section, the State must--
(1) Consider all other bases of eligibility for medical assistance
under the State plan (or waiver of such plan) in accordance with
Sec. Sec. 435.911 and 435.916(f) prior to denying coverage at
application or determining that an individual is ineligible;
(2) For individuals determined ineligible under the State plan (or
waiver of such plan) after considering all bases of eligibility, as
applicable:
(i) Deny such individual's application and provide written notice
and fair hearing rights consistent with Sec. Sec. 435.917 and 435.918
and part 431, subpart E of this subchapter;
(ii) Disenroll such beneficiary not later than the end of the month
following the month in which the 30-calendar day period under paragraph
(a)(2) of this section ends and after the provision of advance written
notice and fair hearing rights consistent with Sec. Sec. 435.917
through 435.918 and part 431, subpart E of this subchapter prior to the
disenrollment;
(iii) Include in the clear statement of the specific reasons
supporting the
[[Page 33478]]
intended action under Sec. 431.210(b) of this subchapter that the
individual failed to:
(A) Make a satisfactory showing of compliance with the community
engagement requirement under Sec. 435.552, including by meeting the
criteria for an exception to be deemed as having demonstrated community
engagement under Sec. 435.553 or, if applicable, Sec. 435.555, for
the month(s) specified in accordance with Sec. 435.556(a); and
(B) Make a satisfactory showing that the community engagement
requirement does not apply to the individual on the basis that the
individual does not meet the definition of applicable individual at
Sec. 435.551, including failure to demonstrate the individual meets
the criteria for one or more of the categories of a specified excluded
individual under Sec. 435.554; and
(iv) Determine the individual's or beneficiary's potential
eligibility for other insurance affordability programs in accordance
with Sec. 435.1200(e).
(e) Prohibition on restrictions to re-applying for coverage. An
agency must not impose any restriction on an applicable individual's
ability to re-apply for coverage or their ability to receive coverage
if determined eligible upon reapplication based on a prior denial of
eligibility or disenrollment for noncompliance under this section.
(f) Reconsideration period. A State must reconsider eligibility
consistent with Sec. 435.916(a)(3)(iii), if an individual, who was
enrolled with eligibility based on MAGI, was disenrolled for failure to
submit information requested in a notice of noncompliance and submits
the information during the reconsideration period described in Sec.
435.916(a)(3)(iii).
Sec. 435.559 Implementation timing for the community engagement
requirement.
(a) Unless granted an exemption under Sec. 435.560, the agency
must require applicable individuals, as defined at Sec. 435.551, to
comply with the requirement to demonstrate community engagement under
Sec. Sec. 435.552 and 435.556, or be deemed to have demonstrated
community engagement under Sec. 435.553 or, if applicable, Sec.
435.555, as a condition of eligibility for medical assistance furnished
on or after January 1, 2027.
(b) The agency may elect to implement Sec. Sec. 435.550 through
435.563 before January 1, 2027, under the State plan or a demonstration
project under section 1115 of the Act.
(c) For a beneficiary who is enrolled as of the State's
implementation date, the agency must verify compliance with the
community engagement requirement at the applicable individual's first
renewal initiated on or after the implementation date.
Sec. 435.560 Good faith effort exemption.
(a) General. CMS temporarily may exempt a State from the
requirement to implement Sec. Sec. 435.550 through 435.559 and 435.561
through 435.563 in accordance with Sec. 435.559 if--
(1) A State submits a request that includes information on all of
the criteria specified in paragraph (b) of this section; and
(2) CMS determines that, based on the information submitted, the
State is demonstrating a good faith effort to comply with the
implementing the requirements of Sec. Sec. 435.550 through 435.559 and
435.561 through 435.563.
(b) Criteria for good faith effort determination. CMS will consider
the following criteria when determining whether a State is
demonstrating a good faith effort:
(1) Any actions taken by the State toward implementing the
community engagement requirement;
(2) Any significant barriers to or challenges in meeting such
requirements, including those related to funding, design, development,
procurement, or installation of necessary systems or resources;
(3) The State's detailed plan and timeline and milestones for fully
implementing the community engagements requirement; and
(4) Any exigent circumstances, such as an administrative or other
emergency beyond the agency's control, impacting the State's ability to
implement the community engagement requirement consistent with Sec.
435.559.
(c) Duration of exemption. An exemption granted under paragraph (a)
of this section shall expire no later than December 31, 2028, and may
not be renewed beyond such date.
(1) CMS will approve initial good faith effort exemptions for a
period not to exceed 6 months.
(2) CMS may grant one or more extensions of an exemption if the
State continues to demonstrate a good faith effort toward full
implementation of Sec. Sec. 435.550 through 435.559 and 435.561
through 435.563.
(3) The length of any extension granted under paragraph (c)(2) of
this section shall be determined by CMS based on its assessment of the
State's progress and review of an updated implementation timeline and
additional information submitted by the State in accordance with
paragraph (d) of this section.
(4) CMS may terminate an exemption granted under paragraph (a) of
this section prior to the expiration date of such exemption, if CMS
determines that the State has--
(i) Failed to comply with the reporting requirements described in
paragraph (d) of this section; or
(ii) Based on the information provided pursuant to paragraph (d) of
this section, failed to make a continued good faith effort toward
implementing Sec. Sec. 435.550 through 435.559 and 435.561 through
435.563.
(d) Reporting requirements. A State granted an exemption under
paragraph (a) of this section must submit to CMS--
(1) A quarterly report on the State's status in achieving the
milestones toward fully implementing Sec. Sec. 435.550 through 435.562
and 435.564 through 435.563; and
(2) Information on specific risks or newly identified barriers or
challenges to fully implementing the community engagement requirement,
including the State's plan to mitigate such risks, barriers, or
challenges and any additional details as requested in a form and
cadence as specified by CMS.
Sec. 435.561 State requirements for outreach.
(a) Outreach. The agency must provide notice, in a manner and
frequency described in this section, of the requirement to demonstrate
community engagement under this subpart to individuals who are--
(1) Eligible to enroll or are enrolled under Sec. 435.119; or
(2) Otherwise eligible to enroll or are enrolled in a demonstration
project under section 1115(a)(2) of the Act that provides coverage
equivalent to minimum essential coverage requirements as defined under
Sec. 435.4, and are--
(i) At least 19 and under 65 years of age;
(ii) Not pregnant;
(iii) Not entitled to or enrolled for benefits under part A of
title XVIII or enrolled for benefits under part B of title XVIII; and
(iv) Not otherwise eligible to enroll under the State plan.
(b) Frequency of outreach. The agency must notify individuals
described in paragraph (a) of this section of the requirement to
demonstrate community engagement--
(1) Three months plus the number of months specified by the State
under Sec. 435.556(a)(1)--
(i) Prior to January 1, 2027, or, if applicable, prior to the
State's earlier implementation date as elected by the state under Sec.
435.559(b); or
(ii) For States that later elect to implement the eligibility group
described at Sec. 435.119, or a section 1115
[[Page 33479]]
demonstration project described in paragraph (a)(2) of this section,
prior to the effective date of such eligibility expansion;
(2) Upon enrollment, during the period of time between the initial
outreach notice and implementation of the community engagement
requirement described in paragraph (b)(1) of this section; and
(3) Periodically as follows--
(i) When such individual is determined or redetermined eligible at
application, at renewal described at section 1902(e)(14)(L) of the Act
and Sec. 435.916, or based on a change in circumstances;
(ii) When the State elects the short-term hardship exception under
Sec. 435.555(a);
(iii) On each occasion on which a short-term hardship exception
relating to an event described in Sec. 435.555(d)(2) becomes available
to applicable individuals or the State effectuates the short-term
hardship event described in Sec. 435.555(d)(3);
(iv) When the State reduces a beneficiary's eligibility and sends
the advance notice described in Sec. 431.211 of this subchapter for:
(A) The deselection of the short-term hardship exception under
Sec. 435.555(a);
(B) The anticipated expiration of a short-term hardship event
described in Sec. 435.555(d)(2) and (3); and
(C) The loss of a beneficiary's status as a specified excluded
individual under Sec. 435.554; and
(v) Upon request by CMS, if State-reported monitoring data under
Sec. 435.562 or other information indicate a need for increased
outreach or a potential compliance issue with Sec. Sec. 435.550
through 435.562, consistent with Sec. 435.562(e)(2).
(c) Content of outreach notice. The notice required under paragraph
(a) of this section must be provided in a manner consistent with Sec.
435.905(b) and include information on--
(1) How to comply with the requirement to demonstrate community
engagement under 1902(xx) of the Act, including--
(i) An explanation of the exceptions to such requirement under
Sec. 435.553, including short-term hardship exceptions under Sec.
435.555, if elected by the State;
(ii) Who is an applicable individual as defined at Sec. 435.551,
including an explanation of exclusions from such definition under Sec.
435.554;
(iii) The number of months an applicable individual is required to
demonstrate community engagement at renewal under Sec.
435.556(a)(2)(i); and
(iv) How often the State will verify compliance with the community
engagement requirement between renewals if the State elects to conduct
more frequent verifications consistent with Sec. 435.556(a)(2)(ii);
(2) The consequences of noncompliance with the community engagement
requirement on Medicaid eligibility and eligibility for advance
payments of the premium tax credit (APTC) and the premium tax credit
(PTC) used to pay for coverage through a Health Insurance Exchange; and
(3) How to report to the State any change in the individual's
status that could result in the individual qualifying or no longer
qualifying--
(i) For an exception under Sec. 435.553;
(ii) For a short-term hardship exception under Sec. 435.555, if
elected by the State; or
(iii) As a specified excluded individual under Sec. 435.554.
(d) Modalities for delivering outreach notice. The notice must be
provided to the individual--
(1) By regular mail, or, if elected by the individual, in an
electronic format consistent with Sec. 435.918; and
(2) In one or more of the following additional modalities:
(i) The individual's electronic account;
(ii) Telephone;
(iii) Text message; or
(iv) Other commonly available electronic means.
(e) Coordination of outreach and other notices. The agency may--
(1) Provide the outreach notice described in this section with an
eligibility determination notice described in Sec. 435.917 or other
communication from the agency to the individual.
(2) Utilize managed care organizations (MCOs), prepaid inpatient
health plans (PIHPs), prepaid ambulatory health plans (PAHPs), primary
care case managers (PCCMs), and PCCM entities, as defined at Sec.
438.2 of this subchapter, to notify their enrollees of the requirement
to demonstrate community engagement consistent with this section
through one or more of the modalities described in paragraph (d)(2) of
this section.
Sec. 435.562 Requirements for States to submit data for monitoring
community engagement.
(a) Basis. This section implements section 1902(a)(6) and (a)(75)
of the Act.
(b) Definitions. As used in this section--
(1) Timely means that all data for required data elements are
submitted according to the cadence and not later than the deadline
specified by CMS.
(2) Complete means that all data for required data elements are
reported.
(3) Sufficient quality means that all data for required data
elements are reported in a form and manner that adheres to
specifications prescribed by CMS.
(c) Reporting requirement. For data about activities described in
Sec. Sec. 435.550 through 435.563 occurring on or after the State's
implementation date under Sec. 435.559, each State must submit to CMS
the required data for the data elements described in paragraph (d) of
this section to monitor enrollment, retention, and eligibility
processes. Such data must be timely, complete, and of sufficient
quality.
(d) Required data elements. States must submit data for the
following categories for individuals who apply for and are receiving
medical assistance, including individuals subject to the requirements
of Sec. Sec. 435.550 through 435.563:
(1) Enrollment totals of individuals receiving medical assistance.
(2) Application and renewal processing and timeliness, including
information, if relevant, about pending applications and renewals that
exceed the timeliness standards.
(3) Outcomes of determinations and redeterminations of eligibility.
(4) Population counts of individuals subject to and their
compliance with the requirements of Sec. Sec. 435.550 through 435.563,
including their manner of compliance.
(5) Any other data specified by CMS to monitor State implementation
of Sec. Sec. 435.550 through 435.563.
(e) Corrective action and additional outreach notices. The agency
may be subject to corrective action under section 1904 of the Act,
additional data collection, or a requirement to send additional
outreach notices under Sec. 435.561(b)(3)(v), when--
(1) Reported data are not timely, complete, or of sufficient
quality; or
(2) Reported data or other available information indicate a failure
to comply substantially with Sec. Sec. 435.550 through 435.562, or
determination and/or redetermination outcomes indicate a need for
increased outreach.
Sec. 435.563 Prohibition of waivers of the community engagement
requirement.
(a) CMS will not approve a section 1115 demonstration project that
waives, in whole or in part, the community engagement provisions of
section 1902(xx) of the Act.
(b) A State implementing the community engagement provisions of
section 1902(xx) of the Act through section 1115 demonstration
authority must ensure compliance with each of the requirements of
section 1902(xx) of the Act.
[[Page 33480]]
8. Section 435.907 is amended by--
a. Removing paragraph (c)(4); and
b. Revising paragraph (d).
The revision reads as follows:
Sec. 435.907 Application.
* * * * *
(d) Prohibition on requiring in-person interviews. The agency may
not require an in-person interview as part of the application process
for a determination of eligibility using MAGI-based income. This
paragraph (d) sunsets on October 1, 2034. CMS will follow applicable
rulemaking procedures to ensure that policy governing in-person
interviews are implemented and effective on October 1, 2034, replacing
the policy scheduled to sunset on that date for the period until
October 1, 2034.
* * * * *
0
9. Section 435.911 is amended by revising paragraph (c) introductory
text and adding paragraph (c)(4) to read as follows:
Sec. 435.911 Determination of eligibility.
* * * * *
(c) For each individual who has submitted an application described
in Sec. 435.907 or whose eligibility is being renewed in accordance
with Sec. 435.916 and who meets the non-financial requirements for
eligibility (or for whom the agency is providing a reasonable
opportunity to verify citizenship or immigration status in accordance
with Sec. 435.956(b)), the State Medicaid agency must comply with the
following--
* * * * *
(4) The provisions of this paragraph (c) sunset on October 1, 2034.
CMS will follow applicable rulemaking procedures to ensure that policy
governing determinations of eligibility are implemented and effective
on October 1, 2034, replacing the policy scheduled to sunset on that
date for the period until October 1, 2034.
* * * * *
0
10. Section 435.912 is revised to read as follows:
Sec. 435.912 Timely determination of eligibility.
(a) For purposes of this section--
(1) Timeliness standards refer to the maximum period of time in
which every applicant is entitled to a determination of eligibility,
subject to the exceptions in paragraph (e) of this section.
(2) Performance standards are overall standards for determining
eligibility in an efficient and timely manner across a pool of
applicants, and include standards for accuracy and consumer
satisfaction, but do not include standards for an individual
applicant's determination of eligibility.
(b) Consistent with guidance issued by the Secretary, the agency
must establish in its State plan timeliness and performance standards
for promptly and without undue delay--
(1) Determining eligibility for Medicaid for individuals who submit
applications to the single State agency or its designee.
(2) Determining potential eligibility for, and transferring
individuals' electronic accounts to, other insurance affordability
programs pursuant to Sec. 435.1200(e).
(3) Determining eligibility for Medicaid for individuals whose
accounts are transferred from other insurance affordability programs,
including at initial application as well as at a regularly-scheduled
renewal or due to a change in circumstances.
(c)(1) The timeliness and performance standards adopted by the
agency under paragraph (b) of this section must cover the period from
the date of application or transfer from another insurance
affordability program to the date the agency notifies the applicant of
its decision or the date the agency transfers the individual to another
insurance affordability program in accordance with Sec. 435.1200(e)
and must comply with the requirements of paragraph (c)(2) of this
section, subject to additional guidance issued by the Secretary to
promote accountability and consistency of high quality consumer
experience among States and between insurance affordability programs.
(2) Timeliness and performance standards included in the State plan
must account for--
(i) The capabilities and cost of generally available systems and
technologies;
(ii) The general availability of electronic data matching and ease
of connections to electronic sources of authoritative information to
determine and verify eligibility;
(iii) The demonstrated performance and timeliness experience of
State Medicaid, CHIP and other insurance affordability programs, as
reflected in data reported to the Secretary or otherwise available; and
(iv) The needs of applicants, including applicant preferences for
mode of application (such as through an internet website, telephone,
mail, in-person, or other commonly available electronic means), as well
as the relative complexity of adjudicating the eligibility
determination based on household, income or other relevant information.
(3) Except as provided in paragraph (e) of this section, the
determination of eligibility for any applicant may not exceed--
(i) 90 days for applicants who apply for Medicaid on the basis of
disability; and
(ii) 45 days for all other applicants.
(d) The agency must inform applicants of the timeliness standards
adopted in accordance with this section.
(e) The agency must determine eligibility within the standards
except in unusual circumstances, for example--
(1) When the agency cannot reach a decision because the applicant
or an examining physician delays or fails to take a required action; or
(2) When there is an administrative or other emergency beyond the
agency's control.
(3) When the agency is unable to meet the standards for applicants
who are provided a notice of noncompliance to demonstrate community
engagement due to the 30-calendar day period that States must provide
for the individual to respond to such notice at Sec. 435.558.
(f) The agency must document the reasons for delay in the
applicant's case record.
(g) The agency must not use the time standards--
(1) As a waiting period before determining eligibility; or
(2) As a reason for denying eligibility (because it has not
determined eligibility within the time standards).
(h) The provisions of this section sunset on October 1, 2034. CMS
will follow applicable rulemaking procedures to ensure that policies
governing timeliness standards for Medicaid eligibility are implemented
and effective on October 1, 2034, replacing the policies scheduled to
sunset on that date.
0
11. Section 435.916 is revised to read as follows:
Sec. 435.916 Periodic renewal of Medicaid eligibility.
(a) Renewal of individuals whose Medicaid eligibility is based on
modified adjusted gross income methods (MAGI). (1) Except as provided
in paragraph (d) of this section, the eligibility of Medicaid
beneficiaries whose financial eligibility is determined using MAGI-
based income must be renewed once every 12 months, and no more
frequently than once every 12 months.
(2) Renewal on basis of information available to agency. The agency
must make a redetermination of eligibility without requiring
information from the individual if able to do so based on reliable
information contained in the individual's account or other more
[[Page 33481]]
current information available to the agency, including but not limited
to information accessed through any data bases accessed by the agency
under Sec. Sec. 435.948, 435.949, and 435.956. If the agency is able
to renew eligibility based on such information, the agency must,
consistent with the requirements of this subpart and part 431, subpart
E of this subchapter, and notify the individual--
(i) Of the eligibility determination, and basis; and
(ii) That the individual must inform the agency, through any of the
modes permitted for submission of applications under Sec. 435.907(a),
if any of the information contained in such notice is inaccurate, but
that the individual is not required to sign and return such notice if
all information provided on such notice is accurate.
(3) Use of a pre-populated renewal form. If the agency cannot renew
eligibility in accordance with paragraph (a)(2) of this section, the
agency must--
(i) Provide the individual with--
(A) A renewal form containing information, as specified by the
Secretary, available to the agency that is needed to renew eligibility.
(B) At least 30 days from the date of the renewal form to respond
and provide any necessary information through any of the modes of
submission specified in Sec. 435.907(a), and to sign the renewal form
in a manner consistent with Sec. 435.907(f);
(C) Notice of the agency's decision concerning the renewal of
eligibility in accordance with part 431, subpart E of this subchapter;
(ii) Verify any information provided by the beneficiary in
accordance with Sec. Sec. 435.945 through 435.956;
(iii) Reconsider in a timely manner the eligibility of an
individual who is terminated for failure to submit the renewal form or
necessary information, if the individual subsequently submits the
renewal form within 90 days after the date of termination, or a longer
period elected by the State, without requiring a new application; and
(iv) Not require an individual to complete an in-person interview
as part of the renewal process.
(b) Redetermination of individuals whose Medicaid eligibility is
determined on a basis other than modified adjusted gross income. The
agency must redetermine the eligibility of Medicaid beneficiaries
excepted from modified adjusted gross income under Sec. 435.603(j), or
circumstances that may change, at least every 12 months. The agency
must make a redetermination of eligibility in accordance with the
provisions of paragraph (a)(2) of this section, if sufficient
information is available to do so. The agency may adopt the procedures
described at paragraph (a)(3) of this section for individuals whose
eligibility cannot be renewed in accordance with paragraph (a)(2) of
this section.
(1) The agency may consider blindness as continuing until the
reviewing physician under Sec. 435.531 determines that a beneficiary's
vision has improved beyond the definition of blindness contained in the
plan; and
(2) The agency may consider disability as continuing until the
review team, under Sec. 435.541, determines that a beneficiary's
disability no longer meets the definition of disability contained in
the plan.
(c) Procedures for reporting changes. The agency must have
procedures designed to ensure that beneficiaries make timely and
accurate reports of any change in circumstances that may affect their
eligibility and that such changes may be reported through any of the
modes for submission of applications described in Sec. 435.907(a).
(d) Agency action on information about changes. (1) Consistent with
the requirements of Sec. 435.952, the agency must promptly redetermine
eligibility between regular renewals of eligibility described in
paragraphs (b) and (c) of this section whenever it receives information
about a change in a beneficiary's circumstances that may affect
eligibility.
(i) For renewals of Medicaid beneficiaries whose financial
eligibility is determined using MAGI-based income, the agency must
limit any requests for additional information from the individual to
information relating to such change in circumstance.
(ii) If the agency has enough information available to it to renew
eligibility with respect to all eligibility criteria, the agency may
begin a new 12-month renewal period under paragraph (a) or (b) of this
section.
(2) If the agency has information about anticipated changes in a
beneficiary's circumstances that may affect his or her eligibility, it
must redetermine eligibility at the appropriate time based on such
changes.
(e) Information requests. The agency may request from beneficiaries
only the information needed to renew eligibility. Requests for non-
applicant information must be conducted in accordance with Sec.
435.907(e).
(f) Consideration for other bases of eligibility and other
insurance affordability programs. Determination of ineligibility and
transmission of data pertaining to individuals no longer eligible for
Medicaid.
(1) Prior to making a determination of ineligibility, the agency
must consider all bases of eligibility, consistent with Sec. 435.911.
(2) For individuals determined ineligible for Medicaid, the agency
must determine potential eligibility for other insurance affordability
programs and comply with the procedures set forth in Sec. 435.1200(e).
(g) Renewal form and notice format. Any renewal form or notice must
be accessible to persons who are limited English proficient and persons
with disabilities, consistent with Sec. 435.905(b).
(h) Sunset date. The provisions of this section sunset on October
1, 2034. CMS will follow applicable rulemaking procedures to ensure
that policies governing the periodic renewals of Medicaid eligibility
and redeterminations based on changes in circumstances are implemented
and effective on October 1, 2034, replacing the policies scheduled to
sunset on that date.
Sec. 435.919 [Removed]
0
12. Section 435.919 is removed.
Sec. 435.945 [Amended]
0
13. Section 435.945 is amended in paragraph (j) by removing the phrase
``provisions set forth in Sec. Sec. 435.940 through 435.956 of this
subpart'' and adding in its place ``provisions set forth in Sec.
435.557 and Sec. Sec. 435.940 through 435.956''.
Sec. 435.1200 [Amended]
0
14. Section 435.1200 is amended in paragraph (e)(1) introductory text
by removing the phrase ``(regarding regularly-scheduled renewals of
eligibility) or Sec. 435.919 (regarding changes in circumstances)''.
PART 438--MANAGED CARE
0
15. The authority citation for part 438 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
16. Section 438.58 is revised to read as follows:
Sec. 438.58 Conflict of interest safeguards.
(a) As a condition for contracting with MCOs, PIHPs, or PAHPs, a
State must have in effect safeguards against conflict of interest on
the part of State and local officers and employees and agents of the
State who have responsibilities relating to the MCO, PIHP, or PAHP
contracts or the enrollment processes specified in Sec. 438.54(b).
These safeguards must be at least as effective as the safeguards
specified in chapter 21 of the Office of
[[Page 33482]]
Federal Procurement Policy Act (41 U.S.C. 2101-2107).
(b) A State may not use an MCO, PIHP, PAHP, or other contractor to
determine beneficiary compliance with the community engagement
requirement in part 435, subpart F of this subchapter, unless the
entity is not, and has no direct or indirect financial relationship
with, an MCO, PIHP, or PAHP that is responsible for providing or
arranging for covered services for individuals enrolled with it under
its contract with the State.
PART 457--ALLOTMENTS AND GRANTS TO STATES
0
17. The authority citation for part 457 continues to read as follows:
Authority: 42 U.S.C. 1302.
0
18. Section 457.340 is amended by revising the heading for paragraph
(d) and paragraph (d)(1) to read as follows:
Sec. 457.340 Application for and enrollment in CHIP.
* * * * *
(d) Timely determination of eligibility. (1) The terms in Sec.
435.912 of this chapter, exclusive of Sec. 435.912(e)(3), apply
equally to CHIP, except that standards for transferring electronic
accounts to other insurance affordability programs are pursuant to
Sec. 457.350 and the standards for receiving applications from other
insurance affordability programs are pursuant to Sec. 457.348. The
provisions of this paragraph (d)(1) sunset on October 1, 2034. CMS will
follow applicable rulemaking procedures to ensure that policies
governing timely determinations of CHIP eligibility are implemented and
effective on October 1, 2034, replacing the policies scheduled to
sunset on that date.
* * * * *
Sec. 457.344 [Removed]
0
19. Section 457.344 is removed.
0
20. Section 457.960 is added to read as follows:
Sec. 457.960 Reporting changes in eligibility and redetermining
eligibility.
If the State requires reporting of changes in circumstances that
may affect the enrollee's eligibility for child health assistance, the
State must--
(a) Establish procedures to ensure that enrollees make timely and
accurate reports of any such change; and
(b) Promptly redetermine eligibility when the State has information
about these changes.
(c) This section sunsets on October 1, 2034. CMS will follow
applicable rulemaking procedures to ensure that policy governing
changes in circumstances and redeterminations of CHIP eligibility are
implemented and effective on October 1, 2034, replacing the policy
scheduled to sunset on that date for the period until October 1, 2034.
PART 600--ADMINISTRATION, ELIGIBILITY, ESSENTIAL HEALTH BENEFITS,
PERFORMANCE STANDARDS, SERVICE DELIVERY REQUIREMENTS, PREMIUM AND
COST SHARING, ALLOTMENTS, AND RECONCILIATION
0
21. The authority citation for part 600 is revised to read as follows:
Authority: 42 U.S.C. 300gg, 1395, and 18051.
0
22. Section 600.320 is amended by revising paragraph (b) to read as
follows:
Sec. 600.320 Determination of eligibility for and enrollment in a
standard health plan.
* * * * *
(b) Timely determinations. The terms of Sec. 435.912 of this
chapter (relating to timely determinations of eligibility under the
Medicaid program) apply to eligibility determinations for enrollment in
a standard health plan exclusive of Sec. 435.912(c)(3)(i) and (e)(3).
The standards established by the State must be included in the BHP
Blueprint.
* * * * *
Robert F. Kennedy, Jr.,
Secretary, Department of Health and Human Services.
[FR Doc. 2026-11094 Filed 6-1-26; 4:45 pm]
BILLING CODE 4120-01-P