CFR 2017 Title42a Vol4

Title 42
Public Health
Parts 430 to 481
Revised as of October 1, 2017
Containing a codification of documents

of general applicability and future effect
As of October 1, 2017
Published by the Office of the Federal Register

National Archives and Records Administration
as a Special Edition of the Federal Register
Pmangrum on DSK3GDR082PROD with CFR
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Table of Contents
Page
Explanation ................................................................................................ v
Title 42:
Chapter IV—Centers for Medicare & Medicaid Services, Depart-

ment of Health and Human Services (Continued) ........................ 3
Finding Aids:
Table of CFR Titles and Chapters ....................................................... 705
Alphabetical List of Agencies Appearing in the CFR ......................... 725
List of CFR Sections Affected ............................................................. 735

iii
Cite this Code: CFR
To cite the regulations in

this volume use title,
part and section num-
ber. Thus, 42 CFR 430.0
refers to title 42, part
430, section 0.
iv
Explanation
The Code of Federal Regulations is a codification of the general and permanent
rules published in the Federal Register by the Executive departments and agen-
cies of the Federal Government. The Code is divided into 50 titles which represent
broad areas subject to Federal regulation. Each title is divided into chapters
which usually bear the name of the issuing agency. Each chapter is further sub-
divided into parts covering specific regulatory areas.
Each volume of the Code is revised at least once each calendar year and issued
on a quarterly basis approximately as follows:
Title 1 through Title 16..............................................................as of January 1
Title 17 through Title 27 .................................................................as of April 1
Title 28 through Title 41 ..................................................................as of July 1
Title 42 through Title 50 .............................................................as of October 1
The appropriate revision date is printed on the cover of each volume.
LEGAL STATUS
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U.S.C. 1507). The Code of Federal Regulations is prima facie evidence of the text
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Many agencies have begun publishing numerous OMB control numbers as amend-
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PAST PROVISIONS OF THE CODE
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vi
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OLIVER A. POTTS,
Director,
Office of the Federal Register.
October 1, 2017.
vii
THIS TITLE
Title 42—PUBLIC HEALTH is composed of five volumes. The parts in these vol-
umes are arranged in the following order: Parts 1–399, parts 400–413, parts 414–
429, parts 430–481, and part 482 to end. The first volume (parts 1–399) contains
current regulations issued under chapter I—Public Health Service (HHS). The
second, third, and fourth volumes (parts 400–413, parts 414–429, and parts 430–481)
include regulations issued under chapter IV—Centers for Medicare & Medicaid
Services (HHS) and the fifth volume (part 482 to end) contains the remaining
regulations in chapter IV and the regulations issued under chapter V by the Of-
fice of Inspector General-Health Care (HHS). The contents of these volumes rep-
resent all current regulations codified under this title of the CFR as of October
1, 2017.
For this volume, Cheryl E. Sirofchuck was Chief Editor. The Code of Federal
Regulations publication program is under the direction of John Hyrum Martinez,
assisted by Stephen J. Frattini.
ix
Title 42—Public Health
(This book contains parts 430 to 481)
Part
CHAPTER IV—Centers for Medicare & Medicaid Services, De-

partment of Health and Human Services (Continued) ....... 430
CHAPTER IV—CENTERS FOR MEDICARE &
MEDICAID SERVICES, DEPARTMENT OF HEALTH
AND HUMAN SERVICES (CONTINUED)
EDITORIAL NOTE: Nomenclature changes to chapter IV appear at 66 FR 39452, July 31, 2001;
67 FR 36540, May 24, 2002; 69 FR 18803, Apr. 9, 2004; and 77 FR 29028, July 16, 2012.
SUBCHAPTER C—MEDICAL ASSISTANCE PROGRAMS
Part Page
430 Grants to States for Medical Assistance Programs 5
431 State organization and general administration ...... 22
432 State personnel administration .............................. 75
433 State fiscal administration ..................................... 79
434 Contracts ................................................................. 124
435 Eligibility in the States, District of Columbia, the
Northern Mariana Islands, and American Samoa 127
436 Eligibility in Guam, Puerto Rico, and the Virgin
Islands .................................................................. 213
438 Managed care .......................................................... 247
440 Services: General provisions ................................... 329
441 Services: Requirements and limits applicable to
specific services .................................................... 361
442 Standards for payment to nursing facilities and in-
termediate care facilities for Individuals with In-
tellectual Disabilities .......................................... 434
447 Payments for services ............................................. 440
455 Program integrity: Medicaid ................................... 494
42 CFR Ch. IV (10–1–17 Edition)
Part Page
456 Utilization control .................................................. 514
SUBCHAPTER D—STATE CHILDREN’S HEALTH INSURANCE PROGRAMS
(SCHIPs)
457 Allotments and grants to States ............................. 551

SUBCHAPTER E—PROGRAMS OF ALL-INCLUSIVE CARE FOR THE
ELDERLY (PACE)
460 Programs of all-inclusive care for the elderly

(PACE) ................................................................. 625
SUBCHAPTER F—QUALITY IMPROVEMENT ORGANIZATIONS
475 Quality improvement organizations ....................... 662

476 Quality improvement organization review ............. 665
478 Reconsiderations and appeals ................................. 682
480 Acquisition, protection, and disclosure of quality
improvement organization information ............... 688
481 [Reserved]
SUBCHAPTER C—MEDICAL ASSISTANCE PROGRAMS
PART 430—GRANTS TO STATES FOR 430.80 Authority of the presiding officer.

430.83 Rights of parties.
MEDICAL ASSISTANCE PROGRAMS 430.86 Discovery.
430.88 Evidence.
Subpart A—Introduction; General
430.90 Exclusion from hearing for mis-
Provisions conduct.
Sec. 430.92 Unsponsored written material.
430.0 Program description. 430.94 Official transcript.
430.1 Scope of subchapter C. 430.96 Record for decision.
430.2 Other applicable Federal regulations. 430.100 Posthearing briefs.
430.3 Appeals under Medicaid. 430.102 Decisions following hearing.
430.5 Definitions. 430.104 Decisions that affect FFP.
Subpart B—State Plans AUTHORITY: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
430.10 The State plan.
430.12 Submittal of State plans and plan SOURCE: 53 FR 36571, Sept. 21, 1988, unless
amendments. otherwise noted.
430.14 Review of State plan material.
430.15 Basis and authority for action on Subpart A—Introduction; General
State plan material.
430.16 Timing and notice of action on State Provisions
plan material.
430.18 Administrative review of action on § 430.0 Program description.
State plan material. Title XIX of the Social Security Act,
430.20 Effective dates of State plans and
enacted in 1965, authorizes Federal
plan amendments.
430.25 Waivers of State plan requirements. grants to States for medical assistance
to low-income persons who are age 65
Subpart C—Grants; Reviews and Audits; or over, blind, disabled, or members of
Withholding for Failure To Comply; De- families with dependent children or
ferral and Disallowance of Claims; Re- qualified pregnant women or children.
duction of Federal Medicaid Payments The program is jointly financed by the
Federal and State governments and ad-
430.30 Grants procedures.
430.32 Program reviews.
ministered by States. Within broad
430.33 Audits. Federal rules, each State decides eligi-
430.35 Withholding of payment for failure to ble groups, types and range of services,
comply with Federal requirements. payment levels for services, and admin-
430.38 Judicial review. istrative and operating procedures.
430.40 Deferral of claims for FFP. Payments for services are made di-
430.42 Disallowance of claims for FFP. rectly by the State to the individuals
430.45 Reduction of Federal Medicaid pay-
ments.
or entities that furnish the services.
430.48 Repayment of Federal funds by in-
stallments. § 430.1 Scope of subchapter C.
The regulations in subchapter C set
Subpart D—Hearings on Conformity of forth State plan requirements, stand-
State Medicaid Plans and Practice to ards, procedures, and conditions for ob-
Federal Requirements taining Federal financial participation
430.60 Scope. (FFP). Each part (or subpart of sec-
430.62 Records to be public. tion) in the subchapter describes the
430.63 Filing and service of papers. specific statutory basis for the regula-
430.64 Suspension of rules. tion. However, where the basis is the
430.66 Designation of presiding officer for Secretary’s general authority to issue
hearing.
regulations for any program under the
430.70 Notice of hearing or opportunity for
hearing. Act (section 1102 of the Act), or his

430.72 Time and place of hearing. general authority to prescribe State
430.74 Issues at hearing. plan requirements needed for proper
430.76 Parties to the hearing. and efficient administration of the
§ 430.2 42 CFR Ch. IV (10–1–17 Edition)
plan (section 1902(a)(4)), those statu- pendix A, lists all the types of disputes
tory provisions are simply cited with- that the Board hears.
out further description.
[53 FR 36571, Sept. 21, 1988, as amended at 56
§ 430.2 Other applicable Federal regu- FR 8845, Mar. 1, 1991]
lations.
§ 430.5 Definitions.
Other regulations applicable to State
Medicaid programs include the fol- As used in this subchapter, unless the
lowing: context indicates otherwise—
(a) 5 CFR part 900, subpart F, Admin- Contractor means any entity that
istration of the Standards for a Merit contracts with the State agency, under
System of Personnel Administration. the State plan, in return for a pay-
(b) The following HHS Regulations in ment, to process claims, to provide or
45 CFR subtitle A: pay for medical services, or to enhance
the State agency’s capability for effec-
Part 16—Procedures of the Departmental Ap-
peals Board.
tive administration of the program.
Part 75—Uniform Administrative Require- Representative has the meaning given
ments, Cost Principles, and Audit Require- the term by each State consistent with
ments for HHS Awards. its laws, regulations, and policies.
Part 80—Nondiscrimination Under Programs
Receiving Federal Assistance Through the [67 FR 41094, June 14, 2002]
Department of Health and Human Serv-
ices: Effectuation of Title VI of the Civil Subpart B—State Plans
Rights Act of 1964.
Part 81—Practice and Procedure for Hearings § 430.10 The State plan.
Under 45 CFR part 80.
Part 84—Nondiscrimination on the Basis of The State plan is a comprehensive
Handicap in Programs and Activities Re- written statement submitted by the
ceiving or Benefiting From Federal Finan- agency describing the nature and scope
cial Assistance.
of its Medicaid program and giving as-
Part 95—General Administration—grant pro-
grams (public assistance and medical assurance that it will be administered in
sistance). conformity with the specific require-
ments of title XIX, the regulations in
FR 8845, Mar. 1, 1991; 81 FR 3011, Jan. 20, 2016]
this Chapter IV, and other applicable
official issuances of the Department.
§ 430.3 Appeals under Medicaid. The State plan contains all informa-
tion necessary for CMS to determine
Three distinct types of disputes may
whether the plan can be approved to
arise under Medicaid.
(a) Compliance with Federal require- serve as a basis for Federal financial
ments. Disputes that pertain to whether participation (FFP) in the State pro-
a State’s plan or proposed plan amend- gram.
ments, or its practice under the plan
§ 430.12 Submittal of State plans and
meet or continue to meet Federal re- plan amendments.
quirements are subject to the hearing
provisions of subpart D of this part. (a) Format. A State plan for Medicaid
(b) FFP in Medicaid expenditures. Dis- consists of a standardized template,
putes that pertain to disallowances of issued and updated by CMS, that in-
FFP in Medicaid expenditures (manda- cludes both basic requirements and in-
tory grants) are heard by the Depart- dividualized content that reflects the
mental Appeals Board (the Board) in characteristics of the State’s program.
accordance with procedures set forth in The Secretary will periodically update
45 CFR part 16. the template and format specifications
(c) Discretionary grants disputes. Dis- for State plans and plan amendments
putes pertaining to discretionary through a process consistent with the
grants, such as grants for special dem- requirements of the Paperwork Reduc-
tion Act.
onstration projects under sections 1110

and 1115 of the Act, which may be (b) Governor’s review—(1) Basic rules.
awarded to a Medicaid agency, are also Except as provided in paragraph (b)(2)
heard by the Board. 45 CFR part 16, ap- of this section—
Centers for Medicare & Medicaid Services, HHS § 430.16
(i) The Medicaid agency must submit § 430.15 Basis and authority for action
the State plan and State plan amend- on State plan material.
ments to the State Governor or his des- (a) Basis for action. (1) Determina-
ignee for review and comment before tions as to whether State plans (includ-
submitting them to the CMS regional
ing plan amendments and administra-
office.
tive practice under the plans) origi-
(ii) The plan must provide that the
nally meet or continue to meet the re-
Governor will be given a specific period
quirements for approval are based on
of time to review State plan amend-
relevant Federal statutes and regula-
ments, long-range program planning
tions.
projections, and other periodic reports
on the Medicaid program, excluding (2) Guidelines are furnished to assist
periodic statistical, budget and fiscal in the interpretation of the regula-
reports. tions.
(iii) Any comments from the Gov- (b) Approval authority. The Regional
ernor must be submitted to CMS with Administrator exercises delegated au-
the plan or plan amendment. thority to approve the State plan and
(2) Exceptions. (i) Submission is not plan amendments on the basis of policy
required if the Governor’s designee is statements and precedents previously
the head of the Medicaid agency. approved by the Administrator.
(ii) Governor’s review is not required (c) Disapproval authority. (1) The Ad-
for preprinted plan amendments that ministrator retains authority for de-
are developed by CMS if they provide termining that proposed plan material
absolutely no options for the State. is not approvable or that previously ap-
(c) Plan amendments. (1) The plan proved material no longer meets the
must provide that it will be amended requirements for approval.
whenever necessary to reflect— (2) The Administrator does not make
(i) Changes in Federal law, regula- a final determination of disapproval
tions, policy interpretations, or court without first consulting the Secretary.
decisions; or
(ii) Material changes in State law, or- § 430.16 Timing and notice of action on
ganization, or policy, or in the State’s State plan material.
operation of the Medicaid program. For (a) Timing. (1) A State plan or plan
changes related to advance directive amendment will be considered ap-
requirements, amendments must be proved unless CMS, within 90 days
submitted as soon as possible, but no after receipt of the plan or plan amend-
later than 60 days from the effective ment in the regional office, sends the
date of the change to State law con- State—
cerning advance directives. (i) Written notice of disapproval; or
(2) Prompt submittal of amendments (ii) Written notice of any additional
is necessary— information it needs in order to make
(i) So that CMS can determine a final determination.
whether the plan continues to meet the (2) If CMS requests additional infor-
requirements for approval; and mation, the 90-day period for CMS ac-
(ii) To ensure the availability of FFP tion on the plan or plan amendment be-
in accordance with § 430.20. gins on the day it receives that infor-
[53 FR 36571, Sept. 21, 1988, as amended at 60 mation.
FR 33293, June 27, 1995; 81 FR 86447, Nov. 30, (b) Notice of final determination. (1)
2016] The Regional Administrator or the Ad-
ministrator notifies the Medicaid agen-
§ 430.14 Review of State plan material. cy of the approval of a State plan or
CMS regional staff reviews State plan amendment.
plans and plan amendments, discusses (2) Only the Administrator gives no-
any issues with the Medicaid agency, tice of disapproval of a State plan or
and consults with central office staff plan amendment.
on questions regarding application of
Federal policy.
§ 430.18 42 CFR Ch. IV (10–1–17 Edition)
§ 430.18 Administrative review of ac- groups eligible for services provided

tion on State plan material. under the approved plan, the effective
(a) Request for reconsideration. Any date is determined in accordance with
State dissatisfied with the Administra- paragraph (a) of this section.
tor’s action on plan material under (2) For a plan amendment that
§ 430.15 may, within 60 days after re- changes the State’s payment method
ceipt of the notice provided under and standards, the rules of § 447.256 of
§ 430.16(b), request that the Adminis- this chapter apply.
trator reconsider the issue of whether (3) For other plan amendments, the
the plan or plan amendment conforms effective date may be a date requested
to the requirements for approval. by the State if CMS approves it.
(b) Notice and timing of hearing. (1)
Within 30 days after receipt of the re- [53 FR 36571, Sept. 21, 1988, as amended at 56
FR 8845, Mar. 1, 1991]
quest, the Administrator notifies the
State of the time and place of the hear- § 430.25 Waivers of State plan require-
ing. ments.
(2) The hearing takes place not less
than 30 days nor more than 60 days (a) Scope of section. This section de-
after the date of the notice, unless the scribes the purpose and effect of waiv-
State and the Administrator agree in ers, identifies the requirements that
writing on an earlier or later date. may be waived and the other regula-
(c) Hearing procedures. The hearing tions that apply to waivers, and sets
procedures are set forth in subpart D of forth the procedures that CMS follows
this part. in reviewing and taking action on
(d) Decision. A decision affirming, waiver requests.
modifying, or reversing the Adminis- (b) Purpose of waivers. Waivers are in-
trator’s original determination is made tended to provide the flexibility needed
in accordance with § 430.102. to enable States to try new or different
(e) Effect of hearing decision. (1) De- approaches to the efficient and cost-ef-
nial of Federal funds, if required by the fective delivery of health care services,
Administrator’s original determina- or to adapt their programs to the spe-
tion, will not be delayed pending a cial needs of particular areas or groups
hearing decision. of beneficiaries. Waivers allow excep-
(2) However, if the Administrator de- tions to State plan requirements and
termines that his or her original deci- permit a State to implement innova-
sion was incorrect, CMS pays the State tive programs or activities on a time-
a lump sum equal to any funds incor- limited basis, and subject to specific
rectly denied. safeguards for the protection of bene-
§ 430.20 Effective dates of State plans ficiaries and the program. Detailed
and plan amendments. rules for waivers are set forth in sub-
part B of part 431, subpart A of part 440,
For purposes of FFP, the following and subpart G of part 441 of this chap-
rules apply: ter.
(a) New plans. The effective date of a
(c) Effect of waivers. (1) Waivers under
new plan—
(1) May not be earlier than the first section 1915(b) allow a State to take
day of the quarter in which an approv- the following actions:
able plan is submitted to the regional (i) Implement a primary care case-
office; and management system or a specialty
(2) With respect to expenditures for physician system.
medical assistance, may not be earlier (ii) Designate a locality to act as cen-
than the first day on which the plan is tral broker in assisting Medicaid bene-
in operation on a statewide basis. ficiaries to choose among competing
(b) Plan amendment. (1) For a plan health care plans.
amendment that provides additional (iii) Share with beneficiaries
services to individuals eligible under (through provision of additional serv-

the approved plan, increases the pay- ices) cost-savings made possible
ment amounts for services already in- through the beneficiaries’ use of more
cluded in the plan, or makes additional cost-effective medical care.
(iv) Limit beneficiaries’ choice of gency room if the conditions of para-

providers (except in emergency situa- graph (c)(3) of this section are met.
tions and with respect to family plan- (e) Submittal of waiver request. The
ning services) to providers that fully State Governor, the head of the Med-
meet reimbursement, quality, and uti- icaid agency, or an authorized designee
lization standards, which are estab- may submit the waiver request.
lished under the State plan and are (f) Review of waiver requests. (1) This
consistent with access, quality, and ef- paragraph applies to initial waiver re-
ficient and economical furnishing of quests and to requests for renewal or
care. amendment of a previously approved
(2) A waiver under section 1915(c) of waiver.
the Act allows a State to include as (2) CMS regional and central office
‘‘medical assistance’’ under its plan staff review waiver requests and sub-
home and community based services mit a recommendation to the Adminis-
furnished to beneficiaries who would trator, who—
otherwise need inpatient care that is (i) Has the authority to approve or
furnished in a hospital, SNF, ICF, or deny waiver requests; and
ICF/IID, and is reimbursable under the
(ii) Does not deny a request without
State plan.
first consulting the Secretary.
(3) A waiver under section 1916 (a)(3)
(3) A waiver request is considered ap-
or (b)(3) of the Act allows a State to
proved unless, within 90 days after the
impose a deduction, cost-sharing or
request is received by CMS, the Admin-
similar charge of up to twice the
istrator denies the request, or the Ad-
‘‘nominal charge’’ established under
ministrator or the Regional Adminis-
the plan for outpatient services, if—
trator sends the State a written re-
(i) The outpatient services are request for additional information nec-
ceived in a hospital emergency room essary to reach a final decision. If addi-
but are not emergency services; and tional information is requested, a new
(ii) The State has shown that Med- 90-day period begins on the day the re-
icaid beneficiaries have actually avail- sponse to the additional information
able and accessible to them alternative request is received by the addressee.
services of nonemergency outpatient (g) Basis for approval—(1) Waivers
services. under section 1915 (b) and (c). The Ad-
(d) Requirements that are waived. In ministrator approves waiver requests if
order to permit the activities described the State’s proposed program or activ-
in paragraph (c) of this section, one or ity meets the requirements of the Act
more of the title XIX requirements and the regulations at § 431.55 or sub-
must be waived, in whole or in part. part G of part 441 of this chapter.
(1) Under section 1915(b) of the Act, (2) Waivers under section 1916. The Ad-
and subject to certain limitations, any ministrator approves a waiver under
of the State plan requirements of sec- section 1916 of the Act if the State
tion 1902 of the Act may be waived to shows, to CMS’s satisfaction, that the
achieve one of the purposes specified in Medicaid beneficiaries have available
that section. and accessible to them sources, other
(2) Under section 1915(c) of the Act, than a hospital emergency room, where
the following requirements may be they can obtain necessary non-
waived: emergency outpatient services.
(i) Statewideness—section 1902(a)(1). (h) Effective date and duration of waiv-
(ii) Comparability of services—sec- ers—(1) Effective date. Waivers receive a
tion 1902(a)(10)(B). prospective effective date determined,
(iii) Income and resource rules—sec- with State input, by the Adminis-
tion 1902(a)(10)(C)(i)(III). trator. The effective date is specified in
(3) Under section 1916 of the Act, the letter of approval to the State.
paragraphs (a)(3) and (b)(3) require that (2) Duration of waivers—(i) Home and
any cost-sharing imposed on bene- community-based services under section

ficiaries be nominal in amount, and 1915(c) of the Act. (A) The initial waiver
provide an exception for nonemergency is for a period of 3 years and may be re-
services furnished in a hospital emer- newed thereafter for periods of 5 years.
§ 430.30 42 CFR Ch. IV (10–1–17 Edition)
(B) For waivers that include individ- cover the Federal share of expenditures
uals who are dually eligible for Medi- for services, training, and administra-
care and Medicaid, 5-year initial ap- tion.
proval periods may be granted at the (2) The amount of the quarterly
discretion of the Secretary for waivers grant is determined on the basis of in-
meeting all necessary programmatic, formation submitted by the State
financial and quality requirements, agency (in quarterly estimate and
and in a manner consistent with the in- quarterly expenditure reports) and
terests of beneficiaries and the objec- other pertinent documents.
tives of the Medicaid program. (b) Quarterly estimates. The Medicaid
(ii) Waivers under section 1915(b) of the agency must submit Form CMS–37
Act. (A) The initial waiver is for a pe- (Medicaid Program Budget Report;
riod of 2 years and may be renewed for Quarterly Distribution of Funding Re-
additional periods of up to 2 years as quirements) to the central office (with
determined by the Administrator. a copy to the regional office) 45 days
(B) For waivers that include individ- before the beginning of each quarter.
uals who are dually eligible for Medi- (c) Expenditure reports. (1) The State
care and Medicaid, 5-year initial and must submit Form CMS–64 (Quarterly
renewal approval periods may be grant- Medicaid Statement of Expenditures
ed at the discretion of the Secretary for the Medical Assistance Program) to
for waivers meeting all necessary pro- the central office (with a copy to the
grammatic, financial and quality re- regional office) not later than 30 days
quirements, and in a manner con- after the end of each quarter.
sistent with the interests of bene- (2) This report is the State’s account-
ficiaries and the objectives of the Med- ing of actual recorded expenditures.
icaid program. The disposition of Federal funds may
(iii) Waivers under section 1916 of the not be reported on the basis of esti-
Act. The initial waiver is for a period of mates.
2 years and may be renewed for addi- (d) Grant award—(1) Computation by
tional periods of up to 2 years as deter- CMS. Regional office staff analyzes the
mined by the Administrator. State’s estimates and sends a rec-
(3) Renewal of waivers. (i) A renewal ommendation to the central office.
request must be submitted at least 90 Central office staff considers the
days (but not more than 120 days) be- State’s estimates, the regional office
fore a currently approved waiver ex- recommendations and any other rel-
pires, to provide adequate time for evant information, including any ad-
CMS review. justments to be made under paragraph
(ii) If a renewal request for a section (d)(2) of this section, and computes the
1915(c) waiver proposes a change in grant.
services provided, eligible population, (2) Content of award. The grant award
service area, or statutory sections computation form shows the estimate
waived, the Administrator may con- of expenditures for the ensuring quar-
sider it a new waiver, and approve it ter, and the amounts by which that es-
for a period of three years. timate is increased or decreased be-
[56 FR 8846, Mar. 1, 1991, as amended at 79 FR cause of an underestimate or overesti-
3028, Jan. 16, 2014] mate for prior quarters, or for any of
the following reasons:
Subpart C—Grants; Reviews and (i) Penalty reductions imposed by
law.
Audits; Withholding for Failure (ii) Accounting adjustments.
To Comply; Deferral and Dis- (iii) Deferrals or disallowances.
allowance of Claims; Reduc- (iv) Interest assessments.
tion of Federal Medicaid Pay- (v) Mandated adjustments such as
ments those required by section 1914 of the
Act.
§ 430.30 Grants procedures.
(3) Effect of award. The grant award

(a) General provisions. (1) Once CMS authorizes the State to draw Federal
has approved a State plan, it makes funds as needed to pay the Federal
quarterly grant awards to the State to share of disbursements.
10
(4) Drawing procedure. The draw is cials and the Department’s program of-
through a commercial bank and the ficials.
Federal Reserve system against a con- (2) The reports set forth OIG opinion
tinuing letter of credit certified to the and recommendations regarding the
Secretary of the Treasury in favor of practices it reviewed, and the allow-
the State payee. (The letter of credit ability of the costs it audited.
payment system was established in ac- (3) Cognizant officials of the Depart-
cordance with Treasury Department ment make final determinations on all
regulations—Circular No. 1075.) audit findings.
(e) General administrative requirements. (c) Action on audit exceptions—(1) Con-
With the following exceptions, the pro- currence or clearance. The State agency
visions of 45 CFR 75, which establish has the opportunity of concurring in
uniform administrative requirements the exceptions or submitting addi-
and cost principles, apply to all grants tional facts that support clearance of
made to States under this subpart: the exceptions.
(1) Cost sharing or matching, 45 CFR (2) Appeal. Any exceptions that are
75.306; and not disposed of under paragraph (c)(1)
(2) Financial reporting, 45 CFR 75.341. of this section are included in a dis-
allowance letter that constitutes the
[53 FR 36571, Sept. 21, 1988, as amended at 77 Department’s final decision unless the
FR 31507, May 29, 2012; 81 FR 3011, Jan. 20, State requests reconsideration by the
2016]
Administrator or the Departmental
§ 430.32 Program reviews. Appeals Board. (Specific rules are set
forth in § 430.42.)
(a) Review of State and local adminis- (3) Adjustment. If the decision by the
tration. In order to determine whether Board requires an adjustment of FFP,
the State is complying with the Fed- either upward or downward, a subse-
eral requirements and the provisions of quent grant award promptly reflects
its plan, CMS reviews State and local the amount of increase or decrease.
administration through analysis of the
State’s policies and procedures, on-site [53 FR 36571, Sept. 21, 1988, as amended at 56
FR 8846, Mar. 1, 1991; 77 FR 31507, May 29,
review of selected aspects of agency op- 2012]
eration, and examination of samples of
individual case records. § 430.35 Withholding of payment for
(b) Quality control program. The State failure to comply with Federal re-
itself is required to carry out a con- quirements.
tinuing quality control program as set (a) Basis for withholding. CMS with-
forth in part 431, subpart P, of this holds payments to the State, in whole
chapter. or in part, only if, after giving the
(c) Action on review findings. If Fed- agency reasonable notice and oppor-
eral or State reviews reveal serious tunity for a hearing in accordance with
problems with respect to compliance subpart D of this part, the Adminis-
with any Federal requirement, the trator finds—
State must correct its practice accord- (1) That the plan no longer complies
ingly. with the provisions of section 1902 of
the Act; or
§ 430.33 Audits. (2) That in the administration of the
(a) Purpose. The Department’s Office plan there is failure to comply substan-
of Inspector General (OIG) periodically tially with any of those provisions.
audits State operations in order to de- (Hearings under subpart D are gen-
termine whether— erally not called until a reasonable ef-
(1) The program is being operated in fort has been made to resolve the
a cost-efficient manner; and issues through conferences and discus-
(2) Funds are being properly expended sions. These may be continued even if a
for the purposes for which they were date and place have been set for the
appropriated under Federal and State hearing.)

law and regulations. (b) Noncompliance of the plan. A ques-
(b) Reports. (1) The OIG releases audit tion of noncompliance of a State plan
reports simultaneously to State offi- may arise from an unapprovable
11
§ 430.38 42 CFR Ch. IV (10–1–17 Edition)
change in the approved State plan or set it aside in whole or in part, or, for
the failure of the State to change its good cause, to remand the case for ad-
approved plan to conform to a new Fed- ditional evidence.
eral requirement for approval of State (d) Response to remand. (1) If the court
plans. remands the case, the Administrator
(c) Noncompliance in practice. A ques- may make new or modified findings of
tion of noncompliance in practice may fact and may modify his or her pre-
arise from the State’s failure to actu- vious determination.
ally comply with a Federal require- (2) The Administrator will certify to
ment, regardless of whether the plan the court the transcript and record of
itself complies with that requirement. the further proceedings.
(d) Notice and implementation of with- (e) Review by the Supreme Court. The
holding. If the Administrator makes a judgment of the appeals court is sub-
finding of noncompliance under para- ject to review by the U.S. Supreme
graph (a) of this section, the following Court upon certiorari or certification,
rules apply: as provided in 28 U.S.C. 1254.
(1) The Administrator notifies the
State: § 430.40 Deferral of claims for FFP.
(i) That no further payments will be
(a) Requirements for deferral. Payment
made to the State (or that payments
of a claim or any portion of a claim for
will be made only for those portions or
FFP is deferred only if—
aspects of the program that are not af-
fected by the noncompliance); and (1) The Administrator or current Des-
(ii) That the total or partial with- ignee questions its allowability and
holding will continue until the Admin- needs additional information to resolve
istrator is satisfied that the State’s the question; and
plan and practice are, and will con- (2) CMS takes action to defer the
tinue to be, in compliance with Federal claim (by excluding the claimed
requirements. amount from the grant award) within
(2) CMS withholds payments, in 60 days after the receipt of a Quarterly
whole or in part, until the Adminis- Statement of Expenditures (prepared in
trator is satisfied regarding the State’s accordance with CMS instructions)
compliance. that includes that claim.
(b) Notice of deferral and State’s re-
§ 430.38 Judicial review. sponsibility. (1) Within 15 days of the ac-
(a) Right to judicial review. Any State tion described in paragraph (a)(2) of
dissatisfied with the Administrator’s this section, the current Designee
final determination on approvability of sends the State a written notice of de-
plan material (§ 430.18) or compliance ferral that—
with Federal requirements (§ 430.35) has (i) Identifies the type and amount of
a right to judicial review. the deferred claim and specifies the
(b) Petition for review. (1) The State reason for deferral; and
must file a petition for review with the (ii) Requests the State to make avail-
U.S. Court of Appeals for the circuit in able all the documents and materials
which the State is located, within 60 the regional office then believes are
days after it is notified of the deter- necessary to determine the allow-
mination. ability of the claim.
(2) The clerk of the court will file a (2) It is the responsibility of the
copy of the petition with the Adminis- State to establish the allowability of a
trator and the Administrator will file deferred claim.
in the court the record of the pro- (c) Handling of documents and mate-
ceedings on which the determination rials. (1) Within 60 days (or within 120
was based. days if the State requests an extension)
(c) Court action. (1) The court is after receipt of the notice of deferral,
bound by the Administrator’s findings the State must make available to the
of fact if they are supported by sub- regional office, in readily reviewable

stantial evidence. form, all requested documents and ma-
(2) The court has jurisdiction to af- terials except any that it identifies as
firm the Administrator’s decision, to not being available.
12
(2) Regional office staff usually initi- (4) A statement of the amount of
ates review within 30 days after receipt FFP claimed, allowed, and disallowed
of the documents and materials. and the manner in which these
(3) If the current Designee finds that amounts were computed.
the materials are not in readily review- (5) Findings of fact on which the dis-
able form or that additional informa- allowance determination is based or a
tion is needed, he or she promptly noti- reference to other documents pre-
fies the State that it has 15 days to viously furnished to the State or in-
submit the readily reviewable or addi- cluded with the notice (such as a report
tional materials. of a financial review or audit) which
(4) If the State does not provide the contain the findings of fact on which
necessary materials within 15 days, the the disallowance determination is
current Designee disallows the claim. based.
(5) The current Designee has 90 days, (6) Pertinent citations to the law,
after all documentation is available in regulations, guides and instructions
readily reviewable form, to determine supporting the action taken.
the allowability of the claim. (7) A request that the State make ap-
(6) If the current Designee cannot propriate adjustment in a subsequent
complete review of the material within expenditure report.
90 days, CMS pays the claim, subject to (8) Notice of the State’s right to re-
a later determination of allowability. quest reconsideration of the disallow-
(d) Effect of decision to pay a deferred ance and the time allowed to make the
claim. Payment of a deferred claim request.
under paragraph (c)(6) of this section (9) A statement indicating that the
does not preclude a subsequent dis- disallowance letter is the Department’s
allowance based on the results of an final decision unless the State requests
audit or financial review. (If there is a reconsideration under paragraph (b)(2)
subsequent disallowance, the State or (f)(2) of this section.
may request reconsideration as pro- (b) Reconsideration of a disallowance.
vided in paragraph (e)(2) of this sec- (1) The Administrator will reconsider
tion.) Medicaid disallowance determinations.
(e) Notice and effect of decision on al- (2) To request reconsideration of a
lowability. (1) The Administrator or disallowance, a State must complete
current Designee gives the State writ- the following:
ten notice of his or her decision to pay (i) Submit the following within 60
or disallow a deferred claim. days after receipt of the disallowance
(2) If the decision is to disallow, the letter:
notice informs the State of its right to (A) A written request to the Adminis-
reconsideration in accordance with 45 trator that includes the following:
CFR part 16. (1) A copy of the disallowance letter.
[53 FR 36571, Sept. 21, 1988, as amended at 77 (2) A statement of the amount in dis-
FR 31507, May 29, 2012] pute.
(3) A brief statement of why the dis-
§ 430.42 Disallowance of claims for allowance should be reversed or re-
FFP. vised, including any information to
(a) Notice of disallowance and of right support the State’s position with re-
to reconsideration. When the Adminis- spect to each issue.
trator or current Designee determines (4) Additional information regarding
that a claim or portion of claim is not factual matters or policy consider-
allowable, he or she promptly sends the ations.
State a disallowance letter that in- (B) A copy of the written request to
cludes the following, as appropriate: the Regional Office.
(1) The date or dates on which the (C) Send all requests for reconsider-
State’s claim for FFP was made. ation via registered or certified mail to
(2) The time period during which the establish the date the reconsideration
expenditures in question were made or was received by CMS.

claimed to have been made. (ii) In all cases, the State has the
(3) The date and amount of any pay- burden of documenting the allow-
ment or notice of deferral. ability of its claims for FFP.
13
§ 430.42 42 CFR Ch. IV (10–1–17 Edition)
(iii) Additional information regard- needed, he or she shall notify the State
ing the legal authority for the dis- via registered or certified mail that it
allowance will not be reviewed in the has 15 business days from the date of
reconsideration but may be presented receipt of the notice to submit the
in any appeal to the Departmental Ap- readily reviewable or additional mate-
peals Board under paragraph (f)(2) of rials.
this section. (ii) If the State does not provide the
(3) A State may request to retain the necessary materials within 15 business
FFP during the reconsideration of the days from the date of receipt of such
disallowance under section 1116(e) of notice, the Administrator shall affirm
the Act, in accordance with § 433.38 of the disallowance in a final reconsider-
this subchapter. ation decision issued within 15 days
(4) The State is not required to re- from the due date of additional infor-
quest reconsideration before seeking mation from the State.
review from the Departmental Appeals (5) If additional documentation is
Board. provided in readily reviewable form
(5) The State may also seek reconsid- under the paragraph (c)(4) of this sec-
eration, and following the reconsider- tion, the Administrator shall issue a
ation decision, request a review from written decision, within 60 days from
the Board. the due date of such information.
(6) If the State elects reconsider- (6) The final written decision shall
ation, the reconsideration process must constitute final CMS administrative
be completed or withdrawn before re- action on the reconsideration and shall
questing review by the Board. be (within 15 business days of the deci-
(c) Procedures for reconsideration of a sion) mailed to the State agency via
disallowance. (1) Within 60 days after registered or certified mail to establish
receipt of the disallowance letter, the the date the reconsideration decision
State shall, in accordance with (b)(2) of was received by the State.
this section, submit in writing to the (7) If the Administrator does not
Administrator any relevant evidence, issue a decision within 60 days from the
documentation, or explanation and date of receipt of the request for recon-
shall simultaneously submit a copy sideration or the date of receipt of the
thereof to the Regional Office. requested additional information, the
(2) After consideration of the policies disallowance shall be deemed to be af-
and factual matters pertinent to the firmed upon reconsideration.
issues in question, the Administrator (8) No section of this regulation shall
shall, within 60 days from the date of be interpreted as waiving the Depart-
receipt of the request for reconsider- ment’s right to assert any provision or
ation, issue a written decision or a re- exemption under the Freedom of Infor-
quest for additional information as de- mation Act.
scribed in paragraph (c)(3) of this sec- (d) Withdrawal of a request for recon-
tion. sideration of a disallowance. (1) A State
(3) At the Administrator’s option, may withdraw the request for reconsid-
CMS may request from the State any eration at any time before the notice of
additional information or documents the reconsideration decision is received
necessary to make a decision. The re- by the State without affecting its right
quest for additional information must to submit a notice of appeal to the
be sent via registered or certified mail Board. The request for withdrawal
to establish the date the request was must be in writing and sent to the Ad-
sent by CMS and received by the State. ministrator, with a copy to the Re-
(4) Within 30 days after receipt of the gional Office, via registered or certified
request for additional information, the mail.
State must submit to the Adminis- (2) Within 60 days after CMS’ receipt
trator, with a copy to the Regional Of- of a State’s withdrawal request, a
fice in readily reviewable form, all re- State may, in accordance with (f)(2) of
quested documents and materials. this section, submit a notice of appeal

(i) If the Administrator finds that the to the Board.
materials are not in readily reviewable (e) Implementation of decisions for re-
form or that additional information is consideration of a disallowance. (1) After
14
undertaking a reconsideration, the Ad- (1) In all cases, the State has the bur-
ministrator may affirm, reverse, or re- den of documenting the allowability of
vise the disallowance and shall issue a its claims for FFP.
final written reconsideration decision (2) The Board shall conduct a thor-
to the State in accordance with para- ough review of the issues, taking into
graph (c)(4) of this section. account all relevant evidence, includ-
(2) If the reconsideration decision re- ing such documentation as the State
quires an adjustment of FFP, either may submit and the Board may re-
upward or downward, a subsequent quire.
grant award will be issued in the (h) Implementation of decisions. (1) The
amount of such increase or decrease. Board may affirm the disallowance, re-
(3) Within 60 days after the receipt of verse the disallowance, modify the dis-
a reconsideration decision from CMS a allowance, or remand the disallowance
State may, in accordance with para- to CMS for further consideration.
graph (f)(2) of this section, submit a no- (2) The Board will issue a final writ-
tice of appeal to the Board. ten decision to the State consistent
(f) Appeal of Disallowance. (1) The De- with 45 CFR part 16.
partmental Appeals Board reviews dis- (3) If the appeal decision requires an
allowances of FFP under title XIX. adjustment of FFP, either upward or
(2) A State that wishes to appeal a downward, a subsequent grant award
disallowance to the Board must: will be issued in the amount of increase
or decrease.
(i) Submit a notice of appeal to the
Board at the address given on the De- [53 FR 36571, Sept. 21, 1988, as amended at 56
partmental Appeals Board’s web site FR 8846, Mar. 1, 1991; 77 FR 31507, May 29,
within 60 days after receipt of the dis- 2012]
allowance letter.
§ 430.45 Reduction of Federal Med-
(A) If a reconsideration of a disallow- icaid payments.
ance was requested, within 60 days
after receipt of the reconsideration de- (a) Methods of reduction. CMS may re-
cision; or duce Medicaid payments to a State as
(B) If reconsideration of a disallow- required under the Act by reducing—
(1) The Federal Medical Assistance
ance was requested and no written de-
Percentage;
cision was issued, within 60 days from
(2) The amount of State expenditures
the date the decision on reconsider-
subject to FFP;
ation of the disallowance was due to be
(3) The rates of FFP; or
issued by CMS.
(4) The amount otherwise payable to
(ii) Include all of the following: the State.
(A) A copy of the disallowance letter. (b) Right to reconsideration. A state
(B) A statement of the amount in dis- that receives written final notice of a
pute. reduction under paragraph (a) of this
(C) A brief statement of why the dis- section has a right to reconsideration.
allowance is wrong. The provisions of § 430.42 (b) and (c)
(3) The Board’s decision of an appeal apply.
under paragraph (f)(2) of this section (c) Other applicable rules. Other rules
shall be the final decision of the Sec- regarding reduction of Medicaid pay-
retary and shall be subject to reconsid- ments are set forth in parts 433 and 447
eration by the Board only upon a mo- of this chapter.
tion by either party that alleges a
clear error of fact or law and is filed § 430.48 Repayment of Federal funds
during the 60-day period that begins on by installments.
the date of the Board’s decision or to (a) Basic conditions. When Federal
judicial review in accordance with payments have been made for claims
paragraph (f)(2)(i) of this section. that are later found to be unallowable,
(g) Appeals procedures. The appeals the State may repay the Federal funds
procedures are those set forth in 45 by installments if all of the following

CFR part 16 for Medicaid and for many conditions are met:
other programs administered by the (1) The amount to be repaid exceeds
Department. 0.25 percent of the estimated or actual
15
§ 430.48 42 CFR Ch. IV (10–1–17 Edition)
annual State share for the Medicaid State share of the current annual ex-
program. penditures until fully repaid.
(2) The State has given the Regional (5) Repayment process. (i) Repayment
Office written notice, before total re- is accomplished through deposits into
payment was due, of its intent to repay the State’s Payment Management Sys-
by installments. tem (PMS) account;
(b) Annual State share determination. (ii) A State may choose to make pay-
CMS determines whether the amount ment by Automated Clearing House
to be repaid exceeds 0.25 percent of the (ACH) direct deposit, by check, or by
annual State share as follows: Fedwire transfer.
(1) If the Medicaid program is ongo- (6) Reductions. If the State chooses to
ing, CMS uses the annual estimated repay amounts representing higher per-
State share of Medicaid expenditures centages during the early quarters, any
for the current year, as shown on the corresponding reduction in required
State’s latest Medicaid Program Budg- minimum percentages is applied first
et Report (CMS–37). The current year is to the last scheduled payment, then to
the year in which the State requests the next to the last payment, and so
the repayment by installments. forth as necessary.
(2) If the Medicaid program has been (d) Alternate repayment amounts,
terminated by Federal law or by the schedules, and procedures for States expe-
State, CMS uses the actual State share riencing economic distress immediately
that is shown on the State’s CMS–64 prior to the repayment period—(1) Repay-
Quarterly Expense Report for the last ment amount. The repayment amount
four quarters filed. may not include amounts previously
(c) Standard Repayment amounts, approved for installment repayment if
schedules, and procedures—(1) Repay- a State initially qualifies for the alter-
ment amount. The repayment amount nate repayment schedule at the onset
may not include any amount pre- of an installment repayment period.
viously approved for installment re- (2) Qualifying period of economic dis-
payment. tress. (i) A State will qualify to avail
(2) Repayment schedule. The max- itself of the alternate repayment
imum number of quarters allowed for schedule if it demonstrates the State is
the standard repayment schedule is 12 experiencing a period of economic dis-
quarters (3 years), except as provided tress;
in paragraphs (c)(4) and (e) of this sec- (ii) A period of economic distress is
tion. one in which the State demonstrates
(3) Quarterly repayment amounts. (i) distress for at least each of the pre-
The quarterly repayment amounts for vious 6 months, ending the month prior
each of the quarters in the repayment to the date of the State’s written re-
schedule will be the larger of the request for an alternate repayment
payment amount divided by 12 quarters schedule, as determined by a negative
or the minimum repayment amount; percent change in the monthly Phila-
(ii) The minimum quarterly repay- delphia Federal Reserve Bank State co-
ment amounts for each of the quarters incident index.
in the repayment schedule is 0.25 per- (3) Repayment schedule. The max-
cent of the estimated State share of imum number of quarters allowed for
the current annual expenditures for the alternate repayment schedule is 12
Medicaid; quarters (3 years), except as provided
(iii) The repayment period may be in paragraph (d)(5) of this section.
less than 12 quarters when the min- (4) Quarterly repayment amounts. (i)
imum repayment amount is required. The quarterly repayment amounts for
(4) Extended schedule. (i) The repay- each of the first 8 quarters in the re-
ment schedule may be extended beyond payment schedule will be the smaller
12 quarterly installments if the total of the repayment amount divided by 12
repayment amount exceeds 100 percent quarters or the maximum quarterly re-
of the estimated State share of the cur- payment amount;

rent annual expenditures; (ii) The maximum quarterly repay-
(ii) The quarterly repayment amount ment amounts for each of the first 8
will be 81⁄3 percent of the estimated quarters in the repayment schedule is
16
0.25 percent of the annual State share (ACH) direct deposit, by check, or by
determination as defined in paragraph Fedwire transfer.
(b) of this section; (7) If the State chooses to repay
(iii) For the remaining 4 quarters, amounts representing higher percent-
the quarterly repayment amount ages during the early quarters, any
equals the remaining balance of the corresponding reduction in required
overpayment amount divided by the re- minimum percentages is applied first
maining 4 quarters. to the last scheduled payment, then to
(5) Extended schedule. (i) For a State the next to the last payment, and so
that initiated its repayment under an forth as necessary.
alternate payment schedule for eco- (e) Alternate repayment amounts,
nomic distress, the repayment schedule schedules, and procedures for States en-
may be extended beyond 12 quarterly tering into distress during a standard re-
installments if the total repayment payment schedule—(1) Repayment
amount exceeds 100 percent of the esti- amount. The repayment amount may
mated State share of current annual include amounts previously approved
expenditures; for installment repayment if a State
(A) In these circumstances, para- enters into a qualifying period of eco-
graph (d)(3) of this section is followed nomic distress during an installment
for repayment of the amount equal to repayment period.
100 percent of the estimated State (2) Qualifying period of economic dis-
share of current annual expenditures. tress. (i) A State will qualify to avail
itself of the alternate repayment
(B) The remaining amount of the re-
schedule if it demonstrates the State is
payment is in quarterly amounts equal
experiencing economic distress;
to 81⁄3 percent of the estimated State
(ii) A period of economic distress is
share of current annual expenditures
one in which the State demonstrates
until fully repaid.
distress for each of the previous 6
(ii) Upon request by the State, the re- months, that begins on the date of the
payment schedule may be extended be- State’s request for an alternate repay-
yond 12 quarterly installments if the ment schedule, as determined by a neg-
State has qualifying periods of eco- ative percent change in the monthly
nomic distress in accordance with Philadelphia Federal Reserve Bank
paragraph (d)(2) of this section during State coincident index.
the first 8 quarters of the alternate re- (3) Repayment schedule. The max-
payment schedule. imum number of quarters allowed for
(A) To qualify for additional quar- the alternate repayment schedule is 12
ters, the States must demonstrate a quarters (3 years), except as provided
period of economic distress in accord- in paragraph (e)(5) of this section.
ance with paragraph (d)(2) of this sec- (4) Quarterly repayment amounts. (i)
tion for at least 1 month of a quarter The quarterly repayment amounts for
during the first 8 quarters of the alter- each of the first 8 quarters in the re-
nate repayment schedule. payment schedule will be the smaller
(B) For each quarter (of the first 8 of the repayment amount divided by 12
quarters of the alternate payment quarters or the maximum repayment
schedule) identified as qualified period amount;
of economic distress, one quarter will (ii) The maximum quarterly repay-
be added to the remaining 4 quarters of ment amounts for each of the first 8
the original 12 quarter repayment pe- quarters in the repayment schedule is
riod. 0.25 percent of the annual State share
(C) The total number of quarters in determination as defined in paragraph
the alternate repayment schedule shall (b) of this section;
not exceed 20 quarters. (iii) For the remaining 4 quarters,
(6) Repayment process. (i) Repayment the quarterly repayment amount
is accomplished through deposits into equals the remaining balance of the
the State’s Payment Management Sys- overpayment amount divided by the re-
tem (PMS) account; maining 4 quarters.
(ii) A State may choose to make pay- (5) Extended schedule. (i) For a State
ment by Automated Clearing House that initiated its repayment under the
17
§ 430.60 42 CFR Ch. IV (10–1–17 Edition)
standard payment schedule and later the hearing. Such negotiations and res-
experienced periods of economic dis- olution of issues are not part of the
tress and elected an alternate repay- hearing, and are not governed by the
ment schedule, the repayment schedule rules in this subpart except as ex-
may be extended beyond 12 quarterly pressly provided.
installments if the total repayment
amount of the remaining balance of the § 430.62 Records to be public.
standard schedule, exceeds 100 percent All pleadings, correspondence, exhib-
of the estimated State share of the cur- its, transcripts of testimony, excep-
rent annual expenditures; tions, briefs, decisions, and other docu-
(ii) In these circumstances, para- ments filed in the docket in any pro-
graph (d)(3) of this section is followed ceeding may be inspected and copied in
for repayment of the amount equal to the office of the CMS Docket Clerk. In-
100 percent of the estimated State quiries may be made to the Docket
share of current annual expenditures; Clerk, Hearing Staff, Bureau of Eligi-
(iii) The remaining amount of the re- bility, Reimbursment and Coverage, 300
payment is in quarterly amounts equal East High Rise, 6325 Security Boule-
to 81⁄3 percent of the estimated State vard, Baltimore, Maryland, 21207. Tele-
share of the current annual expendi- phone: (301) 594–8261.
tures until fully repaid.
(6) Repayment process. (i) Repayment § 430.63 Filing and service of papers.
is accomplished through deposits into (a) Filing. All papers in the pro-
the State’s Payment Management Sys- ceedings are filed with the CMS Docket
tem (PMS) account; Clerk, in an original and two copies.
(ii) A State may choose to make pay- Originals only of exhibits and tran-
ment by Automated Clearing House scripts of testimony need be filed.
(ACH) direct deposit, by check, or by (b) Service. All papers in the pro-
Fedwire transfer. ceedings are served on all parties by
(7) If the State chooses to repay personal delivery or by mail. Service
amounts representing higher percent- on the party’s designated attorney is
ages during the early quarters, any considered service upon the party.
corresponding reduction in required
minimum percentages is applied first § 430.64 Suspension of rules.
to the last scheduled payment, then to Upon notice to all parties, the Ad-
the next to the last payment, and so ministrator or the presiding officer
forth as necessary. may modify or waive any rule in this
[77 FR 31509, May 29, 2012] subpart upon determination that no
party will be unduly prejudiced and the
Subpart D—Hearings on Con- ends of justice will thereby be served.
formity of State Medicaid § 430.66 Designation of presiding offi-
Plans and Practice to Federal cer for hearing.
Requirements (a) The presiding officer at a hearing
is the Administrator or his designee.
§ 430.60 Scope. (b) The designation of the presiding
(a) This subpart sets forth the rules officer is in writing. A copy of the des-
for hearings to States that appeal a de- ignation is served on all parties.
cision to disapprove State plan mate-
rial (under § 430.18) or to withhold Fed- § 430.70 Notice of hearing or oppor-
eral funds (under § 430.35), because the tunity for hearing.
State plan or State practice in the The Administrator mails the State a
Medicaid program is not in compliance notice of hearing or opportunity for
with Federal requirements. hearing that—
(b) Nothing in this subpart is in- (a) Specifies the time and place for
tended to preclude or limit negotia- the hearing;
tions between CMS and the State, (b) Specifies the issues that will be
whether before, during, or after the considered;
hearing to resolve the issues that are, (c) Identifies the presiding officer;
or otherwise would be, considered at and
18
(d) Is published in the FEDERAL REG- vides all parties other than CMS and
ISTER. the State with—
(i) A statement of the intent to re-
§ 430.72 Time and place of hearing. move and the reasons for removal; and
(a) Time. The hearing is scheduled not (ii) A copy of the proposed State plan
less than 30 nor more than 60 days after provision on which CMS and the State
the date of notice to the State. The have agreed.
scheduled date may be changed by (3) Opportunity for written comment.
written agreement between CMS and The notified parties have 15 days to
the State. submit, for consideration by the pre-
(b) Place. The hearing is conducted in siding officer, and for the record, their
the city in which the CMS regional of- views as to, or any information bearing
fice is located or in another place fixed upon, the merits of the proposed plan
by the presiding officer in light of the provision and the merits of the reasons
circumstances of the case, with due re- for removing the issue from consider-
gard for the convenience and necessity ation.
of the parties or their representatives. (d) Remaining issues. The issues con-
sidered at the hearing are limited to
§ 430.74 Issues at hearing. those issues of which the State is noti-
The list of issues specified in the no- fied as provided in § 430.70 and para-
tice of hearing may be augmented or graph (a) of this section, and new or
reduced as provided in this section. modified issues described in paragraph
(a) Additional issues. (1) Before a hear- (b) of this section. They do not include
ing under § 430.35, the Administrator issues or parts of issues removed in ac-
may send written notice to the State cordance with paragraph (c) of this sec-
listing additional issues to be consid- tion.
ered at the hearing. That notice is pub-
lished in the FEDERAL REGISTER. § 430.76 Parties to the hearing.
(2) If the notice of additional issues is (a) CMS and the State. CMS and the
furnished to the State less than 20 days State are parties to the hearing.
before the scheduled hearing date, (b) Other individuals—(1) Basis for par-
postponement is granted if requested ticipation. Other individuals or groups
by the State or any other party. The may be recognized as parties if the
new date may be 20 days after the date issues to be considered at the hearing
of the notice, or a later date agreed to have caused them injury and their in-
by the presiding officer. terest is within the zone of interests to
(b) New or modified issues. If, as a re- be protected by the governing Federal
sult of negotiations between CMS and statute.
the State, the submittal of plan (2) Petition for participation. Any indi-
amendment, a change in the State pro- vidual or group wishing to participate
gram, or other actions by the State, as a party must, within 15 days after
any issue is resolved in whole or in notice of hearing is published in the
part, but new or modified issues are FEDERAL REGISTER, file with the CMS
presented, as specified by the presiding Docket Clerk, a petition that concisely
officer, the hearing proceeds on the states—
new or modified issues. (i) Petitioner’s interest in the pro-
(c) Issues removed from consideration— ceeding;
(1) Basis for removal. If at any time be- (ii) Who will appear for petitioner;
fore, during, or after the hearing, the (iii) The issues on which petitioner
presiding officer finds that the State wishes to participate; and
has come into compliance with Federal (iv) Whether petitioner intends to
requirements on any issue or part of an present witnesses.
issue, he or she removes the appro- The petitioner must also serve a copy
priate issue or part of an issue from of the petition on each party of record
consideration. If all issues are re- at that time.
moved, the hearing is terminated. (3) Comments on petition. Any party

(2) Notice to parties. Before removing may, within 5 days of receipt of the
any issue or part of an issue from con- copy of the petition, file comments on
sideration, the presiding officer pro- it.
19
§ 430.80 42 CFR Ch. IV (10–1–17 Edition)
(4) Action on petition. (i) The presiding delay, maintain order, and make a
officer promptly determines whether record of the proceedings. He or she has
each petitioner has the requisite inter- the authority necessary to accomplish
est in the proceedings and approves or those ends, including but not limited
denies participation accordingly. to authority to take the following ac-
(ii) If petitions are made by more tions:
than one individual or group with com- (1) Change the date, time, and place
mon interests, the presiding officer of the hearing after due notice to the
may— parties. This includes authority to
(A) Request all those petitioners to postpone or adjourn the hearing in
designate a single representative; or whole or in part. In a hearing on dis-
(B) Recognize one or more of those approval of a State plan, or State plan
petitioners to represent all of them. amendments, changes in the date of
(iii) The presiding officer gives each the hearing are subject to the time
petitioner written notice of the deci- limits imposed by section 1116(a)(2) of
sion and, if the decision is to deny, the Act.
briefly states the grounds for denial. (2) Hold conferences to settle or sim-
(c) Amicus curiae (friend of the court)— plify the issues, or to consider other
(1) Petition for participation. Any person matters that may aid in the expedi-
or organization that wishes to partici- tious disposition of the issues.
pate as amicus curiae must, before the (3) Regulate participation of parties
hearing begins, file with the CMS and amici curiae and require parties
Docket Clerk, a petition that concisely and amici curiae to state their position
states— with respect to the various issues in
(i) The petitioners’ interest in the the proceeding.
hearing; (4) Administer oaths and affirma-
(ii) Who will represent the petitioner; tions.
and (5) Rule on motions and other proce-
(iii) The issues on which the peti- dural items, including issuance of pro-
tioner intends to present argument. tective orders or other relief to a party
(2) Action on amicus curiae petition. against whom discovery is sought.
The presiding officer may grant the pe- (6) Regulate the course of the hearing
tition if he or she finds that the peti- and conduct of counsel.
tioner has a legitimate interest in the (7) Examine witnesses.
proceedings, that such participation (8) Receive, rule on, exclude or limit
will not unduly delay the outcome and evidence or discovery.
may contribute materially to the prop- (9) Fix the time for filing motions,
er disposition of the issues. petitions, briefs, or other items.
(3) Nature of amicus participation. An (10) If the presiding officer is the Ad-
amicus curiae is not a party to the ministrator, make a final decision.
hearing but may participate by— (11) If the presiding officer is a des-
(i) Submitting a written statement of ignee of the Administrator, certify the
position to the presiding officer before entire record including recommended
the beginning of the hearing; findings and proposed decision to the
(ii) Presenting a brief oral statement Administrator.
at the hearing, at the point in the pro- (12) Take any action authorized by
ceedings specified by the presiding offi- the rules in this subpart or in conform-
cer; and ance with the provisions of 5 U.S.C. 551
(iii) Submitting a brief or written through 559.
statement when the parties submit (b) The presiding officer does not
briefs. have authority to compel by subpoena
The amicus curiae must serve copies of the production of witnesses, papers, or
any briefs or written statements on all other evidence.
parties. (c) If the presiding officer is a des-
ignee of the Administrator, his or her
§ 430.80 Authority of the presiding offi-
authority pertains to the issues of

cer. compliance by a State with Federal re-
(a) The presiding officer has the duty quirements, and does not extend to the
to conduct a fair hearing, to avoid question of whether, in case of any
20
noncompliance, Federal payments will ceeding. Argument is not received in

be denied in respect to the entire State evidence. It must be presented in state-
plan or only for certain categories ments, memoranda, or briefs, as deter-
under, or parts of, the State plan af- mined by the presiding officer. Brief
fected by the noncompliance. opening statements, concerning the
party’s position and what he or she in-
§ 430.83 Rights of parties. tends to prove, may be made at hear-
All parties may: ings.
(a) Appear by counsel or other au- (b) Testimony. Testimony is given
thorized representative, in all hearing orally under oath or affirmation by
proceedings. witnesses at the hearing. Witnesses are
(b) Participate in any prehearing available at the hearing for cross-ex-
conference held by the presiding offi- amination by all parties.
cer. (c) Stipulations and exhibits. Two or
(c) Agree to stipulations as to facts more parties may agree to stipulations
which will be made a part of the of fact. Those stipulations, and any ex-
record. hibit proposed by any party, are ex-
(d) Make opening statements at the changed before the hearing if the pre-
hearing. siding officer so requires.
(e) Present relevant evidence on the (d) Rules of evidence. (1) Technical
issues at the hearing. rules of evidence do not apply to hear-
(f) Present witnesses who then must ings conducted under this subpart.
be available for cross-examination by However, rules or principles designed
all other parties. to ensure production of the most cred-
(g) Present oral arguments at the ible evidence available and to subject
hearing. testimony to test by cross-examination
(h) Submit written briefs, proposed are applied by the presiding officer
findings of fact, and proposed conclu- when reasonably necessary.
sions of law, after the hearing. (2) A witness may be cross-examined
§ 430.86 Discovery. on any matter material to the pro-
ceeding without regard to the scope of
CMS and any party named in the no- his or her direct examination.
tice issued under § 430.70 has the right (3) The presiding officer may exclude
to conduct discovery (including deposi- irrelevant, immaterial, or unduly rep-
tions) against opposing parties. Rules etitious evidence.
26–37 of the Federal Rules of Civil Pro-
(4) All documents and other evidence
cedures apply to such proceedings;
offered or taken for the record are open
there will be no fixed rule on priority
to examination by the parties and an
of discovery. Upon written motion, the
opportunity is given to refute facts and
presiding officer promptly rules upon
arguments advanced on either side of
any objection to discovery action initi-
the issues.
ated under this section. The presiding
officer also has the power to grant a § 430.90 Exclusion from hearing for
protective order or relief to any party misconduct.
against whom discovery is sought and
to restrict or control discovery so as to The presiding officer may imme-
prevent undue delay in the conduct of diately exclude from the hearing any
the hearing. Upon the failure of any person who—
party to make discovery, the presiding (a) Uses disrespectful, disorderly, or
officer may issue any order and impose contumacious language or engages in
any sanction (other than contempt or- contemptuous behavior;
ders) authorized by Rule 37 of the Fed- (b) Refuses to comply with direc-
eral Rules of Civil Procedure. tions; or
(c) Uses dilatory tactics.
§ 430.88 Evidence.
§ 430.92 Unsponsored written material.
(a) Evidentiary purpose. The hearing is

directed to receiving factual evidence Letters expressing views or urging
and expert opinion testimony related action and other unsponsored written
to the issues involved in the pro- material regarding matters in issue in
21
§ 430.94 42 CFR Ch. IV (10–1–17 Edition)
a hearing are placed in the correspond- (2) Any party may, within 20 days,
ence section of the docket of the pro- file with the Administrator exceptions
ceeding. These data are not considered to the recommended findings and pro-
part of the evidence or record in the posed decision and a supporting brief or
hearing. statement.
(3) The Administrator reviews the
§ 430.94 Official transcript. recommended decision and, within 60
(a) Filing. The official transcripts of days of its issuance, issues his or her
testimony, together with any stipula- own decision.
tions, briefs, or memoranda of law, are (c) Effect of Administrator’s decision.
filed with CMS. The decision of the Administrator
(b) Availability of transcripts. CMS under this section is the final decision
designates an official reporter for each of the Secretary and constitutes ‘‘final
hearing. Transcripts of testimony in agency action’’ within the meaning of 5
hearings may be obtained from the of- U.S.C. 704 and a ‘‘final determination’’
ficial reporter by the parties and the within the meaning of section 1116(a)(3)
public at rates not in excess of the of the Act and § 430.38. The Administra-
maximum rates fixed by the contract tor’s decision is promptly served on all
between CMS and the reporter. parties and amici.
(c) Correction of transcript. Upon no-
tice to all parties, the presiding officer § 430.104 Decisions that affect FFP.
may authorize corrections that affect (a) Scope of decisions. If the Adminis-
substantive matters in the transcript. trator concludes that withholding of
FFP is necessary because a State is out
§ 430.96 Record for decision. of compliance with Federal require-
The transcript of testimony, exhib- ments, in accordance with § 430.35, the
its, and all papers and requests filed in decision also specifies—
the proceedings, except the correspond- (1) Whether no further payments will
ence section of the docket, including be made to the State or whether pay-
rulings and any recommended or initial ments will be limited to parts of the
decision constitute the exclusive program not affected by the non-
record for decision. compliance; and
(2) The effective date of the decision
§ 430.100 Posthearing briefs. to withhold.
The presiding officer fixes the time (b) Consultation. The Administrator
for filing posthearing briefs, which may may ask the parties for recommenda-
contain proposed findings of fact and tions or briefs or may hold conferences
conclusions of law. The presiding offi- of the parties on the question of fur-
cer may also permit reply briefs. ther payments to the State.
(c) Effective date of decision. The effec-
§ 430.102 Decisions following hearing. tive date of a decision to withhold Fed-
(a) Administrator presides. If the pre- eral funds will not be earlier than the
siding officer is the Administrator, he date of the Administrator’s decision
or she issues the hearing decision with- and will not be later than the first day
in 60 days after expiration of the period of the next calendar quarter. The pro-
for submission of posthearing briefs. visions of this section may not be
(b) Administrator’s designee presides. If waived under § 430.64.
the presiding officer is other than the
Administrator, the procedure is as fol- PART 431—STATE ORGANIZATION
lows: AND GENERAL ADMINISTRATION
(1) Upon expiration of the period al-
lowed for submission of posthearing Sec.
briefs, the presiding officer certifies 431.1 Purpose.
the entire record, including his or her
recommended findings and proposed de- Subpart A—Single State Agency
cision, to the Administrator. The Ad- 431.10 Single State agency.

ministrator serves a copy of the rec- 431.11 Organization for administration.
ommended findings and proposed deci- 431.12 Medical care advisory committee.
sion upon all parties and amici, if any. 431.15 Methods of administration.
22
Centers for Medicare & Medicaid Services, HHS Pt. 431
431.16 Reports. 431.222 Group hearings.
431.17 Maintenance of records. 431.223 Denial or dismissal of request for a
431.18 Availability of agency program hearing.
manuals. 431.224 Expedited appeals.
431.20 Advance directives.
PROCEDURES
Subpart B—General Administrative 431.230 Maintaining services.
Requirements 431.231 Reinstating services.
431.232 Adverse decision of local evidentiary
431.40 Basis and scope. hearing.
431.50 Statewide operation. 431.233 State agency hearing after adverse
431.51 Free choice of providers. decision of local evidentiary hearing.
431.52 Payments for services furnished out 431.240 Conducting the hearing.
of State. 431.241 Matters to be considered at the hear-
431.53 Assurance of transportation. ing.
431.54 Exceptions to certain State plan re- 431.242 Procedural rights of the applicant or
quirements. beneficiary.
431.55 Waiver of other Medicaid require- 431.243 Parties in cases involving an eligi-
ments. bility determination.
431.56 Special waiver provisions applicable 431.244 Hearing decisions.
to American Samoa and the Northern 431.245 Notifying the applicant or bene-
Mariana Islands. ficiary of a State agency decision.
431.246 Corrective action.
Subpart C—Administrative Requirements:
Provider Relations FEDERAL FINANCIAL PARTICIPATION
431.105 Consultation to medical facilities. 431.250 Federal financial participation.

431.107 Required provider agreement.
431.108 Effective date of provider agree- Subpart F—Safeguarding Information on
ments. Applicants and beneficiaries
431.110 Participation by Indian Health Serv-
431.300 Basis and purpose.
ice facilities.
431.301 State plan requirements.
431.115 Disclosure of survey information and
431.302 Purposes directly related to State
provider or contractor evaluation.
plan administration.
431.120 State requirements with respect to
431.303 State authority for safeguarding in-
nursing facilities.
formation.
431.304 Publicizing safeguarding require-
Subpart D—Appeals Process for NFs and ments.
ICFs/IID 431.305 Types of information to be safe-
431.151 Scope and applicability. guarded.
431.152 State plan requirements. 431.306 Release of information.
431.307 Distribution of information mate-
431.153 Evidentiary hearing.
rials.
431.154 Informal reconsideration for ICFs/
IID.
Subpart G—Section 1115 Demonstrations
Subpart E—Fair Hearings for Applicants 431.400 Basis and purpose.
and Beneficiaries 431.404 Definitions.
431.408 State public notice process.
GENERAL PROVISIONS 431.412 Application procedures.
431.200 Basis and purpose. 431.416 Federal public notice and approval
431.201 Definitions. process.
431.202 State plan requirements. 431.420 Monitoring and compliance.
431.205 Provision of hearing system. 431.424 Evaluation requirements.
431.206 Informing applicants and bene- 431.428 Reporting requirements.
ficiaries.
Subparts H–L [Reserved]
NOTICE
431.210 Content of notice.
Subpart M—Relations With Other Agencies
431.211 Advance notice. 431.610 Relations with standard-setting and
431.213 Exceptions from advance notice. survey agencies.
431.214 Notice in cases of probable fraud. 431.615 Relations with State health and vo-
cational rehabilitation agencies and title

RIGHT TO HEARING
V grantees.
431.220 When a hearing is required. 431.620 Agreement with State mental health
431.221 Request for hearing. authority or mental institutions.
23
§ 431.1 42 CFR Ch. IV (10–1–17 Edition)
431.621 State requirements with respect to Subpart Q—Requirements for Estimating
nursing facilities. Improper Payments in Medicaid and CHIP
431.625 Coordination of Medicaid with Medi-
care part B. 431.950 Purpose.
431.630 Coordination of Medicaid with QIOs. 431.954 Basis and scope.
431.635 Coordination of Medicaid with Spe- 431.958 Definitions and use of terms.
cial Supplemental Food Program for 431.960 Types of payment errors.
Women, Infants, and Children (WIC). 431.970 Information submission and systems
access requirements.
Subpart N—State Programs for Licensing 431.972 Claims sampling procedures.
431.992 Corrective action plan.
Nursing Home Administrators 431.998 Difference resolution and appeal
431.700 Basis and purpose. process.
431.1002 Recoveries.
431.701 Definitions.
431.1010 Disallowance of Federal financial
431.702 State plan requirement. participation for erroneous State pay-
431.703 Licensing requirement. ments (for PERM review years ending
431.704 Nursing homes designated by other after July 1, 2020).
terms.
431.705 Licensing authority. AUTHORITY: Sec. 1102 of the Social Security
431.706 Composition of licensing board. Act, (42 U.S.C. 1302).
431.707 Standards. SOURCE: 43 FR 45188, Sept. 29, 1978, unless
431.708 Procedures for applying standards. otherwise noted.
431.709 Issuance and revocation of license. EDITORIAL NOTE: Nomenclature changes to
431.710 Provisional licenses. part 431 appear at 75 FR 48852, Aug. 11, 2010.
431.711 Compliance with standards.
431.712 Failure to comply with standards. § 431.1 Purpose.
431.713 Continuing study and investigation.
This part establishes State plan re-
431.714 Waivers.
431.715 Federal financial participation.
quirements for the designation, organi-
zation, and general administrative ac-
Subpart O [Reserved] tivities of a State agency responsible
for operating the State Medicaid pro-
Subpart P—Quality Control gram, directly or through supervision
of local administering agencies.
MEDICAID ELIGIBILITY QUALITY CONTROL
(MEQC) PROGRAM
Subpart A—Single State Agency
431.800 Basis and scope.
431.802 Basis. § 431.10 Single State agency.
(a) Basis, purpose, and definitions. (1)
431.806 State requirements.
This section implements section
431.808 Protection of beneficiary rights.
1902(a)(4) and (5) of the Act.
431.810 Basic elements of the Medicaid Eli-
gibility Quality Control (MEQC) Pro- (2) For purposes of this part—
gram. Appeals decision means a decision
431.812 Review procedures. made by a hearing officer adjudicating
431.814 Pilot planning document. a fair hearing under subpart E of this
431.816 Case review completion deadlines part.
and submittal of reports. Exchange has the meaning given to
431.818 Access to records. the term in 45 CFR 155.20.
431.820 Corrective action under the MEQC Exchange appeals entity has the mean-
program. ing given to the term ‘‘appeals entity,’’
MEDICAID QUALITY CONTROL (MQC) CLAIMS
as defined in 45 CFR 155.500.
PROCESSING ASSESSMENT SYSTEM Medicaid agency is the single State
agency for the Medicaid program.
431.830 Basic elements of the Medicaid qual- (b) Designation and certification. A
ity control (MQC) claims processing as-
State plan must—
sessment system.
431.832 Reporting requirements for claims
(1) Specify a single State agency es-
processing assessment systems. tablished or designated to administer
431.834 Access to records: Claims processing or supervise the administration of the

assessment systems. plan; and
431.836 Corrective action under the MQC (2) Include a certification by the
claims processing assessment systems. State Attorney General, citing the
24
legal authority for the single State (A) Complies with all relevant Fed-
agency to— eral and State law, regulations and
(i) Administer or supervise the ad- policies, including, but not limited to,
ministration of the plan; and those related to the eligibility criteria
(ii) Make rules and regulations that applied by the agency under part 435 of
it follows in administering the plan or this chapter; prohibitions against con-
that are binding upon local agencies flicts of interest and improper incen-
that administer the plan. tives; and safeguarding confidentiality,
(3) The single State agency is respon- including regulations set forth at sub-
sible for determining eligibility for all part F of this part.
individuals applying for or receiving (B) Informs applicants and bene-
benefits in accordance with regulations ficiaries how they can directly contact
in part 435 of this chapter and for fair and obtain information from the agen-
hearings filed in accordance with sub- cy; and
part E of this part. (ii) Must exercise appropriate over-
(c) Delegations. (1) Subject to the re- sight over the eligibility determina-
quirement in paragraph (c)(2) of this tions and appeals decisions made by
section, the Medicaid agency— such agencies to ensure compliance
(i)(A) May, in the approved state with paragraphs (c)(2) and (c)(3)(i) of
plan, delegate authority to determine this section and institute corrective
eligibility for all or a defined subset of action as needed, including, but not
individuals to— limited to, rescission of the authority
(1) The single State agency for the fi- delegated under this section.
nancial assistance program under title (iii) If authority to conduct fair hear-
IV–A (in the 50 States or the District of ings is delegated to the Exchange or
Columbia), or under title I or XVI Exchange appeals entity under para-
(AABD), in Guam, Puerto Rico, or the graph (c)(1)(ii) of this section, the
Virgin Islands; agency may establish a review process
(2) The Federal agency administering whereby the agency may review fair
the supplemental security income pro- hearing decisions made under that del-
gram under title XVI of the Act; or egation, but that review will be limited
(3) The Exchange. to the proper application of federal and
(B) Must in the approved state plan state Medicaid law and regulations, in-
specify to which agency, and the indi- cluding sub-regulatory guidance and
viduals for which, authority to deter- written interpretive policies, and must
mine eligibility is delegated. be conducted by an impartial official
(ii) Delegate authority to conduct not directly involved in the initial de-
fair hearings under subpart E of this termination.
part for denials of eligibility for indi- (d) Agreement with Federal, State or
viduals whose income eligibility is de- local entities making eligibility determina-
termined based on the applicable modi- tions or appeals decisions. The plan must
fied adjusted gross income standard de- provide for written agreements be-
scribed in § 435.911(c) of this chapter, to tween the Medicaid agency and the Ex-
an Exchange or Exchange appeals enti- change or any other State or local
ty, provided that individuals who have agency that has been delegated author-
requested a fair hearing of such a de- ity under paragraph (c)(1)(i) of this sec-
nial are given a choice to have their tion to determine Medicaid eligibility
fair hearing instead conducted by the and for written agreements between
Medicaid agency. the agency and the Exchange or Ex-
(2) The Medicaid agency may dele- change appeals entity that has been
gate authority to make eligibility de- delegated authority to conduct Med-
terminations or to conduct fair hear- icaid fair hearings under paragraph
ings under this section only to a gov- (c)(1)(ii) of this section. Such agree-
ernment agency which maintains per- ments must be available to the Sec-
sonnel standards on a merit basis. retary upon request and must include
(3) The Medicaid agency— provisions for:

(i) Must ensure that any agency to (1) The relationships and respective
which eligibility determinations or ap- responsibilities of the parties, includ-
peals decisions are delegated— ing but not limited to the respective
25
§ 431.11 42 CFR Ch. IV (10–1–17 Edition)
responsibilities to effectuate the fair they perform in carrying out their re-
hearing rules in subpart E of this part; sponsibilities.
(2) Quality control and oversight by [44 FR 17931, Mar. 23, 1979, as amended at 77
the Medicaid agency, including any re- FR 17203, Mar. 23, 2012; 78 FR 42301, July 15,
porting requirements needed to facili- 2013]
tate such control and oversight;
(3) Assurances that the entity to § 431.12 Medical care advisory com-
mittee.
which authority to determine eligi-
bility or conduct fair hearings will (a) Basis and purpose. This section,
comply with the provisions set forth in based on section 1902(a)(4) of the Act,
paragraph (c)(3) of this section. prescribes State plan requirements for
establishment of a committee to advise
(4) For appeals, procedures to ensure
the Medicaid agency about health and
that individuals have notice and a full
medical care services.
opportunity to have their fair hearing (b) State plan requirement. A State
conducted by either the Exchange or plan must provide for a medical care
Exchange appeals entity or the Med- advisory committee meeting the re-
icaid agency. quirements of this section to advise the
(e) Authority of the single State agency. Medicaid agency director about health
The Medicaid agency may not delegate, and medical care services.
to other than its own officials, the au- (c) Appointment of members. The agen-
thority to supervise the plan or to de- cy director, or a higher State author-
velop or issue policies, rules, and regu- ity, must appoint members to the advi-
lations on program matters. sory committee on a rotating and con-
tinuous basis.
[44 FR 17930, Mar. 23, 1979, as amended at 77
(d) Committee membership. The com-
FR 17202, Mar. 23, 2012; 78 FR 42300, July 15,
mittee must include—
2013]
(1) Board-certified physicians and
§ 431.11 Organization for administra- other representatives of the health pro-
tion. fessions who are familiar with the med-
ical needs of low-income population
(a) Basis and purpose. This section, groups and with the resources available
based on section 1902(a)(4) of the Act, and required for their care;
prescribes the general organization and (2) Members of consumers’ groups, in-
staffing requirements for the Medicaid cluding Medicaid beneficiaries, and
agency and the State plan. consumer organizations such as labor
(b) Description of organization. (1) The unions, cooperatives, consumer-spon-
plan must include a description of the sored prepaid group practice plans, and
organization and functions of the Med- others; and
icaid agency. (3) The director of the public welfare
(2) When submitting a state plan department or the public health de-
amendment related to the designation, partment, whichever does not head the
authority, organization or functions of Medicaid agency.
the Medicaid agency, the Medicaid (e) Committee participation. The com-
agency must provide an organizational mittee must have opportunity for par-
ticipation in policy development and
chart reflecting the key components of
program administration, including fur-
the Medicaid agency and the functions
thering the participation of beneficiary
each performs.
members in the agency program.
(c) Eligibility determined or fair hear- (f) Committee staff assistance and fi-
ings decided by other entities. If eligi- nancial help. The agency must provide
bility is determined or fair hearings de- the committee with—
cided by Federal or State entities other (1) Staff assistance from the agency
than the Medicaid agency or by local and independent technical assistance
agencies under the supervision of other as needed to enable it to make effec-
State agencies, the plan must include a tive recommendations; and

description of the staff designated by (2) Financial arrangements, if nec-
those other entities and the functions essary, to make possible the participa-
tion of beneficiary members.
26
(g) Federal financial participation. countability as required by the Sec-

FFP is available at 50 percent in ex- retary.
penditures for the committee’s activi- (c) Retention of records. The plan must
ties. provide that the records required under
paragraph (b) of this section will be re-
§ 431.15 Methods of administration. tained for the periods required by the
A State plan must provide for meth- Secretary.
ods of administration that are found by (d) Conditions for optional use of micro-
the Secretary to be necessary for the film copies. The agency may substitute
proper and efficient operation of the certified microfilm copies for the origi-
plan. nals of substantiating documents re-
(Sec. 1902(a)(4) of the Act) quired for Federal audit and review, if
[44 FR 17931, Mar. 23, 1979]
the conditions in paragraphs (d)(1)
through (4) of this section are met.
§ 431.16 Reports. (1) The agency must make a study of
A State plan must provide that the its record storage and must show that
Medicaid agency will— the use of microfilm is efficient and ec-
(a) Submit all reports required by the onomical.
Secretary; (2) The microfilm system must not
(b) Follow the Secretary’s instruc- hinder the agency’s supervision and
tions with regard to the form and con- control of the Medicaid program.
tent of those reports; and (3) The microfilm system must—
(c) Comply with any provisions that (i) Enable the State to audit the pro-
the Secretary finds necessary to verify priety of expenditures for which FFP is
and assure the correctness of the reclaimed; and
ports. (ii) Enable the HHS Audit Agency
[44 FR 17931, Mar. 23, 1979] and CMS to properly discharge their
respective responsibilities for review-
§ 431.17 Maintenance of records. ing the manner in which the Medicaid
(a) Basis and purpose. This section, program is being administered.
based on section 1902(a)(4) of the Act, (4) The agency must obtain approval
prescribes the kinds of records a Med- from the CMS regional office indi-
icaid agency must maintain, the reten- cating—
tion period, and the conditions under (i) The system meets the conditions
which microfilm copies may be sub- of paragraphs (d)(2) and (3) of this sec-
stituted for original records. tion; and
(b) Content of records. A State plan (ii) The microfilming procedures are
must provide that the Medicaid agency reliable and are supported by an ade-
will maintain or supervise the mainte- quate retrieval system.
nance of the records necessary for the
proper and efficient operation of the
FR 7210, Feb. 28, 1986]
plan. The records must include—
(1) Individual records on each appli- § 431.18 Availability of agency pro-
cant and beneficiary that contain in- gram manuals.
formation on—
(i) Date of application; (a) Basis and purpose. This section,
(ii) Date of and basis for disposition; based on section 1902(a)(4) of the Act,
(iii) Facts essential to determination prescribes State plan requirements for
of initial and continuing eligibility; facilitating access to Medicaid rules
(iv) Provision of medical assistance; and policies by individuals outside the
(v) Basis for discontinuing assist- State Medicaid agency.
ance; (b) State plan requirements. A State
(vi) The disposition of income and plan must provide that the Medicaid
eligibility verification information re- agency meets the requirements of para-
ceived under §§ 435.940 through 435.960 of graphs (c) through (g) of this section.
this subchapter; and (c) Availability in agency offices. (1)
(2) Statistical, fiscal, and other The agency must maintain, in all its
records necessary for reporting and ac- offices, copies of its current rules and
27
§ 431.20 42 CFR Ch. IV (10–1–17 Edition)
policies that affect the public, includ- tory or as recognized by the courts of
ing those that govern eligibility, provi- the State) concerning advance direc-
sion of medical assistance, covered tives, as defined in § 489.100 of this
services, and beneficiary rights and re- chapter, to be distributed by Medicaid
sponsibilities. providers and health maintenance or-
(2) These documents must be avail- ganizations (as specified in section
able upon request for review, study, 1903(m)(1)(A) of the Act) in accordance
and reproduction by individuals during with the requirements under part 489,
regular working hours of the agency. subpart I of this chapter. Revisions to
(d) Availability through other entities. the written descriptions as a result of
The agency must provide copies of its changes in State law must be incor-
current rules and policies to— porated in such descriptions and dis-
(1) Public and university libraries; tributed as soon as possible, but no
(2) The local or district offices of the later than 60 days from the effective
Bureau of Indian Affairs; date of the change in State law, to
(3) Welfare and legal services offices; Medicaid providers and health mainte-
and nance organizations.
(4) Other entities that—
(i) Request the material in order to [57 FR 8202, Mar. 6, 1992, as amended at 60 FR
make it accessible to the public; 33293, June 27, 1995]
(ii) Are centrally located and acces-
sible to a substantial number of the Subpart B—General Administrative
beneficiary population they serve; and Requirements
(iii) Agree to accept responsibility
for filing all amendments or changes SOURCE: 56 FR 8847, Mar. 1, 1991, unless oth-
forwarded by the agency. erwise noted.
(e) Availability in relation to fair hear-
ings. The agency must make available § 431.40 Basis and scope.
to an applicant or beneficiary, or his
representative, a copy of the specific (a) This subpart sets forth State plan
policy materials necessary— requirements and exceptions that per-
(1) To determine whether to request a tain to the following administrative re-
fair hearing; or quirements and provisions of the Act:
(2) To prepare for a fair hearing. (1) Statewideness—section 1902(a)(1);
(f) Availability for other purposes. The (2) Proper and efficient administra-
agency must establish rules for making tion—section 1902(a)(4);
program policy materials available to (3) Comparability of services—section
individuals who request them for other 1902(a)(10) (B)–(E);
purposes. (4) Payment for services furnished
(g) Charges for reproduction. The agen- outside the State—section 1902(a)(16);
cy must make copies of its program (5) Free choice of providers—section
policy materials available without 1902(a)(23);
charge or at a charge related to the (6) Special waiver provisions applica-
cost of reproduction. ble to American Samoa and the North-
[44 FR 17931, Mar. 23, 1979]
ern Mariana Islands—section 1902(j);
and
§ 431.20 Advance directives. (7) Exceptions to, and waiver of,
(a) Basis and purpose. This section, State plan requirements—sections 1915
based on section 1902(a) (57) and (58) of (a)–(c) and 1916 (a)(3) and (b)(3).
the Act, prescribes State plan require- (b) Other applicable regulations in-
ments for the development and dis- clude the following:
tribution of a written description of (1) Section 430.25 Waivers of State
State law concerning advance direc- plan requirements.
tives. (2) Section 440.250 Limits on com-
(b) A State Plan must provide that parability of services.
the State, acting through a State agen-

cy, association, or other private non- § 431.50 Statewide operation.
profit entity, develop a written descrip- (a) Statutory basis. Section 1902(a)(1)
tion of the State law (whether statu- of the Act requires a State plan to be
28
in effect throughout the State, and sec- compliance with section 1902(a)(23)
tion 1915 permits certain exceptions. solely because it imposes certain speci-
(b) State plan requirements. A State fied allowable restrictions on freedom
plan must provide that the following of choice.
requirements are met: (3) Section 1915(b) of the Act author-
(1) The plan will be in operation izes waiver of the section 1902(a)(23)
statewide through a system of local of- freedom of choice of providers require-
fices, under equitable standards for as- ment in certain specified cir-
sistance and administration that are cumstances, but not with respect to
mandatory throughout the State. providers of family planning services.
(2) If administered by political sub- (4) Section 1902(a)(23) of the Act pro-
divisions of the State, the plan will be vides that a beneficiary enrolled in a
mandatory on those subdivisions. primary care case management system
(3) The agency will ensure that the or Medicaid managed care organization
plan is continuously in operation in all (MCO) may not be denied freedom of
local offices or agencies through— choice of qualified providers of family
(i) Methods for informing staff of planning services.
State policies, standards, procedures, (5) Section 1902(e)(2) of the Act pro-
and instructions; vides that an enrollee who, while com-
(ii) Systematic planned examination pleting a minimum enrollment period,
and evaluation of operations in local is deemed eligible only for services fur-
offices by regularly assigned State nished by or through the MCO or
staff who make regular visits; and PCCM, may, as an exception to the
(iii) Reports, controls, or other meth- deemed limitation, seek family plan-
ods. ning services from any qualified pro-
(c) Exceptions. (1) ‘‘Statewide oper- vider.
ation’’ does not mean, for example, (6) Section 1932(a) of the Act permits
that every source of service must fur- a State to restrict the freedom of
nish the service State-wide. The re- choice required by section 1902(a)(23),
quirement does not preclude the agen- under specified circumstances, for all
cy from contracting with a comprehen- services except family planning serv-
sive health care organization (such as ices.
an HMO or a rural health clinic) that (b) State plan requirements. A State
serves a specific area of the State, to plan, except the plan for Puerto Rico,
furnish services to Medicaid bene- the Virgin Islands, or Guam, must pro-
ficiaries who live in that area and vide as follows:
chose to receive services from that (1) Except as provided under para-
HMO or rural health clinic. bene- graph (c) of this section and part 438 of
ficiaries who live in other parts of the this chapter, a beneficiary may obtain
State may receive their services from Medicaid services from any institution,
other sources. agency, pharmacy, person, or organiza-
(2) Other allowable exceptions and tion that is—
waivers are set forth in §§ 431.54 and (i) Qualified to furnish the services;
431.55. and
[56 FR 8847, Mar. 1, 1991; 56 FR 23022, May 20, (ii) Willing to furnish them to that
1991] particular beneficiary.
This includes an organization that fur-
§ 431.51 Free choice of providers. nishes, or arranges for the furnishing
(a) Statutory basis. This section is of, Medicaid services on a prepayment
based on sections 1902(a)(23), 1902(e)(2), basis.
and 1915(a) and (b) and 1932(a)(3) of the (2) A beneficiary enrolled in a pri-
Act. mary care case-management system, a
(1) Section 1902(a)(23) of the Act pro- Medicaid MCO, or other similar entity
vides that beneficiaries may obtain will not be restricted in freedom of
services from any qualified Medicaid choice of providers of family planning
provider that undertakes to provide services.

the services to them. (c) Exceptions. Paragraph (b) of this
(2) Section 1915(a) of the Act provides section does not prohibit the agency
that a State shall not be found out of from—
29
§ 431.52 42 CFR Ch. IV (10–1–17 Edition)
(1) Establishing the fees it will pay beneficiary who is a resident of the
providers for Medicaid services; State, and any of the following condi-
(2) Setting reasonable standards re- tions is met:
lating to the qualifications of pro- (1) Medical services are needed be-
viders; or cause of a medical emergency;
(3) Subject to paragraph (b)(2) of this (2) Medical services are needed and
section, restricting beneficiaries’ free the beneficiary’s health would be en-
choice of providers in accordance with dangered if he were required to travel
one or more of the exceptions set forth to his State of residence;
in § 431.54, or under a waiver as pro- (3) The State determines, on the
vided in § 431.55; or basis of medical advice, that the need-
(4) Limiting the providers who are ed medical services, or necessary sup-
available to furnish targeted case man- plementary resources, are more readily
agement services defined in § 440.169 of available in the other State;
this chapter to target groups that con- (4) It is general practice for bene-
sist solely of individuals with develop- ficiaries in a particular locality to use
mental disabilities or with chronic medical resources in another State.
mental illness. This limitation may (c) Cooperation among States. The plan
only be permitted so that the providers must provide that the State will estab-
of case management services for eligi- lish procedures to facilitate the fur-
ble individuals with developmental dis- nishing of medical services to individ-
abilities or with chronic mental illness uals who are present in the State and
are capable of ensuring that those indi- are eligible for Medicaid under another
viduals receive needed services. State’s plan.
(d) Certification requirement—(1) Con-
tent of certification. If a State imple- § 431.53 Assurance of transportation.
ments a project under one of the excep- A State plan must—
tions allowed under § 431.54 (d), (e) or (a) Specify that the Medicaid agency
(f), it must certify to CMS that the will ensure necessary transportation
statutory safeguards and requirements for beneficiaries to and from providers;
for an exception under section 1915(a) and
of the Act are met. (b) Describe the methods that the
(2) Timing of certification. (i) For an agency will use to meet this require-
exception under § 431.54(d), the State ment.
may not institute the project until [74 FR 31195, June 30, 2009]
after it has submitted the certification
and CMS has made the findings re- § 431.54 Exceptions to certain State
quired under the Act, and so notified plan requirements.
the State. (a) Statutory basis—(1) Section 1915(a)
(ii) For exceptions under § 431.54 (e) or of the Act provides that a State shall
(f), the State must submit the certifi- not be deemed to be out of compliance
cate by the end of the quarter in which with the requirements of sections
it implements the project. 1902(a)(1), (10), or (23) of the Act solely
[56 FR 8847, Mar. 1, 1991, as amended at 67 FR because it has elected any of the excep-
41094, June 14, 2002; 72 FR 68091, Dec. 4, 2007] tions set forth in paragraphs (b) and (d)
through (f) of this section.
§ 431.52 Payments for services fur- (2) Section 1915(g) of the Act provides
nished out of State. that a State may provide, as medical
(a) Statutory basis. Section 1902(a)(16) assistance, targeted case management
of the Act authorizes the Secretary to services under the plan without regard
prescribe State plan requirements for to the requirements of sections
furnishing Medicaid to State residents 1902(a)(1) and 1902(a)(10)(B) of the Act.
who are absent from the State. (3) Section 1915(i) of the Act provides
(b) Payment for services. A State plan that a State may provide, as medical
must provide that the State will pay assistance, home and community-based
for services furnished in another State services under an approved State plan
to the same extent that it would pay amendment that meets certain require-
for services furnished within its bound- ments, without regard to the require-
aries if the services are furnished to a ments of sections 1902(a)(10)(B) and
30
1902(a)(10)(C)(i)(III) of the Act, with re- lized Medicaid services at a frequency

spect to such services. or amount that is not medically nec-
(b) Additional services under a prepay- essary, as determined in accordance
ment system. If the Medicaid agency with utilization guidelines established
contracts on a prepayment basis with by the State, the agency may restrict
an organization that provides services that beneficiary for a reasonable period
additional to those offered under the of time to obtain Medicaid services
State plan, the agency may restrict the from designated providers only. The
provision of the additional services to agency may impose these restrictions
beneficiaries who live in the area only if the following conditions are
served by the organization and wish to met:
obtain services from it. (1) The agency gives the beneficiary
(c) [Reserved] notice and opportunity for a hearing
(d) Special procedures for purchase of (in accordance with procedures estab-
medical devices and laboratory and X-ray lished by the agency) before imposing
tests. The Medicaid agency may estab- the restrictions.
lish special procedures for the purchase (2) The agency ensures that the bene-
of medical devices or laboratory and X- ficiary has reasonable access (taking
ray tests (as defined in § 440.30 of this into account geographic location and
chapter) through a competitive bidding reasonable travel time) to Medicaid
process or otherwise, if the State services of adequate quality.
assures, in the certification required (3) The restrictions do not apply to
under § 431.51(d), and CMS finds, as fol- emergency services furnished to the
lows: beneficiary.
(1) Adequate services or devices are (f) Lock-out of providers. If a Medicaid
available to beneficiaries under the agency finds that a Medicaid provider
special procedures. has abused the Medicaid program, the
(2) Laboratory services are furnished agency may restrict the provider,
through laboratories that meet the fol- through suspension or otherwise, from
lowing requirements: participating in the program for a rea-
(i) They are independent labora- sonable period of time.
tories, or inpatient or outpatient hos- Before imposing any restriction, the
pital laboratories that provide services agency must meet the following condi-
for individuals who are not hospital pa- tions:
tients, or physician laboratories that (1) Give the provider notice and op-
process at least 100 specimens for other portunity for a hearing, in accordance
physicians during any calendar year. with procedures established by the
(ii) They meet the requirements of agency.
subpart M of part 405 or part 482 of this (2) Find that in a significant number
chapter. or proportion of cases, the provider
(iii) Laboratories that require an has:
interstate license under 42 CFR part 74 (i) Furnished Medicaid services at a
are licensed by CMS or receive an ex- frequency or amount not medically
emption from the licensing require- necessary, as determined in accordance
ment by the College of American Pa- with utilization guidelines established
thologists. (Hospital and physician lab- by the agency; or
oratories may participate in competi- (ii) Furnished Medicaid services of a
tive bidding only with regard to serv- quality that does not meet profes-
ices to non-hospital patients and other sionally recognized standards of health
physicians’ patients, respectively.) care.
(3) Any laboratory from which a (3) Notify CMS and the general public
State purchases services under this of the restriction and its duration.
section has no more than 75 percent of (4) Ensure that the restrictions do
its charges based on services to Medi- not result in denying beneficiaries rea-
care beneficiaries and Medicaid bene- sonable access (taking into account ge-
ficiaries. ographic location: and reasonable trav-

(e) Lock-in of beneficiaries who over- el time) to Medicaid services of ade-
utilize Medicaid services. If a Medicaid quate quality, including emergency
agency finds that a beneficiary has uti- services.
31
§ 431.55 42 CFR Ch. IV (10–1–17 Edition)
(g) Targeted case management services. (3) No waiver under this section may
The requirements of § 431.50(b) relating be granted for a period longer than 2
to the statewide operation of a State years, unless the agency requests a
plan and § 440.240 of this chapter related continuation of the waiver.
to comparability of services do not (4) CMS monitors the implementa-
apply with respect to targeted case tion of waivers granted under this sec-
management services defined in tion to ensure that requirements for
§ 440.169 of this chapter. such waivers are being met.
(h) State plan home and community- (i) If monitoring demonstrates that
based services. The requirements of the agency is not in compliance with
§ 440.240 of this chapter related to com- the requirements for a waiver under
parability of services do not apply with this section, CMS gives the agency no-
respect to State plan home and com- tice and opportunity for a hearing.
munity-based services defined in
(ii) If, after a hearing, CMS finds an
§ 440.182 of this chapter.
agency to be out of compliance with
[56 FR 8847, Mar. 1, 1991, as amended at 72 FR the requirements of a waiver, CMS ter-
68091, Dec. 4, 2007; 79 FR 3028, Jan. 16, 2014] minates the waiver and gives the agen-
cy a specified date by which it must
§ 431.55 Waiver of other Medicaid re-
quirements. demonstrate that it meets the applica-
ble requirements of section 1902 of the
(a) Statutory basis. Section 1915(b) of Act.
the Act authorizes the Secretary to (5) The requirements of section
waive most requirements of section 1902(s) of the Act, with regard to ad-
1902 of the Act to the extent he or she justments in payments for inpatient
finds proposed improvements or speci- hospital services furnished to infants
fied practices in the provision of serv-
who have not attained age 1 and to
ices under Medicaid to be cost effec-
children who have not attained age 6
tive, efficient, and consistent with the
and who receive these services in dis-
objectives of the Medicaid program.
proportionate share hospitals, may not
Sections 1915 (f) and (h) prescribe how
be waived under a section 1915(b) waiv-
such waivers are to be approved, con-
er.
tinued, monitored, and terminated.
Section 1902(p)(2) of the Act conditions (c) Case-management system. (1) Waiv-
FFP in payments to an entity under a ers of appropriate requirements of sec-
section 1915(b)(1) waiver on the State’s tion 1902 of the Act may be authorized
provision for exclusion of certain enti- for a State to implement a primary
ties from participation. care case-management system or spe-
(b) General requirements. (1) General cialty physician services system.
requirements for submittal of waiver (i) Under a primary care case-man-
requests, and the procedures that CMS agement system the agency assures
follows for review and action on those that a specific person or persons or
requests are set forth in § 430.25 of this agency will be responsible for locating,
chapter. coordinating, and monitoring all pri-
(2) In applying for a waiver to imple- mary care or primary care and other
ment an approvable project under para- medical care and rehabilitative serv-
graph (c), (d), (e), or (f) of this section, ices on behalf of a beneficiary. The per-
a Medicaid agency must document in son or agency must comply with the
the waiver request and maintain data requirements set forth in part 438 of
regarding: this chapter for primary care case
(i) The cost-effectiveness of the management contracts and systems.
project; (ii) A specialty physician services
(ii) The effect of the project on the system allows States to restrict bene-
accessibility and quality of services; ficiaries of specialty services to des-
(iii) The anticipated impact of the ignated providers of such services, even
project on the State’s Medicaid pro- in the absence of a primary care case-
gram and; management system.

(iv) Assurances that the restrictions (2) A waiver under this paragraph (c)
on free choice of providers do not apply may not be approved unless the State’s
to family planning services. request assures that the restrictions—
32
(i) Do not apply in emergency situa- when a restriction is imposed unless

tions; and the State arranges for reasonable and
(ii) Do not substantially impair ac- adequate beneficiary transfer.
cess to medically necessary services of (ii) Do not discriminate among class-
adequate quality. es of providers on grounds unrelated to
(d) Locality as central broker. Waivers their demonstrated effectiveness and
of appropriate requirements of section efficiency in providing those services;
1902 of the Act may be authorized for a and
State to allow a locality to act as a (iii) Do not apply in emergency cir-
central broker to assist beneficiaries in cumstances.
selecting among competing health care (3) Demonstrated effectiveness and
plans. States must ensure that access efficiency refers to reducing costs or
to medically necessary services of ade- slowing the rate of cost increase and
quate quality is not substantially im- maximizing outputs or outcomes per
paired. unit of cost.
(1) A locality is any defined jurisdic- (4) The agency must make payments
tion, e.g., district, town, city, borough, to providers furnishing services under a
county, parish, or State. freedom of choice waiver under this
(2) A locality may use any agency or paragraph (f) in accordance with the
agent, public or private, profit or non- timely claims payment standards spec-
profit, to act on its behalf in carrying ified in § 447.45 of this chapter for
out its central broker function. health care practitioners participating
(e) Sharing of cost savings. (1) Waivers in the Medicaid program.
of appropriate requirements of section (g) [Reserved]
1902 of the Act may be authorized for a (h) Waivers approved under section
State to share with beneficiaries the 1915(b)(1) of the Act—(1) Basic rules. (i)
cost savings resulting from the bene- An agency must submit, as part of it’s
ficiaries’ use of more cost-effective waiver request, assurance that the en-
medical care. tities described in paragraph (h)(2) of
(2) Sharing is through the provision this section will be excluded from par-
of additional services, including— ticipation under an approved waiver.
(i) Services furnished by a plan se- (ii) FFP is available in payments to
lected by the beneficiary; and an entity that furnishes services under
(ii) Services expressly offered by the a section 1915(b)(1) waiver only if the
State as an inducement for bene- agency excludes from participation any
ficiaries to participate in a primary entity described in paragraph (h)(2) of
care case-management system, a com- this section.
peting health care plan or other system (2) Entities that must be excluded.
that furnishes health care services in a The agency must exclude an entity
more cost-effective manner. that meets any of the following condi-
(f) Restriction of freedom of choice—(1) tions:
Waiver of appropriate requirements of (i) Could be excluded under section
section 1902 of the Act may be author- 1128(b)(8) of the Act as being controlled
ized for States to restrict beneficiaries by a sanctioned individual.
to obtaining services from (or through) (ii) Has a substantial contractual re-
qualified providers or practitioners lationship (direct or indirect) with an
that meet, accept, and comply with the individual convicted of certain crimes,
State reimbursement, quality and uti- as described in section 1128(b)(8)(B) of
lization standards specified in the the Act.
State’s waiver request. (iii) Employs or contracts directly or
(2) An agency may qualify for a waiv- indirectly with one of the following:
er under this paragraph (f) only if its (A) Any individual or entity that,
applicable State standards are con- under section 1128 or section 1128A of
sistent with access, quality and effi- the Act, is precluded from furnishing
cient and economic provision of cov- health care, utilization review, medical
ered care and services and the restric- social services, or administrative serv-
tions it imposes— ices.
(i) Do not apply to beneficiaries re- (B) Any entity described in para-
siding at a long-term care facility graph (h)(2)(i) of this section.
33
§ 431.56 42 CFR Ch. IV (10–1–17 Edition)
(3) Definitions. As used in this sec- furnish consultative services to hos-

tion, substantial contractual relation- pitals, nursing homes, home health
ship means any contractual relation- agencies, clinics, and laboratories in
ship that provides for one or more of order to assist these facilities to—
the following services: (1) Qualify for payments under the
(i) The administration, management, maternal and child health and crippled
or provision of medical services. children’s program (title V of the Act),
(ii) The establishment of policies, or Medicaid or Medicare;
the provision of operational support, (2) Establish and maintain fiscal
for the administration, management, records necessary for the proper and ef-
or provision of medical services. ficient administration of the Act; and
[56 FR 8847, Mar. 1, 1991, as amended at 59 FR (3) Provide information needed to de-
4599, Feb. 1, 1994; 59 FR 36084, July 15, 1994; 67 termine payments due under the Act
FR 41094, June 14, 2002] for services furnished to beneficiaries.
§ 431.56 Special waiver provisions ap- (c) State plan option: Consultation to
plicable to American Samoa and the other facilities. The plan may provide
Northern Mariana Islands. that health agencies and other appro-
(a) Statutory basis. Section 1902(j) of priate State agencies furnish consulta-
the Act provides for waiver of all but tion to other types of facilities if those
three of the title XIX requirements, in facilities are specified in the plan and
the case of American Samoa and the provide medical care to individuals re-
Northern Mariana Islands. ceiving services under the programs
(b) Waiver provisions. American specified in paragraph (b) of this sec-
Samoa or the Northern Mariana Is- tion.
lands may request, and CMS may ap-
§ 431.107 Required provider agree-
prove, a waiver of any of the title XIX ment.
requirements except the following:
(1) The Federal medical assistance (a) Basis and purpose. This section
percentage specified in section 1903 of sets forth State plan requirements,
the Act and § 433.10(b) of this chapter. based on sections 1902(a)(4), 1902(a)(27),
(2) The limit imposed by section 1902(a)(57), and 1902(a)(58) of the Act,
1108(c) of the Act on the amount of that relate to the keeping of records
Federal funds payable to American and the furnishing of information by
Samoa or the Northern Mariana Is- all providers of services (including in-
lands for care and services that meet dividual practitioners and groups of
the section 1905(a) definition for Med- practitioners).
icaid assistance. (b) Agreements. A State plan must
(3) The requirement that payment be provide for an agreement between the
made only with respect to expenditure Medicaid agency and each provider or
made by American Samoa or the organization furnishing services under
Northern Mariana Islands for care and the plan in which the provider or orga-
services that meet the section 1905(a) nization agrees to:
definition of medical assistance. (1) Keep any records necessary to dis-
close the extent of services the pro-
Subpart C—Administrative vider furnishes to beneficiaries;
Requirements: Provider Relations (2) On request, furnish to the Med-
icaid agency, the Secretary, or the
§ 431.105 Consultation to medical fa- State Medicaid fraud control unit (if
cilities. such a unit has been approved by the
(a) Basis and purpose. This section Secretary under § 455.300 of this chap-
implements section 1902(a)(24) of the ter), any information maintained under
Act, which requires that the State plan paragraph (b)(1) of this section and any
provide for consultative services by information regarding payments
State agencies to certain institutions claimed by the provider for furnishing
furnishing Medicaid services. services under the plan;

(b) State plan requirements. A State (3) Comply with the disclosure re-
plan must provide that health agencies quirements specified in part 455, sub-
and other appropriate State agencies part B of this chapter; and
34
(4) Comply with the advance direc- paragraph (b) of this section, the fol-
tives requirements for hospitals, nurs- lowing rules apply:
ing facilities, providers of home health (1) An NF provider agreement is ef-
care and personal care services, hos- fective on the date on which—
pices, and HMOs specified in part 489, (i) The NF is found to be in substan-
subpart I, and § 417.436(d) of this chap- tial compliance as defined in § 488.301 of
ter. this chapter; and
(5)(i) Furnish to the State agency its (ii) CMS or the State survey agency
National Provider Identifier (NPI) (if receives from the NF, if applicable, an
eligible for an NPI); and approvable waiver request.
(ii) Include its NPI on all claims sub- (2) For an agreement with any other
mitted under the Medicaid program. provider, the effective date is the ear-
lier of the following:
[44 FR 41644, July 17, 1979, as amended at 57 (i) The date on which the provider
FR 8202, Mar. 6, 1992; 75 FR 24449, May 5, 2010]
meets all requirements.
§ 431.108 Effective date of provider (ii) The date on which a provider is
agreements. found to meet all conditions of partici-
pation but has lower level deficiencies,
(a) Applicability—(1) General rule. Ex- and CMS or the State survey agency
cept as provided in paragraph (a)(2) of receives from the provider an accept-
this section, this section applies to able plan of correction for the lower
Medicaid provider agreements with en- level deficiencies, or an approvable
tities that, as a basis for participation waiver request, or both. (The date of
in Medicaid— receipt is the effective date of the
(i) Are subject to survey and certifi- agreement, regardless of when CMS ap-
cation by CMS or the State survey proves the plan of correction or waiver
agency; or request, or both.)
(ii) Are deemed to meet Federal re- (d) Accredited provider requests partici-
quirements on the basis of accredita- pation in the Medicaid program—(1) Gen-
tion by an accrediting organization eral rule. If a provider is currently ac-
whose program has CMS approval at credited by a national accrediting or-
the time of accreditation survey and ganization whose program had CMS ap-
accreditation decision. proval at the time of accreditation sur-
(2) Exception. A Medicaid provider vey and accreditation decision, and on
agreement with a laboratory is effec- the basis of accreditation, CMS has
tive only while the laboratory has in deemed the provider to meet Federal
effect a valid CLIA certificate issued requirements, the effective date de-
under part 493 of this chapter, and only pends on whether the provider is sub-
for the specialty and subspecialty tests ject to requirements in addition to
it is authorized to perform. those included in the accrediting orga-
(b) All requirements are met on the date nization’s approved program.
of survey. The agreement is effective on (i) Provider subject to additional re-
the date the onsite survey (including quirements. For a provider that is sub-
the Life Safety Code survey if applica- ject to additional requirements, Fed-
ble) is completed, if on that date the eral or State, or both, the effective
provider meets— date is the date on which the provider
(1) All applicable Federal require- meets all requirements, including the
ments as set forth in this chapter; and additional requirements.
(2) Any other requirements imposed (ii) Provider not subject to additional
by the State for participation in the requirements. For a provider that is not
Medicaid program. (If the provider has subject to additional requirements, the
a time-limited agreement, the new effective date is the date of the pro-
agreement is effective on the day fol- vider’s initial request for participation
lowing expiration of the current agree- if on that date the provider met all
ment.) Federal requirements.
(c) All requirements are not met on the (2) Special rule: Retroactive effective
date of survey. If on the date the survey date. If the provider meets the require-
is completed the provider fails to meet ments of paragraphs (d)(1) and (d)(1)(i)
any of the requirements specified in or (d)(1)(ii) of this section, the effective
35
§ 431.110 42 CFR Ch. IV (10–1–17 Edition)
date may be retroactive for up to one ments of this section and § 488.325 of
year, to encompass dates on which the this chapter are met.
provider furnished, to a Medicaid bene- (d) Disclosure procedure. The Medicaid
ficiary, covered services for which it agency must have a procedure for dis-
has not been paid. closing pertinent findings obtained
from surveys made by the State survey
[62 FR 43935, Aug. 18, 1997]
agency to determine if a health care fa-
§ 431.110 Participation by Indian cility, laboratory, agency, clinic or
Health Service facilities. health care organization meets the re-
quirements for participation in the
(a) Basis. This section is based on sec- Medicaid program.
tion 1902(a)(4) of the Act, proper and ef- (e) Documents subject to disclosure.
ficient administration; 1902(a)(23), free Documents subject to disclosure in-
choice of provider; and 1911, reimburse- clude—
ment of Indian Health Service facili- (1) Survey reports, except for Joint
ties. Commission on the Accreditation of
(b) State plan requirements. A State Hospitals reports prohibited from dis-
plan must provide that an Indian closure under § 422.426(b)(2) of this
Health Service facility meeting State chapter;
requirements for Medicaid participa- (2) Official notifications of findings
tion must be accepted as a Medicaid based on survey reports:
provider on the same basis as any other (3) Pertinent parts of written docu-
qualified provider. However, when ments furnished by the health care pro-
State licensure is normally required, vider to the survey agency that relate
the facility need not obtain a license to the reports and findings; and
but must meet all applicable standards (4) Ownership and contract informa-
for licensure. In determining whether a tion as specified in § 455.104 of this sub-
facility meets these standards, a Med- chapter.
icaid agency or State licensing author- (f) Availability for inspection and copy
ity may not take into account an ab- of statements listing deficiencies. The dis-
sence of licensure of any staff member closure procedure must provide that
of the facility. the State survey agency will—
(1) Make statements of deficiencies
§ 431.115 Disclosure of survey informa-
tion and provider or contractor based on the survey reports available
evaluation. for inspection and copying in both the
public assistance office and the Social
(a) Basis and purpose. This section Security Administration district office
implements— serving the area where the provider is
(1) Section 1902(a)(36) of the Act, located; and
which requires a State plan to provide (2) Submit to the Regional Medicaid
that the State survey agency will Director, through the Medicaid agency,
make publicly available the findings a plan for making those findings avail-
from surveys of health care facilities, able in other public assistance offices
laboratories, agencies, clinics, or orga- in standard metropolitian statistical
nizations; and areas where this information would be
(2) Section 1106(d) of the Act, which helpful to persons likely to use the
places certain restrictions on the Med- health care provider’s services.
icaid agency’s disclosure of contractor (g) When documents must be made
and provider evaluations. available. The disclosure procedure
(b) Definition of State survey agency. must provide that the State survey
The State survey agency referred to in agency will—
this section means the agency specified (1) Retain in the survey agency office
under section 1902(a)(9) of the Act as and make available upon request sur-
responsible for establishing and main- vey reports and current and accurate
taining health standards for private or ownership information; and
public institutions in which Medicaid (2) Make available survey reports,

beneficiaries may receive services. findings, and deficiency statements im-
(c) State plan requirements. A State mediately upon determining that a
plan must provide that the require- health care provider is eligible to begin
36
or continue participation in the Med- aspects of nursing facility services and

icaid program, or within 90 days after are required by the indicated sections
completion of the survey, whichever of the Act.
occurs first. (1) Nurse aide training and com-
(h) Evaluation reports on providers and petency programs, and evaluation of
contractors. (1) If the Secretary sends nurse aide competency (1919(e)(1) of the
the following reports to the Medicaid Act).
agency, the agency must meet the re- (2) Nurse aide registry (1919(e)(2) of
quirements of paragraphs (h) (2) and (3) the Act).
of this section in releasing them:
(i) Individual contractor performance [56 FR 48918, Sept. 26, 1991, as amended at 62
reviews and other formal performance FR 43935, Aug. 18, 1997]
evaluations of carriers, intermediaries,
and State agencies, including the re- Subpart D—Appeals Process for
ports of followup reviews; NFs and ICFs/IID
(ii) Comparative performance evalua-
tions of those contractors, including SOURCE: 44 FR 9753, Feb. 15, 1979, unless
comparisons of either overall perform- otherwise noted.
ance or of any particular aspect of con-
tractor operations; and § 431.151 Scope and applicability.
(iii) Program validation survey re-
(a) General rules. This subpart sets
ports and other formal performance
forth the appeals procedures that a
evaluations of providers, including the
State must make available as follows:
reports of followup reviews.
(2) The agency must not make the re- (1) To a nursing facility (NF) that is
ports public until— dissatisfied with a State’s finding of
(i) The contractor or provider has noncompliance that has resulted in one
had a reasonable opportunity, not to of the following adverse actions:
exceed 30 days, to comment on them; (i) Denial or termination of its pro-
and vider agreement.
(ii) Those comments have been incor- (ii) Imposition of a civil money pen-
porated in the report. alty or other alternative remedy.
(3) The agency must ensure that the (2) To an intermediate care facility
reports contain no identification of infor Individuals with Intellectual Dis-
dividual patients, individual health abilities (ICF/IID) that is dissatisfied
care practitioners or other individuals. with a State’s finding of noncompli-
ance that has resulted in the denial,
FR 41644, July 17, 1979; 59 FR 56232, Nov. 10,
termination, or nonrenewal of its pro-
1994] vider agreement.
(3) To an NF or ICF/IID that is dissat-
§ 431.120 State requirements with re- isfied with a determination as to the
spect to nursing facilities. effective date of its provider agree-
(a) State plan requirements. A State ment.
plan must— (b) Special rules. This subpart also
(1) Provide that the requirements of sets forth the special rules that apply
subpart D of part 483 of this chapter are in particular circumstances, the limi-
met; and tations on the grounds for appeal, and
(2) Specify the procedures and rules the scope of review during a hearing.
that the State follows in carrying out [61 FR 32348, June 24, 1996, as amended at 62
the specified requirements, including FR 43935, Aug. 18, 1997]
review and approval of State-operated
programs. § 431.152 State plan requirements.
(3) To an NF or ICF/IID that is dissat-
isfied with a determination as to the The State plan must provide for ap-
effective date of its provider agree- peals procedures that, as a minimum,
satisfy the requirements of §§ 431.153
ment.
(b) Basis and scope of requirements. and 431.154.
The requirements set forth in part 483 [59 FR 56232, Nov. 10, 1994, as amended at 61
of this chapter pertain to the following FR 32348, June 24, 1996]
37
§ 431.153 42 CFR Ch. IV (10–1–17 Edition)
§ 431.153 Evidentiary hearing. (1) Basic rule. Except as provided in

(a) Right to hearing. Except as pro- paragraph (f)(2) of this section (and
vided in paragraph (b) of this section, notwithstanding any provision of State
and subject to the provisions of para- law), the State must impose all rem-
graphs (c) through (j) of this section, edies timely on the NF, even if the NF
the State must give the facility a full requests a hearing.
evidentiary hearing for any of the ac- (2) Exception. The State may not col-
tions specified in § 431.151. lect a civil money penalty until after
(b) Limit on grounds for appeal. The the 60-day period for request of hearing
following are not subject to appeal: has elapsed or, if the NF requests a
(1) The choice of sanction or remedy. hearing, until issuance of a final ad-
(2) The State monitoring remedy. ministrative decision that supports im-
(3) [Reserved] position of the penalty.
(4) The level of noncompliance found (g) Special rules: Dually participating
by a State except when a favorable facilities. If an NF is also participating
final administrative review decision or seeking to participate in Medicare
would affect the range of civil money as an SNF, and the basis for the State’s
penalty amounts the State could col- denial or termination of participation
lect. in Medicaid is also a basis for denial or
(5) A State survey agency’s decision termination of participation in Medi-
as to when to conduct an initial survey care, the State must advise the facility
of a prospective provider. that—
(c) Notice of deficiencies and impending (1) The appeals procedures specified
remedies. The State must give the facil- for Medicare facilities in part 498 of
ity a written notice that includes: this chapter apply; and
(1) The basis for the decision; and (2) A final decision entered under the
(2) A statement of the deficiencies on Medicare appeals procedures is binding
which the decision was based. for both programs.
(d) Request for hearing. The facility or (h) Special rules: Adverse action by
its legal representative or other au- CMS. If CMS finds that an NF is not in
thorized official must file written re- substantial compliance and either ter-
quest for hearing within 60 days of re- minates the NF’s Medicaid provider
ceipt of the notice of adverse action. agreement or imposes alternative rem-
(e) Special rules: Denial, termination or edies on the NF (because CMS’s find-
nonrenewal of provider agreement—(1) ings and proposed remedies prevail
Appeal by an ICF/IID. If an ICF/IID re- over those of the State in accordance
quests a hearing on denial, termi- with § 488.452 of this chapter), the NF is
nation, or nonrenewal of its provider entitled only to the appeals procedures
agreement— set forth in part 498 of this chapter, in-
(i) The evidentiary hearing must be stead of the procedures specified in this
completed either before, or within 120 subpart.
days after, the effective date of the ad-
(i) Required elements of hearing. The
verse action; and
hearing must include at least the fol-
(ii) If the hearing is made available
lowing:
only after the effective date of the ac-
tion, the State must, before that date, (1) Opportunity for the facility—
offer the ICF/IID an informal reconsid- (i) To appear before an impartial de-
eration that meets the requirements of cision-maker to refute the finding of
§ 431.154. noncompliance on which the adverse
(2) Appeal by an NF. If an NF requests action was based;
a hearing on the denial or termination (ii) To be represented by counsel or
of its provider agreement, the request other representative; and
does not delay the adverse action and (iii) To be heard directly or through
the hearing need not be completed be- its representative, to call witnesses,
fore the effective date of the action. and to present documentary evidence.
(f) Special rules: Imposition of remedies. (2) A written decision by the impar-
If a State imposes a civil money pen- tial decision-maker, setting forth the
alty or other remedies on an NF, the reasons for the decision and the evi-
following rules apply: dence on which the decision is based.
38
(j) Limits on scope of review: Civil (1) Is subject to a proposed transfer

money penalty cases. In civil money pen- or discharge from a nursing facility; or
alty cases— (2) Is adversely affected by the pre-
(1) The State’s finding as to a NF’s admission screening or the annual resi-
level of noncompliance must be upheld dent review that are required by sec-
unless it is clearly erroneous; and tion 1919(e)(7) of the Act.
(2) The scope of review is as set forth (d) Implements section 1943(b)(3) of
in § 488.438(e) of this chapter. the Act and section 1413 of the Afford-
[61 FR 32348, June 24, 1996, as amended at 62
able Care Act to permit coordinated
FR 43935, Aug. 18, 1997; 64 FR 39937, July 23, hearings and appeals among insurance
1999] affordability programs.
[67 FR 41094, June 14, 2002, as amended at 81
§ 431.154 Informal reconsideration for FR 27852, May 6, 2016; 81 FR 86448, Nov. 30,
ICFs/IID. 2016]
The informal reconsideration must,
at a minimum, include— § 431.201 Definitions.
(a) Written notice to the facility of For purposes of this subpart:
the denial, termination or nonrenewal Action means a termination, suspen-
and the findings upon which it was sion of, or reduction in covered benefits
based; or services, or a termination, suspen-
(b) A reasonable opportunity for the sion of, or reduction in Medicaid eligi-
facility to refute those findings in writ- bility or an increase in beneficiary li-
ing, and ability, including a determination that
(c) A written affirmation or reversal a beneficiary must incur a greater
of the denial, termination, or non- amount of medical expenses in order to
renewal. establish income eligibility in accord-
[44 FR 9753, Feb. 15, 1979, as amended at 59 ance with § 435.121(e)(4) or § 435.831 of
FR 56233, Nov. 10, 1994; 61 FR 32349, June 24, this chapter or is subject to an increase
1996] in premiums or cost-sharing charges
under subpart A of part 447 of this
Subpart E—Fair Hearings for chapter. It also means a determination
Applicants and Beneficiaries by a skilled nursing facility or nursing
facility to transfer or discharge a resi-
dent and an adverse determination by a
SOURCE: 44 FR 17932, Mar. 29, 1979, unless
otherwise noted. State with regard to the preadmission
screening and resident review require-
GENERAL PROVISIONS ments of section 1919(e)(7) of the Act.
Adverse determination means a deter-
§ 431.200 Basis and scope. mination made in accordance with sec-
This subpart— tions 1919(b)(3)(F) or 1919(e)(7)(B) of the
(a) Implements section 1902(a)(3) of Act that the individual does not re-
the Act, which requires that a State quire the level of services provided by a
plan provide an opportunity for a fair nursing facility or that the individual
hearing to any person whose claim for does or does not require specialized
assistance is denied or not acted upon services.
promptly; Date of action means the intended
(b) Prescribes procedures for an op- date on which a termination, suspen-
portunity for a hearing if the State sion, reduction, transfer or discharge
agency or non-emergency transpor- becomes effective. It also means the
tation PAHP (as defined in § 438.9(a) of date of the determination made by a
this chapter) takes action, as stated in State with regard to the preadmission
this subpart, to suspend, terminate, or screening and annual resident review
reduce services, or of an adverse ben- requirements of section 1919(e)(7) of the
efit determination by an MCO, PIHP or Act.
PAHP under subpart F of part 438 of De novo hearing means a hearing that
this chapter; and starts over from the beginning.

(c) Implements sections 1919(f)(3) and Evidentiary hearing means a hearing
1919(e)(7)(F) of the Act by providing an conducted so that evidence may be pre-
appeals process for any person who— sented.
39
§ 431.202 42 CFR Ch. IV (10–1–17 Edition)
Joint fair hearing request means a re- uals who have requested a fair hearing
quest for a Medicaid fair hearing which are given the choice to have their fair
is included in an appeal request sub- hearing conducted instead by the Med-
mitted to an Exchange or Exchange ap- icaid agency; at state option the Ex-
peals entity under 45 CFR 155.520 or change or Exchange appeals entity de-
other insurance affordability program cision may be subject to review by the
or appeals entity, in accordance with Medicaid agency in accordance with
the signed agreement between the § 431.10(c)(3)(iii); or
agency and an Exchange or Exchange (2) An evidentiary hearing at the
appeals entity or other program or ap- local level, with a right of appeal to
peals entity described in § 435.1200(b)(3) the Medicaid agency.
of this chapter . (c) The agency may offer local hear-
Local evidentiary hearing means a ings in some political subdivisions and
hearing held on the local or county not in others.
level serving a specified portion of the (d) The hearing system must meet
State. the due process standards set forth in
Notice means a written statement Goldberg v. Kelly, 397 U.S. 254 (1970), and
that meets the requirements of any additional standards specified in
§ 431.210. this subpart.
Request for a hearing means a clear (e) The hearing system must be ac-
expression by the applicant or bene- cessible to persons who are limited
ficiary, or his authorized representa- English proficient and persons who
tive, that he wants the opportunity to have disabilities, consistent with
present his case to a reviewing author- § 435.905(b) of this chapter.
ity. (f) The hearing system must comply
Send means deliver by mail or in with the United States Constitution,
electronic format consistent with the Social Security Act, title VI of the
§ 435.918 of this chapter. Civil Rights Act of 1964, section 504 of
Service authorization request means a the Rehabilitation Act of 1973, the
managed care enrollee’s request for the Americans with Disabilities Act of
provision of a service. 1990, the Age Discrimination Act of
1975, and section 1557 of the Affordable
FR 56505, Nov. 30, 1992; 67 FR 41095, June 14, Care Act and implementing regula-
2002; 78 FR 42301, July 15, 2013; 81 FR 86448, tions.
Nov. 30, 2016] [44 FR 17932, Mar. 29, 1979, as amended at 78
FR 42301, July 15, 2013; 81 FR 86448, Nov. 30,
§ 431.202 State plan requirements. 2016]
A State plan must provide that the
requirements of §§ 431.205 through § 431.206 Informing applicants and
431.246 of this subpart are met. beneficiaries.
(a) The agency must issue and pub-
§ 431.205 Provision of hearing system. licize its hearing procedures.
(a) The Medicaid agency must be re- (b) The agency must, at the time
sponsible for maintaining a hearing specified in paragraph (c) of this sec-
system that meets the requirements of tion, inform every applicant or bene-
this subpart. ficiary in writing—
(b) The State’s hearing system must (1) Of his or her right to a fair hear-
provide for— ing and right to request an expedited
(1) A hearing before— fair hearing;
(i) The Medicaid agency; or (2) Of the method by which he may
(ii) For the denial of eligibility for obtain a hearing;
individuals whose income eligibility is (3) That he may represent himself or
determined based on the applicable use legal counsel, a relative, a friend,
modified adjusted gross income stand- or other spokesman; and
ard described in§ 435.911(c) of this chap- (4) Of the time frames in which the
ter, the Exchange or Exchange appeals agency must take final administrative
entity to which authority to conduct action, in accordance with § 431.244(f).
fair hearings has been delegated under (c) The agency must provide the in-
§ 431.10(c)(1)(ii), provided that individ- formation required in paragraph (b) of
40
this section—(1) At the time that the (c) The specific regulations that sup-
individual applies for Medicaid; port, or the change in Federal or State
(2) At the time the agency denies an law that requires, the action;
individual’s claim for eligibility, bene- (d) An explanation of—
fits or services; or denies a request for (1) The individual’s right to request a
exemption from mandatory enrollment local evidentiary hearing if one is
in an Alternative Benefit Plan; or available, or a State agency hearing; or
takes other action, as defined at (2) In cases of an action based on a
§ 431.201; or whenever a hearing is oth- change in law, the circumstances under
erwise required in accordance with which a hearing will be granted; and
§ 431.220(a); (e) An explanation of the cir-
(3) At the time a skilled nursing fa- cumstances under which Medicaid is
cility or a nursing facility notifies a continued if a hearing is requested.
resident in accordance with § 483.15 of
this chapter that he or she is to be FR 56505, Nov. 30, 1992; 81 FR 86448, Nov. 30,
transferred or discharged; and 2016]
(4) At the time an individual receives
an adverse determination by the State § 431.211 Advance notice.
with regard to the preadmission The State or local agency must send
screening and annual resident review a notice at least 10 days before the date
requirements of section 1919(e)(7) of the of action, except as permitted under
Act. §§ 431.213 and 431.214.
(d) If, in accordance with
§ 431.10(c)(1)(ii), the agency has dele- [78 FR 42301, July 15, 2013]
gated authority to the Exchange or Ex-
change appeals entity to conduct the § 431.213 Exceptions from advance no-
fair hearing, the agency must inform tice.
the individual in writing that— The agency may send a notice not
(1) He or she has the right to have his later than the date of action if—
or her hearing before the agency, in- (a) The agency has factual informa-
stead of the Exchange or the Exchange tion confirming the death of a bene-
appeals entity; and ficiary;
(2) The method by which the indi- (b) The agency receives a clear writ-
vidual may make such election; ten statement signed by a beneficiary
(e) The information required under that—
this subpart must be accessible to indi- (1) He no longer wishes services; or
viduals who are limited English pro- (2) Gives information that requires
ficient and to individuals with disabil- termination or reduction of services
ities, consistent with § 435.905(b) of this and indicates that he understands that
chapter, and may be provided in elec- this must be the result of supplying
tronic format in accordance with that information;
§ 435.918 of this chapter. (c) The beneficiary has been admitted
to an institution where he is ineligible
FR 56505, Nov. 30, 1992; 58 FR 25784, Apr. 28, under the plan for further services;
1993; 78 FR 42301, July 15, 2013; 81 FR 68847, (d) The beneficiary’s whereabouts are
Oct. 4, 2016; 81 FR 86448, Nov. 30, 2016] unknown and the post office returns
agency mail directed to him indicating
NOTICE no forwarding address (See § 431.231 (d)
of this subpart for procedure if the
§ 431.210 Content of notice. beneficiary’s whereabouts become
A notice required under § 431.206 known);
(c)(2), (c)(3), or (c)(4) of this subpart (e) The agency establishes the fact
must contain— that the beneficiary has been accepted
(a) A statement of what action the for Medicaid services by another local
agency, skilled nursing facility, or jurisdiction, State, territory, or com-
nursing facility intends to take and the monwealth;

effective date of such action; (f) A change in the level of medical
(b) A clear statement of the specific care is prescribed by the beneficiary’s
reasons supporting the intended action; physician;
41
§ 431.214 42 CFR Ch. IV (10–1–17 Edition)
(g) The notice involves an adverse de- ing facility or nursing facility has erro-
termination made with regard to the neously determined that he or she
preadmission screening requirements must be transferred or discharged.
of section 1919(e)(7) of the Act; or (3) Any individual who requests it be-
(h) The date of action will occur in cause he or she believes the State has
less than 10 days, in accordance with made an erroneous determination with
§ 483.15(b)(4)(ii) and (b)(8), which pro- regard to the preadmission and annual
vides exceptions to the 30 days notice resident review requirements of section
requirements of § 483.15(b)(4)(i) of this 1919(e)(7) of the Act.
chapter. (4) Any MCO, PIHP, or PAHP en-
[44 FR 17932, Mar. 29, 1979, as amended at 57 rollee who is entitled to a hearing
FR 56505, Nov. 30, 1992; 58 FR 25784, Apr. 28, under subpart F of part 438 of this
1993; 78 FR 42301, July 15, 2013; 81 FR 68847, chapter.
Oct. 4, 2016] (5) Any enrollee in a non-emergency
§ 431.214 Notice in cases of probable medical transportation PAHP (as that
fraud. term is defined in § 438.9 of this chap-
ter) who has an action as stated in this
The agency may shorten the period
subpart.
of advance notice to 5 days before the
(6) Any enrollee who is entitled to a
date of action if—
(a) The agency has facts indicating hearing under subpart B of part 438 of
that action should be taken because of this chapter.
probable fraud by the beneficiary; and (b) The agency need not grant a hear-
(b) The facts have been verified, if ing if the sole issue is a Federal or
possible, through secondary sources. State law requiring an automatic
change adversely affecting some or all
RIGHT TO HEARING beneficiaries.
§ 431.220 When a hearing is required. [44 FR 17932, Mar. 29, 1979, as amended at 57
FR 56505, Nov. 30, 1992; 67 FR 41095, June 14,
(a) The State agency must grant an 2002; 67 FR 65505, Oct. 25, 2002; 81 FR 27853,
opportunity for a hearing to the fol- May 6, 2016; 81 FR 86448, Nov. 30, 2016]
lowing:
(1) Any individual who requests it be- § 431.221 Request for hearing.
cause he or she believes the agency has (a)(1) The agency must establish pro-
taken an action erroneously, denied his cedures that permit an individual, or
or her claim for eligibility or for cov- an authorized representative as defined
ered benefits or services, or issued a de-
at § 435.923 of this chapter, to—
termination of an individual’s liability,
(i) Submit a hearing request via any
or has not acted upon the claim with
of the modalities described in
reasonable promptness including, if ap-
plicable— § 435.907(a) of this chapter, except that
(i) An initial or subsequent decision the requirement to establish proce-
regarding eligibility; dures for submission of a fair hearing
(ii) A determination of the amount of request described in § 435.907(a)(1), (2)
medical expenses that an individual and (5) of this chapter (relating to sub-
must incur in order to establish eligi- missions via Internet Web site, tele-
bility in accordance with § 435.121(e)(4) phone and other electronic means) is
or § 435.831 of this chapter; or effective no later than the date de-
(iii) A determination of the amount scribed in § 435.1200(i) of this chapter;
of premiums and cost sharing charges and
under subpart A of part 447 of this (ii) Include in a hearing request sub-
chapter; mitted under paragraph (a)(1)(i) of this
(iv) A change in the amount or type section, a request for an expedited fair
of benefits or services; or hearing.
(v) A request for exemption from (2) [Reserved]
mandatory enrollment in an Alter- (b) The agency may not limit or

native Benefit Plan. interfere with the applicant’s or bene-
(2) Any resident who requests it be- ficiary’s freedom to make a request for
cause he or she believes a skilled nurs- a hearing.
42
(c) The agency may assist the appli- § 431.244(f)(1) could jeopardize the indi-
cant or beneficiary in submitting and vidual’s life, health or ability to at-
processing his request. tain, maintain, or regain maximum
(d) The agency must allow the appli- function.
cant or beneficiary a reasonable time, (2) The agency must take final ad-
not to exceed 90 days from the date ministrative action within the period
that notice of action is mailed, to re- of time permitted under § 431.244(f)(3) if
quest a hearings. the agency determines that the indi-
vidual meets the criteria for an expe-
dited fair hearing in paragraph (a)(1) of
FR 86448, Nov. 30, 2016]
this section.
§ 431.222 Group hearings. (b) Notice. The agency must notify
the individual whether the request is
The agency— granted or denied as expeditiously as
(a) May respond to a series of indi- possible. Such notice must be provided
vidual requests for hearing by con- orally or through electronic means in
ducting a single group hearing; accordance with § 435.918 of this chap-
(b) May consolidate hearings only in ter, if consistent with the individual’s
cases in which the sole issue involved election under such section; if oral no-
is one of Federal or State law or policy; tice is provided, the agency must fol-
(c) Must follow the policies of this low up with written notice, which may
subpart and its own policies governing be through electronic means if con-
hearings in all group hearings; and sistent with the individual’s election
(d) Must permit each person to under § 435.918.
present his own case or be represented
[81 FR 86449, Nov. 30, 2016]
by his authorized representative.
§ 431.223 Denial or dismissal of re- PROCEDURES

quest for a hearing. § 431.230 Maintaining services.
The agency may deny or dismiss a re- (a) If the agency sends the 10-day or
quest for a hearing if— 5-day notice as required under § 431.211
(a) The applicant or beneficiary with- or § 431.214 of this subpart, and the ben-
draws the request. The agency must ac- eficiary requests a hearing before the
cept withdrawal of a fair hearing re- date of action, the agency may not ter-
quest via any of the modalities avail- minate or reduce services until a deci-
able per § 431.221(a)(1)(i). For telephonic sion is rendered after the hearing un-
hearing withdrawals, the agency must less—
record the individual’s statement and (1) It is determined at the hearing
telephonic signature. For telephonic, that the sole issue is one of Federal or
online and other electronic with- State law or policy; and
drawals, the agency must send the af- (2) The agency promptly informs the
fected individual written confirmation, beneficiary in writing that services are
via regular mail or electronic notifica- to be terminated or reduced pending
tion in accordance with the individ- the hearing decision.
ual’s election under § 435.918(a) of this (b) If the agency’s action is sustained
chapter. by the hearing decision, the agency
(b) The applicant or beneficiary fails may institute recovery procedures
to appear at a scheduled hearing with- against the applicant or beneficiary to
out good cause. recoup the cost of any services fur-
[44 FR 17932, Mar. 29, 1979, as amended at 81 nished the beneficiary, to the extent
FR 86449, Nov. 30, 2016] they were furnished solely by reason of
this section.
§ 431.224 Expedited appeals.
(a) General rule. (1) The agency must FR 24882, Apr. 11, 1980; 78 FR 42302, July 15,
establish and maintain an expedited 2013]
fair hearing process for individuals to

request an expedited fair hearing, if the § 431.231 Reinstating services.
agency determines that the time other- (a) The agency may reinstate serv-
wise permitted for a hearing under ices if a beneficiary requests a hearing
43
§ 431.232 42 CFR Ch. IV (10–1–17 Edition)
not more than 10 days after the date of (d) Discontinue services after the ad-
action. verse decision.
(b) The reinstated services must con- [44 FR 17932, Mar. 29, 1979, as amended at 81
tinue until a hearing decision unless, FR 86449, Nov. 30, 2016]
at the hearing, it is determined that
the sole issue is one of Federal or State § 431.233 State agency hearing after
law or policy. adverse decision of local evi-
(c) The agency must reinstate and dentiary hearing.
continue services until a decision is (a) Unless the applicant or bene-
rendered after a hearing if— ficiary specifically requests a de novo
(1) Action is taken without the ad- hearing, the State agency hearing may
vance notice required under § 431.211 or consist of a review by the agency hear-
§ 431.214 of this subpart; ing officer of the record of the local
(2) The beneficiary requests a hearing evidentiary hearing to determine
within 10 days from the date that the whether the decision of the local hear-
individual receives the notice of ac- ing officer was supported by substan-
tion. The date on which the notice is tial evidence in the record.
received is considered to be 5 days after (b) A person who participates in the
the date on the notice, unless the bene- local decision being appealed may not
ficiary shows that he or she did not re- participate in the State agency hearing
ceive the notice within the 5-day pe- decision.
riod; and
(3) The agency determines that the § 431.240 Conducting the hearing.
action resulted from other than the ap- (a) All hearings must be conducted—
plication of Federal or State law or (1) At a reasonable time, date, and
policy. place;
(d) If a beneficiary’s whereabouts are (2) Only after adequate written no-
unknown, as indicated by the return of tice of the hearing; and
unforwardable agency mail directed to (3) By one or more impartial officials
him, any discontinued services must be or other individuals who have not been
reinstated if his whereabouts become directly involved in the initial deter-
known during the time he is eligible mination of the action in question.
for services. (b) If the hearing involves medical
[44 FR 17932, Mar. 29, 1979, as amended at 78 issues such as those concerning a diag-
FR 42302, July 15, 2013] nosis, an examining physician’s report,
or a medical review team’s decision,
§ 431.232 Adverse decision of local evi- and if the hearing officer considers it
dentiary hearing. necessary to have a medical assess-
If the decision of a local evidentiary ment other than that of the individual
hearing is adverse to the applicant or involved in making the original deci-
beneficiary, the agency must— sion, such a medical assessment must
be obtained at agency expense and
(a) Inform the applicant or bene-
made part of the record.
ficiary of the decision;
(c) A hearing officer must have ac-
(b) Inform the applicant or bene-
cess to agency information necessary
ficiary in writing that he or she has a
to issue a proper hearing decision, in-
right to appeal the decision to the
cluding information concerning State
State agency within 10 days after the
policies and regulations.
individual receives the notice of the
adverse decision. The date on which [44 FR 17932, Mar. 29, 1979, as amended at 78
the notice is received is considered to FR 42302, July 15, 2013]
be 5 days after the date on the notice,
unless the individual shows that he or § 431.241 Matters to be considered at
she did not receive the notice within the hearing.
the 5-day period; and
The hearing must cover—

(c) Inform the applicant or bene- (a) Any matter described in
ficiary of his right to request that his § 431.220(a)(1) for which an individual
appeal be a de novo hearing; and requests a fair hearing.
44
(b) A decision by a skilled nursing fa- (2) All papers and requests filed in
cility or nursing facility to transfer or the proceeding; and
discharge a resident; and (3) The recommendation or decision
(c) A State determination with re- of the hearing officer.
gard to the preadmission screening and (c) The applicant or beneficiary must
annual resident review requirements of have access to the record at a conven-
section 1919(e)(7) of the Act. ient place and time.
(d) In any evidentiary hearing, the
[57 FR 56505, Nov. 30, 1992, as amended at 81
FR 86449, Nov. 30, 2016]] decision must be a written one that—
(1) Summarizes the facts; and
§ 431.242 Procedural rights of the ap- (2) Identifies the regulations sup-
plicant or beneficiary. porting the decision.
The applicant or beneficiary, or his (e) In a de novo hearing, the decision
representative, must be given an oppor- must—
tunity to— (1) Specify the reasons for the deci-
sion; and
(a) Examine at a reasonable time be-
(2) Identify the supporting evidence
fore the date of the hearing and during
and regulations.
the hearing:
(f) The agency must take final ad-
(1) The content of the applicant’s or
ministrative action as follows:
beneficiary’s case file and electronic
(1) Ordinarily, within 90 days from:
account, as defined in § 435.4 of this
(i) The date the enrollee filed an
chapter; and
MCO, PIHP, or PAHP appeal, not in-
(2) All documents and records to be
cluding the number of days the en-
used by the State or local agency or
rollee took to subsequently file for a
the skilled nursing facility or nursing
State fair hearing; or
facility at the hearing;
(ii) For all other fair hearings, the
(b) Bring witnesses;
date the agency receives a request for a
(c) Establish all pertinent facts and
fair hearing in accordance with
circumstances;
§ 431.221(a)(1).
(d) Present an argument without (2) As expeditiously as the enrollee’s
undue interference; and health condition requires, but no later
(e) Question or refute any testimony than 3 working days after the agency
or evidence, including opportunity to receives, from the MCO, PIHP, or
confront and cross-examine adverse PAHP, the case file and information
witnesses. for any appeal of a denial of a service
(f) Request an expedited fair hearing. that, as indicated by the MCO, PIHP,
[44 FR 17932, Mar. 29, 1979, as amended at 57 or PAHP—
FR 56506, Nov. 30, 1992; 81 FR 86449, Nov. 30, (i) Meets the criteria for expedited
2016] resolution as set forth in § 438.410(a) of
this chapter, but was not resolved
§ 431.243 Parties in cases involving an within the timeframe for expedited res-
eligibility determination.
olution; or
If the hearing involves an issue of eli- (ii) Was resolved within the time-
gibility and the Medicaid agency is not frame for expedited resolution, but
responsible for eligibility determina- reached a decision wholly or partially
tions, the agency that is responsible adverse to the enrollee.
for determining eligibility must par- (3) In the case of individuals granted
ticipate in the hearing. an expedited fair hearing in accordance
with § 431.224(a)—
§ 431.244 Hearing decisions. (i) For a claim related to eligibility
(a) Hearing recommendations or deci- described in § 431.220(a)(1), or any claim
sions must be based exclusively on evi- described in § 431.220(a)(2) (relating to a
dence introduced at the hearing. nursing facility) or § 431.220(a)(3) (re-
(b) The record must consist only of— lated to preadmission and annual resi-
(1) The transcript or recording of tes- dent review), as expeditiously as pos-

timony and exhibits, or an official re- sible and, effective no later than the
port containing the substance of what date described in § 435.1200(i) of this
happened at the hearing; chapter, no later than 7 working days
45
§ 431.245 42 CFR Ch. IV (10–1–17 Edition)
after the agency receives a request for (b) The agency decides in the appli-
expedited fair hearing; or cant’s or beneficiary’s favor before the
(ii) For a claim related to services or hearing.
benefits described in § 431.220(a)(1) as [57 FR 56506, Nov. 30, 1992]
expeditiously as possible and, effective
no later than the date described in FEDERAL FINANCIAL PARTICIPATION
§ 435.1200(i) of this chapter, within the
time frame in paragraph (f)(2) of this § 431.250 Federal financial participa-
section. tion.
(iii) For a claim related to services or FFP is available in expenditures
benefits described in § 431.220(a)(4), (5) for—
or (6), in accordance with the time (a) Payments for services continued
frame in paragraph (f)(2) of this sec- pending a hearing decision;
tion. (b) Payments made—
(4)(i) The agency must take final ad- (1) To carry out hearing decisions;
ministrative action on a fair hearing and
request within the time limits set forth (2) For services provided within the
in this paragraph except in unusual cir- scope of the Federal Medicaid program
cumstances when— and made under a court order.
(A) The agency cannot reach a deci- (c) Payments made to take correc-
sion because the appellant requests a tive action prior to a hearing;
delay or fails to take a required action; (d) Payments made to extend the
or benefit of a hearing decision or court
(B) There is an administrative or order to individuals in the same situa-
other emergency beyond the agency’s tion as those directly affected by the
decision or order;
control.
(e) Retroactive payments under para-
(ii) The agency must document the
graphs (b), (c), and (d) of this section in
reasons for any delay in the appellant’s
accordance with applicable Federal
record. policies on corrective payments; and
(g) The public must have access to all (f) Administrative costs incurred by
agency hearing decisions, subject to the agency for—
the requirements of subpart F of this (1) Transportation for the applicant
part for safeguarding of information. or beneficiary, his representative, and
[44 FR 17932, Mar. 29, 1979, as amended at 67 witnesses to and from the hearing;
FR 41095, June 14, 2002; 81 FR 27853, May 6, (2) Meeting other expenses of the ap-
2016; 81 FR 86449, Nov. 30, 2016] plicant or beneficiary in connection
with the hearing;
§ 431.245 Notifying the applicant or (3) Carrying out the hearing proce-
beneficiary of a State agency deci- dures, including expenses of obtaining
sion. the additional medical assessment
The agency must notify the applicant specified in § 431.240 of this subpart; and
or beneficiary in writing of— (4) Hearing procedures for Medicaid
(a) The decision; and and non-Medicaid individuals appealing
(b) His right to request a State agen- transfers, discharges and determina-
cy hearing or seek judicial review, to tions of preadmission screening and an-
the extent that either is available to nual resident reviews under part 483,
him. subparts C and E of this chapter.
§ 431.246 Corrective action. FR 24882, Apr. 11, 1980; 57 FR 56506, Nov. 30,
1992]
The agency must promptly make cor-
rective payments, retroactive to the
date an incorrect action was taken, Subpart F—Safeguarding Informa-
and, if appropriate, provide for admis- tion on Applicants and Bene-
sion or readmission of an individual to ficiaries
a facility if—
(a) The hearing decision is favorable SOURCE: 44 FR 17934, Mar. 29, 1979, unless
to the applicant or beneficiary; or otherwise noted.
46
§ 431.300 Basis and purpose. § 431.302 Purposes directly related to

State plan administration.
(a) Section 1902(a)(7) of the Act re-
quires that a State plan must provide Purposes directly related to plan ad-
safeguards that restrict the use or dis- ministration include—
closure of information concerning ap- (a) Establishing eligibility;
plicants and beneficiaries to purposes (b) Determining the amount of med-
directly connected with the adminis- ical assistance;
tration of the plan. This subpart speci- (c) Providing services for bene-
fies State plan requirements, the types ficiaries; and
of information to be safeguarded, the (d) Conducting or assisting an inves-
conditions for release of safeguarded tigation, prosecution, or civil or crimi-
nal proceeding related to the adminis-
information, and restrictions on the
tration of the plan.
distribution of other information.
(b) For purposes of this subpart, in- § 431.303 State authority for safe-
formation concerning an applicant or guarding information.
beneficiary includes information on a The Medicaid agency must have au-
non-applicant, as defined in § 435.4 of thority to implement and enforce the
this subchapter. provisions specified in this subpart for
(c) Section 1137 of the Act, which re- safeguarding information about appli-
quires agencies to exchange informa- cants and beneficiaries.
tion to verify the income and eligi-
bility of applicants and beneficiaries § 431.304 Publicizing safeguarding re-
(see § 435.940 through § 435.965 of this quirements.
subchapter), requires State agencies to (a) The agency must publicize provi-
have adequate safeguards to assure sions governing the confidential nature
that— of information about applicants and
(1) Information exchanged by the beneficiaries, including the legal sanc-
State agencies is made available only tions imposed for improper disclosure
to the extent necessary to assist in the and use.
valid administrative needs of the pro- (b) The agency must provide copies of
gram receiving the information, and these provisions to applicants and
information received under section beneficiaries and to other persons and
6103(l)(7) of the Internal Revenue Code agencies to whom information is dis-
is exchanged only with agencies au- closed.
thorized to receive that information § 431.305 Types of information to be
under that section of the Code; and safeguarded.
(2) The information is adequately
(a) The agency must have criteria
stored and processed so that it is pro-
that govern the types of information
tected against unauthorized disclosure about applicants and beneficiaries that
for other purposes. are safeguarded.
(d) Section 1943 of the Act and sec- (b) This information must include at
tion 1413 of the Affordable Care Act. least—
[51 FR 7210, Feb. 28, 1986, as amended at 77 (1) Names and addresses;
FR 17203, Mar. 23, 2012] (2) Medical services provided;
(3) Social and economic conditions or
§ 431.301 State plan requirements. circumstances;
A State plan must provide, under a (4) Agency evaluation of personal in-
State statute that imposes legal sanc- formation;
tions, safeguards meeting the require- (5) Medical data, including diagnosis
and past history of disease or dis-
ments of this subpart that restrict the
ability; and
use or disclosure of information con-
(6) Any information received for
cerning applicants and beneficiaries to
verifying income eligibility and

purposes directly connected with the amount of medical assistance pay-
administration of the plan. ments (see § 435.940 through § 435.965 of
this subchapter). Income information
47
§ 431.306 42 CFR Ch. IV (10–1–17 Edition)
received from SSA or the Internal Rev- bility and the amount of assistance
enue Service must be safeguarded ac- under § 435.940 through § 435.965 of this
cording to the requirements of the subchapter, the agency must execute
agency that furnished the data, includ- data exchange agreements with those
ing section 6103 of the Internal Rev- agencies, as specified in § 435.945(i) of
enue Code, as applicable. this subchapter.
(7) Any information received in con- (h) Before requesting information
nection with the identification of le- from, or releasing information to,
gally liable third party resources under other agencies to identify legally liable
§ 433.138 of this chapter. third party resources under § 433.138(d)
(8) Social Security Numbers. of this chapter, the agency must exe-
[44 FR 17934, Mar. 29, 1979, as amended at 51 cute data exchanges agreements, as
FR 7210, Feb. 28, 1986; 52 FR 5975, Feb. 27, specified in § 433.138(h)(2) of this chap-
1987; 77 FR 17203, Mar. 23, 2012] ter.
§ 431.306 Release of information. [44 FR 17934, Mar. 29, 1979, as amended at 51
FR 7210, Feb. 28, 1986; 52 FR 5975, Feb. 27,
(a) The agency must have criteria 1987; 77 FR 17203, Mar. 23, 2012]
specifying the conditions for release
and use of information about appli- § 431.307 Distribution of information
cants and beneficiaries. materials.
(b) Access to information concerning (a) All materials distributed to appli-
applicants or beneficiaries must be re- cants, beneficiaries, or medical pro-
stricted to persons or agency rep- viders must—
resentatives who are subject to stand- (1) Directly relate to the administra-
ards of confidentiality that are com- tion of the Medicaid program;
parable to those of the agency.
(2) Have no political implications ex-
(c) The agency must not publish
cept to the extent required to imple-
names of applicants or beneficiaries.
ment the National Voter Registration
(d) The agency must obtain permis-
Act of 1993 (NVRA) Pub. L. 103–931; for
sion from a family or individual, when-
States that are exempt from the re-
ever possible, before responding to a re-
quirements of NVRA, voter registra-
quest for information from an outside
source, unless the information is to be tion may be a voluntary activity so
used to verify income, eligibility and long as the provisions of section 7(a)(5)
the amount of medical assistance pay- of NVRA are observed;
ment under section 1137 of this Act and (3) Contain the names only of individ-
§§ 435.940 through 435.965 of this chap- uals directly connected with the ad-
ter. ministration of the plan; and
(4) Identify those individuals only in
If, because of an emergency situation,
their official capacity with the State
time does not permit obtaining consent
or local agency.
before release, the agency must notify
(b) The agency must not distribute
the family or individual immediately
materials such as ‘‘holiday’’ greetings,
after supplying the information.
general public announcements, par-
(e) The agency’s policies must apply
tisan voting information and alien reg-
to all requests for information from
istration notices.
outside sources, including govern-
(c) The agency may distribute mate-
mental bodies, the courts, or law en-
rials directly related to the health and
forcement officials.
(f) If a court issues a subpoena for a welfare of applicants and beneficiaries,
case record or for any agency rep- such as announcements of free medical
resentative to testify concerning an ap- examinations, availability of surplus
plicant or beneficiary, the agency must food, and consumer protection informa-
inform the court of the applicable stat- tion.
utory provisions, policies, and regula- (d) Under NVRA, the agency must
tions restricting disclosure of informa- distribute voter information and reg-
istration materials as specified in
tion.
(g) Before requesting information NVRA.
from, or releasing information to, [44 FR 17934, Mar. 29, 1979, as amended at 61
other agencies to verify income, eligi- FR 58143, Nov. 13, 1996]
48
Subpart G—Section 1115 the authority of section 1115 of the Act

Demonstrations because, in the judgment of the Sec-
retary, it is likely to assist in pro-
moting the statutory objectives of the
SOURCE: 77 FR 11696, Feb. 27, 2012, unless
otherwise noted.
Medicaid or CHIP program.
Indian Health Program means a pro-
§ 431.400 Basis and purpose. gram as defined at section 4(12) of the
Indian Health Care Improvement Act,
(a) Basis. This subpart implements
(Pub. L. 94–437).
provisions in section 1115(d) of the Act,
Public notice means a notice issued by
which requires all of the following:
a government agency or legislative
(1) The establishment of application
requirements for Medicaid and CHIP body that contains sufficient detail to
demonstration projects that provide notify the public at large of a proposed
for: action, consistent with the provisions
(i) A process for public notice and of § 431.408 of this subpart.
comment at the State level, including § 431.408 State public notice process.
public hearings, sufficient to ensure a
meaningful level of public input and (a) General. A State must provide at
that does not impose requirements least a 30-day public notice and com-
that are in addition to, or duplicative ment period regarding applications for
of, requirements imposed under the Ad- a demonstration project, or an exten-
ministrative Procedure Act, or require- sion of an existing demonstration
ments that are unreasonable or unnec- project that the State intends to sub-
essarily burdensome with respect to mit to CMS for review and consider-
State compliance. ation.
(ii) Requirements relating to all of (1) Public notice and comment period.
the following: Prior to submitting an application to
(A) The goals of the program to be CMS for a new demonstration project
implemented or renewed under the or an extension of a previously ap-
demonstration project. proved demonstration project, the
(B) Expected State and Federal costs State must provide at least a 30-day
and coverage projections of the State public notice and comment period, and
demonstration project. the public notice shall include all of
(C) Specific plans of the State to en- the following information:
sure the demonstration project will be (i) A comprehensive description of
in compliance with titles XIX or XXI of the demonstration application or ex-
the Act. tension to be submitted to CMS that
(2) A process for public notice and contains a sufficient level of detail to
comment after a demonstration appli- ensure meaningful input from the pub-
cation is received by the Secretary lic, including:
that is sufficient to ensure a meaning- (A) The program description, goals,
ful level of public input. and objectives to be implemented or
(3) A process for the submission of re- extended under the demonstration
ports to the Secretary by a State relat- project, including a description of the
ing to the implementation of a dem- current or new beneficiaries who will
onstration project. be impacted by the demonstration.
(4) Periodic evaluation of demonstra- (B) To the extent applicable, the pro-
tion projects by the Secretary. posed health care delivery system and
(b) Purpose. This subpart sets forth a the eligibility requirements, benefit
process for application and review of coverage and cost sharing (premiums,
Medicaid and CHIP demonstration co-payments, and deductibles) required
projects that provides for transparency of individuals that will be impacted by
and public participation. the demonstration, and how such pro-
visions vary from the State’s current
§ 431.404 Definitions. program features.
For the purposes of this subpart: (C) An estimate of the expected in-
Demonstration means any experi- crease or decrease in annual enroll-
mental, pilot, or demonstration project ment, and in annual aggregate expendi-
which the Secretary approves under tures, including historic enrollment or
49
§ 431.408 42 CFR Ch. IV (10–1–17 Edition)
budgetary data, if applicable. This in- mission of the demonstration applica-

cludes a financial analysis of any tion to CMS, or both.
changes to the demonstration re- (iii) The State must also utilize addi-
quested by the State in its extension tional mechanisms, such as an elec-
request. tronic mailing list, to notify interested
(D) The hypothesis and evaluation parties of the demonstration applica-
parameters of the demonstration. tion(s).
(E) The specific waiver and expendi- (3) Public hearings. At least 20 days
ture authorities that the State believes prior to submitting an application for a
to be necessary to authorize the dem- new demonstration project or exten-
onstration. sion of an existing demonstration
(ii) The locations and Internet ad- project to CMS for review, the State
dress where copies of the demonstra- must have conducted at least two pub-
tion application are available for public hearings, on separate dates and at
lic review and comment. separate locations, regarding the
(iii) Postal and Internet email ad- State’s demonstration application at
dresses where written comments may which members of the public through-
be sent and reviewed by the public, and out the State have an opportunity to
the minimum 30-day time period in provide comments. The State must use
which comments will be accepted. telephonic and/or Web conference capa-
(iv) The location, date, and time of at bilities for at least one of the two re-
least two public hearings convened by quired public hearings to ensure state-
the State to seek public input on the wide accessibility to the public hearing
demonstration application. unless it can document it has afforded
(2) Statement of public notice and pub- the public throughout the State the op-
lic input procedures. (i) The State shall portunity to provide comment, such as
publish its public notice process, public holding the two public hearings in geo-
input process, planned hearings, the graphically distinct areas of the State.
demonstration application(s), and a The State must use at least two of the
link to the relevant Medicaid dem- following public forums:
onstration page(s) on the CMS Web site (i) The Medical Care Advisory Com-
in a prominent location on either the mittee that operates in accordance
main page of the public Web site of the with § 431.12 of this subpart; or
State agency responsible for making (ii) A commission or other similar
applications for demonstrations or on a process, where meetings are open to
demonstration-specific Web page that members of the public; or
is linked in a readily identifiable way (iii) A State legislative process,
to the main page of the State agency’s which would afford an interested party
Web site. The State must maintain and the opportunity to learn about the con-
keep current the public Web site tents of the demonstration application,
throughout the entire public comment and to comment on its contents; or
and review process. (iv) Any other similar process for
(ii) The State shall also publish an public input that would afford an inter-
abbreviated public notice which must ested party the opportunity to learn
include a summary description of the about the contents of the demonstra-
demonstration, the location and times tion application, and to comment on
of the two or more public hearings, and its contents.
an active link to the full public notice (b) Tribal consultation and seeking ad-
document on the State’s Web site in vice from Indian health providers and
the State’s administrative record in ac- urban Indian organizations. A State
cordance with the State’s Administra- with Federally-recognized Indian
tive Procedure Act, provided that such tribes, Indian health programs, and/or
notice is provided at least 30 days prior urban Indian health organizations shall
to the submission of the demonstration include a process to consult with the
application to CMS or in the news- Indian tribes, and seek advice from In-
papers of widest circulation in each dian Health programs and urban Indian
city with a population of 100,000, or health organizations in the State, prior
more, provided that such notice is pro- to submission of an application to CMS
vided at least 30 days prior to the sub- for a new demonstration project, or an
50
extension of a previously approved sions would vary from the State’s cur-
demonstration project, that has or rent program features and the require-
would have a direct effect on Indians, ments of the Act.
tribes, on Indian health programs, or (iii) An estimate of the expected in-
on urban Indian health organizations. crease or decrease in annual enroll-
(1) For initial applications and appli- ment, and in annual aggregate expendi-
cations extending existing demonstra- tures, including historic enrollment or
tion projects that have a direct effect budgetary data, if applicable.
on Indians, tribes, Indian health pro- (iv) Current enrollment data, if appli-
grams, and urban Indian health organi- cable, and enrollment projections ex-
zations in the State, the State must pected over the term of the demonstra-
demonstrate that it has conducted con- tion for each category of beneficiary
sultation activities with tribes and whose health care coverage is impacted
sought advice from Indian health pro- by the demonstration.
grams and urban Indian health organi- (v) Other program features that the
zations prior to submission of such ap- demonstration would modify in the
plication. State’s Medicaid and CHIP programs.
(2) Consultation with Federally-rec- (vi) The specific waiver and expendi-
ognized Indian tribes and solicitation ture authorities that the State believes
of advice from affected Indian health to be necessary to authorize the dem-
providers and urban Indian organiza- onstration.
tions must be conducted in accordance (vii) The research hypotheses that
with the consultation process outlined are related to the demonstration’s pro-
in the July 17, 2001 letter or the State’s posed changes, goals, and objectives, a
formal tribal consultation agreement plan for testing the hypotheses in the
or process and the process for seeking context of an evaluation, and, if a
advice from Indian Health providers quantitative evaluation design is fea-
must be conducted as outlined in the sible, the identification of appropriate
State’s approved Medicaid State Plan. evaluation indicators.
(3) Documentation of the State’s con- (viii) Written documentation of the
sultation activities must be included in State’s compliance with the public no-
the demonstration application, which tice requirements set forth in § 431.408
must describe the notification process, of this subpart, with a report of the
the entities involved in the consulta- issues raised by the public during the
tion(s), the date(s) and location(s) of comment period, which shall be no less
the consultation(s), issues raised, and than 30 days, and how the State consid-
the potential resolution for such ered those comments when developing
issues. the demonstration application.
(2) CMS may request, or the State
§ 431.412 Application procedures. may propose application modifications,
(a) Initial demonstration application as well as additional information to aid
content. (1) Applications for initial ap- in the review of the application. If an
proval of a demonstration will not be application modification substantially
considered complete unless they com- changes the original demonstration de-
ply with the public notice process set sign, CMS may, at its discretion, direct
forth in § 431.408(a) of this subpart, and an additional 30-day public comment
include the following: period.
(i) A comprehensive program descrip- (3) This section does not preclude a
tion of the demonstration, including State from submitting to CMS a pre-
the goals and objectives to be imple- application concept paper or from con-
mented under the demonstration ferring with CMS about its intent to
project. seek a demonstration prior to submit-
(ii) A description of the proposed ting a completed application.
health care delivery system, eligibility (b) Demonstration application proce-
requirements, benefit coverage and dures. A State application for approval
cost sharing (premiums, copayments, of a new demonstration project or an

and deductibles) required of individuals extension of an existing demonstration
who will be impacted by the dem- project must be submitted to CMS as
onstration to the extent such provi- both printed and electronic documents.
51
§ 431.412 42 CFR Ch. IV (10–1–17 Edition)
Electronic documents must be sub- (1) Changes to existing demonstration.

mitted in a format that will be acces- If an extension application includes
sible to individuals with disabilities. substantial changes to the existing
(1) Consistent with § 431.416(a) of this demonstration, CMS may, at its discre-
subpart, within 15 days of receipt of a tion, treat the application as an appli-
complete application, CMS will send cation for a new demonstration.
the State a written notice informing (2) Demonstration extension applica-
the State of receipt of the submitted tion. An application to extend an exist-
application, the date in which the Sec- ing demonstration will be considered
retary received the State’s demonstra- complete, for purposes of initiating the
tion application and the start date of Federal-level public notice period,
the 30-day Federal public notice proc- when the State provides the following:
ess set forth in § 431.416 of this subpart. (i) A historical narrative summary of
The written notice— the demonstration project, which in-
(i) Is provided for purposes of initi- cludes the objectives set forth at the
ating the Federal-level public comment time the demonstration was approved,
period and does not preclude a deter- evidence of how these objectives have
mination that, based on further review, or have not been met, and the future
further information is required to sup- goals of the program.
plement or support the application, or (ii) If changes are requested, a nar-
that the application cannot be ap-
rative of the changes being requested
proved because a required element is
along with the objective of the change
missing or insufficient.
and the desired outcomes.
(ii) Does not prevent a State from
modifying its application or submit- (iii) A list and programmatic descrip-
ting any supplementary information it tion of the waivers and expenditure au-
determines necessary to support CMS’ thorities that are being requested for
review of its application. the extension period, or a statement
(2) Within 15 days of receipt of a dem- that the State is requesting the same
onstration application that CMS deter- waiver and expenditure authorities as
mines is incomplete, CMS will send the those approved in the current dem-
State a written notice of the elements onstration.
missing from the application. (iv) Summaries of External Quality
(3) CMS will publish on its Web site Review Organization (EQRO) reports,
at regular intervals the status of all managed care organization (MCO) and
State submissions, including informa- State quality assurance monitoring,
tion received from the State while the and any other documentation of the
State works with CMS to meet the quality of and access to care provided
demonstration application process set under the demonstration, such as the
forth in this section. CMS Form 416 EPSDT/CHIP report.
(c) Demonstration extension request. A (v) Financial data demonstrating the
request to extend an existing dem- State’s historical and projected ex-
onstration under sections 1115(a), (e), penditures for the requested period of
and (f) of the Act will be considered the extension, as well as cumulatively
only if it is submitted at least 12 over the lifetime of the demonstration.
months prior to the expiration date of This includes a financial analysis of
the demonstration when requesting an changes to the demonstration re-
extension under section 1115(e) of the quested by the State.
Act or 6 months prior to the expiration (vi) An evaluation report of the dem-
date of the demonstration when re- onstration, inclusive of evaluation ac-
questing an extension under section tivities and findings to date, plans for
1115(a) or (f) of the Act, unless a longer evaluation activities during the exten-
time frame is specified in the Special sion period, and if changes are re-
Terms and Conditions for the original quested, identification of research
demonstration. An extension applica- hypotheses related to the changes and
tion, including an extension for the an evaluation design for addressing the
purpose of phasing out a demonstra- proposed revisions.
tion, must be sent from the Governor (vii) Documentation of the State’s
of the State to the Secretary. compliance with the public notice
52
process set forth in § 431.408 of this sub- (1) Publishing the following on the
part, including the post-award public CMS Web site:
input process described in § 431.420(c) of (i) The written notice of CMS receipt
this subpart, with a report of the issues of the State’s complete demonstration
raised by the public during the com- application.
ment period and how the State consid- (ii) Demonstration applications, in-
ered the comments when developing cluding supporting information sub-
the demonstration extension applica- mitted by the State as part of the com-
tion. plete application, and associated con-
(3) CMS may request, or the State cept papers, as applicable.
may propose application modifications, (iii) The proposed effective date of
as well as additional information to aid the demonstration.
in the review of an application to ex- (iv) Addresses to which inquiries and
tend a demonstration. If an application comments from the public may be di-
modification substantially changes the rected to CMS by mail or email.
original demonstration design, CMS (2) Notifying interested parties
may, at its discretion, direct an addi- through a mechanism, such an elec-
tional 30-day public comment period. tronic mailing list, that CMS will cre-
(4) Upon application from the State, ate for this purpose.
the Secretary may extend existing (c) Public disclosure. CMS will publish
demonstration projects on a temporary on its Web site, at regular intervals,
basis for the period during which a suc- appropriate information, which may
cessor demonstration is under review, include, but is not limited to the fol-
without regard to the date when the lowing:
application was submitted. (1) Relevant status update(s);
(d) Approvals. Approval of a new dem- (2) A listing of the issues raised
onstration or a demonstration exten- through the public notice process.
sion will generally be prospective only (d) Publishing of comments. (1) CMS
and Federal Financial Participation will publish written comments elec-
(FFP) will not be available for changes tronically through its Web site or an
to the demonstration that have not alternative Web site.
been approved by CMS. (2) CMS will review and consider all
comments received by the deadline,
§ 431.416 Federal public notice and ap- but will not provide written responses
proval process. to public comments. While comments
(a) General. Within 15 days of receipt may be submitted after the deadline,
of a complete application from the CMS cannot assure that these com-
State for a new demonstration project ments will be considered.
or an extension of a previously ap- (e) Approval of a demonstration appli-
proved demonstration project, CMS cation. (1) CMS will not render a final
will: decision on a demonstration applica-
(1) Send the State a written notice tion until at least 45 days after notice
informing the State of receipt of the of receipt of a completed application,
demonstration application, the date in to receive and consider public com-
which the Secretary received the ments.
State’s demonstration application, the (2) CMS may expedite this process
start dates of the 30-day Federal public under the exception to the normal pub-
notice process, and the end date of the lic notice process provisions in
45-day minimum Federal decision-mak- § 431.416(g) of this subpart.
ing period. (f) Administrative record. (1) CMS will
(2) Publish the written notice ac- maintain, and publish on its public
knowledging receipt of the State’s Web site, an administrative record that
completed application on its Web site may include, but is not limited to the
within the same 15-day timeframe. following:
(b) Public comment period. Upon noti- (i) The demonstration application
fying a State of a completed applica- from the State.

tion, CMS will solicit public comment (ii) The State’s disaster exemption
regarding such demonstration applica- request and CMS’ response, if applica-
tion for 30 days by doing the following: ble.
53
§ 431.420 42 CFR Ch. IV (10–1–17 Edition)
(iii) Written public comments sent to (i) The State acted in good faith, and
the CMS and any CMS responses. in a diligent, timely, and prudent man-
(iv) If an application is approved, the ner.
final special terms and conditions, (ii) The circumstances constitute an
waivers, expenditure authorities, and emergency and could not have been
award letter sent to the State. reasonably foreseen.
(v) If an application is denied, the (iii) Delay would undermine or com-
disapproval letter sent to the State. promise the purpose of the demonstra-
(vi) The State acceptance letter, as tion and be contrary to the interests of
applicable. beneficiaries.
(vii) Specific requirements related to (4) CMS will publish on its Web site
the approved and agreed upon terms any disaster exemption determinations
and conditions, such as implementa- within 15 days of approval, as well as
tion reviews, evaluation design, quar- the revised timeline for public com-
terly progress reports, annual reports, ment or post-award processes, if appli-
and interim and/or final evaluation re- cable.
ports.
(viii) Notice of the demonstration’s § 431.420 Monitoring and compliance.
suspension or termination, if applica- (a) General. (1) Any provision of the
ble. Social Security Act that is not ex-
(2) To ensure that the public has ac- pressly waived by CMS in its approval
cess to all documentation related to of the demonstration project are not
the demonstration project, including waived, and States may not stop com-
the aforementioned items, we will also pliance with any of these provisions
provide a link to the State’s public not expressly waived. Waivers may be
Web site. limited in scope to the extent nec-
(g) Exemption from the normal public essary to achieve a particular purpose
notice process. (1) CMS may waive, in or to the extent of a particular regu-
whole or in part, the Federal and State latory requirement implementing the
public notice procedures to expedite a statutory provision.
decision on a proposed demonstration
(2) States must comply with the
or demonstration extension request
terms and conditions of the agreement
that addresses a natural disaster, pub-
between the Secretary and the State to
lic health emergency, or other sudden
emergency threats to human lives. implement a State demonstration
project.
(2) The Secretary may exempt a
State from the normal public notice (b) Implementation reviews. (1) The
process or the required time con- terms and conditions will provide that
straints imposed in this section or the State will perform periodic reviews
§ 431.408(a) of this subpart when the of the implementation of the dem-
State demonstrates to CMS the exist- onstration.
ence of unforeseen circumstances re- (2) CMS will review documented com-
sulting from a natural disaster, public plaints that a State is failing to com-
health emergency, or other sudden ply with requirements specified in the
emergency that directly threatens special terms and conditions and im-
human lives that warrant an exception plementing waivers of any approved
to the normal public notice process. demonstration.
(i) The State is expected to discharge (3) CMS will promptly share with the
its basic responsibilities in submitting State complaints that CMS has re-
demonstration applications to the Sec- ceived and will also provide notifica-
retary as required in § 431.412 of this tion of any applicable monitoring and
subpart. compliance issues.
(ii) Such applications will be posted (c) Post award. Within 6 months after
on the CMS Web site. the implementation date of the dem-
onstration and annually thereafter, the
(3) A State must establish (or meet)

all of the following criteria to obtain State must hold a public forum—
such an exemption from the normal (1) To solicit comments on the
public notice process requirements: progress of a demonstration project.
54
(2) At which members of the public to undertake an independent evalua-

have an opportunity to provide com- tion of any component of the dem-
ments and in such time as to include a onstration.
summary of the forum in the quarterly (2) The State must submit all re-
report associated with the quarter in quested data and information to CMS
which the forum was held, as well as in or the independent evaluator.
its annual report to CMS.
(3) The public forum to solicit feed- § 431.424 Evaluation requirements.
back on the progress of a demonstra- (a) General. States are permitted and
tion project must occur using one of encouraged to use a range of appro-
the following: priate evaluation strategies (including
(i) A Medical Care Advisory Com- experimental and other quantitative
mittee that operates in accordance and qualitative designs) in the applica-
with § 431.412 of this subpart. tion of evaluation techniques with the
(ii) A commission or other similar approval of CMS.
process, where meetings are open to (b) Demonstration evaluations. Dem-
members of the public, and would af- onstration evaluations will include the
ford an interested party the oppor- following:
tunity to learn about the demonstra- (1) Quantitative research methods. (i)
tion’s progress. These methods involve the empirical
(iii) The State must publish the date, investigation of the impact of key pro-
time, and location of the public forum grammatic features of the demonstra-
in a prominent location on the State’s tion.
public Web site, at least 30 days prior (ii) CMS will consider alternative
to the date of the planned public evaluation designs when quantitative
forum. designs are technically infeasible or
(4) [Reserved] not well suited to the change made by
(d) Terminations and suspensions. (1) the demonstration.
The Secretary may suspend or termi- (2) Approaches that minimize bene-
nate a demonstration in whole or in ficiary impact. The evaluation process
part, any time before the date of expi- must minimize burden on beneficiaries
ration, whenever it determines that and protect their privacy in terms of
the State has materially failed to com- implementing and operating the policy
ply with the terms of the demonstra- approach to be demonstrated while en-
tion project. suring the impact of the demonstration
(2) The Secretary may also withdraw is measured.
waivers or expenditure authorities (c) Evaluation design plan. (1) The
based on a finding that the demonstra- State will submit and receive CMS ap-
tion project is not likely to achieve the proval of a design for an evaluation of
statutory purposes. the demonstration project and publish
(3) The terms and conditions for the this document to the State’s public
demonstration will detail any notice Web site within 30 days of CMS ap-
and appeal rights for the State for a proval.
termination, suspension or withdrawal (2) The draft demonstration evalua-
of waivers or expenditure authorities. tion design must include all of the fol-
(e) Closeout costs. When a demonstra- lowing:
tion is terminated, suspended, or if (i) A discussion of the demonstration
waivers or expenditure authority are hypotheses that are being tested in-
withdrawn, Federal funding is limited cluding monitoring and reporting on
to normal closeout costs associated the progress towards the expected out-
with an orderly termination of the comes.
demonstration or expenditure author- (ii) The data that will be utilized and
ity, including service costs during any the baseline value for each measure.
approved transition period, and admin- (iii) The methods of data collection.
istrative costs of disenrolling partici- (iv) A description of how the effects
pants. of the demonstration will be isolated

(f) Federal evaluators. (1) The State from those other changes occurring in
must fully cooperate with CMS or an the State at the same time through the
independent evaluator selected by CMS use of comparison or control groups to
55
§ 431.428 42 CFR Ch. IV (10–1–17 Edition)
identify the impact of significant as- the reporting year, grievances and ap-
pects of the demonstration. peals.
(v) A proposed date by which a final (6) The existence or results of any au-
report on findings from evaluation ac- dits, investigations or lawsuits that
tivities conducted under the evaluation impact the demonstration.
plan must be submitted to CMS. (7) The financial performance of the
(vi) Any other information pertinent demonstration.
to the State’s research on the policy (8) The status of the evaluation and
operations of the demonstration oper- information regarding progress in
ations. achieving demonstration evaluation
(d) Evaluations for demonstration ex- criteria.
tensions. (1) In the event that the State (9) Any State legislative develop-
requests to extend the demonstration ments that may impact the demonstra-
beyond the current approval period tion.
under the authority of section 1115(a), (10) The results/impact of any dem-
(e), or (f) of the Act, the State must onstration programmatic area defined
submit an interim evaluation report as by CMS that is unique to the dem-
part of the State’s request for a subse- onstration design or evaluation hy-
pothesis.
quent renewal of the demonstration.
(11) A summary of the annual post-
(2) State evaluations must be pub-
award public forum, including all pub-
lished on the State’s public Web site lic comments received regarding the
within 30 days of submission to CMS. progress of the demonstration project.
(e) Approved evaluation designs. The (b) Submitting and publishing annual
State must publish the CMS-approved reports. States must submit a draft an-
demonstration evaluation design on nual report to CMS no later than 90
the State’s public Web site within 30 days after the end of each demonstra-
days of CMS approval. tion year, or as specified in the dem-
(f) Federal evaluations. The State onstration’s STCs. The State must
must comply with all requirements set publish its draft annual report on its
forth in this subpart. public Web site within 30 days of sub-
(g) Federal public notice. CMS will mission to CMS.
post, or provide a link to the State’s (1) Within 60 days of receipt of com-
public Web site, all evaluation mate- ments from CMS, the State must sub-
rials, including research and data col- mit to CMS the final annual report for
lection, on its Web site for purposes of the demonstration year.
sharing findings with the public within (2) The final annual report is to be
30 days of receipt of materials. published on the State’s public Web
site within 30 days of approval by CMS.
§ 431.428 Reporting requirements.
(a) Annual reports. The State must Subparts H–L [Reserved]
submit an annual report to CMS docu-
menting all of the following: Subpart M—Relations With Other
(1) Any policy or administrative dif- Agencies
ficulties in the operation of the dem-
onstration. § 431.610 Relations with standard-set-
(2) The status of the health care de- ting and survey agencies.
livery system under the demonstration (a) Basis and purpose. This section
with respect to issues and/or com- implements—
plaints identified by beneficiaries. (1) Section 1902(a)(9) of the Act, con-
(3) The impact of the demonstration cerning the designation of State au-
in providing insurance coverage to thorities to be responsible for estab-
beneficiaries and uninsured popu- lishing and maintaining health and
lations. other standards for institutions par-
(4) Outcomes of care, quality of care, ticipating in Medicaid; and
cost of care and access to care for dem- (2) Section 1902(a)(33) of the Act, con-
onstration populations. cerning the designation of the State li-
(5) The results of beneficiary satis- censing agency to be responsible for de-
faction surveys, if conducted during termining whether institutions and
56
agencies meet requirements for partici- (3) The agency designated in para-
pation in the State’s Medicaid pro- graph (e)(1) of this section makes rec-
gram. ommendations regarding the effective
(3) Section 1919(g)(1)(A) of the Act, dates of provider agreements, as deter-
concerning responsibilities of the State mined under § 431.108.
for certifying the compliance of non- (f) Written agreement required. The
State operated NFs with requirements plan must provide for a written agree-
of participation in the State’s Medicaid ment (or formal written intra-agency
program. arrangement) between the Medicaid
(b) Designated agency responsible for agency and the survey agency des-
health standards. A State plan must ignated under paragraph (e) of this sec-
designate, as the State authority re- tion, covering the activities of the sur-
sponsible for establishing and main- vey agency in carrying out its respon-
taining health standards for private or sibilities. The agreement must specify
public institutions that provide serv- that—
ices to Medicaid beneficiaries, the (1) Federal requirements and the
same State agency that is used by the forms, methods and procedures that
Secretary to determine qualifications the Administrator designates will be
of institutions and suppliers of services used to determine provider eligibility
to participate in Medicare (see 42 CFR and certification under Medicaid;
405.1902). The requirement for estab- (2) Inspectors surveying the premises
lishing and maintaining standards does of a provider will—
not apply with respect to religious non- (i) Complete inspection reports;
medical institutions as defined in (ii) Note on completed reports wheth-
§ 440.170(b) of this chapter. er or not each requirement for which
(c) Designated agency responsible for an inspection is made is satisfied; and
standards other than health standards. (iii) Document deficiencies in re-
The plan must designate the Medicaid ports;
agency or other appropriate State au- (3) The survey agency will keep on
thority or authorities to be responsible file all information and reports used in
for establishing and maintaining stand- determining whether participating fa-
ards, other than those relating to cilities meet Federal requirements; and
health, for private or public institu- (4) The survey agency will make the
tions that provide services to Medicaid information and reports required under
beneficiaries. paragraph (f)(3) of this section readily
(d) Description and retention of stand- accessible to HHS and the Medicaid
ards. (1) The plan must describe the agency as necessary—
standards established under paragraphs (i) For meeting other requirements
(b) and (c) of this section. under the plan; and
(2) The plan must provide that the (ii) For purposes consistent with the
Medicaid agency keeps these standards Medicaid agency’s effective adminis-
on file and makes them available to tration of the program.
the Administrator upon request. (g) Responsibilities of survey agency.
(e) Designation of survey agency. The The plan must provide that, in certi-
plan must provide that— fying NFs, HHAs, and ICF–IIDs, the
(1) The agency designated in para- survey agency designated under para-
graph (b) of this section, or another graph (e) of this section will —
State agency responsible for licensing (1) Review and evaluate medical and
health institutions in the State, deter- independent professional review team
mines for the Medicaid agency whether reports obtained under part 456 of this
institutions and agencies meet the re- subchapter as they relate to health and
quirements for participation in the safety requirements;
Medicaid program; and (2) Have qualified personnel perform
(2) The agency staff making the de- on-site inspections periodically as ap-
termination under paragraph (e)(1) of propriate based on the timeframes in
this section is the same staff respon- the correction plan and—
sible for making similar determina- (i) At least once during each certifi-
tions for institutions or agencies par- cation period or more frequently if
ticipating under Medicare; and there is a compliance question; and
57
§ 431.615 42 CFR Ch. IV (10–1–17 Edition)
(ii) For non-State operated NFs, (3) Maternal and infant care projects;
within the timeframes specified in (4) Children and youth projects; and
§ 488.308 of this chapter. (5) Projects for the dental health of
(3) Have qualified personnel perform children.
on-site inspections— (c) State plan requirements. A state
(i) At least once during each certifi- plan must—
cation period or more frequently if (1) Describe cooperative arrange-
there is a compliance question; and ments with the State agencies that ad-
(ii) For intermediate care facilities minister, or supervise the administra-
with deficiencies as described in tion of, health services and vocational
§§ 442.112 and 442.113 of this subchapter, rehabilitation services designed to
within 6 months after initial correction make maximum use of these services;
plan approval and every 6 months (2) Provide for arrangements with
thereafter as required under those sec- title V grantees, under which the Med-
tions. icaid agency will utilize the grantee to
(h) FFP for survey responsibilities. (1) furnish services that are included in
FFP is available in expenditures that the State plan;
the survey agency makes to carry out (3) Provide that all arrangements
its survey and certification responsibil- under this section meet the require-
ities under the agreement specified in ments of paragraph (d) of this section;
paragraph (f) of this section. and
(2) FFP is not available in any ex- (4) Provide, if requested by the title
penditures that the survey agency V grantee in accordance with the ar-
makes that are attributable to the rangements made under this section,
State’s overall responsibilities under that the Medicaid agency reimburse
State law and regulations for estab- the grantee or the provider for the cost
lishing and maintaining standards. of services furnished beneficiaries by or
through the grantee.
FR 24883, Apr. 11, 1980; 53 FR 20494, June 3,
(d) Content of arrangements. The ar-
1988; 57 FR 43923, Sept. 23, 1992; 59 FR 56233, rangements referred to in paragraph (c)
Nov. 10, 1994; 62 FR 43936, Aug. 18, 1997; 64 FR must specify, as appropriate—
67052, Nov. 30, 1999; 78 FR 72320, Dec. 2, 2013] (1) The mutual objectives and respon-
sibilities or each party to the arrange-
§ 431.615 Relations with State health ment;
and vocational rehabilitation agen- (2) The services each party offers and
cies and title V grantees. in what circumstances;
(a) Basis and purpose. This section (3) The cooperative and collaborative
implements section 1902(a)(11) and relationships at the State level;
(22)(C) of the Act, by setting forth (4) The kinds of services to be pro-
State plan requirements for arrange- vided by local agencies; and
ments and agreements between the (5) Methods for—
Medicaid agency and— (i) Early identification of individuals
(1) State health agencies; under 21 in need of medical or remedial
(2) State vocational rehabilitation services;
agencies; and (ii) Reciprocal referrals;
(3) Grantees under title V of the Act, (iii) Coordinating plans for health
Maternal and Child Health and Crip- services provided or arranged for bene-
pled Children’s Services. ficiaries;
(b) Definitions. For purposes of this (iv) Payment or reimbursement;
section— (v) Exchange of reports of services
‘‘Title V grantee’’ means the agency, furnished to beneficiaries;
institution, or organization receiving (vi) Periodic review and joint plan-
Federal payments for part or all of the ning for changes in the agreements;
cost of any service program or project (vii) Continuous liaison between the
authorized by title V of the Act, in- parties, including designation of State
cluding— and local liaison staff; and

(1) Maternal and child health serv- (viii) Joint evaluation of policies
ices; that affect the cooperative work of the
(2) Crippled children’s services; parties.
58
(e) Federal financial participation. FFP (5) Recording, reporting, and ex-
is available in expenditures for Med- changing medical and social informa-
icaid services provided to beneficiaries tion about beneficiaries; and
through an arrangement under this (6) Other procedures needed to carry
section. out the agreement.
[44 FR 17935, Mar. 23, 1979]
§ 431.620 Agreement with State mental
health authority or mental institu-
§ 431.621 State requirements with re-
tions. spect to nursing facilities.
(a) Basis and purpose. This section (a) Basis and purpose. This section
implements section 1902(a)(20)(A) of the implements sections 1919(b)(3)(F) and
Act, for States offering Medicaid serv- 1919(e)(7) of the Act by specifying the
ices in institutions for mental diseases terms of the agreement the State must
for beneficiaries aged 65 or older, by have with the State mental health and
specifying the terms of the agreement Intellectual Disability authorities con-
those States must have with other cerning the operation of the State’s
State authorities and institutions. (See preadmission screening and annual
part 441, subpart C of this chapter for resident review (PASARR) program.
regulations implementing section (b) State plan requirement. The State
1902(a)(20) (B) and (C).) plan must provide that the Medicaid
(b) Definition. For purposes of this agency has in effect a written agree-
section, an ‘‘institution for mental dis- ment with the State mental health and
eases’’ means an institution primarily Intellectual Disability authorities that
engaged in providing diagnosis, treat- meets the requirements specified in
ment, or care of persons with mental paragraph (c) of this section.
diseases. This includes medical atten- (c) Provisions required in an agreement.
tion, nursing care, and related services. The agreement must specify the re-
(c) State plan requirement. A State spective responsibilities of the agency
plan that includes Medicaid for persons and the State mental health and Intel-
aged 65 or older in institutions for lectual Disability authorities, includ-
mental diseases must provide that the ing arrangements for—(1) Joint plan-
Medicaid agency has in effect a written ning between the parties to the agree-
agreement with— ment;
(1) The State authority or authori- (2) Access by the agency to the State
ties concerned with mental diseases; mental health and Intellectual Dis-
and ability authorities’ records when nec-
(2) Any institution for mental dis- essary to carry out the agency’s re-
eases that is not under the jurisdiction sponsibilities;
of those State authorities, and that (3) Recording, reporting, and ex-
provides services under Medicaid to changing medical and social informa-
beneficiaries aged 65 or older. tion about individuals subject to
PASARR;
(d) Provisions required in an agreement.
(4) Ensuring that preadmission
The agreement must specify the re-
screenings and annual resident reviews
spective responsibilities of the agency
are performed timely in accordance
and the authority or institution, in-
with §§ 483.112(c) and 483.114(c) of this
cluding arrangements for— part;
(1) Joint planning between the par- (5) Ensuring that, if the State mental
ties to the agreement; health and Intellectual Disability au-
(2) Development of alternative meth- thorities delegate their respective re-
ods of care; sponsibilities, these delegations com-
(3) Immediate readmission to an in- ply with § 483.106(e) of this part;
stitution when needed by a beneficiary (6) Ensuring that PASARR deter-
who is in alternative care; minations made by the State mental
(4) Access by the agency to the insti- health and Intellectual Disability au-
tution, the beneficiary, and the bene- thorities are not countermanded by the
ficiary’s records when necessary to State Medicaid agency, except through
carry out the agency’s responsibilities; the appeals process, but that the State
59
§ 431.625 42 CFR Ch. IV (10–1–17 Edition)
mental health and Intellectual Dis- miums, deductibles, cost sharing, or

ability authorities do not use criteria similar charges under Part B does not
which are inconsistent with those obligate it to provide the full range of
adopted by the State Medicaid agency Part B services to beneficiaries not
under its approved State plan; covered by Medicare.
(7) Designating the independent per- (2) The State plan must specify this
son or entity who performs the exception if it applies.
PASARR evaluations for individuals (c) Effect of payment of premiums on
with MI; and State liability for cost sharing. (1) State
(8) Ensuring that all requirements of payment of Part B premiums on behalf
§§ 483.100 through 483.136 are met. of a Medicaid beneficiary does not obli-
[57 FR 56506, Nov. 30, 1992; 58 FR 25784, Apr. gate it to pay on the beneficiary’s be-
28, 1993] half the Part B deductible and coinsur-
ance amounts for those Medicare Part
§ 431.625 Coordination of Medicaid B services not covered in the Medicaid
with Medicare part B.
State plan.
(a) Basis and purpose. (1) Section (2) If a State pays on a beneficiary’s
1843(a) of the Act requires the Sec- behalf any portion of the deductible or
retary to have entered into an agree- cost sharing amounts under Medicare
ment with any State that requested Part B, the portion paid by a State
that agreement before January 1, 1970, must be reasonably related to the bene-
or during calendar year 1981, under ficiary’s income and resources.
which the State could enroll certain (d) Federal financial participation:
Medicare-eligible beneficiaries under Medicare Part B premiums—(1) Basic
Medicare Part B and agree to pay their rule. Except as provided in paragraph
premiums. (d)(2) of this section, FFP is not avail-
(2) Section 1902(a)(10) of the Act (in able in State expenditures for Medicare
clause (II) following subparagraph (D)), Part B premiums for Medicaid bene-
allows the State to pay the premium, ficiaries unless the beneficiaries re-
deductibles, cost sharing, and other ceive money payments under title I,
charges for beneficiaries enrolled under IV-A, X, XIV, XVI (AABD or SSI) of
Medicare Part B without obligating the Act, or State supplements as per-
itself to provide the range of Part B mitted under section 1616(a) of the Act,
benefits to other beneficiaries; and or as required by section 212 of Pub. L.
(3) Section 1903 (a)(1) and (b) of the 93–66.
Act authorizes FFP for State payment
(2) Exception. FFP is available in ex-
of Medicare Part B premiums for cer-
penditures for Medicare Part B pre-
tain beneficiaries.
miums for the following groups:
(4) This section—
(i) Specifies the exception, relating (i) AFDC families required to be cov-
to Part B coverage, from the require- ered under §§ 435.112 and 436.116 of this
ment to provide comparable services to subchapter, those eligible for contin-
all beneficiaries; and ued Medicaid coverage despite in-
(ii) Prescribes FFP rules concerning creased income from employment;
State payment for Medicare premiums (ii) Beneficiaries required to be cov-
and for services that could have been ered under §§ 435.114, 435.134, and 436.112
covered under Medicare. of this subchapter, those eligible for
(5) Section 1902(a)(15) of the Act re- continued Medicaid coverage despite
quires that if a State chooses to pay increased income from monthly insur-
only a portion of deductibles, cost ance benefits under title II of the Act;
sharing or other charges for bene- (iii) Beneficiaries required to be cov-
ficiaries enrolled under Medicare Part ered under § 435.135 of this subchapter,
B, the portion that is to be paid by a those eligible for continued Medicaid
Medicaid beneficiary must be reason- coverage despite increased income
ably related to the beneficiary’s in- from cost-of-living increases under
come and resources. title II of the Act;

(b) Exception from obligation to provide (iv) Beneficiaries of foster care main-
comparable services; State plan require- tenance payments or adoption assist-
ment. (1) The State’s payment of pre- ance payments who, under Part E of
60
title IV of the Act are considered as re- § 431.630 Coordination of Medicaid

ceiving AFDC; with QIOs.
(v) Individuals required to be covered (a) The State plan may provide for
under § 435.120 of this chapter, that is, the review of Medicaid services
blind or disabled individuals who, through a contract with a QIO des-
under section 1619(b) of the Act, are ignated under part 462 of this chapter.
considered to be receiving SSI; Medicaid requirements for medical and
(vi) Individuals who, in accordance utilization review are deemed to be
with §§ 435.115 and 436.114 of this chap- met for those services or providers sub-
ter are, for purposes of Medicaid eligi- ject to review under the contract.
bility, considered to be receiving (b) The State plan must provide that
AFDC. These are participants in a the contract with the QIO—
(1) Meets the requirements of
work supplementation program, or in-
§ 434.6(a) of this part;
dividuals denied AFDC because the
(2) Includes a monitoring and evalua-
payment would be less than $10; tion plan by which the State ensures
(vii) Certain beneficiaries of Veterans satisfactory performance by the QIO;
Administration pensions during the (3) Identifies the services and pro-
limited time they are, under section viders subject to QIO review;
310(b) of Pub. L. 96–272, considered as (4) Ensures that the review activities
receiving SSI, mandatory State supple- performed by the QIO are not incon-
ments, or AFDC; sistent with QIO review activities of
(viii) Disabled children living at Medicare services and includes a de-
home to whom the State provides Med- scription of whether and to what ex-
icaid under section 1902(e)(3) of the Act; tent QIO determinations will be consid-
(ix) Individuals who become ineli- ered conclusive for Medicaid payment
gible for AFDC because of the collec- purposes.
tion or increased collection of child or [50 FR 15327, Apr. 17, 1985]
spousal support, but, in accordance
with section 406(h) of the Act, remain § 431.635 Coordination of Medicaid
with Special Supplemental Food
eligible for Medicaid for four more Program for Women, Infants, and
months; and Children (WIC).
(x) Individuals who become ineligible
(a) Basis. This section implements
for AFDC because they are no longer sections 1902(a)(11)(C) and 1902(a) (53) of
eligible for the disregard of earnings of the Act, which provide for coordination
$30 or of $30 plus one-third of the re- of Medicaid with the Special Supple-
mainder, but, in accordance with sec- mental Food Program for Women, In-
tion 402(a)(37) of the Act, are consid- fants, and Children (WIC) under section
ered as receiving AFDC for a period of 17 of the Child Nutrition Act of 1966.
9 to 15 months. (b) Definitions. As used in this sec-
(3) No FFP is available in State Med- tion, the terms breastfeeding women,
icaid expenditures that could have been postpartum women, and pregnant women
paid for under Medicare Part B but mean women as defined in section 17 of
were not because the person was not the Child Nutrition Act of 1966 (42
enrolled in Part B. This limit applies U.S.C. 1786(b)).
to all beneficiaries eligible for enroll- (c) State plan requirements. A State
ment under Part B, whether individ- Plan must provide for—
ually or through an agreement under (1) Coordinating operation of the
section 1843(a) of the Act. However, Medicaid program with the State’s op-
FFP is available in expenditures re- eration of the Special Supplemental
Food Program for Women, Infants, and
quired by §§ 435.914 and 436.901 of this
Children;
subchapter for retroactive coverage of
(2) Providing timely written notice of
beneficiaries. the availability of WIC benefits to all
[43 FR 45188, Sept. 29, 1978, as amended at 44 individuals in the State who are deter-
FR 17935, Mar. 23, 1979; 52 FR 47933, Dec. 17, mined to be eligible (including pre-
1987; 53 FR 657, Jan. 11, 1988] sumptively eligible) for Medicaid and
who are:
61
§ 431.700 42 CFR Ch. IV (10–1–17 Edition)
(i) Pregnant women; program for licensing administrators of

(ii) Postpartum women; nursing homes, in a State that does not
(iii) Breastfeeding women; and have a healing arts licensing act or an
(iv) Children under the age of 5. agency as defined in this section.
(3) Referring individuals described Licensed means certified by a State
under paragraphs (c)(2) (i) through (iv) agency or board as meeting all of the
of this section to the local agency re- requirements for a licensed nursing
sponsible for administering the WIC home administrator specified in this
program. subpart.
(d) Notification requirements. (1) The Nursing home means any institution,
agency must give the written notice re- facility, or distinct part of a hospital
quired under paragraph (c) of this sec- that is licensed or formally recognized
tion as soon as the agency identifies as meeting nursing home standards es-
the individual (e.g., at the time of an tablished under State law, or that is
eligibility determination for Medicaid) determined under § 431.704 to be in-
or immediately thereafter (e.g., at the cluded under the requirements of this
time of notice of eligibility). subpart. The term does not include—
(2) The agency, no less frequently (a) A religious nonmedical institu-
than annually, must also provide writ- tion as defined in § 440.170(b) of this
ten notice of the availability of WIC chapter; or
benefits, including the location and (b) A distinct part of a hospital, if
telephone number of the local WIC the hospital meets the definition in
agency or instructions for obtaining § 440.10 or § 440.140 of this subchapter,
further information about the WIC pro- and the distinct part is not licensed
gram, to all Medicaid beneficiaries (in- separately or formally approved as a
cluding those found to be presump- nursing home by the State even though
tively eligible) who are under age 5 or it is designated or certified as a skilled
who are women who might be preg- nursing facility.
nant, postpartum, or breastfeeding as Nursing home administrator means any
described in paragraphs (c)(2) (i) person who is in charge of the general
through (iv) of this section. administration of a nursing home
(3) The agency must effectively in- whether or not the person—
form those individuals who are blind or (a) Has an ownership interest in the
deaf or who cannot read or understand home; or
the English language. (b) Shares his functions and duties
with one or more other persons.
[57 FR 28103, June 24, 1992]
FR 67052, Nov. 30, 1999]
Subpart N—State Programs for Li-
censing Nursing Home Ad- § 431.702 State plan requirement.
ministrators A State plan must provide that the
State has a program for licensing ad-
§ 431.700 Basis and purpose. ministrators of nursing homes that
This subpart implements sections meets the requirements of §§ 431.703
1903(a)(29) and 1908 of the Act which re- through 431.713 of this subpart.
quire that the State plan include a
State program for licensing nursing § 431.703 Licensing requirement.
home administrators. The State licensing program must
provide that only nursing homes super-
§ 431.701 Definitions. vised by an administrator licensed in
Unless otherwise indicated, the fol- accordance with the requirements of
lowing definitions apply for purposes of this subpart may operate in the State.
this subpart:
Agency means the State agency re- § 431.704 Nursing homes designated by
sponsible for licensing individual prac- other terms.
titioners under the State’s healing arts If a State licensing law does not use
licensing act. the term ‘‘nursing home,’’ the CMS Ad-
Board means an appointed State ministrator will determine the term or
board established to carry out a State terms equivalent to ‘‘nursing home’’
62
for purposes of applying the require- techniques, including examinations

ments of this subpart. To obtain this and investigations, for determining if a
determination, the Medicaid agency person meets the licensing standards.
must submit to the Regional Medicaid
Director copies of current State laws § 431.709 Issuance and revocation of li-
that define institutional health care fa- cense.
cilities for licensing purposes. Except as provided in § 431.714 of this
subpart, the agency or board must—
§ 431.705 Licensing authority. (a) Issue licenses to persons who
(a) The State licensing program must meet the agency’s or board’s standards;
provide for licensing of nursing home and
administrators by— (b) Revoke or suspend a license if the
(1) The agency designated under the agency or board determines that the
healing arts act of the State; or person holding the license substan-
(2) A State licensing board. tially fails to meet the standards.
(b) The State agency or board must
perform the functions and duties speci- § 431.710 Provisional licenses.
fied in §§ 431.707 through 431.713 and the To fill a position of nursing home ad-
board must meet the membership re- ministrator that unexpectedly becomes
quirements specified in § 431.706 of this vacant, the agency or board may issue
subpart. one provisional license, for a single pe-
riod not to exceed 6 months. The li-
§ 431.706 Composition of licensing cense may be issued to a person who
board. does not meet all of the licensing re-
(a) The board must be composed of quirements established under § 431.707
persons representing professions and but who—
institutions concerned with the care (a) Is of good character and otherwise
and treatment of chronically ill or in- suitable; and
firm elderly patients. However— (b) Meets any other standards estab-
(1) A majority of the board members lished for provisional licensure by the
may not be representative of a single agency or board.
profession or category of institution;
and § 431.711 Compliance with standards.
(2) Members not representative of in- The agency or board must establish
stitutions may not have a direct finan- and carry out procedures to insure that
cial interest in any nursing home. licensed administrators comply with
(b) For purposes of this section, nurs- the standards in this subpart when
ing home administrators are consid- they serve as nursing home administra-
ered representatives of institutions. tors.
§ 431.707 Standards. § 431.712 Failure to comply with stand-
(a) The agency or board must de- ards.
velop, impose, and enforce standards The agency or board must inves-
that must be met by individuals in tigate and act on all complaints it re-
order to be licensed as a nursing home ceives of violations of standards.
administrator.
(b) The standards must be designed § 431.713 Continuing study and inves-
tigation.
to insure that nursing home adminis-
trators are— The agency or board must conduct a
(1) Of good character; continuing study of nursing homes and
(2) Otherwise suitable; and administrators within the State to im-
(3) Qualified to serve because of prove—
training or experience in institutional (a) Licensing standards; and
administration. (b) The procedures and methods for
enforcing the standards.
§ 431.708 Procedures for applying
standards. § 431.714 Waivers.

The agency or board must develop The agency or board may waive any
and apply appropriate procedures and standards developed under § 431.707 of
63
§ 431.715 42 CFR Ch. IV (10–1–17 Edition)
this subpart for any person who has 1903(u) Limitation of FFP for erroneous
served in the capacity of a nursing medical assistance expenditures.
home administrator during all of the 3
calendar years immediately preceding § 431.804 Definitions.
the calendar year in which the State As used in this subpart—
first meets the requirements in this Active case means an individual deter-
subpart. mined to be currently authorized as el-
igible for Medicaid or CHIP by the
§ 431.715 Federal financial participa- State.
tion. Corrective action means action(s) to be
No FFP is available in expenditures taken by the State to reduce major
by the licensing board for establishing error causes, trends in errors or other
and maintaining standards for the li- vulnerabilities for the purpose of re-
censing of nursing home administra- ducing improper payments in Medicaid
tors. and CHIP.
Deficiency means a finding in proc-
Subpart O [Reserved] essing identified through active case
review or negative case review that
does not meet the definition of an eli-
Subpart P—Quality Control gibility error.
MEDICAID ELIGIBILITY QUALITY CONTROL Eligibility means meeting the State’s
(MEQC) PROGRAM categorical and financial criteria for
receipt of benefits under the Medicaid
SOURCE: Sections 431.800 through 431.808 ap- or CHIP programs.
pear at 55 FR 22166, May 31, 1990, unless oth- Eligibility error is an error resulting
erwise noted. from the States’ improper application
of Federal rules and the State’s docu-
§ 431.800 Basis and scope. mented policies and procedures that
This subpart establishes State re- causes a beneficiary to be determined
quirements for the Medicaid Eligibility eligible when he or she is ineligible for
Quality Control (MEQC) Program de- Medicaid or CHIP, causes a beneficiary
signed to reduce erroneous expendi- to be determined eligible for the incor-
tures by monitoring eligibility deter- rect type of assistance, causes applica-
minations and a claims processing as- tions for Medicaid or CHIP to be im-
sessment that monitors claims proc- properly denied by the State, or causes
essing operations. MEQC will work in existing cases to be improperly termi-
conjunction with the Payment Error nated from Medicaid or CHIP by the
Rate Measurement (PERM) Program State. An eligibility error may also be
established in subpart Q of this part. In caused when a redetermination did not
years in which the State is required to occur timely or a required element of
participate in PERM, as stated in sub- the eligibility determination process
part Q of this part, it will only partici- (for example income) cannot be verified
pate in the PERM program and will not as being performed/completed by the
be required to conduct a MEQC pilot. state.
In the 2 years between PERM cycles, Medicaid Eligibility Quality Control
the State is required to conduct a (MEQC) means a program designed to
MEQC pilot, as set forth in this sub- reduce erroneous expenditures by mon-
part. itoring eligibility determinations and
work in conjunction with the PERM
[82 FR 31182, July 5, 2017]
program established in subpart Q of
§ 431.802 Basis. this part.
MEQC pilot refers to the process used
This subpart implements the fol- to implement the MEQC Program.
lowing sections of the Act, which es- MEQC review period is the 12-month
tablish requirements for State plans timespan from which the State will
and for payment of Federal financial
sample and review cases.

participation (FFP) to States: Negative case means an individual de-
1902(a)(4) Administrative methods for prop- nied or terminated eligibility for Med-
er and efficient operation of the State plan. icaid or CHIP by the State.
64
Off-years are the scheduled 2-year pe- § 431.808 Protection of beneficiary

riod of time between a States’ des- rights.
ignated PERM years. Any individual performing activities
Payment Error Rate Measurement under the MEQC program or the claims
(PERM) Program means the program processing assessment system specified
set forth at subpart Q of this part uti- in this subpart must do so in a manner
lized to calculate a national improper that is consistent with the provisions
payment rate for Medicaid and CHIP. of §§ 435.902 and 436.901 of this sub-
PERM year is the scheduled and des- chapter concerning the rights of bene-
ignated year for a State to participate ficiaries.
in, and be measured by, the PERM Pro-
gram set forth at subpart Q of this § 431.810 Basic elements of the Med-
part. icaid Eligibility Quality Control
(MEQC) Program.
[82 FR 31182, July 5, 2017]
(a) General requirements. The State
§ 431.806 State requirements. must operate the MEQC pilot in ac-
cordance with this section and §§ 431.812
(a) General requirements. (1) In a
through 431.820, as well as other in-
State’s PERM year, the PERM meas-
structions established by CMS.
urement will meet the requirements of
(b) Review requirements. The State
section 1903(u) of the Act.
must conduct reviews for the MEQC
(2) In the 2 years between each
pilot in accordance with the require-
State’s PERM year, the State is re- ments specified in § 431.812 and other
quired to conduct one MEQC pilot, instructions established by CMS.
which will span parts of both off years.
(c) Pilot planning requirements. The
(i) The MEQC pilot review period will State must develop a MEQC pilot plan-
span 12 months of a calendar year, be- ning proposal in accordance with re-
ginning the January 1 following the quirements specified in § 431.814 and
end of the State’s PERM year through other instructions established by CMS.
December 31. (d) Reporting requirements. The State
(ii) The MEQC pilot planning docu- must report the finding of the MEQC
ment described in § 431.814 is due no pilots in accordance with the require-
later than the first November 1 fol- ments specified in § 431.816 and other
lowing the end of the State’s PERM instructions established by CMS.
year. (e) Corrective action requirements. The
(iii) A State must submit its MEQC State must conduct corrective actions
pilot findings and its plan for correc- based on the findings of the MEQC pi-
tive action(s) by the August 1 following lots in accordance with the require-
the end of its MEQC pilot review pe- ments specified in § 431.820 and other
riod. instructions established by CMS.
(b) PERM measurement. Requirements
for the State PERM review process are [82 FR 31183, July 5, 2017]
set forth in subpart Q of this part.
§ 431.812 Review procedures.
(c) MEQC pilots. MEQC pilot require-
ments are specified in §§ 431.812 through (a) General requirements. Each State is
431.820. required to conduct a MEQC pilot dur-
(d) Claims processing assessment system. ing the 2 years between required PERM
Except in a State that has an approved cycles in accordance with the approved
Medicaid Management Information pilot planning document specified in
System (MMIS) under subpart C of part § 431.814, as well as other instructions
433 of this subchapter, a State plan established by CMS. The agency and
must provide for operating a Medicaid personnel responsible for the develop-
quality control claims processing as- ment, direction, implementation, and
sessment system that meets the reevaluation of the MEQC reviews and
quirements of §§431.830 through 431.836. associated activities, must be function-
ally and physically separate from the
[82 FR 31182, July 5, 2017] State agencies and personnel that are
65
§ 431.814 42 CFR Ch. IV (10–1–17 Edition)
responsible for Medicaid and CHIP pol- (d) Error definition. (1) An active case
icy and operations, including eligi- error is an error resulting from the
bility determinations. State’s improper application of Federal
(b) Active case reviews. (1) The State rules and the State’s documented poli-
must review all active cases selected cies and procedures that causes a bene-
from the universe of cases, as estab- ficiary to be determined eligible when
lished in the State’s approved MEQC he or she is ineligible for Medicaid or
pilot planning document, under § 431.814 CHIP, causes a beneficiary to be deter-
to determine if the cases were eligible mined eligible for the incorrect type of
for services, as well as to identify defi- assistance, or when a determination
ciencies in processing subject to cor- did not occur timely or cannot be
rective actions. verified.
(2) The State must select and review, (2) Negative case errors are errors,
at a minimum, 400 active cases in total based on the State’s documented poli-
from the Medicaid and CHIP universe. cies and procedures, resulting from ei-
(i) The State must review at least 200 ther of the following:
(i) Applications for Medicaid or CHIP
Medicaid cases.
that are improperly denied by the
(ii) The State will identify in the State.
pilot planning document at § 431.814 the (ii) Existing cases that are improp-
sample size per program. erly terminated from Medicaid or CHIP
(iii) The State may sample more than by the State.
400 cases. (e) Active case payment reviews. In ac-
(3) The State may propose to focus cordance with instructions established
the active case reviews on recent by CMS, the State must also conduct
changes to eligibility policies and proc- payment reviews to identify payments
esses, areas where the state suspects for active case errors, as well as iden-
vulnerabilities, or proven error prone tify the individual’s understated or
areas. overstated liability, and report pay-
(i) Unless otherwise directed by CMS, ment findings as specified in § 431.816.
the State must propose its active case
[82 FR 31183, July 5, 2017]
review approach in the pilot planning
document described at § 431.814 or per- § 431.814 Pilot planning document.
form a comprehensive review.
(a) Plan approval. For each MEQC
(ii) When the State has a PERM eligi-
pilot, the State must submit a MEQC
bility improper payment rate that ex-
pilot planning document that meets
ceeds the 3 percent national standard
the requirements of this section to
for two consecutive PERM cycles, the
CMS for approval by the first Novem-
State must follow CMS direction for its
ber 1 following the end of the State’s
active case reviews. CMS guidance will
PERM year. The State must receive
be provided to any state meeting this
approval for a plan before the plan can
criteria.
be implemented.
(c) Negative case reviews. (1) As estab- (b) Plan requirements. The State must
lished in the State’s approved MEQC have an approved pilot planning docu-
pilot planning document under § 431.814, ment in effect for each MEQC pilot
the State must review negative cases that must be in accordance with in-
selected from the State’s universe of structions established by CMS and that
cases that are denied or terminated in includes, at a minimum, the following
the review month to determine if the for—
denial, or termination, was correct, as (1) Active case reviews. (i) Focus of the
well as to identify deficiencies in proc- active case reviews in accordance with
essing subject to corrective actions. § 431.812(b)(3) and justification for
(2) The State must review, at a min- focus.
imum, 200 negative cases from Med- (ii) Universe development process.
icaid and 200 negative cases from CHIP. (iii) Sample size per program.
(i) The State may sample more than (iv) Sample selection procedure.
200 cases from Medicaid and/or more (v) Case review process.
than 200 cases from CHIP. (2) Negative case reviews. (i) Universe
(ii) [Reserved] development process.
66
(ii) Sample size per program. (c) In the corrective action report,
(iii) Sample selection procedure. the State must provide updates on cor-
(iv) Case review process. rective actions reported for the pre-
[82 FR 31183, July 5, 2017] vious MEQC pilot.
[82 FR 31184, July 5, 2017]
§ 431.816 Case review completion
deadlines and submittal of reports. MEDICAID QUALITY CONTROL (MQC)
(a) The State must complete case re- CLAIMS PROCESSING ASSESSMENT SYS-
views and submit reports of findings to TEM
CMS as specified in paragraph (b) of
this section in the form and at the SOURCE: Sections 431.830 through 431.836 ap-
time specified by CMS. pear at 55 FR 22170, May 31, 1990, unless oth-
(b) In addition to the reporting re- erwise noted.
quirements specified in § 431.814 relat-
ing to the MEQC pilot planning docu- § 431.830 Basic elements of the Med-
ment, the State must complete case re- icaid quality control (MQC) claims
views and submit reports of findings to processing assessment system.
CMS in accordance with paragraphs An agency must—
(b)(1) and (2) of this section. (a) Operate the MQC claims proc-
(1) For all active and negative cases essing assessment system in accord-
reviewed, the State must submit a de- ance with the policies, sampling meth-
tailed case-level report in a format pro- odology, review procedures, reporting
vided by CMS. forms, requirements, and other instruc-
(2) All case-level findings will be due tions established by CMS.
by August 1 following the end of the (b) Identify deficiencies in the claims
MEQC review period. processing operations.
[82 FR 31183, July 5, 2017] (c) Measure cost of deficiencies;
(d) Provide data to determine appro-
§ 431.818 Access to records. priate corrective action;
The State, upon written request, (e) Provide an assessment of the
must submit to the HHS staff, or other State’s claims processing or that of its
designated entity, all records, includ- fiscal agent;
ing complete local agency eligibility (f) Provide for a claim-by-claim re-
case files or legible copies and all other view where justifiable by data; and
documents pertaining to its MEQC re- (g) Produce an audit trail that can be
views to which the State has access, in- reviewed by CMS or an outside auditor.
cluding information available under
part 435, subpart I of this chapter. § 431.832 Reporting requirements for
claims processing assessment sys-
[82 FR 31184, July 5, 2017] tems.
§ 431.820 Corrective action under the (a) The agency must submit reports
MEQC program. and data specified in paragraph (b) of
The State must— this section to CMS, in the form and at
(a) Take action to correct any active the time specified by CMS.
or negative case errors, including defi- (b) Except when CMS authorizes less
ciencies, found in the MEQC pilot sam- stringent reporting, States must sub-
pled cases in accordance with instruc- mit:
tions established by CMS; (1) A monthly report on claims proc-
(b) By the August 1 following the essing reviews sampled and or claims
MEQC review period, submit to CMS a processing reviews completed during
report that— the month;
(1) Identifies the root cause and any (2) A summary report on findings for
trends found in the case review find- all reviews in the 6-month sample to be
ings. submitted by the end of the 3rd month
(2) Offers corrective actions for each following the scheduled completion of
unique error and deficiency finding reviews for that 6 month period; and
based on the analysis provided in para- (3) Other data and reports as required
graph (b)(1) of this section. by CMS.
67
§ 431.834 42 CFR Ch. IV (10–1–17 Edition)
§ 431.834 Access to records: Claims requires Federal agencies to review and

processing assessment systems. identify annually those programs and
The agency, upon written request, activities that may be susceptible to
must provide HHS staff with access to significant erroneous payments, esti-
all records pertaining to its MQC mate the amount of improper pay-
claims processing assessment system ments, report such estimates to the
reviews to which the State has access, Congress, and submit a report on ac-
including information available under tions the agency is taking to reduce er-
part 435, subpart J, of this chapter. roneous payments.
(3) Section 1902(a)(27)(B) of the Act
§ 431.836 Corrective action under the requires States to require providers to
MQC claims processing assessment
system. agree to furnish the State Medicaid
agencies and the Secretary with infor-
The agency must— mation regarding payments claimed by
(a) Take action to correct those er-
Medicaid providers for furnishing Med-
rors identified through the claims proc-
icaid services.
essing assessment system review and,
if cost effective, to recover those funds (4) Section 601 of the Children’s
erroneously spent; Health Insurance Program Reauthor-
(b) Take administrative action to ization Act of 2009 (CHIPRA) (Pub. L.
prevent and reduce the incidence of 111–3) which requires that the new
those errors; and PERM regulations include the fol-
(c) By August 31 of each year, submit lowing: Clearly defined criteria for er-
to CMS a report of its error analysis rors for both States and providers;
and a corrective action plan on the re- Clearly defined processes for appealing
views conducted since the cut-off-date error determinations; clearly defined
of the previous corrective action plan. responsibilities and deadlines for
States in implementing any corrective
Subpart Q—Requirements for Esti- action plans; requirements for State
mating Improper Payments in verification of an applicant’s self-dec-
Medicaid and CHIP laration or self-certification of eligi-
bility for, and correct amount of, med-
ical assistance under Medicaid or child
SOURCE: 71 FR 51081, Aug. 28, 2006, unless
otherwise noted. health assistance under CHIP; and
State-specific sample sizes for applica-
§ 431.950 Purpose. tion of the PERM requirements.
This subpart requires States and pro- (b) Scope. (1) This subpart requires
viders to submit information and pro- States under the statutory provisions
vide support to Federal contractors as cited in paragraph (a) of this section to
necessary to enable the Secretary to submit information as set forth in
produce national improper payment es- § 431.970 for, among other purposes, es-
timates for Medicaid and the Chil- timating improper payments in the
dren’s Health Insurance Program fee-for-service (FFS) and managed care
(CHIP). components of the Medicaid and CHIP
[82 FR 31184, July 5, 2017] programs and to determine whether
eligibility was correctly determined.
§ 431.954 Basis and scope. This subpart also requires providers to
(a) Basis. The statutory bases for this submit to the Secretary any medical
subpart are as follows: records and other information nec-
(1) Sections 1102, 1902(a)(6), and essary to disclose the extent of services
2107(b)(1) of the Act, which contain the provided to individuals receiving as-
Secretary’s general rulemaking au- sistance, and to furnish information re-
thority and obligate States to provide garding any payments claimed by the
information, as the Secretary may re- provider for furnishing such services,
as requested by the Secretary.
quire, to monitor program perform-

ance. (2) All information must be furnished
(2) The Improper Payments Informa- in accordance with section 1902(a)(7)(A)
tion Act of 2002 (Pub. L. 107–300), which of the Act, regarding confidentiality.
68
(3) This subpart does not apply with cuting the requirements of the PERM
respect to Puerto Rico, Guam, the Vir- program.
gin Islands, the Northern Mariana Is- Federally Facilitated Exchange (FFE)
lands or American Samoa. means the health insurance exchange
[71 FR 51081, Aug. 28, 2006, as amended at 75 established by the Federal government
FR 48847, Aug. 11, 2010] with responsibilities that include mak-
ing Medicaid and CHIP determinations
§ 431.958 Definitions and use of terms. for states that delegate authority to
Adjudication date means either the the FFE.
date on which money was obligated to Federally Facilitated Exchange—Deter-
pay a claim or the date the decision mination (FFE–D) means cases deter-
was made to deny a claim. mined by the FFE in states that have
Annual sample size means the number delegated the authority to make Med-
of fee-for-service claims, managed care icaid/CHIP eligibility determinations
payments, or eligibility cases that will to the FFE.
be sampled for review in a given PERM Federal financial participation means
cycle. the Federal Government’s share of the
Appeals means a process that allows State’s expenditures under the Med-
the State to dispute the PERM Review icaid program and CHIP.
Contractor and Eligibility Review Con- Finding means errors and/or defi-
tractor findings with CMS after the dif- ciencies identified through the med-
ference resolution process has been ex- ical, data processing, and eligibility re-
hausted. views.
Beneficiary means an applicant for, or Improper payment means any payment
beneficiary of, Medicaid or CHIP pro- that should not have been made or that
gram benefits. was made in an incorrect amount (in-
Children’s Health Insurance Program cluding overpayments and underpay-
(CHIP) means the program authorized ments) under statutory, contractual,
and funded under Title XXI of the Act. administrative, or other legally appli-
Corrective action means actions to be cable requirements; and includes any
taken by the State to reduce errors or payment to an ineligible beneficiary,
other vulnerabilities for the purpose of any duplicate payment, any payment
reducing improper payments in Med- for services not received, any payment
icaid and CHIP. incorrectly denied, and any payment
Deficiency means a finding in which a that does not account for credits or ap-
claim or payment had a medical, data plicable discounts.
processing, and/or eligibility error that Improper payment rate means an an-
did not result in federal and/or state nual estimate of improper payments
improper payment. made under Medicaid and CHIP equal
Difference resolution means a process to the sum of the overpayments and
that allows the State to dispute the underpayments in the sample, that is,
PERM Review Contractor and Eligi- the absolute value of such payments,
bility Review Contractor findings di- expressed as a percentage of total pay-
rectly with the contractor. ments made in the sample.
Disallowance means the percentage of Lower limit means the lower bound of
Federal medical assistance funds the the 95-percent confidence interval for
State is required to return to CMS in the State’s eligibility improper pay-
accordance with section 1903(u) of the ment rate.
Act. Medicaid means the joint Federal and
Eligibility means meeting the State’s State program, authorized and funded
categorical and financial criteria for under Title XIX of the Act, that pro-
receipt of benefits under the Medicaid vides medical care to people with low
or CHIP programs. incomes and limited resources.
Eligibility Review Contractor (ERC) Payment means any payment to a
means the CMS contractor responsible provider, insurer, or managed care or-
for conducting state eligibility reviews ganization for a Medicaid or CHIP ben-
for the PERM Program. eficiary for which there is Medicaid or
Federal contractor means the ERC, CHIP Federal financial participation.
RC, or SC which support CMS in exe- It may also mean a direct payment to
69
§ 431.960 42 CFR Ch. IV (10–1–17 Edition)
a Medicaid or CHIP beneficiary in lim- State-specific sample size means the

ited circumstances permitted by CMS sample size determined by CMS that is
regulation or policy. required from each individual State to
Payment error means any claim or support national improper payment
payment where federal and/or state rate precision requirements.
dollars were paid improperly based on Statistical Contractor (SC) means the
medical, data processing, and/or eligi- contractor responsible for collecting
bility reviews. and sampling fee-for-service claims and
PERM means the Payment Error managed care capitation payment
Rate Measurement process to measure data, as well as calculating Medicaid
improper payment in Medicaid and and CHIP state and national improper
CHIP. payment rates.
PERM review period means the time- States means the 50 States and the
frame in which claims and eligibility District of Columbia.
are reviewed for national annual im- [71 FR 51081, Aug. 28, 2006, as amended at 75
proper payment rate calculation pur- FR 48847, Aug. 11, 2010; 82 FR 31184, July 5,
poses, July through June. 2017]
Provider means any qualified provider
recognized under Medicaid and CHIP § 431.960 Types of payment errors.
statute and regulations. (a) General rule. Errors identified for
Provider error includes, but is not lim- the Medicaid and CHIP improper pay-
ited to, medical review errors as de- ments measurement under the Im-
scribed in § 431.960(c) of this subpart, as proper Payments Information Act of
determined in accordance with docu- 2002 must affect payment under appli-
mented State or Federal policies or cable Federal or State policy, or both.
both. (b) Data processing errors. (1) A data
Recoveries mean those monies for processing error is an error resulting in
which the State is responsible to pay an overpayment or underpayment that
back to CMS based on the identifica- is determined from a review of the
tion of Federal improper payments. claim and other information available
Review Contractor (RC) means the in the State’s Medicaid Management
CMS contractor responsible for con- Information System, related systems,
ducting state data processing and med- or outside sources of provider
ical record reviews for the PERM Pro- verification resulting in Federal and/or
gram. State improper payments.
Review year means the year being (2) The difference in payment be-
analyzed for improper payments under tween what the State paid (as adjusted
the PERM Program. within improper payment measure-
State eligibility system means any sys- ment guidelines) and what the State
tem, within the State or with a state- should have paid, in accordance with
delegated contractor, that is used by federal and state documented policies,
the state to determine Medicaid and/or is the dollar measure of the payment
CHIP eligibility and/or that maintains error.
documentation related to Medicaid (3) Data processing errors include,
and/or CHIP eligibility determinations. but are not limited to, the following:
State error includes, but is not limited (i) Payment for duplicate items.
to, dataprocessing errors and eligi- (ii) Payment for non-covered serv-
bility errors as described in § 431.960(b) ices.
and (d), as determined in accordance (iii) Payment for fee-for-service
with documented State and Federal claims for managed care services.
policies. State errors do not include (iv) Payment for services that should
the errors described in paragraph have been paid by a third party but
§ 431.960(e)(2). were inappropriately paid by Medicaid
State payment system means any sys- or CHIP.
tem within the State or with a state- (v) Pricing errors.
delegated contractor that is used to ad- (vi) Logic edit errors.

judicate and pay Medicaid and/or CHIP (vii) Data entry errors.
FFS claims and/or managed care pay- (viii) Managed care rate cell errors.
ments. (ix) Managed care payment errors.
70
(c) Medical review errors. (1) A medical (iv) Was ineligible for managed care
review error is an error resulting in an but enrolled in managed care.
overpayment or underpayment that is (3) The dollars paid in error due to an
determined from a review of the pro- eligibility error is the measure of the
vider’s medical record or other docu- payment error.
mentation supporting the service(s) (4) A State eligibility error does not
claimed, Code of Federal Regulations result from the State’s verification of
that are applicable to conditions of an applicant’s self-declaration or self-
payment, the State’s written policies, certification of eligibility for, and the
and a comparison between the docu- correct amount of, medical assistance
mentation and written policies and the or child health assistance, if the State
information presented on the claim re- process for verifying an applicant’s
sulting in Federal and/or State im- self-declaration or self-certification
proper payments. satisfies the requirements in Federal
(2) The difference in payment be- law or guidance, or, if applicable, has
tween what the State paid (as adjusted the Secretary’s approval.
within improper payment measure- (e) Errors for purposes of determining
ment guidelines) and what the State the national improper payment rates. (1)
should have paid, in accordance with The Medicaid and CHIP national im-
the applicable conditions of payment proper payment rates include, but are
per 42 CFR parts 440 through 484, this not limited to, the errors described in
part (431), and in accordance with the paragraphs (b) through (d) of this sec-
State’s documented policies, is the dol- tion.
lar measure of the payment error. (2) Eligibility errors resulting solely
(3) Medical review errors include, but from determinations of Medicaid or
are not limited to, the following: CHIP eligibility delegated to, and made
(i) Lack of documentation. by, the Federally Facilitated Exchange
(ii) Insufficient documentation. will be included in the national im-
(iii) Procedure coding errors. proper payment rate.
(iv) Diagnosis coding errors. (f) Errors for purposes of determining
(v) Unbundling. the State improper payment rates. The
(vi) Number of unit errors. Medicaid and CHIP State improper
(vii) Medically unnecessary services. payment rates include, but are not lim-
(viii) Policy violations. ited to, the errors described in para-
(ix) Administrative errors. graphs (b) through (d) of this section,
(d) Eligibility errors. (1) An eligibility and do not include the errors described
error is an error resulting in an over- in paragraph (e)(2) of this section.
payment or underpayment that is de- (g) Error codes. CMS will define dif-
termined from a review of a bene- ferent types of errors within the above
ficiary’s eligibility determination, in categories for analysis and reporting
comparison to the documentation used purposes. Only Federal and/or State
to establish a beneficiary’s eligibility dollars in error will factor into the
and applicable federal and state regula- State’s PERM improper payment rate.
tions and policies, resulting in Federal [82 FR 31185, July 5, 2017]
and/or State improper payments.
(2) Eligibility errors include, but are § 431.970 Information submission and
not limited to, the following: systems access requirements.
(i) Ineligible individual, but author- (a) The State must submit informa-
ized as eligible when he or she received tion to the Secretary for, among other
services. purposes, estimating improper pay-
(ii) Eligible individual for the pro- ments in Medicaid and CHIP, that in-
gram, but was ineligible for certain clude, but are not limited to—
services he or she received. (1) Adjudicated fee-for-service or
(iii) Lacked or had insufficient docu- managed care claims information, or
mentation in his or her case record, in both, on a quarterly basis, from the re-
accordance with the State’s docu- view year;

mented policies and procedures, to (2) Upon request from CMS, provider
make a definitive review decision of contact information that has been
eligibility or ineligibility. verified by the State as current;
71
§ 431.972 42 CFR Ch. IV (10–1–17 Edition)
(3) All medical, eligibility, and other (d) The State must provide the Fed-
related policies in effect, and any quar- eral contractor(s) with access to all eli-
terly policy updates; gibility system(s) necessary to conduct
(4) Current managed care contracts, the eligibility review, including any
rate information, and any quarterly eligibility systems of record, any elec-
updates applicable to the review year; tronic document management sys-
(5) Data processing systems manuals; tem(s) that house case file informa-
(6) Repricing information for claims tion, and systems that house the re-
that are determined during the review sults of third party data matches.
to have been improperly paid; [82 FR 31185, July 5, 2017]
(7) Information on claims that were
selected as part of the sample, but § 431.972 Claims sampling procedures.
changed in substance after selection, (a) General requirements. The State
for example, successful provider ap- will submit quarterly FFS claims and
peals; managed care payments, as identified
(8) Adjustments made within 60 days in § 431.970(a), to allow federal contrac-
of the adjudication dates for the origi- tors to conduct data processing, med-
nal claims or line items, with suffi- ical record, and eligibility reviews to
cient information to indicate the na- meet the requirements of the PERM
ture of the adjustments and to match measurement.
the adjustments to the original claims (b) Claims universe. (1) The PERM
or line items; claims universe includes payments
(9) Case documentation to support that were originally paid (paid claims)
the eligibility review, as requested by and for which payment was requested
CMS; but denied (denied claims) during the
(10) A corrective action plan for pur- PERM review period, and for which
poses of reducing erroneous payments there is FFP (or would have been if the
in FFS, managed care, and eligibility; claim had not been denied) through
and Title XIX (Medicaid) or Title XXI
(11) Other information that the Sec- (CHIP).
retary determines is necessary for, (2) The State must establish controls
among other purposes, estimating im- to ensure FFS and managed care
proper payments and determining im- universes are accurate and complete,
proper payment rates in Medicaid and including comparing the FFS and man-
CHIP. aged care universes to the Form CMS–
(b) Providers must submit informa- 64 and Form CMS–21 as appropriate.
tion to the Secretary for, among other (c) Sample size. CMS estimates each
purposes, estimating improper pay- State’s annual sample size for the
ments in Medicaid and CHIP, which in- PERM review at the beginning of the
clude but are not limited to Medicaid PERM cycle.
and CHIP beneficiary medical records, (1) Precision and confidence levels. The
within 75 calendar days of the date the national annual sample size will be es-
request is made by CMS. If CMS deter- timated to achieve at least a minimum
mines that the documentation is insuf- National-level improper payment rate
ficient, providers must respond to the with a 90 percent confidence interval of
request for additional documentation plus or minus 2.5 percent of the total
within 14 calendar days of the date the amount of all payments for Medicaid
request is made by CMS. and CHIP.
(c) The State must provide the Fed- (2) State-specific sample sizes. CMS will
eral contractor(s) with access to all develop State-specific sample sizes for
payment system(s) necessary to con- each State. CMS may take into consid-
duct the medical and data processing eration the following factors in deter-
review, including the Medicaid Man- mining each State’s annual state-spe-
agement Information System (MMIS), cific sample size for the current PERM
any systems that include beneficiary cycle:
demographic and/or provider enroll- (i) State-level precision goals for the
ment information, and any document current PERM cycle;
imaging systems that store paper (ii) The improper payment rate and
claims. precision of that improper payment
72
rate from the State’s previous PERM (C) Scheduled or actual implementa-
cycle; tion date.
(iii) The State’s overall Medicaid and (D) Key personnel responsible for
CHIP expenditures; and each activity.
(iv) Other relevant factors as deter- (E) A monitoring plan for monitoring
mined by CMS. the effectiveness of the action.
[82 FR 31186, July 5, 2017] (4) Evaluation. The State must sub-
mit an evaluation of the corrective ac-
§ 431.992 Corrective action plan. tion plan from the previous measure-
(a) The State must develop a sepa- ment. The State must evaluate the ef-
rate corrective action plan for Med- fectiveness of the corrective action(s)
icaid and CHIP for each improper pay- by assessing all of the following:
ment rate measurement, designed to (i) Improvements in operations.
reduce improper payments in each pro- (ii) Efficiencies.
gram based on its analysis of the im- (iii) Number of errors.
proper payment causes in the FFS, (iv) Improper payments.
managed care, and eligibility compo-
(v) Ability to meet the PERM im-
nents.
proper payment rate targets assigned
(1) The corrective action plan must
by CMS.
address all errors that are included in
the State improper payment rate de- (c) The State must submit to CMS
fined at § 431.960(f)(1) and all defi- and implement the corrective action
ciencies. plan for the fiscal year it was reviewed
(2) For eligibility, the corrective ac- no later than 90 calendar days after the
tion plan must include an evaluation of date on which the State’s Medicaid or
whether actions the State takes to re- CHIP improper payment rates are post-
duce eligibility errors will also avoid ed on the CMS contractor’s Web site.
increases in improper denials. (d) The State must provide updates
(b) In developing a corrective action on corrective action plan implementa-
plan, the State must take the following tion progress annually and upon re-
actions: quest by CMS.
(1) Error analysis. The State must (e) In addition to paragraphs (a)
conduct analysis such as reviewing through (d) of this section, each State
causes, characteristics, and frequency that has an eligibility improper pay-
of errors that are associated with im- ment rates over the allowable thresh-
proper payments. The State must re- old of 3 percent for consecutive PERM
view the findings of the analysis to de- years, must submit updates on the sta-
termine specific programmatic causes tus of corrective action implementa-
to which errors are attributed (for ex- tion to CMS every other month. Status
ample, provider lack of understanding updates must include, but are not lim-
of the requirement to provide docu- ited to the following:
mentation), if any, and to identify root (1) Details on any setbacks along
improper payment causes. with an alternate corrective action or
(2) Corrective action planning. The workaround.
State must determine the corrective (2) Actual examples of how the cor-
actions to be implemented that address rective actions have led to improve-
the root improper payment causes and ments in operations, and explanations
prevent that same improper payment for how the improvements will lead to
from occurring again. a reduction in the number of errors, as
(3) Implementation and monitoring. (i) well as the State’s next PERM eligi-
The State must develop an implemen- bility improper payment rate.
tation schedule for each corrective ac- (3) An overall summary on the status
tion and implement those actions in of corrective actions, planning, and im-
accordance with the schedule. plementation, which demonstrates how
(ii) The implementation schedule the corrective actions will provide the
must identify all of the following for State with the ability to meet the 3
each action: percent threshold.
(A) The specific corrective action.
(B) Status. [82 FR 31186, July 5, 2017]
73
§ 431.998 42 CFR Ch. IV (10–1–17 Edition)
§ 431.998 Difference resolution and ap- tions at part 433, subpart F of this
peal process. Difference resolution chapter. Payments based on erroneous
and appeal process. Medicaid eligibility determinations are
(a) The State may file, in writing, a addressed under section 1903(u) of the
request with the relevant Federal con- Act and related regulations at part 431,
tractor to resolve differences in the subpart P of this chapter.
Federal contractor’s findings based on (b) CHIP. Quarterly Federal pay-
medical, data processing, or eligibility ments to the States under Title XXI of
reviews in Medicaid or CHIP. the Act must be reduced in accordance
(b) The State must file requests to with section 2105(e) of the Act and re-
resolve differences based on the med- lated regulations at part 457, subpart B
ical, data processing, or eligibility re- of this chapter.
views within 25 business days after the
report of review findings is shared with § 431.1010 Disallowance of Federal fi-
the State. nancial participation for erroneous
(c) To file a difference resolution re- State payments (for PERM review
years ending after July 1, 2020).
quest, the State must be able to dem-
onstrate all of the following: (a) Purpose. (1) This section estab-
(1) Have a factual basis for filing the lishes rules and procedures for dis-
request. allowing Federal financial participa-
(2) Provide the appropriate Federal tion (FFP) in erroneous medical assist-
contractor with valid evidence directly ance payments due to eligibility im-
related to the finding(s) to support the proper payment errors, as detected
State’s position. through the PERM program required
(d) For a finding in which the State under this subpart, in effect on and
and the Federal contractor cannot re- after July 1, 2020.
solve the difference in findings, the (2) After the State’s eligibility im-
State may appeal to CMS for final res- proper rate has been established for
olution by filing an appeal within 15 each PERM review period, CMS will
business days from the date the rel- compute the amount of the disallow-
evant Federal contractor’s finding as a ance, removing any underpayments due
result of the difference resolution is to eligibility errors, and adjust the
shared with the State. There is no min- FFP payable to each State. The dis-
imum dollar threshold required to ap- allowance or withholding is only appli-
peal a difference in findings. cable to the State’s PERM year.
(e) To file an appeal request, the (3) CMS will compute the amount to
State must be able to demonstrate all be withheld or disallowed as follows:
of the following: (i) Subtract the 3 percent allowable
(1) Have a factual basis for filing the threshold from the lower limit of the
request. State’s eligibility improper payment
(2) Provide CMS with valid evidence rate percentage excluding underpay-
directly related to the finding(s) to ments.
support the State’s position. (ii) If the difference is greater than
(f) All differences, including those zero, the Federal medical assistance
pending in CMS for final decision that funds for the period, are multiplied by
are not overturned in time for im- that percentage. This product is the
proper payment rate calculation, will amount of the disallowance or with-
be considered as errors in the improper holding.
payment rate calculation in order to (b) Notice to States and showing of good
meet the reporting requirements of the faith. (1) If CMS is satisfied that the
IPIA. State did not meet the 3 percent allow-
[82 FR 31187, July 5, 2017] able threshold despite a good faith ef-
fort, CMS will reduce the funds being
§ 431.1002 Recoveries. disallowed in whole.
(a) Medicaid. States must return to (2) CMS may find that a State did not
CMS the Federal share of overpay- meet the 3 percent allowable threshold
ments based on medical and processing despite a good faith effort if the State
errors in accordance with section has taken the action it believed was
1903(d)(2) of the Act and related regula- needed to meet the threshold, but the
74
threshold was not met. CMS will grant Subpart A—General Provisions
a good faith waiver only if the State
both: § 432.1 Basis and purpose.
(i) Participates in the MEQC pilot This part prescribes regulations to
program in accordance with §§ 431.800 implement section 1902(a)(4) of the Act,
through 431.820, and which relates to a merit system of
(ii) Implements PERM CAPs in ac- State personnel administration and
cordance with § 431.992. training and use of subprofessional
(3) Each State that has an eligibility staff and volunteers in State Medicaid
improper payment rate above the al- programs, and section 1903(a), rates of
lowable threshold will be notified by FFP for Medicaid staffing and training
CMS of the amount of the disallow- costs. It also prescribes regulations,
based on the general administrative
ance.
authority in section 1902(a)(4), for
(c) Disallowance subject to appeal. If State training programs for all staff.
the State does not agree with a dis-
allowance imposed under paragraph (e) § 432.2 Definitions.
of this section, it may appeal to the As used in this part—
Departmental Appeals Board within 30 Community service aides means sub-
days from the date of the final dis- professional staff, employed in a vari-
allowance notice from CMS. The reg- ety of positions, whose duties are an
ular procedures for an appeal of a dis- integral part of the agency’s responsi-
allowance will apply, including review bility for planning, administration, and
by the Appeals Board under 45 CFR for delivery of health services.
part 16. Directly supporting staff means secre-
tarial, stenographic, and copying per-
[82 FR 31187, July 5, 2017] sonnel and file and records clerks who
provide clerical services that directly
PART 432—STATE PERSONNEL support the responsibilities of skilled
ADMINISTRATION professional medical personnel, who
are directly supervised by the skilled
Subpart A—General Provisions professional medical personnel, and
who are in an employer-employee rela-
Sec. tionship with the Medicaid agency.
432.1 Basis and purpose. Fringe benefits means the employer’s
432.2 Definitions. share of premiums for workmen’s com-
432.10 Standards of personnel administra- pensation, employees’ retirement, un-
tion. employment compensation, health in-
surance, and similar expenses.
Subpart B—Training Programs; Full-time training means training that
Subprofessional and Volunteer Programs requires employees to be relieved of all
432.30 Training programs: General require- responsibility for performance of cur-
ments. rent agency work to participate in a
432.31 Training and use of subprofessional training program.
staff. Part-time training means training that
432.32 Training and use of volunteers. allows employees to continue full-time
in their agency jobs or requires only
Subpart C—Staffing and Training partial reduction of work activities to
Expenditures participate in the training activity.
Skilled professional medical personnel
432.45 Applicability of provisions in subpart. means physicians, dentists, nurses, and
432.50 FFP: Staffing and training costs. other specialized personnel who have
432.55 Reporting training and administra-
professional education and training in
tive costs.
the field of medical care or appropriate
AUTHORITY: Sec. 1102 of the Social Security medical practice and who are in an em-
Act (42 U.S.C. 1302). ployer-employee relationship with the

SOURCE: 43 FR 45199, Sept. 29, 1978, unless Medicaid agency. It does not include
otherwise noted. other nonmedical health professionals
such as public administrators, medical
75
§ 432.10 42 CFR Ch. IV (10–1–17 Edition)
analysts, lobbyists, senior managers or the standards by local jurisdictions in-

administrators of public assistance cluded in the plan.
programs or the Medicaid program. (e) Review and adequacy of State laws,
Staff of other public agencies means regulations, and policies. The agency
skilled professional medical personnel must—
and directly supporting staff who are (1) Assure that the U.S. Civil Service
employed in State or local agencies Commission has determined the ade-
other than the Medicaid agency who quacy of current State laws, regula-
perform duties that directly relate to tions, and policy statements that effect
the administration of the Medicaid methods of personnel administration in
program. conformity with the standards, and
Subprofessional staff means persons (2) Submit any changes in them to
performing tasks that demand little or the Commission for review.
no formal education; a high school di-
(f) Statements of acceptance by local
ploma; or less than 4 years of college.
agencies. If the Medicaid agency
Supporting staff means secretarial,
changes from a State-administered to a
stenographic, clerical, and other sub-
professional staff whose activities are State-supervised, locally administered
directly necessary to the carrying out program, it must obtain statements of
of the functions which are the responsi- acceptance of the standards from the
bility of skilled professional medical local agencies.
personnel, as defined in this section. (g) Affirmative action plan. The Med-
Training program means a program of icaid agency must have in effect an af-
educational activities based on the firmative action plan for equal employ-
agency’s training needs and aimed at ment opportunity, that includes spe-
insuring that agency staff acquire the cific action steps and timetables to as-
knowledge and skills necessary to per- sure that opportunity, and meets all
form their jobs. other requirements of 45 CFR 70.4. 1
Volunteer means a person who con- (h) Submittal of requested materials.
tributes personal service to the com- The Medicaid agency must submit to
munity through the agency’s program HHS, upon request, copies of the af-
but is not a replacement or substitute firmative action plan and of the State
for paid staff. and local materials that assure compli-
ance with the standards.
FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. 2, [43 FR 45199, Sept. 29, 1978, as amended at 45
1985] FR 24883, Apr. 11, 1980]
§ 432.10 Standards of personnel admin-

istration. Subpart B—Training Programs;
(a) State plan requirement. A State
Subprofessional and Volun-
plan must provide that the require- teer Programs
ments of paragraphs (c) through (h) of
§ 432.30 Training programs: General
this section are met. requirements.
(b) Terms. In this section, ‘‘stand-
ards’’ refer to those specified in para- (a) A State plan must provide for a
graph (c) of this section. program of training for Medicaid agen-
(c) Methods of personnel administra- cy personnel. (See also §§ 432.31 and
tion. Methods of personnel administra- 432.32 for training programs for sub-
tion must be established and main- professional staff and for volunteers.)
tained, in the Medicaid agency and in (b) The program must—
local agencies administering the (1) Include initial inservice training
propgram, in conformity with: for newly appointed staff, and con-
(1) [Reserved] tinuing training opportunities to im-
(2) 5 CFR part 900, subpart F, Admin- prove the operation of the program;
istration of the Standards for Merit
System of Personnel Administration. 1 Editorial Note: The regulations formerly

(d) Compliance of local jurisdictions. contained in 45 CFR 70.4 were revised and re-
The Medicaid agency must have in ef- issued by the Office of Personnel Manage-
fect methods to assure compliance with ment at 5 CFR part 900, (subpart F).
76
(2) Be related to job duties performed § 432.32 Training and use of volun-
or to be performed by the persons teers.
trained; and
(a) State plan requirement. A State
(3) Be consistent with the program
plan must provide for the training and
objectives of the agency.
use of non-paid or partially paid volun-
§ 432.31 Training and use of subprofes- teers in accordance with the require-
sional staff. ments of this section.
(a) State plan requirement. A State (b) Functions of volunteers. The Med-
plan must provide for the training and icaid agency must make use of volun-
effective use of subprofessional staff as teers in:
community service aides, in accord- (1) Providing services to applicants
ance with the requirements of this sec- and beneficiaries; and
tion. (2) Assisting any advisory commit-
(b) Recruitment and selection. The tees established by the agency.
Medicaid agency must have methods of As used in this paragraph, ‘‘partially
recruitment and selection that afford
paid volunteers’’ means volunteers who
opportunity for full-time or part-time
are reimbursed only for actual ex-
employment of persons of low income,
penses incurred in giving service, with-
including:
(1) Young, middle-aged, and older out regard to the value of the service
persons; or the time required to provide it.
(2) Physically and mentally disabled; (c) Staffing. The agency must des-
and ignate a position whose incumbent is
(3) Beneficiaries. responsible for:
(c) Merit system. Subprofessional posi- (1) The development, organization,
tions must be subject to merit system and administration of the volunteer
requirements except where special ex- program; and
emption is approved on the basis of a (2) Coordination of the program with
State alternative plan for employment related functions.
of disadvantaged persons. (d) Recruitment, selection, training, and
(d) Staffing plan. The agency staffing supervision. The agency must have:
plan must include the kinds of jobs (1) Methods of recruitment and selec-
that subprofessional staff can perform. tion that assure participation of volun-
(e) Career service. The agency must teers of all income levels, in planning
have a career service program that al-
capacities and service provision; and
lows persons:
(1) To enter employment at the sub- (2) A program of organized training
professional level; and and supervision of volunteers.
(2) To progress to positions of in- (e) Reimbursement of expenses. The
creasing responsibility and reward: agency must—
(i) In accordance with their abilities; (1) Reimburse volunteers for actual
and expenses incurred in providing serv-
(ii) Through work experience and pre- ices; and
service and in-service training. (2) Assure that no volunteer is de-
(f) Training, supervision and supportive prived of the opportunity to serve be-
services. The agency must have an orga- cause of the expenses involved.
nized training program, supervision, (f) Progressive expansion. The agency
and supportive services for subprofes- must provide for annual increase in the
sional staff. number of volunteers used until the
(g) Progressive expansion. The agency volunteer program is adequate for the
must provide for annual increase in the achievement of the agency’s service
number of subprofessional staff until: goals.
(1) An appropriate ratio of subprofes-
sional and professional staff has been
achieved; and
(2) There is maximum use of sub-
professional staff as community aides
in the operation of the program.
77
§ 432.45 42 CFR Ch. IV (10–1–17 Edition)
Subpart C—Staffing and Training actual percentages of time spent car-

Expenditures rying out duties in the specified areas,
or another methodology approved by
§ 432.45 Applicability of provisions in CMS.
subpart. (d) Other limitations for FFP rate for
The rates of FFP specified in this skilled professional medical personnel and
subpart C do not apply to State per- directly supporting staff—(1) Medicaid
sonnel who conduct survey activities agency personnel and staff. The rate of
and certify facilities for participation 75 percent FFP is available for skilled
in Medicaid, as provided for under sec- professional medical personnel and di-
tion 1902(a)(33)(B) of the Act. rectly supporting staff of the Medicaid
agency if the following criteria, as ap-
[50 FR 46663, Nov. 12, 1985; 50 FR 49389, Dec. plicable, are met:
2, 1985]
(i) The expenditures are for activities
§ 432.50 FFP: Staffing and training that are directly related to the admin-
costs. istration of the Medicaid program, and
as such do not include expenditures for
(a) Availability of FFP. FFP is avail-
able in expenditures for salary or other medical assistance;
compensation, fringe benefits, travel, (ii) The skilled professional medical
per diem, and training, at rates deter- personnel have professional education
mined on the basis of the individual’s and training in the field of medical
position, as specified in paragraph (b) care or appropriate medical practice.
of this section. ‘‘Professional education and training’’
(b) Rates of FFP. (1) For skilled pro- means the completion of a 2-year or
fessional medical personnel and di- longer program leading to an academic
rectly supporting staff of the Medicaid degree or certificate in a medically re-
agency or of other public agencies (as lated profession. This is demonstrated
defined in § 432.2), the rate is 75 percent. by possession of a medical license, cer-
(2) For personnel engaged directly in tificate, or other document issued by a
the operation of mechanized claims recognized National or State medical
processing and information retrieval licensure or certifying organization or
systems, the rate is 75 percent. a degree in a medical field issued by a
(3) For personnel engaged in the de- college or university certified by a pro-
sign, development, or installation of fessional medical organization. Experi-
mechanized claims processing and in- ence in the administration, direction,
formation retrieval systems, the rate is or implementation of the Medicaid pro-
50 percent for training and 90 percent gram is not considered the equivalent
for all other costs specified in para- of professional training in a field of
graph (a) of this section. medical care.
(4) [Reserved] (iii) The skilled professional medical
(5) For personnel administering fam- personnel are in positions that have
ily planning services and supplies, the duties and responsibilities that require
rate is 90 percent. those professional medical knowledge
(6) For all other staff of the Medicaid and skills.
agency or other public agencies pro- (iv) A State-documented employer-
viding services to the Medicaid agency, employee relationship exists between
and for training and other expenses of the Medicaid agency and the skilled
volunteers, the rate is 50 percent. professional medical personnel and di-
(c) Application of rates. (1) FFP is pro- rectly supporting staff; and
rated for staff time that is split among (v) The directly supporting staff are
functions reimbursed at different rates. secretarial, stenographic, and copying
(2) Rates of FFP in excess of 50 per- personnel and file and records clerks
cent apply only to those portions of the who provide clerical services that are
individual’s working time that are directly necessary for the completion
spent carrying out duties in the speci- of the professional medical responsibil-
fied areas for which the higher rate is ities and functions of the skilled pro-
authorized. fessional medical staff. The skilled pro-
(3) The allocation of personnel and fessional medical staff must directly
staff costs must be based on either the supervise the supporting staff and the
78
performance of the supporting staff’s materials and equipment, for example,

work. books and audiovisual aids.
(2) Staff of other public agencies. The (6) For field instruction in Medicaid:
rate of 75 percent FFP is available for Instructors’ salaries and fringe bene-
staff of other public agencies if the re- fits, rental of space, travel, clerical as-
quirements specified in paragraph sistance, teaching materials and equip-
(d)(1) of this section are met and the ment such as books and audiovisual
public agency has a written agreement aids.
with the Medicaid agency to verify (c) Activities and costs not to be re-
that these requirements are met. ported as training expenditures. The fol-
(e) Limitations on FFP rates for staff in lowing activities are to be reported as
mechanized claims processing and infor- administrative costs:
mation retrieval systems. The special (1) Salaries of supervisors (day-to-day
matching rates for persons working on supervision of staff is not a training ac-
mechanized claims processing and in- tivity); and
formation retrieval systems (para- (2) Cost of employing students on a
graphs (b)(2) and (3) of this section) are temporary basis, for instance, during
applicable only if the design, develop- summer vacation.
ment and installation, or the oper- [43 FR 45199, Sept. 29, 1978, as amended at 44
ation, have been approved by the Ad- FR 17935, Mar. 23, 1979]
ministrator in accordance with part
433, subchapter C, of this chapter.
PART 433—STATE FISCAL
[43 FR 45199, Sept. 29, 1978, as amended at 46 ADMINISTRATION
FR 48566, Oct. 1, 1981; 50 FR 46663, Nov. 12,
1985]
Sec.
433.1 Purpose.
§ 432.55 Reporting training and admin-
istrative costs. Subpart A—Federal Matching and General
(a) Scope. This section identifies ac- Administration Provisions
tivities and costs to be reported as
training or administrative costs on 433.8 [Reserved]
433.10 Rates of FFP for program services.
quarterly estimate and expenditure re- 433.11 Enhanced FMAP rate for children.
ports to CMS. 433.15 Rates of FFP for administration.
(b) Activities and costs to be reported on 433.32 Fiscal policies and accountability.
training expenditures. (1) For fulltime 433.34 Cost allocation.
training (with no assigned agency du- 433.35 Equipment—Federal financial par-
ties): Salaries, fringe benefits, depend- ticipation.
ency allowances, travel, tuition, books, 433.36 Liens and recoveries.
433.37 Reporting provider payments to In-
and educational supplies.
ternal Revenue Service.
(2) For part-time training: Travel, 433.38 Interest charge on disallowed claims
per diem, tuition, books and edu- for FFP.
cational supplies. 433.40 Treatment of uncashed or cancelled
(3) For State and local Medicaid (voided) Medicaid checks.
agency staff development personnel
(including supporting staff) assigned Subpart B—General Administrative
fulltime training functions: Salaries, Requirements State Financial Participation
fringe benefits, travel, and per diem. 433.50 Basis, scope, and applicability.
Costs for staff spending less than full 433.51 Funds from units of government as
time on training for the Medicaid pro- the State share of financial participa-
gram must be allocated between train- tion.
ing and administration in accordance 433.52 General definitions.
with § 433.34 of this subchapter. 433.53 State plan requirements.
(4) For experts engaged to develop or 433.54 Bona fide donations.
conduct special programs: Salary, 433.55 Health care-related taxes defined.
433.56 Classes of health care services and
fringe benefits, travel, and per diem. providers defined.
(5) For agency training activities di- 433.57 General rules regarding revenues
rectly related to the program: Use of from provider-related donations and
space, postage, teaching supplies, and health care-related taxes.
purchase or development of teaching 433.58–433.60 [Reserved]
79
§ 433.1 42 CFR Ch. IV (10–1–17 Edition)
433.66 Permissible provider-related dona- COOPERATIVE AGREEMENTS AND INCENTIVE
tions. PAYMENTS
433.67 Limitations on level of FFP for per- 433.151 Cooperative agreements and incen-
missible provider-related donations. tive payments—State plan requirements.
433.68 Permissible health care-related taxes. 433.152 Requirements for cooperative agree-
433.70 Limitation on level of FFP for reve- ments for third party collections.
nues from health care-related taxes. 433.153 Incentive payments to States and
433.72 Waiver provisions applicable to political subdivisions.
health care-related taxes. 433.154 Distribution of collections.
433.74 Reporting requirements.
Subpart E—Methodologies for Determining
Subpart C—Mechanized Claims Proc- Federal Share of Medicaid Expendi-
essing and Information Retrieval Sys- tures for Adult Eligibility Group
tems
433.202 Scope.
433.110 Basis, purpose, and applicability. 433.204 Definitions.
433.111 Definitions. 433.206 Threshold methodology.
433.112 FFP for design, development, instal-
lation or enhancement of mechanized Subpart F—Refunding of Federal Share of
processing and information retrieval sys- Medicaid Overpayment to Providers
tems.
433.114 Procedures for obtaining initial ap- 433.300 Basis.
proval; notice of decision. 433.302 Scope of subpart.
433.116 FFP for operation of mechanized
433.310 Applicability of requirements.
claims processing and information re-
433.312 Basic requirements for refunds.
trieval systems.
433.316 When discovery of overpayment oc-
433.117 Initial approval of replacement sys- curs and its significance.
tems. 433.318 Overpayments involving providers
433.119 Conditions for reapproval; notice of who are bankrupt or out of business.
decision. 433.320 Procedures for refunds to CMS.
433.120 Procedures for reduction of FFP 433.322 Maintenance of records.
after reapproval review.
433.121 Reconsideration of the decision to AUTHORITY: Sec. 1102 of the Social Security
reduce FFP after reapproval review. Act, (42 U.S.C. 1302).
433.122 Reapproval of a disapproved system. SOURCE: 43 FR 45201, Sept. 29, 1978, unless
433.123 Notification of changes in system re- otherwise noted.
quirements, performance standards or
other conditions for approval or re- § 433.1 Purpose.
approval.
433.127 Termination of FFP for failure to
This part specifies the rates of FFP
provide access to claims processing and for services and administration, and
information retrieval systems. prescribes requirements, prohibitions,
433.131 Waiver for noncompliance with con- and FFP conditions relating to State
ditions of approval and reapproval. fiscal activities.
Subpart D—Third Party Liability Subpart A—Federal Matching and

433.135 Basis and purpose. General Administration Provisions
433.137 State plan requirements. § 433.8 [Reserved]
433.138 Identifying liable third parties.
433.139 Payment of claims. § 433.10 Rates of FFP for program
433.140 FFP and repayment of Federal services.
share. (a) Basis. Sections 1903(a)(1), 1903(g),
1905(b), 1905(y), and 1905(z) provide for
ASSIGNMENT OF RIGHTS TO BENEFITS
payments to States, on the basis of a
433.145 Assignment of rights to benefits— Federal medical assistance percentage,
State plan requirements. for part of their expenditures for serv-
433.146 Rights assigned; assignment method. ices under an approved State plan.
433.147 Cooperation in establishing the iden- (b) Federal medical assistance percent-
tity of a child’s parents and in obtaining
medical support and payments and in

age (FMAP)—Computations. The FMAP
identifying and providing information to is determined by the formula described
assist in pursuing third parties who may in section 1905(b) of the Act. Under the
be liable to pay. formula, if a State’s per capita income
433.148 Denial or termination of eligibility.
80
is equal to the national average per described in section 1902(a)(10)(E)(iv) of

capita income, the Federal share is 55 the Act, is 100 percent, to the extent
percent. If a State’s per capita income that the assistance does not exceed the
exceeds the national average, the Fed- State’s allocation under paragraph
eral share is lower, with a statutory (c)(5)(ii) of this section. To the extent
minimum of 50 percent. If a State’s per that the assistance exceeds that alloca-
capita income is lower than the nation, the Federal share is 0 percent.
tional average, the Federal share is in- (ii) Under section 1933(c)(2) of the Act
creased, with a statutory maximum of and subject to paragraph (c)(5)(iii) of
83 percent. The formula used in deter- this section, the allocation to each
mining the State and Federal share is State is equal to the total allocation
as follows: specified in section 1933(g) of the Act
State Share = [(State per capita income) 2/ multiplied by the Secretary’s estimate
(National per capita income) 2] × 45 per- of the ratio of the total number of indi-
cent viduals described in section
Federal share = 100 percent minus the State 1902(a)(10)(E)(iv) of the Act in the State
share (with a minimum of 50 percent and
a maximum of 83 percent)
to the total number of individuals de-
scribed in section 1902(a)(10)(E)(iv) of
The formula provides for squaring both the Act for all eligible States. In esti-
the State and national average per cap- mating that ratio, the Secretary will
ita incomes; this procedure magnifies use data from the U.S. Census Bureau.
any difference between the State’s in- (iii) If, based on projected expendi-
come and the national average. Con- tures for a fiscal year, or for a shorter
sequently, Federal matching to lower period for which funding is available
income States is increased, and Fed- under section 1933 of the Act, the Sec-
eral matching to higher income States retary determines that the expendi-
is decreased, within the statutory 50–83 tures described in paragraph (c)(5)(i) of
percent limits. The FMAP for Puerto this section for one or more States are
Rico, the Virgin Islands, Guam, the projected to exceed the allocation
Northern Mariana Islands, and Amer- made to the State, the Secretary may
ican Samoa is set by statute at 50 per- adjust each State’s fiscal year alloca-
cent and is subject to dollar limitation, as follows:
tions specified in section 1108 of the (A) The Secretary will compare each
Act. State’s projected total expenditures for
(c) Special provisions. (1) Under sec-
the expenses described in paragraph
tion 1903(a)(5) of the Act, the Federal
(c)(5)(i) of this section to the State’s
share of State expenditures for family
initial allocation determined under
planning services is 90 percent.
(2) Under section 1905(b), the Federal paragraph (c)(5)(ii) of this section, to
share of State expenditures for services determine the extent of each State’s
provided through Indian Health Service projected surplus or deficit.
facilities is 100 percent. (B) The surplus of each State with a
(3) Under section 1903(g), the FMAP projected surplus, as determined in ac-
is reduced if the State does not have an cordance with paragraph (c)(5)(iii)(A)
effective program to control use of in- of this section will be added together
stitutional services. to arrive at the Total Projected Sur-
(4) Under section 1905(b) of the Social plus.
Security Act, the Federal share of (C) The deficit of each State with a
State expenditures described in projected deficit, as determined in ac-
§ 433.11(a) for services provided to chil- cordance with paragraph (c)(5)(iii)(A)
dren, is the enhanced FMAP rate deter- of this section will be added together
mined in accordance with § 457.622(b) of to arrive at the Total Projected Def-
this chapter, subject to the conditions icit.
explained in § 433.11(b). (D) Each State with a projected def-
(5)(i) Under section 1933(d) of the Act, icit will receive an additional alloca-
the Federal share of State expenditures tion equal to the amount of its pro-
for Medicare Part B premiums de- jected deficit, or a prorated amount of
scribed in section 1905(p)(3)(A)(ii) of the such deficit, if the Total Projected Def-
Act on behalf of Qualifying Individuals icit is greater than the Total Projected
81
§ 433.10 42 CFR Ch. IV (10–1–17 Edition)
Surplus. Except as described in para- (ii) The FMAP specified in paragraph

graph (c)(5)(iii)(E) of this section, the (c)(6)(i) of this section will apply to
amount to be reallocated from each amounts expended by a State for med-
State with a projected surplus will be ical assistance for newly eligible indi-
equal to A × B, where A equals the viduals in accordance with the require-
Total Projected Deficit and B equals ments of the methodology applied by
the amount of the State’s projected the State under § 433.206.
surplus as a percentage of the Total (7)(i) Temporary FMAP increase. Dur-
Projected Surplus. ing the period January 1, 2014, through
(E) If the Total Projected Deficit de- December 31, 2015, under section
termined under paragraph (c)(5)(iii)(C) 1905(z)(1) of the Act for a State de-
of this section is greater than the scribed in paragraph (c)(7)(ii) of this
Total Projected Surplus determined section, the FMAP determined under
under paragraph (c)(5)(iii)(B) of this paragraph (b) of this section will be in-
section, each State with a projected creased by 2.2 percentage points.
deficit will receive an additional allo- (ii) A State qualifies for the targeted
cation amount equal to the amount of increase in the FMAP under paragraph
the Total Projected Surplus multiplied (c)(7)(i) of this section, if the State:
by the amount of the projected deficit
(A) Is an expansion State, as de-
for such State as a percentage of the
scribed in § 433.204(b) of this section;
Total Projected Deficit. The amount to
(B) Does not qualify for any pay-
be reallocated from each State with a
projected surplus will be equal to the ments on the basis of the increased
amount of the projected surplus. FMAP under paragraph (c)(6) of this
(iv) CMS will notify States of any section, as determined by the Sec-
changes in allotments resulting from retary; and
any reallocations. (C) Has not been approved by the Sec-
(v) The provisions in paragraph (c)(5) retary to divert a portion of the dis-
of this section will be in effect through proportionate share hospital allotment
the end of the period for which funding for the State under section 1923(f) of
authority is available under section the Act to the costs of providing med-
1933 of the Act. ical assistance or other health benefits
(6)(i) Newly eligible FMAP. Beginning coverage under a demonstration that is
January 1, 2014, under section 1905(y) of in effect on July 1, 2009.
the Act, the FMAP for a State that is (iii) The increased FMAP under para-
one of the 50 States or the District of graph (c)(7)(i) of this section is avail-
Columbia, including a State that meets able for amounts expended by the State
the definition of expansion State in for medical assistance for individuals
§ 433.204(b), for amounts expended by that are not newly eligible as defined
such State for medical assistance for in § 433.204(a)(1).
newly eligible individuals, as defined in (8) Expansion State FMAP. Beginning
§ 433.204(a)(1), will be an increased January 1, 2014, under section 1905(z)(2)
FMAP equal to: of the Act, the FMAP for an expansion
(A) 100 percent, for calendar quarters State defined in § 433.204(b), for
in calendar years (CYs) 2014 through amounts expended by such State for
2016; medical assistance for individuals de-
(B) 95 percent, for calendar quarters scribed in § 435.119 of this chapter who
in CY 2017; are not newly eligible as defined in
(C) 94 percent, for calendar quarters § 433.204(a)(1), and who are nonpregnant
in CY 2018; childless adults with respect to whom
(D) 93 percent, for calendar quarters the State may require enrollment in
in CY 2019; benchmark coverage under section 1937
(E) 90 percent, for calendar quarters of the Act, will be determined in ac-
in CY 2020 and all subsequent calendar cordance with the expansion State
years. FMAP formula in paragraph (c)(8)(i).
82
(i) Expansion State FMAP. group health coverage or other health

(ii) Transition percentage. For pur- insurance coverage, who would be de-
poses of paragraph (c)(8)(i) of this sec- scribed in section 1902(l)(1)(D) of the
tion, the transition percentage is equal Act (poverty-level-related children’s
to: groups) if—
(A) 50 percent, for calendar quarters (i) They had been born on or after
in CY 2014; that date; and
(B) 60 percent, for calendar quarters (ii) They would not qualify for med-
in CY 2015; ical assistance under the State plan in
(C) 70 percent, for calendar quarters effect on March 31, 1997.
in CY 2016; (b) Enhanced FMAP is not available
(D) 80 percent, for calendar quarters if—
in CY 2017; (1) A State adopts income and re-
(E) 90 percent, for calendar quarters source standards and methodologies for
in CY 2018; and purposes of determining a child’s eligi-
(F) 100 percent, for calendar quarters bility under the Medicaid State plan
in CY 2019 and all subsequent calendar that are more restrictive than those
years. applied under policies of the State plan
(Sections 1902(a)(10), 1933 of the Social Secu- (as described in the definition of op-
rity Act (42 U.S.C. 1396a), and Pub. L. 105–33) tional targeted low-income children at
[43 FR 45201, Sept. 29, 1978, as amended at 46 § 435.4 of this chapter) in effect on June
FR 48559, Oct. 1, 1981; 51 FR 41350, Nov. 14, 1, 1997; or
1986; 54 FR 21066, May 16, 1989; 66 FR 2666, (2) No funds are available in the
Jan. 11, 2001; 70 FR 50220, Aug. 26, 2005; 71 FR State’s title XXI allotment, as deter-
25092, Apr. 28, 2006; 73 FR 70893, Nov. 24, 2008; mined under part 457, subpart F of this
78 FR 19942, Apr. 2, 2013] chapter for the quarter enhanced
§ 433.11 Enhanced FMAP rate for chil- FMAP is claimed; or
dren. (3) The State fails to maintain a
valid method of identifying services
(a) Subject to the conditions in para- provided on behalf of children listed in
graph (b) of this section, the enhanced paragraph (a) of this section.
FMAP determined in accordance with
§ 457.622 of this chapter will be used to [66 FR 2666, Jan. 11, 2001]
determine the Federal share of State
expenditures, except any expenditures § 433.15 Rates of FFP for administra-
pursuant to section 1923 of the Act for tion.
payments to disproportionate share (a) Basis. Section 1903(a) (2) through
hospitals for— (5) and (7) of the Act provide for pay-
(1) Services provided to optional tar- ments to States, on the basis of speci-
geted low-income children described in fied percentages, for part of their ex-
§ 435.4 or § 436.3 of this chapter; and penditures for administration of an ap-
(2) Services provided to children born proved State plan.
before October 1, 1983, with or without (b) Activities and rates. (1) [Reserved]
83
ER02AP13.029</GPH>
§ 433.32 42 CFR Ch. IV (10–1–17 Edition)
(2) Administration of family planning of this chapter consistent with

services: 90 percent. (Section 1903 (a)(5); § 438.370(a) of this chapter: 75 percent;
42 CFR 432.50(b)(5).) consistent with § 438.370(b): 50 percent.
(3) Design, development, or installa- [43 FR 45201, Sept. 29, 1978, as amended at 46
tion of mechanized claims processing FR 48566, Oct. 1, 1981; 46 FR 54744, Nov. 4,
and information retrieval systems: 90 1981; 50 FR 15327, Apr. 17, 1985; 50 FR 46664,
percent. (Section 1903(a)(3)(A)(i); 42 Nov. 12, 1985; 56 FR 48918, Sept. 26, 1991; 57 FR
CFR part 433, subpart C, and § 432.50 56506, Nov. 30, 1992; 68 FR 3635, Jan. 24, 2003;
(b)(3).) 81 FR 27853, May 6, 2016]
(4) Operation of mechanized claims
processing and information retrieval § 433.32 Fiscal policies and account-
ability.
systems: 75 percent. (Section 1903(a)
(3)(B); 42 CFR part 433, subpart C and A State plan must provide that the
§ 432.50(b)(2).) Medicaid agency and, where applicable,
(5) Compensation and training of local agencies administering the plan
skilled professional medical personnel will—
and staff directly supporting those per- (a) Maintain an accounting system
sonnel if the criteria specified in and supporting fiscal records to assure
§ 432.50 (c) and (d) are met: 75 percent. that claims for Federal funds are in ac-
(Section 1903(a)(2); 42 CFR 432.50(b)(1).) cord with applicable Federal require-
(6)(i) Funds expended for the per- ments;
formance of medical and utilization re- (b) Retain records for 3 years from
view by a QIO under a contract entered date of submission of a final expendi-
into under section 1902(d) of the Act: 75 ture report;
percent (section 1903(a)(3)(C) of the (c) Retain records beyond the 3-year
Act). period if audit findings have not been
(ii) If a State contracts for medical resolved; and
and utilization review with any indi- (d) Retain records for nonexpendable
vidual or organization not designated property acquired under a Federal
under Part B of Title XI of the Act, grant for 3 years from the date of final
funds expended for such review will be disposition of that property.
reimbursed as provided in paragraph [44 FR 17935, Mar. 23, 1979]
(b)(7) of this section.
(7) All other activities the Secretary § 433.34 Cost allocation.
finds necessary for proper and efficient A State plan under Title XIX of the
administration of the State plan: 50 Social Security Act must provide that
percent. (Section 1903(a)(7).) (See also the single or appropriate Agency will
§ 455.300 of this subchapter for FFP at have an approved cost allocation plan
90 percent for State Medicaid fraud on file with the Department in accord-
control units under section 1903(a)(6).) ance with the requirements contained
(8) Nurse aide training and com- in subpart E of 45 CFR part 95. Subpart
petency evaluation programs and com- E also sets forth the effect on FFP if
petency evaluation programs described the requirements contained in that
in 1919(e)(1) of the Act: for calendar subpart are not met.
quarters beginning on or after July 1,
1988 and before July 1, 1990: The lesser [47 FR 17490, Apr. 23, 1982]
of 90% or the Federal medical assist- § 433.35 Equipment—Federal financial
ance percentage plus 25 percentage participation.
points; for calendar quarters beginning
on or after October 1, 1990: 50%. (Sec- Claims for Federal financial partici-
tion 1903(a)(2)(B) of the Act.) pation in the cost of equipment under
(9) Preadmission screening and an- the Medicaid Program are determined
nual resident review (PASARR) activi- in accordance with subpart G of 45 CFR
ties conducted by the State: 75 percent. part 95. Requirements concerning the
(Sections 1903(a)(2)(C) and 1919(e)(7); 42 management and disposition of equip-
ment under the Medicaid Program are
CFR part 483, subparts C and E.)

(10) Funds expended for the perform- also prescribed in subpart G of 45 CFR
ance of external quality review or the part 95.
related activities described in § 438.358 [47 FR 41564, Sept. 21, 1982]
84
§ 433.36 Liens and recoveries. satisfaction that he or she has been

(a) Basis and purpose. This section providing care which permitted the in-
implements sections 1902(a)(18) and dividual to reside at home rather than
1917(a) and (b) of the Act, which de- in an institution, as provided in para-
scribe the conditions under which an graph (h)(2)(iii)(B) of this section.
agency may impose a lien against a (g) Lien provisions—(1) Incorrect pay-
beneficiary’s property, and when an ments. The agency may place a lien
agency may make an adjustment or re- against an individual’s property, both
cover funds in satisfaction of the claim personal and real, before his or her
against the individual’s estate or real death because of Medicaid claims paid
property. or to be paid on behalf of that indi-
(b) Definition of property. For pur- vidual following a court judgement
poses of this section, ‘‘property’’ in- which determined that benefits were
cludes the homestead and all other per- incorrectly paid for that individual.
sonal and real property in which the (2) Correct payments. Except as pro-
beneficiary has a legal interest. vided in paragraph (g)(3) of this sec-
(c) State plan requirement. If a State tion, the agency may place a lien
chooses to impose a lien against an in- against the real property of an indi-
dividual’s real property (or as provided vidual at any age before his or her
in paragraph (g)(1) of this section, per- death because of Medicaid claims paid
sonal property), the State plan must or to be paid for that individual when—
provide that the provisions of para- (i) An individual is an inpatient of a
graphs (d) through (i) of this section medical institution and must, as a con-
are met. dition of receiving services in the insti-
(d) Procedures. The State plan must tution under the State plan, apply his
specify the process by which the State or her income to the cost of care as
will determine that an institutional- provided in §§ 435.725, 435.832 and 436.832;
ized individual cannot reasonably be and
expected to be discharged from the (ii) The agency determines that he or
medical institution and return home as she cannot reasonably be expected to
provided in paragraph (g)(2)(ii) of this be discharged and return home. The
section. The description of the process agency must notify the individual of
must include the type of notice to be its intention to make that determina-
given the individual, the process by tion and provide an opportunity for a
which the individual will be given the hearing in accordance with State es-
opportunity for a hearing, the hearing tablished procedures before the deter-
procedures, and by whom and on what mination is made. The notice to an in-
basis the determination that the indi- dividual must include an explanation
vidual cannot reasonably be expected of liens and the effect on an individ-
to be discharged from the institution ual’s ownership of property.
will be made. The notice to the indi- (3) Restrictions on placing liens. The
vidual must explain what is meant by agency may not place a lien on an indi-
the term lien, and that imposing a lien vidual’s home under paragraph (g)(2) of
does not mean that the individual will this section if any of the following in-
lose ownership of the home. dividuals is lawfully residing in the
(e) Definitions. The State plan must home:
define the following terms used in this (i) The spouse;
section: (ii) The individual’s child who is
(1) Individual’s home. under age 21 or blind or disabled as de-
(2) Equity interest in home. fined in the State plan; or
(3) Residing in the home for at least (iii) The individual’s sibling (who has
1 (or 2) year(s). an equity interest in the home, and
(4) On a continuing basis. who was residing in the individual’s
(5) Discharge from the medical insti- home for at least one year immediately
tution and return home. before the date the individual was ad-
(6) Lawfully residing. mitted to the medical institution).

(f) Exception. The State plan must (4) Termination of lien. Any lien im-
specify the criteria by which a son or posed on an individual’s real property
daughter can establish to the agency’s under paragraph (g)(2) of this section
85
§ 433.37 42 CFR Ch. IV (10–1–17 Edition)
will dissolve when that individual is (1) Identification of providers; and

discharged from the medical institu- (2) Compliance with the information
tion and returns home. reporting requirements of the Internal
(h) Adjustments and recoveries. (1) The Revenue Code.
agency may make an adjustment or re- (b) Identification of providers. A State
cover funds for Medicaid claims cor- plan must provide for the identifica-
rectly paid for an individual as follows: tion of providers by—
(i) From the estate of any individual (1) Social security number if—
who was 65 years of age or older when (i) The provider is in solo practice; or
he or she received Medicaid; and (ii) The provider is not in solo prac-
(ii) From the estate or upon sale of
tice but billing is by the individual
the property subject to a lien when the
practitioner; or
individual is institutionalized as de-
(2) Employer identification number
scribed in paragraph (g)(2) of this sec-
for all other providers.
tion.
(2) The agency may make an adjust- (c) Compliance with section 6041 of the
ment or recovery under paragraph Internal Revenue Code. The plan must
(h)(1) of this section only: provide that the Medicaid agency com-
(i) After the death of the individual’s plies with the information reporting
surviving spouse; and requirements of section 6041 of the In-
(ii) When the individual has no sur- ternal Revenue Code (26 U.S.C. 6041).
viving child under age 21 or blind or Section 6041 requires the filing of an-
disabled as defined in the State plan; nual information returns showing
and amounts paid to providers, who are
(iii) In the case of liens placed on an identified by name, address, and social
individual’s home under paragraph security number or employer identi-
(g)(2) of this section, when there is no— fication number.
(A) Sibling of the individual residing
§ 433.38 Interest charge on disallowed
in the home, who has resided there for claims for FFP.
at least one year immediately before
the date of the individual’s admission (a) Basis and scope. This section is
to the institution, and has resided based on section 1903(d)(5) of the Act,
there on a continuous basis since that which requires that the Secretary
time; or charge a State interest on the Federal
(B) Son or daughter of the individual share of claims that have been dis-
residing in the home, who has resided allowed but have been retained by the
there for at least two years imme- State during the administrative ap-
diately before the date of the individ- peals process under section 1116(e) of
ual’s admission to the institution, has the Act and the Secretary later recov-
resided there on a continuous basis ers after the administrative appeals
since that time, and can establish to process has been completed. This sec-
the agency’s satisfaction that he or she tion does not apply to—
has been providing care which per- (1) Claims that have been deferred by
mitted the individual to reside at home the Secretary and disallowed within
rather than in an institution. the time limits of § 430.40 of this chap-
(i) Prohibition of reduction of money ter. Deferral of claims for FFP; or
payments. No money payment under an- (2) Claims for expenditures that have
other program may be reduced as a never been paid on a grant award; or
means of recovering Medicaid claims (3) Disallowances of any claims for
incorrectly paid. services furnished before October 1,
[43 FR 45201, Sept. 29, 1978, as amended at 47 1980, regardless of the date of the claim
FR 43647, Oct. 1, 1982; 47 FR 49847, Nov. 3, submitted to CMS.
1982] (b) General principles. (1) CMS will
charge the State interest on FFP
§ 433.37 Reporting provider payments when—
to Internal Revenue Service.
(i) CMS has notified the Medicaid

(a) Basis and purpose. This section, agency under § 430.42 of this subpart
based on section 1902(a)(4) of the Act, that a State’s claim for FFP is not al-
prescribes requirements concerning— lowable;
86
(ii) The agency has requested a re- of a disallowance to the Board and
consideration of the disallowance to wishes to retain the disallowed funds
the Administrator under § 430.42 of this until CMS or the Board issues a final
chapter and has chosen to retain the determination, the agency must notify
FFP during the administrative recon- the CMS Regional Office in writing of
sideration process in accordance with its decision to do so.
paragraph (c)(2) of this section; (2) The agency must mail its notice
(iii)(A) CMS has made a final deter- to the CMS Regional Office within 60
mination upholding part or all of the days of the date of receipt of the notice
disallowance; of the disallowance, as established by
(B) The agency has withdrawn its re- the certified mail receipt accom-
quest for administrative reconsider- panying the notice.
ation on all or part of the disallowance; (3) If the agency withdraws its deci-
or sion to retain the FFP or its request
(C) The agency has reversed its deci- for administrative reconsideration or
sion to retain the funds without with- appeal on all or part of the FFP, the
drawing its request for administrative agency must notify CMS in writing.
reconsideration and CMS upholds all or (d) Amount of interest charged. (1) If
part of the disallowance. the agency retains funds that later be-
(iv) The agency has appealed the dis- come subject to an interest charge
allowance to the Departmental Appeals
under paragraph (b) of this section,
Board under 45 CFR part 16 and has
CMS will offset from the next Medicaid
chosen to retain the FFP during the
grant award to the State the amount of
administrative appeals process in ac-
the funds subject to the interest
cordance with paragraph (c)(2) of this
charge, plus interest on that amount.
section.
(2) The interest charge is at the rate
(v)(A)The Board has made a final de-
CMS determines to be the average of
termination upholding part or all of
the bond equivalent of the weekly 90-
the disallowance;
day Treasury bill auction rates during
(B) The agency has withdrawn its ap-
the period for which interest will be
peal on all or part of the disallowance;
charged.
or
(C) The agency has reversed its deci- (e) Duration of interest. (1) The inter-
sion to retain the funds without with- est charge on the amount of disallowed
drawing its appeal and the Board up- FFP retained by the agency will begin
holds all or part of the disallowance. on the date of the disallowance notice
(2) If the courts overturn, in whole or and end—
in part, a Board decision that has sus- (i) On the date of the final determina-
tained a disallowance, CMS will return tion by CMS of the administrative re-
the principal and the interest collected consideration if the State elects not to
on the funds that were disallowed, appeal to the Board, or final deter-
upon the completion of all judicial ap- mination by the Board;
peals. (ii) On the date CMS receives written
(3) Unless an agency decides to with- notice from the State that it is with-
draw its request for administrative re- drawing its request for administrative
consideration or appeal on part of the reconsideration and elects not to ap-
disallowance and therefore returns peal to the Board, or withdraws its ap-
only that part of the funds on which it peal to the Board on all of the dis-
has withdrawn its request for adminis- allowed funds; or
trative reconsideration or appeal, any (iii) If the agency withdraws its re-
decision to retain or return disallowed quest for administrative reconsider-
funds must apply to the entire amount ation on part of the funds on—
in dispute. (A) The date CMS receives written
(4) If the agency elects to have CMS notice from the agency that it is with-
recover the disputed amount, it may drawing its request for administrative
not reverse that election. reconsideration on a specified part of

(c) State procedures. (1) If the Med- the disallowed funds for the part on
icaid agency has requested administra- which the agency withdraws its request
tive reconsideration to CMS or appeal for administrative reconsideration; and
87
§ 433.40 42 CFR Ch. IV (10–1–17 Edition)
(B) The date of the final determina- the authority to issue checks recog-
tion by CMS on the part for which the nizes a claim. Presentation of a war-
agency pursues its administrative re- rant by the payee to a State officer
consideration; or with authority to issue checks will re-
(iv) If the agency withdraws its ap- sult in release of funds due.
peal on part of the funds, on— (c) Refund of Federal financial partici-
(A) The date CMS receives written pation (FFP) for uncashed checks—(1)
notice from the agency that it is with- General provisions. If a check remains
drawing its appeal on a specified part uncashed beyond a period of 180 days
of the disallowed funds for the part on
from the date it was issued; i.e., the
which the agency withdraws its appeal;
date of the check, it will no longer be
and
(B) The date of the final determina- regarded as an allowable program ex-
tion by the Board on the part for which penditure. If the State has claimed and
the agency pursues its appeal; or received FFP for the amount of the un-
(v) If the agency has given CMS writ- cashed check, it must refund the
ten notice of its intent to repay by in- amount of FFP received.
stallment, in the quarter in which the (2) Report of refund. At the end of
final installment is paid. Interest dur- each calendar quarter, the State must
ing the repayment of Federal funds by identify those checks which remain un-
installments will be at the Current cashed beyond a period of 180 days after
Value of Funds Rate (CVFR); or issuance. The State agency must re-
(vi) The date CMS receives written fund all FFP that it received for un-
notice from the agency that it no cashed checks by adjusting the Quar-
longer chooses to retain the funds. terly Statement of Expenditures for
(2) CMS will not charge interest on that quarter. If an uncashed check is
FFP retained by an agency for more cashed after the refund is made, the
than 12 months for disallowances of State may file a claim. The claim will
FFP made between October 1, 1980 and be considered to be an adjustment to
August 13, 1981.
the costs for the quarter in which the
[48 FR 29485, June 27, 1983, as amended at 77 check was originally claimed. This
FR 31510, May 29, 2012] claim will be paid if otherwise allowed
by the Act and the regulations issued
§ 433.40 Treatment of uncashed or can-
celled (voided) Medicaid checks. pursuant to the Act.
(3) If the State does not refund the
(a) Purpose. This section provides the
appropriate amount as specified in
rules to ensure that States refund the
paragraph (c)(2) of this section, the
Federal portion of uncashed or can-
celled (voided) checks under title XIX. amount will be disallowed.
(b) Definitions. As used in this sec- (d) Refund of FFP for cancelled (void-
tion— ed) checks—(1) General provision. If the
Cancelled (voided) check means a Med- State has claimed and received FFP for
icaid check issued by a State or fiscal the amount of a cancelled (voided)
agent which prior to its being cashed is check, it must refund the amount of
cancelled (voided) by the State or fis- FFP received.
cal agent, thus preventing disburse- (2) Report of refund. At the end of
ment of funds. each calendar quarter, the State agen-
Check means a check or warrant that cy must identify those checks which
a State or local agency uses to make a were cancelled (voided). The State
payment. must refund all FFP that it received
Fiscal agent means an entity that for cancelled (voided) checks by adjust-
processes or pays vendor claims for the ing the Quarterly Statement of Ex-
Medicaid State agency. penditures for that quarter.
Uncashed check means a Medicaid (3) If the State does not refund the
check issued by a State or fiscal agent appropriate amount as specified in
which has not been cashed by the paragraph (d)(2) of this section, the
payee. amount will be disallowed.
Warrant means an order by which the
State agency or local agency without [51 FR 36227, Oct. 9, 1986]
88
Subpart B—General Administrative § 433.51 Public Funds as the State

Requirements State Financial share of financial participation.
Participation (a) Public Funds may be considered
as the State’s share in claiming FFP if
SOURCE: 57 FR 55138, Nov. 24, 1992, unless they meet the conditions specified in
otherwise noted. paragraphs (b) and (c) of this section.
(b) The public funds are appropriated
§ 433.50 Basis, scope, and applicability. directly to the State or local Medicaid
(a) Basis. This subpart interprets and agency, or are transferred from other
public agencies (including Indian
implements—(1) Section 1902(a)(2) of
tribes) to the State or local agency and
the Act which requires States to share
under its administrative control, or
in the cost of medical assistance ex-
certified by the contributing public
penditures and permit both State and
agency as representing expenditures el-
local governments to participate in the
igible for FFP under this section.
financing of the non-Federal portion of
(c) The public funds are not Federal
medical assistance expenditures.
funds, or are Federal funds authorized
(2) Section 1903(a) of the Act, which
by Federal law to be used to match
requires the Secretary to pay each other Federal funds.
State an amount equal to the Federal
medical assistance percentage of the [75 FR 73975, Nov. 30, 2010]
total amount expended as medical as-
sistance under the State’s plan. § 433.52 General definitions.
(3) Section 1903(w) of the Act, which As used in this subpart—
specifies the treatment of revenues Entity related to a health care provider
from provider-related donations and means—
health care-related taxes in deter- (1) An organization, association, cor-
mining a State’s medical assistance ex- poration, or partnership formed by or
penditures for which Federal financial on behalf of a health care provider;
participation (FFP) is available under (2) An individual with an ownership
the Medicaid program. or control interest in the provider, as
(b) Scope. This subpart— defined in section 1124(a)(3) of the Act;
(1) Specifies State plan requirements (3) An employee, spouse, parent,
for State financial participation in ex- child, or sibling of the provider, or of a
penditures for medical assistance. person with an ownership or control in-
(2) Defines provider-related donations terest in the provider, as defined in sec-
and health care-related taxes that may tion 1124(a)(3) of the Act; or
be received without a reduction in (4) A supplier of health care items or
FFP. services or a supplier to providers of
(3) Specifies rules for revenues re- health care items or services.
ceived from provider-related donations Health care provider means the indi-
and health care-related taxes during a vidual or entity that receives any pay-
transition period. ment or payments for health care
(4) Establishes limitations on FFP items or services provided.
when States receive funds from pro- Provider-related donation means a do-
vider-related donations and revenues nation or other voluntary payment (in
generated by health care-related taxes. cash or in kind) made directly or indi-
(c) Applicability. The provisions of rectly to a State or unit of local gov-
this subpart apply to the 50 States and ernment by or on behalf of a health
the District of Columbia, but not to care provider, an entity related to such
any State whose entire Medicaid pro- a health care provider, or an entity
providing goods or services to the
gram is operated under a waiver grant-
State for administration of the State’s
ed under section 1115 of the Act.
Medicaid plan.
[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, (1) Donations made by a health care
1993; 72 FR 29832, May 29, 2007; 72 FR 29832, provider to an organization, which in
May 29, 2007; 75 FR 73975, Nov. 30, 2010] turn donates money to the State, may
89
§ 433.53 42 CFR Ch. IV (10–1–17 Edition)
be considered to be a donation made in- § 433.54 Bona fide donations.

directly to the State by a health care (a) A bona fide donation means a pro-
provider. vider-related donation, as defined in
(2) When an organization receives § 433.52, made to the State or unit of
less than 25 percent of its revenues local government, that has no direct or
from providers and/or provider-related indirect relationship, as described in
entities, its donations will not gen- paragraph (b) of this section, to Med-
erally be presumed to be provider-re- icaid payments made to—
lated donations. Under these cir- (1) The health care provider;
cumstances, a provider-related dona- (2) Any related entity providing
tion to an organization will not be con- health care items and services; or
sidered a donation made indirectly to (3) Other providers furnishing the
the State. However, if the donations same class of items or services as the
from providers to an organization are provider or entity.
subsequently determined to be indirect (b) Provider-related donations will be
donations to the State or unit of local determined to have no direct or indi-
government for administration of the rect relationship to Medicaid payments
State’s Medicaid program, then such if those donations are not returned to
donations will be considered to be the individual provider, the provider
health care related. class, or related entity under a hold
(3) When the organization receives harmless provision or practice, as de-
more than 25 percent of its revenue scribed in paragraph (c) of this section.
from donations from providers or pro- (c) A hold harmless practice exists if
vider-related entities, the organization any of the following applies:
always will be considered as acting on (1) The State (or other unit of gov-
behalf of health care providers if it ernment) provides for a direct or indi-
makes a donation to the State. The rect non-Medicaid payment to those
amount of the organization’s donation providers or others making, or respon-
to the State, in a State fiscal year, sible for, the donation, and the pay-
that will be considered health care re- ment amount is positively correlated
lated, will be based on the percentage to the donation. A positive correlation
of donations the organization received includes any positive relationship be-
from the providers during that period. tween these variables, even if not con-
sistent over time.
§ 433.53 State plan requirements. (2) All or any portion of the Medicaid
A State plan must provide that— payment to the donor, provider class,
(a) State (as distinguished from or related entity, varies based only on
local) funds will be used both for med- the amount of the donation, including
ical assistance and administration; where Medicaid payment is conditional
(b) State funds will be used to pay at on receipt of the donation.
least 40 percent of the non-Federal (3) The State (or other unit of gov-
share of total expenditures under the ernment) receiving the donation pro-
plan; and vides for any direct or indirect pay-
ment, offset, or waiver such that the
(c) State and Federal funds will be
provision of that payment, offset, or
apportioned among the political sub-
waiver directly or indirectly guaran-
divisions of the State on a basis that
tees to return any portion of the dona-
assures that—
tion to the provider (or other parties
(1) Individuals in similar cir-
responsible for the donation).
cumstances will be treated similarly
(d) CMS will presume provider-re-
throughout the State; and
lated donations to be bona fide if the
(2) If there is local financial partici- voluntary payments, including, but not
pation, lack of funds from local sources limited to, gifts, contributions, presen-
will not result in lowering the amount, tations or awards, made by or on behalf
duration, scope, or quality of services of individual health care providers to
or level of administration under the
the State, county, or any other unit of

plan in any part of the State. local government does not exceed—
[57 FR 55138, Nov. 24, 1992; 58 FR 6095, Jan. 26, (1) $5,000 per year in the case of an in-
1993] dividual provider donation; or
90
(2) $50,000 per year in the case of a do- § 433.56 Classes of health care services
nation from any health care organiza- and providers defined.
tional entity. (a) For purposes of this subpart, each
(e) To the extent that a donation pre- of the following will be considered as a
sumed to be bona fide contains a hold separate class of health care items or
harmless provision, as described in services:
paragraph (c) of this section, it will not (1) Inpatient hospital services;
be considered a bona fide donation. (2) Outpatient hospital services;
When provider-related donations are (3) Nursing facility services (other
not bona fide, CMS will deduct this than services of intermediate care fa-
amount from the State’s medical as- cilities for individuals with intellec-
sistance expenditures before calcu- tual disabilities);
lating FFP. This offset will apply to all (4) Intermediate care facility services
years the State received such dona- for individuals with intellectual dis-
tions and any subsequent fiscal year in abilities, and similar services furnished
which a similar donation is received. by community-based residences for in-
dividuals with intellectual disabilities,
[57 FR 55138, Nov. 24, 1992, as amended at 73 under a waiver under section 1915(c) of
FR 9698, Feb. 22, 2008] the Act, in a State in which, as of De-
cember 24, 1992, at least 85 percent of
§ 433.55 Health care-related taxes de-
fined. such facilities were classified as ICF/
IIDs prior to the grant of the waiver;
(a) A health care-related tax is a li- (5) Physician services;
censing fee, assessment, or other man- (6) Home health care services;
datory payment that is related to— (7) Outpatient prescription drugs;
(1) Health care items or services; (8) Services of managed care organi-
(2) The provision of, or the authority zations (including health maintenance
to provide, the health care items or organizations, preferred provider orga-
services; or nizations);
(3) The payment for the health care (9) Ambulatory surgical center serv-
items or services. ices, as described for purposes of the
(b) A tax will be considered to be re- Medicare program in section
lated to health care items or services 1832(a)(2)(F)(i) of the Social Security
under paragraph (a)(1) of this section if Act. These services are defined to in-
at least 85 percent of the burden of the clude facility services only and do not
tax revenue falls on health care pro- include surgical procedures;
viders. (10) Dental services;
(11) Podiatric services;
(c) A tax is considered to be health
(12) Chiropractic services;
care related if the tax is not limited to
(13) Optometric/optician services;
health care items or services, but the
(14) Psychological services;
treatment of individuals or entities
(15) Therapist services, defined to in-
providing or paying for those health
clude physical therapy, speech therapy,
care items or services is different than
occupational therapy, respiratory ther-
the tax treatment provided to other in-
apy, audiological services, and reha-
dividuals or entities.
bilitative specialist services;
(d) A health care-related tax does not (16) Nursing services, defined to in-
include payment of a criminal or civil clude all nursing services, including
fine or penalty, unless the fine or pen- services of nurse midwives, nurse prac-
alty was imposed instead of a tax. titioners, and private duty nurses;
(e) Health care insurance premiums (17) Laboratory and x-ray services,
and health maintenance organization defined as services provided in a li-
premiums paid by an individual or censed, free-standing laboratory or x-
group to ensure coverage or enrollment ray facility. This definition does not
are not considered to be payments for include laboratory or x-ray services

health care items and services for pur- provided in a physician’s office, hos-
poses of determining whether a health pital inpatient department, or hospital
care-related tax exists. outpatient department;
91
§ 433.57 42 CFR Ch. IV (10–1–17 Edition)
(18) Emergency ambulance services; (b) Permissible donations. Subject to

and the limitations specified in § 433.67, a
(19) Other health care items or serv- State may receive, without a reduction
ices not listed above on which the in FFP, provider-related donations
State has enacted a licensing or certifi- that meet at least one of the following
cation fee, subject to the following: requirements:
(i) The fee must be broad based and (1) The donations must be bona fide
uniform or the State must receive a donations, as defined in § 433.54; or
waiver of these requirements; (2) The donations are made by a hos-
(ii) The payer of the fee cannot be pital, clinic, or similar entity (such as
held harmless; and a Federally-qualified health center) for
(iii) The aggregate amount of the fee the direct costs of State or local agen-
cannot exceed the State’s estimated cy personnel who are stationed at the
cost of operating the licensing or cer- facility to determine the eligibility (in-
tification program. cluding eligibility redeterminations) of
(b) Taxes that pertain to each class individuals for Medicaid or to provide
must apply to all items and services outreach services to eligible (or poten-
within the class, regardless of whether tially eligible) Medicaid individuals.
the items and services are furnished by Direct costs of outstationed eligibility
or through a Medicaid-certified or li- workers refers to the costs of training,
censed provider. salaries and fringe benefits associated
[57 FR 55138, Nov. 24, 1992, as amended at 58 with each outstationed worker and
FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, similar allocated costs of State or local
2008] agency support staff, and a prorated
cost of outreach activities applicable
§ 433.57 General rules regarding reve- to the outstationed workers at these
nues from provider-related dona- sites. The prorated costs of outreach
tions and health care-related taxes. activities will be calculated taking the
Effective January 1, 1992, CMS will percent of State outstationed eligi-
deduct from a State’s expenditures for bility workers at a facility to total
medical assistance, before calculating outstationed eligibility workers in the
FFP, funds from provider-related dona- State, and multiplying the percent by
tions and revenues generated by health the total cost of outreach activities in
care-related taxes received by a State the State. Costs for such items as
or unit of local government, in accord- State agency overhead and provider of-
ance with the requirements, condi- fice space are not allowable for this
tions, and limitations of this subpart, purpose.
if the donations and taxes are not— [57 FR 55138, Nov. 24, 1992, as amended at 58
(a) Permissible provider-related do- FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22,
nations, as specified in § 433.66(b); or 2008]
(b) Health care-related taxes, as spec-
ified in § 433.68(b). § 433.67 Limitations on level of FFP for
permissible provider-related dona-
[57 FR 55138, Nov. 24, 1992, as amended at 73 tions.
FR 9698, Feb. 22, 2008]
(a)(1) Limitations on bona fide dona-
§§ 433.58–433.60 [Reserved] tions. There are no limitations on the
amount of bona fide provider-related
§ 433.66 Permissible provider-related donations that a State may receive
donations. without a reduction in FFP, as long as
(a) General rule. (1) Except as speci- the bona fide donations meet the re-
fied in paragraph (a)(2) of this section, quirements of § 433.66(b)(1).
a State may receive revenues from pro- (2) Limitations on donations for
vider-related donations without a re- outstationed eligibility workers. Effective
duction in FFP, only in accordance October 1, 1992, the maximum amount
with the requirements of this section. of provider-related donations for
(2) The provisions of this section re- outstationed eligibility workers, as de-
lating to provider-related donations for scribed in § 433.66(b)(2), that a State
outstationed eligibility workers are ef- may receive without a reduction in
fective on October 1, 1992. FFP may not exceed 10 percent of a
92
State’s medical assistance administra- the unit of government has jurisdic-

tive costs (both the Federal and State tion.
share), excluding the costs of family (3) A State may request a waiver
planning activities. The 10 percent from CMS of the requirement that a
limit for provider-related donations for tax program be broad based, in accord-
outstationed eligibility workers is not ance with the procedures specified in
included in the limit in effect through § 433.72. Waivers from the uniform and
September 30, 1995, for health care-re- broad-based requirements will auto-
lated taxes as described in § 433.70. matically be granted in cases of vari-
(b) Calculation of FFP. CMS will de- ations in licensing and certification
duct from a State’s quarterly medical fees for providers if the amount of such
assistance expenditures, before calcu- fees is not more than $1,000 annually
lating FFP, any provider-related dona- per provider and the total amount
tions received in that quarter that do raised by the State from the fees is
not meet the requirements of used in the administration of the li-
§ 433.66(b)(1) and provider donations for censing or certification program.
outstationed eligibility workers in ex- (d) Uniformly imposed health care-re-
cess of the limits specified under para- lated taxes. A health care-related tax
graph (a)(2) of this section. will be considered to be imposed uni-
[57 FR 55138, Nov. 24, 1992, as amended at 58 formly even if it excludes Medicaid or
FR 43180, Aug. 13, 1993; 73 FR 9698, Feb. 22, Medicare payments (in whole or in
2008] part), or both; or, in the case of a
health care-related tax based on reve-
§ 433.68 Permissible health care-re-
lated taxes. nues or receipts with respect to a class
of items or services (or providers of
(a) General rule. A State may receive items or services), if it excludes either
health care-related taxes, without a re- Medicaid or Medicare revenues with re-
duction in FFP, only in accordance spect to a class of items or services, or
with the requirements of this section. both. The exclusion of Medicaid reve-
(b) Permissible health care-related nues must be applied uniformly to all
taxes. Subject to the limitations speci- providers being taxed.
fied in § 433.70, a State may receive,
(1) A health care-related tax will be
without a reduction in FFP, health
considered to be imposed uniformly if
care-related taxes if all of the fol-
it meets any one of the following cri-
lowing are met:
teria:
(1) The taxes are broad based, as
specified in paragraph (c) of this sec- (i) If the tax is a licensing fee or
tion; similar tax imposed on a class of
(2) The taxes are uniformly imposed health care services (or providers of
throughout a jurisdiction, as specified those health care items or services),
in paragraph (d) of this section; and the tax is the same amount for every
(3) The tax program does not violate provider furnishing those items or
the hold harmless provisions specified services within the class.
in paragraph (f) of this section. (ii) If the tax is a licensing fee or
(c) Broad based health care-related similar tax imposed on a class of
taxes. (1) A health care-related tax will health care items or services (or pro-
be considered to be broad based if the viders of those items or services) on
tax is imposed on at least all health the basis of the number of beds (li-
care items or services in the class or censed or otherwise) of the provider,
providers of such items or services fur- the amount of the tax is the same for
nished by all non-Federal, non-public each bed of each provider of those
providers in the State, and is imposed items or services in the class.
uniformly, as specified in paragraph (d) (iii) If the tax is imposed on provider
of this section. revenue or receipts with respect to a
(2) If a health care-related tax is im- class of items or services (or providers
posed by a unit of local government, of those health care items or services),

the tax must extend to all items or the tax is imposed at a uniform rate for
services or providers (or to all pro- all services (or providers of those items
viders in a class) in the area over which or services) in the class on all the gross
93
§ 433.68 42 CFR Ch. IV (10–1–17 Edition)
revenues or receipts, or on net oper- (1) Waiver of broad-based requirement

ating revenues relating to the provi- only. This test is applied on a per class
sion of all items or services in the basis to a tax that is imposed on all
State, unit, or jurisdiction. Net oper- revenues but excludes certain pro-
ating revenue means gross charges of viders. For example, a tax that is im-
facilities less any deducted amounts posed on all revenues (including Medi-
for bad debts, charity care, and payer care and Medicaid) but excludes teach-
discounts. ing hospitals would have to meet this
(iv) The tax is imposed on items or test. This test cannot be used when a
services on a basis other than those State excludes any or all Medicaid rev-
specified in paragraphs (d)(1) (i) enue from its tax in addition to the ex-
through (iii) of this section, e.g., an ad- clusion of providers, since the test
mission tax, and the State establishes compares the proportion of Medicaid
to the satisfaction of the Secretary revenue being taxed under the proposed
that the amount of the tax is the same tax with the proportion of Medicaid
for each provider of such items or serv- revenue being taxed under a broad-
ices in the class. based tax.
(2) A tax imposed with respect to a (i) A State seeking waiver of the
class of health care items or services broad-based tax requirement only must
will not be considered to be imposed demonstrate that its proposed tax plan
uniformly if it meets either one of the meets the requirement that its plan is
following two criteria: generally redistributive by:
(i) The tax provides for credits, ex- (A) Calculating the proportion of the
clusions, or deductions which have as tax revenue applicable to Medicaid if
its purpose, or results in, the return to the tax were broad based and applied to
providers of all, or a portion, of the tax all providers or activities within the
paid, and it results, directly or indi- class (called P1);
rectly, in a tax program in which— (B) Calculating the proportion of the
(A) The net impact of the tax and tax revenue applicable to Medicaid
payments is not generally redistribu- under the tax program for which the
tive, as specified in paragraph (e) of State seeks a waiver (called P2); and
this section; and (C) Calculating the value of P1/P2.
(B) The amount of the tax is directly (ii) If the State demonstrates to the
correlated to payments under the Med- Secretary’s satisfaction that the value
icaid program. of P1/P2 is at least 1, CMS will auto-
(ii) The tax holds taxpayers harmless matically approve the waiver request.
for the cost of the tax, as described in (iii) If a tax is enacted and in effect
paragraph (f) of this section. prior to August 13, 1993, and the State
(3) If a tax does not meet the criteria demonstrates to the Secretary’s satis-
specified in paragraphs (d)(1)(i) through faction that the value of P1/P2 is at
(iv) of this section, but the State estab- least 0.90, CMS will review the waiver
lishes that the tax is imposed uni- request. Such a waiver will be approved
formly in accordance with the proce- only if the following two criteria are
dures for a waiver specified in § 433.72, met:
the tax will be treated as a uniform (A) The value of P1/P2 is at least 0.90;
tax. and
(e) Generally redistributive. A tax will (B) The tax excludes or provides cred-
be considered to be generally redis- its or deductions only to one or more of
tributive if it meets the requirements the following providers of items and
of this paragraph. If the State desires services within the class to be taxed:
waiver of only the broad-based tax re- (1) Providers that furnish no services
quirement, it must demonstrate com- within the class in the State;
pliance with paragraph (e)(1) of this (2) Providers that do not charge for
section. If the State desires waiver of services within the class;
the uniform tax requirement, whether (3) Rural hospitals (defined as any
or not the tax is broad-based, it must hospital located outside of an urban
demonstrate compliance with para- area as defined in § 412.62(f)(1)(ii) of this
graph (e)(2) of this section. chapter);
94
(4) Sole community hospitals as de- provider’s Medicaid charges paid dur-
fined in § 412.92(a) of this chapter; ing a 12-month period would be its
(5) Physicians practicing primarily in ‘‘Medicaid Statistic’’. If the tax were
medically underserved areas as defined based on provider inpatient days, the
in section 1302(7) of the Public Health number of the provider’s Medicaid days
Service Act; during a 12-month period would be its
(6) Financially distressed hospitals if: ‘‘Medicaid Statistic’’. For the purpose
(i) A financially distressed hospital is of this test, it is not relevant that a
defined by the State law; tax program exempts Medicaid from
(ii) The State law specifies reason- the tax.
able standards for determining finan- (B) Calculating the slope (designated
cially distressed hospitals, and these as B1) of the linear regression, as de-
standards are applied uniformly to all scribed in paragraph (e)(2)(i) of this
hospitals in the State; and section, for the State’s tax program, if
(iii) No more than 10 percent of non- it were broad based and uniform.
public hospitals in the State are ex- (C) Calculating the slope (designated
empt from the tax; as B2) of the linear regression, as de-
(7) Psychiatric hospitals; or scribed in paragraph (e)(2)(i) of this
(8) Hospitals owned and operated by section, for the State’s tax program, as
HMOs. proposed.
(iv) If a tax is enacted and in effect (ii) If the State demonstrates to the
after August 13, 1993, and the State Secretary’s satisfaction that the value
demonstrates to the Secretary’s satis- of B1/B2 is at least 1, CMS will auto-
faction that the value of P1/P2 is at matically approve the waiver request.
least 0.95, CMS will review the waiver (iii) If the State demonstrates to the
request. Such a waiver request will be Secretary’s satisfaction that the value
approved only if the following two cri- of B1/B2 is at least 0.95, CMS will re-
teria are met: view the waiver request. Such a waiver
(A) The value of P1/P2 is at least 0.95; will be approved only if the following
and two criteria are met:
(B) The tax complies with the provi- (A) The value of B1/B2 is at least 0.95;
sions of § 433.68(e)(1)(iii)(B). and
(2) Waiver of uniform tax requirement.
(B) The tax excludes or provides cred-
This test is applied on a per class basis
its or deductions only to one or more of
to all taxes that are not uniform. This
the following providers of items and
includes those taxes that are neither
services within the class to be taxes:
broad based (as specified in § 433.68(c))
(1) Providers that furnish no services
nor uniform (as specified in § 433.68(d)).
within the class in the State;
(i) A State seeking waiver of the uni-
form tax requirement (whether or not (2) Providers that do not charge for
the tax is broad based) must dem- services within the class;
onstrate that its proposed tax plan (3) Rural hospitals (defined as any
meets the requirement that its plan is hospital located outside of an urban
generally redistributive by: area as defined in § 412.62(f)(1)(ii) of this
(A) Calculating, using ordinary least chapter;
squares, the slope (designated as (B) (4) Sole community hospitals as de-
(that is. the value of the x coefficient) fined in § 412.92(a) of this chapter;
of two linear regressions, in which the (5) Physicians practicing primarily in
dependent variable is each provider’s medically underserved areas as defined
percentage share of the total tax paid in section 1302(7) of the Public Health
by all taxpayers during a 12-month pe- Service Act;
riod, and the independent variable is (6) Financially distressed hospitals if:
the taxpayer’s ‘‘Medicaid Statistic’’. (i) A financially distressed hospital is
The term ‘‘Medicaid Statistic’’ means defined by the State law;
the number of the provider’s taxable (ii) The State law specifies reason-
units applicable to the Medicaid pro- able standards for determining finan-
gram during a 12-month period. If, for cially distressed hospitals, and these
example, the State imposed a tax based standards are applied uniformly to all
on provider charges, the amount of a hospitals in the State; and
95
§ 433.70 42 CFR Ch. IV (10–1–17 Edition)
(iii) No more than 10 percent of non- health care items or services. However,
public hospitals in the State are ex- for the period of January 1, 2008
empt from the tax; through September 30, 2011, the appli-
(7) Psychiatric hospitals; or cable percentage of net patient service
(8) Providers or payers with tax rates revenue is 5.5 percent. Compliance in
that vary based exclusively on regions, State fiscal year 2008 will be evaluated
but only if the regional variations are from January 1, 2008 through the last
coterminous with preexisting political day of State fiscal year 2008. Beginning
(and not special purpose) boundaries. with State fiscal year 2009 the 5.5 per-
Taxes within each regional boundary cent tax collection will be measured on
must meet the broad-based and uni- an annual State fiscal year basis.
formity requirements as specified in
(B) When the tax or taxes produce
paragraphs (c) and (d) of this section.
(iv) A B1/B2 value of 0.70 will be ap- revenues in excess of the applicable
plied to taxes that vary based exclu- percentage of the revenue received by
sively on regional variations, and en- the taxpayer, CMS will consider an in-
acted and in effect prior to November direct hold harmless provision to exist
24, 1992, to permit such variations. if 75 percent or more of the taxpayers
(f) Hold harmless. A taxpayer will be in the class receive 75 percent or more
considered to be held harmless under a of their total tax costs back in en-
tax program if any of the following hanced Medicaid payments or other
conditions applies: State payments. The second prong of
(1) The State (or other unit of gov- the indirect hold harmless test is ap-
ernment) imposing the tax provides for plied in the aggregate to all health
a direct or indirect non-Medicaid pay- care taxes applied to each class. If this
ment to those providers or others pay- standard is violated, the amount of tax
ing the tax and the payment amount is revenue to be offset from medical as-
positively correlated to either the tax sistance expenditures is the total
amount or to the difference between amount of the taxpayers’ revenues re-
the Medicaid payment and the tax ceived by the State.
amount. A positive correlation in- (ii) [Reserved]
cludes any positive relationship be-
tween these variables, even if not con- [57 FR 55138, Nov. 24, 1992, as amended at 58
sistent over time. FR 43181, Aug. 13, 1993; 62 FR 53572, Oct. 15,
(2) All or any portion of the Medicaid 1997; 73 FR 9698, Feb. 22, 2008]
payment to the taxpayer varies based
only on the tax amount, including § 433.70 Limitation on level of FFP for
where Medicaid payment is conditional revenues from health care-related
taxes.
on receipt of the tax amount.
(3) The State (or other unit of gov- (a) Limitations. Beginning October 1,
ernment) imposing the tax provides for 1995, there is no limitation on the
any direct or indirect payment, offset, amount of health care-related taxes
or waiver such that the provision of that a State may receive without a re-
that payment, offset, or waiver di- duction in FFP, as long as the health
rectly or indirectly guarantees to hold care-related taxes meet the require-
taxpayers harmless for all or any por- ments specified in § 433.68.
tion of the tax amount. (b) Calculation of FFP. CMS will de-
(i)(A) An indirect guarantee will be duct from a State’s medical assistance
determined to exist under a two prong expenditures, before calculating FFP,
‘‘guarantee’’ test. If the health care-re- revenues from health care-related
lated tax or taxes on each health care
taxes that do not meet the require-
class are applied at a rate that pro-
ments of § 433.68 and any health care-
duces revenues less than or equal to 6
related taxes in excess of the limits
percent of the revenues received by the
taxpayer, the tax or taxes are permis- specified in paragraph (a)(1) of this sec-
tion.
sible under this test. The phrase ‘‘rev-

enues received by the taxpayer’’ refers [57 FR 55138, Nov. 24, 1992, as amended at 73
to the net patient revenue attributable FR 9699, Feb. 22, 2008]
to the assessed permissible class of
96
§ 433.72 Waiver provisions applicable the State or unit of local government,

to health care-related taxes. and health care-related taxes collected.
(a) Bases for requesting waiver. (1) A Each State must also provide any addi-
State may submit to CMS a request for tional information requested by the
a waiver if a health care-related tax Secretary related to any other dona-
does not meet any or all of the fol- tions made by, or any taxes imposed
lowing: on, health care providers. States’ re-
(i) The tax does not meet the broad ports must present a complete, accu-
based criteria specified in § 433.68c); rate, and full disclosure of all of their
and/or donation and tax programs and expend-
(ii) The tax is not imposed uniformly itures.
but meets the criteria specified in (b) Each State must provide the sum-
§ 433.68(d)(2) or (d)(3). mary information specified in para-
(2) When a tax that meets the cri-
graph (a) of this section on a quarterly
teria specified in paragraph (a)(1) of
basis in accordance with procedures es-
this section is imposed on more than
one class of health care items or serv- tablished by CMS.
ices, a separate waiver must be ob- (c) Each State must maintain, in
tained for each class of health care readily reviewable form, supporting
items and services subject to the tax. documentation that provides a detailed
(b) Waiver conditions. In order for description and legal basis for each do-
CMS to approve a waiver request that nation and tax program being reported,
would permit a State to receive tax as well as the source and use of all do-
revenue (within specified limitations) nations received and taxes collected.
without a reduction in FFP, the State This information must be made avail-
must demonstrate, to CMS’s satisfac- able to Federal reviewers upon request.
tion, that its tax program meets all of (d) If a State fails to comply with the
the following requirements: reporting requirements contained in
(1) The net impact of the tax and any this section, future grant awards will
payments made to the provider by the be reduced by the amount of FFP CMS
State under the Medicaid program is
estimates is attributable to the sums
generally redistributive, as described
raised by tax and donation programs as
in § 433.68(e);
(2) The amount of the tax is not di- to which the State has not reported
rectly correlated to Medicaid pay- properly, until such time as the State
ments; and complies with the reporting require-
(3) The tax program does not fall ments. Deferrals and/or disallowances
within the hold harmless provisions of equivalent amounts may also be im-
specified in § 433.68(f). posed with respect to quarters for
(c) Effective date. A waiver will be ef- which the State has failed to report
fective: properly. Unless otherwise prohibited
(1) The date of enactment of the tax by law, FFP for those expenditures will
for programs in existence prior to Au- be released when the State complies
gust 13, 1993 or; with all reporting requirements.
(2) For tax programs commencing on
or after August 13, 1993, on the first day
in the quarter in which the waiver is
Subpart C—Mechanized Claims
received by CMS. Processing and Information
Retrieval Systems
FR 43182, Aug. 13, 1993]
§ 433.110 Basis, purpose, and applica-
§ 433.74 Reporting requirements. bility.
(a) Beginning with the first quarter (a) This subpart implements the fol-
of Federal fiscal year 1993, each State lowing sections of the Act:
must submit to CMS quarterly sum- (1) Section 1903(a)(3) of the Act,
mary information on the source and which provides for FFP in State ex-
use of all provider-related donations penditures for the design, development,
(including all bona fide and presumed- or installation of mechanized claims
to-be bona fide donations) received by processing and information retrieval
97
§ 433.111 42 CFR Ch. IV (10–1–17 Edition)
systems and for the operation of cer- a System of Systems requires inter-
tain systems. Additional HHS regula- operability between the systems.
tions and CMS procedures for imple- (i) The system consists of—
menting these regulations are in 45 (A) Required modules specified by
CFR part 75, 45 CFR part 95, subpart F, the Secretary.
and part 11, State Medicaid Manual; (B) Required changes to the system
and or required module that are specified
(2) Section 1903(r) of the Act, which by the Secretary.
imposes certain standards and condi- (C) Approved enhancements to the
tions on mechanized claims processing system or module.
and information retrieval systems (in-
(ii) A ‘‘Mechanized claims processing
cluding eligibility determination sys-
and information retrieval system’’ in-
tems) in order for these systems to be
clude—s—
eligible for Federal funding under sec-
tion 1903(a) of the Act. (A) An Eligibility and Enrollment
(b) [Reserved] (E&E) System which is used to process
applications from Medicaid or CHIP ap-
[50 FR 30846, July 30, 1985, as amended at 54 plicants and beneficiaries to determine
FR 41973, Oct. 13, 1989; 76 FR 21973, Apr. 19, eligibility for enrollment in the Med-
2011; 80 FR 75841, Dec. 4, 2015] icaid or CHIP programs, as well as
§ 433.111 Definitions. change in circumstance updates and re-
newals; and
For purposes of this section: (B) A Medicaid Management Informa-
(a) The following terms are defined tion System (MMIS) which is used to
at 45 CFR part 95, subpart F § 95.605: process claims for Medicaid payment
‘‘Advance Planning Document’’; ‘‘Design’’ or from providers of medical care and
‘‘System Design’’; ‘‘Development’’; ‘‘En- services furnished to beneficiaries
hancement’’; ‘‘Hardware’’; ‘‘Installation’’; under the medical assistance program
‘‘Operation’’; and, ‘‘Software’’. and to perform other functions nec-
(b) ‘‘Mechanized claims processing essary for economic and efficient oper-
and information retrieval system’’ ations, management, monitoring, and
means: administration of the Medicaid pro-
(1) ‘‘Mechanized claims processing gram. The pertinent business areas are
and information retrieval system’’ those included in the MMIS Certifi-
means the system of software and/or cation Toolkit, and they may be appli-
hardware used to process claims for cable to Fee-For-Service, Managed
medical assistance and to retrieve and Care, or an Administrative Services Or-
produce service utilization and man- ganization (ASO) model.
agement information required by the (c) ‘‘Medicaid Information Tech-
Medicaid single state agency and Fed- nology Architecture (MITA)’’ is defined
eral government for program adminis- at § 495.302 of this chapter.
tration and audit purposes. It may in- (d) ‘‘Open source’’ means software
clude modules of hardware, software, that can be used freely, changed, and
and other technical capabilities that shared (in modified or unmodified
are used by the Medicaid Single State form) by anyone. Open source software
Agency to manage, monitor, and ad- is distributed under Open Source Ini-
minister the Medicaid enterprise, in- tiative-approved licenses that comply
cluding transaction processing, infor- with an open source framework that al-
mation management, and reporting lows for free redistribution, provision
and data analytics. of the source code, allowance for modi-
(2) ‘‘Mechanized claims processing fications and derived works, free and
and information retrieval system’’ in- open distribution of licenses without
cludes a ‘‘System of Systems.’’ Under restrictions and licenses that are tech-
this definition all modules or systems nology-neutral.
developed to support a Medicaid Man- (e) ‘‘Proprietary’’ means a closed
agement Information System (MMIS) source product licensed under exclusive

and Eligibility and Enrollment (E&E) legal right of the copyright holder with
may be implemented as discrete, inde- the intent that the licensee is given
pendent, interoperable elements. Use of the right to use the software only
98
under certain conditions, and re- CMS prior to the State’s expenditure of
stricted from other uses, such as modi- funds for these purposes.
fication, sharing, studying, redistribu- (b) CMS will approve the E&E or
tion, or reverse engineering. claims system described in an APD if
(f) ‘‘Service’’ means a self-contained certain conditions are met. The condi-
unit of functionality that is a dis- tions that a system must meet are:
cretely invokable operation. Services (1) CMS determines the system is
can be combined to provide the likely to provide more efficient, eco-
functionality of a large software appli- nomical, and effective administration
cation. of the State plan.
(g) ‘‘Shared Service’’ means the use (2) The system meets the system re-
of a service, including SaaS, by one quirements, standards and conditions,
part of an organization or group, in- and performance standards in Part 11
cluding states, where that service is of the State Medicaid Manual, as peri-
also made available to other entities of odically amended.
the organization, group or states. Thus (3) The system is compatible with the
the funding and resourcing of the serv- claims processing and information re-
ice is shared and the providing depart- trieval systems used in the administra-
ment effectively becomes an internal tion of Medicare for prompt eligibility
service provider. verification and for processing claims
(h) ‘‘Module’’ means a packaged, for persons eligible for both programs.
functional business process or set of (4) The system supports the data re-
processes implemented through soft- quirements of quality improvement or-
ware, data, and interoperable inter- ganizations established under Part B of
faces that are enabled through design title XI of the Act.
principles in which functions of a com- (5) The State owns any software that
plex system are partitioned into dis- is designed, developed, installed or im-
crete, scalable, reusable components. proved with 90 percent FFP.
(i) ‘‘Commercial Off the Shelf’’ (6) The Department has a royalty
(COTS) software means specialized free, non-exclusive, and irrevocable li-
software (which could be a system, sub- cense to reproduce, publish, or other-
system or module) designed for specific wise use and authorize others to use,
applications that is available for sale for Federal Government purposes, soft-
or lease to other users in the commer- ware, modifications to software, and
cial marketplace, and that can be used documentation that is designed, devel-
with little or no modification. oped, installed or enhanced with 90 per-
(j) ‘‘Software-as-a-Service’’ (SaaS) cent FFP.
means a software delivery model in (7) The costs of the system are deter-
which software is managed and li- mined in accordance with 45 CFR 75,
censed by its vendor-owner on a pay- subpart E.
for-use or subscription basis, centrally (8) The Medicaid agency agrees in
hosted, on-demand, and common to all writing to use the system for the pe-
users. riod of time specified in the advance
[51 FR 45330, Dec. 18, 1986, as amended at 54
planning document approved by CMS
FR 41973, Oct. 13, 1989; 76 FR 21973, Apr. 19, or for any shorter period of time that
2011; 80 FR 75841, Dec. 4, 2015] CMS determines justifies the Federal
funds invested.
§ 433.112 FFP for design, development, (9) The agency agrees in writing that
installation or enhancement of the information in the system will be
mechanized processing and infor- safeguarded in accordance with subpart
mation retrieval systems. F, part 431 of this subchapter.
(a) Subject to paragraph (c) of this (10) Use a modular, flexible approach
section, FFP is available at the 90 per- to systems development, including the
cent rate in State expenditures for the use of open interfaces and exposed ap-
design, development, installation, or plication programming interfaces; the

enhancement of a mechanized claims separation of business rules from core
processing and information retrieval programming, available in both human
system only if the APD is approved by and machine readable formats.
99
§ 433.114 42 CFR Ch. IV (10–1–17 Edition)
(11) Align to, and advance increas- (20) Systems and modules developed,
ingly, in MITA maturity for business, installed or improved with 90 percent
architecture, and data. match must include documentation of
(12) The agency ensures alignment components and procedures such that
with, and incorporation of, industry the systems could be operated by a va-
standards adopted by the Office of the riety of contractors or other users.
National Coordinator for Health IT in (21) For software systems and mod-
accordance with 45 CFR part 170, sub- ules developed, installed or improved
part B: The HIPAA privacy, security with 90 percent match, the State must
and transaction standards; accessi- consider strategies to minimize the
bility standards established under sec- costs and difficulty of operating the
tion 508 of the Rehabilitation Act, or software on alternate hardware or op-
standards that provide greater accessi- erating systems.
bility for individuals with disabilities, (22) Other conditions for compliance
and compliance with Federal civil with existing statutory and regulatory
rights laws; standards adopted by the requirements, issued through formal
Secretary under section 1104 of the Af- guidance procedures, determined by
fordable Care Act; and standards and the Secretary to be necessary to up-
protocols adopted by the Secretary date and ensure proper implementation
under section 1561 of the Affordable of those existing requirements.
Care Act.
(c)(1) FFP is available at 90 percent
(13) Promote sharing, leverage, and
of a State’s expenditures for the de-
reuse of Medicaid technologies and sys-
sign, development, installation or en-
tems within and among States.
hancement of an E&E system that
(14) Support accurate and timely
meets the requirements of this subpart
processing and adjudications/eligibility
and only for costs incurred for goods
determinations and effective commu-
and services provided on or after April
nications with providers, beneficiaries,
19, 2011.
and the public.
(15) Produce transaction data, re- (2) Design, development, installation,
ports, and performance information or enhancement costs include costs for
that would contribute to program eval- initial licensing of commercial off the
uation, continuous improvement in shelf (COTS) software, and the min-
business operations, and transparency imum necessary costs to analyze the
and accountability. suitability of COTS software, install,
(16) The system supports seamless co- configure and integrate the COTS soft-
ordination and integration with the ware, and modify non-COTS software
Marketplace, the Federal Data Serv- to ensure coordination of operations.
ices Hub, and allows interoperability The nature and extent of such costs
with health information exchanges, must be expressly described in the ap-
public health agencies, human services proved APD.
programs, and community organiza- [43 FR 45201, Sept. 29, 1978, as amended at 44
tions providing outreach and enroll- FR 17937, Mar. 23, 1979; 45 FR 14213, Mar. 5,
ment assistance services as applicable. 1980; 50 FR 30846, July 30, 1985; 51 FR 45330,
(17) For E&E systems, the State must Dec. 18, 1986; 54 FR 41973, Oct. 13, 1989; 55 FR
have delivered acceptable MAGI-based 1820, Jan. 19, 1990; 55 FR 4375, Feb. 7, 1990; 76
system functionality, demonstrated by FR 21973, Apr. 19, 2011; 80 FR 75842, Dec. 4,
performance testing and results based 2015; 81 FR 3011, Jan. 20, 2016]
on critical success factors, with lim-
§ 433.114 Procedures for obtaining ini-
ited mitigations and workarounds. tial approval; notice of decision.
(18) The State must submit plans
that contain strategies for reducing (a) To obtain initial approval, the
the operational consequences of failure Medicaid agency must inform CMS in
to meet applicable requirements for all writing that the system meets the con-
major milestones and functionality. ditions specified in § 433.116(c) through
(19) The agency, in writing through (i).

the APD, must identify key state per- (b) If CMS disapproves the system,
sonnel by name, type and time com- the notice will include all of the fol-
mitment assigned to each project. lowing information:
100
(1) The findings of fact upon which (iv) The amount of the payment
the determination was made. made under the plan for the service;
(2) The procedures for appeal of the and
determination in the context of a re- (2) Must not specify confidential
consideration of the resulting disallow- services (as defined by the State) and
ance to the Departmental Appeals must not be sent if the only service
Board. furnished was confidential.
(g) The system must provide both pa-
[50 FR 30847, July 30, 1985, as amended at 54
tient and provider profiles for program
FR 41973, Oct. 13, 1989; 76 FR 21974, Apr. 19,
2011]
management and utilization review
purposes.
§ 433.116 FFP for operation of mecha- (h) If the State has a Medicaid fraud
nized claims processing and infor- control unit certified under section
mation retrieval systems. 1903(q) of the Act and § 455.300 of this
chapter, the Medicaid agency must
(a) Subject to paragraph (j) of this
have procedures to assure that infor-
section, FFP is available at 75 percent
mation on probable fraud or abuse that
of expenditures for operation of a
is obtained from, or developed by, the
mechanized claims processing and in-
system is made available to that unit.
formation retrieval system approved
(See § 455.21 of this chapter for State
by CMS, from the first day of the cal- plan requirements.)
endar quarter after the date the system
(i) The standards and conditions of
met the conditions of initial approval,
§ 433.112(b)(10) through (b)(16) of this
as established by CMS (including a ret- subpart must be met.
roactive adjustment of FFP if nec-
(j) Beginning, and no earlier than,
essary to provide the 75 percent rate
April 19, 2011, FFP is available at 75
beginning on the first day of that cal- percent of a State’s expenditures for
endar quarter). Subject to 45 CFR the operation of an E&E system that
95.611(a), the State shall obtain prior meets the requirements of this subpart.
written approval from CMS when it FFP is not available for E&E systems
plans to acquire ADP equipment or that do not meet the standards and
services, when it anticipates the total conditions.
acquisition costs will exceed thresh-
olds, and meets other conditions of the [45 FR 14213, Mar. 5, 1980. Redesignated and
subpart. amended at 50 FR 30847, July 30, 1985; 55 FR
4375, Feb. 7, 1990; 76 FR 21974, Apr. 19, 2011; 80
(b) CMS will approve enhanced FFP FR 75842, Dec. 4, 2015]
for system operations if the conditions
specified in paragraphs (c) through (i) § 433.117 Initial approval of replace-
of this section are met. ment systems.
(c) The conditions of § 433.112(b)(1) (a) A replacement system must meet
through (22) must be met at the time of all standards and conditions of initial
approval. approval of a mechanized claims proc-
(d) The system must have been oper- essing and information retrieval sys-
ating continuously during the period tem.
for which FFP is claimed. (b) The agency must submit a APD
(e) The system must provide indi- that includes—
vidual notices, within 45 days of the (1) The date the replacement system
payment of claims, to all or a sample will be in operation; and
group of the persons who received serv- (2) A plan for orderly transition from
ices under the plan. the system being replaced to the re-
(f) The notice required by paragraph placement system.
(e) of this section— (c) FFP is available at—
(1) Must specify— (1) 90 percent in expenditures for de-
(i) The service furnished; sign, development, and installation in
(ii) The name of the provider fur-
accordance with the provisions of

nishing the service; § 433.112; and
(iii) The date on which the service (2) 75 percent in expenditures for op-
was furnished; and eration of an approved replacement
101
§ 433.119 42 CFR Ch. IV (10–1–17 Edition)
system in accordance with the provi- ter after CMS issues the written notice
sions of § 433.116(b) through (j), from to the State.
the date that the system met the con- (2) The findings of fact upon which
ditions of initial approval, as estab- the determination was made.
lished by CMS. (3) A statement that State claims in
(d) FFP is available at 75 percent in excess of the reduced FFP rate will be
expenditures for the operation of an ap- disallowed and that any such disallow-
proved system that is being replaced ance will be appealable to the Depart-
(or at a reduced rate determined under
mental Appeals Board.
§ 433.120 of this subpart for a system
that has been disapproved) until the re- [54 FR 41973, Oct. 13, 1989; 55 FR 1820, Jan. 19,
placement system is in operation and 1990; 76 FR 21974, Apr. 19, 2011; 80 FR 75843,
approved. Dec. 4, 2015]
[50 FR 30847, July 30, 1985, as amended at 76 § 433.120 Procedures for reduction of
FR 21974, Apr. 19, 2011] FFP after reapproval review.
§ 433.119 Conditions for reapproval; (a) If CMS determines after the re-
notice of decision. approval review that the system no
(a) CMS periodically reviews each longer meets the conditions for re-
system operation initially approved approval in § 433.119, CMS may reduce
under § 433.114 of this subpart and re- FFP for certain expenditures for sys-
approves it for FFP at 75 percent of ex- tem operations.
penditures if the following standards (b) CMS may reduce FFP from 75 per-
and conditions are met: cent to 50 percent for expenditures re-
(1) The system meets the require- lated to the operations of non-compli-
ments of § 433.112(b)(1), (3), (4), and (7) ant functionality or system compo-
through (22). nents.
(2) The system meets the conditions
of § 433.116 (d) through (j). [80 FR 75843, Dec. 4, 2015]
(3) The system meets the standards,
conditions, and performance standards § 433.121 Reconsideration of the deci-
for reapproval and the system require- sion to reduce FFP after reapproval
review.
ments in part 11 of the State Medicaid
Manual as periodically amended. (a) The State Medicaid agency may
(4) A State system must meet all of appeal (to the Departmental Appeals
the requirements of this subpart within Board under 45 CFR part 16) a disallow-
the appropriate period CMS determines ance concerning a reduction in FFP
should apply as required by § 433.123(b) claimed for system operations caused
of this subpart. by a disapproval of the State’s system.
(b) CMS may review an entire system (b) The decisions concerning whether
operation or focus its review on parts to restore any FFP retroactively and
of the operation. However, at a min- the actual number of quarters for
imum, CMS will review standards, sys- which FFP will be restored under
tem requirements and other conditions § 433.122 of this subpart are not subject
of reapproval that have demonstrated to administrative appeal to the Depart-
weakness in a previous review or re- mental Appeals Board under 45 CFR
views. part 16.
(c) After performing the review under
(c) An agency’s request for a recon-
paragraph (a) of this section, CMS will
sideration before the Board under para-
issue to the Medicaid agency a written
graph (a) of this section does not delay
notice informing the agency whether
implementation of the reduction in
the system is reapproved or dis-
approved. If the system is disapproved, FFP. However, any reduction is subject
the notice will include the following to retroactive adjustment if required
information: by the Board’s determination on recon-
sideration.
(1) CMS’s decision to reduce FFP for

system operations from 75 percent to 50 [50 FR 30848, July 30, 1985, as amended at 54
percent of expenditures, beginning with FR 41974, Oct. 13, 1989; 55 FR 1820, Jan. 19,
the first day of the first calendar quar- 1990; 76 FR 21974, Apr. 19, 2011]
102
§ 433.122 Reapproval of a disapproved to which the new or modified standards

system. or conditions apply.
When FFP has been reduced under [57 FR 38782, Aug. 27, 1992]
§ 433.120(a), and CMS determines upon
subsequent review that the system § 433.127 Termination of FFP for fail-
meets all current performance stand- ure to provide access to claims
ards, system requirements and other processing and information re-
conditions of reapproval, the following trieval systems.
provisions apply: CMS will terminate FFP at any time
(a) CMS will resume FFP in expendi- if the Medicaid agency fails to provide
tures for system operations at the 75 State and Federal representatives with
percent level beginning with the quar- full access to the system, including on-
ter following the review determination site inspection. CMS may request such
that the system again meets conditions access at any time to determine wheth-
of reapproval. er the conditions in this subpart are
(b) CMS may retroactively waive a being met.
reduction of FFP in expenditures for
[43 FR 45201, Sept. 29, 1978. Redesignated and
system operations if CMS determines
amended at 50 FR 30847 and 30848, July 30,
that the waiver could improve the ad- 1985]
ministration of the State Medicaid
plan. However, CMS cannot waive this § 433.131 Waiver for noncompliance
reduction for any quarter before the with conditions of approval and re-
fourth quarter immediately preceding approval.
the quarter in which CMS issues the If a State is unable to comply with
determination (as part of the review the conditions of approval or of re-
process) stating that the system is reapproval and the noncompliance will
approved. cause a percentum reduction in FFP,
[54 FR 41974, Oct. 13, 1989] CMS will waive the FFP reduction in
the following circumstances:
§ 433.123 Notification of changes in (a) Good cause. If CMS determines
system requirements, performance that good cause existed, CMS will
standards or other conditions for waive the FFP reduction attributable
approval or reapproval.
to those items for which the good cause
(a) Whenever CMS modifies system existed. A waiver of FFP consequences
requirements or other conditions for of the failure to meet the conditions of
approval under § 433.112 or § 433.116, approval or reapproval based upon good
CMS will— cause will not extend beyond two con-
(1) Publish a notice in the FEDERAL secutive quarters.
REGISTER making available the pro- (b) Circumstances beyond the control of
posed changes for public comment; a State. The State must satisfactorily
(2) Respond in a subsequent FEDERAL explain the circumstances that are be-
REGISTER notice to comments received; yond its control. When CMS grants the
and waiver, CMS will also defer all other
(3) Issue the new or modified require- system deadlines for the same length of
ments or conditions in the State Med- time that the waiver applies.
icaid Manual. (c) Waiver of deadline. In no case will
(b) For changes in system require- CMS waive the December 31, 2015 dead-
ments or other conditions for approval, lines referenced in § 433.112(c) and
CMS will allow an appropriate period § 433.116(j).
for Medicaid agencies to meet the re-
quirement determining this period on [50 FR 30848, July 30, 1985, as amended at 54
the basis of the requirement’s com- FR 41974, Oct. 13, 1989; 76 FR 21975, Apr. 19,
2011]
plexity and other relevant factors.
(c) Whenever CMS modifies perform-
Subpart D—Third Party Liability
ance standards and other conditions for

reapproval under § 433.119, CMS will no-
tify Medicaid agencies at least one cal- SOURCE: 45 FR 8984, Feb. 11, 1980, unless
endar quarter before the review period otherwise noted.
103
§ 433.135 42 CFR Ch. IV (10–1–17 Edition)
§ 433.135 Basis and purpose. under the plan and for payment of
claims involving third parties.
This subpart implements sections
1902(a)(25), 1902(a)(45), 1903(d)(2), 1903(o), (b) A State plan must provide that—
1903(p), and 1912 of the Act by setting (1) The requirements of §§ 433.145
forth State plan requirements con- through 433.148 are met for assignment
cerning— of rights to benefits, cooperation with
(a) The legal liability of third parties the agency in obtaining medical sup-
to pay for services provided under the port or payments, and cooperation in
plan; identifying and providing information
(b) Assignment to the State of an in- to assist the State in pursuing any lia-
dividual’s rights to third party pay- ble third parties; and
ments; and (2) The requirements of §§ 433.151
(c) Cooperative agreements between through 433.154 are met for cooperative
the Medicaid agency and other entities agreements and incentive payments for
for obtaining third party payments. third party collections.
(c) The requirements of paragraph
[50 FR 46664, Nov. 12, 1985] (b)(1) of this section relating to assign-
ment of rights to benefits and coopera-
tion in obtaining medical support or
For purposes of this subpart— payments and paragraph (b)(2) of this
Private insurer means: section are effective for medical assist-
(1) Any commercial insurance com- ance furnished on or after October 1,
pany offering health or casualty insur- 1984. The requirements of paragraph
ance to individuals or groups (includ- (b)(1) of this section relating to co-
ing both experience-rated insurance operation in identifying and providing
contracts and indemnity contracts); information to assist the State in pur-
(2) Any profit or nonprofit prepaid suing liable third parties are effective
plan offering either medical services or for medical assistance furnished on or
full or partial payment for services in- after July 1, 1986.
cluded in the State plan; and
(3) Any organization administering FR 48606, Nov. 21, 1990; 55 FR 52130, Dec. 19,
health or casualty insurance plans for 1990; 60 FR 35502, July 10, 1995]
professional associations, unions, fra-
ternal groups, employer-employee ben- § 433.138 Identifying liable third par-
efit plans, and any similar organization ties.
offering these payments or services, in- (a) Basic provisions. The agency must
cluding self-insured and self-funded take reasonable measures to determine
plans. the legal liability of the third parties
Third party means any individual, en- who are liable to pay for services fur-
tity or program that is or may be lia- nished under the plan. At a minimum,
ble to pay all or part of the expendi- such measures must include the re-
tures for medical assistance furnished quirements specified in paragraphs (b)
under a State plan. through (k) of this section, unless
Title IV-D agency means the organiza- waived under paragraph (l) of this sec-
tional unit in the State that has the tion.
responsibility for administering or su- (b) Obtaining health insurance informa-
pervising the administration of a State tion: Initial application and redetermina-
plan for child support enforcement tion processes for Medicaid eligibility. (1)
under title IV-D of the Act. If the Medicaid agency determines eli-
[49 FR 8984, Feb. 11, 1980, as amended at 50 gibility for Medicaid, it must, during
FR 46664, Nov. 12, 1985; 50 FR 49389, Dec. 2, the initial application and each rede-
1985] termination process, obtain from the
applicant or beneficiary such health in-
§ 433.137 State plan requirements. surance information as would be useful
(a) A State plan must provide that in identifying legally liable third party
the requirements of §§ 433.138 and resources so that the agency may proc-
433.139 are met for identifying third ess claims under the third party liabil-
parties liable for payment of services ity payment procedures specified in
104
§ 433.139 (b) through (f). Health insur- (d) Exchange of data. Except as pro-
ance information may include, but is vided in paragraph (l) of this section,
not limited to, the name of the policy to obtain and use information for the
holder, his or her relationship to the purpose of determining the legal liabil-
applicant or beneficiary, the social se- ity of the third parties so that the
curity number (SSN) of the policy agency may process claims under the
holder, and the name and address of in- third party liability payment proce-
surance company and policy number. dures specified in § 433.139(b) through
(2) If Medicaid eligibility is deter- (f), the agency must take the following
mined by the Federal agency admin- actions:
istering the supplemental security in- (1) Except as specified in paragraph
come program under title XVI in ac- (d)(2) of this section, as part of the data
cordance with a written agreement exchange requirements under § 435.945
under section 1634 of the Act, the Med- of this chapter, from the State wage in-
icaid agency must take the following formation collection agency (SWICA)
action. It must enter into an agree- defined in § 435.4 of this chapter and
ment with CMS or must have, prior to from the SSA wage and earnings files
February 1, 1985, executed a modified data as specified in § 435.948(a)(1) of this
section 1634 agreement that is still in chapter, the agency must—
effect to provide for— (i) Use the information that identi-
(i) Collection, from the applicant or fies Medicaid beneficiaries that are em-
beneficiary during the initial applica- ployed and their employer(s); and
tion and each redetermination process,
(ii) Obtain and use, if their names
of health insurance information in the
and SSNs are available to the agency
form and manner specified by the Sec-
under paragraph (c) of this section, in-
retary; and
formation that identifies employed ab-
(ii) Transmittal of the information to
sent or custodial parents of bene-
the Medicaid agency.
ficiaries and their employer(s).
(3) If Medicaid eligibility is deter-
mined by any other agency in accord- (2) If the agency can demonstrate to
ance with a written agreement, the CMS that it has an alternate source of
Medicaid agency must modify the information that furnishes information
agreement to provide for— as timely, complete and useful as the
(i) Collection, from the applicant or SWICA and SSA wage and earnings
beneficiary during the initial applica- files in determining the legal liability
tion and each redetermination process, of third parties, the requirements of
of such health insurance information paragraph (d)(1) of this section are
as would be useful in identifying le- deemed to be met.
gally liable third party resources so (3) The agency must request, as re-
that the Medicaid agency may process quired under § 435.948(a)(2) of this chap-
claims under the third party liability ter, from the State title IV–A agency,
payment procedures specified in information not previously reported
§ 433.139 (b) through (f). Health insur- that identifies those Medicaid bene-
ance information may include, but is ficiaries who are employed and their
not limited to, those elements de- employer(s).
scribed in paragraph (b)(1) of this sec- (4) Except as specified in paragraph
tion; and (d)(5) of this section, the agency must
(ii) Transmittal of the information to attempt to secure agreements (to the
the Medicaid agency. extent permitted by State law) to pro-
(c) Obtaining other information. Except vide for obtaining—
as provided in paragraph (l) of this sec- (i) From State Workers’ Compensa-
tion, the agency must, for the purpose tion or Industrial Accident Commis-
of implementing the requirements in sion files, information that identifies
paragraphs (d)(1)(ii) and (d)(4)(i) of this Medicaid beneficiaries and, (if their
section, incorporate into the eligibility names and SSNs were available to the
case file the names and SSNs of absent agency under paragraph (c) of this sec-
or custodial parents of Medicaid bene- tion) absent or custodial parents of
ficiaries to the extent such information Medicaid beneficiaries with employ-
is available. ment-related injuries or illnesses; and
105
§ 433.138 42 CFR Ch. IV (10–1–17 Edition)
(ii) From State Motor Vehicle acci- third party liability payment proce-
dent report files, information that dures specified in § 433.139 (b) through
identifies those Medicaid beneficiaries (f); and
injured in motor vehicle accidents, (ii) The State plan must describe the
whether injured as pedestrians, drivers, methods the agency uses for meeting
passengers, or bicyclists. the requirements of paragraph (g)(1)(i)
(5) If unable to secure agreements as of this section.
specified in paragraph (d)(4) of this sec- (2) Health insurance information and
tion, the agency must submit docu- workers’ compensation data exchanges.
mentation to the regional office that With respect to information obtained
demonstrates the agency made a rea- under paragraphs (b) and (d)(4)(i) of
sonable attempt to secure these agree- this section—
ments. If CMS determines that a rea- (i) Within 60 days, the agency must
sonable attempt was made, the require- followup on such information (if appro-
ments of paragraph (d)(4) of this sec- priate) in order to identify legally lia-
tion are deemed to be met. ble third party resources and incor-
(e) Diagnosis and trauma code edits. porate such information into the eligi-
Except as specified under paragraph (l) bility case file and into its third party
of this section, the agency must take data base and third party recovery unit
action to identify those paid claims for so the agency may process claims
Medicaid beneficiaries that contain di- under the third party liability payment
agnosis codes that are indicative of procedures specified in § 433.139 (b)
trauma, or injury, poisoning, and other through (f); and
consequences of external causes, for (ii) The State plan must describe the
the purpose of determining the legal li- methods the agency uses for meeting
ability of third parties so that the the requirements of paragraph (g)(2)(i)
agency may process claims under the of this section.
third party liability payment proce- (3) State motor vehicle accident report
dures specified in § 433.139(b) through file data exchanges. With respect to in-
(f). formation obtained under paragraph
(f) Data exchanges and trauma code (d)(4)(ii) of this section—
edits: Frequency. Except as provided in (i) The State plan must describe the
paragraph (l) of this section, the agen- methods the agency uses for following
cy must conduct the data exchanges re- up on such information in order to
quired in paragraphs (d)(1) and (3) of identify legally liable third party re-
this section, and diagnosis and trauma sources so the agency may process
edits required in paragraphs (d)(4) and claims under the third party liability
(e) of this section on a routine and payment procedures specified in
timely basis. The State plan must § 433.139 (b) through (f);
specify the frequency of these activi- (ii) After followup, the agency must
ties. incorporate all information that iden-
(g) Followup procedures for identifying tifies legally liable third party re-
legally liable third party resources. Ex- sources into the eligibility case file
cept as provided in paragraph (l) of this and into its third party data base and
section, the State must meet the re- third party recovery unit; and
quirements of this paragraph. (iii) The State plan must specify
(1) SWICA, SSA wage and earnings timeframes for incorporation of the in-
files, and title IV-A data exchanges. With formation.
respect to information obtained under (4) Diagnosis and trauma code edits.
paragraphs (d)(1) through (d)(3) of this With respect to the paid claims identi-
section— fied under paragraph (e) of this sec-
(i) Within 45 days, the agency must tion—
follow up (if appropriate) on such infor- (i) The State plan must describe the
mation to identify legally liable third methods the agency uses to follow up
party resources and incorporate such on such claims in order to identify le-
information into the eligibility case gally liable third party resources so
file and into its third party data base the agency may process claims under
and third party recovery unit so the the third party liability payment pro-
agency may process claims under the cedures specified in § 433.139 (b) through
106
(f) (Methods must include a procedure effectiveness of the third party liabil-
for periodically identifying those trau- ity identification system. However, if
ma codes that yield the highest third the State is not meeting the provisions
party collections and giving priority to of paragraph (e) of this section because
following up on those codes.); it has been granted a waiver of those
(ii) After followup, the agency must provisions under paragraph (l) of this
incorporate all information that iden- section, it is not required to provide
tifies legally liable third party re- the reports required in this paragraph.
sources into the eligibility case file (k) Integration with the State mecha-
and into its third party data base and nized claims processing and information
third party recovery unit; and retrieval system. Basic requirement—De-
(iii) The State plan must specify the velopment of an action plan. (1) If a
timeframes for incorporation of the in- State has a mechanized claims proc-
formation. essing and information retrieval sys-
(h) Obtaining other information and tem approved by CMS under subpart C
data exchanges: Safeguarding informa- of this part, the agency must have an
tion. (1) The agency must safeguard in- action plan for pursuing third party li-
formation obtained from and ex- ability claims and the action plan must
changed under this section with other be integrated with the mechanized
agencies in accordance with the reclaims processing and information re-
quirements set forth in part 431, sub- trieval system.
part F of this chapter. (2) The action plan must describe the
(2) Before requesting information actions and methodologies the State
from, or releasing information to other will follow to—
agencies to identify legally liable third
(i) Identify third parties;
party resources under paragraph (d) of
(ii) Determine the liability of third
this section the agency must execute
parties;
data exchange agreements with those
agencies. The agreements, at a min- (iii) Avoid payment of third party
imum, must specify— claims as required in § 433.139;
(i) The information to be exchanged; (iv) Recover reimbursement from
(ii) The titles of all agency officials third parties after Medicaid claims
with the authority to request third payment as required in § 433.139; and,
party information; (v) Record information and actions
(iii) The methods, including the for- relating to the action plan.
mats to be used, and the timing for re- (3) The action plan must be con-
questing and providing the informa- sistent with the conditions for re-
tion; approval set forth in § 433.119. The por-
(iv) The safeguards limiting the use tion of the plan which is integrated
and disclosure of the information as re- with MMIS is monitored in accordance
quired by Federal or State law or regu- with those conditions and if the condi-
lations; and tions are not met; it is subject to FFP
(v) The method the agency will use to reduction in accordance with proce-
reimburse reasonable costs of fur- dures set forth in § 433.120. The State is
nishing the information if payment is not subject to any other penalty as a
requested. result of other monitoring, quality
(i) Reimbursement. The agency must, control, or auditing requirements for
upon request, reimburse an agency for those items in the action plan.
the reasonable costs incurred in fur- (4) The agency must submit its ac-
nishing information under this section tion plan to the CMS Regional Office
to the Medicaid agency. within 120 days from the date CMS
(j) Reports. The agency must provide issues implementing instructions for
such reports with respect to the data the State Medicaid Manual. If a State
exchanges and trauma code edits set does not have an approved MMIS on
forth in paragraphs (d)(1) through (d)(4) the date of issuance of the State Med-
and paragraph (e) of this section, re- icaid Manual but subsequently imple-
spectively, as the Secretary prescribes ments an MMIS, the State must sub-
for the purpose of determining compli- mit its action plan within 90 days from
ance under § 433.138 and evaluating the the date the system is operational. The
107
§ 433.139 42 CFR Ch. IV (10–1–17 Edition)
CMS Regional Office approves or dis- processed on or after May 12, 1986, the
approves the action plan. agency must use the procedures speci-
(l) Waiver of requirements. (1) The fied in paragraphs (b) through (f) of
agency may request initial and con- this section.
tinuing waiver of the requirements to (2) The agency must submit docu-
determine third party liability found in mentation of the methods (e.g., cost
paragraphs (c), (d)(4), (d)(5), (e), (f), avoidance, pay and recover later) it
(g)(1), (g)(2), (g)(3), and (g)(4) of this uses for payment of claims involving
section if the State determines the ac- third party liability to the CMS Re-
tivity to be not cost-effective. An ac- gional Office.
tivity would not be cost-effective if the (b) Probable liability is established at
cost of the required activity exceeds the time claim is filed. Except as pro-
the third party liability recoupment vided in paragraph (e) of this section—
and the required activity accomplishes, (1) If the agency has established the
at the same or at a higher cost, the probable existence of third party liabil-
same objective as another activity that ity at the time the claim is filed, the
is being performed by the State. agency must reject the claim and re-
(i) The agency must submit a request turn it to the provider for a determina-
for waiver of the requirement in writ- tion of the amount of liability. The es-
ing to the CMS regional office. tablishment of third party liability
(ii) The request must contain ade- takes place when the agency receives
quate documentation to establish that confirmation from the provider or a
to meet a requirement specified by the third party resource indicating the ex-
agency is not cost-effective. Examples tent of third party liability. When the
of documentation are claims recovery amount of liability is determined, the
data and a State analysis documenting agency must then pay the claim to the
a cost-effective alternative that ac- extent that payment allowed under the
complished the same task. agency’s payment schedule exceeds the
(iii) The agency must agree, if a amount of the third party’s payment.
waiver is granted, to notify CMS of any (2) The agency may pay the full
event that occurs that changes the amount allowed under the agency’s
conditions upon which the waiver was payment schedule for the claim and
approved. then seek reimbursement from any lia-
(2) CMS will review a State’s request ble third party to the limit of legal li-
to have a requirement specified under ability if the claim is for labor and de-
paragraph (l)(1) of this section waived livery and postpartum care. (Costs as-
and will request additional information sociated with the inpatient hospital
from the State, if necessary. CMS will stay for labor and delivery and
notify the State of its approval or dis- postpartum care must be cost-avoided.)
approval determination within 30 days (3) The agency must pay the full
of receipt of a properly documented re- amount allowed under the agency’s
quest. payment schedule for the claim and
(3) CMS may rescind a waiver at any seek reimbursement from any liable
time that it determines that the agen- third party to the limit of legal liabil-
cy no longer meets the criteria for ap- ity (and for purposes of paragraph
proving the waiver. If the waiver is re- (b)(3)(ii) of this section, from a third
scinded, the agency has 6 months from party, if the third party liability is de-
the date of the rescission notice to rived from an absent parent whose obli-
meet the requirement that had been gation to pay support is being enforced
waived. by the State title IV-D agency), con-
[52 FR 5975, Feb. 27, 1987, as amended at 54 sistent with paragraph (f) of this sec-
FR 8741, Mar. 2, 1989; 55 FR 1432, Jan. 16, 1990; tion if—
55 FR 5118, Feb. 13, 1990; 60 FR 35502, July 10, (i) The claim is prenatal care for
1995; 81 FR 27853, May 6, 2016; 81 FR 86449, pregnant women, or preventive pedi-
Nov. 30, 2016] atric services (including early and peri-
odic screening, diagnosis and treat-

§ 433.139 Payment of claims. ment services provided for under part
(a) Basic provisions. (1) For claims in- 441, subpart B of this chapter), that is
volving third party liability that are covered under the State plan; or
108
(ii) The claim is for a service covered accordance with paragraph (f) of this
under the State plan that is provided section.
to an individual on whose behalf child (e) Waiver of requirements. (1) The
support enforcement is being carried agency may request initial and con-
out by the State title IV-D agency. The tinuing waiver of the requirements in
agency prior to making any payment paragraphs (b)(1), (d)(1), and (d)(2) of
under this section must assure that the this section, if it determines that the
following requirements are met: requirement is not cost-effective. An
(A) The State plan specifies whether activity would not be cost-effective if
or not providers are required to bill the the cost of the required activity ex-
third party. ceeds the third party liability
(B) The provider certifies that before recoupment and the required activity
billing Medicaid, if the provider has
accomplishes, at the same or at a high-
billed a third party, the provider has
er cost, the same objective as another
waited 30 days from the date of the
activity that is being performed by the
service and has not received payment
State.
from the third party.
(C) The State plan specifies the (i) The agency must submit a request
method used in determining the pro- for waiver of the requirement in writ-
vider’s compliance with the billing re- ing to the CMS regional office.
quirements. (ii) The request must contain ade-
(c) Probable liability is not established quate documentation to establish that
or benefits are not available at the time to meet a requirement specified by the
claim is filed. If the probable existence agency is not cost-effective. Examples
of third party liability cannot be estab- of documentation are costs associated
lished or third party benefits are not with billing, claims recovery data, and
available to pay the beneficiary’s med- a State analysis documenting a cost-ef-
ical expenses at the time the claim is fective alternative that accomplishes
filed, the agency must pay the full the same task.
amount allowed under the agency’s (iii) The agency must agree, if a
payment schedule. waiver is granted, to notify CMS of any
(d) Recovery of reimbursement. (1) If event that occurs that changes the
the agency has an approved waiver conditions upon which the waiver was
under paragraph (e) of this section to approved.
pay a claim in which the probable ex- (2) CMS will review a State’s request
istence of third party liability has been to have a requirement specified under
established and then seek reimburse- paragraph (e)(1) of this section waived
ment, the agency must seek recovery and will request additional information
of reimbursement from the third party
from the State, if necessary. CMS will
to the limit of legal liability within 60
notify the State of its approval or dis-
days after the end of the month in
approval determination within 30 days
which payment is made unless the
of receipt of a properly documented re-
agency has a waiver of the 60-day re-
quest.
quirement under paragraph (e) of this
section. (3) CMS may rescind the waiver at
(2) Except as provided in paragraph any time that it determines that the
(e) of this section, if the agency learns State no longer meets the criteria for
of the existence of a liable third party approving the waiver. If the waiver is
after a claim is paid, or benefits be- rescinded, the agency has 6 months
come available from a third party after from the date of the rescission notice
a claim is paid, the agency must seek to meet the requirement that had been
recovery of reimbursement within 60 waived.
days after the end of the month it (4) An agency requesting a waiver of
learns of the existence of the liable the requirements specifically con-
third party or benefits become avail- cerning either the 60-day limit in para-
able. graph (d)(1) or (d)(2) of this section

(3) Reimbursement must be sought must submit documentation of written
unless the agency determines that re- agreement between the agency and the
covery would not be cost effective in third party, including Medicare fiscal
109
§ 433.140 42 CFR Ch. IV (10–1–17 Edition)
intermediaries and carriers, that ex- duced by the total amount needed to
tension of the billing requirement is meet the incentive payment in § 433.153.
agreeable to all parties.
(f) Suspension or termination of recov- ASSIGNMENT OF RIGHTS TO BENEFITS
ery of reimbursement. (1) An agency
must seek reimbursement from a liable § 433.145 Assignment of rights to bene-
third party on all claims for which it fits—State plan requirements.
determines that the amount it reason- (a) A State plan must provide that,
ably expects to recover will be greater as a condition of eligibility, each le-
than the cost of recovery. Recovery ef- gally able applicant or beneficiary is
forts may be suspended or terminated required to:
only if they are not cost effective. (1) Assign to the Medicaid agency his
(2) The State plan must specify the or her rights, or the rights of any other
threshold amount or other guideline individual eligible under the plan for
that the agency uses in determining whom he or she can legally make an
whether to seek recovery of reimburse- assignment, to medical support and to
ment from a liable third party, or de- payment for medical care from any
scribe the process by which the agency
third party;
determines that seeking recovery of re-
imbursement would not be cost effec- (2) Cooperate with the agency in es-
tive. tablishing the identity of a child’s par-
(3) The State plan must also specify ents and in obtaining medical support
the dollar amount or period of time for and payments, unless the individual es-
which it will accumulate billings with tablishes good cause for not cooper-
respect to a particular liable third ating, and except for individuals de-
party in making the decision whether scribed in § 435.116 of this chapter (preg-
to seek recovery of reimbursement. nant women), who are exempt from co-
operating in establishing the identity
[50 FR 46665, Nov. 12, 1985, as amended at 51 of a child’s parents and obtaining med-
FR 16319, May 2, 1986; 60 FR 35503, July 10,
1995; 62 FR 23140, Apr. 29, 1997] ical support and payments from, or de-
rived from, the non-custodial parent of
§ 433.140 FFP and repayment of Fed- a child; and
eral share. (3) Cooperate in identifying and pro-
(a) FFP is not available in Medicaid viding information to assist the Med-
payments if— icaid agency in pursuing third parties
(1) The agency failed to fulfill the re- who may be liable to pay for care and
quirements of §§ 433.138 and 433.139 with services under the plan, unless the in-
regard to establishing liability and dividual establishes good cause for not
seeking reimbursement from a third cooperating.
party; (b) A State plan must provide that
(2) The agency received reimburse- the requirements for assignments, co-
ment from a liable third party; or operation in establishing paternity and
(3) A private insurer would have been obtaining support, and cooperation in
obligated to pay for the service except identifying and providing information
that its insurance contract limits or to assist the State in pursuing any lia-
excludes payments if the individual is ble third party under §§ 433.146 through
eligible for Medicaid. 433.148 are met.
(b) FFP is available at the 50 percent (c) A State plan must provide that
rate for the agency’s expenditures in the assignment of rights to benefits ob-
carrying out the requirements of this tained from an applicant or beneficiary
subpart. is effective only for services that are
(c) If the State receives FFP in Med- reimbursed by Medicaid.
icaid payments for which it receives
third party reimbursement, the State [55 FR 48606, Nov. 21, 1990, as amended at 58
FR 4907, Jan. 19, 1993; 81 FR 86450, Nov. 30,
must pay the Federal government a

portion of the reimbursement deter- 2016]
mined in accordance with the FMAP
for the State. This payment may be re-
110
§ 433.146 Rights assigned; assignment (4) Pay to the agency any support or
method. medical care funds received that are
(a) Except as specified in paragraph covered by the assignment of rights;
(b) of this section, the agency must re- and
quire the individual to assign to the (5) Take any other reasonable steps
State— to assist in establishing paternity and
(1) His own rights to any medical securing medical support and pay-
care support available under an order ments, and in identifying and providing
of a court or an administrative agency, information to assist the State in pur-
and any third party payments for med- suing any liable third party.
ical care; and (c) Waiver of cooperation for good
(2) The rights of any other individual cause. The agency must waive the re-
eligible under the plan, for whom he quirements in paragraphs (a) and (b) of
can legally make an assignment. this section if it determines that the
individual has good cause for refusing
(b) Assignment of rights to benefits
to cooperate.
may not include assignment of rights
(1) For establishing the identity of a
to Medicare benefits.
child’s parents or obtaining medical
(c) If assignment of rights to benefits
care support and payments, or identi-
is automatic because of State law, the
fying or providing information to as-
agency may substitute such an assign-
sist the State in pursuing any liable
ment for an individual executed assign-
third party for a child for whom the in-
ment, as long as the agency informs
dividual can legally assign rights, the
the individual of the terms and con-
agency must find that cooperation is
sequences of the State law.
against the best interests of the child.
§ 433.147 Cooperation in establishing (2) With respect to obtaining medical
the identity of a child’s parents and care support and payments for an indi-
in obtaining medical support and vidual and identifying and providing
payments and in identifying and information to assist in pursuing liable
providing information to assist in third parties in any case not covered
pursuing third parties who may be by paragraph (c)(1) of this section, the
liable to pay. agency must find that cooperation is
(a) Scope of requirement. The agency against the best interests of the indi-
must require the individual who as- vidual or the person to whom Medicaid
signs his or her rights to cooperate in— is being furnished because it is antici-
(1) Except as exempt under pated that cooperation will result in
§ 433.145(a)(2), establishing the identity reprisal against, and cause physical or
of a child’s parents and obtaining med- emotional harm to, the individual or
ical support and payments for himself other person.
or herself and any other person for [45 FR 8984, Feb. 11, 1980, as amended at 55
whom the individual can legally assign FR 48606, Nov. 21, 1990; 58 FR 4907, Jan. 19,
rights; and 1993; 81 FR 86450, Nov. 30, 2016]
(2) Identifying and providing infor-
mation to assist the Medicaid agency § 433.148 Denial or termination of eli-
in pursuing third parties who may be gibility.
liable to pay for care and services In administering the assignment of
under the plan. rights provision, the agency must:
(b) Essentials of cooperation. As part of (a) Deny or terminate eligibility for
a cooperation, the agency may require any applicant or beneficiary who—
an individual to— (1) Refuses to assign his own rights or
(1) Appear at a State or local office those of any other individual for whom
designated by the agency to provide in- he can legally make an assignment; or
formation or evidence relevant to the (2) In the case of an applicant, does
case; not attest to willingness to cooperate,
(2) Appear as a witness at a court or and in the case of a beneficiary, refuses
other proceeding; to cooperate in establishing the iden-

(3) Provide information, or attest to tity of a child’s parents, obtaining
lack of information, under penalty of medical child support and pursuing lia-
perjury; ble third parties, as required under
111
§ 433.151 42 CFR Ch. IV (10–1–17 Edition)
§ 433.147(a) unless cooperation has been forcement when the following criteria
waived; have been met:
(b) Provide Medicaid to any indi- (i) The Medicaid referral is based
vidual who— solely upon health care services pro-
(1) Cannot legally assign his own vided through an Indian Health Pro-
rights; and gram (as defined at 25 U.S.C. 1603(12)),
(2) Would otherwise be eligible for including through the Purchased/Re-
Medicaid but for the refusal, by a per- ferred Care program, to a child who is
son legally able to assign his rights, to eligible for health care services from
assign his rights or to cooperate as re- the Indian Health Service (IHS).
quired by this subpart; and (ii) [Reserved]
(c) In denying or terminating eligi- (2) The Medicaid agency will provide
bility, comply with the notice and reimbursement to the IV–D agency
hearing requirements of part 431, sub- only for those child support services
part E of this subchapter. performed that are not reimbursable by
[45 FR 8984, Feb. 11, 1980, as amended at 81 the Office of Child Support Enforce-
FR 86450, Nov. 30, 2016] ment under title IV–D of the Act and
that are necessary for the collection of
COOPERATIVE AGREEMENTS AND amounts for the Medicaid program.
INCENTIVE PAYMENTS
§ 433.151 Cooperative agreements and FR 93560, Dec. 20, 2016]
incentive payments—State plan re-
quirements. § 433.153 Incentive payments to States
and political subdivisions.
For medical assistance furnished on
or after October 1, 1984— (a) When payments are required. The
(a) A State plan must provide for en- agency must make an incentive pay-
tering into written cooperative agreement to a political subdivision, a legal
ments for enforcement of rights to and entity of the subdivision such as a
collection of third party benefits with prosecuting or district attorney or a
at least one of the following entities: friend of the court, or another State
The State title IV-D agency, any ap- that enforces and collects medical sup-
propriate agency of any State, and ap- port and payments for the agency.
propriate courts and law enforcement (b) Amount and source of payment. The
officials. The agreements must be in incentive payment must equal 15 per-
accordance with the provisions of cent of the amount collected, and must
§ 433.152. be made from the Federal share of that
(b) A State plan must provide that amount.
the requirements for making incentive (c) Payment to two or more jurisdic-
payments and for distributing third tions. If more than one State or polit-
party collections specified in §§ 433.153 ical subdivision is involved in enforc-
and 433.154 are met. ing and collecting support and pay-
[50 FR 46665, Nov. 12, 1985; 50 FR 49389, Dec. ments:
2, 1985] (1) The agency must pay all of the in-
centive payment to the political sub-
§ 433.152 Requirements for coopera- division, legal entity of the subdivi-
tive agreements for third party col- sion, or another State that collected
lections. medical support and payments at the
(a) Except as specified in paragraph request of the agency.
(b) of this section, the State agency (2) The political subdivision, legal en-
may develop the specific terms of coop- tity or other State that receives the in-
erative agreements with other agencies centive payment must then divide the
as it determines appropriate for indi- incentive payment equally with any
vidual circumstances. other political subdivisions, legal enti-
(b) Agreements with title IV–D agen- ties, or other States that assisted in
cies must specify that: the collection, unless an alternative al-
(1) The Medicaid agency may not location is agreed upon by all jurisdic-
refer a case for medical support en- tions involved.
112
§ 433.154 Distribution of collections. described in § 440.330(a), (b), or (c) of

The agency must distribute collec- this chapter or benchmark equivalent
tions as follows— coverage described in § 440.335 of this
(a) To itself, an amount equal to chapter that has an aggregate actu-
State Medicaid expenditures for the in- arial value that is at least actuarially
dividual on whose right the collection equivalent to benchmark coverage de-
was based. scribed in § 440.330(a), (b), or (c) of this
(b) To the Federal Government, the chapter, or would have been eligible
Federal share of the State Medicaid ex- but not enrolled (or placed on a waiting
penditures, minus any incentive pay- list) for such benefits or coverage
ment made in accordance with § 433.153. through a waiver under the plan that
(c) To the beneficiary, any remaining had a capped or limited enrollment
amount. This amount must be treated that was full.
as income or resources under part 435 (2) Full benefits means, for purposes of
or part 436 of this subchapter, as appro- paragraph (a)(1) of this section, with
priate. respect to an adult individual, medical
assistance for all services covered
Subpart E—Methodologies for De- under the State plan under Title XIX
termining Federal Share of of the Act that is not less in amount,
Medicaid Expenditures for duration, or scope, or is determined by
Adult Eligibility Group the Secretary to be substantially
equivalent, to the medical assistance
available for an individual described in
SOURCE: 78 FR 19942, Apr. 2, 2013, unless
section 1902(a)(10)(A)(i) of the Act.
otherwise noted.
(3) For purposes of establishing under
§ 433.202 Scope. paragraphs (a)(1) and (2) of this section
This subpart sets forth the require- whether an individual would not have
ments and procedures that are applica- been eligible for full benefits, bench-
ble to support State claims for the in- mark coverage, or benchmark equiva-
creased FMAP specified at § 433.10(c)(6) lent coverage under a waiver or dem-
for the medical assistance expenditures onstration program in effect on Decem-
for individuals determined eligible as ber 1, 2009, the State must provide CMS
specified in § 435.119 of this chapter who with its analysis, in accordance with
meet the definition of newly eligible guidance issued by CMS, about whether
individual specified in § 433.204(a)(1). the benefits available under such waiv-
These procedures will also identify iner or demonstration constituted full
dividuals determined eligible as speci- benefits, benchmark coverage, or
fied in § 435.119 of this chapter for benchmark equivalent coverage. CMS
whom the State may claim the regular will review such analysis and confirm
FMAP rate specified at § 433.10(b) or the the applicable FMAP. Individuals for
increased FMAP rate specified at whom such benefits or coverage would
§ 433.10(c)(7) or (8), as applicable. have been available under such waiver
or demonstration are not newly eligi-
§ 433.204 Definitions. ble individuals.
(a)(1) Newly eligible individual means (b)(1) Expansion State means a State
an individual determined eligible for that, as of March 23, 2010, offered
Medicaid in accordance with the re- health benefits coverage statewide to
quirements of the adult group de- parents and nonpregnant, childless
scribed in § 435.119 of this chapter, and adults whose income is at least 100 per-
who, as determined by the State in ac- cent of the Federal Poverty Level. A
cordance with the requirements of State that offers health benefits cov-
§ 433.206, would not have been eligible erage to only parents or only nonpreg-
for Medicaid under the State’s eligi- nant childless adults described in the
bility standards and methodologies for preceding sentence will not be consid-
ered to be an expansion State. Such
the Medicaid State plan, waiver or

demonstration programs in effect in health benefits coverage must:
the State as of December 1, 2009, for (i) Have included inpatient hospital
full benefits or for benchmark coverage services;
113
§ 433.206 42 CFR Ch. IV (10–1–17 Edition)
(ii) Not have been dependent on ac- been eligible in accordance with the
cess to employer coverage, employer December 1, 2009 eligibility standards
contribution, or employment; and and applicable eligibility categories for
(iii) Not have been limited to pre- the benefits described in § 433.204(a)(1),
mium assistance, hospital-only bene- and subject to paragraphs (d), (e), and
fits, a high deductible health plan, or (g) of this section, by incorporating
benefits under a demonstration pro- simplified assessments of resources, en-
gram authorized under section 1938 of rollment cap requirements in place at
the Act. that time, and other special cir-
(2) For purposes of paragraph (b)(1) of cumstances as approved by CMS, re-
this section and for § 433.10(c)(8), a non- spectively.
pregnant childless adult means an indi-
(4) Operate efficiently, without fur-
vidual who is not eligible based on
ther review once an individual has been
pregnancy and does not meet the defi-
determined not to be newly eligible
nition of a caretaker relative in § 435.4
of this chapter. based on the December 1, 2009 stand-
ards for any eligibility category.
§ 433.206 Threshold methodology. (c) Components of the threshold meth-
(a) Overview. Effective January 1, odology. Subject to the submission of a
2014, States must apply the threshold threshold methodology State plan
methodology described in this para- amendment as specified in paragraph
graph for purposes of determining the (h) of this section, the provisions of the
appropriate claiming for the Federal threshold methodology consist of two
share of expenditures at the applicable components, the individual income-
FMAP rates described in § 433.10(b) and based determination and population-
(c) for medical assistance provided based non-income adjustments to re-
with respect to individuals who have flect resource criteria, enrollment caps
been determined eligible for the Med- in effect on December 1, 2009, and other
icaid program under § 435.119 of this factors in accordance with paragraph
chapter. Subject to the provisions of (g) of this section.
this paragraph, States must apply the (1) Scope. The threshold methodology
CMS-approved State specific threshold shall apply with respect to the popu-
methodology to determine and distin- lation, and the associated expenditures
guish such individuals as newly or not for such population, which has been de-
newly eligible individuals in accord- termined eligible for Medicaid under
ance with the definition in section 1902(a)(10)(A)(i)(VIII) of the Act
§ 433.204(a)(1), and in accordance with and in accordance with § 435.119 of this
States’ Medicaid eligibility criteria as chapter. This population and associ-
in effect on December 1, 2009 and to at- ated expenditures must not include in-
tribute their associated medical ex- dividuals who have been determined el-
penditures with the appropriate FMAP. igible for Medicaid under any other
The threshold methodology must not
mandatory or optional eligibility cat-
be applied by States for the purpose of
egory.
determining the applicable FMAP for
individuals under any other eligibility (2) Benefit criteria for newly eligible.
category other than § 435.119 of this An individual eligible for and enrolled
chapter. under § 435.119 of this chapter is consid-
(b) General principles. The threshold ered newly eligible if, with respect to
methodology should: the applicable eligibility category in
(1) Not impact the timing or approval effect on December 1, 2009, the benefits
of an individual’s eligibility for Med- did not meet the criteria described in
icaid. the newly eligible definition at
(2) Not be biased in such a manner as § 433.204(a)(1).
to inappropriately establish the num- (3) Individual income-based determina-
bers of, or medical assistance expendi- tion. The individual income-based de-
tures for, individuals determined to be termination shall be a comparison of

newly or not newly eligible. the individual’s MAGI-based income to
(3) Provide a valid and accurate ac- the income standard in effect on De-
counting of individuals who would have cember 1, 2009, as converted to an
114
equivalent MAGI-based income stand- (4) Treatment of disability. For pur-

ard for each applicable eligibility cat- poses of applying the appropriate
egory as in effect on that date, as fol- FMAP under § 433.10(b) or (c) for the
lows. medical assistance expenditures of an
(i) The amount of an individual’s in- individual in applying the definition of
come under the threshold methodology newly eligible under § 433.204(a)(1), for
is the MAGI-based income determined eligibility categories or groups as in ef-
in accordance with § 435.603 of this fect on December 1, 2009 for which dis-
chapter. ability was an eligibility criteria:
(ii) For each individual, the equiva- (i) During the period of a disability de-
lent MAGI-based income eligibility termination. During the period for
standard is the applicable income eligi- which a disability determination is
bility standard for the applicable cat- pending, including during the period of
egory of eligibility as in effect on De- any appeal process, and absent an ac-
cember 1, 2009 that is converted to an tual disability determination for the
equivalent MAGI-based income stand- individual that is in accordance with
ard. For example, as applicable, a sepa- the disability definition applicable for
rate MAGI-based income standard will the State under Title XIX of the Act,
be applied for individuals determined the individual is not considered to be
to be disabled who would have been eli- disabled.
gible under an optional eligibility cat- (ii) Following a disability determina-
egory in effect on December 1, 2009 that tion. With respect to an individual for
was based on disability. For these pur- which a disability determination was
poses, the applicable equivalent MAGI- pending, following the actual deter-
based standard is the standard as sub- mination of disability, the individual
mitted by the State and approved by will be considered disabled effective
CMS in accordance with CMS guidance. with the date of the disability deter-
(iii) With respect to income eligi- mination, or, if later, the disability
bility criteria, if the individual’s onset date, as determined.
MAGI-based income is at or below the (5) Population-based adjustments to the
applicable converted MAGI-based in- populations of newly eligible and not
come standard for the relevant eligi- newly eligible. (i) The State may elect a
bility category or group, then the indi- resource criteria proxy adjustment de-
vidual is included in the population scribed in paragraph (d) of this section.
that is not newly eligible; (ii) States that had a waiver or dem-
(iv) With respect to income eligi- onstration program with an enrollment
bility criteria, if the individual’s cap in effect as of December 1, 2009
MAGI-based income is greater than the must apply an adjustment based on en-
applicable converted MAGI-based in- rollment caps, subject to the definition
come standard for the relevant eligi- of newly eligible individual in
bility category or group, then the indi- § 433.204(a)(1) and paragraph (e) of this
vidual is included in the population section.
that is newly eligible; (iii) States that have special cir-
(v) Treatment of spend-down programs. cumstances may need to submit associ-
Treatment of medically needy or ated proxy methodologies to CMS for
spend-down programs under the thresh- approval by CMS as described in para-
old methodology is described in paragraph (g) of this section.
graph (f) of this section. (6) Application of FMAP rates to adult
(vi) For purposes of comparing the group expenditures. Subject to popu-
individual’s MAGI-based income to the lation adjustments under paragraphs
applicable converted MAGI-based in- (d), (e), or (g) of this section, federal
come standard in effect on December 1, funding for a State’s expenditures for
2009, an individual will not be consid- medical assistance provided to individ-
ered disabled absent an actual dis- uals determined eligible under § 435.119
ability determination for the indi- of this chapter, including individuals

vidual that is in accordance with the determined eligible under that eligi-
disability definition applicable for the bility group during the evaluation for
State under Title XIX of the Act. another eligibility category, must be
115
§ 433.206 42 CFR Ch. IV (10–1–17 Edition)
claimed using the applicable FMAP as the eligibility determination for an in-
follows: dividual.
(i) The newly eligible FMAP under (2) A State’s resource proxy method-
§ 433.10(c)(6) is applicable for the med- ology must:
ical assistance expenditures for indi- (i) Describe each eligibility group or
viduals determined to be newly eligi- groups for which an individual eligible
ble, as defined in § 433.204(a)(1). under § 435.119 would have been eligible
(ii) The applicable FMAP under on December 1, 2009, subject to re-
§ 433.10(b) or § 433.10(c)(7) or (8) is appli- source criteria, and a methodology to
cable for the medical assistance ex- apply those resource criteria as an ad-
penditures for individuals determined justment to the total expenditures to
not to be newly eligible. adjust determinations of the newly eli-
(7) Status as newly or not newly eligi- gible population under paragraph (c) of
ble. Under the threshold methodology this section.
States must provide that once individ- (ii) Be auditable.
(iii) Be based on statistically valid
uals are determined under the thresh-
data, which is either:
old methodology to be either newly or
(A) Existing State data from and for
not newly eligible individuals in ac-
periods before January 1, 2014 on the
cordance with the applicable December
resources of individuals who had ap-
1, 2009 eligibility criteria, the State
plied and received a determination
would apply that determination until a
with respect to Medicaid eligibility, in-
new determination of MAGI-based in-
cluding resource eligibility under the
come has been made in accordance
State’s applicable December 1, 2009 eli-
with § 435.916 of this chapter, or the in-
gibility criteria. The existing State
dividual has been otherwise determined
data must be specifically related to re-
not to be covered under the adult group source eligibility determinations, indi-
set forth at § 435.119 of this chapter. cate the number and types of individ-
(d) Optional resource criteria proxy ad- uals for whom resource determinations
justment—(1) General. Under an election were made, and establish the denial
under this paragraph (d), the State rates specifically identified as due to
may use a resource proxy methodology excess resources; or
for purposes of adjusting the claims for (B) Post-eligibility State data on the
the expenditures of the population en- resources of individuals described in
rolled under § 435.119 of this chapter to paragraph (d)(2)(iii)(B)(1) and (2) of this
account for individuals who would not section, based on and obtained through
have been eligible for Medicaid because a post-eligibility statistically valid
of the application of resource criteria sample of such individuals with respect
as in effect for such population as of to the applicable Medicaid eligibility
December 1, 2009, and therefore would categories and resource eligibility cri-
meet the newly eligible individual defi- teria under the State’s applicable De-
nition at § 433.204(a)(1). Under this para- cember 1, 2009 eligibility criteria:
graph (d), a State may elect to apply a (1) State data from and for periods
resource proxy methodology with re- before January 1, 2014 must be for indi-
spect to the resource criteria as in ef- viduals in eligibility categories rel-
fect on December 1, 2009 and applied to evant to § 435.119 of this chapter who
the expenditures for a specific eligi- apply and receive a determination with
bility category or categories of individ- respect to Medicaid eligibility, includ-
uals as in effect on December 1, 2009, or ing both approvals and denials, to es-
applied to the expenditures of the en- tablish denial rates specifically due to
tire population enrolled under § 435.119 excess resources and identify numbers
of this chapter. As provided in para- and types of individuals.
graph (d)(4) of this section, the State (2) State data from and for periods on
must indicate any resource proxy elec- or after January 1, 2014 must only be
tion in the threshold methodology for individuals determined eligible and
State plan amendment submitted enrolled under § 435.119 of this chapter,

under paragraph (h) of this section. must compare individuals’ resources to
The use of a resource proxy method- the applicable December 1, 2009 re-
ology must not delay or interfere with source criteria to establish denial rates
116
specifically due to excess resources, definition of newly eligible individual

and identify numbers and types of indi- in § 433.204(a)(1), such States must con-
viduals. sider as newly eligible those individ-
(iv) Describe the State data on indi- uals eligible under § 435.119 of this chap-
viduals’ resources used and the applica- ter who would otherwise be eligible for
tion of such data. Whether such State full benefits, benchmark coverage, or
data is based on data described in para- benchmark equivalent coverage pro-
graph (d)(2)(iii)(A) or (B) of this sec- vided through a demonstration under
tion, such State data must represent the State plan effective December 1,
sampling results for a period of suffi- 2009, but would not have been enrolled
cient length to be statistically valid. (or would have been on a waiting list)
(v) Provide that the resource proxy based on the application of an enroll-
methodology will account for the ment cap or limit determined in ac-
treatment of resources in a statis- cordance with the approved demonstra-
tically valid manner when there is a
tion as in effect on that date. Such
lack of sufficient information to make
States must only apply such enroll-
a resource determination for a par-
ment cap, limit or waiting list provi-
ticular individual in a sampled popu-
lation. sions with respect to eligibility cat-
(vi) Describe the application of the egory or categories for which such pro-
resource proxy methodology in estab- visions were applicable (for example,
lishing the amount and submission of nonpregnant childless adults or par-
claims for Federal funding by the State ents/caretaker relatives) and in effect
for the medical assistance expenditures under the State’s Medicaid program on
of the applicable eligibility group(s). December 1, 2009. For this purpose, in-
Such claims submitted under the re- dividuals who would have been on a
source proxy methodology must reflect waiting list are considered as not en-
the appropriate FMAP for the medical rolled under the demonstration.
assistance expenditures of the affected (2) A State for which multiple enroll-
eligibility group(s). ment caps or limits were in effect
(vii) As appropriate, describe and under its December 1, 2009 Medicaid
demonstrate the statistical validity of program may elect to combine such en-
the resource proxy methodology and rollment caps or limits, unless such
the use of data under such method- treatment would preclude claiming of
ology. Federal funding at the applicable
(3) Effective date for application of re- FMAP rate required under § 433.10(b) or
source proxy. The resource proxy shall (c) (for example, to distinguish claims
not be effective prior to the beginning for childless adults and parents in an
of the quarter in which such resource expansion State) for the medical as-
proxy is submitted to CMS under the sistance expenditures of individuals de-
threshold methodology State plan in termined eligible and enrolled under
paragraph (h) of this section. § 435.119 of this chapter; a State with
(4) One time election for resource proxy. enrollment cap or limit provisions that
The election, application, and descrip-
would preclude combining enrollment
tion of a resource proxy methodology
caps or limit provisions must use sepa-
under this paragraph for individuals
rate caps; or, the State, at its option,
determined eligible under § 435.119 must
be included in a one-time submission of may elect to use separate caps.
a State plan amendment submitted (3) For purposes of claiming Federal
under paragraph (h) of this section no funding, with respect to each claiming
later than one year from the first day period for which the State claims Fed-
of the quarter in which eligibility for eral funding for an eligibility category
individuals under § 435.119 of this chap- for which an enrollment cap or limit is
ter is initially effective for the State. applicable and in effect on December 1,
(e) Enrollment caps adjustment—(1) 2009, the State must account for:
Scope. Certain States may have applied (i) The total unduplicated number of
enrollment caps, limits, or waiting individuals eligible and enrolled under
lists in their Medicaid programs as in § 435.119 of this chapter for the applica-
effect on December 1, 2009. Under the ble claiming period.
117
§ 433.206 42 CFR Ch. IV (10–1–17 Edition)
(ii) The total State medical assist- eligibility categories for which deduc-
ance expenditures for individuals eligi- tion of incurred medical expenses from
ble and enrolled under § 435.119 of this income (referred to as spend-down)
chapter for the applicable claiming pe- under the provisions of sections
riod. 1902(a)(10)(C) or 1902(f) of the Act was
(iii) The enrollment cap or limit in applied in determining individuals’
effect on December 1, 2009 for the eligi- Medicaid eligibility. Paragraphs (f)(2)
bility category, determined in accord- and (3) of this section apply, for pur-
ance with the approved demonstration poses of determining whether an indi-
as in effect on December 1, 2009. vidual enrolled under § 435.119 of this
(A) For States that elect under para- chapter meets the definition of newly
graph (e)(2) of this section to combine eligible under § 433.204(a)(1), and for
the enrollment caps, the enrollment purposes of applying the appropriate
cap is the sum of the enrollment caps FMAP under § 433.10(b) or (c) for the
for each eligibility group which is medical assistance expenditures of the
being combined. individual for which a spend-down eli-
(B) For States that elect to treat the gibility category of a State effective on
enrollment caps separately under para- December 1, 2009 is applicable.
graph (e)(2) of this section, each enroll- (2) Not newly eligible individual. For
ment cap will be accounted for sepa- purposes of a State’s spend-down provi-
rately. sion, an individual enrolled under
(C) The level of the enrollment cap § 435.119 of this chapter whose income
will be as authorized under the dem- before the deduction of incurred med-
onstration in effect on December 1, ical expenses is less than or equal to
2009; or, if the State had affirmatively the applicable December 1, 2009 State
set the cap at a lower level consistent spend-down eligibility income level
with flexibility provided by the dem- that would have resulted in full bene-
onstration terms and conditions, the fits is considered not newly eligible.
State may elect to apply the lower cap The FMAP applicable for the medical
as in effect in the State on December 1, assistance expenditures of such an indi-
2009. If a State elects to use such an al- vidual is the appropriate FMAP under
ternate State-specified enrollment cap, § 433.10(b) and (c) as applicable for an
the State will provide CMS with evi- individual who is not newly eligible.
dence, in its State plan amendment (3) Newly eligible individual. For pur-
submitted to CMS under paragraph (h) poses of a State’s spend-down provi-
of this section, that it had affirma- sion, an individual enrolled under
tively implemented such a cap. Wheth- § 435.119 of this chapter whose income
er the State uses the authorized cap or before the deduction of incurred med-
a lower, verifiable cap as in effect in ical expenses is greater than the appli-
the State consistent with the dem- cable State spend-down eligibility in-
onstration special terms and condi- come level is considered newly eligible.
tions, the amount of expenditures up to The FMAP applicable for the medical
the proportion of the 2009 enrollment assistance expenditures of such an indi-
cap to the total number of currently vidual is the appropriate FMAP under
enrolled people in the group would not § 433.10(b) and (c) as applicable for an
be claimed at the newly eligible FMAP. individual who is newly eligible.
(4) States for which an enrollment (g) Special circumstances. States may
cap, limit, or waiting list was applica- submit additional proxy methodologies
ble under their Medicaid programs as to CMS for approval by CMS in accord-
in effect on December 1, 2009, must de- ance with the State plan requirements
scribe the treatment of such provision outlined in § 433.206(h).
or provisions in the submission to CMS (h) Threshold methodology State plan
for approval by CMS in accordance requirements. To claim expenditures at
with the State plan requirements out- the increased FMAPs described in
lined in § 433.206(h). § 433.210(c)(6) or (c)(8), the State must
(f) Application of spend-down income amend its State plan under the provi-
eligibility criteria—(1) General. Certain sions of subpart B of part 430 to reflect
States’ Medicaid programs as in effect the threshold methodology the State
on December 1, 2009 may have included implements in accordance with the
118
provisions of this section. The thresh- year from discovery of an overpayment

old methodology will be included as an for Medicaid services to recover or at-
attachment to the State plan and, ex- tempt to recover the overpayment
plicitly and by reference, must: from the provider before adjustment in
(1) Specify that the threshold meth- the Federal Medicaid payment to the
odology the State implements is in ac- State is made; and that adjustment
cordance with this section; will be made at the end of the 1-year
(2) Specify that the threshold meth- period, whether or not recovery is
odology the State implements ac- made, unless the State is unable to re-
counts for the individuals determined cover from a provider because the over-
eligible under the adult group in payment is a debt that has been dis-
§ 435.119 of this chapter as a newly eligi- charged in bankruptcy or is otherwise
ble individual or not newly eligible in- uncollectable.
dividual; and, on that basis, the State (c) Section 1903(d)(3) of the Act,
implements appropriate tracking for which provides that the Secretary will
purpose of claiming Federal Medicaid consider the pro rata Federal share of
funding for the associated medical as- the net amount recovered by a State
sistance expenditures. during any quarter to be an overpay-
(3) Reference the converted MAGI- ment.
based December 1, 2009 income eligi- [54 FR 5460, Feb. 3, 1989, as amended at 77 FR
bility standards and the associated eli- 31511, May 29, 2012]
gibility groups, describe how the State
will apply such standards and meth- § 433.302 Scope of subpart.
odologies, and include other relevant This subpart sets forth the require-
criteria in the assignment of FMAP. ments and procedures under which
(4) Indicate any required provisions, States have 1 year following discovery
or options and alternatives the State of overpayments made to providers for
elects, with respect to: Medicaid services to recover or at-
(i) Treatment of resources, in accord- tempt to recover that amount before
ance with paragraph (d) of this section; the States must refund the Federal
(ii) Treatment of enrollment caps or share of these overpayments to CMS,
waiting lists, in accordance with para- with certain exceptions.
graph (e) of this section; and
(iii) Special circumstances as ap- [77 FR 31511, May 29, 2012]
proved by CMS in accordance with
paragraph (g) of this section. § 433.304 Definitions.
As used in this subpart—
[78 FR 19942, Apr. 2, 2013, as amended at 78
FR 32991, June 3, 2013] Discovery (or discovered) means identi-
fication by any State Medicaid agency
official or other State official, the Fed-
Subpart F—Refunding of Federal eral Government, or the provider of an
Share of Medicaid Overpay- overpayment, and the communication
ments to Providers of that overpayment finding or the ini-
tiation of a formal recoupment action
SOURCE: 54 FR 5460, Feb. 3, 1989, unless oth- without notice as described in § 433.316.
erwise noted. Final written notice means that writ-
ten communication, immediately pre-
§ 433.300 Basis. ceding the first level of formal admin-
This subpart implements— istrative or judicial proceedings, from
(a) Section 1903(d)(2)(A) of the Act, a Medicaid agency official or other
which directs that quarterly Federal State official that notifies the provider
payments to the States under title XIX of the State’s overpayment determina-
(Medicaid) of the Act are to be reduced tion and allows the provider to contest
or increased to make adjustment for that determination, or that notifies
prior overpayments or underpayments the State Medicaid agency of the filing
that the Secretary determines have of a civil or criminal action.

been made. Fraud (in accordance with § 455.2)
(b) Section 1903(d)(2)(C) and (D) of the means an intentional deception or mis-
Act, which provides that a State has 1 representation made by a person with
119
§ 433.310 42 CFR Ch. IV (10–1–17 Edition)
the knowledge that the deception could resources later determined to be avail-
result in some unauthorized benefit to able to the State.
himself or some other person. It in- (c) Unallowable costs paid under rate-
cludes any act that constitutes fraud setting systems. (1) Unallowable costs for
under applicable Federal or State law. a prior year paid to an institutional
Overpayment means the amount paid provider under a rate-setting system
by a Medicaid agency to a provider that a State recovers through an ad-
which is in excess of the amount that justment to the per diem rate for a
is allowable for services furnished subsequent period do not constitute
under section 1902 of the Act and which overpayments that are subject to the
is required to be refunded under section requirements of this subpart.
1903 of the Act. In such cases, the State is not re-
Provider (in accordance with § 400.203) quired to refund the Federal share ex-
means any individual or entity fur- plicitly related to the original overpay-
nishing Medicaid services under a pro- ment in accordance with the regula-
vider agreement with the Medicaid tions in this subpart. Refund of the
agency. Federal share occurs when the State
Recoupment means any formal action claims future expenditures made to the
by the State or its fiscal agent to ini- provider at a reduced rate.
tiate recovery of an overpayment with- (2) Unallowable costs for a prior year
out advance official notice by reducing paid to an institutional provider under
future payments to a provider. a rate-setting system that a State
Third party (in accordance with seeks to recover in a lump sum, by an
§ 433.136) means an individual, entity, installment repayment plan, or
or program that is or may be liable to through reduction of future payments
pay for all or part of the expenditures to which the provider would otherwise
for medical assistance furnished under be entitled constitute overpayments
a State plan. that are subject to the requirements of
[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, this subpart.
1989, as amended at 77 FR 31511, May 29, 2012] (d) Recapture of depreciation upon gain
on the sale of assets. Depreciation pay-
§ 433.310 Applicability of requirements are considered overpayments for
ments. purposes of this subpart if a State re-
(a) General rule. Except as provided in quires their recapture in a discrete
paragraphs (b) and (c) of this section, amount(s) upon gain on the sale of as-
the provisions of this subpart apply sets.
to—
(1) Overpayments made to providers § 433.312 Basic requirements for re-
that are discovered by the State; funds.
(2) Overpayments made to providers (a) Basic rules. (1) Except as provided
that are initially discovered by the in paragraph (b) of this section, the
provider and made known to the State State Medicaid agency has 1 year from
agency; and the date of discovery of an overpay-
(3) Overpayments that are discovered ment to a provider to recover or seek
through Federal reviews. to recover the overpayment before the
(b) Third party payments and probate Federal share must be refunded to
collections. The requirements of this CMS.
subpart do not apply to— (2) The State Medicaid agency must
(1) Cases involving third party liabil- refund the Federal share of overpay-
ity because, in these situations, recov- ments at the end of the 1-year period
ery is sought for a Medicaid payment following discovery in accordance with
that would have been made had an- the requirements of this subpart,
other party not been legally respon- whether or not the State has recovered
sible for payment; and the overpayment from the provider.
(2) Probate collections from the es- (b) Exception. The agency is not re-
tates of deceased Medicaid bene- quired to refund the Federal share of
ficiaries, as they represent the recov- an overpayment made to a provider
ery of payments properly made from when the State is unable to recover the
120
overpayment amount because the pro- cific overpaid amount from a provider
vider has been determined bankrupt or without having first notified the pro-
out of business in accordance with vider in writing.
§ 433.318. (d) Overpayments resulting from fraud.
(c) Applicability. (1) The requirements (1) An overpayment that results from
of this subpart apply to overpayments fraud is discovered on the date of the
made to Medicaid providers that occur final written notice (as defined in
and are discovered in any quarter that § 433.304 of this subchapter) of the
begins on or after October 1, 1985. State’s overpayment determination.
(2) The date upon which an overpay- (2) When the State is unable to re-
ment occurs is the date upon which a cover a debt which represents an over-
State, using its normal method of repayment (or any portion thereof) re-
imbursement for a particular class of sulting from fraud within 1 year of dis-
provider (e.g., check, interfund trans- covery because no final determination
fer), makes the payment involving un- of the amount of the overpayment has
allowable costs to a provider. been made under an administrative or
[54 FR 5460, Feb. 3, 1989, as amended at 77 FR judicial process (as applicable), includ-
31511, May 29, 2012] ing as a result of a judgment being
under appeal, no adjustment shall be
§ 433.316 When discovery of overpay- made in the Federal payment to such
ment occurs and its significance. State on account of such overpayment
(a) General rule. The date on which an (or any portion thereof) until 30 days
overpayment is discovered is the begin- after the date on which a final judg-
ning date of the 1-year period allowed ment (including, if applicable, a final
for a State to recover or seek to redetermination on an appeal) is made.
cover an overpayment before a refund (3) The Medicaid agency may treat an
of the Federal share of an overpayment overpayment made to a Medicaid pro-
must be made to CMS. vider as resulting from fraud under
(b) Requirements for notification. Un- subsection (d) of this section only if it
less a State official or fiscal agent of has referred a provider’s case to the
the State chooses to initiate a formal Medicaid fraud control unit, or appro-
recoupment action against a provider priate law enforcement agency in
without first giving written notifica- States with no certified Medicaid fraud
tion of its intent, a State Medicaid control unit, as required by § 455.15,
agency official or other State official § 455.21, or § 455.23 of this chapter, and
must notify the provider in writing of the Medicaid fraud control unit or ap-
any overpayment it discovers in ac- propriate law enforcement agency has
cordance with State agency policies provided the Medicaid agency with
and procedures and must take reason- written notification of acceptance of
able actions to attempt to recover the the case; or if the Medicaid fraud con-
overpayment in accordance with State trol unit or appropriate law enforce-
law and procedures. ment agency has filed a civil or crimi-
(c) Overpayments resulting from situa- nal action against a provider and has
tions other than fraud. An overpayment notified the State Medicaid agency.
resulting from a situation other than (e) Overpayments identified through
fraud is discovered on the earliest of— Federal reviews. If a Federal review at
- any time indicates that a State has
(1) The date on which any Medicaid failed to identify an overpayment or a
agency official or other State official State has identified an overpayment
first notifies a provider in writing of an but has failed to either send written
overpayment and specifies a dollar notice of the overpayment to the pro-
amount that is subject to recovery; vider that specified a dollar amount
(2) The date on which a provider ini- subject to recovery or initiate a formal
tially acknowledges a specific overpaid recoupment from the provider without
amount in writing to the medicaid having first notified the provider in
agency; or writing, CMS will consider the over-

(3) The date on which any State offi- payment as discovered on the date that
cial or fiscal agent of the State initi- the Federal official first notifies the
ates a formal action to recoup a spe- State in writing of the overpayment
121
§ 433.318 42 CFR Ch. IV (10–1–17 Edition)
and specifies a dollar amount subject any case involving a bankrupt or out-
to recovery. of-business provider and, if the debt
(f) Effect of changes in overpayment has not been determined uncollectable,
amount. Any adjustment in the amount take reasonable actions to recover the
of an overpayment during the 1-year overpayment during the 1-year recov-
period following discovery (made in ac- ery period in accordance with policies
cordance with the approved State plan, prescribed by applicable State law and
Federal law and regulations governing administrative procedures.
Medicaid, and the appeals resolution (b) Overpayment debts that the State
process specified in State administra- need not refund. Overpayments are con-
tive policies and procedures) has the sidered debts that the State is unable
following effect on the 1-year recovery to recover within the 1-year period fol-
period: lowing discovery if the following cri-
(1) A downward adjustment in the teria are met:
amount of an overpayment subject to (1) The provider has filed for bank-
recovery that occurs after discovery ruptcy, as specified in paragraph (c) of
does not change the original 1-year re- this section; or
covery period for the outstanding bal- (2) The provider has gone out of busi-
ance. ness and the State is unable to locate
(2) An upward adjustment in the the provider and its assets, as specified
amount of an overpayment subject to in paragraph (d) of this section.
recovery that occurs during the 1-year (c) Bankruptcy. The agency is not re-
period following discovery does not quired to refund to CMS the Federal
change the 1-year recovery period for share of an overpayment at the end of
the original overpayment amount. A the 1-year period following discovery,
new 1-year period begins for the incre- if—
mental amount only, beginning with (1) The provider has filed for bank-
the date of the State’s written notifica- ruptcy in Federal court at the time of
tion to the provider regarding the up- discovery of the overpayment or the
ward adjustment. provider files a bankruptcy petition in
(g) Effect of partial collection by State. Federal court before the end of the 1-
A partial collection of an overpayment year period following discovery; and
amount by the State from a provider (2) The State is on record with the
during the 1-year period following dis- court as a creditor of the petitioner in
covery does not change the 1-year re- the amount of the Medicaid overpay-
covery period for the balance of the ment.
original overpayment amount due to (d) Out of business. (1) The agency is
CMS. not required to refund to CMS the Fed-
(h) Effect of administrative or judicial eral share of an overpayment at the
appeals. Any appeal rights extended to end of the 1-year period following dis-
a provider do not extend the date of covery if the provider is out of business
discovery. on the date of discovery of the overpay-
[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, ment or if the provider goes out of
1989, as amended at 77 FR 31511, May 29, 2012] business before the end of the 1-year
period following discovery.
§ 433.318 Overpayments involving pro- (2) A provider is considered to be out
viders who are bankrupt or out of of business on the effective date of a
business. determination to that effect under
(a) Basic rules. (1) The agency is not State law. The agency must—
required to refund the Federal share of (i) Document its efforts to locate the
an overpayment made to a provider as party and its assets. These efforts must
required by § 433.312(a) to the extent be consistent with applicable State
that the State is unable to recover the policies and procedures; and
overpayment because the provider has (ii) Make available an affidavit or
been determined bankrupt or out of certification from the appropriate
business in accordance with the provi- State legal authority establishing that
sions of this section. the provider is out of business and that
(2) The agency must notify the pro- the overpayment cannot be collected
vider that an overpayment exists in under State law and procedures and
122
citing the effective date of that deter- quarter for which the State submits a
mination under State law. CMS–64 report refunding the Federal
(3) A provider is not out of business share of the overpayment.
when ownershp is transferred within (b) Effect of reporting collections and
the State unless State law and proce- submitting reduced expenditure claims. (1)
dures deem a provider that has trans- The State is not required to refund the
ferred ownership to be out of business Federal share of an overpayment at the
and preclude collection of the overpay- end of the 1-year period if the State has
ment from the provider. already reported a collection or sub-
(e) Circumstances requiring refunds. If mitted an expenditure claim reduced
the 1-year recovery period has expired by a discrete amount to recover the
before an overpayment is found to be overpayment prior to the end of the 1-
uncollectable under the provisions of year period following discovery.
this section, if the State recovers an (2) The State is not required to re-
overpayment amount under a court-ap- port on the Form CMS–64 any collec-
proved discharge of bankruptcy, or if a tions made on overpayment amounts
bankruptcy petition is denied, the for which the Federal share has been
agency must refund the Federal share refunded previously.
of the overpayment in accordance with (3) If a State has refunded the Fed-
the procedures specified in § 433.320 of eral share of an overpayment as re-
this subpart. quired under this subpart and the State
[54 FR 5460, Feb. 3, 1989; 54 FR 8435, Feb. 28, subsequently makes recovery by reduc-
1989, as amended at 77 FR 31512, May 29, 2012] ing future provider payments by a dis-
crete amount, the State need not re-
§ 433.320 Procedures for refunds to flect that reduction in its claim for
CMS. Federal financial participation.
(a) Basic requirements. (1) The agency (c) Reclaiming overpayment amounts
must refund the Federal share of over- previously refunded to CMS. If the
payments that are subject to recovery amount of an overpayment is adjusted
to CMS through a credit on its Quar- downward after the agency has cred-
terly Statement of Expenditures (Form ited CMS with the Federal share, the
CMS–64). agency may reclaim the amount of the
(2) The agency must credit CMS with downward adjustment on the Form
the Federal share of overpayments sub- CMS–64. Under this provision—
ject to recovery on the earlier of— (1) Downward adjustment to an over-
(i) The Form CMS–64 submission due payment amount previously credited to
to CMS for the quarter in which the CMS is allowed only if it is properly
State recovers the overpayment from based on the approved State plan, Fed-
the provider; or eral law and regulations governing
(ii) The Form CMS–64 due to CMS for Medicaid, and the appeals resolution
the quarter in which the 1-year period processes specified in State adminis-
following discovery, established in ac- trative policies and procedures.
cordance with § 433.316, ends. (2) The 2-year filing limit for retro-
(3) A credit on the Form CMS–64 active claims for Medicaid expendi-
must be made whether or not the over- tures does not apply. A downward ad-
payment has been recovered by the justment is not considered a retro-
State from the provider. active claim but rather a reclaiming of
(4) If the State does not refund the costs previously claimed.
Federal share of such overpayment as (d) Expiration of 1-year recovery period.
indicated in paragraph (a)(2) of this If an overpayment has not been deter-
section, the State will be liable for in- mined uncollectable in accordance
terest on the amount equal to the Fed- with the requirements of § 433.318 of
eral share of the non-recovered, non-re- this subpart at the end of the 1-year pe-
funded overpayment amount. Interest riod following discovery of the over-
during this period will be at the Cur- payment, the agency must refund the
rent Value of Funds Rate (CVFR), and Federal share of the overpayment to
will accrue beginning on the day after CMS in accordance with the procedures
the end of the 1-year period following specified in paragraph (a) of this sec-
discovery until the last day of the tion.
123
§ 433.322 42 CFR Ch. IV (10–1–17 Edition)
(e) Court-approved discharge of bank- (2) Upward and downward adjust-

ruptcy. If the State recovers any por- ments to amounts credited in previous
tion of an overpayment under a court- quarters;
approved discharge of bankruptcy, the (3) Amounts of overpayments col-
agency must refund to CMS the Fed- lected under court-approved discharges
eral share of the overpayment amount of bankruptcy;
collected on the next quarterly expend- (4) Amounts of previously reported
iture report that is due to CMS for the overpayments to providers certified as
period that includes the date on which bankrupt or out of business during the
the collection occurs. quarter; and
(f) Bankruptcy petition denied. If a (5) Amounts of overpayments pre-
provider’s petition for bankruptcy is viously credited and reclaimed by the
denied in Federal court, the agency State.
must credit CMS with the Federal
share of the overpayment on the later [54 FR 5460, Feb. 3, 1989, as amended at 77 FR
31512, May 29, 2012]
of—
(1) The Form CMS–64 submission due § 433.322 Maintenance of Records.
to CMS immediately following the date
of the decision of the court; or The Medicaid agency must maintain
(2) The Form CMS–64 submission for a separate record of all overpayment
the quarter in which the 1-year period activities for each provider in a man-
following discovery of the overpayment ner that satisfies the retention and ac-
ends. cess requirements of 45 CFR 75.361
(g) Reclaim of refunds. (1) If a provider through 75.370.
is determined bankrupt or out of busi- [77 FR 31512, May 29, 2012, as amended at 81
ness under this section after the 1-year FR 3011, Jan. 20, 2016]
period following discovery of the over-
payment ends and the State has not PART 434—CONTRACTS
been able to make complete recovery,
the agency may reclaim the amount of
Subpart A—General Provisions
the Federal share of any unrecovered
overpayment amount previously re- Sec.
funded to CMS. CMS allows the re- 434.1 Basis and scope.
claim of a refund by the agency if the 434.2 Definitions.
agency submits to CMS documentation 434.4 State plan requirement.
that it has made reasonable efforts to 434.6 General requirements for all contracts
obtain recovery. and subcontracts.
(2) If the agency reclaims a refund of
Subpart B—Contracts with Fiscal Agents
the Federal share of an overpayment—
and Private Nonmedical Institutions
(i) In bankruptcy cases, the agency
must submit to CMS a statement of its 434.10 Contracts with fiscal agents.
efforts to recover the overpayment dur- 434.12 Contracts with private nonmedical
ing the period before the petition for institutions.
bankruptcy was filed; and 434.14 [Reserved]
(ii) In out-of-business cases, the agen-
cy must submit to CMS a statement of Subpart C [Reserved]
its efforts to locate the provider and its
Subpart D—Contracts With Health Insuring
assets and to recover the overpayment
Organizations
during any period before the provider is
found to be out of business in accord- 434.40 Contract requirements.
ance with § 433.318.
(h) Supporting reports. The agency Subpart E [Reserved]
must report the following information
to support each Quarterly Statement Subpart F—Federal Financial Participation
of Expenditures Form CMS–64: 434.70 Conditions for Federal Financial Par-
(1) Amounts of overpayments not col- ticipation (FFP).

lected during the quarter but refunded 434.76 Costs under fiscal agent contracts.
because of the expiration of the 1-year 434.78 Right to reconsideration of disallow-
period following discovery; ance.
124
AUTHORITY: Sec. 1102 of the Social Security example, with respect to reimburse-
Act (42 U.S.C. 1302). ment formulas or accounting systems.
SOURCE: 48 FR 54020, Nov. 30, 1983, unless [48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec.
otherwise noted. 9, 1983, as amended at 52 FR 22322, June 11,
1987; 55 FR 51295, Dec. 13, 1990; 67 FR 41095,
Subpart A—General Provisions June 14, 2002]
§ 434.1 Basis and scope. § 434.4 State plan requirement.

(a) Statutory basis. This part is based If the State plan provides for con-
on section 1902(a)(4) of the Act, which tracts of the types covered by this
requires that the State plan provide for part, the plan must also provide for
methods of administration that the meeting the applicable requirements of
Secretary finds necessary for the prop- this part.
er and efficient operation of the plan.
(b) Scope. This part sets forth the re- § 434.6 General requirements for all
quirements for contracts with certain contracts and subcontracts.
organizations for furnishing Medicaid (a) Contracts. All contracts under this
services or processing or paying Med- part must include all of the following:
icaid claims, or enchancing the agen- (1) Include provisions that define a
cy’s capability for effective adminis- sound and complete procurement con-
tration of the program. tract, as required by 45 CFR part 75.
[48 FR 54020, Nov. 30, 1983; 48 FR 55128, Dec. (2) Identify the population covered by
9, 1983, as amended at 67 FR 41095, June 14, the contract.
2002] (3) Specify any procedures for enroll-
ment or reenrollment of the covered
§ 434.2 Definitions. population.
As used in this part, unless the con- (4) Specify the amount, duration, and
text indicates otherwise— scope of medical services to be pro-
Fiscal agent means an entity that vided or paid for.
processes or pays vendor claims for the (5) Provide that the agency and HHS
agency. may evaluate through inspection or
Health care projects grant center means other means, the quality, appropriate-
an entity that— ness and timeliness of services per-
(a) Is supported in whole or in part formed under the contract.
by Federal project grant financial as- (6) Specify procedures and criteria
sistance; and for terminating the contract, including
(b) Provides or arranges for medical a requirement that the contractor
services to beneficiaries. promptly supply all information nec-
Private nonmedical institution means essary for the reimbursement of any
an institution (such as a child-care fa- outstanding Medicaid claims.
cility or a maternity home) that— (7) Provide that the contractor main-
(a) Is not, as a matter of regular busi- tains an appropriate record system for
ness, a health insuring organization or services to enrolled beneficiaries.
a community health care center; (8) Provide that the contractor safe-
(b) Provides medical care to its resi- guards information about beneficiaries
dents through contracts or other ar- as required by part 431, subpart F of
rangements with medical providers; this chapter.
and (9) Specify any activities to be per-
(c) Receives capitation payments formed by the contractor that are re-
from the Medicaid agency, under a lated to third party liability require-
nonrisk contract, for its residents who ments in part 433, subpart D of this
are eligible for Medicaid. chapter.
Professional management service or con- (10) Specify which functions may be
sultant firm means a firm that performs subcontracted.
management services such as auditing (11) Provide that any subcontracts

or staff training, or carries out studies meet the requirements of paragraph (b)
or provides consultation aimed at im- of this section.
proving State Medicaid operations, for (12) Specify the following:
125
§ 434.10 42 CFR Ch. IV (10–1–17 Edition)
(i) No payment will be made by the (d) State that payment to providers
contractor to a provider for provider- will be made in accordance with part
preventable conditions, as identified in 447 of this chapter.
the State plan.
(ii) The contractor will require that § 434.12 Contracts with private non-
all providers agree to comply with the medical institutions.
reporting requirements in § 447.26(d) of Contracts with private nonmedical
this subchapter as a condition of pay- institutions must—
ment from the contractor. (a) Meet the requirements of § 434.6;
(iii) The contractor will comply with (b) Specify a capitation fee based on
such reporting requirements to the ex- the cost of the services provided, in ac-
tent the contractor directly furnishes cordance with the reimbursement re-
services. quirements prescribed in part 447 of
(b) Subcontracts. All subcontracts this chapter; and
must be in writing and fulfill the re- (c) Specify when the capitation fee
quirements of this part that are appro- must be paid.
priate to the service or activity dele-
gated under the subcontract. § 434.14 [Reserved]
(c) Continued responsibility of con-
tractor. No subcontract terminates the
legal responsibility of the contractor
Subpart C [Reserved]
to the agency to assure that all activi-
ties under the contract are carried out. Subpart D—Contracts With Health
Insuring Organizations
FR 41095, June 14, 2002; 76 FR 32837, June 6,
§ 434.40 Contract requirements.
2011; 81 FR 3011, Jan. 20, 2016]
(a) Contracts with health insuring or-
Subpart B—Contracts with Fiscal ganizations that are not subject to the
Agents and Private Nonmed- requirements in section 1903(m)(2)(A)
must:
ical Institutions (1) Meet the general requirements for
§ 434.10 Contracts with fiscal agents. all contracts and subcontracts speci-
fied in § 434.6;
Contracts with fiscal agents must—
(2) Specify that the contractor as-
(a) Meet the requirements of § 434.6;
sumes at least part of the underwriting
(b) Include termination procedures
risk and;
that require the contractors to supply
promptly all material necessary for (i) If the contractor assumes the full
continued operation of payment and re- underwriting risk, specify that pay-
lated systems. This material includes— ment of the capitation fees to the con-
(1) Computer programs; tractor during the contract period con-
(2) Data files; stitutes full payment by the agency for
(3) User and operation manuals, and the cost of medical services provided
other documentation; under the contract;
(4) System and program documenta- (ii) If the contractor assumes less
tion; and than the full underwriting risk, specify
(5) Training programs for Medicaid how the risk is apportioned between
agency staff, their agents or designated the agency and the contractor;
representatives in the operation and (3) Specify whether the contractor re-
maintenance of the system; turns to the agency part of any savings
(c) Offer to the State one or both of remaining after the allowable costs are
the following options, if the fiscal deducted from the capitations fees, and
agent or the fiscal agent’s subcon- if savings are returned, the apportion-
tractor has a proprietary right to ma- ment between agency and the con-
terial specified in paragraph (b) of this tractor; and
section: (4) Specify the extent, if any, to
(1) Purchasing the material; or which the contractor may obtain rein-
(2) Purchasing the use of the mate- surance of a portion of the under-
rial through leasing or other means; writing risk.
and (b) The contract must—
126
(1) Specify that the capitation fee (a) The amount paid to the provider
will not exceed the limits set forth of medical services is a medical assist-
under part 447 of this chapter. ance cost; and
(2) Specify that, except as permitted (b) The amount paid to the con-
under paragraph (b) of this section, the tractor for performing the agreed-upon
capitation fee paid on behalf of each functions is an administrative cost.
beneficiary may not be renegotiated—
(i) During the contract period if the § 434.78 Right to reconsideration of
contract period is 1 year or less; or disallowance.
(ii) More often than annually if the A Medicaid agency dissatisfied with a
contract period is for more than 1 year. disallowance of FFP under this subpart
(3) Specify that the capitation fee may request and will be granted recon-
will not include any amount for sideration in accordance with 45 CFR
recoupment of any specific losses suf-
part 16.
fered by the contractor for risks as-
sumed under the same contract or a
prior contract with the agency; and PART 435—ELIGIBILITY IN THE
(4) Specify the actuarial basis for STATES, DISTRICT OF COLUMBIA,
computation of the capitation fee. THE NORTHERN MARIANA IS-
(c) The capitation fee may be renego- LANDS, AND AMERICAN
tiated more frequently than annually SAMOA
for beneficiaries who are not enrolled
at the time of renegotiation or if the Subpart A—General Provisions and
renegotiation is required by changes in Definitions
Federal or State law.
Sec.
[55 FR 51295, Dec. 13, 1990]
435.2 Purpose and applicability.
435.3 Basis.
Subpart E [Reserved] 435.4 Definitions and use of terms.
Subpart F—Federal Financial
Participation Subpart B—Mandatory Coverage
435.100 Scope.
SOURCE: 48 FR 54020, Nov. 20, 1983, unless
otherwise noted. Redesignated at 55 FR 51295, MANDATORY COVERAGE OF FAMILIES AND
Dec. 13, 1990. CHILDREN
435.110 Parents and other caretaker rel-
§ 434.70 Conditions for Federal Finan- atives.
cial Participation (FFP).
435.112 Families terminated from AFDC be-
(a) Basic requirements. FFP is avail- cause of increased earnings or hours of
able only for periods during which the employment. .
contract— 435.115 Families with Medicaid eligibility
(1) Meets the requirements of this extended because of increased collection
part; of spousal support.
(2) Meets the applicable requirements MANDATORY COVERAGE OF PREGNANT WOMEN,
of 45 CFR part 75; and CHILDREN UNDER 19, AND NEWBORN CHILDREN
(3) Is in effect.
(b) Basis for withholding. CMS may 435.116 Pregnant women.
435.117 Deemed newborn children.
withhold FFP for any period during
which the State fails to meet the State MANDATORY COVERAGE OF QUALIFIED FAMILY
plan requirements of this part. MEMBERS
[67 FR 41095, June 14, 2002, as amended at 81 435.118 Infants and children under age 19.
FR 3011, Jan. 20, 2016]
MANDATORY COVERAGE FOR INDIVIDUALS AGE
§ 434.76 Costs under fiscal agent con- 19 THROUGH 64
tracts.
435.119 Coverage for individuals age 19 or
Under each contract with a fiscal older and under age 65 at or below 133
agent— percent FPL.
127
Pt. 435 42 CFR Ch. IV (10–1–17 Edition)
MANDATORY COVERAGE OF THE AGED, BLIND, quirements of the cash assistance pro-
AND DISABLED grams.
435.211 Optional eligibility for individuals
435.120 Individuals receiving SSI.
who would be eligible for cash assistance
435.121 Individuals in States using more re-
if they were not in medical institutions.
strictive requirements for Medicaid than
435.212 Individuals who would be ineligible
the SSI requirements.
if they were not enrolled in an MCO or
435.122 Individuals who are ineligible for
PCCM.
SSI or optional State supplements be-
435.213 Optional eligibility for individuals
cause of requirements that do not apply
needing treatment for breast or cervical
under title XIX of the Act.
cancer.
435.130 Individuals receiving mandatory
435.214 Eligibility for Medicaid limited to
State supplements.
family planning and related services.
435.131 Individuals eligible as essential
435.215 Individuals infected with tuber-
spouses in December 1973.
culosis.
435.132 Institutionalized individuals who 435.217 Individuals receiving home and com-
were eligible in December 1973. munity-based services.
435.133 Blind and disabled individuals eligi- 435.218 Individuals with MAGI-based income
ble in December 1973. above 133 percent FPL.
435.134 Individuals who would be eligible ex- 435.219 Individuals receiving State plan
cept for the increase in OASDI benefits home and community-based services.
under Pub. L. 92–336 (July 1, 1972).
435.135 Individuals who become ineligible OPTIONS FOR COVERAGE OF FAMILIES AND
for cash assistance as a result of OASDI CHILDREN
cost-of-living increases received after
April 1977. 435.220 Optional eligibility for parents and
435.136 State agency implementation re- other caretaker relatives.
quirements for one-time notice and an- 435.221 [Reserved]
nual review system. 435.222 Optional eligibility for reasonable
435.137 Disabled widows and widowers who classifications of individuals under age
would be eligible for SSI except for the 21.
increase in disability benefits resulting 435.225 Individuals under age 19 who would
from elimination of the reduction under be eligible for Medicaid if they were in a
Pub. L. 98–31. medical institution.
435.138 Disabled widows and widowers aged 435.226 Optional eligibility for independent
60 through 64 who would be eligible for foster care adolescents.
SSI benefits except for receipt of early 435.227 Optional eligibility for individuals
social security benefits. under age 21 who are under State adop-
tion assistance agreements.
MANDATORY COVERAGE OF CERTAIN ALIENS 435.229 Optional targeted low-income chil-
dren.
435.139 Coverage for certain aliens.
OPTIONS FOR COVERAGE OF THE AGED, BLIND,
MANDATORY COVERAGE OF ADOPTION AND DISABLED
ASSISTANCE AND FOSTER CARE CHILDREN
435.230 Aged, blind, and disabled individuals
435.145 Children with adoption assistance, in States that use more restrictive re-
foster care, or guardianship care under quirements for Medicaid than SSI re-
title IV–E. quirements: Optional coverage.
435.150 Former foster care children. 435.232 Individuals receiving only optional
MANDATORY COVERAGE OF SPECIAL GROUPS State supplements.
435.234 Individuals receiving only optional
435.170 Pregnant women eligible for ex- State supplements in States using more
tended or continuous eligibility. restrictive eligibility requirements than
435.172 Continuous eligibility for hospital- SSI and certain States using SSI cri-
ized children. teria.
435.236 Individuals in institutions who are
Subpart C—Options for Coverage eligible under a special income level.
435.200 Scope. Subpart D—Optional Coverage of the
435.201 Individuals included in optional
Medically Needy
groups.
435.300 Scope.
OPTIONS FOR COVERAGE OF FAMILIES AND
435.301 General rules.
CHILDREN AND THE AGED, BLIND, AND DIS-

435.308 Medically needy coverage of individ-
ABLED
uals under age 21.
435.210 Optional eligibility for individuals 435.310 Medically needy coverage of parents
who meet the income and resource re- and other caretaker relatives.
128
435.320 Medically needy coverage of the more restrictive requirements for Med-
aged in States that cover individuals re- icaid than SSI.
ceiving SSI. 435.640 Protected Medicaid eligibility for in-
435.322 Medically needy coverage of the dividuals eligible in December 1973.
blind in States that cover individuals re-
ceiving SSI. Subpart H—Specific Post-Eligibility Finan-
435.324 Medically needy coverage of the dis- cial Requirements for the Categori-
abled in States that cover individuals re-
cally Needy
ceiving SSI.
435.326 Individuals who would be ineligible 435.700 Scope.
if they were not enrolled in an MCO or 435.725 Post-eligibility treatment of income
PCCM. of institutionalized individuals in SSI
435.330 Medically needy coverage of the States: Application of patient income to
aged, blind, and disabled in States using the cost of care.
more restrictive eligibility requirements
435.726 Post-eligibility treatment of income
for Medicaid than those used under SSI.
of individuals receiving home and com-
435.340 Protected medically needy coverage
munity-based services furnished under a
for blind and disabled individuals eligible
waiver: Application of patient income to
in December 1973.
the cost of care.
435.350 Coverage for certain aliens.
435.733 Post-eligibility treatment of income
Subpart E—General Eligibility Requirements of institutionalized individuals in States
using more restrictive requirements than
435.400 Scope. SSI: Application of patient income to the
435.401 General rules. cost of care.
435.402 [Reserved] 435.735 Post-eligibility treatment of income
435.403 State residence. and resources of individuals receiving
435.404 Applicant’s choice of category. home and community-based services fur-
435.406 Citizenship and non-citizen eligi- nished under a waiver: Application of pa-
bility. tient income to the cost of care.
435.407 Types of acceptable documentary
evidence of citizenship. Subpart I—Specific Eligibility and Post-Eligi-
bility Financial Requirements for the
Subpart F—Categorical Requirements for Medically Needy
Eligibility
435.800 Scope.
435.500 Scope.
MEDICALLY NEEDY INCOME STANDARD
AGE
435.520 Age requirements for the aged. 435.811 Medically needy income standard:
General requirements.
BLINDNESS 435.814 Medically needy income standard:
State plan requirements.
435.530 Definition of blindness.
435.531 Determinations of blindness. MEDICALLY NEEDY INCOME ELIGIBILITY
DISABILITY 435.831 Income eligibility.
435.540 Definition of disability. 435.832 Post-eligibility treatment of income
435.541 Determinations of disability. of institutionalized individuals: Applica-
tion of patient income to the cost of
Subpart G—General Financial Eligibility care.
Requirements and Options MEDICALLY NEEDY RESOURCE STANDARD
435.600 Scope. 435.840 Medically needy resource standard:
435.601 Application of financial eligibility General requirements.
methodologies. 435.843 Medically needy resource standard:
435.602 Financial responsibility of relatives State plan requirements.
and other individuals.
435.603 Application of modified adjusted DETERMINING ELIGIBILITY ON THE BASIS OF
gross income (MAGI). RESOURCES
435.604 [Reserved]
435.606 [Reserved] 435.845 Medically needy resource eligibility.
435.608 Applications for other benefits. 435.850–435.852 [Reserved]
435.610 Assignment of rights to benefits.
435.622 Individuals in institutions who are Subpart J—Eligibility in the States and
eligible under a special income level. District of Columbia
435.631 General requirements for deter-
mining income eligibility in States using 435.900 Scope.
129
GENERAL METHODS OF ADMINISTRATION 435.1004 Beneficiaries overcoming certain
conditions of eligibility.
435.901 Consistency with objectives and
statutes. LIMITATIONS ON FFP
435.902 Simplicity of administration.
435.903 Adherence of local agencies to State 435.1005 Beneficiaries in institutions eligi-
plan requirements. ble under a special income standard.
435.904 Establishment of outstation loca- 435.1006 Beneficiaries of optional State sup-
tions to process applications for certain plements only.
low-income eligibility groups. 435.1007 Categorically needy, medically
needy, and qualified Medicare bene-
APPLICATIONS
ficiaries.
435.905 Availability and accessibility of pro- 435.1008 FFP in expenditures for medical as-
gram information. sistance for individuals who have de-
435.906 Opportunity to apply. clared citizenship or nationality or satis-
435.907 Written application. factory immigration status.
435.908 Assistance with application. 435.1009 Institutionalized individuals.
435.909 Automatic entitlement to Medicaid 435.1010 Definitions relating to institutional
following a determination of eligibility status.
under other programs.
435.910 Use of social security number. REQUIREMENTS FOR STATE SUPPLEMENTS
DETERMINATION OF MEDICAID ELIGIBILITY 435.1011 Requirement for mandatory State
435.911 Determination of eligibility. supplements.
435.912 Timely determination of eligibility. 435.1012 Requirement for maintenance of op-
435.914 Case documentation. tional State supplement expenditures.
435.915 Effective date.
FFP FOR PREMIUM ASSISTANCE
REDETERMINATIONS OF MEDICAID ELIGIBILITY 435.1015 FFP for premium assistance for
435.916 Periodic renewal of Medicaid eligi- plans in the individual market.
bility.
435.917 Notice of agency’s decision con- Subpart L—Options for Coverage of Spe-
cerning eligibility, benefits, or services. cial Groups under Presumptive Eligi-
435.918 Use of electronic notices. bility
435.920 Verification of SSNs.
435.923 Authorized representatives. 435.1100 Basis for presumptive eligibility.
435.926 Continuous eligibility for children.
PRESUMPTIVE ELIGIBILITY FOR CHILDREN
FURNISHING MEDICAID
435.1101 Definitions related to presumptive
435.930 Furnishing Medicaid. eligibility.
INCOME AND ELIGIBILITY VERIFICATION 435.1102 Children covered under presumptive
REQUIREMENTS eligibility.
435.1103 Presumptive eligibility for other in-
435.940 Basis and scope. dividuals.
435.945 General requirements. 435.1110 Presumptive eligibility determined
435.948 Requesting information.
by hospitals.
435.949 Verification of information through
an electronic service.
435.952 Use of information.
Subpart M—Coordination of Eligibility and
435.956 Verification of other non-financial Enrollment Between Medicaid, CHIP,
information. Exchanges and Other Insurance Af-
435.960 Standardized formats for furnishing fordability Programs
and obtaining information to verifying
income and eligibility. 435.1200 Medicaid agency responsibilities for
435.965 Delay of effective date. a coordinated eligibility and enrollment
process with other insurance afford-
Subpart K—Federal Financial Participation ability programs.
435.1205 Alignment with exchange initial
435.1000 Scope. open enrollment period.
FFP IN EXPENDITURES FOR DETERMINING AUTHORITY: Sec. 1102 of the Social Security
ELIGIBILITY AND PROVIDING SERVICES Act (42 U.S.C. 1302).

435.1001 FFP for administration. SOURCE: 43 FR 45204, Sept. 29, 1978, unless
435.1002 FFP for services. otherwise noted.
435.1003 FFP for redeterminations.
130
Subpart A—General Provisions 1902(a)(10) Required and optional groups.

1902(a)(12) Determination of blindness.
and Definitions 1902(a)(17) Standards for determining eligi-
bility: flexibility in the application of in-
§ 435.2 Purpose and applicability. come eligibility standards.
This part sets forth, for the 50 States, 1902(a)(19) Safeguards for simplicity of ad-
the District of Columbia, the Northern ministration and best interests of bene-
Mariana Islands, and American ficiaries.
1902(a)(34) Three-month retroactive eligi-
Samoa—
bility.
(a) The eligibility provisions that a 1902(a)(46)(B) Requirement to verify citizen-
State plan must contain; ship.
(b) The mandatory and optional 1902(a) (second paragraph after (47)) Eligi-
groups of individuals to whom Med- bility despite increased monthly insurance
icaid is provided under a State plan; benefits under title II.
(c) The eligibility requirements and 1902(a)(55) Mandatory use of outstation lo-
procedures that the Medicaid agency cations other than welfare offices to re-
ceive and initially process applications of
must use in determining and redeter-
certain low-income pregnant women, in-
mining eligibility, and requirements it fants, and children under age 19.
may not use; 1902(b) Prohibited conditions for eligibility:
(d) The availability of FFP for pro- Age requirement of more that 65 years;
viding Medicaid and for administering State residence requirements excluding in-
the eligibility provisions of the plan; dividuals who reside in the state; and
and Citizenship requirement excluding United
(e) Other requirements concerning States citizens.
1902(e) Four-month continued eligibility for
eligibility determinations, such as use families ineligible because of increased
of an institutionalized individual’s in- hours or income from employment.
come for the cost of care. 1902(e)(2) Minimum eligibility period for
[43 FR 45204, Sept. 29, 1978, as amended at 44 beneficiary enrolled in an HMO.
1902(e)(3) Optional coverage of certain dis-
FR 17937, Mar. 23, 1979; 51 FR 41350, Nov. 14,
abled children being cared for at home.
1986]
1902(e)(4) Eligibility of newborn children of
Medicaid eligible women.
§ 435.3 Basis.
1902(e)(5) Eligibility of pregnant woman for
(a) This part implements the fol- extended coverage for specified postpartum
lowing sections of the Act and public period after pregnancy ends.
laws that mandate eligibility require- 1902(f) State option to restrict Medicaid eli-
ments and standards: gibility for aged, blind, or disabled individ-
uals to those who would have been eligible
402(a)(22) Eligibility of deemed beneficiaries under State plan in effect in January 1972.
of AFDC who receive zero payments be- 1902(j) Medicaid program in American
cause of recoupment of overpayments. Samoa.
402(a)(37) Eligibility of individuals who lose 1902(ee) Option to verify citizenship through
AFDC eligibility due to increased earnings. electronic data sharing with the Social Se-
414(g) Eligibility of certain individuals par- curity Administration.
ticipating in work supplementation pro- 1903(f) Income limitations for medically
grams. needy and individuals covered by State
473(b) Eligibility of children in foster care supplement eligibility requirements.
and adopted children who are deemed 1903(v) Payment for emergency services
AFDC beneficiaries. under Medicaid provided to non-citizens.
1619(b) Benefits for blind individuals or 1905(a) Definition of medical assistance.
those with disabling impairments whose 1905(a) (clause following (21)) Prohibitions
income equals or exceeds a specific SSI against providing Medicaid to certain in-
limit. stitutionalized individuals.
1634(b) Preservation of benefit status for 1905(a) (second sentence) Definition of es-
disabled widows and widowers who lost SSI sential person.
benefits because of 1983 changes in actu- 1905(a) Definition of medical assistance.
arial reduction formula. 1905(a)(i)–(viii) List of eligible individuals.
1634(d) Individuals who lose eligibility for 1905(d)(2) Definition of resident of an inter-
SSI benefits due to entitlement to early mediate care facility for individuals with
widow’s or widower’s social security dis- intellectual disabilities.
ability benefits under section 202(e) or (f) 1905(j) Definition of State supplementary
of the Act. payment.
1902(a)(8) Opportunity to apply; assistance 1905(k) Eligibility of essential spouses of el-
must be furnished promptly. igible individuals.
131
§ 435.4 42 CFR Ch. IV (10–1–17 Edition)
1905(n) Definition of qualified pregnant AB means aid to the blind under title
woman and child. X of the Act;
1912(a) Conditions of eligibility.
Advance payments of the premium tax
1915(c) Home or community-based services.
1915(d) Home or community-based services
credit (APTC) has the meaning given
for individuals age 65 or older. the term in 45 CFR 155.20.
412(e)(5) of Immigration and Nationality AFDC means aid to families with de-
Act—Eligibility of certain refugees. pendent children under title IV-A of
Pub. L. 93–66, section 230 Deemed eligibility the Act;
of certain essential persons. Affordable Care Act means the Patient
Pub. L. 93–66, section 231 Deemed eligibility Protection and Affordable Care Act of
of certain persons in medical institutions.
2010 (Pub. L. 111–148), as amended by
Pub. L. 93–66, section 232 Deemed eligibility
of certain blind and disabled medically in- the Health Care and Education Rec-
digent persons. onciliation Act of 2010 (Pub. L. 111–152),
Pub. L. 93–233, section 13(c) Deemed eligi- as amended by the Three Percent With-
bility of certain individuals receiving man- holding Repeal and Job Creation Act
datory State supplementary payments. (Pub. L. 112–56).
Pub. L. 94–566, section 503 Deemed eligi- Affordable Insurance Exchanges (Ex-
bility of certain individuals who would be changes) has the meaning given the
eligible for supplemental security income
benefits but for cost-of-living increases in
term ‘‘Exchanges’’ in 45 CFR 155.20.
social security benefits. Agency means a single State agency
Pub. L. 96–272, section 310(b)(1) Continued designated or established by a State in
eligibility of certain beneficiaries of Vet- accordance with § 431.10(b) of this sub-
erans Administration pensions. chapter.
Pub. L. 99–509, section 9406 Payment for Applicable modified adjusted gross in-
emergency medical services provided to
come (MAGI) standard has the meaning
aliens.
Pub. L. 99–603, section 201 Aliens granted le-
provided in § 435.911(b)(1) of this part.
galized status under section 245A of the Applicant means an individual who is
Immigration and Nationality Act (8 U.S.C. seeking an eligibility determination
1255a) may under certain circumstances be for himself or herself through an appli-
eligible for Medicaid. cation submission or a transfer from
Pub. L. 99–603, section 302 Aliens granted le- another agency or insurance afford-
galized status under section 210 of the Im- ability program.
migration and Nationality Act may under
certain circumstances be eligible for Med- Application means the single stream-
icaid (8 U.S.C. 1160). lined application described at
Pub. L. 99–603, section 303 Aliens granted § 435.907(b) of this part or an applica-
legal status under section 210A of the Im- tion described in § 435.907(c)(2) of this
migration and Nationality Act may under part submitted by or on behalf of an in-
certain circumstances be eligible for Med- dividual.
icaid (8 U.S.C. 1161). APTD means aid to the permanently
(b) This part implements the fol- and totally disabled under title XIV of
lowing other provisions of the Act or the Act;
public laws that establish additional Beneficiary means an individual who
State plan requirements: has been determined eligible and is
currently receiving Medicaid.
1618 Requirement for operation of certain
State supplementation programs. Caretaker relative means a relative of
Pub. L. 93–66, section 212(a) Required man- a dependent child by blood, adoption,
datory minimum State supplementation of or marriage with whom the child is liv-
SSI benefits programs. ing, who assumes primary responsi-
[52 FR 43071, Nov. 9, 1987; 52 FR 48438, Dec. 22, bility for the child’s care (as may, but
1987, as amended at 55 FR 36819, Sept. 7, 1990; is not required to, be indicated by
55 FR 48607, Nov. 21, 1990; 57 FR 29155, June claiming the child as a tax dependent
30, 1992; 59 FR 48809, Sept. 23, 1994; 81 FR for Federal income tax purposes), and
86450, Nov. 30, 2016] who is one of the following—
(1) The child’s father, mother, grand-
§ 435.4 Definitions and use of terms.
father, grandmother, brother, sister,

As used in this part— stepfather, stepmother, stepbrother,
AABD means aid to the aged, blind, stepsister, uncle, aunt, first cousin,
and disabled under title XVI of the Act; nephew, or niece.
132
(2) The spouse of such parent or rel- vided by the agency. A combined eligi-
ative, even after the marriage is termi- bility notice must be issued in accord-
nated by death or divorce. ance with the agreement(s) con-
(3) At State option, another relative summated by the agency in accordance
of the child based on blood (including with § 435.1200(b)(3).
those of half-blood), adoption, or mar- Coordinated content means informa-
riage; the domestic partner of the par- tion included in an eligibility notice
ent or other caretaker relative; or an regarding, if applicable –
adult with whom the child is living and (1) The transfer of an individual’s or
who assumes primary responsibility for household’s electronic account to an-
the dependent child’s care. other insurance affordability program;
Categorically needy refers to families (2) Any notice sent by the agency to
and children, aged, blind, or disabled another insurance affordability pro-
individuals, and pregnant women, de- gram regarding an individual’s eligi-
scribed under subparts B and C of this bility for Medicaid;
part who are eligible for Medicaid. Sub- (3) The potential impact, if any, of—
part B of this part describes the man- (i) The agency’s determination of eli-
datory eligibility groups who, gen- gibility or ineligibility for Medicaid on
erally, are receiving or deemed to be eligibility for another insurance afford-
receiving cash assistance under the ability program; or
Act. These mandatory groups are speci- (ii) A determination of eligibility for,
fied in sections 1902(a)(10)(A)(i), 1902(e), or enrollment in, another insurance af-
1902(f), and 1928 of the Act. Subpart C of fordability program on an individual’s
this part describes the optional eligi- eligibility for Medicaid; and
bility groups of individuals who, gen- (4) The status of household members
erally, meet the categorical require- on the same application or renewal
ments or income or resource require- form whose eligibility is not yet deter-
ments that are the same as or less re- mined.
strictive than those of the cash assist- Dependent child means a child who
ance programs and who are not receiv- meets both of the following criteria:
ing cash payments. These optional (1) Is under the age of 18, or, at State
groups are specified in sections option, is age 18 and a full-time student
1902(a)(10)(A)(ii), 1902(e), and 1902(f) of in secondary school (or equivalent vo-
the Act. cational or technical training), if be-
Citizenship includes status as a ‘‘na- fore attaining age 19 the child may rea-
tional of the United States,’’ and in- sonably be expected to complete such
cludes both citizens of the United school or training.
States and non-citizen nationals of the (2) Is deprived of parental support by
United States described in 8 U.S.C. reason of the death, absence from the
1101(a)(22). home, physical or mental incapacity,
Combined eligibility notice means an or unemployment of at least one par-
eligibility notice that informs an indi- ent, unless the State has elected in its
vidual or multiple family members of a State plan to eliminate such depriva-
household of eligibility for each of the tion requirement. A parent is consid-
insurance affordability programs and ered to be unemployed if he or she is
enrollment in a qualified health plan working less than 100 hours per month,
through the Exchange, for which a de- or such higher number of hours as the
termination or denial of eligibility was State may elect in its State plan.
made, as well as any right to request a Effective income level means the in-
fair hearing or appeal related to the de- come standard applicable under the
termination made for each program. A State plan for an eligibility group,
combined notice must meet the re- after taking into consideration any dis-
quirements of § 435.917(a) and contain regard of a block of income applied in
the content described in § 435.917(b) and determining financial eligibility for
(c), except that information described such group.
in § 435.917(b)(1)(iii) and (iv) may be in- Electronic account means an elec-

cluded in a combined notice issued by tronic file that includes all informa-
another insurance affordability pro- tion collected and generated by the
gram or in a supplemental notice pro- agency regarding each individual’s
133
§ 435.4 42 CFR Ch. IV (10–1–17 Edition)
Medicaid eligibility and enrollment, in- AABD if his SSI payment is less than
cluding all documentation required that amount;
under § 435.914 and including any infor- Medically needy refers to families,
mation collected or generated as part children, aged, blind, or disabled indi-
of a fair hearing process conducted viduals, and pregnant women listed
under subpart E of this part, the Ex- under subpart D of this part who are
change appeals process conducted not listed in subparts B and C of this
under 45 CFR part 155, subpart F or part as categorically needy but who
other insurance affordability program may be eligible for Medicaid under this
appeals process. part because their income and re-
Eligibility determination means an ap-
sources are within limits set by the
proval or denial of eligibility in accord-
State under its Medicaid plan (includ-
ance with § 435.911 as well as a renewal
or termination of eligibility in according persons whose income and re-
ance with § 435.916 of this part. sources fall within these limits after
Family size has the meaning provided their incurred expenses for medical or
in § 435.603(b) of this part. remedial care are deducted) (Specific
Federal poverty level (FPL) means the financial requirements for determining
Federal poverty level updated periodi- eligibility of the medically needy ap-
cally in the FEDERAL REGISTER by the pear in subpart I of this part.);
Secretary of Health and Human Serv- Minimum essential coverage means
ices under the authority of 42 U.S.C. coverage defined in section 5000A(f) of
9902(2), as in effect for the applicable subtitle D of the Internal Revenue
budget period used to determine an in- Code, as added by section 1401 of the
dividual’s eligibility in accordance Affordable Care Act, and implementing
with § 435.603(h) of this part. regulations of such section issued by
Household income has the meaning the Secretary of the Treasury.
provided in § 435.603(d) of this part. Modified adjusted gross income (MAGI)
Insurance affordability program means has the meaning provided at 26 CFR
a program that is one of the following: 1.36B–1(e)(2).
(1) A State Medicaid program under
Non-applicant means an individual
title XIX of the Act.
who is not seeking an eligibility deter-
(2) A State children’s health insur-
ance program (CHIP) under title XXI of mination for himself or herself and is
the Act. included in an applicant’s or bene-
(3) A State basic health program es- ficiary’s household to determine eligi-
tablished under section 1331 of the Af- bility for such applicant or beneficiary.
fordable Care Act. Non-citizen has the same meaning as
(4) A program that makes coverage in the term ‘‘alien,’’ as defined at 8 U.S.C.
a qualified health plan through the Ex- 1101(a)(3) and includes any individual
change with advance payments of the who is not a citizen or national of the
premium tax credit established under United States, defined at 8 U.S.C.
section 36B of the Internal Revenue 1101(a)(22).
Code available to qualified individuals. OAA means old age assistance under
(5) A program that makes available title I of the Act;
coverage in a qualified health plan OASDI means old age, survivors, and
through the Exchange with cost-shar- disability insurance under title II of
ing reductions established under sec- the Act;
tion 1402 of the Affordable Care Act. Optional State supplement means a
MAGI-based income has the meaning
cash payment made by a State, under
provided in § 435.603(e) of this part.
section 1616 of the Act, to an aged,
Mandatory State supplement means a
blind, or disabled individual;
cash payment a State is required to
make under section 212, Pub. L. 93–66 Optional targeted low-income child
(July 9, 1973) to an aged, blind, or dis- means a child under age 19 who meets
the financial and categorical standards
abled individual. Its purpose is to pro-

vide an individual with the same described below.
amount of cash assistance he was re- (1) Financial need. An optional tar-
ceiving under OAA, AB, APTD, or geted low-income child:
134
(i) Has a household income at or riod, which begins on the date the preg-
below 200 percent of the Federal pov- nancy ends, extends 60 days, and then
erty line for a family of the size in- ends on the last day of the month in
volved; and which the 60-day period ends.
(ii) Resides in a State with no Med- Qualified non-citizen includes the
icaid applicable income level (as de- term ‘‘qualified alien’’ as defined at 8
fined at § 457.10 of this chapter); or U.S.C. 1641(b) and (c).
(iii) Resides in a State that has a Secure electronic interface means an
Medicaid applicable income level (as interface which allows for the exchange
defined at § 457.10 of this chapter) and of data between Medicaid and other in-
has household income that either: surance affordability programs and ad-
(A) Exceeds the Medicaid applicable heres to the requirements in part 433,
income level for the age of such child, subpart C of this chapter.
but not by more than 50 percentage Shared eligibility service means a com-
points; or mon or shared eligibility system or
(B) Does not exceed the income level service used by a State to determine
specified for such child to be eligible individuals’ eligibility for insurance af-
for medical assistance under the poli- fordability programs.
cies of the State plan under title XIX SSI means supplemental security in-
on June 1, 1997. come under title XVI of the Act.
(2) No other coverage and State mainte-
SWICA means the State Wage Infor-
nance of effort. An optional targeted
mation Collection Agency under sec-
low-income child is not covered under a
tion 1137(a) of the Act. It is the State
group health plan or health insurance
agency administering the State unem-
coverage, or would not be eligible for
ployment compensation law; a separate
Medicaid under the policies of the
agency administering a quarterly wage
State plan in effect on March 31, 1997;
reporting system; or a State agency ad-
except that, for purposes of this stand-
ministering an alternative system
ard—
which has been determined by the Sec-
(i) A child shall not be considered to
retary of Labor, in consultation with
be covered by health insurance cov-
the Secretary of Agriculture and the
erage based on coverage offered by the
Secretary of Health and Human Serv-
State under a program in operation
ices, to be as effective and timely in
prior to July 1, 1997 if that program re-
providing employment related income
ceived no Federal financial participa-
and eligibility data.
tion;
(ii) A child shall not be considered to Tax dependent has the same meaning
as the term ‘‘dependent’’ under section
be covered under a group health plan or
152 of the Internal Revenue Code, as an
health insurance coverage if the child
individual for whom another individual
did not have reasonable geographic ac-
claims a deduction for a personal ex-
cess to care under that coverage.
emption under section 151 of the Inter-
(3) For purposes of this section, poli-
nal Revenue Code for a taxable year.
cies of the State plan a under title XIX
plan include policies under a Statewide [43 FR 45204, Sept. 29, 1978, as amended at 45
demonstration project under section FR 24883, Apr. 11, 1980; 46 FR 6909, Jan. 22,
1115(a) of the Act other than a dem- 1981; 46 FR 47984, Sept. 30, 1981; 51 FR 7211,
onstration project that covered an ex- Feb. 28, 1986; 58 FR 4925, Jan. 19, 1993; 66 FR
panded group of eligible children but 2666, Jan. 11, 2001; 77 FR 17203, Mar. 23, 2012;
81 FR 86450, Nov. 30, 2016]
that either—
(i) Did not provide inpatient hospital § 435.10 State plan requirements.
coverage; or
(ii) Limited eligibility to children A State plan must—
previously enrolled in Medicaid, im- (a) Provide that the requirements of
posed premiums as a condition of ini- this part are met; and
tial or continued enrollment, and did (b) Specify the groups to whom Med-
not impose a general time limit on eli- icaid is provided, as specified in sub-
gibility. parts B, C, and D of this part, and the
Pregnant woman means a woman dur- conditions of eligibility for individuals
ing pregnancy and the post partum pe- in those groups.
135
§ 435.100 42 CFR Ch. IV (10–1–17 Edition)
Subpart B—Mandatory Coverage ployment or increased hours of employ-

ment, the agency must continue to
§ 435.100 Scope. provide Medicaid for 4 months to all
This subpart prescribes requirements members of the family if—
for coverage of categorically needy in- (1) The family received AFDC in any
dividuals. 3 or more months during the 6-month
period immediately before the month
MANDATORY COVERAGE OF FAMILIES AND in which it became ineligible for
CHILDREN AFDC; and
(2) At least one member of the family
§ 435.110 Parents and other caretaker is employed throughout the 4-month
relatives. period, although this need not be the
(a) Basis. This section implements same member for the whole period.
sections 1931(b) and (d) of the Act. (b) The 4 calendar month period be-
(b) Scope. The agency must provide gins on the date AFDC is terminated. If
Medicaid to parents and other care- AFDC benefits are terminated retro-
taker relatives, as defined in § 435.4, actively, the 4 calendar month period
and, if living with such parent or other also begins retroactively with the first
caretaker relative, his or her spouse, month in which AFDC was erroneously
whose household income is at or below paid.
the income standard established by the [43 FR 45204, Sept. 29, 1978, as amended at 45
agency in the State plan, in accordance FR 24883, Apr. 11, 1980]
with paragraph (c) of this section.
(c) Income standard. The agency must § 435.115 Families with Medicaid eligi-
establish in its State plan the income bility extended because of in-
standard as follows: creased collection of spousal sup-
(1) The minimum income standard is port.
a State’s AFDC income standard in ef- (a) Basis. This section implements
fect as of May 1, 1988 for the applicable sections 408(a)(11)(B) and 1931(c)(1) of
family size converted to a MAGI-equiv- the Act.
alent standard in accordance with (b) Eligibility. (1) The extended eligi-
guidance issued by the Secretary under bility period is for 4 months.
section 1902(e)(14)(A) and (E) of the Act. (2) The agency must provide coverage
(2) The maximum income standard is during an extended eligibility period to
the higher of— a parent or other caretaker relative
(i) The effective income level in ef- who was eligible and enrolled for Med-
fect for section 1931 low-income fami- icaid under § 435.110, and any dependent
lies under the Medicaid State plan or child of such parent or other caretaker
waiver of the State plan as of March 23, relative who was eligible and enrolled
2010 or December 31, 2013, if higher, under § 435.118, in at least 3 out of the
converted to a MAGI-equivalent stand- 6 months immediately preceding the
ard in accordance with guidance issued month that eligibility for the parent or
by the Secretary under section other caretaker relative under § 435.110
1902(e)(14)(A) and (E) of the Act; or is lost due to increased collection of
(ii) A State’s AFDC income standard spousal support under title IV–D of the
in effect as of July 16, 1996 for the ap- Act.
plicable family size, increased by no [81 FR 86451, Nov. 30, 2016]
more than the percentage increase in
the Consumer Price Index for all urban MANDATORY COVERAGE OF PREGNANT
consumers between July 16, 1996 and WOMEN, CHILDREN UNDER 19, AND
the effective date of such increase. NEWBORN CHILDREN
§ 435.116 Pregnant women.
FR 42302, July 15, 2013]
§ 435.112 Families terminated from sections 1902(a)(10)(A)(i)(III) and (IV);
AFDC because of increased earn-
1902(a)(10)(A)(ii)(I), (IV), and (IX); and

ings or hours of employment. 1931(b) and (d) of the Act.
(a) If a family loses AFDC solely be- (b) Scope. The agency must provide
cause of increased income from em- Medicaid to pregnant women whose
136
household income is at or below the in- (i) The minimum applicable income
come standard established by the agen- limit is the State’s AFDC income
cy in its State plan, in accordance with standard in effect as of May 1, 1988 for
paragraph (c) of this section. the applicable family size converted to
(c) Income standard. The agency must a MAGI-equivalent standard in accord-
establish in its State plan the income ance with guidance issued by the Sec-
standard as follows: retary under section 1902(e)(14)(A) and
(1) The minimum income standard is (E) of the Act.
the higher of: (ii) The maximum applicable income
(i) 133 percent FPL for the applicable limit is the highest effective income
family size; or level for coverage under section
(ii) Such higher income standard up 1902(a)(10)(A)(i)(III) of the Act or under
to 185 percent FPL, if any, as the State section 1931(b) and (d) of the Act in ef-
had established as of December 19, 1989 fect under the Medicaid State plan or
for determining eligibility for pregnant waiver of the State plan as of March 23,
women, or, as of July 1, 1989, had au- 2010 or December 31, 2013, if higher,
thorizing legislation to do so. converted to a MAGI-equivalent stand-
(2) The maximum income standard is ard.
the higher of— [77 FR 17204, Mar. 23, 2012, as amended at 78
(i) The highest effective income level FR 42302, July 15, 2013]
in effect under the Medicaid State plan
for coverage under the sections speci- § 435.117 Deemed newborn children.
fied at paragraph (a) of this section, or (a) Basis. This section implements
waiver of the State plan covering preg- sections 1902(e)(4) and 2112(e) of the
nant women, as of March 23, 2010 or De- Act.
cember 31, 2013, if higher, converted to (b) Eligibility. (1) The agency must
a MAGI-equivalent standard in accord- provide Medicaid to children from
ance with guidance issued by the Sec- birth until the child’s first birthday
retary under section 1902(e)(14)(A) and without application if, for the date of
(E) of the Act; or the child’s birth, the child’s mother
(ii) 185 percent FPL. was eligible for and received covered
(d) Covered services. (1) Pregnant services under—
women are covered under this section (i) The Medicaid State plan (includ-
for the full Medicaid coverage de- ing during a period of retroactive eligi-
scribed in paragraph (d)(2) of this sec- bility under § 435.915) regardless of
tion, except that the agency may pro- whether payment for services for the
vide only pregnancy-related services mother is limited to services necessary
described in paragraph (d)(3) of this to treat an emergency medical condi-
section for pregnant women whose in- tion, as defined in section 1903(v)(3) of
come exceeds the applicable income the Act; or
limit established by the agency in its (ii) The CHIP State plan as a tar-
State plan, in accordance with para- geted low-income pregnant woman in
graph (d)(4) of this section. accordance with section 2112 of the
(2) Full Medicaid coverage consists of Act, with household income at or below
all services which the State is required the income standard established by the
to cover under § 440.210(a)(1) of this sub- agency under § 435.118 for infants under
chapter and all services which it has age 1.
opted to cover under § 440.225 and (2) The agency may provide coverage
§ 440.250(p) of this subchapter. under this section to children from
(3) Pregnancy-related services con- birth until the child’s first birthday
sists of services covered under the without application who are not de-
State plan consistent with scribed in (b)(1) of this section if, for
§ 440.210(a)(2) and § 440.250(p) of this sub- the date of the child’s birth, the child’s
chapter. mother was eligible for and received
(4) Applicable income limit for full Med- covered services under—
icaid coverage of pregnant women. For (i) The Medicaid State plan of any
purposes of paragraph (d)(1) of this sec- State (including during a period of ret-
tion— roactive eligibility under § 435.915); or
137
§ 435.118 42 CFR Ch. IV (10–1–17 Edition)
(ii) Any of the following, provided tary evidence of citizenship and iden-
that household income of the child’s tity as required under § 435.406.
mother at the time of the child’s birth
is at or below the income standard es- FR 86451, Nov. 30, 2016]
tablished by the agency under § 435.118
for infants under age 1: MANDATORY COVERAGE OF QUALIFIED
(A) The State’s separate CHIP State FAMILY MEMBERS
plan as a targeted low-income child;
(B) The CHIP State plan of any State § 435.118 Infants and children under
as a targeted low-income pregnant age 19.
woman or child; or (a) Basis. This section implements
(C) A Medicaid or CHIP demonstra- sections 1902(a)(10)(A)(i)(III), (IV), (VI),
tion project authorized under section and (VII); 1902(a)(10)(A)(ii)(IV) and (IX);
1115 of the Act. and 1931(b) and (d) of the Act.
(3) The child is deemed to have ap- (b) Scope. The agency must provide
plied and been determined eligible Medicaid to children under age 19
under the Medicaid State plan effective whose household income is at or below
as of the date of birth, and remains eli- the income standard established by the
gible regardless of changes in cir- agency in its State plan, in accordance
cumstances until the child’s first birth- with paragraph (c) of this section.
day, unless the child dies or ceases to (c) Income standard. (1) The minimum
be a resident of the State or the child’s income standard is the higher of—
representative requests a voluntary (i) 133 percent FPL for the applicable
termination of eligibility. family size; or
(c) Medicaid identification number. (1) (ii) For infants under age 1, such
The Medicaid identification number of higher income standard up to 185 per-
the mother serves as the child’s identi- cent FPL, if any, as the State had es-
fication number, and all claims for cov- tablished as of December 19, 1989 for de-
ered services provided to the child may termining eligibility for infants, or, as
be submitted and paid under such num- of July 1, 1989 had authorizing legisla-
ber, unless and until the State issues tion to do so.
the child a separate identification (2) The maximum income standard
number. for each of the age groups of infants
(2) The State must issue a separate under age 1, children age 1 through age
Medicaid identification number for the 5, and children age 6 through age 18 is
child prior to the effective date of any the higher of—
termination of the mother’s eligibility (i) 133 percent FPL;
or prior to the date of the child’s first (ii) The highest effective income
birthday, whichever is sooner, except level for each age group in effect under
that the State must issue a separate the Medicaid State plan for coverage
Medicaid identification number in the under the applicable sections of the
case of a child born to a mother: Act listed at paragraph (a) of this sec-
(i) Whose coverage is limited to serv- tion or waiver of the State plan cov-
ices necessary for the treatment of an ering such age group as of March 23,
emergency medical condition, con- 2010 or December 31, 2013, if higher,
sistent with § 435.139 or § 435.350; converted to a MAGI-equivalent stand-
(ii) Covered under the State’s sepa- ard in accordance with guidance issued
rate CHIP; or by the Secretary under section
(iii) Who received Medicaid in an- 1902(e)(14)(A) and (E) of the Act; or
other State on the date of birth. (iii) For infants under age 1, 185 per-
(d) Renewal of eligibility. A redeter- cent FPL.
mination of eligibility must be com-
[77 FR 17205, Mar. 23, 2012]
pleted on behalf of the children de-
scribed in this provision in accordance

with the procedures at § 435.916. At that
time, the State must collect documen-
138
MANDATORY COVERAGE FOR INDIVIDUALS be receiving SSI. This includes individ-

AGE 19 THROUGH 64 uals who are—
(a) Receiving SSI pending a final de-
§ 435.119 Coverage for individuals age termination of blindness or disability;
19 or older and under age 65 at or
below 133 percent FPL. (b) Receiving SSI under an agree-
ment with the Social Security Admin-
(a) Basis. This section implements istration to dispose of resources that
section 1902(a)(10)(A)(i)(VIII) of the exceed the SSI dollar limits on re-
Act. sources; or
(b) Eligibility. Effective January 1, (c) Receiving benefits under section
2014, the agency must provide Medicaid
1619(a) of the Act or in section 1619(b)
to individuals who:
status (blind individuals or those with
(1) Are age 19 or older and under age
disabling impairments whose income
65;
equals or exceeds a specific Supple-
(2) Are not pregnant;
mental Security Income limit). (Regu-
(3) Are not entitled to or enrolled for lations at 20 CFR 416.260 through
Medicare benefits under part A or B of
416.269 contain requirements governing
title XVIII of the Act;
determinations of eligibility under this
(4) Are not otherwise eligible for and
provision.) For purposes of this para-
enrolled for mandatory coverage under
graph (c), this mandatory categorically
a State’s Medicaid State plan in ac-
cordance with subpart B of this part; needy group of individuals includes
and those qualified severely impaired indi-
(5) Have household income that is at viduals defined in section 1905(q) of the
or below 133 percent FPL for the appli- Act.
cable family size. [55 FR 33705, Aug. 17, 1990]
(c) Coverage for dependent children. (1)
A State may not provide Medicaid § 435.121 Individuals in States using
under this section to a parent or other more restrictive requirements for
caretaker relative living with a de- Medicaid than the SSI require-
pendent child if the child is under the ments.
age specified in paragraph (c)(2) of this (a) Basic eligibility group requirements.
section, unless such child is receiving (1) If the agency does not provide Med-
benefits under Medicaid, the Children’s icaid under § 435.120 to aged, blind, and
Health Insurance Program under sub- disabled individuals who are SSI bene-
chapter D of this chapter, or otherwise ficiaries, the agency must provide Med-
is enrolled in minimum essential cov- icaid to aged, blind, and disabled indi-
erage as defined in § 435.4 of this part.
viduals who meet eligibility require-
(2) For the purpose of paragraph (c)(1)
ments that are specified in this sec-
of this section, the age specified is
tion.
under age 19, unless the State had
elected as of March 23, 2010 to provide (2) Except to the extent provided in
Medicaid to individuals under age 20 or paragraph (a)(3) of this section, the
21 under § 435.222 of this part, in which agency may elect to apply more re-
case the age specified is such higher strictive eligibility requirements to
age. the aged, blind, and disabled that are
more restrictive than those of the SSI
[58 FR 48614, Sept. 17, 1993, as amended at 77 program. The more restrictive require-
FR 17205, Mar. 23, 2012; 78 FR 42302, July 15,
2013] ments may be no more restrictive than
those requirements contained in the
MANDATORY COVERAGE OF THE AGED, State’s Medicaid plan in effect on Jan-
BLIND, AND DISABLED uary 1, 1972. If any of the State’s 1972
Medicaid plan requirements were more
§ 435.120 Individuals receiving SSI. liberal than of the SSI program, the
State must use the SSI requirement in-
Except as allowed under § 435.121, the

agency must provide Medicaid to aged, stead of the more liberal requirements,
blind, and disabled individuals or cou- except to the extent the State elects to
ples who are receiving or are deemed to use more liberal criteria under § 435.601.
139
§ 435.121 42 CFR Ch. IV (10–1–17 Edition)
(3) The agency must not apply a more (c) Group composition. The agency
restrictive requirement under the pro- may apply more restrictive require-
visions of paragraph (a)(2) of this sec- ments only to the aged, to the blind, to
tion if: the disabled, or to any combination of
(i) The requirement conflicts with these groups. For example, the agency
the requirements of section 1924 of the may apply more restrictive require-
Act, which governs the eligibility and ments to the aged and disabled under
post-eligibility treatment of income this provision and provide Medicaid to
and resources of institutionalized indi- all blind individuals who are SSI bene-
viduals with community spouses; ficiaries.
(ii) The requirement conflicts with a (d) Nonfinancial conditions. The agen-
more liberal requirement which the cy may apply more restrictive require-
agency has elected to use under ments that are nonfinancial conditions
§ 435.601; or of eligibility. For example, the agency
(iii) The more restrictive require- may use a more restrictive definition
ment conflicts with a more liberal re- of disability or may limit eligibility of
quirement the State has elected to use the disabled to individuals age 18 and
under § 435.234(c) in determining eligi- older, or both. If the agency limits eli-
bility for State supplementary pay- gibility of disabled individuals to indi-
ments. viduals age 18 or older, it must provide
(b) Mandatory coverage. If the agency Medicaid to individuals under age 18
chooses to apply more restrictive re- who receive SSI benefits and who
quirements than SSI to aged, blind, or would be eligible to receive AFDC
disabled individuals, it must provide under the State’s approved plan if they
Medicaid to: did not receive SSI. If the agency im-
(1) Individuals who meet the require- posed an age limit for disabled individ-
ments of section 1619(b)(3) of the Act uals under its 1972 approved State plan
even though they may not continue to but does not use that limit, it must
meet the requirements of this section; apply the same nonfinancial require-
and ment to individuals under age 18 that
(2) Qualified Medicare beneficiaries it applies to disabled individuals age 18
described in section 1905(p) of the Act and older.
and qualified working disabled individ- (e) Financial conditions. (1) The agen-
uals described in section 1905(s) of the cy may apply more restrictive require-
Act without consideration of the more ments that are financial conditions of
restrictive eligibility requirements eligibility.
specified in this section. (2) Any income eligibility standards
(3) Individuals who: that the agency applies must:
(i) Qualify for benefits under section (i) Equal the income standard (or
1619(a) or are in eligibility status under Federal Benefit Rate (FBR)) that
section 1619(b)(1) of the Act as deter- would be used under SSI based on an
mined by SSA; and individual’s living arrangement; or
(ii) Were eligible for Medicaid under (ii) Be a more restrictive standard
the more restrictive criteria in the which is no more restrictive than that
State’s approved Medicaid plan in the under the approved State’s January 1,
reference month—the month imme- 1972 Medicaid plan.
diately preceding the first month in (3) If the categorically needy income
which they became eligible under sec- standard established under paragraph
tion 1619(a) or (b)(1) of the Act. ‘‘Were (e)(2) of this section is less than the op-
eligible for Medicaid’’ means that indi- tional categorically needy standard es-
viduals were issued Medicaid cards by tablished under § 435.230, the agency
the State for the reference month. must provide Medicaid to all aged,
Under this provision, the reference blind, and disabled individuals who
month for determining Medicaid eligi- have income equal to or below the
bility for all individuals under section higher standard.
1619 of the Act is the month imme- (4) In a State that does not have a
diately preceding the first month of medically needy program that covers
the most recent period of eligibility aged, blind, and disabled individuals,
under section 1619 of the Act. the agency must allow individuals to
140
deduct from income incurred medical limits on the amounts of incurred med-
and remedial expenses (that is, spend ical expenses that are deducted.
down) to become eligible under this (2) For purposes of counting income
section. However, individuals with in- with respect to individuals who are re-
come above the categorically needy ceiving benefits under section 1619(a) f
standards may only spend down to the the Act or are in section 1619(b)(1) of
standard selected by the State under the Act status but who do not meet the
paragraph (e)(2) of this section which requirements of paragraph (b)(3)(ii) of
applies to the individual’s living ar- this section, the agency may disregard
rangement. some or all of the amount of the indi-
(5) In a State that elects to provide vidual’s income that is in excess of the
medically needy coverage to aged, SSI Federal benefit rate under section
blind, and disabled individuals, the 1611(b) of the Act.
agency must allow individuals to de-
[58 FR 4926, Jan. 19, 1993, as amended at 78
duct from income incurred medical and
FR 42302, July 15, 2013]
remedial care expenses (spend down) to
become categorically needy when they § 435.122 Individuals who are ineli-
are SSI beneficiaries (including indi- gible for SSI or optional State sup-
viduals deemed to be SSI beneficiaries plements because of requirements
under §§ 435.135, 435.137, and 435.138), eli- that do not apply under title XIX of
gible spouses of SSI beneficiaries, the Act.
State supplement beneficiaries, and in- If an agency provides Medicaid to
dividuals who are eligible for a supple- aged, blind, or disabled individuals re-
ment but who do not receive supple- ceiving SSI or optional State supple-
mentary payments. Such persons may ments, it must provide Medicaid to in-
only spend down to the standard se- dividuals who would be eligible for SSI
lected by the State under paragraph or optional State supplements except
(e)(2) of this section. Individuals who for an eligibility requirement used in
are not SSI beneficiaries, eligible those programs that is specifically pro-
spouses of SSI beneficiaries, State sup- hibited under title XIX.
plement beneficiaries, or individuals
who are eligible for a supplement must [47 FR 43648, Oct. 1, 1982; 47 FR 49847, Nov. 3,
spend down to the State’s medically 1982]
needy income standards for aged, blind,
§ 435.130 Individuals receiving manda-
and disabled individuals in order to be- tory State supplements.
come Medicaid eligible.
(f) Deductions from income. (1) In addi- The agency must provide Medicaid to
tion to any income disregards specified individuals receiving mandatory State
in the approved State plan in accord- supplements.
ance with § 435.601(b), the agency must
deduct from income: § 435.131 Individuals eligible as essen-
tial spouses in December 1973.
(i) SSI payments;
(ii) State supplementary payments (a) The agency must provide Med-
that meet the conditions specified in icaid to any person who was eligible for
§§ 435.232 and 435.234; and Medicaid in December 1973 as an essen-
(iii) Expenses incurred by the indi- tial spouse of an aged, blind, or dis-
vidual or financially responsible rel- abled individual who was receiving
atives for necessary medical and reme- cash assistance, if the conditions in
dial services that are recognized under paragraph (b) of this section are met.
State law and are not subject to pay- An ‘‘essential spouse’’ is defined in sec-
ment by a third party, unless the third tion 1905(a) of the Act as one who is liv-
party is a public program of a State or ing with the individual; whose needs
political subdivision of a State. These were included in determining the
expenses include Medicare and other amount of cash payment to the indi-
health insurance premiums, deductions vidual under OAA, AB, APTD, or
and coinsurance charges, and copay- AABD; and who is determined essential
ments or deductibles imposed under to the individual’s well-being.
§ 447.52, § 447.53, or § 447.54 of this chap- (b) The agency must continue Med-
ter. The agency may set reasonable icaid if—
141
§ 435.132 42 CFR Ch. IV (10–1–17 Edition)
(1) The aged, blind, or disabled indi- § 435.134 Individuals who would be eli-
vidual continues to meet the December gible except for the increase in
1973 eligibility requirements of the ap- OASDI benefits under Pub. L. 92–
plicable State cash assistance plan; and 336 (July 1, 1972).
(2) The essential spouse continues to The agency must provide Medicaid to
meet the conditions that were in effect individuals who meet the following
in December 1973 under the applicable conditions:
cash assistance plan for having his (a) In August 1972, the individual was
needs included in computing the pay- entitled to OASDI and—
ment to the aged, blind, or disabled in- (1) He was receiving OAA, AB, APTD,
or AABD; or
dividual.
(2) He would have been eligible for
§ 435.132 Institutionalized individuals one of those programs except that he
who were eligible in December had not applied, and the Medicaid plan
1973. covered this optional group; or
(3) He would have been eligible for
The agency must provide Medicaid to one of those programs if he were not in
individuals who were eligible for Med- a medical institution or intermediate
icaid in December 1973, or any part of care facility, and the Medicaid plan
that month, as inpatients of medical covered this optional group.
institutions or residents of inter- (b) The individual would currently be
mediate care facilities that were par- eligible for SSI or a State supplement
ticipating in the Medicaid program and except that the increase in OASDI
who— under Pub. L. 92–336 raised his income
(a) For each consecutive month after over the limit allowed under SSI. This
December 1973— includes an individual who—
(1) Continue to meet the require- (1) Meets all current SSI require-
ments for Medicaid eligibility that ments except for the requirement to
were in effect under the State’s plan in file an application; or
December 1973 for institutionalized in- (2) Would meet all current SSI re-
dividuals; and quirements if he were not in a medical
institution or intermediate care facil-
(2) Remain institutionalized; and
ity, and the State’s Medicaid plan cov-
(b) Are determined by the State or a ers this optional group.
professional standards review organiza-
tion to continue to need institutional [43 FR 45204, Sept. 29, 1978, as amended at 45
care. FR 24883, Apr. 11, 1980]
§ 435.135 Individuals who become in-

§ 435.133 Blind and disabled individ- eligible for cash assistance as a re-
uals eligible in December 1973. sult of OASDI cost-of-living in-
The agency must provide Medicaid to creases received after April 1977.
individuals who— (a) If an agency provides Medicaid to
(a) Meet all current requirements for aged, blind, or disabled individuals re-
Medicaid eligibility except the criteria ceiving SSI or State supplements, it
for blindness or disability; must provide Medicaid to individuals
(b) Were eligible for Medicaid in De- who—
cember 1973 as blind or disabled indi- (1) Are receiving OASDI;
viduals, whether or not they were re- (2) Were eligible for and receiving
ceiving cash assistance in December SSI or State supplements but became
1973; and ineligible for those payments after
April 1977; and
(c) For each consecutive month after
(3) Would still be eligible for SSI or
December 1973, continue to meet the
State supplements if the amount of
criteria for blindness or disability and OASDI cost-of-living increases paid
the other conditions of eligibility used under section 215(i) of the Act, after
under the Medicaid plan in December
the last month after April 1977 for

1973. which those individuals were both eli-
gible for and received SSI or a State
supplement and were entitled to
142
OASDI, were deducted from current § 435.137 Disabled widows and wid-
OASDI benefits. owers who would be eligible for SSI
(b) Cost-of-living increases include except for the increase in disability
the increases received by the indi- benefits resulting from elimination
of the reduction factor under Pub.
vidual or his or her financially respon- L. 98–21.
sible spouse or other family member
(e.g., a parent). (a) If the agency provides Medicaid to
aged, blind, or disabled individuals re-
(c) If the agency adopts more restric-
ceiving SSI or State supplements, the
tive eligibility requirements than
agency much provide Medicaid to dis-
those under SSI, it must provide Med- abled widows and widowers who—
icaid to individuals specified in para- (1) Became ineligible for SSI or a
graph (a) of this section on the same mandatory or optional State supple-
basis as Medicaid is provided to indi- ment as a result of the elimination of
viduals continuing to receive SSI or the additional reduction factor for dis-
State supplements. If the individual in- abled widows and widowers under age
curs enough medical expenses to reduce 60 required by section 134 of Pub. L. 98–
his or her income to the financial eligi- 21, and for purposes of title XIX, are
bility standard for the categorically deemed to be title XVI payment bene-
needy, the agency must cover that in- ficiaries under section 1634(b) of the So-
dividual as categorically needy. In de- cial Security Act; and
termining the amount of his or her in- (2) Meet the conditions of paragraphs
come, the agency may deduct the cost- (b) and (e) of this section.
of-living increases paid under section (b) The individuals must meet the
215(i) after the last month after April following conditions:
1977 for which that individual was both (1) They were entitled to monthly
eligible for and received SSI or a State OASDI benefits under title II of the
supplement and was entitled to OASDI, Act for December 1983:
up to the amount that made him or her (2) They were entitled to and received
ineligible for SSI. widow’s or widower’s disability bene-
fits under section 202(e) or (f) of the
[51 FR 12330, Apr. 10, 1986] Act for January 1984;
(3) They became ineligible for SSI or
§ 435.136 State agency implementation a mandatory or optional State supple-
requirements for one-time notice ment in the first month in which the
and annual review system. increase under Pub. L. 98–21 was paid
An agency must— (and in which a retroactive payment
(a) Provide a one-time notice of po- for that increase for prior months was
tential Medicaid eligibility under not made);
§ 435.135 to all individuals who meet the (4) They have been continously enti-
requirements of § 435.135 (a) or (c) who tled to widow’s or widower’s disability
were not receiving Medicaid as of benefits under section 202(e) or (f) from
March 9, 1984; and the first month that the increase under
(b) Establish an annual review sys- Pub. L. 98–21 was received; and
(5) They would be eligible for SSI
tem to identify individuals who meet
benefits or a mandatory or optional
the requirements of § 435.135 (a) or (c)
State supplement if the amount of the
and who lose categorically needy eligi- increase under Pub. L. 98–21 and subse-
bility for Medicaid because of a loss of quent cost-of-living adjustments in
SSI. States without medically needy widow’s or widower’s benefits under
programs must send notices of poten- section 215(i) of the Act were deducted
tial eligibility for Medicaid to these in- from their income.
dividuals for 3 consecutive years fol- (c) If the agency adopts more restric-
lowing their identification through the tive requirements than those under
annual review system. SSI, it must provide Medicaid to indi-
[51 FR 12330, Apr. 10, 1986]

viduals specified in paragraph (a) of
this section on the same basis as Med-
icaid is provided to individuals con-
tinuing to receive SSI or a mandatory
143
§ 435.138 42 CFR Ch. IV (10–1–17 Edition)
or optional State supplement. The plication to obtain protected Medicaid

State must consider the individuals coverage.
specified in paragraph (a) of this sec-
[55 FR 48607, Nov. 21, 1990]
tion to have no more income than the
SSI Federal benefit rate if the indi- § 435.138 Disabled widows and wid-
vidual was eligible for SSI in the owers aged 60 through 64 who
month prior to the first month in would be eligible for SSI except for
which the increase under Public Law early receipt of social security ben-
98–21 was paid (and in which retro- efits.
active payments for that increase for (a) If the agency provides Medicaid to
prior months was not being made), and aged, blind, or disabled individuals re-
the individual would be eligible for SSI ceiving SSI or State supplements, the
except for the amount of the increase agency must provide Medicaid to dis-
under Public Law 98–21 and subsequent abled widows and widowers who—
cost-of-living adjustments in his or her (1) Are at least age 60;
widow’s or widower’s benefits under
(2) Are not entitled to hospital insur-
section 215(i) of the Act. The State
ance benefits under Medicare Part A;
must consider individuals who qualify
and
under paragraph (a) of this section on
the basis of loss of a mandatory or op- (3) Become ineligible for SSI or a
tional State supplementary payment, State supplement because of manda-
rather than the loss of SSI, to have no tory application (under section
more income than the relevant SSP 1611(e)(2)) for and receipt of widow’s or
rate. If the State’s income eligibility widower’s social security disability
level is lower than the SSP or SSI Fed- benefits under section 202(e) or (f) (or
eral benefit rates, individuals quali- any other provision of section 202 if
fying under paragraph (a) of this sec- they are also eligible for benefits under
tion who are deemed to have income at subsections (e) or (f)) of the Act.
either the SSP rate or the SSI Federal For purposes of title XIX, individuals
benefit rate may further reduce their who meet these requirements are
countable income by incurring medical deemed to be title XVI payment bene-
expenses in the amount by which their ficiaries under section 1634(d) of the
income exceeds the State’s income eli- Act.
gibility standard. When the individual (b) If the agency adopts more restric-
has reduced his or her income by this tive eligibility requirements than
amount, he or she will be eligible for those under SSI, it must provide Med-
Medicaid as categorically needy. icaid to individuals specified in para-
(d) The agency must notify each indi- graph (a) of this section on the same
vidual who may be eligible for Med- basis as Medicaid is provided to indi-
icaid under this section of his or her viduals continuing to receive SSI or a
potential eligibility, in accordance mandatory or optional State supple-
with instructions issued by the Sec- ment. If the individual incurs enough
retary. medical expenses to reduce his or her
(e)(1) Except as provided in paragraph income to the financial eligibility
(e)(2) of this section, the provisions of standard for the categorically needy
this section apply only to those indi- under the State’s more restrictive eli-
viduals who filed a written application gibility criteria, the agency must cover
for Medicaid on or before June 30, 1988, the individual as categorically needy.
to obtain protected Medicaid coverage. In determining the amount of his or
(2) Individuals who may be eligible her income, the agency may deduct all,
under this section residing in States part, or none of the amount of the so-
that use a more restrictive income cial security disability benefits that
standard than that of the SSI program, made him or her ineligible for SSI or a
under section 1902(f) of the Act, have State supplement, up to the amount
that made him or her ineligible for
up to six months after the State sends

notice pursuant to the District Court’s SSI.
order in Darling v. Bowen (685 F. Supp. (c) Individuals who may be eligible
1125 (W.D.Mo. 1988) to file a written ap- under this section must file a written
144
application for Medicaid. Medicaid cov- within the State and enrolled in Med-
erage may begin no earlier than July 1, icaid under the State’s Medicaid State
1988. plan or under a section 1115 demonstra-
(d) The agency must determine tion project upon attaining:
whether individuals may be eligible for (i) Age 18; or
Medicaid under this section. (ii) A higher age at which the State’s
or such Tribe’s foster care assistance
[55 FR 48608, Nov. 21, 1990]
ends under title IV–E of the Act.
MANDATORY COVERAGE OF CERTAIN (c) Options. At the State option, the
ALIENS agency may provide Medicaid to indi-
viduals who meet the requirements at
§ 435.139 Coverage for certain aliens. paragraphs (b)(1) and (2) of this section,
The agency must provide services were in foster care under the responsi-
necessary for the treatment of an bility of the State or Tribe within the
emergency medical condition, as de- State upon attaining either age de-
fined in § 440.255(c) of this chapter, to scribed in paragraph (b)(3)(i) or (ii) of
those aliens described in § 435.406(c) of this section, and were:
this subpart. (1) Enrolled in Medicaid under the
State’s Medicaid State plan or under a
[55 FR 36819, Sept. 7, 1990] section 1115 demonstration project at
some time during the period in foster
MANDATORY COVERAGE OF ADOPTION AS- care during which the individual at-
SISTANCE AND FOSTER CARE CHIL- tained such age; or
DREN (2) Placed by the State or Tribe in
§ 435.145 Children with adoption as- another State and, while in such place-
sistance, foster care, or guardian- ment, were enrolled in the other
ship care under title IV–E. State’s Medicaid State plan or under a
section 1115 demonstration project:
(a) Basis. This section implements (i) Upon attaining either age de-
sections 1902(a)(10)(A)(i)(I) and 473(b)(3) scribed in paragraph (b)(3)(i) or (ii) of
of the Act. this section; or
(b) Eligibility. The agency must pro- (ii) At state option, at some time
vide Medicaid to individuals for during the period in foster care during
whom— which the individual attained such age.
(1) An adoption assistance agreement
is in effect with a State or Tribe under [81 FR 86451, Nov. 30, 2016]
title IV–E of the Act, regardless of
whether adoption assistance is being MANDATORY COVERAGE OF SPECIAL
provided or an interlocutory or other GROUPS
judicial decree of adoption has been § 435.170 Pregnant women eligible for
issued; or extended or continuous eligibility.
(2) Foster care or kinship guardian-
ship assistance maintenance payments (a) Basis. This section implements
are being made by a State or Tribe sections 1902(e)(5) and 1902(e)(6) of the
under title IV–E of the Act. Act.
(b) Extended eligibility for pregnant
[81 FR 86451, Nov. 30, 2016] women. For a pregnant woman who was
eligible and enrolled under subpart B,
§ 435.150 Former foster care children. C, or D of this part on the date her
(a) Basis. This section implements pregnancy ends, the agency must pro-
section 1902(a)(10)(A)(i)(IX) of the Act. vide coverage described in paragraph
(b) Eligibility. The agency must pro- (d) of this section through the last day
vide Medicaid to individuals who: of the month in which the 60-day
(1) Are under age 26; postpartum period ends.
(2) Are not eligible and enrolled for (c) Continuous eligibility for pregnant
mandatory coverage under §§ 435.110 women. For a pregnant woman who was
through 435.118 or §§ 435.120 through eligible and enrolled under subpart B,

435.145; and C, or D of this part and who, because of
(3) Were in foster care under the re- a change in household income, will not
sponsibility of the State or a Tribe otherwise remain eligible, the agency
145
§ 435.172 42 CFR Ch. IV (10–1–17 Edition)
must provide coverage described in (1) Aged individuals (65 years of age
paragraph (d) of this section through of older);
the last day of the month in which the (2) Blind individuals (as defined in
60-day post-partum period ends. § 435.530);
(d) Covered Services. The coverage de- (3) Disabled individuals (as defined in
scribed in this paragraph (d) consists § 435.541);
of— (4) Individuals under age 21 (or, at
(1) Full Medicaid coverage, as de- State option, under age 20, 19, or 18) or
scribed in § 435.116(d)(2); or reasonable classifications of these indi-
(2) Pregnancy-related services de- viduals; and
scribed in § 435.116(d)(3), if the agency (5) Parents and other caretaker rel-
has elected to establish an income atives (as defined in § 435.4).
limit under § 435.116(d)(4), above which (b) If the agency provides Medicaid to
pregnant women enrolled for coverage any individual in an optional group
under § 435.116 receive pregnancy-re- specified in paragraph (a) of this sec-
lated services described in tion, the agency must provide Medicaid
§ 435.116(d)(3). to all individuals who apply and are
(e) Presumptive Eligibility. This sec- found eligible to be members of that
tion does not apply to pregnant women group.
covered during a presumptive eligi- (c) States that elect to use more re-
bility period under section 1920 of the strictive eligibility requirements for
Act. Medicaid than the SSI requirements
[81 FR 86452, Nov. 30, 2016]
for any group or groups of aged, blind,
and disabled individuals under § 435.121
§ 435.172 Continuous eligibility for must apply the specific requirements
hospitalized children. of § 435.230 in establishing eligibility of
(a) Basis. This section implements these groups of individuals as optional
section 1902(e)(7) of the Act. categorically needy.
(b) Requirement. The agency must [58 FR 4927, Jan. 19, 1993, as amended at 81
provide Medicaid to an individual eligi- FR 86452, Nov. 30, 2016]
ble and enrolled under § 435.118 until
the end of an inpatient stay for which OPTIONS FOR COVERAGE OF FAMILIES
inpatient services are furnished, if the AND CHILDREN AND THE AGED, BLIND,
individual: AND DISABLED
(1) Was receiving inpatient services
§ 435.210 Optional eligibility for indi-
covered by Medicaid on the date the in- viduals who meet the income and
dividual is no longer eligible under resource requirements of the cash
§ 435.118 based on the child’s age; and assistance programs.
(2) Would remain eligible but for at-
taining such age.
section 1902(a)(10)(A)(ii)(I) of the Act.
[81 FR 86452, Nov. 30, 2016] (b) Eligibility. The agency may pro-
vide Medicaid to any group or groups of
Subpart C—Options for Coverage individuals specified in § 435.201(a)(1)
through (3) who meet the income and
§ 435.200 Scope. resource requirements of SSI or an op-
This subpart specifies options for tional State supplement program in
coverage of individuals as categorically States that provide Medicaid to op-
needy. tional State supplement recipients.
[81 FR 86452, Nov. 30, 2016]
§ 435.201 Individuals included in op-
tional groups. § 435.211 Optional eligibility for indi-
(a) The agency may choose to cover viduals who would be eligible for
as optional categorically needy any cash assistance if they were not in
group or groups of the following indi- medical institutions.
viduals who are not receiving cash as- (a) Basis. This section implements
sistance and who meet the appropriate section 1902(a)(10)(A)(ii)(IV) of the Act.
eligibility criteria for groups specified (b) Eligibility. The agency may pro-
in the separate sections of this subpart: vide Medicaid to any group or groups of
146
individuals specified in § 435.201(a)(1) treatment for breast or cervical cancer;

through (3) who are institutionalized in and
a title XIX reimbursable medical insti- (4) Do not otherwise have creditable
tution and who: coverage, as defined in section 2704(c)
(1) Are ineligible for the SSI or an op- of the Public Health Service Act, for
tional State supplement program in treatment of the individual’s breast or
States that provide Medicaid to op- cervical cancer. An individual is not
tional State supplement recipients, be- considered to have creditable coverage
cause of lower income standards used just because the individual may:
under the program to determine eligi- (i) Receive medical services provided
bility for institutionalized individuals; by the Indian Health Service, a tribal
but organization, or an Urban Indian orga-
(2) Would be eligible for aid or assist- nization; or
ance under SSI or an optional State (ii) Obtain health insurance coverage
supplement program (as specified in after a waiting period of uninsurance.
§ 435.232 or § 435.234) if they were not in- (c) Need for treatment. An individual is
stitutionalized. considered to need treatment for breast
[81 FR 86452, Nov. 30, 2016] or cervical cancer if the initial screen
under BCCEDP or, subsequent to the
§ 435.212 Individuals who would be in- initial period of eligibility, the individ-
eligible if they were not enrolled in ual’s treating health professional de-
an MCO or PCCM. termines that:
The State agency may provide that a (1) Definitive treatment for breast or
beneficiary who is enrolled in an MCO cervical cancer is needed, including
or PCCM and who becomes ineligible treatment of a precancerous condition
for Medicaid is considered to continue or early stage cancer, and including di-
to be eligible— agnostic services as necessary to deter-
(a) For a period specified by the agen- mine the extent and proper course of
cy, ending no later than 6 months from treatment; and
the date of enrollment; and (2) More than routine diagnostic
(b) Except for family planning serv- services or monitoring services for a
ices (which the beneficiary may obtain precancerous breast or cervical condi-
from any qualified provider) only for tion are needed.
services furnished to him or her as an [81 FR 86452, Nov. 30, 2016]
MCO enrollee.
[56 FR 8849, Mar. 1, 1991, as amended at 67 FR
§ 435.214 Eligibility for Medicaid lim-
41095, June 14, 2002]
ited to family planning and related
services.
§ 435.213 Optional eligibility for indi- (a) Basis. This section implements
viduals needing treatment for sections 1902(a)(10)(A)(ii)(XXI) and
breast or cervical cancer. 1902(ii) and clause (XVI) in the matter
(a) Basis. This section implements following section 1902(a)(10)(G) of the
sections 1902(a)(10)(A)(ii)(XVIII) and Act.
1902(aa) of the Act. (b) Eligibility. (1) The agency may pro-
(b) Eligibility. The agency may provide Medicaid limited to the services
vide Medicaid to individuals who— described in paragraph (d) of this sec-
(1) Are under age 65; tion to individuals (of any gender)
(2) Are not eligible and enrolled for who—
mandatory coverage under the State’s (i) Are not pregnant; and
Medicaid State plan in accordance with (ii) Meet the income eligibility re-
subpart B of this part; quirements at paragraph (c) of this sec-
(3) Have been screened under the Cen- tion.
ters for Disease Control and Prevention (2) [Reserved]
(CDC) breast and cervical cancer early (c) Income standard. (1) The income
detection program (BCCEDP), estab- standard established in the State plan

lished in accordance with the require- may not exceed the higher of the in-
ments of section 1504 of the Public come standard for pregnant women in
Health Service Act, and found to need effect under—
147
§ 435.215 42 CFR Ch. IV (10–1–17 Edition)
(i) The Medicaid State plan in ac- (c) Covered Services. Individuals eligi-
cordance with § 435.116. ble under this section are covered for
(ii) A Medicaid demonstration under the following services related to the
section 1115 of the Act. treatment of infection with tuber-
(iii) The CHIP State plan under sec- culosis:
tion 2112 of the Act. (1) Prescribed drugs, described in
(iv) A CHIP demonstration under sec- § 440.120 of this chapter;
tion 1115 of the Act. (2) Physician’s services, described in
(2) The individual’s household income § 440.50 of this chapter;
is determined in accordance with
(3) Outpatient hospital and rural
§ 435.603. The agency must indicate in
its State plan the options selected by it health clinic described in § 440.20 of this
under § 435.603(k). chapter, and Federally-qualified health
(d) Covered services. Individuals eligi- center services;
ble under this section are covered for (4) Laboratory and x-ray services (in-
family planning and family planning- cluding services to confirm the pres-
related benefits as described in clause ence of the infection), described in
(XVI) of the matter following section § 440.30 of this chapter;
1902(a)(10)(G) of the Act. (5) Clinic services, described in
§ 440.90 of this chapter;
[81 FR 86453, Nov. 30, 2016]
(6) Case management services defined
§ 435.215 Individuals infected with tu- in § 440.169 of this chapter; and
berculosis. (7) Services other than room and
(a) Basis. This section implements board designated to encourage comple-
sections 1902(a)(10)(A)(ii)(XII) and tion of regimens of prescribed drugs by
1902(z)(1) of the Act. outpatients including services to ob-
(b) Eligibility. The agency may pro- serve directly the intake of prescrip-
vide Medicaid to individuals who— tion drugs.
(1) Are infected with tuberculosis; [81 FR 86453, Nov. 30, 2016]
(2) Are not eligible for full coverage
under the State’s Medicaid State plan § 435.217 Individuals receiving home
(that is, all services which the State is and community-based services.
required to cover under § 440.210(a)(1) of
this chapter and all services which it The agency may provide Medicaid to
has opted to cover under § 440.225 of this any group or groups of individuals in
chapter, or which the State covers the community who meet the following
under an approved alternative benefits requirements:
plan under § 440.325 of this chapter), in- (a) The group would be eligible for
cluding coverage for tuberculosis treat- Medicaid if institutionalized.
ment as elected by the State for this (b) In the absence of home and com-
group; and munity-based services under a waiver
(3) Have household income that does granted under part 441—
not exceed the income standard estab- (1) Subpart G of this subchapter, the
lished by the State in its State plan, group would otherwise require the level
which standard must not exceed the of care furnished in a hospital, NF, or
higher of— an ICF/IID; or
(i) The maximum income standard (2) Subpart H of this subchapter, the
applicable to disabled individuals for group would otherwise require the level
mandatory coverage under subpart B of of care furnished in an NF and are age
this part; or 65 or older.
(ii) The effective income level for (c) The group receives the waivered
coverage of individuals infected with services.
tuberculosis under the State plan in ef-
fect as of March 23, 2010, or December [57 FR 29155, June 30, 1992]
31, 2013, if higher, converted, at State
§ 435.218 Individuals with MAGI-based
option, to a MAGI-equivalent standard

in accordance with guidance issued by income above 133 percent FPL.
the Secretary under section (a) Basis. This section implements
1902(e)(14)(A) and (E) of the Act. section 1902(a)(10)(A)(ii)(XX) of the Act.
148
(b) Eligibility—(1) Criteria. The agency (2) Have income that does not exceed
may provide Medicaid to individuals 150 percent of the Federal poverty line
who: (FPL);
(i) Are under age 65; (3) Meet the needs-based criteria
(ii) Are not eligible for and enrolled under § 441.715 of this chapter; and
for mandatory coverage under a State’s (4) Will receive State plan home and
Medicaid State plan in accordance with community-based services as defined in
subpart B of this part; § 440.182 of this chapter.
(iii) Are not otherwise eligible for (b) Individuals who—
and enrolled for optional coverage (1) Would be determined eligible by
under a State’s Medicaid State plan in the agency under an existing waiver or
accordance with section demonstration project under sections
1902(a)(10)(A)(ii)(I) through (XIX) of the 1915(c), 1915(d), 1915(e) or 1115 of the
Act and subpart C of this part, based on Act, but are not required to receive
information available to the State services under such waivers or dem-
from the application filed by or on be- onstration projects;
half of the individual; and
(2) Have income that does not exceed
(iv) Have household income that ex-
300 percent of the Supplemental Secu-
ceeds 133 percent FPL but is at or
rity Income Federal Benefit Rate (SSI/
below the income standard elected by
FBR); and
the agency and approved in its Med-
(3) Will receive State plan home and
icaid State plan, for the applicable
community-based services as defined in
family size.
(2) Limitations. (i) A State may not, § 440.182 of this chapter.
except as permitted under an approved (c) For purposes of determining eligi-
phase-in plan adopted in accordance bility under paragraph (a) of this sec-
with paragraph (b)(3) of this section, tion, the agency may not take into ac-
provide Medicaid to higher income in- count an individual’s resources and
dividuals described in paragraph (b)(1) must use income standards that are
of this section without providing Med- reasonable, consistent with the objec-
icaid to lower income individuals de- tives of the Medicaid program, simple
scribed in such paragraph. to administer, and in the best interests
(ii) The limitation on eligibility of of the beneficiary. Income methodolo-
parents and other caretaker relatives gies may include use of existing in-
specified in § 435.119(c) of this section come methodologies, such as the SSI
also applies to eligibility under this program rules. However, subject to the
section. Secretary’s approval, the agency may
(3) Phase-in plan. A State may phase use other income methodologies that
in coverage to all individuals described meet the requirements of this para-
in paragraph (b)(1) of this section under graph.
a phase-in plan submitted in a State [79 FR 3028, Jan. 16, 2014]
plan amendment to and approved by
the Secretary. OPTIONS FOR COVERAGE OF FAMILIES
AND CHILDREN
[77 FR 17205, Mar. 23, 2012]
§ 435.219 Individuals receiving State § 435.220 Optional eligibility for par-

plan home and community-based ents and other caretaker relatives.
services. (a) Basis. This section implements
If the agency provides State plan section 1902(a)(10)(A)(ii)(I) of the Act
home and community-based services to for optional eligibility of parents and
individuals described in section other caretaker relatives as defined at
1915(i)(1), the agency, under its State § 435.4.
plan, may, in addition, provide Med- (b) Eligibility. The agency may pro-
icaid to individuals in the community vide Medicaid to parents and other
who are described in one or both of caretaker relatives defined in § 435.4
paragraphs (a) or (b) of this section. and, if living with such parent or other
(a) Individuals who— caretaker relative, his or her spouse,
(1) Are not otherwise eligible for whose household income is at or below
Medicaid; the income standard established by the
149
§ 435.221 42 CFR Ch. IV (10–1–17 Edition)
agency in its State plan, in accordance § 435.225 Individuals under age 19 who
with paragraph (c) of this section. would be eligible for Medicaid if
(c) Income standard. The income they were in a medical institution.
standard under this section— (a) The agency may provide Medicaid
(1) Must exceed the income standard to children 18 years of age or younger
established by the agency under who qualify under section 1614(a) of the
§ 435.110(c); and Act, who would be eligible for Medicaid
(2) May not exceed the higher of the if they were in a medical institution,
State’s AFDC payment standard in ef- and who are receiving, while living at
fect as of July 16, 1996, or the State’s home, medical care that would be pro-
highest effective income level for eligi- vided in a medical institution.
bility of parents and other caretaker (b) If the agency elects the option
relatives in effect under the Medicaid provided by paragraph (a) of this sec-
State plan or demonstration program tion, it must determine, in each case,
under section 1115 of the Act as of that the following conditions are met:
March 23, 2010, or December 31, 2013, if (1) The child requires the level of
higher, converted to a MAGI-equiva- care provided in a hospital, SNF, or
lent standard in accordance with guid- ICF.
ance issued by the Secretary under sec- (2) It is appropriate to provide that
tion 1902(e)(14)(A) and (E) of the Act. level of care outside such an institu-
[81 FR 86453, Nov. 30, 2016] tion.
(3) The estimated Medicaid cost of
§ 435.221 [Reserved] care outside an institution is no higher
than the estimated Medicaid cost of
§ 435.222 Optional eligibility for rea- appropriate institutional care.
sonable classifications of individ-
uals under age 21. (c) The agency must specify in its
State plan the method by which it de-
(a) Basis. This section implements termines the cost-effectiveness of car-
sections 1902(a)(10)(A)(ii)(I) and (IV) of ing for disabled children at home.
the Act for optional eligibility of indi-
viduals under age 21. [55 FR 48608, Nov. 21, 1990]
(b) Eligibility. The agency may pro-
§ 435.226 Optional eligibility for inde-
vide Medicaid to all—or to one or more pendent foster care adolescents.
reasonable classifications, as defined in
the State plan, of—individuals under (a) Basis. This section implements
age 21 (or, at State option, under age section 1902(a)(10)(A)(ii)(XVII) of the
20, 19 or 18) who have household income Act.
at or below the income standard estab- (b) Eligibility. The agency may pro-
lished by the agency in its State plan vide Medicaid to individuals under age
in accordance with paragraph (c) of 21 (or, at State option, under age 20 or
this section. 19) who were in foster care under the
(c) Income standard. The income responsibility of a State or Tribe (or,
standard established under this section at State or Tribe option, only to such
may not exceed the higher of the individuals for whom Federal foster
State’s AFDC payment standard in ef- care assistance under title IV–E of the
fect as of July 16, 1996, or the State’s Act was being provided) on the individ-
highest effective income level, if any, ual’s 18th birthday and have household
for such individuals under the Medicaid income at or below the income stand-
State plan or a demonstration program ard, if any, established by the agency
under section 1115 of the Act as of in its State plan in accordance with
March 23, 2010, or December 31, 2013, if paragraph (c) of this section.
higher, converted to a MAGI-equiva- (c) Income standard. (1) The income
lent standard in accordance with guid- standard established under this section
ance issued by the Secretary under sec- may not be lower than the State’s in-
tion 1902(e)(14)(A) and (E) of the Act. come standard established under
§ 435.110.
[81 FR 86453, Nov. 30, 2016]
150
(2) The State may elect to have no plan, has entered into an adoption as-
income standard for eligibility under sistance agreement.
this section.
[81 FR 86454, Nov. 30, 2016]
[81 FR 86453, Nov. 30, 2016]
§ 435.229 Optional targeted low-income
§ 435.227 Optional eligibility for indi- children.
viduals under age 21 who are under (a) Basis. This section implements
State adoption assistance agree-
ments. section 1902(a)(10)(A)(ii)(XIV) of the
Act.
(a) Basis. This section implements (b) Eligibility. The agency may pro-
section 1902(a)(10)(A)(ii)(VIII) of the vide Medicaid to individuals under age
Act. 19, or at State option within a range of
(b) Eligibility. The agency may pro- ages under age 19 established in the
vide Medicaid to individuals under age State plan, who meet the definition of
21 (or, at State option, under age 20, 19, an optional targeted low-income child
or 18): in § 435.4 and have household income at
(1) For whom an adoption assistance or below the income standard estab-
agreement (other than an agreement lished by the agency in its State plan
under title IV–E of the Act) between a in accordance with paragraph (c) of
State and the adoptive parent(s) is in
this section.
effect;
(c) Income standard. The income
(2) Who the State agency which en-
standard established under this section
tered into the adoption agreement de-
may not exceed the higher of—
termined could not be placed for adop-
tion without Medicaid coverage be- (1) 200 percent of the Federal poverty
cause the child has special needs for level (FPL);
medical or rehabilitative care; and (2) A percentage of the FPL which ex-
(3) Who, prior to the adoption agree- ceeds the State’s Medicaid applicable
ment being entered into— income level, defined at § 457.10 of this
(i) Were eligible under the Medicaid chapter, by no more than 50 percentage
State plan of the State with the adop- points (converted to a MAGI-equiva-
tion assistance agreement; or lent standard in accordance with guid-
(ii) Had household income at or below ance issued by the Secretary under sec-
the income standard established by the tion 1902(e)(14)(A) and (E) of the Act);
agency in its State plan in accordance and
with paragraph (c) of this section. (3) The highest effective income level
(c) Income standard. The income for coverage of such individuals under
standard established under this section the Medicaid State plan or demonstra-
may not exceed the effective income tion program under section 1115 of the
level (converted to a MAGI-equivalent Act or for coverage of targeted low-in-
standard in accordance with guidance come children, defined in § 457.10 of this
issued by the Secretary under section chapter, under the CHIP State plan or
1902(e)(14)(A) and (E) of the Act) under demonstration program under section
the State plan or under a demonstra- 1115 of the Act, as of March 23, 2010, or
tion program under section 1115 of the December 31, 2013, converted to a
Act as of March 23, 2010 or December MAGI-equivalent standard in accord-
31, 2013, whichever is higher, that was ance with guidance issued by the Sec-
applied by the State to the household retary under section 1902(e)(14)(A) and
income of a child prior to the execution (E) of the Act.
of an adoption assistance agreement
[81 FR 86454, Nov. 30, 2016]
for purposes of determining eligibility
of children described in paragraphs
(b)(1) and (2) of this section.
(d) Limit Eligibility The agency may

limit eligibility under this section to
children for whom the State, or an-
other State identified in the State
151
§ 435.230 42 CFR Ch. IV (10–1–17 Edition)
OPTIONS FOR COVERAGE OF THE AGED, (iv) Individuals receiving only op-
BLIND, AND DISABLED tional State supplements described in
§ 435.234;
§ 435.230 Aged, blind, and disabled in- (v) Institutionalized individuals with
dividuals in States that use more income below a special income level de-
restrictive requirements for Med-
icaid than SSI requirements: Op- scribed in § 435.236;
tional coverage. (vi) Aged and disabled individuals
who have income below 100 percent of
(a) Basic optional coverage rule. If the
the Federal poverty level described in
agency elects the option under § 435.121
section 1905(m) of the Act.
to provide mandatory eligibility for
aged, blind, and disabled SSI bene- (3) Individuals who qualify for special
ficiaries using more restrictive require- status under §§ 435.135 and 435.138, and
ments than those used under SSI, the with respect to whom the State elects
agency may provide eligibility as op- to disregard some or the maximum
tional categorically needy to addi- amount of title II payments permitted
tional individuals who meet the re- to be disregarded under those sections.
quirements of this section. (d) Use of more liberal methods. The
(b) Group composition. Subject to the agency may elect to apply more liberal
conditions specified in paragraphs (d) methods of counting income and re-
and (e) of this section, the agency may sources that are approved for this eligi-
provide Medicaid to individuals who: bility group under the provisions of
(1) Meet the nonfinancial criteria § 435.601.
that the State has elected to apply [58 FR 4928, Jan. 19, 1993]
under § 435.121;
(2) Meet the resource requirements § 435.232 Individuals receiving only
that the State has elected to apply optional State supplements.
under § 435.121; and (a) If the agency provides Medicaid to
(3) Meet the income eligibility stand- individuals receiving SSI under
ards specified in paragraph (c) of this § 435.120, it may provide Medicaid, in
section. one or more of the following classifica-
(c) Criteria for income standards. The tions, to individuals who receive only
agency may provide Medicaid to the
an optional State supplement that
following individuals who meet the re-
meets the conditions specified in para-
quirements of paragraphs (b)(1) and
graph (b) of this section and who would
(b)(2) of this section:
be eligible for SSI except for the level
(1) Individuals who are financially el-
of their income.
igible for but not receiving SSI bene-
fits and who, before deduction of in- (1) All aged individuals.
curred medical and remedial expenses, (2) All blind individuals.
meet the State’s more restrictive eligi- (3) All disabled individuals.
bility requirements described in (4) Only aged individuals in domi-
§ 435.121; ciliary facilities or other group living
(2) Individuals who meet the income arrangements as defined under SSI.
standards of the following eligibility (5) Only blind individuals in domi-
groups: ciliary facilities or other group living
(i) Individuals who would be eligible arrangements as defined under SSI.
for cash assistance except for institu- (6) Only disabled individuals in domi-
tional status described in § 435.211; ciliary facilities or other group living
(ii) Individuals who are enrolled in an arrangements as defined under SSI.
HMO or other entity and who are (7) Individuals receiving a federally
deemed to continue to be Medicaid eli- administered optional State supple-
gible for a period specified by the agen- ment that meets the conditions speci-
cy up to 6 months from the date of en- fied in this section.
rollment and who became ineligible (8) Individuals in additional classi-
during the specified enrollment period, fications specified by the Secretary for
as described in § 435.212; federally administered supplementary

(iii) Individuals receiving home and payments under 20 CFR 416.2020(d).
community-based waiver services de- (9) Reasonable groups of individuals,
scribed in § 435.217; as specified by the State, receiving
152
State-administered supplementary (5) Only blind individuals in domi-

payments. ciliary facilities or other group living
(b) Payments under the optional sup- arrangements as defined under SSI.
plement program must be— (6) Only disabled individuals in domi-
(1) Based on need and paid in cash on ciliary facilities or other group living
a regular basis; arrangements as defined under SSI.
(2) Equal to the difference between (7) Individuals receiving a Federally-
the individual’s countable income and administered optional State supple-
the income standard used to determine ment that meets the conditions speci-
eligibility for supplement. Countable fied in this section.
income is income remaining after de- (8) Individuals in additional classi-
ductions required under SSI or, at fications specified by the Secretary.
State option, more liberal deductions (9) Reasonable groups of individuals,
are made (see § 435.1006 for limitations as specified by the State, receiving
on FFP in Medicaid expenditures for State-administered supplementary
individuals receiving optional State payments.
supplements); and (c) Payments under the optional sup-
plement program must be:
(3) Available to all individuals in
(1) Based on need and paid in cash on
each classification in paragraph (a) of
a regular basis;
this section and available on a state- (2) Equal to the difference between
wide basis. However, the plan may pro- the individual’s countable income and
vide for variations in the income stand- the income standard used to determine
ard by political subdivision according eligibility for supplements. Countable
to cost-of-living differences. income is income remaining after de-
[43 FR 45204, Sept. 29, 1978. Redesignated and ductions are applied. The income de-
amended at 58 FR 4928, Jan. 19, 1993] ductions may be more restrictive than
required under SSI (see § 435.1006 for
§ 435.234 Individuals receiving only limitations on FFP in Medicaid ex-
optional State supplements in penditures for individuals receiving op-
States using more restrictive eligi- tional State supplements); and
bility requirements than SSI and
certain States using SSI criteria. (3) Available to all individuals in
each classification in paragraph (b) of
(a) In States using more restrictive this section and available on a state-
eligibility requirements than SSI or in wide basis. However, the plan may pro-
States that use SSI criteria but do not vide for variations in the income stand-
have section 1616 or 1634 agreements ard by political subdivision according
with the Social Security Administra- to cost-of-living differences.
tion for eligibility determinations, the
[58 FR 4928, Jan. 19, 1993]
agency may provide Medicaid to indi-
viduals specified in paragraph (b) of § 435.236 Individuals in institutions
this section who receive only a State who are eligible under a special in-
supplement if the State supplement come level.
meets the conditions specified in para- (a) If the agency provides Medicaid
graph (c) of this section. under § 435.211 to individuals in institu-
(b) The agency may provide Medicaid tions who would be eligible for AFDC,
to all individuals receiving only State SSI, or State supplements except for
supplements if, except for their in- their institutional status, it may also
come, the individuals meet the more cover aged, blind, and disabled individ-
restrictive eligibility requirements uals in institutions who—
under § 435.121 or SSI criteria, or to one (1) Because of their income, would
or more of the following classifications not be eligible for SSI or State supple-
of individuals who meet these criteria: ments if they were not institutional-
(1) All aged individuals. ized; but
(2) All blind individuals. (2) Have income below a level speci-
(3) All disabled individuals. fied in the plan under § 435.722. (See
(4) Only aged individuals in domi- § 435.1005 for limitations on FFP in
ciliary facilities or other group living Medicaid expenditures for individuals
arrangements as defined under SSI. specified in this section.)
153
§ 435.300 42 CFR Ch. IV (10–1–17 Edition)
(b) The agency may cover individuals period, beginning on the last day of
under this section whether or not the pregnancy, ends. Eligibility must be
State pays optional supplements. provided, regardless of changes in the
woman’s financial circumstances that
FR 24884, Apr. 11, 1980. Redesignated at 58 FR may occur within this extended period.
4928, Jan. 19, 1993] These women are eligible for the ex-
tended period for all services under the
Subpart D—Optional Coverage of plan that are pregnancy-related (as de-
fined in § 440.210(c)(1) of this sub-
the Medically Needy chapter).
§ 435.300 Scope. (2) The agency may provide Medicaid
to any of the following groups of indi-
This subpart specifies the option for
viduals;
coverage of medically needy individ-
uals. (i) Individuals under age 21 (§ 435.308).
(ii) Parents and other caretaker rel-
§ 435.301 General rules. atives (§ 435.310).
(a) An agency may provide Medicaid (iii) Aged (§§ 435.320 and 435.330).
to individuals specified in this subpart (iv) Blind (§§ 435.322, 435.330 and
who: 435.340).
(1) Either: (v) Disabled (§§ 435.324, 435.330, and
(i) Have income that meets the appli- 435.340).
cable standards in §§ 435.811 and 435.814; (3) If the agency provides Medicaid to
or any individual in a group specified in
(ii) If their income is more than al- paragraph (b)(2) of this section, the
lowed under the standard, have in- agency must provide Medicaid to all
curred medical expenses at least equal individuals eligible to be members of
to the difference between their income that group.
and the applicable income standard;
and
FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22,
(2) Have resources that meet the ap- 1987; 55 FR 48609, Nov. 21, 1990; 58 FR 4929,
plicable standards in §§ 435.840 and Jan. 19, 1993; 81 FR 86454, Nov. 30, 2016]
435.843.
(b) If the agency chooses this option, § 435.308 Medically needy coverage of
the following provisions apply: individuals under age 21.
(1) The agency must provide Med-
(a) If the agency provides Medicaid to
icaid to the following individuals who
the medically needy, it may provide
meet the requirements of paragraph (a)
Medicaid to individuals under age 21
of this section:
(or, at State option, under age 20, 19, or
(i) All pregnant women during the
18), as specified in paragraph (b) of this
course of their pregnancy who, except
section:
for income and resources, would be eli-
gible for Medicaid as mandatory or op- (1) Who would not be covered under
tional categorically needy under sub- the mandatory medically needy group
parts B or C of this part; of individuals under 18 under
(ii) All individuals under 18 years of § 435.301(b)(1)(ii); and
age who, except for income and re- (2) Who meet the income and re-
sources, would be eligible for Medicaid source requirements of subpart I of this
as mandatory categorically needy part.
under subpart B of this part; (b) The agency may cover all individ-
(iii) Women who, while pregnant, ap- uals described in paragraph (a) of this
plied for, were eligible for, and received section or reasonable classifications of
Medicaid services as medically needy those individuals. Examples of reason-
on the day that their pregnancy ends. able classifications are as follows:
The agency must provide medically (1) Individuals in foster homes or pri-
needy eligibility to these women for an vate institutions for whom a public
extended period following termination agency is assuming a full or partial fi-

of pregnancy. This period extends from nancial responsibility. If the agency
the last day of the pregnancy through covers these individuals, it may also
the end of the month in which a 60-day provide Medicaid to individuals placed
154
in foster homes or private institutions (a) The requirements for blindness, as

by private nonprofit agencies. specified in §§ 435.530 and 435.531; and
(2) Individuals in adoptions sub- (b) The income and resource require-
sidized in full or in part by a public ments of subpart I of this part.
agency.
[46 FR 47986, Sept. 30, 1981]
(3) Individuals in nursing facilities
when nursing facility services are pro- § 435.324 Medically needy coverage of
vided under the plan to individuals the disabled in States that cover in-
within the age group selected under dividuals receiving SSI.
this provision. When the agency covers If the agency provides Medicaid to
such individuals, it may also provide individuals receiving SSI and elects to
Medicaid to individuals in inter- cover the medically needy, it may pro-
mediate care facilities for individuals vide Medicaid to disabled individuals
with intellectual disabilities. who meet—
(4) Individuals receiving active treat- (a) The requirements for disability,
ment as inpatients in psychiatric fa- as specified in §§ 435.540 and 435.541; and
cilities or programs, if inpatient psy- (b) The income and resource require-
chiatric services for individuals under ments of subpart I of this part.
21 are provided under the plan.
[46 FR 47986, Sept. 30, 1981; 46 FR 54743, Nov.
[46 FR 47986, Sept. 30, 1981, as amended at 58 11, 1981]
FR 4929, Jan. 19, 1993]
§ 435.326 Individuals who would be in-
§ 435.310 Medically needy coverage of eligible if they were not enrolled in
parents and other caretaker rel- an MCO or PCCM.
atives.
If the agency provides Medicaid to
If the agency provides Medicaid for
the categorically needy under § 435.212,
it may provide it under the same rules
Medicaid to parents and other care-
to medically needy beneficiaries who
taker relatives who meet:
are enrolled in MCOs or PCCMs.
(a) The definition of ‘‘caretaker rel-
ative’’ at § 435.4, or are the spouse of a [67 FR 41095, June 14, 2002]
parent or caretaker relative; and
(b) The medically needy income and § 435.330 Medically needy coverage of
resource requirements at subpart I of the aged, blind, and disabled in
States using more restrictive eligi-
this part. bility requirements for Medicaid
[81 FR 86454, Nov. 30, 2016] than those used under SSI.
(a) If an agency provides Medicaid as
§ 435.320 Medically needy coverage of categorically needy only to those aged,
the aged in States that cover indi-
viduals receiving SSI. blind, or disabled individuals who meet
more restrictive requirements than
If the agency provides Medicaid to used under SSI and elects to cover the
individuals receiving SSI and elects to medically needy, it may provide Med-
cover the medically needy, it may pro- icaid as medically needy to those aged,
vide Medicaid to individuals who— blind, or disabled individuals who:
(a) Are 65 years of age and older, as (1) Do not qualify for Medicaid as
specified in § 435.520; and categorically needy under § 435.121 or
(b) Meet the income and resource re- § 435.230; and
quirements of subpart I of this part. (2) If applying as blind or disabled,
[46 FR 47986, Sept. 30, 1981] meet the definition of blindness or dis-
ability established under § 435.121.
§ 435.322 Medically needy coverage of (b) Except as specified in paragraph
the blind in States that cover indi- (c) of this section, the agency must
viduals receiving SSI. apply to individuals covered under the
If the agency provides Medicaid to option of this section the same finan-
individuals receiving SSI and elects to cial and nonfinancial requirements

cover the medically needy, it may pro- that are applied to individuals covered
vide Medicaid to blind individuals who as categorically needy under §§ 435.121
meet— and 435.230.
155
§ 435.340 42 CFR Ch. IV (10–1–17 Edition)
(c) In determining the financial eligi- (b) The agency must base any op-
bility of individuals who are considered tional group covered under subparts B
as medically needy under this section, and C of this part on reasonable classi-
the agency must apply the financial fications that do not result in arbi-
eligibility requirements of subparts G trary or inequitable treatment of indi-
and I of this part. viduals and groups and that are con-
sistent with the objectives of Title
[58 FR 4929, Jan. 19, 1993]
XIX.
§ 435.340 Protected medically needy (c) The agency must not use require-
coverage for blind and disabled in- ments for determining eligibility for
dividuals eligible in December 1973. optional coverage groups that are—
(1) [Reserved]
If an agency provides Medicaid to the (2) For aged, blind, and disabled indi-
medically needy, it must cover individ- viduals, more restrictive than those
uals who— used under SSI, except for individuals
(a) Where eligible as medically needy receiving an optional State supplement
under the Medicaid plan in December as specified in § 435.230 or individuals in
1973 on the basis of the blindness or dis- categories specified by the agency
ability criteria of the AB, APTD, or under § 435.121.
AABD plan;
(b) For each consecutive month after [43 FR 45204, Sept. 29, 1978, as amended at 81
FR 86454, Nov. 30, 2016]
December 1973, continue to meet—
(1) Those blindness or disability cri- § 435.402 [Reserved]
teria; and
(2) The eligibility requirements for § 435.403 State residence.
the medically needy under the Decem- (a) Requirement. The agency must
ber 1973 Medicaid plan; and provide Medicaid to eligible residents
(c) Meet the current requirements for of the State, including residents who
eligibility as medically needy under are absent from the State. The condi-
the Medicaid plan except for blindness tions under which payment for services
or disability criteria. is provided to out-of-State residents
[46 FR 47987, Sept. 30, 1981] are set forth in § 431.52 of this chapter.
(b) Definition. For purposes of this
§ 435.350 Coverage for certain aliens. section—Institution has the same mean-
ing as Institution and Medical institu-
If an agency provides Medicaid to the tion, as defined in § 435.1010. For pur-
medically needy, it must provide the poses of State placement, the term also
services necessary for the treatment of includes foster care homes, licensed as
an emergency medical condition, as de- set forth in 45 CFR 1355.20, and pro-
fined in § 440.255(c) of this chapter, to viding food, shelter and supportive
those aliens described in § 435.406(c) of services to one or more persons unre-
this subpart. lated to the proprietor.
[55 FR 36819, Sept. 7, 1990] (c) Incapability of indicating intent.
For purposes of this section, an indi-
Subpart E—General Eligibility vidual is considered incapable of indi-
cating intent if the individual—
Requirements (1) Has an I.Q. of 49 or less or has a
§ 435.400 Scope. mental age of 7 or less, based on tests
acceptable to the Intellectual Dis-
This subpart prescribes general re- ability agency in the State:
quirements for determining the eligi- (2) Is judged legally incompetent; or
bility of both categorically and medi- (3) Is found incapable of indicating
cally needy individuals specified in intent based on medical documentation
subparts B, C, and D of this part. obtained from a physician, psycholo-
gist, or other person licensed by the
§ 435.401 General rules.
State in the field of intellectual dis-

(a) A Medicaid agency may not im- ability.
pose any eligibility requirement that is (d) Who is a State resident. A resident
prohibited under Title XIX of the Act. of a State is any individual who:
156
(1) Meets the conditions in para- (h) Individuals age 21 and over. Except
graphs (e) through (i) of this section; or as provided in paragraph (f) of this sec-
(2) Meets the criteria specified in an tion, with respect to individuals age 21
interstate agreement under paragraph and over —
(k) of this section. (1) For an individual not residing in
(e) Placement by a State in an out-of- an institution as defined in paragraph
State institution—(1) General rule. Any (b) of this section, the State of resi-
agency of the State, including an enti- dence is the State where the individual
ty recognized under State law as being is living and—
under contract with the State for such (i) Intends to reside, including with-
purposes, that arranges for an indi- out a fixed address; or
vidual to be placed in an institution lo- (ii) Has entered the State with a job
cated in another State, is recognized as commitment or seeking employment
acting on behalf of the State in making (whether or not currently employed).
a placement. The State arranging or (2) For an individual not residing in
actually making the placement is con- an institution as defined in paragraph
sidered as the individual’s State of res- (b) of this section who is not capable of
idence. stating intent, the State of residency is
(2) Any action beyond providing in- the State where the individual is liv-
formation to the individual and the in- ing.
dividual’s family would constitute ar- (3) For any institutionalized indi-
ranging or making a State placement. vidual who became incapable of indi-
However, the following actions do not cating intent before age 21, the State of
constitute State placement: residence is—
(i) Providing basic information to in- (i) That of the parent applying for
dividuals about another State’s Med- Medicaid on the individual’s behalf, if
icaid program, and information about the parents reside in separate States (if
the availability of health care services a legal guardian has been appointed
and facilities in another State. and parental rights are terminated, the
(ii) Assisting an individual in locat- State of residence of the guardian is
ing an institution in another State, used instead of the parent’s);
provided the individual is capable of in- (ii) The parent’s or legal guardian’s
dicating intent and independently de- State of residence at the time of place-
cides to move. ment (if a legal guardian has been ap-
(3) When a competent individual pointed and parental rights are termi-
leaves the facility in which the indi- nated, the State of residence of the
vidual is placed by a State, that indi- guardian is used instead of the par-
vidual’s State of residence for Medicaid ent’s); or
purposes is the State where the indi- (iii) The current State of residence of
vidual is physically located. the parent or legal guardian who files
(4) Where a placement is initiated by the application if the individual is in-
a State because the State lacks a suffi- stitutionalized in that State (if a legal
cient number of appropriate facilities guardian has been appointed and paren-
to provide services to its residents, the tal rights are terminated, the State of
State making the placement is the in- residence of the guardian is used in-
dividual’s State of residence for Med- stead of the parent’s).
icaid purposes. (iv) The State of residence of the in-
(f) Individuals receiving a State supple- dividual or party who files an applica-
mentary payment (SSP). For individuals tion is used if the individual has been
of any age who are receiving an SSP, abandoned by his or her parent(s), does
the State of residence is the State pay- not have a legal guardian and is insti-
ing the SSP. tutionalized in that State.
(g) Individuals receiving Title IV-E pay- (4) For any institutionalized indi-
ments. For individuals of any age who vidual who became incapable of indi-
are receiving Federal payments for fos- cating intent at or after age 21, the
ter care and adoption assistance under State of residence is the State in which
title IV-E of the Social Security Act, the individual is physically present, ex-
the State of residence is the State cept where another State makes a
where the child lives. placement.
157
§ 435.403 42 CFR Ch. IV (10–1–17 Edition)
(5) For any other institutionalized in- abandoned by his or her parent(s), does
dividual, the State of residence is the not have a legal guardian and is insti-
State where the individual is living and tutionalized in that State.
intends to reside. (j) Specific prohibitions. (1) The agency
(i) Individuals under age 21. For an in- may not deny Medicaid eligibility be-
dividual under age 21 who is not eligi- cause an individual has not resided in
ble for Medicaid based on receipt of as- the State for a specified period.
sistance under title IV–E of the Act, as (2) The agency may not deny Med-
addressed in paragraph (g) of this sec- icaid eligibility to an individual in an
tion, and is not receiving a State sup- institution, who satisfies the residency
plementary payment, as addressed in rules set forth in this section, on the
paragraph (f) of this section, the State grounds that the individual did not es-
of residence is as follows: tablish residence in the State before
(1) For an individual who is capable entering the institution.
of indicating intent and who is emanci- (3) The agency may not deny or ter-
pated from his or her parent or who is minate a resident’s Medicaid eligibility
married, the State of residence is de- because of that person’s temporary ab-
termined in accordance with paragraph sence from the State if the person in-
(h)(1) of this section. tends to return when the purpose of the
(2) For an individual not described in absence has been accomplished, unless
paragraph (i)(1) of this section, not liv- another State has determined that the
ing in an institution as defined in para- person is a resident there for purposes
graph (b) of this section and not eligi- of Medicaid.
ble for Medicaid based on receipt of as- (k) Interstate agreements. A State may
sistance under title IV–E of the Act, as have a written agreement with another
addressed in paragraph (g) of this sec- State setting forth rules and proce-
tion, and is not receiving a State sup- dures resolving cases of disputed resi-
plementary payment, as addressed in dency. These agreements may establish
paragraph (f) of this section, the State criteria other than those specified in
of residence is: paragraphs (c) through (i) of this sec-
(i) The State where the individual re- tion, but must not include criteria that
sides, including without a fixed ad- result in loss of residency in both
dress; or States or that are prohibited by para-
(ii) The State of residency of the par- graph (j) of this section. The agree-
ent or caretaker, in accordance with ments must contain a procedure for
paragraph (h)(1) of this section, with providing Medicaid to individuals pend-
whom the individual resides. ing resolution of the case. States may
(3) For any institutionalized indi- use interstate agreements for purposes
vidual who is neither married nor other than cases of disputed residency
emancipated, the State of residence to facilitate administration of the pro-
is— gram, and to facilitate the placement
(i) The parent’s or legal guardian’s and adoption of title IV-E individuals
State of residence at the time of place- when the child and his or her adoptive
ment (if a legal guardian has been apparent(s) move into another State.
pointed and parental rights are termi- (l) Continued Medicaid for institu-
nated, the State of residence of the tionalized beneficiaries. If an agency is
guardian is used instead of the par- providing Medicaid to an institutional-
ent’s); or ized beneficiary who, as a result of this
(ii) The current State of residence of section, would be considered a resident
the parent or legal guardian who files of a different State—
the application if the individual is in- (1) The agency must continue to pro-
stitutionalized in that State (if a legal vide Medicaid to that beneficiary from
guardian has been appointed and paren- June 24, 1983 until July 5, 1984, unless it
tal rights are terminated, the State or makes arrangements with another
residence of the guardian is used in- State of residence to provide Medicaid
stead of the parent’s). at an earlier date: and

(iii) The State of residence of the in- (2) Those arrangements must not in-
dividual or party who files an applica- clude provisions prohibited by para-
tion is used if the individual has been graph (i) of this section.
158
(m) Cases of disputed residency. Where nance or adoption assistance payments

two or more States cannot resolve under Title IV–E of the Act.
which State is the State of residence, (E)(1) Individuals who are or were
the State where the individual is phys- deemed eligible for Medicaid in the
ically located is the State of residence. State under § 435.117 or § 457.360 of this
chapter on or after July 1, 2006, based
FR 48609, Nov. 21, 1990; 71 FR 39222, July 12, on being born to a pregnant woman eli-
2006; 77 FR 17206, Mar. 23, 2012] gible under the State’s Medicaid or
CHIP state plan or waiver of such plan;
§ 435.404 Applicant’s choice of cat- (2) At State option, individuals who
egory. were deemed eligible for coverage
The agency must allow an individual under § 435.117 or § 457.360 of this chap-
who would be eligible under more than ter in another State on or after July 1,
one category to have his eligibility de- 2006, provided that the agency verifies
termined for the category he selects. such deemed eligibility.
(2)(i) Except as specified in 8 U.S.C.
§ 435.406 Citizenship and non-citizen 1612(b)(1) (permitting States an option
eligibility. with respect to coverage of certain
(a) The agency must provide Med- qualified non-citizens), qualified non-
icaid to otherwise eligible individuals citizens as described in section 431 of
who are— the Personal Responsibility and Work
(1) Citizens and nationals of the Opportunity Reconciliation Act of 1996
United States, provided that— (8 U.S.C. 1641) (including qualified non-
(i) The individual has made a dec- citizens subject to the 5-year bar) who
laration of United States citizenship, have provided satisfactory documen-
as defined in § 435.4, or an individual de- tary evidence of Qualified Non-Citizen
scribed in paragraph (a)(3) of this sec- status, which status has been verified
tion has made such declaration on the with the Department of Homeland Se-
individual’s behalf, and such status is curity (DHS) under a declaration re-
verified in accordance with paragraph quired by section 1137(d) of the Act
(c) of this section; and that the applicant or beneficiary is an
(ii) For purposes of the declaration non-citizen in a satisfactory immigra-
and citizenship verification require- tion status.
ments discussed in paragraphs (a)(1)(i) (ii) The eligibility of qualified non-
of this section, an individual includes citizens who are subject to the 5-year
applicants under a section 1115 dem- bar in 8 U.S.C. 1613 is limited to the
onstration (including a family plan- benefits described in paragraph (b) of
ning demonstration project) for which this section.
a State receives Federal financial par- (3) For purposes of paragraphs (a)(1)
ticipation in its expenditures. and (2), of this section, a declaration of
(iii) The following groups of individ- citizenship or satisfactory immigration
uals are exempt from the requirement status may be provided, in writing and
to provide documentation to verify under penalty of perjury, by an adult
citizenship in paragraph (c) of this sec- member of the individual’s household,
tion: an authorized representative, as de-
(A) Individuals receiving SSI benefits fined in § 435.923, or if the applicant is a
under title XVI of the Act. minor or incapacitated, someone act-
(B) Individuals entitled to or enrolled ing responsibly for the applicant pro-
in any part of Medicare. vided that such individual attests to
(C) Individuals receiving disability having knowledge of the individual’s
insurance benefits under section 223 of status.
the Act or monthly benefits under sec- (b) The agency must provide payment
tion 202 of the Act, based on the indi- for the services described in § 440.255(c)
vidual’s disability (as defined in sec- of this chapter to residents of the State
tion 223(d) of the Act). who otherwise meet the eligibility re-
(D) Individuals who are in foster care quirements of the State plan (except
and who are assisted under Title IV-B for receipt of AFDC, SSI, or State Sup-
of the Act, and individuals who are plementary payments) who are quali-
beneficiaries of foster care mainte- fied non-citizens subject to the 5-year
159
§ 435.407 42 CFR Ch. IV (10–1–17 Edition)
bar or who are non-qualified non-citi- (D) Documents on Tribal letterhead,

zens who meet all Medicaid eligibility issued under the signature of the ap-
criteria, except non-qualified non-citi- propriate Tribal official, that meet the
zens need not present a social security requirements of paragraph (a)(5)(i) of
number or document immigration sta- this section.
tus. (6) A data match with the Social Se-
(c) The agency must verify the dec- curity Administration.
laration of citizenship or satisfactory (b) Evidence of citizenship. If an appli-
immigration status under paragraph cant does not provide documentary evi-
(a)(1) or (2) of this section in accord- dence from the list in paragraph (a) of
ance with § 435.956. this section, the following must be ac-
[55 FR 36819, Sept. 7, 1990, as amended at 56 cepted as satisfactory evidence to es-
FR 10807, Mar. 14, 1991; 71 FR 39222, July 12, tablish citizenship if also accompanied
2006; 72 FR 38691, July 13, 2007; 81 FR 86454, by an identity document listed in para-
Nov. 30, 2016] graph (c) of this section—
(1) A U.S. public birth certificate
§ 435.407 Types of acceptable docu-
mentary evidence of citizenship. showing birth in one of the 50 States,
the District of Columbia, Guam, Amer-
(a) Stand-alone evidence of citizenship. ican Samoa, Swain’s Island, Puerto
The following must be accepted as suf- Rico (if born on or after January 13,
ficient documentary evidence of citi- 1941), the Virgin Islands of the U.S. or
zenship: the CNMI (if born after November 4,
(1) A U.S. passport, including a U.S. 1986, (CNMI local time)). The birth
Passport Card issued by the Depart- record document may be issued by a
ment of State, without regard to any State, Commonwealth, Territory, or
expiration date as long as such pass-
local jurisdiction. If the document
port or Card was issued without limita-
shows the individual was born in Puer-
tion.
to Rico or the Northern Mariana Is-
(2) A Certificate of Naturalization.
lands before the applicable date ref-
(3) A Certificate of U.S. Citizenship.
erenced in this paragraph, the indi-
(4) A valid State-issued driver’s li-
vidual may be a collectively natural-
cense if the State issuing the license
ized citizen. The following will estab-
requires proof of U.S. citizenship, or
obtains and verifies a SSN from the ap- lish U.S. citizenship for collectively
plicant who is a citizen before issuing naturalized individuals:
such license. (i) Puerto Rico: Evidence of birth in
(5)(i) Documentary evidence issued Puerto Rico and the applicant’s state-
by a Federally recognized Indian Tribe ment that he or she was residing in the
identified in the FEDERAL REGISTER by U.S., a U.S. possession, or Puerto Rico
the Bureau of Indian Affairs within the on January 13, 1941.
U.S. Department of the Interior, and (ii) Northern Mariana Islands (NMI)
including Tribes located in a State (formerly part of the Trust Territory of
that has an international border, the Pacific Islands (TTPI)):
which— (A) Evidence of birth in the NMI,
(A) Identifies the Federally recog- TTPI citizenship and residence in the
nized Indian Tribe that issued the doc- NMI, the U.S., or a U.S. Territory or
ument; possession on November 3, 1986, (NMI
(B) Identifies the individual by name; local time) and the applicant’s state-
and ment that he or she did not owe alle-
(C) Confirms the individual’s mem- giance to a foreign State on November
bership, enrollment, or affiliation with 4, 1986 (NMI local time);
the Tribe. (B) Evidence of TTPI citizenship,
(ii) Documents described in para- continuous residence in the NMI since
graph (a)(5)(i) of this section include, before November 3, 1981 (NMI local
but are not limited to: time), voter registration before Janu-
(A) A Tribal enrollment card; ary 1, 1975, and the applicant’s state-
(B) A Certificate of Degree of Indian ment that he or she did not owe alle-
Blood; giance to a foreign State on November
(C) A Tribal census document; 4, 1986 (NMI local time);
160
(C) Evidence of continuous domicile ing the child’s name and U.S. place of
in the NMI since before January 1, 1974, birth.
and the applicant’s statement that he (17) Federal or State census record
or she did not owe allegiance to a for- showing U.S. citizenship or a U.S. place
eign State on November 4, 1986 (NMI of birth.
local time). Note: If a person entered (18) If the applicant does not have
the NMI as a nonimmigrant and lived one of the documents listed in para-
in the NMI since January 1, 1974, this graphs (a) or (b)(1) through (17) of this
does not constitute continuous domi- section, he or she may submit an affi-
cile and the individual is not a U.S. cit- davit signed by another individual
izen. under penalty of perjury who can rea-
(2) At State option, a cross match sonably attest to the applicant’s citi-
with a State vital statistics agency zenship, and that contains the appli-
documenting a record of birth. cant’s name, date of birth, and place of
(3) A Certification of Report of Birth, U.S. birth. The affidavit does not have
issued to U.S. citizens who were born to be notarized.
outside the U.S. (c) Evidence of identity. (1) The agency
(4) A Report of Birth Abroad of a U.S. must accept the following as proof of
Citizen. identity, provided such document has a
(5) A Certification of birth in the photograph or other identifying infor-
United States. mation sufficient to establish identity,
(6) A U.S. Citizen I.D. card. including, but not limited to, name,
(7) A Northern Marianas Identifica- age, sex, race, height, weight, eye
tion Card issued by the U.S. Depart- color, or address:
ment of Homeland Security (or prede- (i) Identity documents listed at 8
cessor agency). CFR 274a.2 (b)(1)(v)(B)(1), except a driv-
er’s license issued by a Canadian gov-
(8) A final adoption decree showing
ernment authority.
the child’s name and U.S. place of
(ii) Driver’s license issued by a State
birth, or if an adoption is not final, a
or Territory.
Statement from a State-approved
(iii) School identification card.
adoption agency that shows the child’s
(iv) U.S. military card or draft
name and U.S. place of birth.
record.
(9) Evidence of U.S. Civil Service em-
(v) Identification card issued by the
ployment before June 1, 1976.
Federal, State, or local government.
(10) U.S. Military Record showing a (vi) Military dependent’s identifica-
U.S. place of birth. tion card.
(11) A data match with the SAVE (vii) U.S. Coast Guard Merchant Mar-
Program or any other process estab- iner card.
lished by DHS to verify that an indi- (viii) For children under age 19, a
vidual is a citizen. clinic, doctor, hospital, or school
(12) Documentation that a child record, including preschool or day care
meets the requirements of section 101 records.
of the Child Citizenship Act of 2000 as (ix) A finding of identity from an Ex-
amended (8 U.S.C. 1431). press Lane agency, as defined in sec-
(13) Medical records, including, but tion 1902(e)(13)(F) of the Act.
not limited to, hospital, clinic, or doc- (x) Two other documents containing
tor records or admission papers from a consistent information that corrobo-
nursing facility, skilled care facility, rates an applicant’s identity. Such doc-
or other institution that indicate a uments include, but are not limited to,
U.S. place of birth. employer identification cards; high
(14) Life, health, or other insurance school, high school equivalency and
record that indicates a U.S. place of college diplomas; marriage certificates;
birth. divorce decrees; and property deeds or
(15) Official religious record recorded titles.
in the U.S. showing that the birth oc- (2) Finding of identity from a Federal
curred in the U.S. or State governmental agency. The
(16) School records, including pre- agency may accept as proof of identity
school, Head Start and daycare, show- a finding of identity from a Federal
161
§ 435.500 42 CFR Ch. IV (10–1–17 Edition)
agency or another State agency (not AGE

described in paragraph (c)(1)(ix) of this
section), including but not limited to a § 435.520 Age requirements for the
public assistance, law enforcement, in- aged.
ternal revenue or tax bureau, or correc- The agency must not impose an age
tions agency, if the agency has verified requirement of more than 65 years.
and certified the identity of the indi-
vidual. [58 FR 4929, Jan. 19, 1993]
(3) If the applicant does not have any BLINDNESS
document specified in paragraph (c)(1)
of this section and identity is not § 435.530 Definition of blindness.
verified under paragraph (c)(2) of this
section, the agency must accept an af- (a) Definition. The agency must use
fidavit signed, under penalty of per- the same definition of blindness as used
jury, by a person other than the appli- under SSI, except that—
cant who can reasonably attest to the (1) In determining the eligibility of
applicant’s identity. Such affidavit individuals whose Medicaid eligibility
must contain the applicant’s name and is protected under §§ 435.130 through
other identifying information estab- 435.134, the agency must use the defini-
lishing identity, as described in para- tion of blindness that was used under
graph (c)(1) of this section. The affi- the Medicaid plan in December 1973;
davit does not have to be notarized. and
(d) Verification of citizenship by a Fed- (2) The agency may use a more re-
eral agency or another State. The agency strictive definition to determine eligi-
may rely, without further documenta- bility under § 435.121, if the definition is
tion of citizenship or identity, on a no more restrictive than that used
verification of citizenship made by a under the Medicaid plan on January 1,
Federal agency or another State agen- 1972.
cy, if such verification was done on or (b) State plan requirement. The State
after July 1, 2006. plan must contain the definition of
(e) Assistance with obtaining docu- blindness, expressed in ophthalmic
mentation. States must provide assist- measurements.
ance to individuals who need assistance
§ 435.531 Determinations of blindness.
in securing satisfactory documentary
evidence of citizenship in a timely (a) Except as specified in paragraph
manner. (b) of this section, in determining
(f) Documentary evidence. A photo- blindness—
copy, facsimile, scanned or other copy (1) A physician skilled in the diseases
of a document must be accepted to the of the eye or an optometrist, whichever
same extent as an original document the individual selects, must examine
under this section, unless information him, unless both of the applicant’s eyes
on the copy submitted is inconsistent are missing;
with other information available to the (2) The examiner must submit a re-
agency or the agency otherwise has port of examination to the Medicaid
reason to question the validity of, or agency; and
the information in, the document. (3) A physician skilled in the diseases
of the eye (for example, an ophthalmol-
[81 FR 86455, Nov. 30, 2016]
ogist or an eye, ear, nose, and throat
specialist) must review the report and
Subpart F—Categorical determine on behalf of the agency—
Requirements for Eligibility (i) Whether the individual meets the
definition of blindness; and
§ 435.500 Scope. (ii) Whether and when re-examina-
This subpart prescribes categorical tions are necessary for periodic rede-
requirements for determining the eligi- terminations of eligibility, as required

bility of both categorically and medi- under § 435.916 of this part.
cally needy individuals specified in (b) If an agency provides Medicaid to
subparts B, C, and D of this part. individuals receiving SSI on the basis
162
of blindness, this section does not (ii) If the SSA determination is

apply for those individuals. changed, the new determination is also
binding on the agency.
(2) The agency must refer to SSA all
FR 17937, Mar. 23, 1979]
applicants who allege new information
DISABILITY or evidence affecting previous SSA de-
terminations of ineligibility based
§ 435.540 Definition of disability. upon disability for reconsideration or
reopening of the determination, except
(a) Definition. The agency must use in cases specified in paragraph (c)(4) of
the same definition of disability as this section.
used under SSI, except that— (c) Determinations made by the Med-
(1) In determining the eligibility of icaid agency. The agency must make a
individuals whose Medicaid eligibility determination of disability in accord-
is protected under §§ 435.130 through ance with the requirements of this sec-
435.134, the agency must use the definition if any of the following cir-
tion of disability that was used under cumstances exist:
the Medicaid plan in December 1973; (1) The individual applies for Med-
and icaid as a non-cash beneficiary and has
(2) The agency may use a more re- not applied to SSA for SSI cash bene-
strictive definition to determine eligi- fits, whether or not a State has a sec-
bility under § 435.121, if the definition is tion 1634 agreement with SSA; or an in-
no more restrictive than that used dividual applies for Medicaid and has
under the Medicaid plan on January 1, applied to SSA for SSI benefits and is
1972. found ineligible for SSI for a reason
(b) State plan requirements. The State other than disability.
plan must contain the definition of dis- (2) The individual applies both to
ability. SSA for SSI and to the State Medicaid
agency for Medicaid, the State agency
§ 435.541 Determinations of disability. has a section 1634 agreement with SSA,
(a) Determinations made by SSA. The and SSA has not made an SSI dis-
following rules and those under para- ability determination within 90 days
graph (b) of this section apply where an from the date of the individual’s appli-
individual has applied for Medicaid on cation for Medicaid.
the basis of disability. (3) The individual applies to SSA for
SSI and to the State Medicaid agency
(1) If the agency has an agreement
for Medicaid, the State does not have a
with the Social Security Administra-
section 1634 agreement with SSA, and
tion (SSA) under section 1634 of the
either the State uses more restrictive
Act, the agency may not make a deter-
criteria than SSI for determining Med-
mination of disability when the only icaid eligibility under its section 1902(f)
application is filed with SSA. option or, in the case of a State that
(2) The agency may not make an uses SSI criteria, SSA has not made an
independent determination of dis- SSI disability determination in time
ability if SSA has made a disability de- for the State to comply with the Med-
termination within the time limits set icaid time limit for making a prompt
forth in § 435.912 on the same issues pre- determination on an individual’s appli-
sented in the Medicaid application. A cation for Medicaid.
determination of eligibility for SSI (4) The individual applies for Med-
payments based on disability that is icaid as a non-cash beneficiary, wheth-
made by SSA automatically confers er or not the State has a section 1634
Medicaid eligibility, as provided for agreement with SSA, and—
under § 435.909. (i) Alleges a disabling condition dif-
(b) Effect of SSA determinations. (1) Ex- ferent from, or in addition to, that con-
cept in the circumstances specified in sidered by SSA in making its deter-
paragraph (c)(3) of this section—
mination; or
(i) An SSA disability determination (ii) Alleges more than 12 months
is binding on an agency until the deter- after the most recent SSA determina-
mination is changed by SSA. tion denying disability that his or her
163
§ 435.600 42 CFR Ch. IV (10–1–17 Edition)
condition has changed or deteriorated necessary, to determine the capacities

since that SSA determination and al- of the individual to perform substan-
leges a new period of disability which tial gainful activity, as specified in 20
meets the durational requirements of CFR part 416, subpart J.
the Act, and has not applied to SSA for (3) Periodic reexaminations. The review
a determination with respect to these team must determine whether and
allegations. when reexaminations will be necessary
(iii) Alleges less than 12 months after for periodic redeterminations of eligi-
the most recent SSA determination de- bility as required under § 435.916 of this
nying disability that his or her condi- part, using the principles set forth in 20
tion has changed or deteriorated since CFR 416.989 and 416.990. If a State uses
that SSA determination, alleges a new the same definition of disability as
period of disability which meets the SSA, as provided for under § 435.540, and
durational requirements of the Act, a beneficiary is Medicaid eligible be-
and— cause he or she receives SSI, this para-
(A) Has applied to SSA for reconsid- graph (f)(3) does not apply. The reex-
eration or reopening of its disability amination will be conducted by SSA.
decision and SSA refused to consider
[54 FR 50761, Dec. 11, 1989; 77 FR 17206, Mar.
the new allegations; and/or
23, 2012]
(B) He or she no longer meets the
nondisability requirements for SSI but
may meet the State’s nondisability re- Subpart G—General Financial Eli-
quirements for Medicaid eligibility. gibility Requirements and Op-
(d) Basis for determinations. The agen- tions
cy must make a determination of dis-
ability as provided in paragraph (c) of § 435.600 Scope.
this section— This subpart prescribes:
(1) On the basis of the evidence re- (a) General financial requirements
quired under paragraph (e) of this sec- and options for determining the eligi-
tion; and bility of both categorically and medi-
(2) In accordance with the require- cally needy individuals specified in
ments for evaluating that evidence subparts B, C, and D of this part. Sub-
under the SSI program specified in 20 parts H and I of this part prescribe ad-
CFR 416.901 through 416.998. ditional financial requirements.
(e) Medical and nonmedical evidence. (b) [Reserved]
The agency must obtain a medical re-
port and other nonmedical evidence for [58 FR 4929, Jan. 19, 1993, as amended at 59
individuals applying for Medicaid on FR 43052, Aug. 22, 1994]
the basis of disability. The medical re-
port and nonmedical evidence must in- § 435.601 Application of financial eligi-
bility methodologies.
clude diagnosis and other information
in accordance with the requirements (a) Definitions. For purposes of this
for evidence applicable to disability de- section, cash assistance financial meth-
terminations under the SSI program odologies refers to the income and re-
specified in 20 CFR part 416, subpart I. sources methodologies of the AFDC,
(f) Disability review teams—(1) Func- SSI, or State supplement programs, or,
tion. A review team must review the for aged, blind, and disabled individ-
medical report and other evidence re- uals in States that use more restrictive
quired under paragraph (e) of this sec- criteria than SSI, the methodologies
tion and determine on behalf of the established in accordance with the re-
agency whether the individual’s condi- quirements of §§ 435.121 and 435.230.
tion meets the definition of disability. (b) Basic rule for use of non-MAGI fi-
(2) Composition. The review team nancial methodologies. (1) This section
must be composed of a medical or psy- only applies to individuals excepted
chological consultant and another indi- from application of MAGI-based meth-
vidual who is qualified to interpret and ods in accordance with § 435.603(j).

evaluate medical reports and other evi- (2) Except as specified in paragraphs
dence relating to the individual’s phys- (c) and (d) of this section or in § 435.121
ical or mental impairments and, as or as permitted under § 435.831(b)(1), in
164
determining financial eligibility of in- (4) The less restrictive methodology

dividuals as categorically or medically applied under this section must be
needy, the agency must apply the fi- comparable for all persons within each
nancial methodologies and require- category of assistance (aged, or blind,
ments of the cash assistance program or disabled, or AFDC related) within an
that is most closely categorically re- eligibility group. For example, if the
lated to the individual’s status. agency chooses to apply less restrictive
(c) Financial responsibility of relatives. income or resource methodology to an
The agency must use the requirements eligibility group of aged individuals, it
for financial responsibility of relatives must apply that methodology to all
specified in § 435.602. aged individuals within the selected
(d) Use of less restrictive methodologies group.
than those under cash assistance pro- (5) The application of the less restric-
grams. (1) At State option, and subject tive income and resource methodolo-
to the conditions of paragraphs (d)(2) gies permitted under this section must
through (5) of this section, the agency be consistent with the limitations and
may apply income and resource meth- conditions on FFP specified in subpart
odologies that are less restrictive than K of this part.
the cash assistance methodologies or (e) [Reserved]
methodologies permitted under (f) State plan requirements. (1) The
§ 435.831(b)(1) in determining eligibility State plan must specify that, except to
for the following groups: the extent precluded in § 435.602, in de-
(i) Qualified Medicare beneficiaries termining financial eligibility of indi-
specified in sections 1902(a)(10)(E) and viduals, the agency will apply the cash
1905(p) of the Act; assistance financial methodologies and
(ii) Optional categorically needy in- requirements, unless the agency choos-
dividuals under groups established es to apply less restrictive income and
under subpart C of this part and sec- resource methodologies in accordance
tion 1902(a)(10)(A)(ii) of the Act; with paragraph (d) of this section.
(iii) Medically needy individuals (2) If the agency chooses to apply less
under groups established under subpart restrictive income and resource meth-
D of this part and section odologies, the State plan must specify:
1902(a)(10)(C)(i)(III) of the Act; and (i) The less restrictive methodologies
(iv) Aged, blind, and disabled individ- that will be used; and
uals in States using more restrictive (ii) The eligibility group or groups to
eligibility requirements than SSI which the less restrictive methodolo-
under groups established under gies will be applied.
§§ 435.121 and 435.230.
(2) The income and resource meth- [58 FR 4929, Jan. 19, 1993, as amended at 59
odologies that an agency elects to FR 43052, Aug. 22, 1994; 81 FR 86456, Nov. 30,
apply to groups of individuals described 2016]
in paragraph (d)(1) of this section may
be less restrictive, but no more restric- § 435.602 Financial responsibility of
relatives and other individuals.
tive (except in States using more re-
strictive requirements than SSI), than: (a)(1) This section only applies to in-
(i) For groups of aged, blind, and dis- dividuals excepted from application of
abled individuals, the SSI methodolo- MAGI-based methods in accordance
gies; or with § 435.603(j).
(ii) For all other groups, the meth- (2) Basic requirements. Subject to the
odologies under the State plan most provisions of paragraphs (b) and (c) of
closely categorically related to the in- this section, in determining financial
dividual’s status. responsibility of relatives and other
(3) A financial methodology is con- persons for individuals under Medicaid,
sidered to be no more restrictive if, by the agency must apply the following
using the methodology, additional in- requirements and methodologies:
dividuals may be eligible for Medicaid (i) Except for a spouse of an indi-
and no individuals who are otherwise vidual or a parent for a child who is
eligible are by use of that methodology under age 21 or blind or disabled, the
made ineligible for Medicaid. agency must not consider income and
165
§ 435.603 42 CFR Ch. IV (10–1–17 Edition)
resources of any relative as available in the State Medicaid plan in accord-

to an individual. ance with § 435.601(d).
(ii) In relation to individuals under (d) [Reserved]
age 21 (as described in section 1905(a)(i)
of the Act), the financial responsibility [58 FR 4930, Jan. 19, 1993, as amended at 59
FR 43052, Aug. 22, 1994; 81 FR 86456, Nov. 30,
requirements and methodologies that
2016]
apply include considering the income
and resources of parents or spouses § 435.603 Application of modified ad-
whose income and resources will be justed gross income (MAGI).
considered if the individual under age
21 were dependent under the State’s ap- (a) Basis, scope, and implementation.
proved State plan under title IV–A of (1) This section implements section
the Act in effect as of July 16, 1996, 1902(e)(14) of the Act.
whether or not they are actually con- (2) Effective January 1, 2014, the
tributed, except as specified under agency must apply the financial meth-
paragraph (c) of this section. These re- odologies set forth in this section in
quirements and methodologies must be determining the financial eligibility of
applied in accordance with the provi- all individuals for Medicaid, except for
sions of the State’s approved title IV– individuals identified in paragraph (j)
A State plan as of July 16, 1996. of this section and as provided in para-
(iii) When a couple ceases to live tograph (a)(3) of this section.
gether, the agency must count only the (3) In the case of determining ongo-
income of the individual spouse in de- ing eligibility for beneficiaries deter-
termining his or her eligibility, begin- mined eligible for Medicaid coverage to
ning the first month following the
begin on or before December 31, 2013,
month the couple ceases to live to-
application of the financial methodolo-
gether.
(iv) In the case of eligible institu- gies set forth in this section will not be
tionalized spouses who are aged, blind, applied until March 31, 2014 or the next
and disabled and who have shared the regularly-scheduled renewal of eligi-
same room in a title XIX Medicaid in- bility for such individual under § 435.916
stitution, the agency has the option of of this part, whichever is later.
considering these couples as eligible (b) Definitions. For purposes of this
couples for purposes of counting in- section—
come and resources or as eligible indi- Child means a natural or biological,
viduals, whichever is more advan- adopted or step child.
tageous to the couple. Code means the Internal Revenue
(b) Requirements for States using more Code.
restrictive requirements. Subject to the Family size means the number of per-
provisions of paragraph (c) of this sec- sons counted as members of an individ-
tion, in determining financial eligi- ual’s household. In the case of deter-
bility of aged, blind, or disabled indi- mining the family size of a pregnant
viduals in States that apply eligibility woman, the pregnant woman is count-
requirements more restrictive than ed as herself plus the number of chil-
those used under SSI, the agency must dren she is expected to deliver. In the
apply: case of determining the family size of
(1) The requirements and methodolo-
other individuals who have a pregnant
gies for financial responsibility of rel-
woman in their household, the preg-
atives used under the SSI program; or
nant woman is counted, at State op-
(2) More extensive requirements for
relative responsibility than specified in tion, as either 1 or 2 person(s) or as
§ 435.602(a) but no more extensive than herself plus the number of children she
the requirements under the Medicaid is expected to deliver.
plan in effect on January 1, 1972. Parent means a natural or biological,
(c) Use of less restrictive methodologies. adopted or step parent.
Sibling means natural or biological,
The agency may apply income and re-

sources methodologies that are less re- adopted, half, or step sibling.
strictive than those used under the Tax dependent has the meaning pro-
cash assistance programs as specified vided in § 435.4 of this part.
166
(c) Basic rule. Except as specified in income as defined in section

paragraph (i), (j), and (k) of this sec- 36B(d)(2)(B) of the Code, with the fol-
tion, the agency must determine finan- lowing exceptions—
cial eligibility for Medicaid based on (1) An amount received as a lump
‘‘household income’’ as defined in para- sum is counted as income only in the
graph (d) of this section. month received.
(d) Household income—(1) General rule. (2) Scholarships, awards, or fellow-
Except as provided in paragraphs (d)(2) ship grants used for education purposes
through (d)(4) of this section, house- and not for living expenses are ex-
hold income is the sum of the MAGI- cluded from income.
based income, as defined in paragraph (3) American Indian/Alaska Native ex-
(e) of this section, of every individual ceptions. The following are excluded
included in the individual’s household. from income:
(2) Income of children and tax depend- (i) Distributions from Alaska Native
ents. (i) The MAGI-based income of an Corporations and Settlement Trusts;
individual who is included in the (ii) Distributions from any property
household of his or her natural, adopt- held in trust, subject to Federal re-
ed or step parent and is not expected to strictions, located within the most re-
be required to file a tax return under cent boundaries of a prior Federal res-
section 6012(a)(1) of the Code for the ervation, or otherwise under the super-
taxable year in which eligibility for vision of the Secretary of the Interior;
Medicaid is being determined, is not in- (iii) Distributions and payments from
cluded in household income whether or rents, leases, rights of way, royalties,
not the individual files a tax return. usage rights, or natural resource ex-
(ii) The MAGI-based income of a tax traction and harvest from—
dependent described in paragraph (A) Rights of ownership or possession
(f)(2)(i) of this section who is not ex- in any lands described in paragraph
pected to be required to file a tax re- (e)(3)(ii) of this section; or
turn under section 6012(a)(1) of the (B) Federally protected rights regard-
Code for the taxable year in which eli- ing off-reservation hunting, fishing,
gibility for Medicaid is being deter- gathering, or usage of natural re-
mined is not included in the household sources;
income of the taxpayer whether or not (iv) Distributions resulting from real
such tax dependent files a tax return. property ownership interests related to
(3) In the case of individuals de- natural resources and improvements—
scribed in paragraph (f)(2)(i) of this sec- (A) Located on or near a reservation
tion, household income may, at State or within the most recent boundaries
option, also include actually available of a prior Federal reservation; or
cash support, exceeding nominal (B) Resulting from the exercise of
amounts, provided by the person claim- federally-protected rights relating to
ing such individual as a tax dependent. such real property ownership interests;
(4) Effective January 1, 2014, in deter- (v) Payments resulting from owner-
mining the eligibility of an individual ship interests in or usage rights to
using MAGI-based income, a state items that have unique religious, spir-
must subtract an amount equivalent to itual, traditional, or cultural signifi-
5 percentage points of the Federal pov- cance or rights that support subsist-
erty level for the applicable family size ence or a traditional lifestyle accord-
only to determine the eligibility of an ing to applicable Tribal Law or custom;
individual for medical assistance under (vi) Student financial assistance pro-
the eligibility group with the highest vided under the Bureau of Indian Af-
income standard using MAGI-based fairs education programs.
methodologies in the applicable Title (f) Household—(1) Basic rule for tax-
of the Act, but not to determine eligi- payers not claimed as a tax dependent. In
bility for a particular eligibility group. the case of an individual who expects
(e) MAGI-based income. For the pur- to file a tax return for the taxable year
poses of this section, MAGI-based in- in which an initial determination or re-

come means income calculated using newal of eligibility is being made, and
the same financial methodologies used who does not expect to be claimed as a
to determine modified adjusted gross tax dependent by another taxpayer, the
167
§ 435.603 42 CFR Ch. IV (10–1–17 Edition)
household consists of the taxpayer and, of this section, the individual’s parents
subject to paragraph (f)(5) of this sec- and siblings under the age specified in
tion, all persons whom such individual paragraph (f)(3)(iv) of this section.
expects to claim as a tax dependent. (iv) The age specified in this para-
(2) Basic rule for individuals claimed as graph is either of the following, as
a tax dependent. In the case of an indi- elected by the agency in the State
vidual who expects to be claimed as a plan—
tax dependent by another taxpayer for (A) Age 19; or
the taxable year in which an initial de- (B) Age 19 or, in the case of full-time
termination or renewal of eligibility is students, age 21.
being made, the household is the (4) Married couples. In the case of a
household of the taxpayer claiming married couple living together, each
such individual as a tax dependent, ex- spouse will be included in the house-
cept that the household must be deter-
hold of the other spouse, regardless of
mined in accordance with paragraph
whether they expect to file a joint tax
(f)(3) of this section in the case of—
return under section 6013 of the Code or
(i) Individuals other than a spouse or
whether one spouse expects to be
child who expect to be claimed as a tax
claimed as a tax dependent by the
dependent by another taxpayer; and
other spouse.
(ii) Individuals under the age speci-
(5) For purposes of paragraph (f)(1) of
fied by the State under paragraph
this section, if, consistent with the
(f)(3)(iv) of this section who expect to
procedures adopted by the State in ac-
be claimed by one parent as a tax de-
cordance with § 435.956(f) of this part, a
pendent and are living with both par-
taxpayer cannot reasonably establish
ents but whose parents do not expect to
that another individual is a tax de-
file a joint tax return; and
pendent of the taxpayer for the tax
(iii) Individuals under the age speci-
year in which Medicaid is sought, the
fied by the State under paragraph
inclusion of such individual in the
(f)(3)(iv) of this section who expect to
household of the taxpayer is deter-
be claimed as a tax dependent by a
mined in accordance with paragraph
non-custodial parent. For purposes of
(f)(3) of this section.
this section—
(A) A court order or binding separa- (g) No resource test or income dis-
tion, divorce, or custody agreement es- regards. In the case of individuals
tablishing physical custody controls; whose financial eligibility for Medicaid
or is determined in accordance with this
(B) If there is no such order or agree- section, the agency must not—
ment or in the event of a shared cus- (1) Apply any assets or resources test;
tody agreement, the custodial parent is or
the parent with whom the child spends (2) Apply any income or expense dis-
most nights. regards under sections 1902(r)(2) or
(3) Rules for individuals who neither 1931(b)(2)(C), or otherwise under title
file a tax return nor are claimed as a tax XIX of the Act, except as provided in
dependent. In the case of individuals paragraph (d)(1) of this section.
who do not expect to file a Federal tax (h) Budget period—(1) Applicants and
return and do not expect to be claimed new enrollees. Financial eligibility for
as a tax dependent for the taxable year Medicaid for applicants, and other indi-
in which an initial determination or re- viduals not receiving Medicaid benefits
newal of eligibility is being made, or at the point at which eligibility for
who are described in paragraph (f)(2)(i), Medicaid is being determined, must be
(f)(2)(ii), or (f)(2)(iii) of this section, the based on current monthly household
household consists of the individual income and family size.
and, if living with the individual— (2) Current beneficiaries. For individ-
(i) The individual’s spouse; uals who have been determined finan-
(ii) The individual’s children under cially-eligible for Medicaid using the
the age specified in paragraph (f)(3)(iv) MAGI-based methods set forth in this
of this section; and section, a State may elect in its State
(iii) In the case of individuals under plan to base financial eligibility either
the age specified in paragraph (f)(3)(iv) on current monthly household income
168
and family size or income based on pro- cy, in accordance with section
jected annual household income and 1902(e)(13) of the Act.
family size for the remainder of the (2) Individuals who are age 65 or older
current calendar year. when age is a condition of eligibility.
(3) In determining current monthly (3) Individuals whose eligibility is
or projected annual household income being determined on the basis of being
and family size under paragraphs (h)(1) blind or disabled, or on the basis of
or (h)(2) of this section, the agency being treated as being blind or dis-
may adopt a reasonable method to in- abled, including, but not limited to, in-
clude a prorated portion of reasonably dividuals eligible under § 435.121,
predictable future income, to account § 435.232 or § 435.234 of this part or under
for a reasonably predictable increase or section 1902(e)(3) of the Act, but only
decrease in future income, or both, as for the purpose of determining eligi-
evidenced by a signed contract for em- bility on such basis.
ployment, a clear history of predict- (4) Individuals who request coverage
able fluctuations in income, or other for long-term care services and sup-
clear indicia of such future changes in ports for the purpose of being evalu-
income. Such future increase or de- ated for an eligibility group under
crease in income or family size must be which long-term care services and sup-
verified in the same manner as other
ports not covered for individuals deter-
income and eligibility factors, in ac-
mined eligible using MAGI-based finan-
cordance with the income and eligi-
cial methods are covered, or for indi-
bility verification requirements at
viduals being evaluated for an eligi-
§ 435.940 through § 435.965, including by
bility group for which being institu-
self-attestation if reasonably compat-
ible with other electronic data ob- tionalized, meeting an institutional
tained by the agency in accordance level of care or satisfying needs-based
with such sections. criteria for home and community based
services is a condition of eligibility.
(i) If the household income of an indi-
vidual determined in accordance with For purposes of this paragraph, ‘‘long-
this section results in financial ineligi- term care services and supports’’ in-
bility for Medicaid and the household clude nursing facility services, a level
income of such individual determined of care in any institution equivalent to
in accordance with 26 CFR 1.36B–1(e) is nursing facility services; and home and
below 100 percent FPL, Medicaid finan- community-based services furnished
cial eligibility will be determined in under a waiver or State plan under sec-
accordance with 26 CFR 1.36B–1(e). tions 1915 or 1115 of the Act; home
(j) Eligibility Groups for which MAGI- health services as described in sections
based methods do not apply. The finan- 1905(a)(7) of the Act and personal care
cial methodologies described in this services described in sections
section are not applied in determining 1905(a)(24) of the Act.
the Medicaid eligibility of individuals (5) Individuals who are being evalu-
described in this paragraph. The agen- ated for eligibility for Medicare cost
cy must use the financial methods de- sharing assistance under section
scribed in § 435.601 and § 435.602 of this 1902(a)(10)(E) of the Act, but only for
subpart. purposes of determining eligibility for
(1) Individuals whose eligibility for such assistance.
Medicaid does not require a determina- (6) Individuals who are being evalu-
tion of income by the agency, includ- ated for coverage as medically needy
ing, but not limited to, individuals re- under subparts D and I of this part, but
ceiving Supplemental Security Income only for the purpose of determining eli-
(SSI) eligible for Medicaid under gibility on such basis.
§ 435.120 of this part, individuals (k) Eligibility. In the case of an indi-
deemed to be receiving SSI and eligible vidual whose eligibility is being deter-
mined under § 435.214, the agency may—
for Medicaid under § 435.135, § 435.137 or

§ 435.138 of this part and individuals for (1) Consider the household to consist
whom the State relies on a finding of of only the individual for purposes of
income made by an Express Lane agen- paragraph (f) of this section;
169
§ 435.604 42 CFR Ch. IV (10–1–17 Edition)
(2) Count only the MAGI-based in- establishes good cause for not cooper-
come of the individual for purposes of ating.
paragraph (d) of this section. (3) Cooperate in identifying and pro-
(3) Increase the family size of the in- viding information to assist the Med-
dividual, as defined in paragraph (b) of icaid agency in pursuing third parties
the section, by one. who may be liable to pay for care and
[77 FR 17206, Mar. 23, 2012, as amended at 78 services under the plan, unless the in-
FR 42302, July 15, 2013; 81 FR 86456, Nov. 30, dividual establishes good cause for not
2016] cooperating.
(b) The requirements for assignment
§ 435.604 [Reserved] of rights must be applied uniformly for
all groups covered under the plan.
§ 435.606 [Reserved]
§ 435.608 Applications for other bene- FR 4907, Jan. 19, 1993. Redesignated at 58 FR
fits. 4931, Jan. 19, 1993, as amended at 81 FR 86457,
(a) As a condition of eligibility, the Nov. 30, 2016]
agency must require applicants and
beneficiaries to take all necessary § 435.622 Individuals in institutions
who are eligible under a special in-
steps to obtain any annuities, pensions,
come level.
retirement, and disability benefits to
which they are entitled, unless they (a) If an agency, under § 435.231, pro-
can show good cause for not doing so. vides Medicaid to individuals in med-
(b) Annuities, pensions, retirement ical institutions, nursing facilities, and
and disability benefits include, but are intermediate care facilities for Individ-
not limited to, veterans’ compensation uals with Intellectual Disabilities who
and pensions, OASDI benefits, railroad would not be eligible for SSI or State
retirement benefits, and unemploy- supplements if they were not institu-
ment compensation. tionalized, the agency must use income
[43 FR 45204, Sept. 29, 1978. Redesignated at standards based on the greater need for
58 FR 4931, Jan. 19, 1993] financial assistance that the individ-
uals would have if they were not in the
§ 435.610 Assignment of rights to bene- institution. The standards may vary by
fits. the level of institutional care needed
(a) Consistent with §§ 433.145 through by the individual (hospital, nursing fa-
433.148 of this chapter, as a condition of cility, or intermediate level care for in-
eligibility, the agency must require le- dividuals with intellectual disabil-
gally able applicants and beneficiaries ities), or by other factors related to in-
to: dividual needs. (See § 435.1005 for FFP
(1) Assign rights to the Medicaid limits on income standards established
agency to medical support and to pay- under this section.)
ment for medical care from any third (b) In determining the eligibility of
party; individuals under the income standards
(2) In the case of applicants, attest established under this section, the
that they will cooperate, and, in the agency must not take into account in-
case of beneficiaries, cooperate with come that would be disregarded in de-
the agency in— termining eligibility for SSI or for an
(i) Establishing the identity of a optional State supplement.
child’s parents and in obtaining med- (c) The agency must apply the in-
ical support and payments, unless the
come standards established under this
individual establishes good cause for
section effective with the first day of a
not cooperating or is a pregnant
period of not less than 30 consecutive
woman described in § 435.116; and
days of institutionalization.
(ii) Identifying and providing infor-
mation to assist the Medicaid agency [43 FR 45204, Sept. 29, 1978, as amended at 45
in pursuing third parties who may be FR 24884, Apr. 11, 1980; 53 FR 3595, Feb. 8,
liable to pay for care and services 1988. Redesignated and amended at 58 FR
under the plan, unless the individual 4932, Jan. 19, 1993]
170
§ 435.631 General requirements for de- Subpart H—Specific Post-Eligibility

termining income eligibility in Financial Requirements for the
States using more restrictive re-
quirements for Medicaid than SSI. Categorically Needy
(a) Income eligibility methods. In deter- § 435.700 Scope.
mining income eligibility of aged, This subpart prescribes specific fi-
blind, and disabled individuals in a nancial requirements for determining
State using more restrictive eligibility the post-eligibility treatment of in-
requirements than SSI, the agency come of categorically needy individ-
must use the methods for treating in- uals, including requirements for apply-
come elected under §§ 435.121 and ing patient income to the cost of care.
435.230, under § 435.601. The methods
used must be comparable for all indi- [58 FR 4931, Jan. 19, 1993]
viduals within each category of indi-
§ 435.725 Post-eligibility treatment of
viduals under § 435.121 and each cat- income of institutionalized individ-
egory of individuals within each op- uals in SSI States: Application of
tional categorically needy group inpatient income to the cost of care.
cluded under § 435.230 and for each cat- (a) Basic rules. (1) The agency must
egory of individuals under the medi- reduce its payment to an institution,
cally needy option described under for services provided to an individual
§ 435.800. specified in paragraph (b) of this sec-
(b) Categorically needy versus medically tion, by the amount that remains after
needy eligibility. (1) Individuals who deducting the amounts specified in
have income equal to, or below, the paragraphs (c) and (d) of this section,
categorically needy income standards from the individual’s total income,
described in §§ 435.121 and 435.230 are (2) The individual’s income must be
categorically needy in States that in- determined in accordance with para-
clude the medically needy under their graph (e) of this section.
plans. (3) Medical expenses must be deter-
(2) Categorically needy eligibility in mined in accordance with paragraph (f)
States that do not include the medi- of this section.
cally needy is determined in accord- (b) Applicability. This section applies
ance with the provisions of § 435.121 to the following individuals in medical
(e)(4) and (e)(5). institutions and intermediate care fa-
cilities.
[58 FR 4932, Jan. 19, 1993]
(1) Individuals receiving cash assist-
§ 435.640 Protected Medicaid eligi- ance under SSI or AFDC who are eligi-
bility for individuals eligible in De- ble for Medicaid under § 435.110 or
cember 1973. § 435.120.
(2) Individuals who would be eligible
In determining whether individuals for AFDC, SSI, or an optional State
continue to meet the income require- supplement except for their institu-
ments used in December 1973, for pur- tional status and who are eligible for
poses of determining eligibility under Medicaid under § 435.211.
§§ 435.131, 435.132, and 435.133, the agen- (3) Aged, blind, and disabled individ-
cy must deduct increased OASDI pay- uals who are eligible for Medicaid,
ments to the same extent that these under § 435.231, under a higher income
deductions were in effect in December standard than the standard used in de-
1973. These deductions are required by termining eligibility for SSI or op-
section 306 of the Social Security tional State supplements.
Amendments of 1972 (Pub. L. 92–603) (c) Required deductions. In reducing
and section 1007 of Pub. L. 91–172 (en- its payment to the institution, the
acted Dec. 30, 1969), modified by section agency must deduct the following
304 of Pub. L. 92–603. amounts, in the following order, from

the individual’s total income, as deter-
[43 FR 45204, Sept. 29, 1978. Redesignated at
58 FR 4932, Jan. 19, 1993]
mined under paragraph (e) of this sec-
tion. Income that was disregarded in
171
§ 435.725 42 CFR Ch. IV (10–1–17 Edition)
determining eligibility must be consid- (iii) Not exceed the higher of the
ered in this process. need standard for a family of the same
(1) Personal needs allowance. A per- size used to determine eligibility under
sonal needs allowance that is reason- the State’s approved AFDC plan or the
able in amount for clothing and other medically needy income standard es-
personal needs of the individual while tablished under § 435.811, if the agency
in the institution. This protected per- provides Medicaid under the medically
sonal needs allowance must be at needy coverage option for a family of
least— the same size.
(i) $30 a month for an aged, blind, or (4) Expenses not subject to third party
disabled individual, including a child payment. Amounts for incurred ex-
applying for Medicaid on the basis of penses for medical or remedial care
blindness or disability; that are not subject to payment by a
(ii) $60 a month for an institutional- third party, including—
ized couple if both spouses are aged, (i) Medicare and other health insur-
blind, or disabled and their income is ance premiums, deductibles, or coin-
considered available to each other in surance charges; and
determining eligibility; and (ii) Necessary medical or remedial
(iii) For other individuals, a reason- care recognized under State law but
able amount set by the agency, based not covered under the State’s Medicaid
on a reasonable difference in their per- plan, subject to reasonable limits the
sonal needs from those of the aged, agency may establish on amounts of
blind, and disabled. these expenses.
(2) Maintenance needs of spouse. For (5) Continued SSI and SSP benefits.
an individual with only a spouse at The full amount of SSI and SSP bene-
home, an additional amount for the fits that the individual continues to re-
maintenance needs of the spouse. This ceive under sections 1611(e)(1) (E) and
amount must be based on a reasonable (G) of the Act.
assessment of need but must not ex- (d) Optional deduction: Allowance for
ceed the highest of— home maintenance. For single individ-
(i) The amount of the income stand- uals and couples, an amount (in addi-
ard used to determine eligibility for tion to the personal needs allowance)
SSI for an individual living in his own for maintenance of the individual’s or
home, if the agency provides Medicaid couple’s home if—
only to individuals receiving SSI; (1) The amount is deducted for not
(ii) The amount of the highest in- more than a 6-month period; and
come standard, in the appropriate cat- (2) A physician has certified that ei-
egory of age, blindness, or disability, ther of the individuals is likely to re-
used to determine eligibility for an op- turn to the home within that period.
tional State supplement for an indi- (3) For single individuals and couples,
vidual in his own home, if the agency an amount (in addition to the personal
provides Medicaid to optional State needs allowance) for maintenance of
supplement beneficiaries under the individual’s or couple’s home if—
§ 435.230; or (i) The amount is deducted for not
(iii) The amount of the medically more than a 6-month period; and
needy income standard for one person (ii) A physician has certified that ei-
established under § 435.811, if the agen- ther of the individuals is likely to re-
cy provides Medicaid under the medi- turn to the home within that period.
cally needy coverage option. (e) Determination of income—(1) Op-
(3) Maintenance needs of family. For tion. In determining the amount of an
an individual with a family at home, individual’s income to be used to re-
an additional amount for the mainte- duce the agency’s payment to the insti-
nance needs of the family. This amount tution, the agency may use total in-
must— come received, or it may project
(i) Be based on a reasonable assess- monthly income for a prospective pe-
ment of their financial need; riod not to exceed 6 months.

(ii) Be adjusted for the number of (2) Basis for projection. The agency
family members living in the home; must base the projection on income re-
and ceived in the preceding period, not to
172
exceed 6 months, and on income ex- ing amounts disregarded in deter-

pected to be received. mining eligibility):
(3) Adjustments. At the end of the pro- (1) An amount for the maintenance
spective period specified in paragraph needs of the individual that the State
(e)(1) of this section, or when any sig- may set at any level, as long as the fol-
nificant change occurs, the agency lowing conditions are met:
must reconcile estimates with income (i) The deduction amount is based on
received. a reasonable assessment of need.
(f) Determination of medical expenses—
(ii) The State establishes a maximum
(1) Option. In determining the amount
deduction amount that will not be ex-
of medical expenses to be deducted
from an individual’s income, the agen- ceeded for any individual under the
cy may deduct incurred medical ex- waiver.
penses, or it may project medical ex- (2) For an individual with only a
penses for a prospective period not to spouse at home, an additional amount
exceed 6 months. for the maintenance needs of the
(2) Basis for projection. The agency spouse. This amount must be based on
must base the estimate on medical ex- a reasonable assessment of need but
penses incurred in the preceding pe- must not exceed the highest of—
riod, not to exceed 6 months, and on (i) The amount of the income stand-
medical expenses expected to be in- ard used to determine eligibility for
curred. SSI for an individual living in his own
(3) Adjustments. At the end of the pro- home, if the agency provides Medicaid
spective period specified in paragraph only to individuals receiving SSI;
(f)(1) of this section, or when any sig- (ii) The amount of the highest in-
nificant change occurs, the agency come standard, in the appropriate cat-
must reconcile estimates with incurred egory of age, blindness, or disability,
medical expenses. used to determine eligibility for an op-
[43 FR 45204, Sept. 29, 1978, as amended at 45 tional State supplement for an indi-
FR 24884, Apr. 11, 1980; 48 FR 5735, Feb. 8, vidual in his own home, if the agency
1983; 53 FR 3595, Feb. 8, 1988; 55 FR 33705, Aug. provides Medicaid to optional State
17, 1990; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR supplement beneficiaries under
4932, Jan. 19, 1993]
§ 435.230; or
§ 435.726 Post-eligibility treatment of (iii) The amount of the medically
income of individuals receiving needy income standard for one person
home and community-based serv- established under §§ 435.811 and 435.814,
ices furnished under a waiver: Ap- if the agency provides Medicaid under
plication of patient income to the the medically needy coverage option.
cost of care.
(3) For an individual with a family at
(a) The agency must reduce its pay- home, an additional amount for the
ment for home and community-based maintenance needs of the family. This
services provided to an individual spec- amount must—
ified in paragraph (b) of this section, by
(i) Be based on a reasonable assess-
the amount that remains after deduct-
ment of their financial need;
ing the amounts specified in paragraph
(c) of this section from the individual’s (ii) Be adjusted for the number of
income. family members living in the home;
(b) This section applies to individuals and
who are eligible for Medicaid under (iii) Not exceed the higher of the
§ 435.217 and are receiving home and need standard for a family of the same
community-based services furnished size used to determine eligibility under
under a waiver of Medicaid require- the State’s AFDC plan or the medically
ments specified in part 441, subpart G needy income standard established
or H of this subchapter. under § 435.811 for a family of the same
(c) In reducing its payment for home size.
and community-based services, the (4) Amounts for incurred expenses for
agency must deduct the following medical or remedial care that are not
amounts, in the following order, from subject to payment by a third party in-
the individual’s total income (includ- cluding—
173
§ 435.733 42 CFR Ch. IV (10–1–17 Edition)
(i) Medicare and other health insur- mining eligibility must be considered
ance premiums, deductibles, or coin- in this process.
surance charges; and (1) Personal needs allowance. A per-
(ii) Necessary medical or remedial sonal needs allowance that is reason-
care recognized under State law but able in amount for clothing and other
not covered under the State’s Medicaid personal needs of the individual while
plan, subject to reasonable limits the in the institution. This protected per-
agency may establish on amounts of sonal needs allowance must be at
these expenses. least—
(i) $30 a month for an aged, blind, or
[46 FR 48539, Oct. 1, 1981, as amended at 50 FR
10026, Mar. 13, 1985; 57 FR 29155, June 30, 1992;
disabled individual, including a child
58 FR 4932, Jan. 19, 1993; 59 FR 37715, July 25, applying for Medicaid on the basis of
1994] blindness or disability;
(ii) $60 a month for an institutional-
§ 435.733 Post-eligibility treatment of ized couple if both spouses are aged,
income of institutionalized individ- blind, or disabled and their income is
uals in States using more restric- considered available to each other in
tive requirements than SSI: Appli- determining eligibility; and
cation of patient income to the cost
of care. (iii) For other individuals, a reason-
able amount set by the agency, based
(a) Basic rules. (1) The agency must on a reasonable difference in their per-
reduce its payment to an institution, sonal needs from those of the aged,
for services provided to an individual blind, and disabled.
specified in paragraph (b) of this sec- (2) Maintenance needs of spouse. For
tion, by the amount that remains after an individual with only a spouse at
deducting the amounts specified in home, an additional amount for the
paragraphs (c) and (d) of this section, maintenance needs of the spouse. This
from the individual’s total income. amount must be based on a reasonable
(2) The individual’s income must be assessment of need but must not ex-
determined in accordance with para- ceed the higher of—
graph (e) of this section. (i) The more restrictive income
(3) Medical expenses must be deter- standard established under § 435.121; or
mined in accordance with paragraph (f) (ii) The amount of the medically
of this section. needy income standard for one person
(b) Applicability. This section applies established under § 435.811, if the agen-
to the following individuals in medical cy provides Medicaid under the medi-
institutions and intermediate care fa- cally needy coverage option.
cilities: (3) Maintenance needs of family. For
(1) Individuals receiving cash assist- an individual with a family at home,
ance under AFDC who are eligible for an additional amount for the mainte-
Medicaid under § 435.110 and individuals nance needs of the family. This amount
eligible under § 435.121. must—
(2) Individuals who would be eligible (i) Be based on a reasonable assess-
for AFDC, SSI, or an optional State ment of their financial need;
supplement except for their institu- (ii) Be adjusted for the number of
tional status and who are eligible for family members living in the home;
Medicaid under § 435.211. and
(3) Aged, blind, and disabled individ- (iii) Not exceed the higher of the
uals who are eligible for Medicaid, need standard for a family of the same
under § 435.231, under a higher income size used to determine eligibility under
standard than the standard used in de- the State’s approved AFDC plan or the
termining eligibility for SSI or op- medically needy income standard es-
tional State supplements. tablished under § 435.811, if the agency
(c) Required deductions. The agency provides Medicaid under the medically
must deduct the following amounts, in needy coverage option for a family of
the following order, from the individ- the same size.

ual’s total income, as determined (4) Expenses not subject to third party
under paragraph (e) of this section. In- payment. Amounts for incurred ex-
come that was disregarded in deter- penses for medical or remedial care
174
that are not subject to payment by a (3) Adjustments. At the end of the pro-
third party, including— spective period specified in paragraph
(i) Medicare and other health insur- (f)(1) of this section, or when any sig-
ance permiums, deductibles, or coin- nificant change occurs, the agency
surance charges; and must reconcile estimates with incurred
(ii) Necessary medical or remedial medical expenses.
care recognized under State law but
not covered under the State’s Medicaid FR 5735, Feb. 8, 1983; 53 FR 3596, Feb. 8, 1988;
plan, subject to reasonable limits the 55 FR 33705, Aug. 17, 1990; 56 FR 8850, 8854,
agency may establish on amounts of Mar. 1, 1991; 58 FR 4932, Jan. 19, 1993]
these expenses.
(5) Continued SSI and SSP benefits. § 435.735 Post-eligibility treatment of
The full amount of SSI and SSP bene- income and resources of individuals
fits that the individual continues to re- receiving home and community-
ceive under sections 1611(e)(1) (E) and based services furnished under a
waiver: Application of patient in-
(G) of the Act. come to the cost of care.
(d) Optional deduction: Allowance for
home maintenance. For single individ- (a) The agency must reduce its pay-
uals and couples, an amount (in addi- ment for home and community-based
tion to the personal needs allowance) services provided to an individual spec-
for maintenance of the individual’s or ified in paragraph (b) of this section, by
couple’s home if— the amount that remains after deduct-
(1) The amount is deducted for not ing the amounts specified in paragraph
more than a 6-month period; and (c) of this section from the individual’s
(2) A physician has certified that ei- income.
ther of the individuals is likely to re- (b) This section applies to individuals
turn to the home within that period. who are eligible for Medicaid under
(e) Determination of income—(1) Op- § 435.217, and are eligible for home and
tion. In determining the amount of an community-based services furnished
individual’s income to be used to re- under a waiver of State plan require-
duce the agency’s payment to the insti- ments specified in part 441, subpart G
tution, the agency may use total in- or H of this subchapter.
come received, or it may project total (c) In reducing its payment for home
monthly income for a prospective pe- and community-based services, the
riod not to exceed 6 months. agency must deduct the following
(2) Basis for projection. The agency amounts, in the following order, from
must base the projection on income re- the individual’s total income (includ-
ceived in the preceding period, not to ing amounts disregarded in deter-
exceed 6 months, and on income ex- mining eligibility):
pected to be received. (1) An amount for the maintenance
(3) Adjustments. At the end of the pro- needs of the individual that the State
spective period specified in paragraph may set at any level, as long as the fol-
(e)(1) of this section, or when any sig- lowing conditions are met:
nificant change occurs, the agency (i) The deduction amount is based on
must reconcile estimates with income a reasonable assessment of need.
received. (ii) The State establishes a maximum
(f) Determination of medical expenses— deduction amount that will not be ex-
(1) Option. In determining the amount ceeded for any individual under the
of medical expenses that may be de- waiver.
ducted from an individual’s income, (2) For an individual with only a
the agency may deduct incurred med- spouse at home, an additional amount
ical expenses, or it may project med- for the maintenance needs of the
ical expenses for a prospective period spouse. This amount must be based on
not to exceed 6 months. a reasonable assessment of need but
(2) Basis for projection. The agency must not exceed the higher of—
must base the estimate on medical ex- (i) The more restrictive income
penses incurred in the preceding pe- standard established under § 435.121; or
riod, not to exceed 6 months, and med- (ii) The medically needy standard for
ical expenses expected to be incurred. an individual.
175
§ 435.800 42 CFR Ch. IV (10–1–17 Edition)
(3) For an individual with a family at the assistance unit. Subject to the lim-
home, an additional amount for the itations specified in paragraph (e) of
maintenance needs of the family. This this section. The standard may not di-
amount must— minish by an increase in the number of
(i) Be based on a reasonable assess- persons in the assistance unit. For ex-
ment of their financial need; ample, if the income level in the stand-
(ii) Be adjusted for the number of ard for an assistance unit of two is set
family members living in the home; at $400, the income level in the stand-
and ard for an assistance unit of three may
(iii) Not exceed the higher of the not be less than $400.
need standard for a family of the same (c) In States that do not use more re-
size used to determine eligibility under strictive requirements than SSI, the
the State’s approved AFDC plan or the income standard must be set at an
medically needy income standard es- amount that is no lower than the low-
tablished under § 435.811 for a family of est income standards used under the
the same size. cash assistance programs that are re-
(4) Amounts for incurred expenses for lated to the State’s covered medically
medical or remedial care that are not needy eligibility group or groups of in-
subject to payment by a third party, dividuals under § 435.301. The amount of
including— the income standard is subject to the
(i) Medicare and other health insur- limitations specified in paragraph (e)
ance premiums, deductibles, or coin- of this section.
surance charges; and (d) In States that use more restric-
(ii) Necessary medical or remedial tive requirements for aged, blind, and
care recognized under State law but disabled individuals than SSI:
not covered under the State’s Medicaid (1) For all individuals except aged,
plan, subject to reasonable limits the blind, and disabled individuals, the in-
agency may establish on amounts of come standard must be set in accord-
these expenses. ance with paragraph (c) of this section;
and
[46 FR 48540, Oct. 1, 1981, as amended at 50 FR (2) For all aged, blind, and disabled
10026, Mar. 13, 1985; 57 FR 29155, June 30, 1992; individuals or any combination of
58 FR 4932, Jan. 19, 1993; 59 FR 37716, July 25,
these groups of individuals, the agency
1994]
may establish a separate single medi-
cally needy income standard that is
Subpart I—Specific Eligibility and more restrictive than the single in-
Post-Eligibility Financial Re- come standard set under paragraph (c)
quirements for the Medically of this section. However, the amount of
Needy the more restrictive separate standard
for aged, blind, or disabled individuals
§ 435.800 Scope. must be no lower than the higher of
This subpart prescribes specific fi- the lowest categorically needy income
nancial requirements for determining standard currently applied under the
the eligibility of medically needy indi- State’s more restrictive criteria under
viduals under subpart D of this part. § 435.121 or the medically needy income
standard in effect under the State’s
[58 FR 4932, Jan. 19, 1993]
Medicaid plan on January 1, 1972. The
MEDICALLY NEEDY INCOME STANDARD amount of the income standard is sub-
ject to the limitations specified in
§ 435.811 Medically needy income paragraph (e) of this section.
standard: General requirements. (e) The income standards specified in
(a) Except as provided in paragraph paragraphs (c) and (d) of this section
(d)(2) of this section, to determine eli- must not exceed the maximum dollar
gibility of medically needy individuals, amount of income allowed for purposes
a Medicaid agency must use a single in- of FFP under § 435.1007.
(f) The income standard may vary
come standard under this subpart that

meets the requirements of this section. based on the variations between shelter
(b) The income standard must take costs in urban areas and rural areas.
into account the number of persons in [58 FR 4932, Jan. 19, 1993]
176
§ 435.814 Medically needy income terms of § 435.602, except that in apply-

standard: State plan requirements. ing § 435.602(a)(2)(ii) to individuals
The State plan must specify the in- under age 21, the agency may, at State
come standard for the covered medi- option, include all parents as defined in
cally needy groups. § 435.603(b) (including stepparents) who
are living with the individual in the in-
[58 FR 4933, Jan. 19, 1993] dividual’s household for purposes of de-
termining household income and fam-
MEDICALLY NEEDY INCOME ELIGIBILITY
ily size, without regard to whether the
§ 435.831 Income eligibility. parent’s income and resources would be
counted under the State’s approved
The agency must determine income
State plan under title IV–A of the Act
eligibility of medically needy individ-
in effect as of July 16, 1996, if the indi-
uals in accordance with this section.
vidual were a dependent child under
(a) Budget periods. (1) The agency
such State plan.
must use budget periods of not more
(2) For aged, blind, or disabled indi-
than 6 months to compute income. The
viduals in States covering all SSI bene-
agency may use more than one budget
period. ficiaries, the agency must deduct
(2) The agency may include in the amounts that would be deducted in de-
budget period in which income is com- termining eligibility under SSI. How-
puted all or part of the 3-month retro- ever, the agency must also deduct the
active period specified in § 435.915. The highest amounts from income that
budget period can begin no earlier than would be deducted in determining eligi-
the first month in the retroactive pe- bility for optional State supplements if
riod in which the individual received these supplements are paid to all indi-
covered services. This provision applies viduals who are receiving SSI or would
to all medically needy individuals ex- be eligible for SSI except for their in-
cept in groups for whom criteria more come.
restrictive than that used in the SSI (3) For aged, blind, or disabled indi-
program apply. viduals in States using income require-
(3) If the agency elects to begin the ments more restrictive than SSI, the
first budget period for the medically agency must deduct amounts that are
needy in any month of the 3-month pe- no more restrictive than those used
riod prior to the date of the application under the Medicaid plan on January 1,
in which the applicant received covered 1972 and no more liberal than those
services, this election applies to all used in determining eligibility under
medically needy groups. SSI or an optional State supplement.
(b) Determining countable income. For However, the amounts must be at least
purposes of determining medically the same as those that would be de-
needy eligibility under this part, the ducted in determining eligibility,
agency must determine an individual’s under § 435.121, of the categorically
countable income as follows: needy.
(1) For individuals under age 21, preg- (c) Eligibility based on countable in-
nant women, and parents and other come. If countable income determined
caretaker relatives, the agency may under paragraph (b) of this section is
apply— equal to or less than that applicable in-
(i) The AFDC methodologies in effect come standard under § 435.814, the indi-
in the State as of August 16, 1996, con- vidual is eligible for Medicaid.
sistent with § 435.601 (relating to finan- (d) Deduction of incurred medical ex-
cial methodologies for non-MAGI eligi- penses. If countable income exceeds the
bility determinations) and § 435.602 (re- income standard, the agency must de-
lating to financial responsibility of rel- duct from income medical expenses in-
atives and other individuals for non- curred by the individual or family or
MAGI eligibility determinations); or financially responsible relatives that
(ii) The MAGI-based methodologies are not subject to payment by a third
defined in § 435.603(b) through (f). If the party. An expense is incurred on the

agency applies the MAGI-based meth- date liability for the expense arises.
odologies defined in § 435.603(b) through The agency must determine deductible
(f), the agency must comply with the incurred expenses in accordance with
177
§ 435.831 42 CFR Ch. IV (10–1–17 Edition)
paragraphs (e), (f), and (g) of this sec- ceding months, whether paid or unpaid,
tion and deduct those expenses in ac- to the extent that the expenses have
cordance with paragraph (h) of this sec- not been deducted previously in estab-
tion. lishing eligibility;
(e) Determination of deductible incurred (4) For any of the 3 months preceding
expenses: Required deductions based on the month of application that are not
kinds of services. Subject to the provi- includable under paragraph (f)(2) of
sions of paragraph (g), in determining this section, expenses incurred in the 3-
incurred medical expenses to be de- month period that were a current li-
ducted from income, the agency must ability of the individual in any such
include the following: month for which a spenddown calcula-
(1) Expenses for Medicare and other tion is made and that had not been pre-
health insurance premiums, and viously deducted from income in estab-
deductibles or coinsurance charges, in- lishing eligibility for medical assist-
cluding enrollment fees, copayments, ance;
or deductibles imposed under § 447.51 or (5) Current payments (that is, pay-
§ 447.53 of this subchapter; ments made in the current budget pe-
(2) Expenses incurred by the indi- riod) on other expenses incurred before
vidual or family or financially respon- the current budget period and not pre-
sible relatives for necessary medical viously deducted from income in any
and remedial services that are recog- budget period in establishing eligi-
nized under State law but not included bility for such period; and
in the plan;
(6) If the individual’s eligibility for
(3) Expenses incurred by the indi-
medical assistance was established in
vidual or family or by financially re-
each such preceding period, expenses
sponsible relatives for necessary med-
incurred before the current budget pe-
ical and remedial services that are in-
riod but not previously deducted from
cluded in the plan, including those that
income in establishing eligibility, to
exceed agency limitations on amount,
the extent that such expenses are un-
duration, or scope of services.
paid and are:
(f) Determination of deductible incurred
expenses: Required deductions based on (i) Described in paragraphs (e)(1)
the age of bills. Subject to the provi- through (e)(3) of this section; and
sions of paragraph (g), in determining (ii) Carried over from the preceding
incurred medical expenses to be de- budget period or periods because the
ducted from income, the agency must individual had a spenddown liability in
include the following: each such preceding period that was
(1) For the first budget period or peri- met without deducting all such in-
ods that include only months before curred, unpaid expenses.
the month of application for medical (g) Determination of deductible incurred
assistance, expenses incurred during medical expenses: Optional deductions. In
such period or periods, whether paid or determining incurred medical expenses
unpaid, to the extent that the expenses to be deducted from income, the agen-
have not been deducted previously in cy—
establishing eligibility; (1) May include medical institutional
(2) For the first prospective budget expenses (other than expenses in acute
period that also includes any of the 3 care facilities) projected to the end of
months before the month of applica- the budget period at the Medicaid re-
tion for medical assistance, expenses imbursement rate;
incurred during such budget period, (2) May, to the extent determined by
whether paid or unpaid, to the extent the State and specified in its approved
that the expenses have not been de- plan, include expenses incurred earlier
ducted previously in establishing eligi- than the third month before the month
bility; of application (except States using
(3) For the first prospective budget more restrictive eligibility criteria
period that includes none of the under the option in section 1902(f) of
months preceding the month of appli- the Act must deduct incurred expenses
cation, expenses incurred during such regardless of when the expenses were
budget period and any of the 3 pre- incurred); and
178
(3) May set reasonable limits on the the applicable budget (spenddown) pe-
amount to be deducted for expenses riod—
specified in paragraphs (e)(1), (e)(2), (i) If his or her spenddown liability is
and (g)(2) of this section. met after the first day of the budget
(h) Order of deduction. The agency period; and
must deduct incurred medical expenses (ii) If beginning eligibility after the
that are deductible under paragraphs first day of the budget period makes
(e), (f), and (g) of this section in the the individual’s share of health care ex-
order prescribed under one of the fol- penses under § 435.725, § 435.726, § 435.733,
lowing three options: § 435.735 or § 435.832 greater than the in-
(1) Type of service. Under this option, dividual’s contributable income deter-
the agency deducts expenses in the fol- mined under these sections.
lowing order based on type of expense (2) At the end of the prospective pe-
or service: riod specified in paragraphs (f)(2) and
(i) Cost-sharing expenses as specified (f)(3) of this section, and any subse-
in paragraph (e)(1) of this section. quent prospective period or, if earlier,
when any significant change occurs,
(ii) Services not included in the State
the agency must reconcile the pro-
plan as specified in paragraph (e)(2) of
jected amounts with the actual
this section.
amounts incurred, or with changes in
(iii) Services included in the State circumstances, to determine if the ad-
plan as specified in paragraph (e)(3) of justed deduction of incurred expenses
this section but that exceed limita- reduces income to the income stand-
tions on amounts, duration, or scope of ard.
services. (3) Except as provided in paragraph
(iv) Services included in the State (i)(1) of this section, in States that
plan as specified in paragraph (e)(3) of elect partial month coverage, an indi-
this section but that are within agency vidual is eligible for Medicaid on the
limitations on amount, duration, or day that the deduction of incurred
scope of services. health care expenses (and of projected
(2) Chronological order by service date. institutional expenses if the agency
Under this option, the agency deducts elects the option under paragraph (g)(1)
expenses in chronological order by the of this section) reduces income to the
date each service is furnished, or in the income standard.
case of insurance premiums, coinsur- (4) Except as provided in paragraph
ance or deductible charges, the date (i)(1) of this section, in States that
such amounts are due. Expenses for elect full month coverage, an indi-
services furnished on the same day vidual is eligible on the first day of the
may be deducted in any reasonable month in which spenddown liability is
order established by the State. met.
(3) Chronological order by bill submis- (5) Expenses used to meet spenddown
sion date. Under this option, the agency liability are not reimbursable under
deducts expenses in chronological Medicaid. To the extent necessary to
order by the date each bill is submitted prevent the transfer of an individual’s
to the agency by the individual. If spenddown liability to the Medicaid
more than one bill is submitted at one program, States must reduce the
time, the agency must deduct the bills amount of provider charges that would
from income in the order prescribed in otherwise be reimbursable under Med-
either paragraph (h)(1) or (h)(2) of this icaid.
section.
(i) Eligibility based on incurred medical FR 17208, Mar. 23, 2012; 81 FR 86457, Nov. 30,
expenses. (1) Whether a State elects 2016]
partial or full month coverage, an indi-
vidual who is expected to contribute a § 435.832 Post-eligibility treatment of
portion of his or her income toward the income of institutionalized individ-
uals: Application of patient income
costs of institutional care or home and

community-based services under to the cost of care.
§ 435.725, § 435.726, § 435.733, § 435.735 or (a) Basic rules. (1) The agency must
§ 435.832 is eligible on the first day of reduce its payment to an institution,
179
§ 435.832 42 CFR Ch. IV (10–1–17 Edition)
for services provided to an individual used to determine eligibility for an op-

specified in paragraph (b) of this sec- tional State supplement for an indi-
tion, by the amount that remains after vidual in his own home, if the agency
deducting the amounts specified in provides Medicaid to optional State
paragraphs (c) and (d) of this section, supplement beneficiaries under
from the individual’s total income. § 435.230; or
(2) The individual’s income must be (iii) The amount of the medically
determined in accordance with para- needy income standard for one person
graph (e) of this section. established under § 435.811.
(3) Medical expenses must be deter- (3) Maintenance needs of family. For
mined in accordance with paragraph (f) an individual with a family at home,
of this section. an additional amount for the mainte-
(b) Applicability. This section applies nance needs of the family. This amount
to medically needy individuals in med- must—
ical institutions and intermediate care (i) Be based on a reasonable assess-
facilities. ment of their financial need;
(c) Required deductions. The agency (ii) Be adjusted for the number of
must deduct the following amounts, in family members living in the home;
the following order, from the individ- and
ual’s total income, as determined (iii) Not exceed the highest of the fol-
under paragraph (e) of this section. In- lowing need standards for a family of
come that was disregarded in deter- the same size:
mining eligibility must be considered
(A) The standard used to determine
in this process.
eligibility under the State’s approved
(1) Personal needs allowance. A per-
AFDC plan.
sonal needs allowance that is reason-
(B) The medically needy income
able in amount for clothing and other
standard established under § 435.811.
personal needs of the individual while
in the institution. This protected per- (4) Expenses not subject to third
sonal needs allowance must be at party payment. Amounts for incurred
least— expenses for medical or remedial care
(i) $30 a month for an aged, blind, or that are not subject to payment by a
disabled individual, including a child third party, including—
applying for Medicaid on the basis of (i) Medicare and other health insur-
blindness or diability. ance permiums, deductibles, or coin-
(ii) $60 a month for an institutional- surance charges; and
ized couple if both spouses are aged, (ii) Necessary medical or remedial
blind, or disabled and their income is care recognized under State law but
considered available to each other in not covered under the State’s Medicaid
determining eligibility; and plan, subject to reasonable limits the
(iii) For other individuals, a reason- agency may establish on amounts of
able amount set by the agency, based these expenses.
on a reasonable difference in their per- (d) Optional deduction: Allowance for
sonal needs from those of the aged, home maintenance. For single individ-
blind, and disabled. uals and couples, an amount (in addi-
(2) Maintenance needs of spouse. For tion to the personal needs allowance)
an individual with only a spouse at for maintenance of the individual’s or
home, an additional amount for the couple’s home if—
maintenance needs of the spouse. This (1) The amount is deducted for not
amount must be based on a reasonable more than a 6-month period; and
assessment of need but must not ex- (2) A physician has certified that ei-
ceed the highest of— ther of the individuals is likely to re-
(i) The amount of the income stand- turn to the home within that period.
ard used to determine eligibility for (e) Determination of income—(1) Op-
SSI for an individual living in his own tion. In determining the amount of an
home; individual’s income to be used to re-

(ii) The amount of the highest in- duce the agency’s payment to the insti-
come standard, in the appropriate cat- tution, the agency may use total in-
egory of age, blindness, or disability, come received or it may project total
180
monthly income for a prospective pe- (1) For all individuals except aged,
riod not to exceed 6 months. blind, and disabled individuals, the re-
(2) Basis for projection. The agency source standard must be set in accord-
must base the projection on income re- ance with paragraph (b) of this section;
ceived in the preceding period, not to and
exceed 6 months, and on income ex- (2) For all aged, blind, and disabled
pected to be received. individuals or any combination of
(3) Adjustments. At the end of the pro- these groups of individuals, the agency
spective period specified in paragraph may establish a separate single medi-
(e)(1) of this section, or when any sig- cally needy resource standard that is
nificant change occurs, the agency more restrictive than the single re-
must reconcile estimates with income source standard set under paragraph
received. (b) of this section. However, the
(f) Determination of medical expenses— amount of the more restrictive sepa-
(1) Option. In determining the amount rate standard for aged, blind, or dis-
of medical expenses to be deducted abled individuals must be no lower
from an individual’s income, the agen- than the higher of the lowest categori-
cy may deduct incurred medical ex- cally needy resource standard cur-
penses, or it may project medical ex- rently applied under the State’s more
penses for a prospective period not to restrictive criteria under § 435.121 or
exceed 6 months. the medically needy resource standard
(2) Basis for projection. The agency in effect under the State’s Medicaid
must base the estimate on medical ex- plan on January 1, 1972.
penses incurred in the preceding pe- (d) The resource standard established
riod, not to exceed 6 months, and med- under paragraph (a) of this section may
ical expenses expected to be incurred. not diminish by an increase in the
(3) Adjustments. At the end of the pro- number of persons in the assistance
spective period specified in paragraph unit. For example, the resource stand-
(f)(1) of this section, or when any sig- ard for an assistance unit of three may
nificant change occurs, the agency not be less than that set for a unit of
must reconcile estimates with incurred two.
medical expenses. [58 FR 4933, Jan. 19, 1993]
FR 47988, Sept. 30, 1981; 48 FR 5735, Feb. 8, § 435.843 Medically needy resource
1983; 53 FR 3596, Feb. 8, 1988; 53 FR 5344, Feb. standard: State plan requirements.
23, 1988; 56 FR 8850, 8854, Mar. 1, 1991; 58 FR The State plan must specify the re-
4933, Jan. 19, 1993]
source standard for the covered medi-
MEDICALLY NEEDY RESOURCE STANDARD cally needy groups.
[58 FR 4933, Jan. 19, 1993]
§ 435.840 Medically needy resource
standard: General requirements. DETERMINING ELIGIBILITY ON THE BASIS
(a) To determine eligibility of medi- OF RESOURCES
cally needy individuals, a Medicaid
agency must use a single resource § 435.845 Medically needy resource eli-
standard that meets the requirements gibility.
of this section. To determine eligibility on the basis
(b) In States that do not use more re- of resources for medically needy indi-
strictive criteria than SSI for aged, viduals, the agency must:
blind, and disabled individuals, the re- (a) Consider only the individual’s re-
source standard must be established at sources and those that are considered
an amount that is no lower than the available to him under the financial re-
lowest resource standard used under sponsibility requirements for relatives
the cash assistance programs that rein § 435.602.
late to the State’s covered medically (b) Deduct the amounts that would
needy eligibility group or groups of in- be deducted in determining resource

dividuals under § 435.301. eligibility for the medically needy
(c) In States using more restrictive group as provided for in § 435.601 or
requirements than SSI: under the criteria of States using more
181
§§ 435.850–435.852 42 CFR Ch. IV (10–1–17 Edition)
restrictive criteria than SSI as pro- § 435.903 Adherence of local agencies

vided for in § 435.121. In determining the to State plan requirements.
amount of an individual’s resources for The agency must—
Medicaid eligibility, States must count (a) Have methods to keep itself cur-
amounts of resources that otherwise rently informed of the adherence of
would not be counted under the condi- local agencies to the State plan provi-
tional eligibility provisions of the SSI sions and the agency’s procedures for
or AFDC programs. determining eligibility; and
(c) Apply the resource standard speci- (b) Take corrective action to ensure
fied under § 435.840. their adherence.
[58 FR 4933, Jan. 19, 1993] [44 FR 17937, Mar. 23, 1979. Redesignated at 59
FR 48809, Sept. 23, 1994]
§§ 435.850–435.852 [Reserved]
§ 435.904 Establishment of outstation
locations to process applications for
Subpart J—Eligibility in the States certain low-income eligibility
and District of Columbia groups.
(a) State plan requirements. The Med-
SOURCE: 44 FR 17937, Mar. 23, 1979, unless icaid State plan must specify that the
otherwise noted. requirements of this section are met.
(b) Opportunity to apply. The agency
§ 435.900 Scope. must provide an opportunity for the
This subpart sets forth requirements following groups of low-income preg-
for processing applications, deter- nant women, infants, and children
mining eligibility, and furnishing Med- under age 19 to apply for Medicaid at
icaid. outstation locations other than AFDC
offices:
GENERAL METHODS OF ADMINISTRATION (1) The groups of pregnant women or
infants with incomes up to 133 percent
§ 435.901 Consistency with objectives of the Federal poverty level as speci-
and statutes.
fied under section 1902(a)(10)(A)(i)(IV)
The Medicaid agency’s standards and of the Act;
methods for providing information to (2) The group of children age 1 up to
applicants and beneficiaries and for de- age 6 with incomes at 133 percent of the
termining eligibility must be con- Federal poverty level as specified
sistent with the objectives of the pro- under section 1902(a)(10)(A)(i)(VI) of the
gram and with the rights of individuals Act;
under the United States Constitution, (3) The group of children age 6 up to
the Social Security Act, title VI of the age 19 born after September 30, 1983,
Civil Rights Act of 1964, section 504 of with incomes up to 100 percent of the
the Rehabilitation Act of 1973, the Federal poverty level as specified
Americans with Disabilities Act of under section 1902(a)(10)(A)(i)(VII) of
1990, the Age Discrimination Act of the Act; and
1975, section 1557 of the Affordable Care (4) The groups of pregnant women or
Act, and all other relevant provisions infants, children age 1 up to age 6, and
of Federal and State laws and their re- children age 6 up to age 19, who are not
spective implementing regulations. eligible as a mandatory group, with in-
[81 FR 86457, Nov. 30, 2016]
comes up to 185 percent of the Federal
poverty level as specified under section
§ 435.902 Simplicity of administration. 1902(a)(10)(A)(ii)(IX) of the Act.
(c) Outstation locations: general re-
The agency’s policies and procedures quirements. (1) The agency must estab-
must ensure that eligibility is deter- lish either—
mined in a manner consistent with (i) Outstation locations at each dis-
simplicity of administration and the proportionate share hospital, as de-
best interests of the applicant or bene-
fined in section 1923(a)(1)(A) of the Act,

ficiary. and each Federally-qualified health
[44 FR 17937, Mar. 23, 1979. Redesignated at 59 center, as defined in section
FR 48809, Sept. 23, 1994] 1905(1)(2)(B) of the Act, participating in
182
the Medicaid program and providing locations specified in paragraphs (c)(l)

services to Medicaid-eligible pregnant and (2) of this section.
women and children; or (d) Outstation functions. (1) The agen-
(ii) Other outstation locations, which cy must provide for the receipt and ini-
include at least some, disproportionate tial processing of Medicaid applica-
share hospitals and federally-qualified tions from the designated eligibility
health centers, as specified under an al- groups at each outstation location.
ternative State plan that is submitted (2) ‘‘Initial processing’’ means taking
to and approved by CMS if the fol- applications, assisting applicants in
lowing conditions are met:
completing the application, providing
(A) The State must demonstrate that
information and referrals, obtaining re-
the alternative plan for outstationing
is equally effective as, or more effec- quired documentation to complete
tive than, a plan that would meet the processing of the application, assuring
requirements of paragraph (c)(1)(i) of that the information contained on the
this section in enabling the individuals application form is complete, and con-
described in paragraph (b) of this sec- ducting any necessary interviews. It
tion to apply for and receive Medicaid; does not include evaluating the infor-
and mation contained on the application
(B) The State must provide assur- and the supporting documentation nor
ances that the level of staffing and making a determination of eligibility
funding committed by the State under or ineligibility.
the alternative plan equals or exceeds (3) The agency may, at its option,
the level of staffing and funding under allow appropriate State eligibility
a plan that would meet the require- workers assigned to outstation loca-
ments of establishing the outstation tions to evaluate the information con-
locations at the sites specified in para- tained on the application and the sup-
graph (c)(1)(i) of this section. porting documentation and make a de-
(2) The agency must establish termination of eligibility if the work-
outstation locations at Indian health ers are authorized to determine eligi-
clinics operated by a tribe or tribal or- bility for the agency which determines
ganization as these clinics are specifi-
Medicaid eligibility under § 431.10 of
cally included in the definition of Fed-
this subchapter.
erally-qualified health centers under
section 1905(l)(2)(B) of the Act and are (e) Staffing. (1) Except for outstation
also included in the definition of rural locations that are infrequently used by
health clinics under part 491, subpart A the low-income eligibility groups, the
of this chapter. State agency must have staff available
(3) The agency may establish addi- at each outstation location during the
tional outstation locations at any regular office operating hours of the
other site where potentially eligible State Medicaid agency to accept appli-
pregnant women or children receive cations and to assist applicants with
services—for example, at school-linked the application process.
service centers and family support cen- (2) The agency may station staff at
ters. These additional sites may also one outstation location or rotate staff
include sites other than the main among several locations as workload
outstation location of those Federally- and staffing availability dictate.
qualified health centers or dispropor- (3) The agency may use State em-
tionate share hospitals providing serv- ployees, provider or contractor em-
ices to Medicaid-eligible pregnant ployees, or volunteers who have been
women and to children and that oper- properly trained to staff outstation lo-
ate more than one site. cations under the following conditions:
(4) The agency may, at its option,
(i) State outstation intake staff may
enter into reciprocal agreements with
neighboring States to ensure that the perform all eligibility processing func-
tions, including the eligibility deter-
groups described in paragraph (b) of

this section who customarily receive mination, if the staff is authorized to
services in a neighboring State have do so at the regular Medicaid intake
the opportunity to apply at outstation office.
183
§ 435.905 42 CFR Ch. IV (10–1–17 Edition)
(ii) Provider or contractor employees (2) Individuals living with disabilities

and volunteers may perform only ini- through the provision of auxiliary aids
tial processing functions as defined in and services at no cost to the indi-
paragraph (d)(2) of this section. vidual in accordance with the Ameri-
(4) Provider and contractor employ- cans with Disabilities Act and section
ees and volunteers are subject to the 504 of the Rehabilitation Act; and
confidentiality of information rules (3) Individuals must be informed of
specified in part 431, subpart F, of this the availability of the accessible infor-
subchapter, to the prohibition against mation and language services described
reassignment of provider claims speci- in this paragraph and how to access
fied in § 447.10 of this subchapter, and such information and services, at a
to all other State or Federal laws con- minimum through providing taglines
cerning conflicts of interest. in non-English languages indicating
(5) At locations that are infrequently the availability of language services.
used by the designated low-income eli-
gibility groups, the State agency may
FR 86457, Nov. 30, 2016]
use volunteers, provider or contractor
employees, or its own eligibility staff, § 435.906 Opportunity to apply.
or telephone assistance.
(i) The agency must display a notice The agency must afford an individual
in a prominent place at the outstation wishing to do so the opportunity to
location advising potential applicants apply for Medicaid without delay.
of when outstation intake workers will
§ 435.907 Application.
be available.
(ii) The notice must include a tele- (a) Basis and implementation. In ac-
phone number that applicants may call cordance with section 1413(b)(1)(A) of
for assistance. the Affordable Care Act, the agency
(iii) The agency must comply with must accept an application from the
Federal and State laws and regulations applicant, an adult who is in the appli-
governing the provision of adequate no- cant’s household, as defined in
tice to persons who are blind or deaf or § 435.603(f), or family, as defined in sec-
who are unable to read or understand tion 36B(d)(1) of the Code, an author-
the English language. ized representative, or if the applicant
is a minor or incapacitated, someone
[59 FR 48809, Sept. 23, 1994]
acting responsibly for the applicant,
APPLICATIONS and any documentation required to es-
tablish eligibility—
§ 435.905 Availability and accessibility (1) Via the internet Web site de-
of program information. scribed in § 435.1200(f) of this part;
(a) The agency must furnish the fol- (2) By telephone;
lowing information in electronic and (3) Via mail;
paper formats (including through the (4) In person; and
Internet Web site described in (5) Through other commonly avail-
§ 435.1200(f) of this part), and orally as able electronic means.
appropriate, to all applicants and other (b) The application must be—
individuals who request it: (1) The single, streamlined applica-
(1) The eligibility requirements; tion for all insurance affordability pro-
(2) Available Medicaid services; and grams developed by the Secretary; or
(3) The rights and responsibilities of (2) An alternative single, streamlined
applicants and beneficiaries. application for all insurance afford-
(b) Such information must be pro- ability programs, which may be no
vided to applicants and beneficiaries in more burdensome on the applicant
plain language and in a manner that is than the application described in para-
accessible and timely to— graph (b)(1) of this section, approved by
(1) Individuals who are limited the Secretary.
English proficient through the provi- (c) For individuals applying, or who
sion of language services at no cost to may be eligible, for assistance on a
the individual including, oral interpre- basis other than the applicable MAGI
tation and written translations; standard in accordance with
184
§ 435.911(c)(2) of this part, the agency sons who have disabilities, consistent
may use either— with § 435.905(b) of this subpart.
(1) An application described in para- (h) Reinstatement of withdrawn appli-
graph (b) of this section and supple- cations. (1) In the case of individuals
mental forms to collect additional in- described in paragraph (h)(2) of this
formation needed to determine eligi- section, the agency must reinstate the
bility on such other basis; or application submitted by the indi-
(2) An application designed specifi- vidual, effective as of the date the ap-
cally to determine eligibility on a basis plication was first received by the Ex-
other than the applicable MAGI stand- change.
ard. Such application must minimize (2) Individuals described in this para-
burden on applicants. graph are individuals who—
(3) Any MAGI-exempt applications (i) Submitted an application de-
and supplemental forms in use by the scribed in paragraph (b) of this section
agency must be submitted to the Sec- to the Exchange;
retary. (ii) Withdrew their application for
(d) The agency may not require an Medicaid in accordance with 45 CFR
in-person interview as part of the ap- 155.302(b)(4)(A);
plication process for a determination (iii) Are assessed as potentially eligi-
of eligibility using MAGI-based in- ble for Medicaid by the Exchange ap-
come. peals entity.
(e) Limits on information. (1) The agen- [77 FR 17208, Mar. 23, 2012, as amended at 78
cy may only require an applicant to FR 42302, July 15, 2013]
provide the information necessary to
make an eligibility determination or § 435.908 Assistance with application
for a purpose directly connected to the and renewal.
administration of the State plan. (a) The agency must provide assist-
(2) The agency may request informa- ance to any individual seeking help
tion necessary to determine eligibility with the application or renewal process
for other insurance affordability or in person, over the telephone, and on-
benefit programs. line, and in a manner that is accessible
(3) The agency may request a non-ap- to individuals with disabilities and
plicant’s SSN provided that— those who are limited English pro-
(i) Provision of such SSN is vol- ficient, consistent with § 435.905(b) of
untary; this subpart.
(ii) Such SSN is used only to deter- (b) The agency must allow indi-
mine an applicant’s or beneficiary’s vidual(s) of the applicant or bene-
eligibility for Medicaid or other insur- ficiary’s choice to assist in the applica-
ance affordability program or for a pur- tion process or during a renewal of eli-
pose directly connected to the adminis- gibility.
tration of the State plan; and (c) Certified Application Counselors. (1)
(iii) At the time such SSN is re- At State option, the agency may cer-
quested, the agency provides clear notify staff and volunteers of State-des-
tice to the individual seeking assist- ignated organizations to act as applica-
ance, or person acting on such individ- tion assisters, authorized to provide as-
ual’s behalf, that provision of the non- sistance to applicants and beneficiaries
applicant’s SSN is voluntary and infor- with the application process and during
mation regarding how the SSN will be renewal of eligibility. To be certified,
used. application assisters must be—
(f) The agency must require that all (i) Authorized and registered by the
initial applications are signed under agency to provide assistance at appli-
penalty of perjury. Electronic, includ- cation and renewal;
ing telephonically recorded, signatures (ii) Effectively trained in the eligi-
and handwritten signatures trans- bility and benefits rules and regula-
mitted via any other electronic trans- tions governing enrollment in a QHP
mission must be accepted. through the Exchange and all insur-

(g) Any application or supplemental ance affordability programs operated
form must be accessible to persons who in the State, as implemented in the
are limited English proficient and per- State; and
185
§ 435.909 42 CFR Ch. IV (10–1–17 Edition)
(iii) Trained in and adhere to all § 435.909 Automatic entitlement to

rules regulations relating to the safe- Medicaid following a determination
guarding and confidentiality of infor- of eligibility under other programs.
mation and prohibiting conflict of in- The agency must not require a sepa-
terest, including regulations set forth rate application for Medicaid from an
at part 431, subpart F of this chapter, individual, if—
and at 45 CFR 155.260(f), regulations re- (a) [Reserved]
lating to the prohibition against reas- (b) The agency has an agreement
signment of provider claims specified with the Social Security Administra-
in § 447.10 of this chapter, and all other tion (SSA) under section 1634 of the
State and Federal laws concerning con- Act for determining Medicaid eligi-
flicts of interest and confidentiality of bility; and—
information. (1) The individual receives SSI;
(2) For purposes of this section, as- (2) The individual receives a manda-
sistance includes providing informa- tory State supplement under either a
tion on insurance affordability pro- federally-administered or State-admin-
grams and coverage options, helping istered program; or
individuals complete an application or (3) The individual receives an op-
renewal, working with the individual tional State supplement and the agen-
to provide required documentation, cy provides Medicaid to beneficiaries of
submitting applications and renewals optional supplements under § 435.230.
to the agency, interacting with the
agency on the status of such applica- [44 FR 17937, Mar. 23, 1979, as amended at 81
tions and renewals, assisting individ- FR 86457, Nov. 30, 2016]
uals with responding to any requests § 435.910 Use of social security num-
from the agency, and managing their ber.
case between the eligibility determina-
tion and regularly scheduled renewals. (a) Except as provided in paragraph
Application assisters may be certified (h) of this section, the agency must re-
by the agency to act on behalf of appli- quire, as a condition of eligibility, that
cants and beneficiaries for one, some or each individual (including children)
all of the permitted assistance activi- seeking Medicaid furnish each of his or
ties. her Social Security numbers (SSN).
(3) If the agency elects to certify ap- (b) The agency must advise the appli-
plication assisters, it must establish cant of—
procedures to ensure that— (1) [Reserved]
(2) The statute or other authority
(i) Applicants and beneficiaries are
under which the agency is requesting
informed of the functions and respon-
the applicant’s SSN; and
sibilities of certified application assist-
ers; (3) The uses the agency will make of
each SSN, including its use for
(ii) Individuals are able to authorize
verifying income, eligibility, and
application assisters to receive con-
amount of medical assistance pay-
fidential information about the indi-
ments under §§ 435.940 through 435.960.
vidual related to the individual’s appli-
(c)–(d) [Reserved]
cation for or renewal of Medicaid; and
(e) If an applicant cannot recall his
(iii) The agency does not disclose SSN or SSNs or has not been issued a
confidential applicant or beneficiary SSN the agency must—
information to an application assister
(1) Assist the applicant in completing
unless the applicant or beneficiary has
an application for an SSN;
authorized the application assister to
(2) Obtain evidence required under
receive such information.
SSA regulations to establish the age,
(4) Application assisters may not im- the citizenship or alien status, and the
pose, accept or receive payment or true identity of the applicant; and
compensation in any form from appli- (3) Either send the application to
cants or beneficiaries for application
SSA or, if there is evidence that the

assistance. applicant has previously been issued a
[77 FR 17208, Mar. 23, 2012, as amended at 78 SSN, request SSA to furnish the num-
FR 42302, July 15, 2013] ber.
186
(f) The agency must not deny or modified adjusted gross income stand-
delay services to an otherwise eligible ard means 133 percent of the Federal
individual pending issuance or poverty level or, if higher –
verification of the individual’s SSN by (i) In the case of parents and other
SSA or if the individual meets one of caretaker relatives described in
the exceptions in paragraph (h) of this § 435.110(b), the income standard estab-
section. lished in accordance with § 435.110(c) or
(g) The agency must verify the SSN § 435.220(c);
furnished by an applicant or bene- (ii) In the case of pregnant women,
ficiary with SSA to ensure the SSN the income standard established in ac-
was issued to that individual, and to cordance with § 435.116(c) of this part;
determine whether any other SSNs (iii) In the case of individuals under
were issued to that individual. age 19, the income standard established
(h) Exception. (1) The requirement of in accordance with § 435.118(c) of this
paragraph (a) of this section does not part;
apply and a State may give a Medicaid (iv) The income standard established
identification number to an individual under § 435.218(b)(1)(iv) of this part, if
who— the State has elected to provide cov-
(i) Is not eligible to receive an SSN; erage under such section and, if appli-
(ii) Does not have an SSN and may cable, coverage under the State’s
only be issued an SSN for a valid non- phase-in plan has been implemented for
work reason in accordance with 20 CFR the individual whose eligibility is
422.104; or being determined.
(iii) Refuses to obtain an SSN be- (2) In the case of individuals who
cause of well-established religious ob- have attained at least age 65 and indi-
jections. viduals who have attained at least age
(2) The identification number may be 19 and who are entitled to or enrolled
either an SSN obtained by the State on for Medicare benefits under part A or B
the applicant’s behalf or another or title XVIII of the Act, there is no
unique identifier. applicable modified adjusted gross in-
(3) The term well established religious come standard, except that in the case
objections means that the applicant— of such individuals—
(i) Is a member of a recognized reli- (i) Who are also pregnant, the appli-
gious sect or division of the sect; and cable modified adjusted gross income
(ii) Adheres to the tenets or teach- standard is the standard established
ings of the sect or division of the sect under paragraph (b)(1) of this section;
and for that reason is conscientiously or
opposed to applying for or using a na- (ii) Who are also a parent or care-
tional identification number. taker relative, as described in § 435.4,
(4) A State may use the Medicaid the applicable modified adjusted gross
identification number established by income standard is the higher of the in-
the State to the same extent as an SSN come standard established in accord-
is used for purposes described in para- ance with § 435.110(c) or § 435.220(c).
graph (b)(3) of this section. (c) For each individual who has sub-
mitted an application described in
FR 7211, Feb. 28, 1986; 66 FR 2667, Jan. 11, § 435.907 or whose eligibility is being re-
2001; 77 FR 17209, Mar. 23, 2012; 81 FR 86457, newed in accordance with § 435.916 and
Nov. 30, 2016] who meets the non-financial require-
ments for eligibility (or for whom the
DETERMINATION OF MEDICAID agency is providing a reasonable oppor-
ELIGIBILITY tunity to verify citizenship or immi-
gration status in accordance with
§ 435.911 Determination of eligibility. § 435.956(b)) of this chapter, the State
(a) Statutory basis. This section im- Medicaid agency must comply with the
plements sections 1902(a)(4), (a)(8), following—
(a)(10)(A), (a)(19), and (e)(14) and sec- (1) The agency must, promptly and
tion 1943 of the Act. without undue delay consistent with
(b)(1) Except as provided in para- timeliness standards established under
graph (b)(2) of this section, applicable § 435.912, furnish Medicaid to each such
187
§ 435.912 42 CFR Ch. IV (10–1–17 Edition)
individual whose household income is (b) Consistent with guidance issued

at or below the applicable modified ad- by the Secretary, the agency must es-
justed gross income standard. tablish in its State plan timeliness and
(2) For each individual described in performance standards for, promptly
paragraph (d) of this section, the agen- and without undue delay—
cy must collect such additional infor- (1) Determining eligibility for Med-
mation as may be needed consistent icaid for individuals who submit appli-
with § 435.907(c), to determine whether cations to the single State agency or
such individual is eligible for Medicaid its designee.
on any basis other than the applicable (2) Determining potential eligibility
modified adjusted gross income stand- for, and transferring individuals’ elec-
ard, and furnish Medicaid on such tronic accounts to, other insurance af-
basis. fordability programs pursuant to
(3) For individuals not eligible on the § 435.1200(e) of this part.
basis of the applicable modified ad- (3) Determining eligibility for Med-
justed gross income standard, the agen- icaid for individuals whose accounts
cy must comply with the requirements are transferred from other insurance
set forth in § 435.1200(e) of this part. affordability programs, including at
(d) For purposes of paragraph (c)(2) of initial application as well as at a regu-
this section, individuals described in larly-scheduled renewal or due to a
this paragraph include: change in circumstances.
(1) Individuals whom the agency (c)(1) The timeliness and performance
identifies, on the basis of information standards adopted by the agency under
contained in an application described paragraph (b) of this section must
in § 435.907(b) of this part, or renewal cover the period from the date of appli-
form described in § 435.916(a)(3) of this cation or transfer from another insur-
part, or on the basis of other informa- ance affordability program to the date
tion available to the State, as poten- the agency notifies the applicant of its
tially eligible on a basis other than the decision or the date the agency trans-
applicable MAGI standard; fers the individual to another insur-
(2) Individuals who submit an alter- ance affordability program in accord-
native application described in ance with § 435.1200(e) of this part, and
§ 435.907(c) of this part; and must comply with the requirements of
(3) Individuals who otherwise request paragraph (c)(2) of this section, subject
a determination of eligibility on a to additional guidance issued by the
basis other than the applicable MAGI Secretary to promote accountability
standard as described in § 435.603(j) of and consistency of high quality con-
this part. sumer experience among States and be-
tween insurance affordability pro-
[77 FR 17209, Mar. 23, 2012, as amended at 81 grams.
FR 86457, Nov. 30, 2016] (2) Timeliness and performance
standards included in the State plan
§ 435.912 Timely determination of eli- must account for—
gibility.
(i) The capabilities and cost of gen-
(a) For purposes of this section— erally available systems and tech-
(1) ‘‘Timeliness standards’’ refer to nologies;
the maximum period of time in which (ii) The general availability of elec-
every applicant is entitled to a deter- tronic data matching and ease of con-
mination of eligibility, subject to the nections to electronic sources of au-
exceptions in paragraph (e) of this sec- thoritative information to determine
tion. and verify eligibility;
(2) ‘‘Performance standards’’ are (iii) The demonstrated performance
overall standards for determining eligi- and timeliness experience of State
bility in an efficient and timely man- Medicaid, CHIP and other insurance af-
ner across a pool of applicants, and in- fordability programs, as reflected in
clude standards for accuracy and con- data reported to the Secretary or oth-
sumer satisfaction, but do not include erwise available; and
standards for an individual applicant’s (iv) The needs of applicants, includ-
determination of eligibility. ing applicant preferences for mode of
188
application (such as through an inter- (2) There is a supporting entry in the

net Web site, telephone, mail, in-per- case record that the applicant has died;
son, or other commonly available elec- or
tronic means), as well as the relative (3) There is a supporting entry in the
complexity of adjudicating the eligi- case record that the applicant cannot
bility determination based on house- be located.
hold, income or other relevant infor- [44 FR 17937, Mar. 23, 1979. Redesignated at 77
mation. FR 17209, Mar. 23, 2012]
(3) Except as provided in paragraph
(e) of this section, the determination of § 435.915 Effective date.
eligibility for any applicant may not (a) The agency must make eligibility
exceed— for Medicaid effective no later than the
(i) Ninety days for applicants who third month before the month of appli-
apply for Medicaid on the basis of dis- cation if the individual—
ability; and (1) Received Medicaid services, at
(ii) Forty-five days for all other ap- any time during that period, of a type
plicants. covered under the plan; and
(d) The agency must inform appli- (2) Would have been eligible for Med-
cants of the timeliness standards icaid at the time he received the serv-
adopted in accordance with this sec- ices if he had applied (or someone had
tion. applied for him), regardless of whether
(e) The agency must determine eligi- the individual is alive when application
bility within the standards except in for Medicaid is made.
unusual circumstances, for example— (b) The agency may make eligiblity
(1) When the agency cannot reach a for Medicaid effective on the first day
decision because the applicant or an of a month if an individual was eligible
examining physician delays or fails to at any time during that month.
take a required action, or (c) The State plan must specify the
(2) When there is an administrative date on which eligibility will be made
or other emergency beyond the agen- effective.
cy’s control.
[44 FR 17937, Mar. 23, 1979. Redesignated at 77
(f) The agency must document the
FR 17209, Mar. 23, 2012]
reasons for delay in the applicant’s
case record. REDETERMINATIONS OF MEDICAID
(g) The agency must not use the time ELIGIBILITY
standards—
(1) As a waiting period before deter- § 435.916 Periodic renewal of Medicaid
mining eligibility; or eligibility.
(2) As a reason for denying eligibility (a) Renewal of individuals whose Med-
(because it has not determined eligi- icaid eligibility is based on modified ad-
bility within the time standards). justed gross income methods (MAGI). (1)
[44 FR 17937, Mar. 23, 1979, as amended at 45 Except as provided in paragraph (d) of
FR 24887, Apr. 11, 1980; 54 FR 50762, Dec. 11, this section, the eligibility of Medicaid
1989. Redesignated and amended at 77 FR beneficiaries whose financial eligibility
17209, Mar. 23, 2012] is determined using MAGI-based in-
come must be renewed once every 12
§ 435.914 Case documentation. months, and no more frequently than
(a) The agency must include in each once every 12 months.
applicant’s case record facts to support (2) Renewal on basis of information
the agency’s decision on his applica- available to agency. The agency must
tion. make a redetermination of eligibility
(b) The agency must dispose of each without requiring information from
application by a finding of eligibility the individual if able to do so based on
or ineligibility, unless— reliable information contained in the
(1) There is an entry in the case individual’s account or other more cur-
record that the applicant voluntarily rent information available to the agen-
withdrew the application, and that the cy, including but not limited to infor-
agency sent a notice confirming his de- mation accessed through any data
cision; bases accessed by the agency under
189
§ 435.916 42 CFR Ch. IV (10–1–17 Edition)
§§ 435.948, 435.949 and 435.956 of this part. ficiaries excepted from modified ad-
If the agency is able to renew eligi- justed gross income under § 435.603(j) of
bility based on such information, the this part, for circumstances that may
agency must, consistent with the re- change, at least every 12 months. The
quirements of this subpart and subpart agency must make a redetermination
E of part 431 of this chapter, notify the of eligibility in accordance with the
individual— provisions of paragraph (a)(2) of this
(i) Of the eligibility determination, section, if sufficient information is
and basis; and available to do so. The agency may
(ii) That the individual must inform adopt the procedures described at
the agency, through any of the modes § 435.916(a)(3) for individuals whose eli-
permitted for submission of applica- gibility cannot be renewed in accord-
tions under § 435.907(a) of this subpart, ance with paragraph (a)(2) of this sec-
if any of the information contained in tion.
such notice is inaccurate, but that the (1) The agency may consider blind-
individual is not required to sign and ness as continuing until the reviewing
return such notice if all information physician under § 435.531 of this part de-
provided on such notice is accurate. termines that a beneficiary’s vision has
(3) Use of a pre-populated renewal improved beyond the definition of
form. If the agency cannot renew eligi- blindness contained in the plan; and
bility in accordance with paragraph (2) The agency may consider dis-
(a)(2) of this section, the agency must— ability as continuing until the review
(i) Provide the individual with— team, under § 435.541 of this part, deter-
(A) A renewal form containing infor- mines that a beneficiary’s disability no
mation, as specified by the Secretary, longer meets the definition of dis-
available to the agency that is needed ability contained in the plan.
to renew eligibility. (c) Procedures for reporting changes.
(B) At least 30 days from the date of The agency must have procedures de-
the renewal form to respond and pro- signed to ensure that beneficiaries
vide any necessary information make timely and accurate reports of
through any of the modes of submis- any change in circumstances that may
sion specified in § 435.907(a) of this part, affect their eligibility and that such
and to sign the renewal form in a man- changes may be reported through any
ner consistent with § 435.907(f) of the of the modes for submission of applica-
part; tions described in § 435.907(a) of this
(C) Notice of the agency’s decision part.
concerning the renewal of eligibility in (d) Agency action on information about
accordance with this subpart and sub- changes. (1) Consistent with the re-
part E of part 431 of this chapter; quirements of § 435.952 of this part, the
(ii) Verify any information provided agency must promptly redetermine eli-
by the beneficiary in accordance with gibility between regular renewals of
§§ 435.945 through 435.956 of this part; eligibility described in paragraphs (b)
(iii) Reconsider in a timely manner and (c) of this section whenever it re-
the eligibility of an individual who is ceives information about a change in a
terminated for failure to submit the re- beneficiary’s circumstances that may
newal form or necessary information, if affect eligibility.
the individual subsequently submits (i) For renewals of Medicaid bene-
the renewal form within 90 days after ficiaries whose financial eligibility is
the date of termination, or a longer pe- determined using MAGI-based income,
riod elected by the State, without re- the agency must limit any requests for
quiring a new application; additional information from the indi-
(iv) Not require an individual to com- vidual to information relating to such
plete an in-person interview as part of change in circumstance.
the renewal process. (ii) If the agency has enough informa-
(b) Redetermination of individuals tion available to it to renew eligibility
whose Medicaid eligibility is determined with respect to all eligibility criteria,

on a basis other than modified adjusted the agency may begin a new 12-month
gross income. The agency must redeter- renewal period under paragraphs (a) or
mine the eligibility of Medicaid bene- (b) of this section.
190
(2) If the agency has information (i) The basis and effective date of eli-
about anticipated changes in a bene- gibility;
ficiary’s circumstances that may affect (ii) The circumstances under which
his or her eligibility, it must redeter- the individual must report, and proce-
mine eligibility at the appropriate dures for reporting, any changes that
time based on such changes. may affect the individual’s eligibility;
(e) The agency may request from (iii) If applicable, the amount of med-
beneficiaries only the information ical expenses which must be incurred
needed to renew eligibility. Requests to establish eligibility in accordance
for non-applicant information must be with § 435.121 or § 435.831.
conducted in accordance with (iv) Basic information on the level of
§ 435.907(e) of this part. benefits and services available based on
(f) Determination of ineligibility and the individual’s eligibility, including,
transmission of data pertaining to indi- if applicable—
viduals no longer eligible for Medicaid. (A) The differences in coverage avail-
(1) Prior to making a determination able to individuals enrolled in bench-
of ineligibility, the agency must con- mark or benchmark-equivalent cov-
sider all bases of eligibility, consistent erage or in an Alternative Benefits
with § 435.911 of this part. Plan and coverage available to individ-
(2) For individuals determined ineli- uals described in § 440.315 of this chap-
gible for Medicaid, the agency must deter (relating to exemptions from man-
termine potential eligibility for other datory enrollment in benchmark or
insurance affordability programs and benchmark-equivalent coverage);
comply with the procedures set forth in (B) A description of any premiums
§ 435.1200(e) of this part. and cost sharing required under Part
(g) Any renewal form or notice must 447 Subpart A of this chapter;
be accessible to persons who are lim- (C) An explanation of how to receive
ited English proficient and persons additional detailed information on ben-
with disabilities, consistent with efits and financial responsibilities; and
§ 435.905(b) of this subpart. (D) An explanation of any right to
appeal the eligibility status or level of
[77 FR 17210, Mar. 23, 2012] benefits and services approved.
(2) Notice of adverse action including
§ 435.917 Notice of agency’s decision denial, termination or suspension of
concerning eligibility, benefits, or
services. eligibility or change in benefits or
services. Any notice of denial, termi-
(a) Notice of eligibility determinations. nation or suspension of Medicaid eligi-
Consistent with §§ 431.206 through bility or change in benefits or services
431.214 of this chapter, the agency must must be consistent with § 431.210 of this
provide all applicants and beneficiaries chapter.
with timely and adequate written no- (c) Eligibility. Whenever an approval,
tice of any decision affecting their eli- denial, or termination of eligibility is
gibility, including an approval, denial, based on an applicant’s or beneficiary’s
termination or suspension of eligi- having household income at or below
bility, or a denial or change in benefits the applicable modified adjusted gross
and services. Such notice must— income standard in accordance with
(1) Be written in plain language; § 435.911, the eligibility notice must
(2) Be accessible to persons who are contain—
limited English proficient and individ- (1) Information regarding bases of
uals with disabilities, consistent with eligibility other than the applicable
§ 435.905(b), and modified adjusted gross income stand-
(3) If provided in electronic format, ard and the benefits and services af-
comply with § 435.918(b). forded to individuals eligible on such
(b) Content of eligibility notice—(1) No- other bases, sufficient to enable the in-
tice of approved eligibility. Any notice of dividual to make an informed choice as
an approval of Medicaid eligibility to whether to request a determination

must include, but is not limited to, on such other bases; and
clear statements containing the fol- (2) Information on how to request a
lowing information— determination on such other bases;
191
§ 435.918 42 CFR Ch. IV (10–1–17 Edition)
(d) Combined Eligibility Notice. The § 435.920 Verification of SSNs.

agency’s responsibility to provide no-
(a) In redetermining eligibility, the
tice under this section is satisfied by a
combined eligibility notice, as defined agency must review case records to de-
in § 435.4, provided by the Exchange or termine whether they contain the
other insurance affordability program beneficiary’s SSN or, in the case of
in accordance with an agreement be- families, each family member’s SSN.
tween the agency and such program (b) If the case record does not contain
consummated in accordance with the required SSNs, the agency must re-
§ 435.1200(b)(3), except that, if the infor- quire the beneficiary to furnish them
mation described in paragraph and meet other requirements of
(b)(1)(iii) and (iv) of this section is not § 435.910.
included in such combined eligibility (c) For any beneficiary whose SSN
notice, the agency must provide the in- was established as part of the case
dividual with a supplemental notice of record without evidence required under
such information, consistent with this the SSA regulations as to age, citizen-
section. ship, alien status, or true identity, the
[81 FR 86458, Nov. 30, 2016] agency must obtain verification of
these factors in accordance with
§ 435.918 Use of electronic notices. § 435.910.
(a) Effective no earlier than October [44 FR 17937, Mar. 23, 1979, as amended at 51
1, 2013 and no later than January 1, FR 7211, Feb. 28, 1986]
2015, the agency must provide individ-
uals with a choice to receive notices § 435.923 Authorized representatives.
and information required under this (a)(1) The agency must permit appli-
part or subpart E of part 431 of this cants and beneficiaries to designate an
chapter in electronic format or by reg- individual or organization to act re-
ular mail and must be permitted to sponsibly on their behalf in assisting
change such election. with the individual’s application and
(b) If the individual elects to receive renewal of eligibility and other ongo-
communications from the agency elec-
ing communications with the agency.
tronically, the agency must—
Such a designation must be in accord-
(1) Ensure that the individual’s elec-
ance with paragraph (f) of this section,
tion to receive notices electronically is
including the applicant’s signature,
confirmed by regular mail.
and must be permitted at the time of
(2) Ensure that the individual is in-
formed of his or her right to change application and at other times.
such election to receive notices (2) Authority for an individual or en-
through regular mail. tity to act on behalf of an applicant or
(3) Post notices to the individual’s beneficiary accorded under state law,
electronic account within 1 business including but not limited to, a court
day of notice generation. order establishing legal guardianship
(4) Send an email or other electronic or a power of attorney, must be treated
communication alerting the individual as a written designation by the appli-
that a notice has been posted to his or cant or beneficiary of authorized rep-
her account. The agency may not in- resentation.
clude confidential information in the (b) Applicants and beneficiaries may
email or electronic alert. authorize their representatives to—
(5) Send a notice by regular mail (1) Sign an application on the appli-
within three business days of the date cant’s behalf;
of a failed electronic communication if (2) Complete and submit a renewal
an electronic communication is un- form;
deliverable. (3) Receive copies of the applicant or
(6) At the individual’s request, pro- beneficiary’s notices and other commu-
vide through regular mail any notice nications from the agency;
posted to the individual’s electronic (4) Act on behalf of the applicant or

account. beneficiary in all other matters with
[78 FR 42303, July 15, 2013] the agency.
192
(c) The power to act as an authorized (b) Eligibility. The agency may pro-
representative is valid until the appli- vide continuous eligibility for the pe-
cant or beneficiary modifies the au- riod specified in paragraph (c) of this
thorization or notifies the agency that section for an individual who is:
the representative is no longer author- (1) Under age 19 or under a younger
ized to act on his or her behalf, or the age specified by the agency in its State
authorized representative informs the plan; and
agency that he or she no longer is act- (2) Eligible and enrolled for manda-
ing in such capacity, or there is a
tory or optional coverage under the
change in the legal authority upon
State plan in accordance with subpart
which the individual or organization’s
authority was based. Such notice must B or C of this part.
be in accordance with paragraph (f) of (c) Continuous eligibility period. (1)
this section and should include the ap- The agency must specify in the State
plicant or authorized representative’s plan the length of the continuous eligi-
signature as appropriate. bility period, not to exceed 12 months.
(d) The authorized representative— (2) A continuous eligibility period be-
(1) Is responsible for fulfilling all re- gins on the effective date of the indi-
sponsibilities encompassed within the vidual’s eligibility under § 435.915 or
scope of the authorized representation, most recent redetermination or re-
as described in paragraph (b)(2) of this newal of eligibility under § 435.916 and
section, to the same extent as the indi- ends after the period specified by the
vidual he or she represents; agency under paragraph (c)(1) of this
(2) Must agree to maintain, or be le- section.
gally bound to maintain, the confiden- (d) Applicability. A child’s eligibility
tiality of any information regarding may not be terminated during a con-
the applicant or beneficiary provided tinuous eligibility period, regardless of
by the agency.
any changes in circumstances, unless:
(e) The agency must require that, as
a condition of serving as an authorized (1) The child attains the maximum
representative, a provider or staff age specified in accordance with para-
member or volunteer of an organiza- graph (b)(1) of this section;
tion must affirm that he or she will ad- (2) The child or child’s representative
here to the regulations in part 431, sub- requests a voluntary termination of
part F of this chapter and at 45 CFR eligibility;
155.260(f) (relating to confidentiality of (3) The child ceases to be a resident
information), § 447.10 of this chapter of the State;
(relating to the prohibition against re- (4) The agency determines that eligi-
assignment of provider claims as ap- bility was erroneously granted at the
propriate for a facility or an organiza- most recent determination, redeter-
tion acting on the facility’s behalf), as mination or renewal of eligibility be-
well as other relevant State and Fed- cause of agency error or fraud, abuse,
eral laws concerning conflicts of inter- or perjury attributed to the child or
est and confidentiality of information. the child’s representative; or
(f) For purposes of this section, the (5) The child dies.
agency must accept electronic, includ-
ing telephonically recorded, signatures [81 FR 86458, Nov. 30, 2016]
and handwritten signatures trans-
mitted by facsimile or other electronic FURNISHING MEDICAID
transmission. Designations of author-
ized representatives must be accepted § 435.930 Furnishing Medicaid.
through all of the modalities described The agency must—
in § 435.907(a). (a) Furnish Medicaid promptly to
[78 FR 42303, July 15, 2013] beneficiaries without any delay caused
by the agency’s administrative proce-
§ 435.926 Continuous eligibility for dures;
children. (b) Continue to furnish Medicaid reg-

(a) Basis. This section implements ularly to all eligible individuals until
section 1902(e)(12) of the Act. they are found to be ineligible; and
193
§ 435.940 42 CFR Ch. IV (10–1–17 Edition)
(c) Make arrangements to assist ap- accordance with §§ 435.948 through

plicants and beneficiaries to get emer- 435.956 of this subpart.
gency medical care whenever needed, (c) The agency must furnish, in a
24 hours a day and 7 days a week. timely manner, income and eligibility
information, subject to regulations at
INCOME AND ELIGIBILITY VERIFICATION part 431 subpart F of this chapter,
REQUIREMENTS needed for verifying eligibility to the
following programs:
SOURCE: Sections 435.940 through 935.965 ap- (1) To other agencies in the State and
pear at 51 FR 7211, Feb. 28, 1986, unless other- other States and to the Federal pro-
wise noted.
grams both listed in § 435.948(a) of this
§ 435.940 Basis and scope. subpart and identified in section 1137(b)
of the Act;
The income and eligibility (2) Other insurance affordability pro-
verification requirements set forth at grams;
§§ 435.940 through 435.960 are based on (3) The child support enforcement
sections 1137, 1902(a)(4), 1902(a)(19), program under part D of title IV of the
1902(a)(46)(B), 1902(ee), 1903(r)(3), 1903(x), Act; and
and 1943(b)(3) of the Act, and section (4) SSA for OASDI under title II and
1413 of the Affordable Care Act. Noth- for SSI benefits under title XVI of the
ing in the regulations in this subpart Act.
should be construed as limiting the (d) All State eligibility determina-
State’s program integrity measures or tion systems must conduct data
affecting the State’s obligation to en- matching through the Public Assist-
sure that only eligible individuals re- ance Reporting Information System
ceive benefits, consistent with parts 431 (PARIS).
and 455 of this subchapter, or its obli- (e) The agency must, as required
gation to provide for methods of ad- under section 1137(a)(7) of the Act, and
ministration that are in the best inter- upon request, reimburse another agen-
est of applicants and beneficiaries and cy listed in § 435.948(a) of this subpart
are necessary for the proper and effi- or paragraph (c) of this section for rea-
cient operation of the plan, consistent sonable costs incurred in furnishing in-
with § 431.15 of this subchapter and sec- formation, including new develop-
tion 1902(a)(19) of the Act. mental costs.
[77 FR 17211, Mar. 23, 2012, as amended at 81 (f) Prior to requesting information
FR 86459, Nov. 30, 2016] for an applicant or beneficiary from an-
other agency or program under this
§ 435.945 General requirements. subpart, the agency must inform the
(a) Except where the law requires individual that the agency will obtain
other procedures (such as for citizen- and use information available to it
ship and immigration status informa- under this subpart to verify income
tion), the agency may accept attesta- and eligibility or for other purposes di-
tion of information needed to deter- rectly connected to the administration
mine the eligibility of an individual for of the State plan.
Medicaid (either self-attestation by the (g) Consistent with § 431.16 of this
individual or attestation by an adult subchapter, the agency must report in-
who is in the applicant’s household, as formation as prescribed by the Sec-
defined in § 435.603(f) of this part, or retary for purposes of determining
family, as defined in section 36B(d)(1) compliance with § 431.305 of this sub-
of the Internal Revenue Code, an au- chapter, subpart P of part 431, §§ 435.910
thorized representative, or, if the indi- and 435.940 through 435.965 and of evalu-
vidual is a minor or incapacitated, ating the effectiveness of the income
someone acting responsibly for the in- and eligibility verification system.
dividual) without requiring further in- (h) Information exchanged electroni-
formation (including documentation) cally between the State Medicaid agen-
from the individual. cy and any other agency or program

(b) The agency must request and use must be sent and received via secure
information relevant to verifying an electronic interfaces as defined in
individual’s eligibility for Medicaid in § 435.4 of this part.
194
(i) The agency must execute written tered supplementary payment pro-
agreements with other agencies before grams under section 1616(a) of the Act,
releasing data to, or requesting data and any State program administered
from, those agencies. Such agreements under a plan approved under Titles I,
must provide for appropriate safe- X, XIV, or XVI of the Act; and
guards limiting the use and disclosure (2) Information related to eligibility
of information as required by Federal or enrollment from the Supplemental
or State law or regulations. Nutrition Assistance Program, the
(j) Verification plan. The agency must State program funded under part A of
develop, and update as modified, and title IV of the Act, and other insurance
submit to the Secretary, upon request, affordability programs.
a verification plan describing the (b) To the extent that the informa-
verification policies and procedures tion identified in paragraph (a) of this
adopted by the State agency to imple-
section is available through the elec-
ment the provisions set forth in
tronic service established in accord-
§§ 435.940 through 435.956 of this subpart
ance with § 435.949 of this subpart, the
in a format and manner prescribed by
agency must obtain the information
the Secretary.
(k) Flexibility in information collection through such service.
and verification. Subject to approval by (c) The agency must request the in-
the Secretary, the agency may request formation by SSN, or if an SSN is not
and use information from a source or available, using other personally iden-
sources alternative to those listed in tifying information in the individual’s
§ 435.948(a) of this subpart, or through a account, if possible.
mechanism other than the electronic [77 FR 17211, Mar. 23, 2012]
service described in § 435.949(a) of this
subpart, provided that such alternative § 435.949 Verification of information
source or mechanism will reduce the through an electronic service.
administrative costs and burdens on in- (a) The Secretary will establish an
dividuals and States while maximizing
electronic service through which
accuracy, minimizing delay, meeting
States may verify certain information
applicable requirements relating to the
with, or obtain such information from,
confidentiality, disclosure, mainte-
Federal agencies and other data
nance, or use of information, and pro-
sources, including SSA, the Depart-
moting coordination with other insur-
ment of Treasury, and the Department
ance affordability programs.
of Homeland Security.
[77 FR 17211, Mar. 23, 2012, as amended at 81 (b) To the extent that information
FR 86459, Nov. 30, 2016] related to eligibility for Medicaid is
§ 435.948 Verifying financial informa- available through the electronic serv-
tion. ice established by the Secretary,
States must obtain the information
(a) The agency must in accordance through such service, subject to the re-
with this section request the following quirements in subpart C of part 433 of
information relating to financial eligi- this chapter, except as provided for in
bility from other agencies in the State § 435.945(k) of this subpart.
and other States and Federal programs
to the extent the agency determines [77 FR 17212, Mar. 23, 2012]
such information is useful to verifying
the financial eligibility of an indi- § 435.952 Use of information and re-
vidual: quests of additional information
(1) Information related to wages, net from individuals.
earnings from self-employment, un- (a) The agency must promptly evalu-
earned income and resources from the ate information received or obtained
State Wage Information Collection by it in accordance with regulations
Agency (SWICA), the Internal Revenue under § 435.940 through § 435.960 of this
Service (IRS), the Social Security Ad- subpart to determine whether such in-
ministration (SSA), the agencies ad- formation may affect the eligibility of
ministering the State unemployment an individual or the benefits to which
compensation laws, the State-adminis- he or she is entitled.
195
§ 435.956 42 CFR Ch. IV (10–1–17 Edition)
(b) If information provided by or on (3) Exception for special circumstances.

behalf of an individual (on the applica- The agency must establish an excep-
tion or renewal form or otherwise) is tion to permit, on a case-by-case basis,
reasonably compatible with informa- self-attestation of individuals for all
tion obtained by the agency in accord- eligibility criteria when documenta-
ance with § 435.948, § 435.949 or § 435.956 tion does not exist at the time of appli-
of this subpart, the agency must deter- cation or renewal, or is not reasonably
mine or renew eligibility based on such available, such as in the case of indi-
information. viduals who are homeless or have expe-
(c) An individual must not be re- rienced domestic violence or a natural
quired to provide additional informa- disaster. This exception does not apply
tion or documentation unless informa- if documentation is specifically re-
tion needed by the agency in accord- quired under title XI or XIX, such as
ance with § 435.948, § 435.949 or § 435.956 requirements for verifying citizenship
of this subpart cannot be obtained elec- and immigration status, as imple-
tronically or the information obtained mented at § 435.956(a).
electronically is not reasonably com- (d) The agency may not deny or ter-
patible, as provided in the verification minate eligibility or reduce benefits
plan described in § 435.945(j) with infor- for any individual on the basis of infor-
mation provided by or on behalf of the mation received in accordance with
individual. regulations under § 435.940 through
(1) Income information obtained § 435.960 of this subpart unless the agen-
through an electronic data match shall cy has sought additional information
be considered reasonably compatible from the individual in accordance with
with income information provided by paragraph (c) of this section, and pro-
or on behalf of an individual if both are vided proper notice and hearing rights
either above or at or below the applica- to the individual in accordance with
ble income standard or other relevant this subpart and subpart E of part 431.
income threshold.
(2) If information provided by or on [77 FR 17212, Mar. 23, 2012, as amended at 81
FR 86459, Nov. 30, 2016]
behalf of an individual is not reason-
ably compatible with information ob- § 435.956 Verification of other non-fi-
tained through an electronic data nancial information.
match, the agency must seek addi-
tional information from the individual, (a) Citizenship and immigration status.
including— (1)(i) The agency must—
(i) A statement which reasonably ex- (A) Verify citizenship status through
plains the discrepancy; or the electronic service established in ac-
(ii) Other information (which may in- cordance with § 435.949 or alternative
clude documentation), provided that mechanism authorized in accordance
documentation from the individual is with § 435.945(k), if available; and
permitted only to the extent electronic (B) Promptly attempt to resolve any
data are not available and establishing inconsistencies, including typo-
a data match would not be effective, graphical or other clerical errors, be-
considering such factors as the admin- tween information provided by the in-
istrative costs associated with estab- dividual and information from an elec-
lishing and using the data match com- tronic data source, and resubmit cor-
pared with the administrative costs as- rected information through such elec-
sociated with relying on paper docu- tronic service or alternative mecha-
mentation, and the impact on program nism.
integrity in terms of the potential for (ii) If the agency is unable to verify
ineligible individuals to be approved as citizenship status in accordance with
well as for eligible individuals to be de- paragraph (a)(1)(i) of this section, the
nied coverage; agency must verify citizenship either—
(A) Through a data match with the
(iii) The agency must provide the in-

dividual a reasonable period to furnish Social Security Administration; or
any additional information required (B) In accordance with § 435.407.
under paragraph (c) of this section. (2) The agency must—
196
(i) Verify immigration status such reasonable opportunity period, in

through the electronic service estab- accordance with § 435.911(c).
lished in accordance with § 435.949, or (iii) If a reasonable opportunity pe-
alternative mechanism authorized in riod is provided, the agency may begin
accordance with § 435.945(k); to furnish benefits to otherwise eligible
(ii) Promptly attempt to resolve any individuals, effective the date of appli-
inconsistencies, including typo- cation, or the first day of the month of
graphical or other clerical errors, be- application, consistent with the agen-
tween information provided by the in- cy’s election under § 435.915(b).
dividual and information from an elec- (b) Reasonable opportunity period. (1)
tronic data source, and resubmit cor- The agency must provide a reasonable
rected information through such elec- opportunity period to individuals who
tronic service or alternative mecha- have made a declaration of citizenship
nism. or satisfactory immigration status in
(3) For purposes of the exemption accordance with § 435.406(a), and for
from the five-year waiting period de- whom the agency is unable to verify
scribed in 8 U.S.C. 1613, the agency citizenship or satisfactory immigration
must verify that an individual is an status in accordance with paragraph
honorably discharged veteran or in ac- (a) of this section. During the reason-
tive military duty status, or the spouse able opportunity period, the agency
or unmarried dependent child of such must continue efforts to complete
person, as described in 8 U.S.C. verification of the individual’s citizen-
1612(b)(2) through the electronic service ship or satisfactory immigration sta-
described in § 435.949 or alternative tus, or request documentation if nec-
mechanism authorized in accordance essary. The agency must provide notice
with § 435.945(k). If the agency is unable of such opportunity that is accessible
to verify such status through such to persons who have limited English
proficiency and individuals with dis-
service the agency may accept self-at-
abilities, consistent with § 435.905(b).
testation of such status.
During such reasonable opportunity pe-
(4)(i) The agency must maintain a
riod, the agency must, if relevant to
record of having verified citizenship or verification of the individual’s citizen-
immigration status for each individual, ship or satisfactory immigration sta-
in a case record or electronic database tus—
in accordance with the State’s record (i) In the case of individuals declar-
retention policies in accordance with ing citizenship who do not have an SSN
§ 431.17(c) of this chapter. at the time of such declaration, assist
(ii) Unless the individual reports a the individual in obtaining an SSN in
change in citizenship or the agency has accordance with § 435.910, and attempt
received information indicating a po- to verify the individual’s citizenship in
tential change in the individual’s citi- accordance with paragraph (a)(1) of
zenship, the agency may not re-verify this section once an SSN has been ob-
or require an individual to re-verify tained and verified;
citizenship at a renewal of eligibility (ii) Promptly provide the individual
under § 435.916 of this subpart, or upon with information on how to contact
a subsequent application following a the electronic data source described in
break in coverage. paragraph (a) of this section so that he
(5) If the agency cannot promptly or she can attempt to resolve any in-
verify the citizenship or satisfactory consistencies defeating electronic
immigration status of an individual in verification directly with such source,
accordance with paragraph (a)(1) or (2) and pursue verification of the individ-
of this section, the agency— ual’s citizenship or satisfactory immi-
(i) Must provide a reasonable oppor- gration status if the individual or
tunity in accordance with paragraph source informs the agency that the in-
(b) of this section; and consistencies have been resolved; and
(ii) May not delay, deny, reduce or (iii) Provide the individual with an
terminate benefits for an individual opportunity to provide other docu-
whom the agency determines to be oth- mentation of citizenship or satisfac-
erwise eligible for Medicaid during tory immigration status, in accordance
197
§ 435.960 42 CFR Ch. IV (10–1–17 Edition)
with section 1137(d) of the Act and paragraph (b)(4)(ii) of this section are
§ 435.406 or § 435.407. met.
(2) The reasonable opportunity pe- (ii) Prior to implementing any limits
riod— under paragraph (b)(4)(i) of this sec-
(i) Begins on the date on which the tion, the agency must—
notice described in paragraph (b)(1) of (A) Demonstrate that the lack of lim-
this section is received by the indi- its jeopardizes program integrity; and
vidual. The date on which the notice is (B) Receive approval of a State plan
received is considered to be 5 days after amendment prior to implementing lim-
the date on the notice, unless the indi- its.
vidual shows that he or she did not re- (c) State residency. (1) The agency
ceive the notice within the 5-day pe- may verify State residency in accord-
riod. ance with § 435.945(a) of this subpart or
(ii)(A) Ends on the earlier of the date through other reasonable verification
the agency verifies the individual’s procedures consistent with the require-
citizenship or satisfactory immigration
ments in § 435.952 of this subpart.
status or determines that the indi-
(2) Evidence of immigration status
vidual did not verify his or her citizen-
may not be used to determine that an
ship or satisfactory immigration status
in accordance with paragraph (a)(2) of individual is not a State resident.
this section, or 90 days after the date (d) Social Security numbers. The agen-
described in paragraph (b)(2)(i) of this cy must verify Social Security num-
section, except that, bers (SSNs) in accordance with § 435.910
(B) The agency may extend the rea- of this subpart.
sonable opportunity period beyond 90 (e) Pregnancy. The agency must ac-
days for individuals declaring to be in cept self-attestation of pregnancy un-
a satisfactory immigration status if less the State has information that is
the agency determines that the indi- not reasonably compatible with such
vidual is making a good faith effort to attestation, subject to the require-
obtain any necessary documentation or ments of § 435.952 of this subpart.
the agency needs more time to verify (f) Age, date of birth and household
the individual’s status through other size. The agency may verify date of
available electronic data sources or to birth and the individuals that comprise
assist the individual in obtaining docu- an individual’s household, as defined in
ments needed to verify his or her sta- § 435.603(f) of this part, in accordance
tus. with § 435.945(a) of this subpart or
(3) If, by the end of the reasonable op- through other reasonable verification
portunity period, the individual’s citi- procedures consistent with the require-
zenship or satisfactory immigration ments in § 435.952 of this subpart.
status has not been verified in accord-
ance with paragraph (a) of this section, [77 FR 17212, Mar. 23, 2012, as amended at 81
the agency must take action within 30 FR 86459, Nov. 30, 2016]
days to terminate eligibility in accord-
§ 435.960 Standardized formats for fur-
ance with part 431 subpart E (relating nishing and obtaining information
to notice and appeal rights) of this to verifying income and eligibility.
chapter, except that §§ 431.230 and
431.231 of this chapter (relating to (a) The agency must maintain for all
maintaining and reinstating services) applicants and beneficiaries within an
may be applied at State option. agency file the SSN, surname and
(4)(i) The agency may establish in its other data elements in a format that at
State plan reasonable limits on the a minimum allows the agency to fur-
number of reasonable opportunity peri- nish and to obtain eligibility and in-
ods during which medical assistance is come information from the agencies or
furnished which a given individual may programs referenced in § 435.945(b) and
receive once denied eligibility for Med- § 435.948(a).

icaid due to failure to verify citizen- (b) The format to be used will be pre-
ship or satisfactory immigration sta- scribed by—
tus, provided that the conditions in
198
(1) CMS when the agency furnishes FFP IN EXPENDITURES FOR DETER-
information to, or requests informa- MINING ELIGIBILITY AND PROVIDING
tion from, any Federal or State agen- SERVICES
cy, except SSA and the Internal Rev-
enue Service as specified in paragraphs § 435.1001 FFP for administration.
(b) (2) and (3), respectively; (a) FFP is available in the necessary
(2) The Commissioner of Social Secu- administrative costs the State incurs
rity when the agency requests informa- in—
tion from SSA; and (1) Determining and redetermining
(3) The Commissioner of Internal Medicaid eligibility and in providing
Revenue when the agency requests in- Medicaid to eligible individuals; and
formation from the Internal Revenue (2) Administering presumptive eligi-
Service. bility.
[52 FR 5977, Feb. 27, 1987] (b) Administrative costs include any
costs incident to an eye examination or
§ 435.965 Delay of effective date. medical examination to determine
whether an individual is blind or dis-
(a) If the agency submits, by May 29,
abled.
1986, a plan describing a good faith ef-
fort to come into compliance with the [43 FR 45204, Sept. 29, 1978, as amended at 66
requirements of section 1137 of the Act FR 2667, Jan. 11, 2001; 81 FR 86460, Nov. 30,
and of §§ 435.910 and 435.940 through 2016]
435.960 of this subpart, the Secretary
may, after consultation with the Sec- § 435.1002 FFP for services.
retary of Agriculture and the Sec- (a) Except for the limitations and
retary of Labor, grant a delay in the ef- conditions specified in §§ 435.1007,
fective date of §§ 435.910 and 435.940 35.1008, 435.1009, and 438.814 of this chap-
through 435.960, but not beyond Sep- ter, FFP is available in expenditures
tember 30, 1986. for Medicaid services for all bene-
(b) The Secretary may not grant a ficiaries whose coverage is required or
delay of the effective date of section allowed under this part.
1137(c) of the Act, which is imple- (b) FFP is available in expenditures
mented by § 435.955 (a) and (c). (The pro- for services provided to beneficiaries
visions of these statutory and regula- who were eligible for Medicaid in the
tion sections require the agency to fol- month in which the medical care or
low certain procedures before taking services were provided except that, for
any adverse actions based on informa- beneficiaries who establish eligibility
tion from the Internal Revenue Service for Medicaid by deducting incurred
concerning unearned income.) medical expenses from income, FFP is
not available for expenses that are the
Subpart K—Federal Financial beneficiary’s liability. (See §§ 435.915
Participation and 436.901 of this subchapter for regu-
lations on retroactive eligibility for
§ 435.1000 Scope. Medicaid.)
(c) FFP is available in expenditures
This subpart specifies when, and the
for services covered under the plan
extent to which, FFP is available in ex-
that are furnished—
penditures for determining eligibility
and for Medicaid services to individ- (1) During a presumptive eligibility
uals determined eligible under this period to individuals who are deter-
part, and prescribes limitations and mined to be presumptively eligible for
conditions on FFP for those expendi- Medicaid in accordance with subpart L
tures. of this part;
(2) During a period of presumptive
eligibility;
(3) By a provider that is eligible for
payment under the plan; and
199
§ 435.1003 42 CFR Ch. IV (10–1–17 Edition)
(4) Regardless of whether such indi- § 435.1004 Beneficiaries overcoming

viduals file an application for a full eli- certain conditions of eligibility.
gibility determination or are deter- (a) FFP is available, as specified in
mined eligible for Medicaid following paragraph (b) of this section, in ex-
the period of presumptive eligibility. penditures for services provided to
[43 FR 45204, Sept. 29, 1978, as amended at 44 beneficiaries who are overcoming cer-
FR 17939, Mar. 23, 1979; 66 FR 2667, Jan. 11, tain eligibility conditions, including
2001; 67 FR 41095, June 14, 2002; 71 FR 39225, blindness, disability, continued ab-
July 12, 2006; 77 FR 17212, Mar. 23, 2012; 81 FR sence or incapacity of a parent, or un-
86460, Nov. 30, 2016] employment of a parent.
(b) FFP is available for a period not
§ 435.1003 FFP for redeterminations. to exceed—
(a) If the Social Security Administra- (1) The period during which a recipi-
tion (SSA) notifies an agency that a ent of SSI or an optional State supple-
beneficiary has been determined ineli- ment continues to receive cash pay-
gible for SSI, FFP is available in Med- ments while these conditions are being
icaid expenditures for services to the overcome; or
beneficiary as follows: (2) For beneficiaries, eligible for Med-
(1) If the agency receives the SSA no- icaid only and recipients of SSI or an
tice by the 10th day of the month, FFP optional State supplement who do not
is available under this section only continue to receive cash payments, the
through the end of the month unless second month following the month in
the beneficiary requests a hearing which the beneficiary’s Medicaid cov-
under subpart E, part 431 of this sub- erage will have been terminated.
chapter. [43 FR 45204, Sept. 29, 1978, as amended at 45
(2) If the agency receives the SSA no- FR 24887, Apr. 11, 1980; 81 FR 86460, Nov. 30,
tice after the 10th day of the month, 2016]
FFP is available only through the end
of the following month, unless the ben- LIMITATIONS ON FFP
eficiary requests a hearing under sub- § 435.1005 Beneficiaries in institutions
part E, part 431 of this subchapter. eligible under a special income
(3) If a beneficiary requests a hear- standard.
ing, FFP is available as specified in For beneficiaries in institutions
subpart E, part 431 of this subchapter. whose Medicaid eligibility is based on a
(b) The agency must take prompt ac- special income standard established
tion to determine eligibility after re- under § 435.236, FFP is available in ex-
ceiving the SSA notice. penditures for services provided to
(c) When a change in Federal law af- those individuals only if their income
fects the eligibility of substantial num- before deductions, as determined by
bers of Medicaid beneficiaries, the Sec- SSI budget methodology, does not ex-
retary may waive the otherwise appli- ceed 300 percent of the SSI benefit
cable FFP requirements and redeter- amount payable under section 1611(b)(1)
mination time limits of this section, in of the Act to an individual in his own
order to provide a reasonable time to home who has no income or resources.
complete such redeterminations. The [58 FR 4933, Jan. 19, 1993]
Secretary will designate an additional
amount of time beyond that allowed § 435.1006 Beneficiaries of optional
under paragraphs (a) and (b) of this sec- State supplements only.
tion, within which FFP will be avail- FFP is available in expenditures for
able, to perform large numbers of rede- services provided to individuals receiv-
terminations arising from a change in ing optional State supplements but not
Federal law. receiving SSI, if their income before
[43 FR 45204, Sept. 29, 1978, as amended at 44 deductions, as determined by SSI budg-
FR 17939, Mar. 23, 1979; 62 FR 1685, Jan. 13, et methodology, does not exceed 300
1997] percent of the SSI benefit amount pay-
able under section 1611(b)(1) of the Act
200
to an individual who has no income and would ordinarily be paid to a family of

resources. two without income or resources may
[45 FR 24887, Apr. 11, 1980]
use an amount based upon a reasonable
relationship to such an AFDC standard
§ 435.1007 Categorically needy, medi- for a family of two.
cally needy, and qualified Medicare (e) FFP is not available in expendi-
beneficiaries. tures for services provided to categori-
(a) FFP is available in expenditures cally needy and medically needy bene-
for covered services provided to cat- ficiaries subject to the FFP limits if
egorically needy beneficiaries, medi- their annual income, after the cash as-
cally needy beneficiaries, and qualified sistance income deductions and any in-
Medicare beneficiaries, subject to the come disregards in the State plan au-
restrictions contained in subpart K of thorized under section 1902(r)(2) of the
this part and as provided in paragraphs Act are applied, exceeds the 1331⁄3 per-
(b) and (e) of this section. However, the cent limitation described under para-
restrictions listed in paragraphs (b) graphs (b), (c), and (d) of this section.
and (e) of this section do not apply to (f) A State may use the less restric-
expenditures for medical assistance tive income methodologies included
made on behalf of qualified Medicare under its State plan as authorized
beneficiaries under section 1905(p) of under § 435.601 in determining whether
the Act; individuals receiving Medicaid a family’s income exceeds the limita-
as categorically needy under section tion described in paragraph (b) of this
1902(a)(10)(A)(i) (I), (II), (III), (IV), (V), section.
(VI), or (VII) and section
1902(a)(10)(A)(ii) (I), (IX), or (X) and
FR 2321, 2667, Jan. 11, 2001]
section 1905(u) of the Act; individuals
who are eligible to receive benefits (or § 435.1008 FFP in expenditures for
would be eligible for those benefits if medical assistance for individuals
they were not in a medical institution); who have declared citizenship or
and any individuals deemed to be mem- nationality or satisfactory immigra-
bers of the groups identified in this tion status.
sentence. (a) This section implements sections
(b) Except as provided in paragraphs 1137 and 1902(a)(46)(B) of the Act.
(c) and (d) of this section, FFP is not (b) Except as provided in paragraph
available in State expenditures for in- (c) of this section, FFP is not available
dividuals (including the medically to a State for expenditures for medical
needy) whose annual income after de- assistance furnished to individuals un-
ductions specified in § 435.831(a) and (c) less the State has verified citizenship
exceeds the following amounts, round- or immigration status in accordance
ed to the next higher multiple of $100. with § 435.956.
(c) In the case of a family consisting
(c) FFP is available to States for oth-
only of two individuals, both of whom
erwise eligible individuals whose dec-
are adults and at least one of whom is
laration of U.S. citizenship or satisfac-
aged, blind, or disabled, the State of
tory immigration status in accordance
California may use the amount of the
with section 1137(d) of the Act and
AFDC payment most frequently made
§ 435.406(c) has been verified in accord-
to a family of one adult and two chil-
ance with § 435.956, who are exempt
dren for purposes of computing the
from the requirements to verify citi-
1331⁄3 percent limitation (under the au-
zenship under § 435.406(a)(1)(iii), or for
thority of section 4106 of Public Law
whom benefits are provided during a
100–230).
reasonable opportunity period to verify
(d) For purposes of paragraph (b)(1) of
citizenship, nationality, or satisfactory
this section, a State that as of June 1,
immigration status in accordance with
1989, has in its State plan (as defined in
section § 435.956(b), including the time
section 2373(c)(5) of Public Law 98–369
period during which an appeal is pend-
as amended by section 9 of Public Law

ing if the State has elected the option
100–93) an amount for individuals that
under § 435.956(b)(3).
was reasonably related to 1331⁄3 percent
of the highest amount of AFDC which [81 FR 86460, Nov. 30, 2016]
201
§ 435.1009 42 CFR Ch. IV (10–1–17 Edition)
§ 435.1009 Institutionalized individ- The term does not include detention fa-
uals. cilities, forestry camps, training
(a) FFP is not available in expendi- schools or any other facility operated
tures for services provided to— primarily for the detention of children
(1) Individuals who are inmates of who are determined to be delinquent.
public institutions as defined in In an institution refers to an indi-
§ 435.1010; or vidual who is admitted to live there
(2) Individuals under age 65 who are and receive treatment or services pro-
patients in an institution for mental vided there that are appropriate to his
diseases unless they are under age 22 requirements.
and are receiving inpatient psychiatric Inmate of a public institution means a
services under § 440.160 of this sub- person who is living in a public institu-
chapter. tion. An individual is not considered an
(b) The exclusion of FFP described in inmate if—
paragraph (a) of this section does not (a) He is in a public educational or
apply during that part of the month in vocational training institution for pur-
which the individual is not an inmate poses of securing education or voca-
of a public institution or a patient in tional training; or
an institution for tuberculosis or men- (b) He is in a public institution for a
tal diseases. temporary period pending other ar-
(c) An individual on conditional re-
rangements appropriate to his needs.
lease or convalescent leave from an in-
stitution for mental diseases is not Inpatient means a patient who has
considered to be a patient in that insti- been admitted to a medical institution
tution. However, such an individual as an inpatient on recommendation of
who is under age 22 and has been re- a physician or dentist and who—
ceiving inpatient psychiatric services (1) Receives room, board and profes-
under § 440.160 of this subchapter is con- sional services in the institution for a
sidered to be a patient in the institu- 24 hour period or longer, or
tion until he is unconditionally re- (2) Is expected by the institution to
leased or, if earlier, the date he reaches receive room, board and professional
age 22. services in the institution for a 24 hour
period or longer even though it later
develops that the patient dies, is dis-
FR 13199, Apr. 3, 1985; 50 FR 38811, Sept. 25,
1985. Redesignated and amended at 71 FR charged or is transferred to another fa-
39225, July 12, 2006] cility and does not actually stay in the
institution for 24 hours.
§ 435.1010 Definitions relating to insti- Institution means an establishment
tutional status. that furnishes (in single or multiple fa-
For purposes of FFP, the following cilities) food, shelter, and some treat-
definitions apply: ment or services to four or more per-
Active treatment in intermediate care sons unrelated to the proprietor.
facilities for individuals with intellectual Institution for mental diseases means a
disabilities means treatment that meets hospital, nursing facility, or other in-
the requirements specified in the stitution of more than 16 beds that is
standard concerning active treatment primarily engaged in providing diag-
for intermediate care facilities for per- nosis, treatment or care of persons
sons with Intellectual Disability under with mental diseases, including med-
§ 483.440(a) of this subchapter. ical attention, nursing care and related
Child-care institution means a non- services. Whether an institution is an
profit private child-care institution, or institution for mental diseases is deter-
a public child-care institution that ac- mined by its overall character as that
commodates no more than twenty-five of a facility established and main-
children, which is licensed by the State tained primarily for the care and treat-
in which it is situated, or has been ap- ment of individuals with mental dis-
proved by the agency of the State re- eases, whether or not it is licensed as
sponsible for licensing or approval of such. An institution for Individuals
institutions of this type, as meeting with Intellectual Disabilities is not an
the standards established for licensing. institution for mental diseases.
202
Institution for Individuals with Intellec- tient remains in the facility past mid-
tual Disabilities or persons with related night.
conditions means an institution (or dis- Patient means an individual who is
tinct part of an institution) that— receiving needed professional services
(a) Is primarily for the diagnosis, that are directed by a licensed practi-
treatment, or rehabilitation of Individ- tioner of the healing arts toward main-
uals with Intellectual Disabilities or tenance, improvement, or protection of
persons with related conditions; and health, or lessening of illness, dis-
(b) Provides, in a protected residen- ability, or pain.
tial setting, ongoing evaluation, plan- Persons with related conditions means
ning, 24-hour supervision, coordination, individuals who have a severe, chronic
and integration of health or rehabilita- disability that meets all of the fol-
tive services to help each individual lowing conditions:
function at his greatest ability. (a) It is attributable to—
Institution for tuberculosis means an (1) Cerebral palsy or epilepsy; or
institution that is primarily engaged (2) Any other condition, other than
in providing diagnosis, treatment, or mental illness, found to be closely re-
care of persons with tuberculosis, in- lated to Intellectual Disability because
cluding medical attention, nursing this condition results in impairment of
care, and related services. Whether an general intellectual functioning or
institution is an institution for tuber- adaptive behavior similar to that of
culosis is determined by its overall mentally retarded persons, and re-
character as that of a facility estab- quires treatment or services similar to
lished and maintained primarily for those required for these persons.
the care and treatment of tuberculosis, (b) It is manifested before the person
whether or not it is licensed as such. reaches age 22.
Medical institution means an institu- (c) It is likely to continue indefi-
tion that— nitely.
(a) Is organized to provide medical (d) It results in substantial func-
care, including nursing and convales- tional limitations in three or more of
cent care; the following areas of major life activ-
(b) Has the necessary professional ity:
personnel, equipment, and facilities to
(1) Self-care.
manage the medical, nursing, and
(2) Understanding and use of lan-
other health needs of patients on a con-
guage.
tinuing basis in accordance with ac-
cepted standards; (3) Learning.
(c) Is authorized under State law to (4) Mobility.
provide medical care; and (5) Self-direction.
(d) Is staffed by professional per- (6) Capacity for independent living.
sonnel who are responsible to the insti- Public institution means an institu-
tution for professional medical and tion that is the responsibility of a gov-
nursing services. The services must in- ernmental unit or over which a govern-
clude adequate and continual medical mental unit exercises administrative
care and supervision by a physician; control. The term ‘‘public institution’’
registered nurse or licensed practical does not include—
nurse supervision and services and (a) A medical institution as defined
nurses’ aid services, sufficient to meet in this section;
nursing care needs; and a physician’s (b) An intermediate care facility as
guidance on the professional aspects of defined in §§ 440.140 and 440.150 of this
operating the institution. chapter;
Outpatient means a patient of an or- (c) A publicly operated community
ganized medical facility or distinct residence that serves no more than 16
part of that facility who is expected by residents, as defined in this section; or
the facility to receive, and who does re- (d) A child-care institution as defined
ceive, professional services for less in this section with respect to—
than a 24-hour period regardless of the (1) Children for whom foster care
hour of admission, whether or not a maintenance payments are made under
bed is used or whether or not the pa- title IV-E of the Act; and
203
§ 435.1011 42 CFR Ch. IV (10–1–17 Edition)
(2) Children receiving AFDC—foster effect an agreement with the Secretary

care under title IV-A of the Act. under section 212 of Pub. L. 93–66 (July
Publicly operated community residence 9, 1973) for minimum mandatory State
that serves no more than 16 residents is supplements of the basic SSI benefit.
defined in 20 CFR 416.231(b)(6)(i). A (b) This section does not apply to any
summary of that definition is repeated State that meets the conditions of sec-
here for the information of readers. tion 212(f) of Pub. L. 93–66.
(a) In general, a publicly operated
community residence means— [43 FR 45204, Sept. 29, 1978. Redesignated at
(1) It is publicly operated as defined 71 FR 39225, July 12, 2006]
in 20 CFR 416.231(b)(2).
(2) It is designed or has been changed § 435.1012 Requirement for mainte-
to serve no more than 16 residents and nance of optional State supplement
expenditures.
it is serving no more than 16; and
(3) It provides some services beyond (a) This section applies to States
food and shelter such as social services, that make optional State supplement
help with personal living activities, or payments under section 1616(a) of the
training in socialization and life skills. Act and mandatory supplement pay-
Occasional medical or remedial care ments under section 212(a) of Pub. L.
may also be provided as defined in 45 93–66.
CFR 228.1; and (b) FFP in Medicaid expenditures is
(b) A publicly operated community not available during any period in
residence does not include the fol- which the State does not have in effect
lowing facilities, even though they ac- an agreement with the Secretary under
commodate 16 or fewer residents: section 1618 of the Act to maintain its
(1) Residential facilities located on supplementary payments.
the grounds of, or immediately adja-
cent to, any large institution or mul- [43 FR 45204, Sept. 29, 1978, as amended at 55
tiple purpose complex. FR 48609, Nov. 21, 1990. Redesignated at 71 FR
(2) Educational or vocational train- 39225, July 12, 2006]
ing institutions that primarily provide
an approved, accredited, or recognized FFP FOR PREMIUM ASSISTANCE
program to individuals residing there.
§ 435.1015 FFP for premium assistance
(3) Correctional or holding facilities for plans in the individual market.
for individuals who are prisoners, have
been arrested or detained pending dis- (a) FFP is available for payment of
position of charges, or are held under the costs of insurance premiums on be-
court order as material witnesses or ju- half of an eligible individual for a
veniles. health plan offered in the individual
(4) Hospitals, nursing facilities, and market that provides the individual
intermediate care facilities for individ- with benefits for which the individual
uals with intellectual disabilities. is covered under the State plan, subject
to the following conditions:
FR 28655, July 1, 1982; 47 FR 31532, July 20, (1) The insurer is obligated to pay
1982; 51 FR 19181, May 28, 1986; 52 FR 47934, primary to Medicaid for all health care
Dec. 17, 1987; 53 FR 657, Jan. 11, 1988; 53 FR items and services for which the in-
20495, June 3, 1988; 56 FR 8854, Mar. 1, 1991; 56 surer is legally and contractually re-
FR 23022, May 20, 1991; 59 FR 56233, Nov. 10, sponsible under the individual health
1994. Redesignated at 71 FR 39225, July 12, plan, as required under part 433 subpart
2006]
D of this chapter;
REQUIREMENTS FOR STATE (2) The agency furnishes all benefits
SUPPLEMENTS for which the individual is covered
under the State plan that are not
§ 435.1011 Requirement for mandatory available through the individual health
State supplements. plan;
(a) Except as specified in paragraph (3) The individual does not incur any
(b) of this section, FFP is not available cost sharing charges in excess of any
in Medicaid expenditures in any quar- amounts imposed by the agency under
ter in which the State does not have in subpart A of part 447; and
204
(4) The total cost of purchasing such filed, the day on which a decision is
coverage, including administrative ex- made on that application; or
penditures, the costs of paying all cost (2) In the case of a child on whose be-
sharing charges in excess of the half a Medicaid application has not
amounts imposed by the agency under been filed, the last day of the month
subpart A of part 447, and the costs of following the month in which the de-
providing benefits as required by (a)(2) termination of presumptive eligibility
of this section, must be comparable to was made.
the cost of providing direct coverage Presumptive income standard means
under the State plan. the highest income eligibility standard
(b) A State may not require an indi-
established under the plan that is most
vidual to receive benefits through pre-
likely to be used to establish the reg-
mium assistance under this section,
ular Medicaid eligibility of a child of
and a State must inform an individual
that it is the individual’s choice to re- the age involved.
ceive either direct coverage under the Qualified entity means an entity that
Medicaid State plan or coverage is determined by the State to be capa-
through premium assistance for an in- ble of making determinations of pre-
dividual health plan. A State must re- sumptive eligibility for children, and
quire that an individual who elects pre- that—
mium assistance obtain through the in- (1) Furnishes health care items and
surance coverage all benefits for which services covered under the approved
the insurer is responsible and must plan and is eligible to receive pay-
provide the individual with informa- ments under the approved plan;
tion on how to access any additional (2) Is authorized to determine eligi-
benefits and cost sharing assistance bility of a child to participate in a
not provided by the insurer. Head Start program under the Head
[78 FR 42303, July 15, 2013] Start Act;
(3) Is authorized to determine eligi-
Subpart L—Options for Coverage bility of a child to receive child care
services for which financial assistance
of Special Groups under Pre- is provided under the Child Care and
sumptive Eligibility Development Block Grant Act of 1990;
SOURCE: 66 FR 2667, Jan. 11, 2001, unless bility of an infant or child to receive
otherwise noted.
assistance under the special nutrition
§ 435.1100 Basis for presumptive eligi- program for women, infants, and chil-
bility. dren (WIC) under section 17 of the Child
This subpart implements sections Nutrition Act of 1966;
1920, 1920A, 1920B, 1920C, and (5) Is authorized to determine eligi-
1902(a)(47)(B) of the Act. bility of a child for medical assistance
under the Medicaid State plan, or eligi-
[81 FR 86460, Nov. 30, 2016] bility of a child for child health assist-
§ 435.1101 Definitions related to pre- ance under the State Children’s Health
sumptive eligibility. Insurance Program;
(6) Is an elementary or secondary
For the purposes of this subpart, the
school, as defined in section 14101 of
following definitions apply:
the Elementary and Secondary Edu-
Application means, consistent with
cation Act of 1965 (20 U.S.C. 8801);
the definition at § 435.4, the single
streamlined application adopted by the (7) Is an elementary or secondary
agency under § 435.907(a); and school operated or supported by the
Period of presumptive eligibility means Bureau of Indian Affairs;
a period that begins on the date on (8) Is a State or Tribal child support
which a qualified entity determines enforcement agency;
(9) Is an organization that—
that a child is presumptively eligible

and ends with the earlier of— (i) Provides emergency food and shel-
(1) In the case of a child on whose be- ter under a grant under the Stewart B.
half a Medicaid application has been McKinney Homeless Assistance Act;
205
§ 435.1102 42 CFR Ch. IV (10–1–17 Edition)
(ii) Is a State or Tribal office or enti- (2) Establish procedures to ensure

ty involved in enrollment in the pro- that qualified entities—
gram under title XIX, Part A of title (i) Notify the parent or caretaker of
IV, or title XXI; or the child at the time a determination
(iii) Determines eligibility for any regarding presumptive eligibility is
assistance or benefits provided under made, in writing and orally if appro-
any program of public or assisted hous- priate, of such determination;
ing that receives Federal funds, includ- (ii) Provide the parent or caretaker
ing the program under section 8 or any of the child with a regular Medicaid ap-
other section of the United States plication form;
Housing Act of 1937 (42 U.S.C. 1437) or (iii) Within five working days after
under the Native American Housing the date that the determination is
Assistance and Self Determination Act made, notify the agency that a child is
of 1996 (25 U.S.C. 4101 et seq.); presumptively eligible;
(10) Is a health facility operated by (iv) For children determined to be
the Indian Health Service, a Tribe or presumptively eligible, notify the
Tribal organization under the Indian child’s parent or caretaker at the time
Self Determination and Education As-
the determination is made, in writing
sistance Act (25 U.S.C. 450 et seq.), or an
and orally if appropriate, that—
Urban Indian Organization under title
V of the Indian Health Care Improve- (A) If a Medicaid application on be-
ment Act (25 U.S.C. 1651 et seq.). half of the child is not filed by the last
day of the following month, the child’s
(11) Any other entity the State so
presumptive eligibility will end on that
deems, as approved by the Secretary.
last day; and
Services means all services covered
under the plan including EPSDT (see (B) If a Medicaid application on be-
part 440 of this chapter). half of the child is filed by the last day
of the following month, the child’s pre-
[66 FR 2667, Jan. 11, 2001, as amended at 66 sumptive eligibility will end on the day
FR 33822, June 25, 2001; 81 FR 86460, Nov. 30, that a decision is made on the Medicaid
2016] application.
§ 435.1102 Children covered under pre- (v) For children determined not to be
sumptive eligibility. presumptively eligible, notify the
child’s parent or caretaker at the time
(a) The agency may elect to provide the determination is made, in writing
Medicaid services for children under and orally if appropriate—
age 19 or a younger age specified by the
(A) Of the reason for the determina-
State during a presumptive eligibility
tion; and
period following a determination by a
(B) That he or she may file an appli-
qualified entity, on the basis of pre-
liminary information, that the indication for Medicaid on the child’s be-
vidual has gross income (or, at state half with the Medicaid agency; and
option, a reasonable estimate of house- (vi) Do not delegate the authority to
hold income, as defined in § 435.603 of determine presumptive eligibility to
this part, determined using simplified another entity.
methods prescribed by the agency) at (3) Establish oversight mechanisms
or below the income standard estab- to ensure that presumptive eligibility
lished by the State for the age of the determinations are being made con-
child under § 435.118(c) or under § 435.229 sistent with the statute and regula-
if applicable and higher. tions.
(b) If the agency elects to provide (c) The agency must adopt reasonable
services to children during a period of standards regarding the number of pe-
presumptive eligibility, the agency riods of presumptive eligibility that
must— will be authorized for a child in a given
(1) Provide qualified entities with ap- time frame.
(d) The agency—
plication forms for Medicaid and infor-

mation on how to assist parents, care- (1) May require, for purposes of mak-
takers and other persons in completing ing a presumptive eligibility deter-
and filing such forms; mination under this section, that the
206
individual has attested to being, or an- (c)(1) The terms of §§ 435.1101 and
other person who attests to having rea- 435.1102 apply to individuals who may
sonable knowledge of the individual’s be eligible under § 435.213 of this part
status has attested to the individual (relating to individuals with breast or
being, a— cervical cancer) or § 435.214 of this part
(i) Citizen or national of the United (relating to eligibility for limited fam-
States or in satisfactory immigration ily planning benefits) such that the
status; or agency may provide Medicaid during a
(ii) Resident of the State; and presumptive eligibility period fol-
(2) May not— lowing a determination by a qualified
(i) Impose other conditions for pre- entity described in paragraph (c)(2) of
sumptive eligibility not specified in this section that—
this section; or (i) The individual meets the eligi-
(ii) Require verification of the condi-
bility requirements of § 435.213; or
tions for presumptive eligibility.
(e) Notice and fair hearing regula- (ii) The individual meets the eligi-
tions in subpart E of part 431 of this bility requirements of § 435.214, except
chapter do not apply to determinations that coverage provided during a pre-
of presumptive eligibility under this sumptive eligibility period to such in-
section. dividuals is limited to the services de-
scribed in § 435.214(d).
[43 FR 45204, Sept. 29, 1978, as amended at 77 (2) Qualified entities described in this
FR 17212, Mar. 23, 2012; 78 FR 42304, July 15,
2013]
paragraph include qualified entities
which participate as providers under
§ 435.1103 Presumptive eligibility for the State plan and which the agency
other individuals. determines are capable of making pre-
(a) The terms of §§ 435.1101 and sumptive eligibility determinations.
435.1102 apply to pregnant women such [78 FR 42304, July 15, 2013]
that the agency may provide Medicaid
to pregnant women during a presump- § 435.1110 Presumptive eligibility de-
tive eligibility period following a determined by hospitals.
termination by a qualified entity that
(a) Basic rule. The agency must pro-
the pregnant woman has income at or
vide Medicaid during a presumptive eli-
below the income standard established
gibility period to individuals who are
by the State under § 435.116(c), except
determined by a qualified hospital, on
that coverage of services provided to
the basis of preliminary information,
such women is limited to ambulatory
to be presumptively eligible subject to
prenatal care and the number of pre-
the same requirements as apply to the
sumptive eligibility periods that may
State options under §§ 435.1102 and
be authorized for pregnant women is
435.1103, but regardless of whether the
one per pregnancy.
(b) If the agency provides Medicaid agency provides Medicaid during a pre-
during a presumptive eligibility period sumptive eligibility period under such
to children under § 435.1102 or to preg- sections.
nant women under paragraph (a) of this (b) Qualified hospitals. A qualified
section, the agency may also apply the hospital is a hospital that—
terms of §§ 435.1101 and 435.1102 to the (1) Participates as a provider under
individuals described in one or more of the State plan or a demonstration
the following sections of this part, under section 1115 of the Act, notifies
based on the income standard estab- the agency of its election to make pre-
lished by the state for such individuals sumptive eligibility determinations
and providing the benefits covered under this section, and agrees to make
under that section: §§ 435.110 (parents presumptive eligibility determinations
and caretaker relatives), 435.119 (indi- consistent with State policies and pro-
viduals aged 19 or older and under age cedures;
65), 435.150 (former foster care chil- (2) At State option, assists individ-
dren), and 435.218 (individuals under uals in completing and submitting the
age 65 with income above 133 percent full application and understanding any
FPL). documentation requirements; and
207
§ 435.1200 42 CFR Ch. IV (10–1–17 Edition)
(3) Has not been disqualified by the § 435.1200 Medicaid agency respon-
agency in accordance with paragraph sibilities for a coordinated eligi-
(d) of this section. bility and enrollment process with
(c) State options for bases of presump- other insurance affordability pro-
grams.
tive eligibility. The agency may—
(1) Limit the determinations of pre- (a) Statutory basis, purpose, and defini-
sumptive eligibility which hospitals tions.
may elect to make under this section (1) Statutory basis and purpose. This
to determinations based on income for section implements section 1943(b)(3) of
all of the populations described in the Act as added by section 2201 of the
§§ 435.1102 and 435.1103; or Affordable Care Act to ensure coordi-
nated eligibility and enrollment among
(2) Permit hospitals to elect to make
insurance affordability programs.
presumptive eligibility determinations
(2) Definitions. (i) Combined eligibility
on additional bases approved under the
notice has the meaning as provided in
State plan or an 1115 demonstration.
§ 435.4.
(d) Disqualification of hospitals. (1) The
(ii) Coordinated content has the mean-
agency may establish standards for
ing as provided in § 435.4.
qualified hospitals related to the pro-
(iii) Joint fair hearing request has the
portion of individuals determined pre-
meaning provided in § 431.201 of this
sumptively eligible for Medicaid by the chapter.
hospital who:
(b) General requirements and defini-
(i) Submit a regular application, as tions. The State Medicaid agency
described in § 435.907, before the end of must—
the presumptive eligibility period; or (1) Fulfill the responsibilities set
(ii) Are determined eligible for Med- forth in paragraphs (d) through (h) of
icaid by the agency based on such ap- this section and, if applicable, para-
plication. graph (c) of this section.
(2) The agency must take action, in- (2) Certify for the Exchange and
cluding, but not limited to, disquali- other insurance affordability programs
fication of a hospital as a qualified hos- the criteria applied in determining
pital under this section, if the agency Medicaid eligibility.
determines that the hospital is not— (3) Enter into and, upon request, pro-
(i) Making, or is not capable of mak- vide to the Secretary one or more
ing, presumptive eligibility determina- agreements with the Exchange, Ex-
tions in accordance with applicable change appeals entity and the agencies
state policies and procedures; or administering other insurance afford-
(ii) Meeting the standard or stand- ability programs as are necessary to
ards established by the agency under fulfill the requirements of this section,
paragraph (d)(1) of this section. including a clear delineation of the re-
(3) The agency may disqualify a hos- sponsibilities of each program to—
pital as a qualified hospital under this (i) Minimize burden on individuals
paragraph only after it has provided seeking to obtain or renew eligibility
the hospital with additional training or or to appeal a determination of eligi-
bility for enrollment in a QHP or for
taken other reasonable corrective ac-
one or more insurance affordability
tion measures to address the issue.
program;
[78 FR 42304, July 15, 2013] (ii) Ensure compliance with para-
graphs (d) through (h) of this section
Subpart M—Coordination of Eligi- and, if applicable, paragraph (c) of this
bility and Enrollment Between section;
(iii) Ensure prompt determinations of
Medicaid, CHIP, Exchanges eligibility and enrollment in the appro-
and Other Insurance Afford- priate program without undue delay,
ability Programs
consistent with timeliness standards

established under § 435.912, based on the
SOURCE: 77 FR 17212, Mar. 23, 2012, unless date the application is submitted to
otherwise noted. any insurance affordability program;
208
(iv) Provide for a combined eligi- (1) Accept, via secure electronic
bility notice and opportunity to submit interface, the electronic account for
a joint fair hearing request, consistent the individual and notify such program
with paragraphs (g) and (h) of this sec- of the receipt of the electronic ac-
tion; and count;
(v) If the agency has delegated au- (2) Not request information or docu-
thority to conduct fair hearings to the mentation from the individual in the
Exchange or Exchange appeals entity individual’s electronic account, or pro-
under § 431.10(c)(1)(ii) of this chapter, vided to the agency by another insur-
provide for a combined appeals decision ance affordability program or appeals
by the Exchange or Exchange appeals entity;
entity for individuals who requested an (3) Promptly and without undue
appeal of an Exchange-related deter- delay, consistent with timeliness
mination in accordance with 45 CFR standards established under § 435.912,
part155 subpart F and a fair hearing of determine the Medicaid eligibility of
a denial of Medicaid eligibility which is the individual, in accordance with
conducted by the Exchange or Ex- § 435.911, without requiring submission
change appeals entity. of another application and, for individ-
(c) Provision of Medicaid for individuals determined not eligible for Med-
uals found eligible for Medicaid by an- icaid, comply with paragraph (e) of this
other insurance affordability program. If section as if the individual had sub-
the agency has entered into an agree- mitted an application to the agency;
ment in accordance with § 431.10(d) of
(4) Accept any finding relating to a
this chapter under which the Exchange
criterion of eligibility made by such
or other insurance affordability pro-
program or appeals entity, without fur-
gram makes final determinations of
ther verification, if such finding was
Medicaid eligibility, for each indi-
made in accordance with policies and
vidual determined so eligible by the
procedures which are the same as those
Exchange (including as a result of a de-
applied by the agency or approved by it
cision made by the Exchange or Ex-
in the agreement described in para-
change appeals entity in accordance
with paragraph (g)(6) or (7)(i)(A) of this graph (b)(3) of this section; and
section) or other program, the agency (5) Notify such program of the final
must— determination of the individual’s eligi-
(1) Establish procedures to receive, bility or ineligibility for Medicaid.
via secure electronic interface, the (e) Evaluation of eligibility for other in-
electronic account containing the de- surance affordability programs—(1) Indi-
termination of Medicaid eligibility; viduals determined not eligible for Med-
(2) Comply with the provisions of icaid. For each individual who submits
§ 435.911 of this part to the same extent an application or renewal to the agen-
as if the application had been sub- cy which includes sufficient informa-
mitted to the Medicaid agency; and tion to determine Medicaid eligibility,
(3) Comply with the provisions of or whose eligibility is being renewed in
§ 431.10 of this subchapter to ensure it accordance to a change in cir-
maintains oversight for the Medicaid cumstance in accordance with
program. § 435.916(d), and whom the agency deter-
(d) Transfer from other insurance af- mines is not eligible for Medicaid, and
fordability programs to the State Medicaid for each individual determined ineli-
agency. For individuals for whom an- gible for Medicaid in accordance with a
other insurance affordability program fair hearing under subpart E of part 431
has not made a determination of Med- of this chapter, the agency must
icaid eligibility, but who have been as- promptly and without undue delay,
sessed by such program (including as a consistent with timeliness standards
result of a decision made by the Ex- established under § 435.912, determine
change appeals entity) as potentially potential eligibility for, and, as appro-
Medicaid eligible, and for individuals priate, transfer via a secure electronic
not so assessed, but who otherwise re- interface the individual’s electronic ac-
quest a full determination by the Med- count to, other insurance affordability
icaid agency, the agency must— programs.
209
§ 435.1200 42 CFR Ch. IV (10–1–17 Edition)
(2) Individuals undergoing a Medicaid (g) Coordination involving appeals enti-

eligibility determination on a basis other ties. The agency must—
than MAGI. In the case of an individual (1) Include in the agreement into
with household income greater than which the agency has entered under
the applicable MAGI standard and for paragraph (b)(3) of this section that, if
whom the agency is determining eligi- the Exchange or other insurance af-
bility in accordance with § 435.911(c)(2) fordability program provides an appli-
of this part, the agency must promptly cant or beneficiary with a combined
and without undue delay, consistent eligibility notice including a deter-
with timeliness standards established mination that the individual is not eli-
under § 435.912 of this part, determine gible for Medicaid, the Exchange or Ex-
potential eligibility for, and as appro- change appeals entity (or other insur-
priate transfer via secure electronic ance affordability program or other
interface the individual’s electronic ac- program’s appeals entity) will—
count to, other insurance affordability (i) Provide the applicant or bene-
programs and provide timely notice to ficiary with an opportunity to submit a
such other program— joint fair hearing request, including an
(i) That the individual is not Med- opportunity to a request expedited re-
icaid eligible on the basis of the appli- view of his or her fair hearing request
cable MAGI standard, but that a final consistent with § 431.221(a)(1)(ii) of this
determination of Medicaid eligibility is chapter; and
still pending; and (ii) Notify the Medicaid agency of
(ii) Of the agency’s final determina- any joint fair hearing request and
tion of eligibility or ineligibility for transmit to the agency the electronic
Medicaid. account of the individual who made
such request, unless the fair hearing
(3) The agency may enter into an
will be conducted by the Exchange or
agreement with the Exchange to make
Exchange appeals entity in accordance
determinations of eligibility for enroll-
to a delegation of authority under
ment in a QHP through the Exchange,
§ 431.10(c)(1)(ii) of this chapter; and
advance payments of the premium tax
(2) Beginning on the applicability
credit and cost-sharing reductions, date described in paragraph (i) of this
consistent with 45 CFR 155.110(a)(2). section, establish a secure electronic
(f) Internet Web site. (1) The State interface the through which—
Medicaid agency must make available (i) The Exchange or Exchange ap-
to current and prospective Medicaid peals entity (or other insurance afford-
applicants and beneficiaries a Web site ability program or appeals entity) can
that— notify the agency that an individual
(i) Operates in conjunction with or is has submitted a joint fair hearing re-
linked to the Web site described in quest in accordance with paragraph
§ 457.340(a) of this subchapter and to the (g)(1)(ii) of this section;
Web site established by the Exchange (ii) The individual’s electronic ac-
under 45 CFR 155.205; and count, including any information pro-
(ii) Supports applicant and bene- vided by the individual as part of an
ficiary activities, including accessing appeal to either the agency or Ex-
information on the insurance afford- change appeals entity (or other insur-
ability programs available in the ance affordability program or appeals
State, applying for and renewing cov- entity), can be transferred from one
erage, and other activities as appro- program or appeals entity to the other;
priate. and
(2) Such Web site, any interactive ki- (iii) The agency can notify the Ex-
osks and other information systems es- change, Exchange appeals entity (or
tablished by the State to support Med- other insurance affordability program
icaid information and enrollment ac- or appeals entity) of the information
tivities must be in plain language and described in paragraphs (g)(5)(i)(A), (B)
be accessible to individuals with dis- and (C) of this section.

abilities and persons who are limited (3) Accept and act on a joint fair
English proficient, consistent with hearing request submitted to the Ex-
§ 435.905(b) of this subpart. change or Exchange appeals entity and
210
transferred to the agency as if the re- entity and comply with paragraph (c)
quest for fair hearing had been sub- of this section in the same manner as if
mitted directly to the agency in ac- the determination of Medicaid eligi-
cordance with § 431.221 of this chapter; bility had been made by the Exchange.
(4) In conducting a fair hearing in ac- (ii) Individuals described in this para-
cordance with subpart E or part 431 of graph are individuals who were deter-
this chapter, minimize to the max- mined ineligible for Medicaid by the
imum extent possible, consistent with Exchange in accordance with 45 CFR
guidance issued by the Secretary, any 155.305(c), who did not request a fair
requests for information or documenta- hearing of such determination, and
tion from the individual included in whom the Exchange appeals entity de-
the individual’s electronic account or termines are eligible for Medicaid in
provided to the agency by the Ex- deciding an appeal requested by the in-
change or Exchange appeals entity. dividual in accordance with 45 CFR
(5)(i) In the case of individuals depart 155 subpart F.
scribed in paragraph (g)(5)(ii) of this (7)(i) In the case of individuals de-
section who submit a request a fair scribed in paragraph (g)(7)(ii) of this
hearing under subpart E of part 431 of section, the agency must either—
this chapter to the agency or who sub- (A) Accept a determination of Med-
mit a joint fair hearing request to the icaid eligibility made by the Exchange
Exchange or Exchange appeals entity
appeals entity and comply with para-
(or other insurance affordability pro-
graph (c) of this section in the same
gram or appeals entity), if the fair
manner as if the determination of Med-
hearing is conducted by the Medicaid
icaid eligibility had been made by the
agency, transmit, through the elec-
Exchange; or
tronic interface established under
paragraph (g)(1) of this section, to the (B) Accept a determination of Med-
Exchange, Exchange appeals entity (or icaid eligibility made by the Exchange
other insurance affordability program appeals entity as an assessment of
or appeals entity), as appropriate and Medicaid eligibility made by the Ex-
necessary to enable such other entity change and make a determination of
to fulfill its responsibilities under 45 eligibility in accordance with para-
CFR part 155, 42 CFR part 457 or 42 CFR graph (d) of this section, taking into
part 600— account any additional information
(A) Notice that the individual has re- provided to or obtained by the Ex-
quested a fair hearing; change appeals entity in conducting
(B) Whether Medicaid benefits will be the Exchange-related appeal.
furnished pending final administrative (ii) Individuals described in this para-
action on such fair hearing request in graph are individuals who were deter-
accordance with § 431.230 or § 431.231 of mined ineligible for Medicaid by the
this chapter; and Medicaid agency in accordance with
(C) The hearing decision made by the paragraph (e) of the section, who did
agency. not request a fair hearing of such de-
(ii) Individuals described in this para- termination of Medicaid ineligibility,
graph include individuals determined and whom the Exchange appeals entity
ineligible for Medicaid— determines are eligible for Medicaid in
(A) By the Exchange; or deciding an appeal requested by the in-
(B) By the agency and transferred to dividual in accordance with 45 CFR
the Exchange or other insurance af- part 155 subpart F.
fordability program in accordance with (h) Coordination of eligibility notices.
paragraph (e)(1) or (2) of this section. The agency must—
(6)(i) In the case of individuals de- (1) Include in the agreement into
scribed in paragraph (g)(6)(ii) of this which the agency has entered under
section, if the agency has delegated au- paragraph (b)(3) of this section that, to
thority under § 431.10(c)(1)(i) to the Ex- the maximum extent feasible, the
change to make Medicaid eligibility agency, Exchange or other insurance

determinations, the agency must ac- affordability program will provide a
cept a determination of Medicaid eligi- combined eligibility notice, as defined
bility made by the Exchange appeals in § 435.4, to individuals, as well as to
211
§ 435.1205 42 CFR Ch. IV (10–1–17 Edition)
multiple members of the same house- months from the date of a published
hold included on the same application FEDERAL REGISTER document alerting
or renewal form. States of the requirement to comply
(2) For individuals and other house- with paragraphs (g)(2) of this section
hold members who will not receive a and §§ 431.221(a)(1)(i), 431.244(f)(3)(i) and
combined eligibility notice, include ap- (ii) of this chapter. The earliest we will
propriate coordinated content, as de- publish such notice will be May 30,
fined in § 435.4, in any notice provided 2017, which would result in an earliest
by the agency in accordance with effective date of November 30, 2017.
§ 435.917. [77 FR 17212, Mar. 23, 2012, as amended at 81
(3) For individuals determined ineli- FR 86461, Nov. 30, 2016]
gible for Medicaid based on having
household income above the applicable § 435.1205 Alignment with exchange
MAGI standard, but who are under- initial open enrollment period.
going a Medicaid eligibility determina- (a) Definitions. For purposes of this
tion on a basis other than MAGI in ac- section—
cordance with (e)(2) of this section, the Eligibility based on MAGI means Med-
agency must— icaid eligibility based on the eligibility
(i) Provide notice to the individual, requirements which will be effective
consistent with § 435.917— under the State plan, or waiver of such
(A) That the agency— plan, as of January 1, 2014, consistent
(1) Has determined the individual in- with §§ 435.110 through 435.119, 435.218
eligible for Medicaid due to household and 435.603.
income over the applicable MAGI (b) Medicaid agency responsibilities to
standard; and achieve coordinated open enrollment. For
(2) Is continuing to evaluate Med- the period beginning October 1, 2013
icaid eligibility on other bases, includ- through December 31, 2013, the agency
ing a plain language explanation of the must
other bases being considered. (1) Accept all of the following:
(B) Include in such notice coordi- (i) The single streamlined application
nated content that the agency has described in § 435.907.
transferred the individual’s electronic (ii) Via secure electronic interface,
account to the other insurance afford- an electronic account transferred from
ability program (as required under another insurance affordability pro-
paragraph (e)(2) of this section) and an gram.
explanation that eligibility for or en- (2) For eligibility based on MAGI,
rollment in such other program will comply with the terms of § 435.1200 of
not affect the determination of Med- this part, such that—
icaid eligibility on a non-MAGI basis; (i) For each electronic account trans-
and ferred to the agency under paragraph
(i) Provide the individual with no- (c)(1)(ii) of this section, the agency
tice, consistent with § 435.917, of the consistent with either of the following:
final determination of eligibility on all (A) Section 435.1200(c), accepts a de-
bases, including coordinated content termination of Medicaid eligibility
regarding, as applicable— based on MAGI, made by another insur-
(A) The notice being provided to the ance affordability program.
Exchange or other program in accord- (B) Section 435.1200(d), determines
ance with paragraph (e)(2)(ii) of this eligibility for Medicaid based on MAGI.
section; (ii) Consistent with § 435.1200(e), for
(B) Any impact that approval of Med- each single streamlined application
icaid eligibility may have on the indi- submitted directly to the agency under
vidual’s eligibility for such other pro- paragraph (b)(1)(i) of this section—
gram; and (A) Determine eligibility based on
(C) The transfer of the individual’s MAGI; and
electronic account to the Exchange in (B) For each individual determined
accordance with paragraph (e)(1) of this not Medicaid eligible based on MAGI,
section. determine potential eligibility for
(i) Notice of applicability date. The other insurance affordability programs,
date described in this paragraph is 6 based on the requirements which will
212
be effective for each program, and information on how to obtain and sub-
transfer the individual’s electronic ac- mit such application.
count to such program via secure elec- [78 FR 42305, July 15, 2013]
tronic interface.
(iii) Provide notice and fair hearing
rights, in accordance with § 435.917 of PART 436—ELIGIBILITY IN GUAM,
this part, part 431 subpart E of this PUERTO RICO, AND THE VIRGIN
chapter, and § 435.1200 for those deter- ISLANDS
mined ineligible for Medicaid.
(3) For each individual determined el- Subpart A—General Provisions and
igible based on MAGI in accordance Definitions
with paragraph (c)(2) of this section— Sec.
(i) Provide notice, including the ef- 436.1 Purpose and applicability.
fective date of eligibility, to such indi- 436.2 Basis.
vidual, consistent with § 435.917 of this 436.3 Definitions and use of terms.
part, and furnish Medicaid. 436.10 State plan requirements.
(ii) Apply the terms of § 435.916 (relat- Subpart B—Mandatory Coverage of the
ing to beneficiary responsibility to in- Categorically Needy
form the agency of any changes in cir-
cumstances that may affect eligibility) 436.100 Scope.
and § 435.952 (regarding use of informa- 436.110 Individuals receiving cash assist-
tion received by the agency). The first ance.
renewal under § 435.916 of this part may, 436.111 Individuals who are not eligible for
cash assistance because of a requirement
at State option, be scheduled to occur
not applicable under Medicaid.
anytime between 12 months from the 436.112 Individuals who would be eligible for
date of application and 12 months from cash assistance except for increased
January 1, 2014. OASDI under Pub. L. 92–336 (July 1, 1972).
(4) For eligibility effective in 2013, for 436.114 Individuals deemed to be receiving
all applicants— AFDC.
(i) Consistent with the requirements 436.116 Families terminated from AFDC be-
cause of increased earnings or hours of
of subpart J of this part, and applying employment.
the eligibility requirements in effect 436.118 Children for whom adoption assist-
under the State plan, or waiver of such ance or foster care maintenance pay-
plan, as of the date the individual sub- ments are made.
mits an application to any insurance 436.120 Qualified pregnant women and chil-
affordability program— dren who are not qualified family mem-
(A) Determine the individual’s eligi- bers.
436.121 Qualified family members.
bility based on the information pro-
436.122 Pregnant women eligible for ex-
vided on the application or in the elec- tended coverage.
tronic account; or 436.124 Newborn children.
(B) Request additional information 436.128 Coverage for certain qualified aliens.
from the individual needed by the
agency to determine eligibility based Subpart C—Options for Coverage as
on the eligibility requirements in ef- Categorically Needy
fect on such date, including on a basis
436.200 Scope.
excepted from application of MAGI- 436.201 Individuals included in optional
based methods, as described in § 435.603, groups.
and determine such eligibility if such
information is provided; and OPTIONS FOR COVERAGE OF FAMILIES AND
(C) Furnish Medicaid to individuals CHILDREN AND AGED, BLIND, AND DISABLED
INDIVIDUALS, INCLUDING PREGNANT WOMEN
determined eligible under this clause
or provide notice and fair hearing 436.210 Individuals who meet the income
rights in accordance with part 431 sub- and resource requirements of the cash as-
part E of this part if eligibility effec- sistance programs.
436.211 Individuals who would be eligible for
tive in 2013 is denied; or cash assistance if they were not in med-

(ii) Notify the individual of the op- ical institutions.
portunity to submit a separate applica- 436.212 Individuals who would be eligible for
tion for coverage effective in 2013 and cash assistance if the State plan for
213
OAA, AFDC, AB, APTD, or AABD were BLINDNESS
as broad as allowed under the Act.
436.530 Definition of blindness.
436.217 Individuals receiving home and com- 436.531 Determination of blindness.
munity-based services.
436.219 Individuals receiving State plan DISABILITY
home and community-based services.
436.540 Definition of disability.
436.220 Individuals who would meet the in-
436.541 Determination of disability.
come and resource requirements under
AFDC if child care costs were paid from
Subpart G—General Financial Eligibility
earnings.
436.222 Individuals under age 21 who meet Requirements and Options
the income and resource requirements of 436.600 Scope.
AFDC. 436.601 Application of financial eligibility
436.224 Individuals under age 21 who are methodologies.
under State adoption assistance agree- 436.602 Financial responsibility of relatives
ments. and other individuals.
436.229 Optional targeted low-income chil- 436.604 [Reserved]
dren. 436.606 [Reserved]
436.608 Applications for other benefits.
OPTIONS FOR COVERAGE OF THE AGED, BLIND, 436.610 Assignment of rights to benefits.
AND DISABLED
436.230 Essential spouses of aged, blind, or Subpart H [Reserved]

disabled individuals receiving cash as-
sistance. Subpart I—Financial Requirements for the
Medically Needy
Subpart D—Optional Coverage of the 436.800 Scope.
Medically Needy
MEDICALLY NEEDY INCOME STANDARD
436.300 Scope.
436.301 General rules. 436.811 Medically needy income standard:
436.308 Medically needy coverage of individ- General requirements.
uals under age 21. 436.814 Medically needy income standard:
436.310 Medically needy coverage of speci- State plan requirements.
fied relatives. MEDICALLY NEEDY INCOME ELIGIBILITY AND
436.320 Medically needy coverage of the LIABILITY FOR PAYMENT OF MEDICAL EX-
aged. PENSES
436.321 Medically needy coverage of the
blind. 436.831 Income eligibility.
436.322 Medically needy coverage of the dis- 436.832 Post-eligibility treatment of income
abled. of institutionalized individuals: Applica-
436.330 Coverage for certain aliens. tion of patient income to the cost of
care.
Subpart E—General Eligibility Requirements MEDICALLY NEEDY RESOURCE STANDARD
436.400 Scope. 436.840 Medically needy resource standard:
436.401 General rules. General requirements.
436.402 [Reserved] 436.843 Medically needy resource standard:
436.403 State residence. State plan requirements.
436.404 Applicant’s choice of category.
DETERMINING ELIGIBILITY ON THE BASIS OF
436.406 Citizenship and alienage.
RESOURCES
436.407 Types of acceptable documentary
evidence of citizenship. 436.845 Medically needy resource eligibility.
436.408 [Reserved]
Subpart J—Eligibility in Guam, Puerto Rico,
Subpart F—Categorical Requirements for and the Virgin Islands
Medicaid Eligibility
436.900 Scope.
436.500 Scope. 436.901 General requirements.
436.909 Automatic entitlement to Medicaid
DEPENDENCY following a determination of eligibility
under other programs.
436.510 Determination of dependency.
AGE Subpart K—Federal Financial Participation

(FFP)
436.520 Age requirements for the aged.
436.522 Determination of age. 436.1000 Scope.
214
FFP FOR EXPENDITURES FOR DETERMINING 402(a)(37) Eligibility of individuals who lose
ELIGIBILITY AND PROVIDING SERVICES AFDC eligibility due to increased earnings.
414(g) Eligibility of certain individuals par-
436.1001 FFP for administration.
ticipating in work supplementation pro-
436.1002 FFP for services.
grams.
436.1003 Beneficiaries overcoming certain
473(b) Eligibility of children in foster care
conditions of eligibility.
and adopted children who are deemed
436.1004 FFP in expenditures for medical as-
AFDC beneficiaries.
sistance for individuals who have de-
1902(a)(8) Opportunity to apply; assistance
clared United States citizenship or na-
must be furnished promptly.
tionality under section 1137(d) of the Act
1902(a)(10) Required and optional groups.
and with respect to whom the State has
1902(a)(12) Determination of blindness.
not documented citizenship and identity.
1902(a)(16) Out-of-State care for State resi-
436.1005 Institutionalized individuals.
dents.
436.1006 Definitions relating to institutional
1902(a)(17) Standards for determining eligi-
status.
bility; flexibility in the application of in-
come eligibility standards.
Subpart L—Option for Coverage of Special 1902(a)(19) Safeguards for simplicity of ad-
Groups ministration and best interests of bene-
436.1100 Basis and scope. ficiaries.
1902(a)(34) Three-month retroactive eligi-
PRESUMPTIVE ELIGIBILITY FOR CHILDREN bility.
1902(a) (second paragraph after (47)) Eligi-
436.1101 Definitions related to presumptive bility despite increased monthly insurance
eligibility for children. benefits under title II.
436.1102 General rules. 1902(a)(55) Mandatory use of outstation loca-
AUTHORITY: Sec. 1102 of the Social Security tions other than welfare offices to receive
Act (42 U.S.C. 1302). and initially process applications of cer-
tain low-income pregnant women, infants,
SOURCE: 43 FR 45218, Sept. 29, 1978, unless and children under age 19.
otherwise noted. 1902(b) Prohibited conditions for eligibility:
Age requirements of more than 65 years;
Subpart A—General Provisions State residence requirements excluding in-
dividuals who reside in the State; and
and Definitions Citizenship requirement excluding United
States citizens.
§ 436.1 Purpose and applicability. 1902(e) Four-month continued eligibility for
This part sets forth, for Guam, Puer- families ineligible because of increased
to Rico, and the Virgin Islands— hours or income from employment.
(a) The eligibility provisions that a 1902(e)(2) Minimum eligibility period for
State plan must contain; beneficiaries enrolled in HMO.
1902(e)(3) Optional coverage of certain dis-
(b) The mandatory and optional abled children at home.
groups of individuals to whom Med- 1902(e)(4) Eligibility of newborn children of
icaid is provided under a State plan; Medicaid-eligible women.
(c) The eligibility requirements and 1902(e)(5) Eligibility of pregnant women for
procedures that a Medicaid agency extended coverage for a specified period
must use in determining and redeter- after pregnancy ends.
mining eligibility, and requirements it 1903(v) Payment for emergency services
under Medicaid provided to aliens.
may not use; and
1905(a) (i)-(viii) List of eligible individuals.
(d) The availability of FFP for pro- 1905(a) (clause following (21)) Prohibitions
viding Medicaid and for administering against providing Medicaid to certain in-
the eligibility provisions of the plan. stitutionalized individuals.
1905(a) (second sentence) Definition f essen-
tial person.
FR 17939, Mar. 23, 1979]
1905(d)(2) Definition of resident of an inter-
mediate care facility for individuals with
§ 436.2 Basis.
intellectual disabilities.
This part implements the following 1905(n) Definition of qualified pregnant
sections of the Act and public laws woman and child.
that state requirements and standards 1912(a) Conditions of eligibility.
for eligibility: 1915(c) Home or community based services.
1915(d) Home and community-based services

402(a)(22) Eligibility of deemed beneficiaries for individuals age 65 or older.
of AFDC who receive zero payments be- 412(e)(5) of Immigration and Nationality
cause of recoupment of overpayments. Act-Eligibility of certain refugees.
215
§ 436.3 42 CFR Ch. IV (10–1–17 Edition)
Pub. L. 93–66, section 230 Deemed eligibility ing cash payments. These optional
of certain essential persons. groups are specified in sections
Pub. L. 93–66, section 231 Deemed eligibility 1902(a)(10)(A)(ii) and 1902(e) of the Act.
of certain persons in medical institutions.
Pub. L. 93–66, section 232 Deemed eligibility Families and children refers to eligible
of certain blind and disabled medically in- members of families with children who
digent persons. are financially eligible under AFDC or
Pub. L. 96–272, section 310(b)(1) Continued medically needy rules and who are de-
eligibility of certain beneficiaries of Vet- prived of parental support or care as
erans Administration pensions. defined under the AFDC program (see
Pub. L. 99–509, section 9406 Payment for
45 CFR 233.90; 233.100). In addition, this
emergency medical services provided to
aliens. group includes individuals under age 21
Pub. L. 99–603, section 201 Aliens granted le- who are not deprived of parental sup-
galized status under section 245A of the port or care but who are financially eli-
Immigration and Nationality Act (8 U.S.C. gible under AFDC or medically needy
1255a) may under certain circumstances be rules (see optional coverage group,
eligible for Medicaid. § 436.222);
Pub. L. 99–603, section 302 Aliens granted le-
Medically needy means families, chil-
galized status under section 210 of the Im-
migration and Nationality Act may under dren, aged, blind, or disabled individ-
certain circumstances be eligible for Med- uals, and pregnant women listed in
icaid (8 U.S.C. 1160). subpart D of this part who are not list-
Pub. L. 99–603, section 303 Aliens granted ed in subparts B and C of this part as
legal status under section 210A of the Im- categorically needy but who may be el-
migration and Nationality Act may under igible for Medicaid under this part be-
certain circumstances be eligible for Med- cause their income and resources are
icaid (8 U.S.C. 1161).
within limits set by the State under its
[52 FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, Medicaid plan (including persons whose
1987, as amended at 55 FR 36820, Sept. 7, 1990; income and resources fall within these
55 FR 48609, Nov. 21, 1990; 57 FR 29155, June limits after their incurred expenses for
30, 1992; 59 FR 48811, Sept. 23, 1994]
medical or remedial care are deducted).
§ 436.3 Definitions and use of terms. (Specific financial requirements for de-
termining eligibility of the medically
As used in this part— needy appear in subpart I of this part.)
AABD means aid to the aged, blind, OAA means old age assistance under
and disabled under title XVI of the Act; title I of the Act;
AB means aid to the blind under title
OASDI means old age, survivors, and
X of the Act;
disability insurance under Title II of
AFDC means aid to families with de-
the Act.
pendent children under title IV-A of
Optional targeted low-income child
the Act;
means a child under age 19 who meets
APTD means aid to the permanently
the financial and categorical standards
and totally disabled under title XIV of
described below.
the Act;
Categorically needy refers to families (1) Financial need. An optional tar-
and children, aged, blind or disabled in- geted low-income child:
dividuals, and pregnant women listed (i) Has a family income at or below
under subparts B and C of this part who 200 percent of the Federal poverty line
are eligible for Medicaid. Subpart B of for a family of the size involved;
this part describes the mandatory eli- (ii) Resides in a State with no Med-
gibility groups who, generally, are re- icaid applicable income level (as de-
ceiving or deemed to be receiving cash fined in § 457.10 of this chapter); or,
assistance under the Act. These man- (iii) Resides in a State that has a
datory groups are specified in sections Medicaid applicable income level (as
1902(a)(10)(A)(i) and 1902(e) of the Act. defined in § 457.10) and has family in-
Subpart C of this part describes the op- come that either:
tional eligibility groups of individuals (A) Exceeds the Medicaid applicable
who, generally, meet the categorical income level for the age of such child,
requirements that are the same as or but not by more than 50 percentage
less restrictive than those of the cash points (expressed as a percentage of the
assistance programs but are not receiv- Federal poverty line); or
216
(B) Does not exceed the income level Subpart B—Mandatory Coverage
specified for such child to be eligible of the Categorically Needy
for medical assistance under the poli-
cies of the State plan under title XIX § 436.100 Scope.
on June 1, 1997.
This subpart prescribes requirements
(2) No other coverage and State mainte- for coverage of categorically needy in-
nance of effort. An optional targeted dividuals.
low-income child is not covered under a
group health plan or health insurance § 436.110 Individuals receiving cash
coverage, or would not be eligible for assistance.
Medicaid under the policies of the
(a) A Medicaid agency must provide
State plan in effect on March 31, 1997; Medicaid to individuals receiving cash
except that, for purposes of this stand- assistance under OAA, AFDC, AB,
ard— APTD, or AABD.
(i) A child shall not be considered to (b) For purposes of this section, an
be covered by health insurance cov- individual is receiving cash assistance
erage based on coverage offered by the if his needs are considered in deter-
State under a program in operation mining the amount of the payment.
prior to July 1, 1997 if that program re- This includes an individual whose pres-
ceived no Federal financial participa- ence in the home is considered essen-
tion; tial to the well-being of a beneficiary
(ii) A child shall not be considered to under the State’s plan for OAA, AFDC,
be covered under a group health plan or AB, APTD, or AABD if that plan were
health insurance coverage if the child as broad as allowed under the Act for
did not have reasonable geographic ac- FFP.
cess to care under that coverage.
(3) For purposes of this section, poli- § 436.111 Individuals who are not eligi-
cies of the State plan under title XIX ble for cash assistance because of a
plan include policies under a Statewide requirement not applicable under
demonstration project under section Medicaid.
1115(a) of the Act other than a dem- (a) The agency must provide Med-
onstration project that covered an ex- icaid to individuals who would be eligi-
panded group of eligible children but ble for OAA, AB, APTD, or AABD ex-
that either— cept for an eligibility requirement used
(i) Did not provide inpatient hospital in those programs that is specifically
coverage; or prohibited under title XIX of the Act.
(ii) Limited eligibility to children (b) The agency also must provide
previously enrolled in Medicaid, im- Medicaid to:
posed premiums as a condition of ini- (1) Individuals denied AFDC solely
tial or continued enrollment, and did because of policies requiring the deem-
not impose a general time limit on eli- ing of income and resources of the fol-
gibility. lowing individuals who are not in-
cluded as financially responsible rel-
[43 FR 45218, Sept. 29, 1978, as amended at 45 atives under section 1902(a)(17)(D) of
FR 24887, Apr. 11, 1980; 46 FR 47989, Sept. 30,
the Act:
1981; 58 FR 4934, Jan. 19, 1993; 66 FR 2668, Jan.
11, 2001] (i) Stepparents who are not legally
liable for support of stepchildren under
§ 436.10 State plan requirements. a State law of general applicability;
(ii) Grandparents
A State plan must—
(iii) Legal guardians;
(a) Provide that the requirements of
this part are met; and (iv) Aliens sponsors who are not orga-
nizations; and
(b) Specify the groups to whom Med-
(v) Siblings.
icaid is provided, as specified in sub-

parts B, C, and D of this part, and the (2) [Reserved]
conditions of eligibility for individuals [58 FR 4934, Jan. 19, 1993, as amended at 59
in those groups. FR 43053, Aug. 22, 1994]
217
§ 436.112 42 CFR Ch. IV (10–1–17 Edition)
§ 436.112 Individuals who would be eli- (1) Participates in a State-operated

gible for cash assistance except for work supplementation program under
increased OASDI under Pub. L. 92– section 414 of the Act; and
336 (July 1, 1972). (2) Would be eligible for an AFDC
The agency must provide Medicaid to cash payment if the individual were
individuals who meet the following not participating in the work sup-
conditions: plementation program.
(a) In August 1972, the individual was (d) The State must deem to be receiv-
entitled to OASDI and— ing AFDC those individuals who are de-
nied AFDC payments from the title IV-
(1) He was receiving cash assistance;
A State agency solely because that
or
agency is recovering an overpayment.
(2) He would have been eligible for (e) The State must deem to be receiv-
cash assistance if he had applied, and ing AFDC individuals described in sec-
the Medicaid plan covered this optional tion 473(a)(1) of the Act—
group; or (1) For whom an adoption assistance
(3) He would have been eligible for agreement is in effect under title IV-E
cash assistance if he were not in a med- of the Act, whether or not adoption as-
ical institution or intermediate care sistance is being provided or an inter-
facility, and the Medicaid plan covered locutory or other judicial decree of
this optional group. adoption has been issued; or
(b) The individual would currently be (2) For whom foster care mainte-
eligible for cash assistance except that nance payments are made under title
the increase in OASDI under Pub. L. IV-E of the Act.
92–336 raised his income over the limit (f) The State must deem an indi-
allowed under the cash assistance pro- vidual to be receiving AFDC if a new
gram. This includes an individual collection or increased collection of
who— child or spousal support under title IV-
(1) Meets all current requirements for D of the Social Security Act results in
cash assistance except for the require- the termination of AFDC eligibility in
ment to file an application; or accordance with section 406(h) of the
(2) Would meet all current require- Social Security Act. States must con-
ments for cash assistance if he were tinue to provide Medicaid for four con-
not in a medical institution or inter- secutive calendar months, beginning
mediate care facility, and the Medicaid with the first month of AFDC ineligi-
plan covers this optional group. bility, to each dependent child and
each relative with whom such a child is
§ 436.114 Individuals deemed to be re- living (including the eligible spouse of
ceiving AFDC. such relative as described in section
406(b) of the Social Security Act) who:
(a) The Medicaid agency must pro- (1) Becomes ineligible for AFDC on or
vide Medicaid to individuals deemed to after August 16, 1984; and
be receiving AFDC, as specified in this (2) Has received AFDC for at least
section. three of the six months immediately
(b) The State must deem individuals preceding the month in which the indi-
to be receiving AFDC who are denied a vidual becomes ineligible for AFDC;
cash payment from the title IV-A State and
agency solely because the amount of (3) Becomes ineligible for AFDC
the AFDC payment would be less than wholly or partly as a result of the initi-
$10. ation of or an increase in the amount
(c) The State may deem participants of a child or spousal support collection
in a work supplementation program to under title IV-D.
be receiving AFDC under section 414(g) (g)(1) Except as provided in para-
of the Act. This section permits States, graph (g)(2) of this section, individuals
for purposes of title XIX, to deem an who are eligible for extended Medicaid
individual and any child or relative of lose this coverage if they move to an-
the individual (or other individual liv- other State during the 4-month period.
ing in the same household) to be re- However, if they move back to and re-
ceiving AFDC, if the individual— establish residence in the State in
218
which they have extended coverage, § 436.116 Families terminated from

they are eligible for any of the months AFDC because of increased earn-
remaining in the 4-month period in ings or hours of employment.
which they are residents of the State. (a) If a family loses AFDC solely be-
(2) If a State has chosen in its State cause of increased income from em-
plan to provide Medicaid to non-resi- ployment or increased hours of employ-
dents, the State may continue to pro- ment, the agency must continue to
vide the 4-month extended benefits to provide Medicaid for 4 months to all
individuals who have moved to another members of the family if—
State. (1) The family received AFDC in any
(h) For purposes of paragraph (f) of 3 or more months during the 6-month
this section: period immediately before the month
(1) The new collection or increased in which it became ineligible for
collection of child or spousal support AFDC; and
results in the termination of AFDC eli- (2) At least one member of the family
gibility when it actively causes or con- is employed throughout the 4-month
tributes to the termination. This oc- period, although this need not be the
curs when: same member for the whole period.
(i) The change in support collection (b) The 4 calendar month period be-
in and of itself is sufficient to cause in- gins on the date AFDC is terminated. If
eligibility. This rule applies even if the AFDC benefits are terminated retro-
support collection must be added to actively, the 4 calendar month period
other, stable income. It also applies also begins retroactively with the first
month in which AFDC was erroneously
even if other independent factors, alone
paid.
or in combination with each other,
might simultaneously cause ineligi- [43 FR 45218, Sept. 29, 1978, as amended at 45
bility; or FR 24887, Apr. 11, 1980]
(ii) The change in support contrib-
§ 436.118 Children for whom adoption
utes to ineligibility but does not by assistance or foster care mainte-
itself cause ineligibility. Ineligibility nance payments are made.
must result when the change in sup-
port is combined with other changes in The agency must provide Medicaid to
income or changes in other cir- children for whom adoption assistance
or foster care maintenance payments
cumstances and the other changes in
are made under title IV-E of the Act.
income or circumstances cannot alone
or in combination result in termi- [47 FR 28656, July 1, 1982]
nation without the change in support.
(2) In cases of increases in the § 436.120 Qualified pregnant women
amounts of both the support collec- and children who are not qualified
family members.
tions and earned income, eligibility
under this section does not preclude (a) The Medicaid agency must pro-
eligibility under 45 CFR 233.20(a)(14) or vide Medicaid to a pregnant woman
section 1925 of the Social Security Act whose pregnancy has been medically
(which was added by section 303(a) of verified and who—
the Family Support Act of 1988 (42 (1) Would be eligible for an AFDC
U.S.C. 1396r–6)). Extended periods re- cash payment (or would be eligible for
sulting from both an increase in the an AFDC cash payment if coverage
amount of the support collection and under the State’s AFDC plan included
the AFDC-unemployed parents pro-
from an increase in earned income
gram) if her child had been born and
must run concurrently.
was living with her in the month of
[46 FR 47989, Sept. 30, 1981, as amended at 52 payment;
FR 43072, Nov. 9, 1987; 52 FR 48438, Dec. 22, (2) Is a member of a family that
1987; 55 FR 48610, Nov. 21, 1990; 59 FR 59377, would be eligible for an AFDC cash
Nov. 17, 1994] payment if the State’s AFDC plan in-
cluded an AFDC-unemployed parents
program; or
219
§ 436.121 42 CFR Ch. IV (10–1–17 Edition)
(3) Meets the income and resource re- § 436.122 Pregnant women eligible for
quirements of the State’s approved extended coverage.
AFDC plan. In determining whether (a) The Medicaid agency must pro-
the woman meets the AFDC income vide categorically needy Medicaid eli-
and resource requirements, the unborn gibility for an extended period fol-
child or children are considered mem- lowing termination of pregnancy to
bers of the household, and the woman’s women who, while pregnant, applied
family is treated as though deprivation for, were eligible for, and received Med-
exists. icaid services on the day that their
(b) The provisions of paragraphs (a) pregnancy ends. This period extends
(1) and (2) of this section are effective from the last day of pregnancy through
October 1, 1984. The provisions of para- the end of the month in which a 60-day
graph (a)(3) of this section are effective period, beginning on the last day of the
July 1, 1986. pregnancy, ends. Eligibility must be
(c) The agency must provide Med- provided, regardless of changes in the
icaid to children who meet all of the woman’s financial circumstances that
following criteria: may occur within this extended period.
(1) They are born after September 30, These pregnant women are eligible for
1983; the extended period for all services
(2) Effective October 1, 1988, they are under the plan that are pregnancy-re-
under age 6 (or if designated by the lated (as defined in § 440.210(c)(1) of this
State, any age that exceeds age 6 but subchapter).
does not exceed age 8), and effective (b) The provisions of paragraph (a) of
October 1, 1989 they are under age 7 (or this section apply to Medicaid fur-
if designated by the State, any age nished on or after April 7, 1986.
that exceeds age 7 but does not exceed [55 FR 48610, Nov. 21, 1990]
age 8); and
(3) They meet the income and re- § 436.124 Newborn children.
source requirements of the State’s ap- (a) The agency must provide Med-
proved AFDC plan. icaid eligibility to a child born to a
[52 FR 43072, Nov. 9, 1987, as amended at 55 woman who has applied for, has been
FR 48610, Nov. 21, 1990; 58 FR 48614, Sept. 17, determined eligible and is receiving
1993] Medicaid on the date of the child’s
birth. The child is deemed to have ap-
§ 436.121 Qualified family members. plied and been found eligible for Med-
(a) Definition. A qualified family mem- icaid on the date of birth and remains
ber is any member of a family, includ- eligible for one year so long as the
ing pregnant women and children eligi- woman remains (or would remain if
ble for Medicaid under § 436.120 of this pregnant) eligible and the child is a
subpart, who would be receiving AFDC member of the woman’s household.
cash benefits on the basis of the unem- This provision applies in instances
ployment of the principal wage earner where the labor and delivery services
under section 407 of the Act had the were furnished prior to the date of ap-
State not chosen to place time limits plication and covered by Medicaid
on those benefits as permitted under based on retroactive eligibility.
section 407(b)(2)(B)(i) of the Act. (b) The agency must provide Med-
(b) State plan requirement. The State icaid eligibility in the same manner de-
plan must provide that the State scribed in paragraph (a) of this section
makes Medicaid available to any indi- to a child born to an otherwise-eligible
vidual who meets the definition of qualified alien woman subject to the 5-
‘‘qualified family member’’ as specified year bar so long as the woman has filed
in paragraph (a) of this section. a complete Medicaid application, in-
cluding but not limited to meeting
(c) Applicability. The provisions in
residency, income and resource re-

this section are applicable from Octo-
quirements, has been determined eligi-
ber 1, 1992, through September 30, 1998.
ble, is receiving Medicaid on the date
[58 FR 48614, Sept. 17, 1993] of the child’s birth, and remains (or
220
would remain if pregnant) Medicaid eli- of this chapter. In determining whether

gible. All standard Medicaid applica- the woman would remain eligible for
tion procedures apply, including timely these services, the State must consider
determination of eligibility and ade- whether the woman would remain eli-
quate notice of the agency’s decision gible if pregnant. This provision ap-
concerning eligibility. A 5-year bar plies in instances where the labor and
qualified alien receiving emergency delivery services were furnished prior
medical services only under § 435.139 of to the date of application and covered
this chapter is considered to be Med- by Medicaid based on retroactive eligi-
icaid-eligible and receiving Medicaid bility.
for purposes of this provision. With re- (d) A redetermination of eligibility
spect to whether the mother remains must be completed on behalf of the
(or would remain if pregnant) eligible children described in this provision in
for Medicaid after the birth of the accordance with the procedures at
child, the State must determine wheth- § 435.916. At that time, the State must
er a 5-year bar qualified alien would re- collect documentary evidence of citi-
main eligible for emergency services zenship and identity as required under
under § 435.139 of this chapter. In deter- § 436.406.
mining whether the woman would re- [52 FR 43073, Nov. 9, 1987; 52 FR 48438, Dec. 22,
main eligible for these services, the 1987, as amended at 72 FR 38694, July 13, 2007]
State must consider whether the
woman would remain eligible if preg- § 436.128 Coverage for certain quali-
nant. This provision applies in in- fied aliens.
stances where the labor and delivery The agency must provide the services
services were furnished prior to the necessary for the treatment of an
date of application and covered by emergency medical condition as de-
Medicaid based on retroactive eligi- fined in § 440.255(c) of this chapter to
bility. those aliens described in § 436.406(c) of
(c) The agency must provide Med- this subpart.
icaid eligibility in the same manner de-
scribed in paragraph (a) of this section [55 FR 36820, Sept. 7, 1990]
to a child born to an otherwise-eligible
non-qualified alien woman so long as Subpart C—Options for Coverage
the woman has filed a complete Med- as Categorically Needy
icaid application (other than providing
a social security number or dem- § 436.200 Scope.
onstrating immigration status), includ- This subpart specifies options for
ing but not limited to meeting resi- coverage of individuals as categorically
dency, income and resource require- needy.
ments, has been determined eligible, is
receiving Medicaid on the date of the § 436.201 Individuals included in op-
child’s birth, and remains (or would re- tional groups.
main if pregnant) Medicaid eligible. All (a) The agency may choose to cover
standard Medicaid application proce- as optional categorically needy any
dures apply, including timely deter- group or groups of the following indi-
mination of eligibility and adequate viduals who are not receiving cash as-
notice of the agency’s decision con- sistance and who meet the appropriate
cerning eligibility. A non-qualified eligibility criteria for groups specified
alien receiving emergency medical in the separate sections of this subpart:
services only under § 435.139 of this (1) Aged individuals (65 years of age
chapter is considered to be Medicaid-el- or older);
igible and receiving Medicaid for pur- (2) Blind individuals (as defined in
poses of this provision. With respect to § 436.530);
whether the mother remains (or would (3) Disabled individuals (as defined in
remain if pregnant) eligible for Med- § 436.541);
icaid after the birth of the child, the (4) Individuals under age 21 (or, at
State must determine whether a non- State option), under age 20, 19, or 18) or
qualified alien would remain eligible reasonable classifications of these indi-
for emergency services under § 435.139 viduals;
221
§ 436.210 42 CFR Ch. IV (10–1–17 Edition)
(5) Specified relatives under section § 436.212 Individuals who would be eli-
406(b)(1) of the Act who have in their gible for cash assistance if the State
care an individual who is determined to plan for OAA, AFDC, AB, APTD, or
be dependent) as specified in § 436.510; AABD were as broad as allowed
under the Act.
(6) Pregnant women; and
(7) Essential spouses specified under (a) The agency may provide Medicaid
§ 436.230. to any group or groups of individuals
(b) If the agency provides Medicaid to specified under § 436.201(a) who:
(1) Would be eligible for OAA, AFDC,
any individual in an optional group
AB, APTD, or AABD if the State’s plan
specified in paragraph (a) of this sec-
under those programs included individ-
tion, the agency must provide Medicaid
uals whose coverage under title I, IV-A,
to all individuals who apply and are X, XIV, or XVI of the Act is optional
found eligible to be members of that (for example, the agency may provide
group. Medicaid to individuals who are 18
[58 FR 4934, Jan. 19, 1993] years of age and who are attending sec-
ondary school full-time and are ex-
OPTIONS FOR COVERAGE OF FAMILIES pected to complete their education be-
AND CHILDREN AND AGED, BLIND, AND fore age 19, even though the State’s
DISABLED INDIVIDUALS, INCLUDING AFDC plan does not include them); or
PREGNANT WOMEN (2) Would qualify for OAA, AFDC,
AB, APTD, or AABD if the State’s plan
§ 436.210 Individuals who meet the in- under those programs did not contain
come and resource requirements of eligibility requirements more restric-
the cash assistance programs. tive than, or in addition to, those re-
The agency may provide Medicaid to quired under the appropriate title of
any group or groups of individuals the Act. (For example, the agency may
specified under § 436.201(a)(1), (a)(2), provide Medicaid to individuals who
(a)(3), (a)(5), and (a)(6) who are not would meet the Federal definition of
mandatory categorically needy and disability, 45 CFR 233.80, but who do
who meet the income and resource re- not meet the State’s more restrictive
quirements of the appropriate cash as- definitions.)
sistance program for their status (that (b) The agency may cover one or
is, OAA, AFDC, AB, APTD, or AABD). more optional groups under any of the
titles of the Act without covering all
[58 FR 4935, Jan. 19, 1993] such groups.
§ 436.211 Individuals who would be eli-
FR 24887, Apr. 11, 1980; 46 FR 47990, Sept. 30,
gible for cash assistance if they
1981; 58 FR 4935, Jan. 19, 1993]
were not in medical institutions.
The agency may provide Medicaid to § 436.217 Individuals receiving home
any group or groups of individuals and community-based services.
specified in § 436.201(a) who are in title The agency may provide Medicaid to
XIX reimbursable medical institutions any group or groups of individuals in
and who: the community who meet the following
(a) Are ineligible for the cash assist- requirements:
ance program appropriate for their sta- (a) The group would be eligible for
tus (that is, OAA, AFDC, AB, APTD, or Medicaid if institutionalized.
AABD) because of lower income stand- (b) In the absence of home and com-
ards used under the program to deter- munity-based services under a waiver
mine eligibility for institutionalized granted under part 441—
individuals; but (1) Subpart G of this subchapter, the
(b) Would be eligible for aid or assist- group would otherwise require the level
ance under the State’s approved plan of care furnished in a hospital, NF, or
under OAA, AFDC, AB, APTD, or an ICF/IID; or
AABD if they were not institutional- (2) Subpart H of this subchapter, the
group would otherwise require the level
ized.
of care furnished in a NF and are age 65
[58 FR 4935, Jan. 19, 1993] or older.
222
(c) The group receives the waivered § 436.220 Individuals who would meet
services. the income and resource require-
ments under AFDC if child care
[57 FR 29155, June 30, 1992] costs were paid from earnings.
§ 436.219 Individuals receiving State (a) The agency may provide Medicaid
plan home and community-based to any group or groups of individuals
services. specified under § 436.201(a)(4), (a)(5), and
If the agency provides State plan (a)(6) who would meet the income and
home and community-based services to resource requirements under the
individuals described in section State’s AFDC plan if their work-re-
1915(i)(1) of the Act, the agency, under lated child care costs were paid from
its State plan, may, in addition, pro- their earnings rather than by a State
vide Medicaid to of individuals in the agency as a service expenditure.
community who are described in one or (b) The agency may use this option
both of paragraphs (a) or (b) of this sec- only if the State’s AFDC plan deducts
tion. work-related child care costs from in-
(a) Individuals who— come to determine the amount of
(1) Are not otherwise eligible for AFDC.
Medicaid; [43 FR 45218, Sept. 29, 1978, as amended at 58
(2) Have income that does not exceed FR 4935, Jan. 19, 1993]
150 percent of the Federal poverty line
(FPL); § 436.222 Individuals under age 21 who
(3) Meet the needs-based criteria meet the income and resource re-
under § 441.715 of this chapter; and quirements of AFDC.
(4) Will receive State plan home and (a) The agency may provide Medicaid
community-based services as defined in to individuals under age 21 (or at State
§ 440.182 of this chapter. option, under age 20, 19, or 18) or rea-
(b) Individuals who— sonable categories of these individuals
(1) Would be determined eligible by as specified in paragraph (b) of this sec-
the agency under an existing waiver or tion, who are not receiving cash assist-
demonstration project under sections ance but who meet the income and re-
1915(c), 1915(d), 1915(e) or 1115 of the source requirements of the State’s ap-
Act, but are not required to receive proved AFDC plan.
services under such waivers or dem- (b) The agency may cover all individ-
onstration projects; uals described in paragraph (a) of this
(2) Have income that does not exceed section or reasonable classifications of
300 percent of the Supplemental Secu- those individuals. Examples of reason-
rity Income Federal Benefit Rate (SSI/ able classifications are as follows:
FBR); and (1) Individuals in foster homes or pri-
(3) Will receive State plan home and vate institutions for whom a public
community-based services as defined in agency is assuming a full or partial fi-
§ 440.182 of this chapter. nancial responsibility. If the agency
(c) For purposes of determining eligi- covers these individuals, it may also
bility under paragraph (a) of this sec- provide Medicaid to individuals of the
tion, the agency may not take into ac- same age in foster homes or private in-
count an individual’s resources and stitutions by private nonprofit agen-
must use income standards that are cies.
reasonable, consistent with the objec- (2) Individuals in adoptions sub-
tives of the Medicaid program, simple sidized in full or in part by a public
to administer, and in the best interests agency.
of the beneficiary. Income methodolo- (3) Individuals in nursing facilities
gies may include use of existing in- when nursing facility services are pro-
come methodologies, such as the rules vided under the plan to individuals
of the OAA, AB, APTD or AABD pro- within the age group selected under
grams. However, subject to the Sec- this provision. If the agency covers
retary’s approval, the agency may use
these individuals, it may also provide

other income methodologies that meet Medicaid to individuals in inter-
the requirements of this paragraph. mediate care facilities for individuals
[79 FR 3029, Jan. 16, 2014] with intellectual disabilities.
223
§ 436.224 42 CFR Ch. IV (10–1–17 Edition)
(4) Individuals receiving active treat- § 436.229 Optional targeted low-income

ment as inpatients in psychiatric fa- children.
cilities or programs, if inpatient psy- The agency may provide Medicaid
chiatric services for individuals under to—
21 are provided under the plan. (a) All individuals under age 19 who
[46 FR 47990, Sept. 30, 1981, as amended at 58 are optional targeted low-income chil-
FR 4935, Jan. 19, 1993] dren as defined in § 436.3; or
(b) Reasonable categories of these in-
§ 436.224 Individuals under age 21 who dividuals.
are under State adoption assistance
agreements. [66 FR 2668, Jan. 11, 2001]
(a) The agency may provide Medicaid OPTIONS FOR COVERAGE OF THE AGED,
to individuals under the age of 21 (or, BLIND, AND DISABLED
at State option, age 20, 19, or 18)—
(1) For whom an adoption agreement § 436.230 Essential spouses of aged,
blind, or disabled individuals re-
(other than an agreement under title ceiving cash assistance.
IV-E) between the State and adoptive
parent(s) is in effect; The agency may provide Medicaid to
(2) Who, the State agency responsible the spouse of an individual receiving
for adoption assistance has determined, OAA, AB, APTD, or AABD, if—
cannot be placed with adoptive parents (a) The spouse is living with the indi-
without Medicaid because the child has vidual receiving cash assistance;
special needs for medical or rehabilita- (b) The cash assistance agency has
tive care; and determined that the spouse is essential
(3) Who meet either of the following: to the well-being of the individual and
has considered the spouse’s needs in de-
(i) Were eligible for Medicaid under
termining the amount of cash assist-
the State plan before the adoption
ance provided to the individual.
agreement was entered into; or
(ii) Would have been eligible for Med-
icaid before the adoption agreement Subpart D—Optional Coverage of
was entered into, if the eligibility the Medically Needy
standards and methodologies of the fos-
§ 436.300 Scope.
ter care program were used without
employing the threshold title IV-A eli- This subpart specifies the option for
gibility determination. coverage of medically needy individ-
(b) For adoption assistance agree- uals.
ments entered into before April 7,
1986—
(1) The agency must deem the re- (a) A Medicaid agency may provide
quirements of paragraph (a)(1) and (2) Medicaid to individuals specified in
of this section to be met if the State this subpart who:
adoption assistance agency determines (1) Either:
that— (i) Have income that meets the
(i) At the time of the adoption place- standard in § 436.811; or
ment, the child had special needs for (ii) If their income is more than al-
medical or rehabilitative care that lowed under the standard, have in-
made the child difficult to place; and curred medical expenses at least equal
(ii) There is in effect an adoption as- to the difference between their income
sistance agreement between the State and the applicable income standards;
and the adoptive parent(s). and
(2) Have resources that meet the
(2) The agency must deem the re-
standard in §§ 436.840 and 436.843.
quirements of paragraph (a)(3) of this
(b) If the agency chooses this option,
section to be met if the child was found
the following provisions apply:
by the State to be eligible for Medicaid
(1) The agency must provide Med-

before the adoption assistance agree-
icaid to the following individuals who
ment was entered into.
meet the requirements of paragraph (a)
[55 FR 48610, Nov. 21, 1990] of this section:
224
(i) All pregnant women during the paragraph (b)(2) of this section, the
course of their pregnancy who, except agency must provide Medicaid to all
for income and resources, would be eli- individuals eligible to be members of
gible for Medicaid as mandatory or op- that group.
tional categorically needy under sub-
parts B and C of this part; [46 FR 47990, Sept. 30, 1981; 46 FR 54743, Nov.
4, 1981, as amended at 52 FR 43073, Nov. 9,
(ii) All individuals under 18 years of
1987; 55 FR 48610, Nov. 21, 1990; 58 FR 4935,
age who, except for income and re-
Jan. 19, 1993]
sources, would be eligible for Medicaid
as mandatory categorically needy § 436.308 Medically needy coverage of
under subpart B of this part; individuals under age 21.
(iii) All newborn children born on or
after October 1, 1984, to a woman who is (a) If the agency provides Medicaid to
eligible as medically needy and receiv- the medically needy, it may provide
ing Medicaid on the date of the child’s Medicaid to individuals under age 21
birth. The child is deemed to have ap- (or at State option, under age 20, 19, or
plied and been found eligible for Med- 18) as specified in paragraph (b) of this
icaid on the date of birth and remains section:
eligible as medically needy for ne year (1) Who would not be covered under
so long as the woman remains eligible the mandatory medically needy group
and the child is a member of the wom- of individuals under 18 under
an’s household. If the woman’s basis of § 436.301(b)(1)(ii); and
eligibility changes to categorically (2) Who meet the income and re-
needy, the child is eligible as categori- source requirements of subpart I of this
cally needy under § 436.124. The woman part.
is considered to remain eligible if she (b) The agency may cover all individ-
meets the spend-down requirements in uals in paragraph (a) of this section or
any consecutive budget period fol- individuals in reasonable classifica-
lowing the birth of the child.
tions. Examples of reasonable classi-
(iv) Women who, while pregnant, ap-
fications are as follows:
plied for, were eligible for, and received
Medicaid services as medically needed (1) Individuals in foster homes or pri-
on the day that their pregnancy ends. vate institutions for whom a public
The agency must provide medically agency is assuming a full or partial fi-
needy eligibility to these women for an nancial responsibility. If the agency
extended period following termination covers these individuals, it may also
of pregnancy. This period begins on the provide Medicaid to individuals placed
last day of the pregnancy and extends in foster homes or private institutions
through the end of the month in which by private nonprofit agencies.
a 60-day period following termination (2) Individuals in adoptions sub-
of pregnancy ends. Eligibility must be sidized in full or in part by a public
provided, regardless of changes in the agency.
women’s financial circumstances that (3) Individuals in nursing facilities
may occur within this extended period. when nursing facility services are pro-
These women are eligible for the ex- vided under the plan to individuals
tended period for all services under the within the age group selected under
plan that are pregnancy-related (as de- this provision. When the agency covers
fined in § 440.210(c)(1) of this sub- such individuals, it may also provide
chapter). Medicaid to individuals in inter-
(2) The agency may provide Medicaid mediate care facilities for individuals
to any or all of the following groups of with intellectual disabilities.
individuals: (4) Individuals receiving active treat-
(i) Individuals under age 21 (§ 436.308).
ment as inpatients in psychiatric fa-
(ii) Specified relatives (§ 436.310).
cilities or programs, if inpatient psy-
(iii) Aged (§ 436.320).
chiatric services for individuals under
(iv) Blind (§ 436.321).

21 are provided under the plan.
(v) Disabled (§ 436.322).
(3) If the agency provides Medicaid to [46 FR 47990, Sept. 30, 1981, as amended at 58
any individual in a group specified in FR 4935, Jan. 19, 1993]
225
§ 436.310 42 CFR Ch. IV (10–1–17 Edition)
§ 436.310 Medically needy coverage of services necessary for the treatment of

specified relatives. an emergency medical condition, as de-
(a) If the agency provides for the fined in § 440.255(c) of this chapter to
medically needy, it may provide Med- those aliens described in § 436.406(c) of
icaid to specified relatives, defined in this subpart.
paragraph (b) of this section, who meet [55 FR 36820, Sept. 7, 1990]
the income and resource requirements
of subpart I of this part.
(b) Specified relatives means individ- Subpart E—General Eligibility
uals who: Requirements
(1) Are listed under section 406(b)(1)
of the Act and in 45 CFR § 436.400 Scope.
233.90(c)(1)(v)(A); and This subpart prescribes general re-
(2) Have in their care an individual quirements for determining the eligi-
who is determined to be (or would, if bility of both categorically needy and
needy, be) dependent, as specified in medically needy individuals specified
§ 436.510. in subparts B, C, and D of the part.
[58 FR 4936, Jan. 19, 1993]
§ 436.320 Medically needy coverage of (a) The agency may not impose any
the aged.
eligibility requirement that is prohib-
If the agency provides Medicaid to ited under title XIX.
the medically needy, it may provide (b) The agency must base any op-
Medicaid to individuals who—
tional group covered under subparts B
(a) Are 65 years of age and older, as
and C of this part on reasonable classi-
provided for in § 436.520; and
(b) Meet the income and resource re- fications that do not result in arbi-
quirements of subpart I of this part. trary or inequitable treatment of indi-
viduals and groups and are consistent
[46 FR 47991, Sept. 30, 1981] with the objectives of title XIX.
§ 436.321 Medically needy coverage of (c) The agency must not use require-
the blind. ments for determining eligibility for
optional coverage groups that are more
restrictive than those used under the
Medicaid to blind individuals who State plans for OAA, AFDC, AB, APTD,
meet— or AABD.
(a) The requirements for blindness, as
specified in §§ 436.530 and 436.531; and
(b) The income and resource require- § 436.403 State residence.
ments of subpart I of this part.
(a) Requirement. The agency must
[46 FR 47991, Sept. 30, 1981] provide Medicaid to eligible residents
§ 436.322 Medically needy coverage of of the State, including residents who
the disabled. are absent from the State. The condi-
tions under which payment for service
the medically needy, it may provide is provided to out-of-State residents
Medicaid to disabled individuals who are set forth in § 431.52 of this chapter.
meet— (b) Definition. For purposes of this
(a) The requirements for disability, section—Institution has the same mean-
as specified in §§ 436.540 and 436.541; and ing as Institution and Medical institu-
(b) The income and resource require- tion, as defined in § 435.1010 of this chap-
ments of subpart I of this part. ter. For purposes of State placement,
the term also includes ‘‘foster care
[46 FR 47991, Sept. 30, 1981]
homes’’, licensed as set forth in 45 CFR
§ 436.330 Coverage for certain aliens. 1355.20, and providing food, shelter and
supportive services to one or more per-
If an agency provides Medicaid to the
medically needy, it must provide the sons unrelated to the proprietor.
226
(c) Incapability of indicating intent. (4) Where placement is initiated by a

For purposes of this section, an indi- State because the State lacks a suffi-
vidual is considered incapable of indi- cient number of appropriate facilities
cating intent if the individual— to provide services to its residents, the
(1) Has an I.Q. of 49 or less or has a State making the placement is the in-
mental age of 7 or less, based on tests dividual’s State of residence for Med-
acceptable to the Intellectual Dis- icaid purposes.
ability agency in the State; (f) Individuals receiving title IV-E pay-
(2) Is judged legally incompetent; or ments. For individuals of any age who
(3) Is found incapable of indicating are receiving Federal payment for fos-
intent based on medical documentation ter care and adoption assistance under
obtained from a physician, psycholo- title IV-E of the Social Security Act,
gist, or other person licensed by the the State of residence is the State
State in the field of intellectual dis- where the child lives.
ability. (g) Individuals under age 21. (1) For
(d) Who is a State resident. A resident any individual who is emancipated
of a State is any individual who: from his or her parents or who is mar-
ried and capable of indicating intent,
(1) Meets the conditions in para-
the State of residence is the State
graphs (e) through (h) of this section;
where the individual is living with the
or
intention to remain there permanently
(2) Meets the criteria specified in an
or for an indefinite period.
interstate agreement under paragraph
(2) For any individual not residing in
(j) of this section.
an institution as defined in paragraph
(e) Placement by a State in an out-of- (b) whose Medicaid eligibility is based
state institution—(1) General rule. Any on blindness or disability, the State of
agency of the State, including an enti- residence is the State in which the in-
ty recognized under State law as being dividual is living.
under contract with the State for such (3) For any other non-institutional-
purposes, that arranges for an indi- ized individual not subject to para-
vidual to be placed in an institution lo- graph (h)(1) or (h)(2) of this section, the
cated in another State, is recognized as State of residence is determined in ac-
acting on behalf of the State in making cordance with 45 CFR 233.40, the rules
a placement. The State arranging or governing residence under the AFDC
actually making the placement is con- program.
sidered as the individual’s State of res- (4) For any institutionalized indi-
idence. vidual who is neither married nor
(2) Any action beyond providing in- emancipated, the State of residence
formation to the individual and the in- is—
dividual’s family would constitute ar- (i) The parents’ or legal guardian’s
ranging or making a State placement. current State of residence at the time
However, the following actions do not of placement; or
constitute State placement: (ii) The current State of residence of
(i) Providing basic information to in- the parent or legal guardian who files
dividuals about another State’s Med- the application, if the individual is in-
icaid program, and information about stitutionalized in that State. If a legal
the availability of health care services guardian has been appointed and the
and facilities in another State. parental rights are terminated, the
(ii) Assisting an individual in locat- State of residence of the guardian is
ing an institution in another State pro- used instead of the parent’s.
vided the individual is capable of indi- (iii) The State of residence of the in-
cating intent and independently de- dividual or party who files an applica-
cides to move. tion is used if the individual has been
(3) When a competent individual abandoned by his or her parent(s), does
leaves the facility in which the indi- not have a legal guardian and is insti-
vidual is placed by a State, that indi- tutionalized in that State.

vidual’s State of residency for Med- (h) Individuals age 21 and over. (1) For
icaid purposes is the State where the any individual not residing in an insti-
individual is physically located. tution as defined in paragraph (b), the
227
§ 436.404 42 CFR Ch. IV (10–1–17 Edition)
State of residence is the State where (3) The agency may not deny or ter-
the individual is— minate a resident’s Medicaid eligibility
(i) Living with the intention to re- because of that person’s temporary ab-
main there permanently or for an in- sence from the State if the person in-
definite period (or if incapable of stat- tends to return when the purpose of the
ing intent, where the individual is liv- absence has been accomplished, unless
ing); or another State has determined that the
(ii) Living and which the individual person is a resident there for purposes
entered with a job commitment or of Medicaid.
seeking employment (whether or not (j) Interstate agreements. A State may
currently employed). have a written agreement with another
(2) For any institutionalized indi- State setting forth rules and proce-
vidual who became incapable of indi- dures resolving cases of disputed resi-
dency. These agreements may establish
cating intent before age 21, the State of
criteria other than those specified in
residence is—
paragraphs (c) through (h) of this sec-
(i) That of the parents applying for tion, but must not include criteria that
Medicaid on the individual’s behalf, if result in loss of residency in both
the parents reside in separate States; States or that are prohibited by para-
(ii) The parent’s or legal guardian’s graph (i) of this section. The agree-
State of residence at the time of placements must contain a procedure for
ment; or providing Medicaid to individuals pend-
(iii) The current State of residence of ing resolution of the case.
the parent or legal guardian who files States may use interstate agreements
the application, if the individual is infor purposes other than cases of dis-
stitutionalized in that State. If a legal puted residency to facilitate adminis-
guardian has been appointed and paren- tration of the program, and to facili-
tal rights are terminated, the State of tate the placement and adoption of
residence of the guardian is used in- title IV-E individuals when the child
stead of the legal parent’s. and his or her adoptive parent(s) move
(iv) The State of residence of the in- into another State.
dividual or party who files an applica- (k) Continued Medicaid for institu-
tion is used if the individual has been tionalized beneficiaries. An agency is
abandoned by his or her parent(s), does providing Medicaid to an institutional-
not have a legal guardian and is insti- ized beneficiary who, as a result of this
tutionalized in that State. section, would be considered a resident
(3) For any institutionalized indi- of a different State—
vidual who became incapable of indi- (1) The agency must continue to pro-
cating intent at or after age 21, the vide Medicaid to that beneficiary from
State of residence is the State in which June 24, 1983 until July 5, 1984 unless it
the individual is physically present, ex- makes arrangements with another
cept where another State makes a State of residence to provide Medicaid
placement. at an earlier date; and
(4) For any other institutionalized in- (2) Those arrangements must not in-
dividual, the State of residence is the clude provisions prohibited by para-
State where the individual is living graph (g) of this section.
with the intention to remain there per- (l) Cases of disputed residency. Where
manently or for an indefinite period. two or more States cannot resolve
(i) Specific prohibitions. (1) The agency which State is the State of residence,
may not deny Medicaid eligibility be- the State where the individual is phys-
cause an individual has not resided in ically located is the State of residence.
the State for a specified period. [49 FR 13533, Apr. 5, 1984, as amended at 55
(2) The agency may not deny Med- FR 48610, Nov. 21, 1990; 71 FR 39225, July 12,
icaid eligibility to an individual in an 2006]
institution, who satisfies the residency
§ 436.404 Applicant’s choice of cat-
rules set forth in this section, on the

grounds that the individual did not es- egory.
tablish residence in the State before The agency must allow an individual
entering the institution. who would be eligible under more than
228
one category to have his eligibility de- to the 5-year bar) who have provided
termined for the category he selects. satisfactory documentary evidence of
Qualified Alien status, which status
§ 436.406 Citizenship and alienage. has been verified with the Department
(a) The agency must provide Med- of Homeland Security (DHS) under a
icaid to otherwise eligible residents of declaration required by section 1137(d)
the United States who are— of the Act that the applicant or bene-
(1) Citizens: (i) Under a declaration ficiary is an alien in a satisfactory im-
required by section 1137(d) of the Act migration status.
that the individual is a citizen or na- (ii) The eligibility of qualified aliens
tional of the United States; and who are subject to the 5-year bar in 8
(ii) The individual has provided satis- U.S.C. 1613 is limited to the benefits de-
factory documentary evidence of citi- scribed in paragraph (b) of this section.
zenship or national status, as described (b) The agency must provide payment
in § 435.407. for the services described in § 440.255(c)
(iii) An individual for purposes of the of this chapter to residents of the State
declaration and citizenship documenta- who otherwise meet the eligibility re-
tion requirements discussed in para- quirements of the State plan (except
graphs (a)(1)(i) and (a)(1)(ii) of this sec- for receipt of AFDC, SSI, or State Sup-
tion includes both applicants and bene- plementary payments) who are quali-
ficiaries under a section 1115 dem- fied aliens subject to the 5-year bar or
onstration (including a family plan- who are non-qualified aliens who meet
ning demonstration project) for which all Medicaid eligibility criteria, except
a State receives Federal financial par- non-qualified aliens need not present a
ticipation in their expenditures, as social security number or document
though the expenditures were for med- immigration status.
ical assistance. [55 FR 36820, Sept. 7, 1990, as amended at 71
(iv) Individuals must declare their FR 39225, July 12, 2006; 72 FR 38694, July 13,
citizenship and the State must docu- 2007]
ment an individual’s eligibility file on
initial applications and initial redeter- § 436.407 Types of acceptable docu-
minations effective July 1, 2006. mentary evidence of citizenship.
(v) The following groups of individ- For purposes of this section, the term
uals are exempt from the requirements ‘‘citizenship’’ includes status as a ‘‘na-
in paragraph (a)(1)(ii) of this section: tional of the United States’’ as defined
(A) Individuals receiving SSI benefits by section 101(a)(22) of the Immigration
under title XVI of the Act; and Nationality Act (8 U.S.C.
(B) Individuals entitled to or enrolled § 1101(a)(22)) to include both citizens of
in any part of Medicare; the United States and non-citizen na-
(C) Individuals receiving disability tionals of the United States.
insurance benefits under section 223 of (a) Primary evidence of citizenship and
the Act or monthly benefits under sec- identity. The following evidence must
tion 202 of the Act, based on the indi- be accepted as satisfactory documen-
vidual’s disability (as defined in sec- tary evidence of both identity and citi-
tion 223(d) of the Act); and zenship:
(D) Individuals who are in foster care (1) A U.S. passport. The Department
and who are assisted under Title IV–B of State issues this. A U.S. passport
of the Act, and individuals who are does not have to be currently valid to
beneficiaries of foster care mainte- be accepted as evidence of U.S. citizen-
nance or adoption assistance payments ship, as long as it was originally issued
under Title IV-E of the Act. without limitation.
(2)(i) Except as specified in 8 U.S.C.
1612(b)(1) (permitting States an option NOTE: Spouses and children were some-
with respect to coverage of certain times included on one passport through 1980.
U.S. passports issued after 1980 show only
qualified aliens), qualified aliens as de-
one person. Consequently, the citizenship
scribed in section 431 of the Personal and identity of the included person can be es-
Responsibility and Work Opportunity tablished when one of these passports is pre-
Reconciliation Act of 1996 (8 U.S.C. sented. Exception: Do not accept any pass-
1641) (including qualified aliens subject port as evidence of U.S. citizenship when it
229
§ 436.407 42 CFR Ch. IV (10–1–17 Edition)
was issued with a limitation. However, such Commonwealth, Territory, or local ju-
a passport may be used as proof of identity. risdiction. It must have been recorded
(2) A Certificate of Naturalization (DHS before the person was 5 years of age. A
Forms N–550 or N–570.) Department of delayed birth record document that is
Homeland Security issues for natu- recorded at or after 5 years of age is
ralization. considered fourth level evidence of citi-
(3) A Certificate of U.S. Citizenship zenship. (NOTE: If the document shows
(DHS Forms N–560 or N–561.) Depart- the individual was born in Puerto Rico,
ment of Homeland Security issues cer- the Virgin Islands of the U.S., or the
tificates of citizenship to individuals Northern Mariana Islands before these
who derive citizenship through a par- areas became part of the U.S., the indi-
ent. vidual may be a collectively natural-
(4) A valid State-issued driver’s license, ized citizen. Collective naturalization
but only if the State issuing the license occurred on certain dates listed for
requires proof of U.S. citizenship before each of the territories.) The following
issuance of such license or obtains a so- will establish U.S. citizenship for col-
cial security number from the appli- lectively naturalized individuals:
cant and verifies before certification (i) Puerto Rico:
that such number is valid and assigned (A) Evidence of birth in Puerto Rico
to the applicant who is a citizen. (This on or after April 11, 1899 and the appli-
provision is not effective until such cant’s statement that he or she was re-
time as a State makes providing evi- siding in the U.S., a U.S. possession, or
dence of citizenship a condition of Puerto Rico on January 13, 1941; or
issuing a driver’s license and evidence (B) Evidence that the applicant was a
that the license holder is a citizen is Puerto Rican citizen and the appli-
included on the license or in a system cant’s statement that he or she was re-
of records available to the Medicaid siding in Puerto Rico on March 1, 1917
agency. States must ensure that the and that he or she did not take an oath
process complies with this statutory of allegiance to Spain.
provision in section 6036 of the Deficit (ii) U.S. Virgin Islands:
Reduction Act of 2005. CMS will mon- (A) Evidence of birth in the U.S. Vir-
itor compliance of States imple- gin Islands, and the applicant’s state-
menting this provision.) ment of residence in the U.S., a U.S.
(b) Secondary evidence of citizenship. If possession, or the U.S. Virgin Islands
primary evidence from the list in para- on February 25, 1927; or
graph (a) of this section is unavailable, (B) The applicant’s statement indi-
an applicant or beneficiary should pro- cating residence in the U.S. Virgin Is-
vide satisfactory documentary evi- lands as a Danish citizen on January
dence of citizenship from the list speci- 17, 1917 and residence in the U.S., a U.S.
fied in this section to establish citizen- possession, or the U.S. Virgin Islands
ship and satisfactory documentary evi- on February 25, 1927, and that he or she
dence from paragraph (e) of this sec- did not make a declaration to maintain
tion to establish identity, in accord- Danish citizenship; or
ance with the rules specified in this (C) Evidence of birth in the U.S. Vir-
section. gin Islands and the applicant’s state-
(1) A U.S. public birth certificate ment indicating residence in the U.S.,
showing birth in one of the 50 States, a U.S. possession, or Territory or the
the District of Columbia, Puerto Rico Canal Zone on June 28, 1932.
(if born on or after January 13, 1941), (iii) Northern Mariana Islands (NMI)
Guam (on or after April 10, 1899), the (formerly part of the Trust Territory of
Virgin Islands of the U.S. (on or after the Pacific Islands (TTPI)):
January 17, 1917), American Samoa, (A) Evidence of birth in the NMI,
Swain’s Island, or the Northern Mar- TTPI citizenship and residence in the
iana Islands (after November 4, 1986 NMI, the U.S., or a U.S. Territory or
(NMI local time)). A State, at its op- possession on November 3, 1986 (NMI
tion, may use a cross match with a local time) and the applicant’s state-
State vital statistics agency to document that he or she did not owe alle-
ment a birth record. The birth record giance to a foreign State on November
document may be issued by the State, 4, 1986 (NMI local time); or
230
(B) Evidence of TTPI citizenship, until 1973. It revised the form and re-
continuous residence in the NMI since numbered it as Form I–197. INS issued
before November 3, 1981 (NMI local the I–197 from 1973 until April 7, 1983.
time), voter registration before Janu- INS issued Form I–179 and I–197 to nat-
ary 1, 1975 and the applicant’s state- uralized U.S. citizens living near the
ment that he or she did not owe alle- Canadian or Mexican border who need-
giance to a foreign State on November ed it for frequent border crossings. Al-
4, 1986 (NMI local time); or though neither form is currently
(C) Evidence of continuous domicile issued, either form that was previously
in the NMI since before January 1, 1974 issued is still valid.
and the applicant’s statement that he (6) A Northern Mariana Identification
or she did not owe allegiance to a for- Card (I–873). (Issued by the DHS to a
eign State on November 4, 1986 (NMI collectively naturalized citizen of the
local time). United States who was born in the
(D) NOTE: If a person entered the NMI Northern Mariana Islands before No-
as a nonimmigrant and lived in the vember 4, 1986.) The former Immigra-
NMI since January 1, 1974, this does not tion and Naturalization Service (INS)
constitute continuous domicile and the issued the I–873 to a collectively natu-
individual is not a U.S. citizen. ralized citizen of the U.S. who was born
(2) A Certification of Report of Birth in the NMI before November 4, 1986.
(DS–1350). The Department of State The card is no longer issued, but those
issues a DS–1350 to U.S. citizens in the previously issued are still valid.
U.S. who were born outside the U.S. (7) An American Indian Card (I–872)
and acquired U.S. citizenship at birth, issued by the Department of Homeland Se-
based on the information shown on the curity with the classification code ‘‘KIC.’’
FS–240. When the birth was recorded as (Issued by DHS to identify U.S. citizen
a Consular Report of Birth (FS–240), members of the Texas Band of
certified copies of the Certification of Kickapoos living near the United
Report of Birth Abroad (DS–1350) can States/Mexican border.) DHS issues
be issued by the Department of State this card to identify a member of the
in Washington, DC. The DS–1350 con- Texas Band of Kickapoos living near
tains the same information as that on the U.S./Mexican border. A classifica-
the current version of Consular Report tion code ‘‘KIC’’ and a statement on
of Birth FS–240. The DS–1350 is not the back denote U.S. citizenship
issued outside the U.S. (8) A final adoption decree showing the
(3) A Report of Birth Abroad of a U.S. child’s name and U.S. place of birth. The
Citizen (Form FS–240). The Department adoption decree must show the child’s
of State consular office prepares and name and U.S. place of birth. In situa-
issues this. A Consular Report of Birth tions where an adoption is not finalized
can be prepared only at an American and the State in which the child was
consular office overseas while the child born will not release a birth certificate
is under the age of 18. Children born prior to final adoption, a statement
outside the U.S. to U.S. military per- from a State approved adoption agency
sonnel usually have one of these. that shows the child’s name and U.S.
(4) A Certification of birth issued by the place of birth is acceptable. The adop-
Department of State (Form FS–545 or DS– tion agency must state in the certifi-
1350). Before November 1, 1990, Depart- cation that the source of the place of
ment of State consulates also issued birth information is an original birth
Form FS–545 along with the prior certificate.
version of the FS–240. In 1990, U.S. con- (9) Evidence of U.S. Civil Service em-
sulates ceased to issue Form FS–545. ployment before June 1, 1976. The docu-
Treat an FS–545 the same as the DS– ment must show employment by the
1350. U.S. government before June 1, 1976.
(5) A U.S. Citizen I.D. card. (This form Individuals employed by the U.S. Civil
was issued until the 1980s by INS. Al- Service prior to June 1, 1976 had to be
though no longer issued, holders of this U.S. citizens.

document may still use it consistent (10) U.S. Military Record showing a
with the provisions of section 1903(x) of U.S. place of birth. T he document must
the Act.) INS issued the I–179 from 1960 show a U.S. place of birth (for example
231
§ 436.407 42 CFR Ch. IV (10–1–17 Edition)
a DD–214 or similar official document available. Third level evidence may be

showing a U.S. place of birth.) used only when the applicant or bene-
(11) A data verification with the Sys- ficiary alleges birth in the U.S. A sec-
tematic Alien Verification for Entitlements ond document from paragraph (e) of
(SAVE) Program for naturalized citizens. this section to establish identity must
A State may conduct a verification also be presented:
with SAVE to determine if an indi- (1) Extract of a hospital record on
vidual is a naturalized citizen, provided hospital letterhead established at the
that such verification is conducted time of the person’s birth that was cre-
consistent with the terms of a Memo- ated 5 years before the initial applica-
randum of Understanding or other tion date and that indicates a U.S.
agreement with the Department of place of birth. (For children under 16
Homeland Security (DHS) authorizing the document must have been created
verification of claims to U.S. citizen- near the time of birth or 5 years before
ship through SAVE, including but not the date of application.) Do not accept
limited to provision of the individual’s a souvenir ‘‘birth certificate’’ issued by
alien registration number if required the hospital.
by DHS. (2) Life, health, or other insurance
(12) Child Citizenship Act. Adopted or record showing a U.S. place of birth
biological children born outside the that was created at least 5 years before
United States may establish citizen- the initial application date that indi-
ship obtained automatically under sec- cates a U.S. place of birth. (For chil-
tion 320 of the Immigration and Na- dren under 16 the document must have
tionality Act (8 U.S.C. 1431), as amend- been created near the time of birth or
ed by the Child Citizenship Act of 2000 5 years before the date of application.)
(Pub. L. 106–395, enacted on October 30, Life or health insurance records may
2000). The State must obtain documen- show biographical information for the
tary evidence that verifies that at any person including place of birth; the
time on or after February 27, 2001, the record can be used to establish U.S.
following conditions have been met: citizenship when it shows a U.S. place
(i) At least one parent of the child is of birth.
a United States citizen by either birth (3) Religious record recorded in the
or naturalization (as verified under the U.S. within 3 months of birth showing
requirements of this part); the birth occurred in the U.S. and
(ii) The child is under the age of 18; showing either the date of the birth or
(iii) The child is residing in the the individual’s age at the time the
United States in the legal and physical record was made. The record must be
custody of the U.S. citizen parent; an official record recorded with the re-
(iv) The child was admitted to the ligious organization. Caution: In ques-
United States for lawful permanent tionable cases (for example, where the
residence (as verified under the re- child’s religious record was recorded
quirements of 8 U.S.C. 1641 pertaining near a U.S. international border and
to verification of qualified alien sta- the child may have been born outside
tus); and the U.S.), the State must consider
(v) If adopted, the child satisfies the verifying the religious record and/or
requirements of section 101(b)(1) of the documenting that the mother was in
Immigration and Nationality Act (8 the U.S. at the time of the birth.
U.S.C. 1101(b)(1) pertaining to inter- (4) Early school record showing a
national adoptions (admission for law- U.S. place of birth. The school record
ful permanent residence as IR–3 (child must show the name of the child, the
adopted outside the United States)), or date of admission to the school, the
as IR–4 (child coming to the United date of birth (or age at the time the
States to be adopted) with final adop- record was made), a U.S. place of birth,
tion having subsequently occurred). and the name(s) and place(s) of birth of
(c) Third level evidence of citizenship. the applicant’s parents.
Third level evidence of U.S. citizenship (d) Fourth level evidence of citizenship.
is documentary evidence of satisfac- Fourth level evidence of citizenship is
tory reliability that is used when both documentary evidence of the lowest re-
primary and secondary evidence is un- liability. Fourth level evidence should
232
only be used in the rarest of cir- (4) Medical (clinic, doctor, or hos-
cumstances. This level of evidence is pital) record created at least 5 years
used only when primary, secondary and before the initial application date that
third level evidence is unavailable. indicates a U.S. place of birth. (For
With the exception of the affidavit children under 16 the document must
process described in paragraph (d)(5) of have been created near the time of
this section, the applicant may only birth or 5 years before the date of ap-
use fourth level evidence of citizenship plication.) Medical records generally
if alleging a U.S. place of birth. In ad- show biographical information for the
dition, a second document establishing person including place of birth; the
identity must be presented as described record can be used to establish U.S.
in paragraph (e) of this section citizenship when it shows a U.S. place
(1) Federal or State census record show- of birth. (NOTE: An immunization
ing U.S. citizenship or a U.S. place of record is not considered a medical
birth. (Generally for persons born 1900 record for purposes of establishing U.S.
through 1950.) The census record must citizenship.)
also show the applicant’s age. (5) Written affidavit. Affidavits should
ONLY be used in rare circumstances. If
NOTE: Census records from 1900 through
1950 contain certain citizenship information. the documentation requirement needs
To secure this information the applicant, to be met through affidavits, the fol-
beneficiary or State should complete a Form lowing rules apply:
BC–600, Application for Search of Census (i) There must be at least two affida-
Records for Proof of Age. Add in the remarks vits by two individuals who have per-
portion ‘‘U.S. citizenship data requested.’’ sonal knowledge of the event(s) estab-
Also add that the purpose is for Medicaid eli- lishing the applicant’s or beneficiary’s
gibility. This form requires a fee.
claim of citizenship (the two affidavits
(2) One of the following documents could be combined in a joint affidavit).
that show a U.S. place of birth and was (ii) At least one of the individuals
created at least 5 years before the ap- making the affidavit cannot be related
plication for Medicaid. (For children to the applicant or beneficiary. Neither
under 16 the document must have been of the two individuals can be the appli-
created near the time of birth or 5 cant or beneficiary.
years before the date of application.) (iii) In order for the affidavit to be
This document must be one of the fol- acceptable the persons making them
lowing and show a U.S. place of birth: must be able to provide proof of their
(i) Seneca Indian tribal census. own citizenship and identity.
(ii) Bureau of Indian Affairs tribal (iv) If the individual(s) making the
census records of the Navajo Indians. affidavit has (have) information which
(iii) U.S. State Vital Statistics offi- explains why documentary evidence es-
cial notification of birth registration. tablishing the applicant’s claim or citi-
(iv) A delayed U.S. public birth zenship does not exist or cannot be
record that is recorded more than 5 readily obtained, the affidavit should
years after the person’s birth. contain this information as well.
(v) Statement signed by the physi- (v) The State must obtain a separate
cian or midwife who was in attendance affidavit from the applicant/beneficiary
at the time of birth. or other knowledgeable individual
(vi) The Roll of Alaska Natives main- (guardian or representative) explaining
tained by the Bureau of Indian Affairs. why the evidence does not exist or can-
(3) Institutional admission papers not be obtained.
from a nursing facility, skilled care fa- (vi) The affidavits must be signed
cility or other institution created at under penalty of perjury and need not
least 5 years before the initial applica- be notarized.
tion date that indicates a U.S. place of (e) Evidence of identity. The following
birth. Admission papers generally show documents may be accepted as proof of
biographical information for the per- identity and must accompany a docu-
son including place of birth; the record ment establishing citizenship from the
can be used to establish U.S. citizen- groups of documentary evidence of citi-
ship when it shows a U.S. place of zenship in the groups in paragraphs (b)
birth. through (d) of this section.
233
§ 436.407 42 CFR Ch. IV (10–1–17 Edition)
(1) Identity documents described in 8 dence of identity is available to the in-

CFR 274a.2(b)(1)(v)(B)(1). dividual prior to accepting such docu-
(i) Driver’s license issued by State or ments. Such documents must at a min-
Territory either with a photograph of imum contain the individual’s name,
the individual or other identifying in- plus any additional information estab-
formation of the individual such as lishing the individual’s identity. All
name, age, sex, race, height, weight, or documents used must contain con-
eye color. sistent identifying information. These
(ii) School identification card with a documents include employer identifica-
photograph of the individual. tion cards, high school and college di-
(iii) U.S. military card or draft plomas from accredited institutions
record. (including general education and high
(iv) Identification card issued by the school equivalency diplomas), marriage
Federal, State, or local government certificates, divorce decrees, and prop-
with the same information included on erty deeds/titles.
driver’s licenses. (f) Special identity rules for children.
(v) Military dependent’s identifica- For children under 16, a clinic, doctor,
tion card. hospital or school record may be ac-
(vi) Certificate of Degree of Indian cepted for purposes of establishing
Blood, or other American Indian/Alas- identity. School records may include
ka Native Tribal document with a pho- nursery or daycare records and report
tograph or other personal identifying cards. If the State accepts such
information relating to the individual. records, it must verify them with the
Acceptable if the document carries a issuing school. If none of the above
photograph of the applicant or bene- documents in the preceding groups are
ficiary, or has other personal identi- available, an affidavit may be used. An
fying information relating to the indi- affidavit is only acceptable if it is
vidual such as age, weight, height, signed under penalty of perjury by a
race, sex, and eye color. parent, guardian or caretaker relative
(vii) U.S. Coast Guard Merchant Mar- (as defined in the regulations at 45 CFR
iner card. 233.90(c)(v)) stating the date and place
NOTE TO PARAGRAPH (e)(1): Exception: Do of the birth of the child and cannot be
not accept a voter’s registration card or Ca- used if an affidavit for citizenship was
nadian driver’s license as listed in 8 CFR provided. The affidavit is not required
274a.2(b)(1)(v)(B)(1). CMS does not view these to be notarized. A State may accept an
as reliable for identity.
identity affidavit on behalf of a child
(2) At State option, a State may use under the age of 18 in instances when
a cross match with a Federal or State school ID cards and drivers’ licenses
governmental, public assistance, law are not available to the individual in
enforcement or corrections agency’s that area until that age.
data system to establish identity if the (g) Special identity rules for disabled in-
agency establishes and certifies true dividuals in institutional care facilities. A
identity of individuals. Such agencies State may accept an identity affidavit
may include food stamps, child sup- signed under penalty of perjury by a
port, corrections, including juvenile residential care facility director or ad-
detention, motor vehicle, or child pro- ministrator on behalf of an institu-
tective services. The State Medicaid tionalized individual in the facility.
Agency is still responsible for assuring States should first pursue all other
the accuracy of the identity determina- means of verifying identity prior to ac-
tion. cepting an affidavit. The affidavit is
(3) At State option, a State may ac- not required to be notarized.
cept three or more documents that to- (h) Special populations needing assist-
gether reasonably corroborate the ance. States must assist individuals to
identity of an individual provided such secure satisfactory documentary evi-
documents have not been used to estab- dence of citizenship when because of
lish the individual’s citizenship and the incapacity of mind or body the indi-
individual submitted second or third vidual would be unable to comply with
tier evidence of citizenship. The State the requirement to present satisfactory
must first ensure that no other evi- documentary evidence of citizenship in
234
a timely manner and the individual ments to verify citizenship and docu-
lacks a representative to assist him or ments to verify identity, and CMS will
her. make available to States necessary in-
(i) Documentary evidence. (1) All docu- formation in this regard. States must
ments must be either originals or cop- ensure that all case records within this
ies certified by the issuing agency. category will be so identified and made
Uncertified copies, including notarized available to conduct these automated
copies, shall not be accepted. matches. CMS may also require States
(2) States must maintain copies of to match files for individuals who used
citizenship and identification docu- first or second level documents to
ments in the case record or electronic verify citizenship as well. CMS may
data base and make these copies avail- provide further guidance to States with
able for compliance audits. respect to actions required in a case of
(3) States may permit applicants and a negative match.
beneficiaries to submit such documen- (j) Record retention. The State must
tary evidence without appearing in per- retain documents in accordance with 45
son at a Medicaid office. States may CFR 75.361.
accept original documents in person,
(k) Reasonable opportunity to present
by mail, or by a guardian or authorized
satisfactory documentary evidence of citi-
representative.
zenship. States must give an applicant
(4) If documents are determined to be
inconsistent with pre-existing informa- or beneficiary a reasonable opportunity
tion, are counterfeit, or altered, States to submit satisfactory documentary
should investigate for potential fraud evidence of citizenship before taking
and abuse, including but not limited action affecting the individual’s eligi-
to, referral to the appropriate State bility for Medicaid. The time States
and Federal law enforcement agencies. give for submitting documentation of
(5) Presentation of documentary evi- citizenship should be consistent with
dence of citizenship is a one time activ- the time allowed to submit documenta-
ity; once a person’s citizenship is docu- tion to establish other facets of eligi-
mented and recorded in a State data- bility for which documentation is re-
base subsequent changes in eligibility quested. (See § 435.930 and § 435.911 of
should not require repeating the docu- this chapter.)
mentation of citizenship unless later [71 FR 39226, July 12, 2006, as amended at 72
evidence raises a question of the per- FR 38695, July 13, 2007; 81 FR 3011, Jan. 20,
son’s citizenship. The State need only 2016]
check its databases to verify that the
individual already established citizen- § 436.408 [Reserved]
ship.
(6) CMS requires that as a check Subpart F—Categorical Require-
against fraud, using currently avail-
able automated capabilities, States
ments for Medicaid Eligibility
will conduct a match of the applicant’s § 436.500 Scope.
name against the corresponding Social
Security number that was provided. In This subpart prescribes categorical
addition, in cooperation with other requirements for determining the eligi-
agencies of the Federal government, bility of both categorically needy and
CMS encourages States to use auto- medically needy individuals specified
mated capabilities to verify citizenship in subparts B, C, and D of this part.
and identity of Medicaid applicants.
Automated capabilities may fall within DEPENDENCY
the computer matching provisions of
the Privacy Act of 1974, and CMS will § 436.510 Determination of depend-
ency.
explore any implementation issues
that may arise with respect to those For families with dependent children
requirements. When these capabilities who are not receiving AFDC, the agen-
become available, States will be re- cy must use the definitions and proce-
quired to match files for individuals dures used under the State’s AFDC
who used third or fourth tier docu- plan to determine whether—
235
§ 436.520 42 CFR Ch. IV (10–1–17 Edition)
(a) An individual is a dependent child specialist) must review the report and
because he is deprived of parental sup- determine on behalf of the agency—
port or care; and (1) Whether the individual meets the
(b) An individual is an eligible mem- definition of blindness; and
ber of a family with dependent chil- (2) Whether and when reexaminations
dren. are necessary for periodic redetermina-
tions of eligibility, as required under
FR 4936, Jan. 19, 1993] § 435.916 of this subchapter. Blindness is
considered to continue until the re-
AGE viewing physician determines that the
beneficiary’s vision no longer meets
§ 436.520 Age requirements for the the definition.
aged.
The agency must not impose an age FR 17939, Mar. 23, 1979]
requirement of more than 65 years.
DISABILITY
[58 FR 4936, Jan. 19, 1993]
§ 436.540 Definition of disability.
§ 436.522 Determination of age.
(a) Definition. The agency must use
(a) In determining age, the agency
the definition of permanent and total
must use the common law method
disability that is used in the State plan
(under which an age is reached the day
for APTD or AABD. (See 45 CFR
before the anniversary of birth) or the
233.80(a)(1) for the Federal rec-
popular usage method (under which a
ommended definition of permanent and
specific age is reached on the anniver-
total disability.)
sary of birth), whichever is used under
(b) State plan requirement. The State
the corresponding State plan for OAA,
plan must contain the definition of per-
AFDC, AB, APTD, or AABD.
manent and total disability.
(b) The agency may use an arbitrary
date, such as July 1, for determining an § 436.541 Determination of disability.
individual’s age if the year, but not the
month, of his birth is known. (a) Basic requirements. (1) At a min-
imum, the agency must use the review
[58 FR 4936, Jan. 19, 1993] team, information, and evidence re-
quirements specified in paragraph (b)
BLINDNESS through (d) of this section in making a
§ 436.530 Definition of blindness. determination of disability.
(2) If the requirements or deter-
(a) Definition. The agency must use mining disability under the State’s
the definition of blindness that is used APTD or AABD program are more re-
in the State plan for AB or AABD. strictive than the minimum require-
(b) State plan requirement. The State ments specified in this section, the
plan must contain the definition of agency must use the requirements ap-
blindness, expressed in ophthalmic plied under the APTD or AABD pro-
measurements. gram.
(b) The agency must obtain a medical
§ 436.531 Determination of blindness.
report and a social history for individ-
In determining blindness— uals applying for Medicaid on the basis
(a) A physician skilled in the diseases of disability. The medical report must
of the eye or an optometrist, whichever include a diagnosis based on medical
the individual selects, must examine evidence. The social history must con-
him, unless both of the applicant’s eyes tain enough information to enable the
are missing; agency to determine disability.
(b) The examiner must submit a re- (c) A physician and social worker,
port of examination to the Medicaid qualified by professional training and
agency; and experience, must review the medical

(c) A physician skilled in the diseases report and social history and deter-
of the eye (for example, an ophthalmol- mine on behalf of the agency whether
ogist or an eye, ear, nose, and throat the individual meets the definition of
236
disability. The physician must deter- At State option, and subject to the
mine whether and when reexamina- conditions of paragraphs (d)(2) through
tions will be necessary for periodic re- (d)(5) of this section, the agency may
determinations of eligibility as re- apply income and resource methodolo-
quired under § 435.916 of this sub- gies that are less restrictive than the
chapter. cash assistance methodologies in deter-
(d) In subsequently determining dis- mining financial eligibility of the fol-
ability, the physician and social work- lowing groups:
er must review reexamination reports (i) Qualified pregnant women and
and the social history and determine children under the mandatory categori-
whether the individual continues to cally needy group under § 436.120;
meet the definition. Disability is con- (ii) Low-income pregnant women, in-
sidered to continue until this deter- fants, and children specified in section
mination is made. 1902(a)(10)(i) (IV), (VI), and (VII) of the
[54 FR 50762, Dec. 11, 1989] Act;
(iii) Qualified Medicare beneficiaries
Subpart G—General Financial Eli- specified in sections 1902(a)(10)(E) and
gibility Requirements and Op- 1905(p) of the Act;
tions (iv) Optional categorically needy in-
dividuals under groups established
§ 436.600 Scope. under subpart C of this part and sec-
This subpart prescribes: tion 1902(a)(10)(A)(ii) of the Act; and
(a) General financial requirements (v) Medically needy individuals under
and options for determining the eligi- groups established under subpart D of
bility of both categorically needy and this part and section
medically needy individuals specified 1902(a)(10)(C)(i)(III) of the Act.
in subparts B, C, and D of this part. (2) The income and resource meth-
Subparts H and I of this part prescribe odologies that an agency elects to
additional financial requirements. apply to groups of individuals under
(b) [Reserved] paragraph (c)(1) of this section may be
less restrictive, but no more restric-
tive, than:
FR 43053, Aug. 22, 1994]
(i) For groups of aged, blind, and dis-
§ 436.601 Application of financial eligi- abled individuals, the SSI methodolo-
bility methodologies. gies; or
(a) Definitions. For purposes of this (ii) For all other groups, the meth-
section, cash assistance financial methodologies under the State plan most
odologies refers to the income and re- closely categorically related to the in-
sources methodologies of the OAA, dividual’s status.
AFDC, AB, APTD, and AABD pro- (3) A financial methodology is con-
grams. sidered to be no more restrictive if, by
(b) Basic rule for use of cash assistance using the methodology, additional in-
methodologies. Except as specified in dividuals may be eligible for Medicaid
paragraphs (c) and (d) of this section, and no individuals who are otherwise
in determining financial eligibility of eligible are by use of that methodology
individuals as categorically and medi- made ineligible for Medicaid.
cally needy, the agency must apply the (4) The less restrictive methodology
cash assistance financial methodolo- applied under this section must be
gies and requirements of the cash as- comparable for all persons within each
sistance program that is most closely category of assistance (aged, or blind,
categorically related to the individ- or disabled, or AFDC-related) within
ual’s status. each eligibility group. For example, if
(c) Financial responsibility of relatives. the agency chooses to apply a less re-
The agency must use the requirements strictive income or resource method-
for financial responsibility of relatives ology to aged individuals, it must

specified in § 436.602. apply that methodology to an eligi-
(d) Use of less restrictive methodologies bility group of all aged individuals
than under cash assistance program. (1) within the selected group.
237
§ 436.602 42 CFR Ch. IV (10–1–17 Edition)
(5) The application of the less restric- income and resources of the individual
tive income and resource methodolo- in determining his or her eligibility,
gies permitted under this section must beginning the first month following the
be consistent with the limitations and month the couple ceases to live to-
conditions on FFP specified in subpart gether.
K of this part. (b) The agency may apply income and
(e) [Reserved] resource methodologies that are less
(f) State plan requirements. (1) The restrictive than the cash assistance
State plan must specify that, except to methodologies as specified in the State
the extent precluded by § 436.602 in de- plan in accordance with § 436.601(d).
termining financial eligibility of indi-
(c) [Reserved]
viduals, the agency will apply the cash
assistance financial methodologies and [58 FR 4936, Jan. 19, 1993, as amended at 59
requirements, unless the agency choos- FR 43053, Aug. 22, 1994]
es to apply less restrictive income and
resource methodologies, in accordance § 436.604 [Reserved]
with paragraph (d) of this section.
(2) If the agency chooses to apply less § 436.606 [Reserved]
restrictive income and resource meth-
§ 436.608 Applications for other bene-
odologies, the State plan must specify:
fits.
(i) The less restrictive methodologies
that will used; and (a) As a condition of eligibility, the
(ii) The eligibility groups or groups agency must require applicants and
to which the less restrictive meth- beneficiaries to take all necessary
odologies will be applied. steps to obtain any annuities, pensions,
and retirement and disability benefits
FR 43053, Aug. 22, 1994] to which they are entitled, unless they
can show good cause for not doing so.
§ 436.602 Financial responsibility of (b) Annuities, pensions, and retire-
relatives and other individuals. ment and disability benefits include,
(a) Subject to the provisions of para- but are not limited to, veterans’ com-
graphs (b) and (c) of this section, in de- pensation and pensions, OASDI bene-
termining financial responsibility of fits, railroad retirement benefits, and
relatives and other persons for individ- unemployment compensation.
uals under Medicaid, the agency must
[43 FR 45218, Sept. 29, 1978. Redesignated at
use the following financial eligibility 58 FR 4937, Jan. 19, 1993]
requirements and methodologies.
(1) Except for a spouse of an indi- § 436.610 Assignment of rights to bene-
vidual or a parent for a child who is fits.
under age 21 or blind or disabled, the
agency must not consider income and (a) As a condition of eligibility, the
resources of any relative as available agency must require legally able appli-
to an individual. cants and beneficiaries to:
(2) In relation to individuals under 21 (1) Assign rights to the Medicaid
(as described in section 1905(a)(i) of the agency to medical support and to pay-
Act), the financial responsibility re- ment for medical care from any third
quirements and methodologies include party;
considering the income and resources (2) Cooperate with the agency in es-
of parents or spouses whose income and tablishing paternity and in obtaining
resources would be considered if the in- medical support and payments, unless
dividual under age 21 were dependent the individual establishes good cause
under the State’s approved AFDC plan, for not cooperating, and except for in-
whether or not they are actually con- dividuals described in section
tributed. These requirements and 1902(l)(1)(A) of the Act (poverty level
methodologies must be applied in ac- pregnant women), who are exempt from
cordance with provisions of the State’s cooperating in establishing paternity

approved AFDC plan. and obtaining medical support and pay-
(3) When a couple ceases to live to- ments from, or derived from, the father
gether, the agency must count only the of the child born out of wedlock; and
238
(3) Cooperate in identifying and pro- (c) The income standard must be set
viding information to assist the Med- at an amount that is no lower than the
icaid agency in pursuing third parties lowest income standard used on or
who may be liable to pay for care and after January 1, 1966, to determine eli-
services under the plan, unless the in- gibility under the cash assistance pro-
dividual establishes good cause for not grams that are related to the State’s
cooperating. covered medically needy group or
(b) The requirements for assignment groups of individuals under § 436.301.
of rights must be applied uniformly for (d) The income standard may vary
all groups covered under the plan. based on the variations between shelter
(c) The requirements of paragraph (a) costs in urban areas and rural areas.
of this section for assignment of rights
[58 FR 4938, Jan. 19, 1993]
to medical support and other payments
and cooperation in obtaining medical
§ 436.814 Medically needy income
support and payments are effective for standard: State plan requirements.
medical assistance furnished on or
after October 1, 1984. The requirement The State plan must specify the in-
for cooperation in identifying and pro- come standard for the covered medi-
viding information for pursuing liable cally needy groups.
third parties is effective for medical as- [58 FR 4938, Jan. 19, 1993]
sistance furnished on or after July 1,
1986. MEDICALLY NEEDY INCOME ELIGIBILITY
[55 FR 48610, Nov. 21, 1990; 55 FR 52130, Dec. AND LIABILITY FOR PAYMENT OF MED-
19, 1990, as amended at 58 FR 4908, Jan. 19, ICAL EXPENSES
1993. Redesignated at 58 FR 4937, Jan. 19,
1993] § 436.831 Income eligibility.
The agency must determine income
Subpart H [Reserved] eligibility of medically needy individ-
uals in accordance with this section.
Subpart I—Financial Requirements (a) Budget periods. (1) The agency
for the Medically Needy must use budget periods of not more
than 6 months to compute income. The
§ 436.800 Scope. agency may use more than one budget
period.
This subpart prescribes financial re-
quirements for determining the eligi- (2) The agency must include in the
bility of medically needy individuals budget period in which income is com-
under subpart D of this part. puted all or part of the 3-month retro-
active period specified in § 435.914. The
MEDICALLY NEEDY INCOME STANDARD budget period can begin no earlier then
the first month in the retroactive pe-
§ 436.811 Medically needy income riod in which the individual received
standard: General requirements. covered services.
(a) To determine eligibility of medi- (3) If the agency elects to begin the
cally needy individuals, the agency first budget period for the medically
must use a single income standard for needy in any month of the 3-month pe-
all covered medically needy groups riod prior to the date of application in
that meets the requirements of this which the applicant received covered
section. services, this election applies to all
(b) The income standard must take medically needy groups.
into account the number of persons in (b) Determining countable income. The
the assistance unit. The standard may agency must, to determine countable
not diminish by the number of persons income, deduct amounts that would be
in the unit (for example, if the income deducted in determining eligibility
level in the standard for an assistance under the State’s approved plan for
unit of two is set at $400, the income OAA, AFDC, AB, APTD, or AABD.
level in the standard for an assistance (c) Eligibility based on countable in-
unit of three may not be less than come. If countable income determined
$400). under paragraph (b) of this section is
239
§ 436.831 42 CFR Ch. IV (10–1–17 Edition)
equal to or less than the applicable in- (2) For the first prospective budget
come standard under § 436.814, the indi- period that also includes any of the 3
vidual is eligible for Medicaid. months before the month of applica-
(d) Deduction of incurred medical ex- tion for medical assistance, expenses
penses. If countable income exceeds the incurred during such budget period,
income standard, the agency must de- whether paid or unpaid, to the extent
duct from income medical expenses in- that the expenses have not been de-
curred by the individual or family or ducted previously in establishing eligi-
financially responsible relatives that bility;
are not subject to payment by a third (3) For the first prospective budget
party. An expense is incurred on the period that includes none of the
date liability for the expense arises. months preceding the month of appli-
The agency must determine deductible cation, expenses incurred during such
incurred expenses in accordance with budget period and any of the 3 pre-
paragraphs (e), (f) and (g) of this sec- ceding months, whether paid or unpaid,
tion and deduct those expenses in ac- to the extent that the expenses have
cordance with paragraph (h) of this sec- not been deducted previously in estab-
tion. lishing eligibility;
(e) Determination of deductible incurred (4) For any of the 3 months preceding
expenses: Required deductions based on the month of application that are not
kinds of services. Subject to the provi- includable under paragraph (f)(2) of
sions of paragraph (g) of this section, this section, expenses incurred in the 3-
in determining incurred medical ex- month period that were a current li-
penses to be deducted from income, the ability of the individual in any such
agency must include the following: month for which a spenddown calcula-
(1) Expenses for Medicare and other tion is made and that had not been pre-
health insurance premiums, and viously deducted from income in estab-
deductibles or coinsurance charges, in- lishing eligibility for medical assist-
cluding enrollment fees, copayments, ance;
or deductibles imposed under § 447.52, (5) Current payments (that is, pay-
§ 447.53, or § 447.54 of this chapter; ments made in the current budget pe-
(2) Expenses incurred by the indi- riod) on other expenses incurred before
vidual or family or financially respon- the current budget period and not pre-
sible relatives for necessary medical viously deducted from income in any
and remedial services that are recog- budget period in establishing eligi-
nized under State law but not included bility for such period; and
in the plan; (6) If the individual’s eligibility for
(3) Expenses incurred by the indi- medical assistance was established in
vidual or family or by financially re- each such preceding period, expenses
sponsible relatives for necessary med- incurred before the current budget pe-
ical and remedial services that are in- riod but not previously deducted from
cluded in the plan, including those that income, to the extent that such ex-
exceed agency limitations on amount, penses are unpaid and are:
duration or scope of services; (i) Described in paragraphs (e)(1)
(f) Determination of deductible incurred through (e)(3) of this section; and
expenses: Required deductions based on (ii) Are carried over from the pre-
the age of bills. Subject to the provi- ceding budget period or periods because
sions of paragraph (g) of this section, the individual had a spenddown liabil-
in determining incurred medical ex- ity in each such preceding period that
penses to be deducted from income, the was met without deducting all such in-
agency must include the following: curred, unpaid expenses.
(1) For the first budget period or peri- (g) Determination of deductible incurred
ods that include only months before medical expenses: Optional deductions. In
the month of application for medical determining incurred medical expenses
assistance, expenses incurred during to be deducted from income, the agen-
such period or periods, whether paid or cy—

unpaid, to the extent that the expenses (1) May include medical institutional
have not been deducted previously in expenses (other than expenses in acute
establishing eligibility; care facilities) projected to the end of
240
the budget period at the Medicaid re- portion of his or her income toward the
imbursement rate; costs of institutional care or home and
(2) May, to the extent determined by community-based services under
the agency and specified in its ap- § 436.832 is eligible on the first day of
proved plan, include expenses incurred the applicable budget (spenddown) pe-
earlier than the third month before the riod—
month of application; and (i) If his or her spenddown liability is
(3) May set reasonable limits on the met after the first day of the budget
amount to be deducted for expenses period; and
specified in paragraphs (e)(1), (e)(2),
(ii) If beginning eligibility after the
and (g)(2) of this section.
first day of the budget period makes
(h) Order of deduction. The agency
must deduct incurred medical expenses the individual’s share of health care ex-
that are deductible under paragraphs penses under § 436.832 greater than the
(e), (f), and (g) of this section, in the individual’s contributable income de-
order prescribed under one of the fol- termined under this section.
lowing three options: (2) At the end of the prospective pe-
(1) Type of service. Under this option, riod specified in paragraph (f)(2) or
the agency deducts expenses in the fol- (f)(3) of this section and any subse-
lowing order based on type of service: quent prospective period or, if earlier,
(i) Cost-sharing expenses as specified when any significant change occurs,
in paragraph (e)(1) of this section. the agency must reconcile the pro-
(ii) Services not included in the State jected amounts with the actual
plan as specified in paragraph (e)(2) of amounts incurred, or with changes in
this section. circumstances, to determine if the ad-
(iii) Services included in the State justed deduction of incurred expenses
plan as specified in paragraph (e)(3) of reduces income to the income stand-
this section but that exceed agency ard.
limitations on amount, duration, or (3) Except as provided in paragraph
scope of services. (i)(1) of this section, if agencies elect
(iv) Services included in the State
partial month coverage, an individual
plan as specified in paragraph (e)(3) of
is eligible for Medicaid on the day that
this section but that are within agency
limitations on amount, duration, or the deduction of incurred health care
scope of services. expenses (and of projected institutional
(2) Chronological order by service date. expenses if the agency elects the option
Under this option, the agency deducts under paragraph (g)(1) of this section)
expenses in chronological order by the reduces income to the income stand-
date each service is furnished, or in the ard.
case of insurance premiums, coinsur- (4) Except as provided in paragraph
ance, or deductibles charges the date (i)(1) of this section, if agencies elect
such amounts are due. Expenses for full month coverage, an individual is
services furnished on the same day eligible on the first day of the month
may be deducted in any reasonable in which spenddown liability is met.
order established by the State. (5) Expenses used to meet spenddown
(3) Chronological order by bill submis- liability are not reimbursable under
sion date. Under this option, the agency Medicaid. Therefore, to the extent nec-
deducts expenses in chronological essary to prevent the transfer of an in-
order by the date each bill is submitted dividual’s spenddown liability to the
to the agency by the individual. If Medicaid program, States must reduce
more than one bill is submitted at one the amount of provider charges that
time, the agency must deduct the bills would otherwise be reimbursable under
from income in the order prescribed in
Medicaid.
either paragraph (h)(1) or (h)(2) of this
section. [59 FR 1674, Jan. 12, 1994, as amended at 78
(i) Eligibility based on incurred medical FR 42305, July 15, 2013]

expenses. (1) Whether a State elects
partial or full month coverage, an indi-
vidual who is expected to contribute a
241
§ 436.832 42 CFR Ch. IV (10–1–17 Edition)
§ 436.832 Post-eligibility treatment of (i) The amount of the highest need

income of institutionalized individ- standard for an individual without in-
uals: Application of patient income come and resources under the State’s
to the cost of care. approved plan for OAA, AFDC, AB,
(a) Basic rules. (1) The agency must APTD, or AABD; or
reduce its payment to an institution, (ii) The amount of the highest medi-
for services provided to an individual cally needy income standard for one
specified in paragraph (b) of this sec- person established under § 436.811.
tion, by the amount that remains after (3) Maintenance needs of family. For
deducting the amounts specified in an individual with a family at home,
paragraphs (c) and (d) of this section an additional amount for the mainte-
from the individual’s total income. nance needs of the family. This amount
(2) The individual’s income must be must—
determined in accordance with para- (i) Be based on a reasonable assess-
graph (e) of this section. ment of their financial need;
(3) Medical expenses must be deter- (ii) Be adjusted for the number of
mined in accordance with paragraph (f) family members living in the home;
of this section. and
(b) Applicability. This section applies (iii) Not exceed the highest of the fol-
to medically needy individuals in med- lowing need standards for a family of
ical institutions and intermediate care the same size:
facilities. (A) The standard used to determine
(c) Required deductions. The agency eligibility under the State’s Medicaid
must deduct the following amounts, in plan, as provided for in § 436.811.
the following order, from the individ- (B) The standard used to determine
ual’s total income as determined under eligibility under the State’s approved
paragraph (e) of this section. Income AFDC plan.
that was disregarded in determining (4) Expenses not subject to third party
eligibility must be considered in this payment. Amounts for incurred ex-
process. penses for medical or remedial care
(1) Personal needs allowance. A per- that are not subject to payment by a
sonal needs allowance that is reason- third party, including—
able in amount for clothing and other (i) Medicare and other health insur-
personal needs of the individual while ance premiums, deductibles, or coin-
in the institution. This protected per- surance charges; and
sonal needs allowance must be at (ii) Necessary medical or remedial
least— care recognized under State law but
(i) $30 a month for an aged, blind, or not covered under the State’s Medicaid
disabled individual, including a child plan, subject to reasonable limits the
applying for Medicaid on the basis of agency may establish on amounts of
blindness or disability; these expenses.
(ii) $60 a month for an institutional- (d) Optional deduction: Allowance for
ized couple if both spouses are aged, home maintenance. For single individ-
blind, or disabled and their income is uals and couples, an amount (in addi-
considered available to each other in tion to the personal needs allowance)
determining eligibility; and for maintenance of the individual’s or
(iii) For other individuals, a reason- couple’s home if—
able amount set by the agency, based (1) The amount is deducted for not
on a reasonable difference in their per- more than a 6-month period; and
sonal needs from those of the aged, (2) A physician has certified that ei-
blind, or disabled. ther of the individuals is likely to re-
(2) Maintenance needs of spouse. For turn to the home within that period.
an individual with only a spouse at (e) Determination of income—(1) Op-
home, an additional amount for the tion. In determining the amount of an
maintenance needs of the spouse. This individual’s income to be used to re-

amount must be based on a reasonable duce the agency’s payment to the insti-
assessment of need but must not ex- tution, the agency may use total in-
ceed the higher of— come received or it may project total
242
monthly income for a prospective pe- three may not be less than that set for
riod not to exceed 6 months. an assistance unit of two.
(2) Basis for projection. The agency [58 FR 4938, Jan. 19, 1993]
must base the projection on income re-
ceived in the preceding period, not to § 436.843 Medically needy resource
exceed 6 months, and on income ex- standard: State plan requirements.
pected to be received. The State plan must specify the re-
(3) Adjustments. At the end of the pro- source standard for the covered medi-
spective period specified in paragraph cally needy groups.
(e)(1) of this section, or when any sig-
nificant change occurs, the agency [58 FR 4938, Jan. 19, 1993]
must reconcile estimates with income
received. DETERMINING ELIGIBILITY ON THE BASIS
OF RESOURCES
(f) Determination of medical expenses—
(1) Option. In determining the amount § 436.845 Medically needy resource eli-
of medical expenses to be deducted gibility.
from an individual’s income, the agen-
To determine eligibility on the basis
cy may deduct incurred medical ex-
of resources for medically needy indi-
penses, or it may project medical ex-
viduals, the agency must—
penses for a prospective period not to
(a) Consider only the individual’s re-
exceed 6 months.
sources and those that are considered
(2) Basis for projection. The agency available to him under the financial re-
must base the estimate on medical ex- sponsibility requirements for relatives
penses incurred in the preceding pe- under § 436.602;
riod, not to exceed 6 months, and med- (b) Consider only resources available
ical expenses expected to be incurred. during the period for which income is
(3) Adjustments. At the end of the pro- computed under § 436.831(a);
spective period specified in paragraph (c) Deduct the value of resources that
(f)(1) of this section, or when any sig- would be deducted in determining eligi-
nificant change occurs, the agency bility under the State’s plan for OAA,
must reconcile estimates with incurred AFDC, AB, APTD, or AABD or under
medical expenses. the State’s less restrictive financial
[45 FR 24888, Apr. 11, 1980, as amended at 46 methodology specified in the State
FR 47991, Sept. 30, 1981; 48 FR 5735, Feb. 8, Medicaid plan in accordance with
1983; 53 FR 3597, Feb. 8, 1988; 56 FR 8851, 8854, § 436.601. In determining the amount of
Mar. 1, 1991; 58 FR 4938, Jan. 19, 1993] an individual’s resources for Medicaid
eligibility, States must count amounts
MEDICALLY NEEDY RESOURCE STANDARD of resources that otherwise would not
be counted under the conditional eligi-
§ 436.840 Medically needy resource bility provisions of the AFDC program.
standard: General requirements.
(d) Apply the resource standards es-
(a) To determine eligibility of medi- tablished under § 436.840.
cally needy individuals, the Medicaid
agency must use a single resource [43 FR 45218, Sept. 29, 1978, as amended at 46
FR 47992, Sept. 30, 1981; 58 FR 4938, Jan. 19,
standard that is set at an amount that 1993]
is no lower than the lowest resource
standard used on or after January 1,
1966, to determine eligibility under the Subpart J—Eligibility in Guam,
cash assistance programs that are re- Puerto Rico, and the Virgin Islands
lated to the State’s covered medically
needy group or groups of individuals SOURCE: 44 FR 17939, Mar. 23, 1979, unless
under § 436.301. otherwise noted.
(b) The resource standard established
under paragraph (a) of this section may § 436.900 Scope.
not diminish by an increase in the This subpart sets forth requirements

number of persons in the assistance for processing applications, deter-
unit. For example, the resource level in mining eligibility, and furnishing Med-
the standard for an assistance unit of icaid.
243
§ 436.901 42 CFR Ch. IV (10–1–17 Edition)
§ 436.901 General requirements. month in which the medical care or

The Medicaid agency must comply services were provided, except that, for
with all the requirements of part 435, beneficiaries who establish eligibility
subpart J, of this subchapter, except for Medicaid by deducting incurred
those specified in § 435.909. medical expenses from income, FFP is
not available for expenses that are the
§ 436.909 Automatic entitlement to beneficiary’s liability.
Medicaid following a determination (c) FFP is available in expenditures
of eligibility under other programs. for services covered under the plan
The agency may not require a sepa- that are furnished—
rate application for Medicaid from an (1) To children who are determined
individual if the individual receives by a qualified entity to be presump-
cash assistance under a State plan for tively eligible;
OAA, AFDC, AB, APTD, or AABD. (2) During a period of presumptive
eligibility;
Subpart K—Federal Financial (3) By a provider that is eligible for
Participation (FFP) payment under the plan; and
§ 436.1000 Scope. (4) Regardless of whether the chil-
dren are determined eligible for Med-
This subpart specifies when, and the icaid following the period of presump-
extent to which, FFP is available in ex- tive eligibility.
penditures for determining eligibility
and for Medicaid services to individ- [43 FR 45218, Sept. 29, 1978, as amended at 44
uals determined eligible under this FR 17940, Mar. 23, 1979; 66 FR 2669, Jan. 11,
part, and prescribes limitations and 2001]
conditions on FFP for those expendi-
tures. § 436.1003 beneficiaries overcoming
certain conditions of eligibility.
FFP FOR EXPENDITURES FOR DETER- FFP is available for a temporary pe-
MINING ELIGIBILITY AND PROVIDING riod specified in the State plan in ex-
SERVICES penditures for services provided to
beneficiaries who are overcoming cer-
§ 436.1001 FFP for administration.
tain eligibility conditions, including
(a) FFP is available in the necessary blindness, disability, continued ab-
administrative costs the State incurs sence or incapacity of a parent, or un-
in— employment of a parent.
(1) Determining and redetermining
Medicaid eligibility and in providing [45 FR 24888, Apr. 11, 1980]
Medicaid to eligible individuals; and
(2) Determining presumptive eligi- § 436.1004 FFP in expenditures for
bility for children and providing serv- medical assistance for individuals
ices to presumptively eligible children. who have declared United States
citizenship or nationality under
(b) Administrative costs include any section 1137(d) of the Act and with
costs incident to an eye examination or respect to whom the State has not
medical examination to determine documented citizenship and iden-
whether an individual is blind or dis- tity.
abled.
Except for individuals described in
[43 FR 45218, Sept. 29, 1978, as amended at 66 § 436.406(a)(1)(v), FFP will not be avail-
FR 2668, Jan. 11, 2001] able to a State with respect to expendi-
§ 436.1002 FFP for services. tures for medical assistance furnished
to individuals unless the State has ob-
(a) FFP is available in expenditures tained satisfactory documentary evi-
for Medicaid services for all bene- dence of citizenship or national status,
ficiaries whose coverage is required or as described in § 436.407 of this chapter
allowed under this part. that complies with the requirements of

(b) FFP is available in expenditures
section 1903(x) of the Act.
for services provided to beneficiaries
who were eligible for Medicaid in the [72 FR 38697, July 13, 2007]
244
§ 436.1005 Institutionalized individ- (b) Scope. This subpart prescribes the

uals. requirements for providing medical as-
(a) FFP is not available in expendi- sistance to special groups who are not
tures for services provided to— eligible for Medicaid as categorically
or medically needy.
(1) Individuals who are inmates of
public institutions as defined in PRESUMPTIVE ELIGIBILITY FOR CHILDREN
§ 435.1010 of this chapter; or
(2) Individuals under age 65 who are § 436.1101 Definitions related to pre-
patients in an institution for mental sumptive eligibility period for chil-
diseases unless they are under age 22 dren.
and are receiving inpatient psychiatric Application form means at a minimum
services under § 440.160 of this sub- the form used to apply for Medicaid
chapter. under the poverty-level-related eligi-
(b) The exclusion of FFP described in bility groups described in section
paragraph (a) of this section does not 1902(l) of the Act or a joint form for
apply during that part of the month in children to apply for the State Chil-
which the individual is not an inmate dren’s Health Insurance Program and
of a public institution or a patient in Medicaid.
an institution for mental diseases. Period of presumptive eligibility means
(c) An individual on conditional re- a period that begins on the date on
lease or convalescent leave from an in- which a qualified entity determines
stitution for mental diseases is not that a child is presumptively eligible
considered to be a patient in that insti- and ends with the earlier of—
tution. However, such an individual (1) In the case of a child on whose be-
who is under age 22 and has been re- half a Medicaid application has been
ceiving inpatient pyschiatric services filed, the day on which a decision is
under § 440.160 of this subchapter is con- made on that application; or
sidered to be a patient in the institu- (2) In the case of a child on whose be-
tion until he is unconditionally re- half a Medicaid application has not
leased or, if earlier, the date he reaches been filed, the last day of the month
age 22. following the month in which the de-
termination of presumptive eligibility
[43 FR 45204, Sept. 29, 1978, as amended at 50 was made.
FR 13200, Apr. 3, 1985; 50 FR 38811, Sept. 25, Presumptive income standard means
1985. Redesignated and amended at 71 FR the highest income eligibility standard
39229, July 12, 2006]
established under the plan that is most
§ 436.1006 Definitions relating to insti- likely to be used to establish the reg-
tutional status. ular Medicaid eligibility of a child of
the age involved.
For purposes of FFP, the definitions Qualified entity means an entity that
in § 435.1010 of this chapter apply to this is determined by the State to be capa-
part. ble of making determinations of pre-
[44 FR 17939, Mar. 23, 1979. Redesignated and sumptive eligibility for children, and
amended at 71 FR 39229, July 12, 2006] that—
(1) Furnishes health care items and
services covered under the approved
Subpart L—Option for Coverage plan and is eligible to receive pay-
of Special Groups ments under the approved plan;
SOURCE: 66 FR 2669, Jan. 11, 2001, unless bility of a child to participate in a
otherwise noted. Head Start program under the Head
Start Act;
§ 436.1100 Basis and scope. (3) Is authorized to determine eligi-
(a) Statutory basis. Section 1920A of bility of a child to receive child care
the Act allows States to provide Med- services for which financial assistance
icaid services to children under age 19 is provided under the Child Care and
during a period of presumptive eligi- Development Block Grant Act of 1990;
bility, prior to a formal determination (4) Is authorized to determine eligi-
of Medicaid eligibility. bility of an infant or child to receive
245
§ 436.1102 42 CFR Ch. IV (10–1–17 Edition)
assistance under the special nutrition presumptive eligibility, the agency

program for women, infants, and chil- must—
dren (WIC) under section 17 of the Child (1) Provide qualified entities with ap-
Nutrition Act of 1966; plication forms for Medicaid and infor-
(5) Is authorized to determine eligi- mation on how to assist parents, care-
bility of a child for medical assistance takers and other persons in completing
under the Medicaid State plan, or eligi- and filing such forms;
bility of a child for child health assist- (2) Establish procedures to ensure
ance under the State Children’s Health that qualified entities—
Insurance Program; (i) Notify the parent or caretaker of
(6) Is an elementary or secondary the child at the time a determination
school, as defined in section 14101 of regarding presumptive eligibility is
the Elementary and Secondary Edu- made, in writing and orally if appro-
cation Act of 1965 (20 U.S.C. 8801); priate, of such determination;
(7) Is an elementary or secondary (ii) Provide the parent or caretaker
school operated or supported by the
of the child with a Medicaid applica-
Bureau of Indian Affairs;
tion form;
(8) Is a State or Tribal child support
(iii) Within 5 working days after the
enforcement agency;
date that the determination is made,
(9) Is an organization that—
notify the agency that a child is pre-
(i) Provides emergency food and shel-
sumptively eligible;
ter under a grant under the Stewart B.
McKinney Homeless Assistance Act; (iv) For children determined to be
(ii) Is a State or Tribal office or enti- presumptively eligible, notify the
ty involved in enrollment in the pro- child’s parent or caretaker at the time
gram under this title, Part A of title the determination is made, in writing
IV, or title XXI; or and orally if appropriate, that—
(iii) Determines eligibility for any (A) If a Medicaid application on be-
assistance or benefits provided under half of the child is not filed by the last
any program of public or assisted hous- day of the following month, the child’s
ing that receives Federal funds, includ- presumptive eligibility will end on that
ing the program under section 8 or any last day; and
other section of the United States (B) If a Medicaid application on be-
Housing Act of 1937 (42 U.S.C. 1437) or half of the child is filed by the last day
under the Native American Housing of the following month, the child’s pre-
Assistance and Self Determination Act sumptive eligibility will end on the day
of 1996 (25 U.S.C. 4101 et seq.); and that a decision is made on the Medicaid
(10) Any other entity the State so application; and
deems, as approved by the Secretary. (v) For children determined not to be
Services means all services covered presumptively eligible, notify the
under the plan including EPSDT (see child’s parent or caretaker at the time
part 440 of this chapter.) the determination is made, in writing
and orally if appropriate—
FR 33822, June 25, 2001] (A) Of the reason for the determina-
tion; and
§ 436.1102 General rules. (B) That he or she may file an appli-
(a) The agency may provide services cation for Medicaid on the child’s be-
to children under age 19 during one or half with the Medicaid agency; and
more periods of presumptive eligibility (3) Provide all services covered under
following a determination made by a the plan, including EPSDT.
qualified entity that the child’s esti- (4) Allow determinations of presump-
mated gross family income or, at the tive eligibility to be made by qualified
State’s option, the child’s estimated entities on a Statewide basis.
family income after applying simple (c) The agency must adopt reasonable
disregards, does not exceed the applica- standards regarding the number of pe-
ble income standard. riods of presumptive eligibility that
(b) If the agency elects to provide will be authorized for a child in a given
services to children during a period of time frame.
246
PART 438—MANAGED CARE 438.214 Provider selection.

438.224 Confidentiality.
438.228 Grievance and appeal systems.
Subpart A—General Provisions 438.230 Subcontractual relationships and
Sec. delegation.
438.1 Basis and scope. 438.236 Practice guidelines.
438.2 Definitions. 438.242 Health information systems.
438.3 Standard contract requirements.
438.4 Actuarial soundness. Subpart E—Quality Measurement and
438.5 Rate development standards. Improvement; External Quality Review
438.6 Special contract provisions related to
438.310 Basis, scope, and applicability.
payment.
438.7 Rate certification submission.
438.330 Quality assessment and performance
438.8 Medical loss ratio (MLR) standards.
improvement program.
438.9 Provisions that apply to non-emer-
438.332 State review of the accreditation
gency medical transportation PAHPs.
status of MCOs, PIHPs, and PAHPs.
438.10 Information requirements.
438.334 Medicaid managed care quality rat-
438.12 Provider discrimination prohibited.
ing system.
438.14 Requirements that apply to MCO,
438.340 Managed care State quality strat-
PIHP, PAHP, PCCM, and PCCM entity
egy.
contracts involving Indians, Indian
438.350 External quality review.
health care providers (IHCPs), and Indian
438.352 External quality review protocols.
managed care entities (IMCEs).
438.354 Qualifications of external quality re-
Subpart B—State Responsibilities view organizations.
438.356 State contract options for external
438.50 State Plan requirements. quality review.
438.52 Choice of MCOs, PIHPs, PAHPs, 438.358 Activities related to external qual-
PCCMs, and PCCM entities. ity review.
438.54 Managed care enrollment. 438.360 Nonduplication of mandatory activi-
438.56 Disenrollment: Requirements and ties with Medicare or accreditation re-
limitations. view.
438.58 Conflict of interest safeguards. 438.362 Exemption from external quality re-
438.60 Prohibition of additional payments view.
for services covered under MCO, PIHP or 438.364 External quality review results.
PAHP contracts. 438.370 Federal financial participation
438.62 Continued services to enrollees. (FFP).
438.66 State monitoring requirements.
438.68 Network adequacy standards. Subpart F—Grievance and Appeal System
438.70 Stakeholder engagement when LTSS
is delivered through a managed care pro- 438.400 Statutory basis, definitions, and ap-
gram. plicability.
438.71 Beneficiary support system. 438.402 General requirements.
438.74 State oversight of the minimum MLR 438.404 Timely and adequate notice of ad-
requirement. verse benefit determination.
438.406 Handling of grievances and appeals.
Subpart C—Enrollee Rights and Protections 438.408 Resolution and notification: Griev-
ances and appeals.
438.100 Enrollee rights. 438.410 Expedited resolution of appeals.
438.102 Provider-enrollee communications. 438.414 Information about the grievance and
438.104 Marketing activities. appeal system to providers and sub-
438.106 Liability for payment. contractors.
438.108 Cost sharing. 438.416 Recordkeeping requirements.
438.110 Member advisory committee. 438.420 Continuation of benefits while the
438.114 Emergency and poststabilization MCO, PIHP, or PAHP appeal and the
services. State fair hearing are pending.
438.116 Solvency standards. 438.424 Effectuation of reversed appeal reso-
lutions.
Subpart D—MCO, PIHP and PAHP
Standards Subpart G [Reserved]
438.206 Availability of services. Subpart H—Additional Program Integrity
438.207 Assurance of adequate capacity and Safeguards
services.
438.208 Coordination and continuity of care. 438.600 Statutory basis, basic rule, and ap-
438.210 Coverage and authorization of serv- plicability.
ices. 438.602 State responsibilities.
247
§ 438.1 42 CFR Ch. IV (10–1–17 Edition)
438.604 Data, information, and documenta- (1) Section 1902(a)(4) of the Act re-
tion that must be submitted. quires that States provide for methods
438.606 Source, content, and timing of cer- of administration that the Secretary
tification.
438.608 Program integrity requirements
finds necessary for proper and efficient
under the contract. operation of the State plan. The appli-
438.610 Prohibited affiliations. cation of the requirements of this part
to PIHPs and PAHPs that do not meet
Subpart I—Sanctions the statutory definition of an MCO or a
438.700 Basis for imposition of sanctions.
PCCM is under the authority in section
438.702 Types of intermediate sanctions. 1902(a)(4) of the Act.
438.704 Amounts of civil money penalties. (2) Section 1903(i)(25) of the Act pro-
438.706 Special rules for temporary manage- hibits payment to a State unless a
ment. State provides enrollee encounter data
438.708 Termination of an MCO, PCCM or required by CMS.
PCCM entity contract.
438.710 Notice of sanction and pre-termi-
(3) Section 1903(m) of the Act con-
nation hearing. tains requirements that apply to com-
438.722 Disenrollment during termination prehensive risk contracts.
hearing process. (4) Section 1903(m)(2)(H) of the Act
438.724 Notice to CMS. provides that an enrollee who loses
438.726 State plan requirement. Medicaid eligibility for not more than
438.730 Sanction by CMS: Special rules for 2 months may be enrolled in the suc-
MCOs.
ceeding month in the same MCO or
Subpart J—Conditions for Federal Financial PCCM if that MCO or PCCM still has a
Participation (FFP) contract with the State.
(5) Section 1905(t) of the Act contains
438.802 Basic requirements. requirements that apply to PCCMs.
438.806 Prior approval.
438.808 Exclusion of entities.
(6) Section 1932 of the Act—
438.810 Expenditures for enrollment broker (i) Provides that, with specified ex-
services. ceptions, a State may require Medicaid
438.812 Costs under risk and nonrisk con- beneficiaries to enroll in MCOs or
tracts. PCCMs.
438.816 Expenditures for the beneficiary sup- (ii) Establishes the rules that MCOs,
port system for enrollees using LTSS.
438.818 Enrollee encounter data. PCCMs, the State, and the contracts
between the State and those entities
Subpart K—Parity in Mental Health and must meet, including compliance with
Substance Use Disorder Benefits requirements in sections 1903(m) and
1905(t) of the Act that are implemented
438.900 Meaning of terms.
in this part.
438.905 Parity requirements for aggregate
lifetime and annual dollar limits. (iii) Establishes protections for en-
438.910 Parity requirements for financial re- rollees of MCOs and PCCMs.
quirements and treatment limitations. (iv) Requires States to develop a
438.915 Availability of information. quality assessment and performance
438.920 Applicability. improvement strategy.
438.930 Compliance dates.
(v) Specifies certain prohibitions
AUTHORITY: Sec. 1102 of the Social Security aimed at the prevention of fraud and
Act (42 U.S.C. 1302). abuse.
SOURCE: 67 FR 41095, June 14, 2002, unless (vi) Provides that a State may not
otherwise noted. enter into contracts with MCOs unless
it has established intermediate sanc-
Subpart A—General Provisions tions that it may impose on an MCO
that fails to comply with specified re-
SOURCE: 81 FR 27853, May 6, 2016, unless quirements.
otherwise noted. (vii) Specifies rules for Indian enroll-
ees, Indian health care providers, and
§ 438.1 Basis and scope. Indian managed care entities.

(a) Statutory basis. This part is based (viii) Makes other minor changes in
on the following statutory sections: the Medicaid program.
248
(b) Scope. This part sets forth re- (2) Rural health clinic services.
quirements, prohibitions, and proce- (3) Federally Qualified Health Center
dures for the provision of Medicaid (FQHC) services.
services through MCOs, PIHPs, PAHPs, (4) Other laboratory and X-ray serv-
PCCMs and PCCM entities. Require- ices.
ments vary depending on the type of (5) Nursing facility (NF) services.
entity and on the authority under (6) Early and periodic screening, di-
which the State contracts with the en- agnostic, and treatment (EPSDT) serv-
tity. Provisions that apply only when ices.
the contract is under a mandatory (7) Family planning services.
managed care program authorized by (8) Physician services.
section 1932(a)(1)(A) of the Act are (9) Home health services.
identified as such. Enrollee means a Medicaid bene-
§ 438.2 Definitions. ficiary who is currently enrolled in an
MCO, PIHP, PAHP, PCCM, or PCCM
As used in this part— entity in a given managed care pro-
Abuse means as the term is defined in gram.
§ 455.2 of this chapter. Enrollee encounter data means the in-
Actuary means an individual who
formation relating to the receipt of
meets the qualification standards es-
any item(s) or service(s) by an enrollee
tablished by the American Academy of
under a contract between a State and a
Actuaries for an actuary and follows
MCO, PIHP, or PAHP that is subject to
the practice standards established by
the requirements of §§ 438.242 and
the Actuarial Standards Board. In this
438.818.
part, Actuary refers to an individual
Federally qualified HMO means an
who is acting on behalf of the State
HMO that CMS has determined is a
when used in reference to the develop-
qualified HMO under section 1310(d) of
ment and certification of capitation
the PHS Act.
rates.
Capitation payment means a payment Fraud means as the term is defined in
the State makes periodically to a con- § 455.2 of this chapter.
tractor on behalf of each beneficiary Health insuring organization (HIO)
enrolled under a contract and based on means a county operated entity, that
the actuarially sound capitation rate in exchange for capitation payments,
for the provision of services under the covers services for beneficiaries—
State plan. The State makes the pay- (1) Through payments to, or arrange-
ment regardless of whether the par- ments with, providers;
ticular beneficiary receives services (2) Under a comprehensive risk con-
during the period covered by the pay- tract with the State; and
ment. (3) Meets the following criteria—
Choice counseling means the provision (i) First became operational prior to
of information and services designed to January 1, 1986; or
assist beneficiaries in making enroll- (ii) Is described in section 9517(c)(3) of
ment decisions; it includes answering the Omnibus Budget Reconciliation
questions and identifying factors to Act of 1985 (as amended by section 4734
consider when choosing among man- of the Omnibus Budget Reconciliation
aged care plans and primary care pro- Act of 1990 and section 205 of the Medi-
viders. Choice counseling does not in- care Improvements for Patients and
clude making recommendations for or Providers Act of 2008).
against enrollment into a specific Long-term services and supports (LTSS)
MCO, PIHP, or PAHP. means services and supports provided
Comprehensive risk contract means a to beneficiaries of all ages who have
risk contract between the State and an functional limitations and/or chronic
MCO that covers comprehensive serv- illnesses that have the primary purpose
ices, that is, inpatient hospital services of supporting the ability of the bene-
and any of the following services, or ficiary to live or work in the setting of
any three or more of the following their choice, which may include the in-
services: dividual’s home, a worksite, a provider-
(1) Outpatient hospital services. owned or controlled residential setting,
249
§ 438.2 42 CFR Ch. IV (10–1–17 Edition)
a nursing facility, or other institu- basis of the incurred costs, subject to

tional setting. the specified limits.
Managed care organization (MCO) Overpayment means any payment
means an entity that has, or is seeking made to a network provider by a MCO,
to qualify for, a comprehensive risk PIHP, or PAHP to which the network
contract under this part, and that is— provider is not entitled to under Title
(1) A Federally qualified HMO that XIX of the Act or any payment to a
meets the advance directives require- MCO, PIHP, or PAHP by a State to
ments of subpart I of part 489 of this which the MCO, PIHP, or PAHP is not
chapter; or entitled to under Title XIX of the Act.
(2) Any public or private entity that Potential enrollee means a Medicaid
meets the advance directives require- beneficiary who is subject to manda-
ments and is determined by the Sec- tory enrollment or may voluntarily
retary to also meet the following con- elect to enroll in a given MCO, PIHP,
ditions: PAHP, PCCM or PCCM entity, but is
(i) Makes the services it provides to not yet an enrollee of a specific MCO,
its Medicaid enrollees as accessible (in PIHP, PAHP, PCCM, or PCCM entity.
terms of timeliness, amount, duration, Prepaid ambulatory health plan
and scope) as those services are to (PAHP) means an entity that—
other Medicaid beneficiaries within the (1) Provides services to enrollees
area served by the entity. under contract with the State, and on
(ii) Meets the solvency standards of the basis of capitation payments, or
§ 438.116. other payment arrangements that do
Managed care program means a man- not use State plan payment rates.
aged care delivery system operated by (2) Does not provide or arrange for,
a State as authorized under sections and is not otherwise responsible for the
1915(a), 1915(b), 1932(a), or 1115(a) of the provision of any inpatient hospital or
Act. institutional services for its enrollees;
Material adjustment means an adjust- and
ment that, using reasonable actuarial
(3) Does not have a comprehensive
judgment, has a significant impact on
risk contract.
the development of the capitation pay-
ment such that its omission or Prepaid inpatient health plan (PIHP)
misstatement could impact a deter- means an entity that—
mination whether the development of (1) Provides services to enrollees
the capitation rate is consistent with under contract with the State, and on
generally accepted actuarial principles the basis of capitation payments, or
and practices. other payment arrangements that do
Network provider means any provider, not use State plan payment rates.
group of providers, or entity that has a (2) Provides, arranges for, or other-
network provider agreement with a wise has responsibility for the provi-
MCO, PIHP, or PAHP, or a subcon- sion of any inpatient hospital or insti-
tractor, and receives Medicaid funding tutional services for its enrollees; and
directly or indirectly to order, refer or (3) Does not have a comprehensive
render covered services as a result of risk contract.
the state’s contract with an MCO, Primary care means all health care
PIHP, or PAHP. A network provider is services and laboratory services cus-
not a subcontractor by virtue of the tomarily furnished by or through a
network provider agreement. general practitioner, family physician,
Nonrisk contract means a contract be- internal medicine physician, obstetri-
tween the State and a PIHP or PAHP cian/gynecologist, pediatrician, or
under which the contractor— other licensed practitioner as author-
(1) Is not at financial risk for changes ized by the State Medicaid program, to
in utilization or for costs incurred the extent the furnishing of those serv-
under the contract that do not exceed ices is legally authorized in the State
the upper payment limits specified in in which the practitioner furnishes

§ 447.362 of this chapter; and them.
(2) May be reimbursed by the State Primary care case management means a
at the end of the contract period on the system under which:
250
(1) A primary care case manager Rate cell means a set of mutually ex-
(PCCM) contracts with the State to clusive categories of enrollees that is
furnish case management services defined by one or more characteristics
(which include the location, coordina- for the purpose of determining the
tion and monitoring of primary health capitation rate and making a capita-
care services) to Medicaid bene- tion payment; such characteristics
ficiaries; or may include age, gender, eligibility
(2) A PCCM entity contracts with the category, and region or geographic
State to provide a defined set of func- area. Each enrollee should be cat-
tions. egorized in one of the rate cells for
Primary care case management entity each unique set of mutually exclusive
(PCCM entity) means an organization benefits under the contract.
that provides any of the following func- Rating period means a period of 12
tions, in addition to primary care case months selected by the State for which
management services, for the State: the actuarially sound capitation rates
(1) Provision of intensive telephonic are developed and documented in the
or face-to-face case management, in- rate certification submitted to CMS as
cluding operation of a nurse triage ad- required by § 438.7(a).
vice line. Risk contract means a contract be-
(2) Development of enrollee care tween the State an MCO, PIHP or
plans. PAHP under which the contractor—
(3) Execution of contracts with and/ (1) Assumes risk for the cost of the
or oversight responsibilities for the ac- services covered under the contract;
tivities of FFS providers in the FFS and
program. (2) Incurs loss if the cost of fur-
(4) Provision of payments to FFS nishing the services exceeds the pay-
providers on behalf of the State. ments under the contract.
State means the Single State agency
(5) Provision of enrollee outreach and
as specified in § 431.10 of this chapter.
education activities.
Subcontractor means an individual or
(6) Operation of a customer service
entity that has a contract with an
call center.
MCO, PIHP, PAHP, or PCCM entity
(7) Review of provider claims, utiliza- that relates directly or indirectly to
tion and practice patterns to conduct the performance of the MCO’s, PIHP’s,
provider profiling and/or practice im- PAHP’s, or PCCM entity’s obligations
provement. under its contract with the State. A
(8) Implementation of quality im- network provider is not a subcon-
provement activities including admin- tractor by virtue of the network pro-
istering enrollee satisfaction surveys vider agreement with the MCO, PIHP,
or collecting data necessary for per- or PAHP.
formance measurement of providers.
(9) Coordination with behavioral § 438.3 Standard contract require-
health systems/providers. ments.
(10) Coordination with long-term (a) CMS review. The CMS must review
services and supports systems/pro- and approve all MCO, PIHP, and PAHP
viders. contracts, including those risk and
Primary care case manager (PCCM) nonrisk contracts that, on the basis of
means a physician, a physician group their value, are not subject to the prior
practice or, at State option, any of the approval requirement in § 438.806. Pro-
following: posed final contracts must be sub-
(1) A physician assistant. mitted in the form and manner estab-
(2) A nurse practitioner. lished by CMS. For States seeking ap-
(3) A certified nurse-midwife. proval of contracts prior to a specific
Provider means any individual or en- effective date, proposed final contracts
tity that is engaged in the delivery of must be submitted to CMS for review
services, or ordering or referring for no later than 90 days prior to the effec-
those services, and is legally author- tive date of the contract.
ized to do so by the State in which it (b) Entities eligible for comprehensive
delivers the services. risk contracts. A State may enter into a
251
§ 438.3 42 CFR Ch. IV (10–1–17 Edition)
comprehensive risk contract only with grams that meet the conditions set
the following: forth in § 438.50(a).
(1) An MCO. (3) The MCO, PIHP, PAHP, PCCM or
(2) The entities identified in section PCCM entity will not, on the basis of
1903(m)(2)(B)(i), (ii), and (iii) of the Act. health status or need for health care
(3) Community, Migrant, and Appa- services, discriminate against individ-
lachian Health Centers identified in uals eligible to enroll.
section 1903(m)(2)(G) of the Act. Unless (4) The MCO, PIHP, PAHP, PCCM or
they qualify for a total exemption PCCM entity will not discriminate
under section 1903(m)(2)(B) of the Act, against individuals eligible to enroll on
these entities are subject to the regula- the basis of race, color, national origin,
tions governing MCOs under this part. sex, sexual orientation, gender iden-
(4) An HIO that arranges for services tity, or disability and will not use any
and became operational before January policy or practice that has the effect of
1986. discriminating on the basis of race,
(5) An HIO described in section color, or national origin, sex, sexual
9517(c)(3) of the Omnibus Budget Rec- orientation gender identity, or dis-
onciliation Act of 1985 (as amended by ability.
section 4734(2) of the Omnibus Budget (e) Services that may be covered by an
Reconciliation Act of 1990). MCO, PIHP, or PAHP. (1) An MCO,
(c) Payment. The following require- PIHP, or PAHP may cover, for enroll-
ments apply to the final capitation ees, services that are in addition to
rate and the receipt of capitation pay- those covered under the State plan as
ments under the contract: follows:
(1) The final capitation rate for each (i) Any services that the MCO, PIHP
MCO, PIHP or PAHP must be: or PAHP voluntarily agree to provide,
(i) Specifically identified in the ap- although the cost of these services can-
plicable contract submitted for CMS not be included when determining the
review and approval. payment rates under paragraph (c) of
(ii) The final capitation rates must this section.
be based only upon services covered (ii) Any services necessary for com-
under the State plan and additional pliance by the MCO, PIHP, or PAHP
services deemed by the State to be nec- with the requirements of subpart K of
essary to comply with the require- this part and only to the extent such
ments of subpart K of this part (apply- services are necessary for the MCO,
ing parity standards from the Mental PIHP, or PAHP to comply with
Health Parity and Addiction Equity § 438.910.
Act), and represent a payment amount (2) An MCO, PIHP, or PAHP may
that is adequate to allow the MCO, cover, for enrollees, services or settings
PIHP or PAHP to efficiently deliver that are in lieu of services or settings
covered services to Medicaid-eligible covered under the State plan as fol-
individuals in a manner compliant with lows:
contractual requirements. (i) The State determines that the al-
(2) Capitation payments may only be ternative service or setting is a medi-
made by the State and retained by the cally appropriate and cost effective
MCO, PIHP or PAHP for Medicaid-eli- substitute for the covered service or
gible enrollees. setting under the State plan;
(d) Enrollment discrimination prohib- (ii) The enrollee is not required by
ited. Contracts with MCOs, PIHPs, the MCO, PIHP, or PAHP to use the al-
PAHPs, PCCMs and PCCM entities ternative service or setting;
must provide as follows: (iii) The approved in lieu of services
(1) The MCO, PIHP, PAHP, PCCM or are authorized and identified in the
PCCM entity accepts individuals eligi- MCO, PIHP, or PAHP contract, and
ble for enrollment in the order in will be offered to enrollees at the op-
which they apply without restriction tion of the MCO, PIHP, or PAHP; and
(unless authorized by CMS), up to the (iv) The utilization and actual cost of
limits set under the contract. in lieu of services is taken into account
(2) Enrollment is voluntary, except in in developing the component of the
the case of mandatory enrollment pro- capitation rates that represents the
252
covered State plan services, unless a ments set forth in §§ 422.208 and 422.210
statute or regulation explicitly re- of this chapter.
quires otherwise. (2) In applying the provisions of
(f) Compliance with applicable laws and §§ 422.208 and 422.210 of this chapter, ref-
conflict of interest safeguards. All con- erences to ‘‘MA organization,’’ ‘‘CMS,’’
tracts with MCOs, PIHPs, PAHPs, and ‘‘Medicare beneficiaries’’ must be
PCCMs and PCCM entities must: read as references to ‘‘MCO, PIHP, or
(1) Comply with all applicable Fed- PAHP,’’ ‘‘State,’’ and ‘‘Medicaid bene-
eral and State laws and regulations in- ficiaries,’’ respectively.
cluding Title VI of the Civil Rights Act (j) Advance directives. (1) All MCO and
of 1964; Title IX of the Education PIHP contracts must provide for com-
Amendments of 1972 (regarding edu- pliance with the requirements of
cation programs and activities); the § 422.128 of this chapter for maintaining
Age Discrimination Act of 1975; the Re- written policies and procedures for ad-
habilitation Act of 1973; the Americans vance directives, as if such regulation
with Disabilities Act of 1990 as amend- applied directly to MCOs and PIHPs.
ed; and section 1557 of the Patient Pro- (2) All PAHP contracts must provide
tection and Affordable Care Act. for compliance with the requirements
(2) Comply with the conflict of inter- of § 422.128 of this chapter for maintain-
est safeguards described in § 438.58 and ing written policies and procedures for
with the prohibitions described in sec- advance directives as if such regulation
tion 1902(a)(4)(C) of the Act applicable applied directly to PAHPs if the PAHP
to contracting officers, employees, or includes, in its network, any of those
independent contractors. providers listed in § 489.102(a) of this
(g) Provider-preventable condition re- chapter.
quirements. All contracts with MCOs, (3) The MCO, PIHP, or PAHP subject
PIHPs and PAHPs must comply with to the requirements of this paragraph
the requirements mandating provider (j) must provide adult enrollees with
identification of provider-preventable written information on advance direc-
conditions as a condition of payment, tives policies, and include a description
as well as the prohibition against pay- of applicable State law.
ment for provider-preventable condi- (4) The information must reflect
tions as set forth in § 434.6(a)(12) and changes in State law as soon as pos-
§ 447.26 of this chapter. MCOs, PIHPs, sible, but no later than 90 days after
and PAHPs, must report all identified the effective date of the change.
provider-preventable conditions in a (k) Subcontracts. All subcontracts
form and frequency as specified by the must fulfill the requirements of this
State. part for the service or activity dele-
(h) Inspection and audit of records and gated under the subcontract in accord-
access to facilities. All contracts must ance with § 438.230.
provide that the State, CMS, the Office (l) Choice of network provider. The
of the Inspector General, the Comp- contract must allow each enrollee to
troller General, and their designees choose his or her network provider to
may, at any time, inspect and audit the extent possible and appropriate.
any records or documents of the MCO, (m) Audited financial reports. The con-
PIHP, PAHP, PCCM or PCCM entity, tract must require MCOs, PIHPs, and
or its subcontractors, and may, at any PAHPs to submit audited financial re-
time, inspect the premises, physical fa- ports specific to the Medicaid contract
cilities, and equipment where Med- on an annual basis. The audit must be
icaid-related activities or work is con- conducted in accordance with gen-
ducted. The right to audit under this erally accepted accounting principles
section exists for 10 years from the and generally accepted auditing stand-
final date of the contract period or ards.
from the date of completion of any (n) Parity in mental health and sub-
audit, whichever is later. stance use disorder benefits. (1) All MCO
(i) Physician incentive plans. (1) MCO, contracts, and any PIHP and PAHP
PIHP, and PAHP contracts must pro- contracts providing services to MCO
vide for compliance with the require- enrollees, must provide for services to
253
§ 438.3 42 CFR Ch. IV (10–1–17 Edition)
be delivered in compliance with the re- ment, based on the beneficiary’s health
quirements of subpart K of this part in- status or need for health care services.
sofar as those requirements are appli- (5) Provide that enrollees have the
cable. right to disenroll in accordance with
(2) Any State providing any services § 438.56(c).
to MCO enrollees using a delivery sys- (r) Additional rules for contracts with
tem other than the MCO delivery sys- PCCM entities. In addition to the re-
tem must provide documentation of quirements in paragraph (q) of this sec-
how the requirements of subpart K of tion, States must submit PCCM entity
this part are met with the submission contracts to CMS for review and ap-
of the MCO contract for review and approval to ensure compliance with the
proval under paragraph (a) of this sec- provisions of this paragraph (r); § 438.10;
tion. and § 438.310(c)(2).
(o) LTSS contract requirements. Any (s) Requirements for MCOs, PIHPs, or
contract with an MCO, PIHP or PAHP PAHPs that provide covered outpatient
that includes LTSS as a covered ben- drugs. Contracts that obligate MCOs,
efit must require that any services cov- PIHPs or PAHPs to provide coverage of
ered under the contract that could be covered outpatient drugs must include
authorized through a waiver under sec- the following requirements:
tion 1915(c) of the Act or a State plan (1) The MCO, PIHP or PAHP provides
amendment authorized through sec- coverage of covered outpatient drugs as
tions 1915(i) or 1915(k) of the Act be de- defined in section 1927(k)(2) of the Act,
livered in settings consistent with that meets the standards for such cov-
§ 441.301(c)(4) of this chapter. erage imposed by section 1927 of the
(p) Special rules for certain HIOs. Con- Act as if such standards applied di-
tracts with HIOs that began operating rectly to the MCO, PIHP, or PAHP.
on or after January 1, 1986, and that (2) The MCO, PIHP, or PAHP reports
the statute does not explicitly exempt drug utilization data that is necessary
from requirements in section 1903(m) of for States to bill manufacturers for re-
the Act, are subject to all the require- bates in accordance with section
ments of this part that apply to MCOs 1927(b)(1)(A) of the Act no later than 45
and contracts with MCOs. These HIOs calendar days after the end of each
may enter into comprehensive risk quarterly rebate period. Such utiliza-
contracts only if they meet the criteria tion information must include, at a
of paragraph (b) of this section. minimum, information on the total
(q) Additional rules for contracts with number of units of each dosage form,
PCCMs. A PCCM contract must meet strength, and package size by National
the following requirements: Drug Code of each covered outpatient
(1) Provide for reasonable and ade- drug dispensed or covered by the MCO,
quate hours of operation, including 24- PIHP, or PAHP.
hour availability of information, refer- (3) The MCO, PIHP or PAHP estab-
ral, and treatment for emergency med- lishes procedures to exclude utilization
ical conditions. data for covered outpatient drugs that
(2) Restrict enrollment to bene- are subject to discounts under the 340B
ficiaries who reside sufficiently near drug pricing program from the reports
one of the PCCM’s delivery sites to required under paragraph (s)(2) of this
reach that site within a reasonable section when states do not require sub-
time using available and affordable mission of managed care drug claims
modes of transportation. data from covered entities directly.
(3) Provide for arrangements with, or (4) The MCO, PIHP or PAHP must op-
referrals to, sufficient numbers of phy- erate a drug utilization review program
sicians and other practitioners to en- that complies with the requirements
sure that services under the contract described in section 1927(g) of the Act
can be furnished to enrollees promptly and 42 CFR part 456, subpart K, as if
and without compromise to quality of such requirement applied to the MCO,

care. PIHP, or PAHP instead of the State.
(4) Prohibit discrimination in enroll- (5) The MCO, PIHP or PAHP must
ment, disenrollment, and re-enroll- provide a detailed description of its
254
drug utilization review program activi- must be reviewed and approved by CMS
ties to the State on an annual basis. as actuarially sound. To be approved
(6) The MCO, PIHP or PAHP must by CMS, capitation rates must:
conduct a prior authorization program (1) Have been developed in accord-
that complies with the requirements of ance with standards specified in § 438.5
section 1927(d)(5) of the Act, as if such and generally accepted actuarial prin-
requirements applied to the MCO, ciples and practices. Any proposed dif-
PIHP, or PAHP instead of the State. ferences among capitation rates ac-
(t) Requirements for MCOs, PIHPs, or cording to covered populations must be
PAHPs responsible for coordinating bene- based on valid rate development stand-
fits for dually eligible individuals. In a ards and not based on the rate of Fed-
State that enters into a Coordination eral financial participation associated
of Benefits Agreement with Medicare with the covered populations.
for FFS, an MCO, PIHP, or PAHP con- (2) Be appropriate for the populations
tract that includes responsibility for to be covered and the services to be
coordination of benefits for individuals furnished under the contract.
dually eligible for Medicaid and Medi- (3) Be adequate to meet the require-
care must require the MCO, PIHP, or ments on MCOs, PIHPs, and PAHPs in
PAHP to enter into a Coordination of §§ 438.206, 438.207, and 438.208.
Benefits Agreement with Medicare and (4) Be specific to payments for each
participate in the automated claims rate cell under the contract.
crossover process. (5) Payments from any rate cell must
(u) Recordkeeping requirements. MCOs,
not cross-subsidize or be cross-sub-
PIHPs, and PAHPs must retain, and re-
sidized by payments for any other rate
quire subcontractors to retain, as ap-
cell.
plicable, the following information: en-
(6) Be certified by an actuary as
rollee grievance and appeal records in
meeting the applicable requirements of
§ 438.416, base data in § 438.5(c), MLR re-
this part, including that the rates have
ports in § 438.8(k), and the data, infor-
been developed in accordance with the
mation, and documentation specified
requirements specified in § 438.3(c)(1)(ii)
in §§ 438.604, 438.606, 438.608, and 438.610
and (e).
for a period of no less than 10 years.
(v) Applicability date. Sections 438.3(h) (7) Meet any applicable special con-
and (q) apply to the rating period for tract provisions as specified in § 438.6.
contracts with MCOs, PIHPs, PAHPs, (8) Be provided to CMS in a format
PCCMs, and PCCM entities beginning and within a timeframe that meets re-
on or after July 1, 2017. Until that ap- quirements in § 438.7.
plicability date, states are required to (9) Be developed in such a way that
continue to comply with § 438.6(g) and the MCO, PIHP, or PAHP would rea-
(k) contained in the 42 CFR, parts 430 sonably achieve a medical loss ratio
to 481, edition revised as of October 1, standard, as calculated under § 438.8, of
2015. at least 85 percent for the rate year.
The capitation rates may be developed
§ 438.4 Actuarial soundness. in such a way that the MCO, PIHP, or
(a) Actuarially sound capitation rates PAHP would reasonably achieve a med-
defined. Actuarially sound capitation ical loss ratio standard greater than 85
rates are projected to provide for all percent, as calculated under § 438.8, as
reasonable, appropriate, and attainable long as the capitation rates are ade-
costs that are required under the terms quate for reasonable, appropriate, and
of the contract and for the operation of attainable non-benefit costs.
the MCO, PIHP, or PAHP for the time
§ 438.5 Rate development standards.
period and the population covered
under the terms of the contract, and (a) Definitions. As used in this section
such capitation rates are developed in and § 438.7(b), the following terms have
accordance with the requirements in the indicated meanings:
paragraph (b) of this section. Budget neutral means a standard for

(b) CMS review and approval of actu- any risk sharing mechanism that rec-
arially sound capitation rates. Capitation ognizes both higher and lower expected
rates for MCOs, PIHPs, and PAHPs costs among contracted MCOs, PIHPs,
255
§ 438.5 42 CFR Ch. IV (10–1–17 Edition)
or PAHPs under a managed care pro- PAHP’s provision of State plan serv-
gram and does not create a net aggre- ices to Medicaid enrollees.
gate gain or loss across all payments (4) Consistent with paragraph (f) of
under that managed care program. this section, make appropriate and rea-
Prospective risk adjustment means a sonable adjustments to account for
methodology to account for antici- changes to the base data, pro-
pated variation in risk levels among grammatic changes, non-benefit com-
contracted MCOs, PIHPs, or PAHPs ponents, and any other adjustment
that is derived from historical experi- necessary to establish actuarially
ence of the contracted MCOs, PIHPs, or sound rates.
PAHPs and applied to rates for the rat- (5) Take into account the MCO’s,
ing period for which the certification is PIHP’s, or PAHP’s past medical loss
submitted. ratio, as calculated and reported under
Retrospective risk adjustment means a § 438.8, in the development of the capi-
methodology to account for variation tation rates, and consider the projected
in risk levels among contracted MCOs, medical loss ratio in accordance with
PIHPs, or PAHPs that is derived from § 438.4(b)(9).
experience concurrent with the rating (6) Consistent with paragraph (g) of
period of the contracted MCOs, PIHPs, this section, if risk adjustment is ap-
or PAHPs subject to the adjustment plied, select a risk adjustment method-
and calculated at the expiration of the ology that uses generally accepted
rating period. models and apply it in a budget neutral
manner across all MCOs, PIHPs, or
Risk adjustment is a methodology to
PAHPs in the program to calculate ad-
account for the health status of enroll-
justments to the payments as nec-
ees via relative risk factors when pre-
essary.
dicting or explaining costs of services
(c) Base data. (1) States must provide
covered under the contract for defined
all the validated encounter data, FFS
populations or for evaluating retro-
data (as appropriate), and audited fi-
spectively the experience of MCOs,
nancial reports (as defined in § 438.3(m))
PIHPs, or PAHPs contracted with the
that demonstrate experience for the
State. populations to be served by the MCO,
(b) Process and requirements for setting PIHP, or PAHP to the actuary devel-
actuarially sound capitation rates. In set- oping the capitation rates for at least
ting actuarially sound capitation rates, the three most recent and complete
the State must follow the steps below, years prior to the rating period.
in an appropriate order, in accordance (2) States and their actuaries must
with this section, or explain why they use the most appropriate data, with
are not applicable: the basis of the data being no older
(1) Consistent with paragraph (c) of than from the 3 most recent and com-
this section, identify and develop the plete years prior to the rating period,
base utilization and price data. for setting capitation rates. Such base
(2) Consistent with paragraph (d) of data must be derived from the Med-
this section, develop and apply trend icaid population, or, if data on the
factors, including cost and utilization, Medicaid population is not available,
to base data that are developed from derived from a similar population and
actual experience of the Medicaid pop- adjusted to make the utilization and
ulation or a similar population in ac- price data comparable to data from the
cordance with generally accepted actu- Medicaid population. Data must be in
arial practices and principles. accordance with actuarial standards
(3) Consistent with paragraph (e) of for data quality and an explanation of
this section, develop the non-benefit why that specific data is used must be
component of the rate to account for provided in the rate certification.
reasonable expenses related to MCO, (3) Exception. (i) States that are un-
PIHP, or PAHP administration; taxes; able to base their rates on data meet-
licensing and regulatory fees; contribu- ing the qualifications in paragraph

tion to reserves; risk margin; cost of (c)(2) of this section that the basis of
capital; and other operational costs as- the data be no older than from the 3
sociated with the MCO’s, PIHP’s, or most recent and complete years prior
256
to the rating period may request ap- given contract year subject to the
proval for an exception; the request schedule in paragraph (d)(3) of this sec-
must describe why an exception is nection.
essary and describe the actions the Incentive arrangement means any pay-
state intends to take to come into ment mechanism under which a MCO,
compliance with those requirements. PIHP, or PAHP may receive additional
(ii) States that request an exception funds over and above the capitation
from the base data standards estab- rates it was paid for meeting targets
lished in this section must set forth a specified in the contract.
corrective action plan to come into Pass-through payment is any amount
compliance with the base data stand- required by the State to be added to
ards no later than 2 years from the rat- the contracted payment rates, and con-
ing period for which the deficiency was sidered in calculating the actuarially
identified. sound capitation rate, between the
(d) Trend. Each trend must be reason- MCO, PIHP, or PAHP and hospitals,
able and developed in accordance with physicians, or nursing facilities that is
generally accepted actuarial principles not for the following purposes: A spe-
and practices. Trend must be developed cific service or benefit provided to a
primarily from actual experience of the specific enrollee covered under the con-
Medicaid population or from a similar tract; a provider payment methodology
population. permitted under paragraphs (c)(1)(i)
(e) Non-benefit component of the rate. through (iii) of this section for services
The development of the non-benefit and enrollees covered under the con-
component of the rate must include tract; a subcapitated payment arrange-
reasonable, appropriate, and attainable ment for a specific set of services and
expenses related to MCO, PIHP, or enrollees covered under the contract;
PAHP administration, taxes, licensing GME payments; or FQHC or RHC wrap
and regulatory fees, contribution to re- around payments.
serves, risk margin, cost of capital, and Risk corridor means a risk sharing
other operational costs associated with mechanism in which States and MCOs,
the provision of services identified in PIHPs, or PAHPs may share in profits
§ 438.3(c)(1)(ii) to the populations cov- and losses under the contract outside
ered under the contract. of a predetermined threshold amount.
(f) Adjustments. Each adjustment Withhold arrangement means any pay-
must reasonably support the development mechanism under which a por-
ment of an accurate base data set for tion of a capitation rate is withheld
purposes of rate setting, address appro- from an MCO, PIHP, or PAHP and a
priate programmatic changes, reflect portion of or all of the withheld
the health status of the enrolled popu- amount will be paid to the MCO, PIHP,
lation, or reflect non-benefit costs, and or PAHP for meeting targets specified
be developed in accordance with gen- in the contract. The targets for a with-
erally accepted actuarial principles hold arrangement are distinct from
and practices. general operational requirements
(g) Risk adjustment. Prospective or under the contract. Arrangements that
retrospective risk adjustment meth- withhold a portion of a capitation rate
odologies must be developed in a budg- for noncompliance with general oper-
et neutral manner consistent with gen- ational requirements are a penalty and
erally accepted actuarial principles not a withhold arrangement.
and practices. (b) Basic requirements. (1) If used in
the payment arrangement between the
§ 438.6 Special contract provisions re- State and the MCO, PIHP, or PAHP, all
lated to payment. applicable risk-sharing mechanisms,
(a) Definitions. As used in this part, such as reinsurance, risk corridors, or
the following terms have the indicated stop-loss limits, must be described in
meanings: the contract, and must be developed in
Base amount is the starting amount, accordance with § 438.4, the rate devel-
calculated according to paragraph opment standards in § 438.5, and gen-
(d)(2) of this section, available for pass- erally accepted actuarial principles
through payments to hospitals in a and practices.
257
§ 438.6 42 CFR Ch. IV (10–1–17 Edition)
(2) Contracts with incentive arrange- (iii) Made available to both public
ments may not provide for payment in and private contractors under the same
excess of 105 percent of the approved terms of performance.
capitation payments attributable to (iv) Does not condition MCO, PIHP,
the enrollees or services covered by the or PAHP participation in the withhold
incentive arrangement, since such arrangement on the MCO, PIHP, or
total payments will not be considered PAHP entering into or adhering to
to be actuarially sound. For all incen- intergovernmental transfer agree-
tive arrangements, the contract must ments.
provide that the arrangement is— (v) Necessary for the specified activi-
(i) For a fixed period of time and per- ties, targets, performance measures, or
formance is measured during the rating quality-based outcomes that support
period under the contract in which the program initiatives as specified in the
incentive arrangement is applied. State’s quality strategy under § 438.340.
(ii) Not to be renewed automatically. (c) Delivery system and provider pay-
(iii) Made available to both public ment initiatives under MCO, PIHP, or
and private contractors under the same PAHP contracts—(1) General rule. Except
terms of performance. as specified in this paragraph (c), in
(iv) Does not condition MCO, PIHP, paragraph (d) of this section, in a spe-
or PAHP participation in the incentive cific provision of Title XIX, or in an-
arrangement on the MCO, PIHP, or other regulation implementing a Title
PAHP entering into or adhering to XIX provision related to payments to
intergovernmental transfer agree- providers, that is applicable to man-
ments. aged care programs, the State may not
(v) Necessary for the specified activi- direct the MCO’s, PIHP’s or PAHP’s ex-
ties, targets, performance measures, or penditures under the contract.
quality-based outcomes that support (i) The State may require the MCO,
program initiatives as specified in the PIHP or PAHP to implement value-
State’s quality strategy at § 438.340. based purchasing models for provider
(3) Contracts that provide for a with- reimbursement, such as pay for per-
hold arrangement must ensure that the formance arrangements, bundled pay-
capitation payment minus any portion ments, or other service payment mod-
of the withhold that is not reasonably els intended to recognize value or out-
achievable is actuarially sound as de- comes over volume of services.
termined by an actuary. The total (ii) The State may require MCOs,
amount of the withhold, achievable or PIHPs, or PAHPs to participate in a
not, must be reasonable and take into multi-payer or Medicaid-specific deliv-
consideration the MCO’s, PIHP’s or ery system reform or performance im-
PAHP’s financial operating needs ac- provement initiative.
counting for the size and characteris- (iii) The State may require the MCO,
tics of the populations covered under PIHP or PAHP to:
the contract, as well as the MCO’s, (A) Adopt a minimum fee schedule
PIHP’s or PAHP’s capital reserves as for network providers that provide a
measured by the risk-based capital particular service under the contract;
level, months of claims reserve, or or
other appropriate measure of reserves. (B) Provide a uniform dollar or per-
The data, assumptions, and methodolo- centage increase for network providers
gies used to determine the portion of that provide a particular service under
the withhold that is reasonably achiev- the contract.
able must be submitted as part of the (C) Adopt a maximum fee schedule
documentation required under for network providers that provide a
§ 438.7(b)(6). For all withhold arrange- particular service under the contract,
ments, the contract must provide that so long as the MCO, PIHP, or PAHP re-
the arrangement is— tains the ability to reasonably manage
(i) For a fixed period of time and per- risk and has discretion in accom-
formance is measured during the rating plishing the goals of the contract.
period under the contract in which the (2) Process for approval. (i) All con-
withhold arrangement is applied. tract arrangements that direct the
(ii) Not to be renewed automatically. MCO’s, PIHP’s or PAHP’s expenditures
258
under paragraphs (c)(1)(i) through (iii) pass-through payments (as defined in

of this section must be developed in ac- paragraph (a) of this section) to net-
cordance with § 438.4, the standards work providers that are hospitals, phy-
specified in § 438.5, generally accepted sicians, or nursing facilities under the
actuarial principles and practices, and contract, provided the requirements of
have written approval prior to imple- this paragraph (d) are met. States may
mentation. To obtain written approval, not require MCOs, PIHPs, and PAHPs
a state must demonstrate, in writing, to make pass-through payments other
that the arrangement— than those permitted under this para-
(A) Is based on the utilization and de- graph (d).
livery of services; (i) In order to use a transition period
(B) Directs expenditures equally, and described in this paragraph (d), a State
using the same terms of performance, must demonstrate that it had pass-
for a class of providers providing the through payments for hospitals, physi-
service under the contract; cians, or nursing facilities in:
(C) Expects to advance at least one of (A) Managed care contract(s) and
the goals and objectives in the quality rate certification(s) for the rating pe-
strategy in § 438.340; riod that includes July 5, 2016, and were
(D) Has an evaluation plan that submitted for CMS review and approval
measures the degree to which the ar- on or before July 5, 2016; or
rangement advances at least one of the (B) If the managed care contract(s)
goals and objectives in the quality and rate certification(s) for the rating
strategy in § 438.340; period that includes July 5, 2016 had
(E) Does not condition network pro- not been submitted to CMS on or be-
vider participation in contract ar- fore July 5, 2016, the managed care con-
rangements under paragraphs (c)(1)(i) tract(s) and rate certification(s) for a
through (iii) of this section on the net- rating period before July 5, 2016 that
work provider entering into or adher- had been most recently submitted for
ing to intergovernmental transfer CMS review and approval as of July 5,
agreements; and 2016.
(F) May not be renewed automati- (ii) CMS will not approve a retro-
cally. active adjustment or amendment, not-
(ii) Any contract arrangements that withstanding the adjustments to the
direct the MCO’s, PIHP’s or PAHP’s ex- base amount permitted in paragraph
penditures under paragraphs (c)(1)(i) or (d)(2) of this section, to managed care
(c)(1)(ii) of this section must also dem- contract(s) and rate certification(s) to
onstrate, in writing, that the arrange- add new pass-through payments or in-
ment— crease existing pass-through payments
(A) Must make participation in the defined in paragraph (a) of this section.
value-based purchasing initiative, de- (2) Calculation of the base amount. The
livery system reform or performance base amount of pass-through payments
improvement initiative available, is the sum of the results of paragraphs
using the same terms of performance, (d)(2)(i) and (ii) of this section.
to a class of providers providing serv- (i) For inpatient and outpatient hos-
ices under the contract related to the pital services that will be provided to
reform or improvement initiative; eligible populations through the MCO,
(B) Must use a common set of per- PIHP, or PAHP contracts for the rat-
formance measures across all of the ing period that includes pass-through
payers and providers; payments and that were provided to
(C) May not set the amount or fre- the eligible populations under MCO,
quency of the expenditures; and PIHP, or PAHP contracts two years
(D) Does not allow the State to re- prior to the rating period, the State
coup any unspent funds allocated for must determine reasonable estimates
these arrangements from the MCO, of the aggregate difference between:
PIHP, or PAHP. (A) The amount Medicare FFS would
(d) Pass-through payments under MCO, have paid for those inpatient and out-
PIHP, and PAHP contracts—(1) General patient hospital services utilized by
rule. States may continue to require the eligible populations under the
MCOs, PIHPs, and PAHPs to make MCO, PIHP, or PAHP contracts for the
259
§ 438.6 42 CFR Ch. IV (10–1–17 Edition)
12-month period immediately two years tract but must be phased out no longer
prior to the rating period that will in- than on the 10-year schedule, beginning
clude pass-through payments; and with rating periods for contract(s) that
(B) The amount the MCOs, PIHPs, or start on or after July 1, 2017. For rating
PAHPs paid (not including pass periods for contract(s) beginning on or
through payments) for those inpatient after July 1, 2027, the State cannot re-
and outpatient hospital services uti- quire pass-through payments for hos-
lized by the eligible populations under pitals under a MCO, PIHP, or PAHP
MCO, PIHP, or PAHP contracts for the contract. Until July 1, 2027, the total
12-month period immediately 2 years dollar amount of pass-through pay-
prior to the rating period that will in- ments to hospitals may not exceed the
clude pass-through payments. lesser of:
(ii) For inpatient and outpatient hos- (i) A percentage of the base amount,
pital services that will be provided to beginning with 100 percent for rating
eligible populations through the MCO, periods for contract(s) beginning on or
PIHP, or PAHP contracts for the rat- after July 1, 2017, and decreasing by 10
ing period that includes pass-through percentage points each successive year;
payments and that were provided to or
the eligible populations under Medicaid (ii) The total dollar amount of pass-
FFS for the 12-month period imme- through payments to hospitals identi-
diately 2 years prior to the rating pe- fied in the managed care contract(s)
riod, the State must determine reason- and rate certification(s) used to meet
able estimates of the aggregate dif- the requirement of paragraph (d)(1)(i)
ference between: of this section.
(A) The amount Medicare FFS would
(4) Documentation of the base amount
have paid for those inpatient and out-
for pass-through payments to hospitals.
patient hospital services utilized by
All contract arrangements that direct
the eligible populations under Medicaid
pass-through payments under the
FFS for the 12-month period imme-
MCO’s, PIHP’s or PAHP’s contract for
diately 2 years prior to the rating pe-
hospitals must document the calcula-
riod that will include pass-through
payments; and tion of the base amount in the rate cer-
(B) The amount the State paid under tification required in § 438.7. The docu-
Medicaid FFS (not including pass mentation must include the following:
through payments) for those inpatient (i) The data, methodologies, and as-
and outpatient hospital services uti- sumptions used to calculate the base
lized by the eligible populations for the amount;
12-month period immediately 2 years (ii) The aggregate amounts cal-
prior to the rating period that will in- culated for paragraphs (d)(2)(i)(A),
clude pass-through payments. (d)(2)(i)(B), (d)(2)(ii)(A), (d)(2)(ii)(B) of
(iii) The base amount must be cal- this section; and
culated on an annual basis and is recal- (iii) The calculation of the applicable
culated annually. percentage of the base amount avail-
(iv) States may calculate reasonable able for pass-through payments under
estimates of the aggregate differences the schedule in paragraph (d)(3) of this
in paragraphs (d)(2)(i) and (ii) of this section.
section in accordance with the upper (5) Pass-through payments to physi-
payment limit requirements in 42 CFR cians or nursing facilities. For States
part 447. that meet the requirement in para-
(3) Schedule for the reduction of the graph (d)(1)(i) of this section, rating pe-
base amount of pass-through payments riods for contract(s) beginning on or
for hospitals under the MCO, PIHP, or after July 1, 2017 through rating peri-
PAHP contract and maximum amount of ods for contract(s) beginning on or
permitted pass-through payments for each after July 1, 2021, may continue to re-
year of the transition period. For States quire pass-through payments to physi-
that meet the requirement in para- cians or nursing facilities under the
graph (d)(1)(i) of this section, pass- MCO, PIHP, or PAHP contract of no
through payments for hospitals may more than the total dollar amount of
continue to be required under the con- pass-through payments to physicians
260
or nursing facilities, respectively, iden- nation of why any base data requested
tified in the managed care contract(s) was not provided by the State) and of
and rate certification(s) used to meet how the actuary determined which
the requirement of paragraph (d)(1)(i) base data set was appropriate to use for
of this section. For rating periods for the rating period.
contract(s) beginning on or after July (2) Trend. Each trend factor, includ-
1, 2022, the State cannot require pass- ing trend factors for changes in the uti-
through payments for physicians or lization and price of services, applied
nursing facilities under a MCO, PIHP, to develop the capitation rates must be
or PAHP contract.
adequately described with enough de-
(e) Payments to MCOs and PIHPs for
tail so CMS or an actuary applying
enrollees that are a patient in an institu-
generally accepted actuarial principles
tion for mental disease. The State may
make a monthly capitation payment to and practices can understand and
an MCO or PIHP for an enrollee aged evaluate the following:
21–64 receiving inpatient treatment in (i) The calculation of each trend used
an Institution for Mental Diseases, as for the rating period and the reason-
defined in § 435.1010 of this chapter, so ableness of the trend for the enrolled
long as the facility is a hospital pro- population.
viding psychiatric or substance use dis- (ii) Any meaningful difference in how
order inpatient care or a sub-acute fa- a trend differs between the rate cells,
cility providing psychiatric or sub- service categories, or eligibility cat-
stance use disorder crisis residential egories.
services, and length of stay in the IMD (3) Non-benefit component of the rate.
is for a short term stay of no more The development of the non-benefit
than 15 days during the period of the component of the rate must be ade-
monthly capitation payment. The pro- quately described with enough detail so
vision of inpatient psychiatric or sub- CMS or an actuary applying generally
stance use disorder treatment in an accepted actuarial principles and prac-
IMD must meet the requirements for in tices can identify each type of non-ben-
lieu of services at § 438.3(e)(2)(i) efit expense that is included in the rate
through (iii). For purposes of rate set- and evaluate the reasonableness of the
ting, the state may use the utilization cost assumptions underlying each ex-
of services provided to an enrollee pense. The actuary may document the
under this section when developing the non-benefit costs according to the
inpatient psychiatric or substance use types of non-benefit costs under
disorder component of the capitation
§ 438.5(e).
rate, but must price utilization at the
(4) Adjustments. All adjustments used
cost of the same services through pro-
viders included under the State plan. to develop the capitation rates must be
adequately described with enough de-
[81 FR 27853, May 6, 2016, as amended at 82 tail so that CMS, or an actuary apply-
FR 39, Jan. 3, 2017; 82 FR 5428, Jan. 18, 2017] ing generally accepted actuarial prin-
§ 438.7 Rate certification submission. ciples and practices, can understand
and evaluate all of the following:
(a) CMS review and approval of the rate (i) How each material adjustment
certification. States must submit to was developed and the reasonableness
CMS for review and approval, all MCO, of the material adjustment for the en-
PIHP, and PAHP rate certifications
rolled population.
concurrent with the review and ap-
(ii) The cost impact of each material
proval process for contracts as speci-
fied in § 438.3(a). adjustment and the aggregate cost im-
(b) Documentation. The rate certifi- pact of non-material adjustments.
cation must contain the following in- (iii) Where in the rate setting process
formation: the adjustment was applied.
(1) Base data. A description of the (iv) A list of all non-material adjust-
ments used in the rate development
base data used in the rate setting proc-

ess (including the base data requested process.
by the actuary, the base data that was (5) Risk adjustment. (i) All prospective
provided by the State, and an expla- risk adjustment methodologies must be
261
§ 438.7 42 CFR Ch. IV (10–1–17 Edition)
adequately described with enough de- (c) Rates paid under risk contracts. The
tail so that CMS or an actuary apply- State, through its actuary, must cer-
ing generally accepted actuarial prin- tify the final capitation rate paid per
ciples and practices can understand rate cell under each risk contract and
and evaluate the following: document the underlying data, assump-
(A) The data, and any adjustments to tions and methodologies supporting
that data, to be used to calculate the that specific capitation rate.
adjustment. (1) The State may pay each MCO,
(B) The model, and any adjustments PIHP or PAHP a capitation rate under
to that model, to be used to calculate the contract that is different than the
the adjustment.
capitation rate paid to another MCO,
(C) The method for calculating the
PIHP or PAHP, so long as each capita-
relative risk factors and the reason-
ableness and appropriateness of the tion rate per rate cell that is paid is
method in measuring the risk factors independently developed and set in ac-
of the respective populations. cordance with this part.
(D) The magnitude of the adjustment (2) If the State determines that a ret-
on the capitation rate per MCO, PIHP, roactive adjustment to the capitation
or PAHP. rate is necessary, the retroactive ad-
(E) An assessment of the predictive justment must be supported by a ra-
value of the methodology compared to tionale for the adjustment and the
prior rating periods. data, assumptions and methodologies
(F) Any concerns the actuary has used to develop the magnitude of the
with the risk adjustment process. adjustment must be adequately de-
(ii) All retrospective risk adjustment scribed with enough detail to allow
methodologies must be adequately de- CMS or an actuary to determine the
scribed with enough detail so that CMS reasonableness of the adjustment.
or an actuary applying generally ac- These retroactive adjustments must be
cepted actuarial principles and prac- certified by an actuary in a revised
tices can understand and evaluate the rate certification and submitted as a
following: contract amendment to be approved by
(A) The party calculating the risk ad- CMS. All such adjustments are also
justment.
subject to Federal timely claim filing
(B) The data, and any adjustments to
requirements.
that data, to be used to calculate the
adjustment. (3) The State may increase or de-
(C) The model, and any adjustments crease the capitation rate per rate cell,
to that model, to be used to calculate as required in paragraph (c) of this sec-
the adjustment. tion and § 438.4(b)(4), up to 1.5 percent
(D) The timing and frequency of the without submitting a revised rate cer-
application of the risk adjustment. tification, as required under paragraph
(E) Any concerns the actuary has (a) of this section. Such changes of the
with the risk adjustment process. capitation rate within the permissible
(iii) Application of an approved risk 1.5 percent range must be consistent
adjustment methodology to capitation with a modification of the contract as
rates does not require a revised rate required in § 438.3(c).
certification because payment of capi- (d) Provision of additional information.
tation rates as modified by the ap- The State must, upon CMS’ request,
proved risk adjustment methodology provide additional information, wheth-
must be within the scope of the origi- er part of the rate certification or addi-
nal rate certification. The State must tional supplemental materials, if CMS
provide to CMS the payment terms up- determines that information is perti-
dated by the application of the risk ad- nent to the approval of the certifi-
justment methodology consistent with cation under this part. The State must
§ 438.3(c).
identify whether the information pro-
(6) Special contract provisions. A de-

vided in addition to the rate certifi-
scription of any of the special contract
provisions related to payment in § 438.6 cation is proffered by the State, the ac-
that are applied in the contract. tuary, or another party.
262
§ 438.8 Medical loss ratio (MLR) stand- Partial credibility means a standard
ards. for which the experience of an MCO,
(a) Basic rule. The State must ensure, PIHP, or PAHP is determined to be suf-
through its contracts starting on or ficient for the calculation of a MLR
after July 1, 2017, that each MCO, but with a non-negligible chance that
PIHP, and PAHP calculate and report a the difference between the actual and
MLR in accordance with this section. target medical loss ratios is statis-
For multi-year contracts that do not tically significant. An MCO, PIHP, or
start in 2017, the State must require PAHP that is assigned partial credi-
the MCO, PIHP, or PAHP to calculate bility (or is partially credible) will re-
and report a MLR for the rating period ceive a credibility adjustment to its
that begins in 2017. MLR.
(b) Definitions. As used in this sec- (c) MLR requirement. If a State elects
tion, the following terms have the indi- to mandate a minimum MLR for its
cated meanings: MCOs, PIHPs, or PAHPs, that min-
Credibility adjustment means an ad- imum MLR must be equal to or higher
justment to the MLR for a partially than 85 percent (the standard used for
credible MCO, PIHP, or PAHP to ac- projecting actuarial soundness under
count for a difference between the ac- § 438.4(b)) and the MLR must be cal-
tual and target MLRs that may be due culated and reported for each MLR re-
to random statistical variation. porting year by the MCO, PIHP, or
Full credibility means a standard for PAHP, consistent with this section.
which the experience of an MCO, PIHP, (d) Calculation of the MLR. The MLR
or PAHP is determined to be sufficient experienced for each MCO, PIHP, or
for the calculation of a MLR with a PAHP in a MLR reporting year is the
minimal chance that the difference be- ratio of the numerator (as defined in
tween the actual and target medical paragraph (e) of this section) to the de-
loss ratio is not statistically signifi- nominator (as defined in paragraph (f)
cant. An MCO, PIHP, or PAHP that is of this section). A MLR may be in-
assigned full credibility (or is fully creased by a credibility adjustment, in
credible) will not receive a credibility accordance with paragraph (h) of this
adjustment to its MLR. section.
Member months mean the number of (e) Numerator—(1) Required elements.
months an enrollee or a group of en- The numerator of an MCO’s, PIHP’s, or
rollees is covered by an MCO, PIHP, or PAHP’s MLR for a MLR reporting year
PAHP over a specified time period, is the sum of the MCO’s, PIHP’s, or
such as a year. PAHP’s incurred claims (as defined in
MLR reporting year means a period of (e)(2) of this section); the MCO’s,
12 months consistent with the rating PIHP’s, or PAHP’s expenditures for ac-
period selected by the State. tivities that improve health care qual-
No credibility means a standard for ity (as defined in paragraph (e)(3) of
which the experience of an MCO, PIHP, this section); and fraud prevention ac-
or PAHP is determined to be insuffi- tivities (as defined in paragraph (e)(4)
cient for the calculation of a MLR. An of this section).
MCO, PIHP, or PAHP that is assigned (2) Incurred claims. (i) Incurred claims
no credibility (or is non-credible) will must include the following:
not be measured against any MLR re- (A) Direct claims that the MCO,
quirements. PIHP, or PAHP paid to providers (in-
Non-claims costs means those expenses cluding under capitated contracts with
for administrative services that are network providers) for services or sup-
not: Incurred claims (as defined in plies covered under the contract and
paragraph (e)(2) of this section); ex- services meeting the requirements of
penditures on activities that improve § 438.3(e) provided to enrollees.
health care quality (as defined in para- (B) Unpaid claims liabilities for the
graph (e)(3) of this section); or licens- MLR reporting year, including claims
ing and regulatory fees, or Federal and reported that are in the process of
State taxes (as defined in paragraph being adjusted or claims incurred but
(f)(2) of this section). not reported.
263
§ 438.8 42 CFR Ch. IV (10–1–17 Edition)
(C) Withholds from payments made (4) Fines and penalties assessed by
to network providers. regulatory authorities.
(D) Claims that are recoverable for (B) Amounts paid to the State as re-
anticipated coordination of benefits. mittance under paragraph (j) of this
(E) Claims payments recoveries re- section.
ceived as a result of subrogation. (C) Amounts paid to network pro-
(F) Incurred but not reported claims viders under to § 438.6(d).
based on past experience, and modified (vi) Incurred claims paid by one
to reflect current conditions, such as MCO, PIHP, or PAHP that is later as-
changes in exposure or claim frequency sumed by another entity must be re-
or severity. ported by the assuming MCO, PIHP, or
(G) Changes in other claims-related PAHP for the entire MLR reporting
reserves. year and no incurred claims for that
(H) Reserves for contingent benefits MLR reporting year may be reported
and the medical claim portion of law- by the ceding MCO, PIHP, or PAHP.
suits.
(3) Activities that improve health care
(ii) Amounts that must be deducted
quality. Activities that improve health
from incurred claims include the fol-
care quality must be in one of the fol-
lowing:
lowing categories:
(A) Overpayment recoveries received
(i) An MCO, PIHP, or PAHP activity
from network providers.
that meets the requirements of 45 CFR
(B) Prescription drug rebates re-
158.150(b) and is not excluded under 45
ceived and accrued.
CFR 158.150(c).
(iii) Expenditures that must be in-
cluded in incurred claims include the (ii) An MCO, PIHP, or PAHP activity
following: related to any EQR-related activity as
(A) The amount of incentive and described in § 438.358(b) and (c).
bonus payments made, or expected to (iii) Any MCO, PIHP, or PAHP ex-
be made, to network providers. penditure that is related to Health In-
(B) The amount of claims payments formation Technology and meaningful
recovered through fraud reduction ef- use, meets the requirements placed on
forts, not to exceed the amount of issuers found in 45 CFR 158.151, and is
fraud reduction expenses. The amount not considered incurred claims, as de-
of fraud reduction expenses must not fined in paragraph (e)(2) of this section.
include activities specified in para- (4) Fraud prevention activities. MCO,
graph (e)(4) of this section. PIHP, or PAHP expenditures on activi-
(iv) Amounts that must either be in- ties related to fraud prevention as
cluded in or deducted from incurred adopted for the private market at 45
claims include, respectively, net pay- CFR part 158. Expenditures under this
ments or receipts related to State man- paragraph must not include expenses
dated solvency funds. for fraud reduction efforts in paragraph
(v) Amounts that must be excluded (e)(2)(iii)(B) of this section.
from incurred claims: (f) Denominator—(1) Required elements.
(A) Non-claims costs, as defined in The denominator of an MCO’s, PIHP’s,
paragraph (b) of this section, which in- or PAHP’s MLR for a MLR reporting
clude the following: year must equal the adjusted premium
(1) Amounts paid to third party ven- revenue. The adjusted premium rev-
dors for secondary network savings. enue is the MCO’s, PIHP’s, or PAHP’s
(2) Amounts paid to third party ven- premium revenue (as defined in para-
dors for network development, admin- graph (f)(2) of this section) minus the
istrative fees, claims processing, and MCO’s, PIHP’s, or PAHP’s Federal,
utilization management. State, and local taxes and licensing
(3) Amounts paid, including amounts and regulatory fees (as defined in para-
paid to a provider, for professional or graph (f)(3) of this section) and is ag-
administrative services that do not gregated in accordance with paragraph
represent compensation or reimburse- (i) of this section.

ment for State plan services or services (2) Premium revenue. Premium rev-
meeting the definition in § 438.3(e) and enue includes the following for the
provided to an enrollee. MLR reporting year:
264
(i) State capitation payments, devel- (v) Payments made by an MCO,

oped in accordance with § 438.4, to the PIHP, or PAHP that are otherwise ex-
MCO, PIHP, or PAHP for all enrollees empt from Federal income taxes, for
under a risk contract approved under community benefit expenditures as de-
§ 438.3(a), excluding payments made fined in 45 CFR 158.162(c), limited to
under § 438.6(d). the highest of either:
(ii) State-developed one time pay- (A) Three percent of earned premium;
ments, for specific life events of enroll- or
ees. (B) The highest premium tax rate in
(iii) Other payments to the MCO, the State for which the report is being
PIHP, or PAHP approved under submitted, multiplied by the MCO’s,
§ 438.6(b)(3).
PIHP’s, or PAHP’s earned premium in
(iv) Unpaid cost-sharing amounts the State.
that the MCO, PIHP, or PAHP could
(4) Denominator when MCO, PIHP, or
have collected from enrollees under the
contract, except those amounts the PAHP is assumed. The total amount of
MCO, PIHP, or PAHP can show it made the denominator for a MCO, PIHP, or
a reasonable, but unsuccessful, effort PAHP which is later assumed by an-
to collect. other entity must be reported by the
(v) All changes to unearned premium assuming MCO, PIHP, or PAHP for the
reserves. entire MLR reporting year and no
(vi) Net payments or receipts related amount under this paragraph for that
to risk sharing mechanisms developed year may be reported by the ceding
in accordance with § 438.5 or § 438.6. MCO, PIHP, or PAHP.
(3) Federal, State, and local taxes and (g) Allocation of expense—(1) General
licensing and regulatory fees. Taxes, li- requirements. (i) Each expense must be
censing and regulatory fees for the included under only one type of ex-
MLR reporting year include: pense, unless a portion of the expense
(i) Statutory assessments to defray fits under the definition of, or criteria
the operating expenses of any State or for, one type of expense and the re-
Federal department. mainder fits into a different type of ex-
(ii) Examination fees in lieu of pre- pense, in which case the expense must
mium taxes as specified by State law. be pro-rated between types of expenses.
(iii) Federal taxes and assessments (ii) Expenditures that benefit mul-
allocated to MCOs, PIHPs, and PAHPs, tiple contracts or populations, or con-
excluding Federal income taxes on in- tracts other than those being reported,
vestment income and capital gains and must be reported on a pro rata basis.
Federal employment taxes. (2) Methods used to allocate expenses.
(iv) State and local taxes and assess- (i) Allocation to each category must be
ments including: based on a generally accepted account-
(A) Any industry-wide (or subset) as- ing method that is expected to yield
sessments (other than surcharges on the most accurate results.
specific claims) paid to the State or lo- (ii) Shared expenses, including ex-
cality directly. penses under the terms of a manage-
(B) Guaranty fund assessments. ment contract, must be apportioned
(C) Assessments of State or locality pro rata to the contract incurring the
industrial boards or other boards for expense.
operating expenses or for benefits to
(iii) Expenses that relate solely to
sick employed persons in connection
with disability benefit laws or similar the operation of a reporting entity,
taxes levied by States. such as personnel costs associated with
(D) State or locality income, excise, the adjusting and paying of claims,
and business taxes other than premium must be borne solely by the reporting
taxes and State employment and simi- entity and are not to be apportioned to
the other entities.
lar taxes and assessments.

(E) State or locality premium taxes (h) Credibility adjustment. (1) A MCO,
plus State or locality taxes based on PIHP, or PAHP may add a credibility
reserves, if in lieu of premium taxes. adjustment to a calculated MLR if the
265
§ 438.8 42 CFR Ch. IV (10–1–17 Edition)
MLR reporting year experience is par- deemed partially credible, and CMS
tially credible. The credibility adjust- will develop adjustments, using linear
ment is added to the reported MLR cal- interpolation, based on the number of
culation before calculating any remit- enrollee member months.
tances, if required by the State as de- (vi) CMS may adjust the number of
scribed in paragraph (j) of this section. enrollee member months necessary for
(2) A MCO, PIHP, or PAHP may not a MCO’s, PIHP’s, or PAHP’s experience
add a credibility adjustment to a cal- to be non-credible, partially credible,
culated MLR if the MLR reporting year or fully credible so that the standards
experience is fully credible. are rounded for the purposes of admin-
(3) If a MCO’s, PIHP’s, or PAHP’s ex- istrative simplification. The number of
perience is non-credible, it is presumed member months will be rounded to
to meet or exceed the MLR calculation 1,000 or a different degree of rounding
standards in this section. as appropriate to ensure that the credi-
(4) On an annual basis, CMS will pub- bility thresholds are consistent with
lish base credibility factors for MCOs, the objectives of this regulation.
PIHPs, and PAHPs that are developed (i) Aggregation of data. MCOs, PIHPs,
according to the following method- or PAHPs will aggregate data for all
ology: Medicaid eligibility groups covered
(i) CMS will use the most recently under the contract with the State un-
available and complete managed care less the State requires separate report-
encounter data or FFS claims data, ing and a separate MLR calculation for
and enrollment data, reported by the specific populations.
states to CMS. This data may cover (j) Remittance to the State if specific
more than 1 year of experience. MLR is not met. If required by the
(ii) CMS will calculate the credibility State, a MCO, PIHP, or PAHP must
adjustment so that a MCO, PIHP, or provide a remittance for an MLR re-
PAHP receiving a capitation payment porting year if the MLR for that MLR
that is estimated to have a medical reporting year does not meet the min-
loss ratio of 85 percent would be ex- imum MLR standard of 85 percent or
pected to experience a loss ratio less higher if set by the State as described
than 85 percent 1 out of every 4 years, in paragraph (c) of this section.
or 25 percent of the time. (k) Reporting requirements. (1) The
(iii) The minimum number of mem- State, through its contracts, must re-
ber months necessary for a MCO’s, quire each MCO, PIHP, or PAHP to
PIHP’s, or PAHP’s medical loss ratio submit a report to the State that in-
to be determined at least partially cludes at least the following informa-
credible will be set so that the credi- tion for each MLR reporting year:
bility adjustment would not exceed 10 (i) Total incurred claims.
percent for any partially credible MCO, (ii) Expenditures on quality improv-
PIHP, or PAHP. Any MCO, PIHP, or ing activities.
PAHP with enrollment less than this (iii) Expenditures related to activi-
number of member months will be de- ties compliant with § 438.608(a)(1)
termined non-credible. through (5), (7), (8) and (b).
(iv) The minimum number of member (iv) Non-claims costs.
months necessary for an MCO’s, (v) Premium revenue.
PIHP’s, or PAHP’s medical loss ratio (vi) Taxes, licensing and regulatory
to be determined fully credible will be fees.
set so that the minimum credibility (vii) Methodology(ies) for allocation
adjustment for any partially credible of expenditures.
MCO, PIHP, or PAHP would be greater (viii) Any credibility adjustment ap-
than 1 percent. Any MCO, PIHP, or plied.
PAHP with enrollment greater than (ix) The calculated MLR.
this number of member months will be (x) Any remittance owed to the
determined to be fully credible. State, if applicable.
(v) A MCO, PIHP, or PAHP with a (xi) A comparison of the information

number of enrollee member months be- reported in this paragraph with the au-
tween the levels established for non- dited financial report required under
credible and fully credible plans will be § 438.3(m).
266
(xii) A description of the aggregation § 438.9 Provisions that apply to non-

method used under paragraph (i) of this emergency medical transportation
section. PAHPs.
(xiii) The number of member months. (a) For purposes of this section, Non-
(2) A MCO, PIHP, or PAHP must sub- Emergency Medical Transportation
mit the report required in paragraph (NEMT) PAHP means an entity that
(k)(1) of this section in a timeframe provides only NEMT services to enroll-
and manner determined by the State, ees under contract with the State, and
which must be within 12 months of the on the basis of prepaid capitation pay-
end of the MLR reporting year. ments, or other payment arrangements
(3) MCOs, PIHPs, or PAHPs must re- that do not use State plan payment
quire any third party vendor providing rates.
claims adjudication activities to pro- (b) Unless listed in this paragraph
vide all underlying data associated (b), a requirement of this part does not
with MLR reporting to that MCO, apply to NEMT PAHPs, NEMT PAHP
PIHP, or PAHP within 180 days of the contracts, or States in connection with
end of the MLR reporting year or with- a NEMT PAHP. The following require-
in 30 days of being requested by the ments and options apply to NEMT
MCO, PIHP, or PAHP, whichever comes PAHPs, NEMT PAHP contracts, and
sooner, regardless of current contrac- States in connection with NEMT
tual limitations, to calculate and vali- PAHPs, to the same extent that they
date the accuracy of MLR reporting. apply to PAHPs, PAHP contracts, and
(l) Newer experience. A State, in its States in connection with PAHPs.
discretion, may exclude a MCO, PIHP, (1) All contract provisions in § 438.3
or PAHP that is newly contracted with except requirements for:
the State from the requirements in (i) Physician incentive plans at
this section for the first year of the § 438.3(i).
MCO’s, PIHP’s, or PAHP’s operation. (ii) Advance directives at § 438.3(j).
Such MCOs, PIHPs, or PAHPs must be (iii) LTSS requirements at § 438.3(o).
required to comply with the require- (iv) MHPAEA at § 438.3(n).
ments in this section during the next (2) The actuarial soundness require-
MLR reporting year in which the MCO, ments in § 438.4.
PIHP, or PAHP is in business with the
(3) The information requirements in
State, even if the first year was not a
§ 438.10.
full 12 months.
(4) The provision against provider
(m) Recalculation of MLR. In any in-
discrimination in § 438.12.
stance where a State makes a retro-
(5) The State responsibility provi-
active change to the capitation pay-
sions in §§ 438.56, 438.58, 438.60, 438.62(a),
ments for a MLR reporting year where
and 438.818.
the report has already been submitted
(6) The provisions on enrollee rights
to the State, the MCO, PIHP, or PAHP
and protections in subpart C of this
must re-calculate the MLR for all MLR
part except for §§ 438.110 and 438.114.
reporting years affected by the change
(7) The PAHP standards in
and submit a new report meeting the
§§ 438.206(b)(1), 438.210, 438.214, 438.224,
requirements in paragraph (k) of this
438.230, and 438.242.
section.
(8) An enrollee’s right to a State fair
(n) Attestation. MCOs, PIHPs, and
hearing under subpart E of part 431 of
PAHPs must attest to the accuracy of
this chapter.
the calculation of the MLR in accord-
ance with requirements of this section (9) Prohibitions against affiliations
when submitting the report required with individuals debarred or excluded
under paragraph (k) of this section. by Federal agencies in § 438.610.
(10) Requirements relating to con-
[81 FR 27853, May 6, 2016, as amended at 82 tracts involving Indians, Indian Health
FR 39, Jan. 3, 2017] Care Providers, and Indian managed
care entities in § 438.14.
267
§ 438.10 42 CFR Ch. IV (10–1–17 Edition)
§ 438.10 Information requirements. tation services and devices, health in-

(a) Definitions. As used in this sec- surance, home health care, hospice
tion, the following terms have the indi- services, hospitalization, hospital out-
cated meanings: patient care, medically necessary, net-
Limited English proficient (LEP) means work, non-participating provider, phy-
potential enrollees and enrollees who sician services, plan, preauthorization,
do not speak English as their primary participating provider, premium, pre-
language and who have a limited abil- scription drug coverage, prescription
ity to read, write, speak, or understand drugs, primary care physician, primary
English may be LEP and may be eligi- care provider, provider, rehabilitation
ble to receive language assistance for a services and devices, skilled nursing
particular type of service, benefit, or care, specialist, and urgent care; and
encounter. (ii) Model enrollee handbooks and en-
Prevalent means a non-English lan- rollee notices.
guage determined to be spoken by a (5) The State must ensure, through
significant number or percentage of po- its contracts, that each MCO, PIHP,
tential enrollees and enrollees that are PAHP and PCCM entity provides the
limited English proficient. required information in this section to
Readily accessible means electronic in- each enrollee.
formation and services which comply (6) Enrollee information required in
with modern accessibility standards
this section may not be provided elec-
such as section 508 guidelines, section
tronically by the State, MCO, PIHP,
504 of the Rehabilitation Act, and
PAHP, PCCM, or PCCM entity unless
W3C’s Web Content Accessibility
Guidelines (WCAG) 2.0 AA and suc- all of the following are met:
cessor versions. (i) The format is readily accessible;
(b) Applicability. The provisions of (ii) The information is placed in a lo-
this section apply to all managed care cation on the State, MCO’s, PIHP’s,
programs which operate under any au- PAHP’s, or PCCM’s, or PCCM entity’s
thority in the Act. Web site that is prominent and readily
(c) Basic rules. (1) Each State, enroll- accessible;
ment broker, MCO, PIHP, PAHP, (iii) The information is provided in
PCCM, and PCCM entity must provide an electronic form which can be elec-
all required information in this section tronically retained and printed;
to enrollees and potential enrollees in (iv) The information is consistent
a manner and format that may be eas- with the content and language require-
ily understood and is readily accessible ments of this section; and
by such enrollees and potential enroll- (v) The enrollee is informed that the
ees. information is available in paper form
(2) The State must utilize its bene- without charge upon request and pro-
ficiary support system required in vides it upon request within 5 business
§ 438.71. days.
(3) The State must operate a Web site
(7) Each MCO, PIHP, PAHP, and
that provides the content, either di-
PCCM entity must have in place mech-
rectly or by linking to individual MCO,
anisms to help enrollees and potential
PIHP, PAHP, or PCCM entity Web
enrollees understand the requirements
sites, specified in paragraphs (g), (h),
and benefits of the plan.
and (i) of this section.
(4) For consistency in the informa- (d) Language and format. The State
tion provided to enrollees, the State must:
must develop and require each MCO, (1) Establish a methodology for iden-
PIHP, PAHP and PCCM entity to use: tifying the prevalent non-English lan-
(i) Definitions for managed care ter- guages spoken by enrollees and poten-
minology, including appeal, co-pay- tial enrollees throughout the State,
ment, durable medical equipment, and in each MCO, PIHP, PAHP, or
PCCM entity service area.
emergency medical condition, emer-

gency medical transportation, emer- (2) Make oral interpretation avail-
gency room care, emergency services, able in all languages and written trans-
excluded services, grievance, habili- lation available in each prevalent non-
268
English language. All written mate- (ii) That auxiliary aids and services
rials for potential enrollees must in- are available upon request and at no
clude taglines in the prevalent non- cost for enrollees with disabilities; and
English languages in the State, as well (iii) How to access the services in
as large print, explaining the avail- paragraphs (d)(5)(i) and (ii) of this sec-
ability of written translations or oral tion.
interpretation to understand the infor- (6) Provide, and require MCOs,
mation provided and the toll-free tele- PIHPs, PAHPs, PCCMs, and PCCM en-
phone number of the entity providing tities to provide, all written materials
choice counseling services as required for potential enrollees and enrollees
by § 438.71(a). Large print means print- consistent with the following:
ed in a font size no smaller than 18 (i) Use easily understood language
point. and format.
(3) Require each MCO, PIHP, PAHP, (ii) Use a font size no smaller than 12
and PCCM entity to make its written point.
materials that are critical to obtaining (iii) Be available in alternative for-
services, including, at a minimum, pro- mats and through the provision of aux-
vider directories, enrollee handbooks, iliary aids and services in an appro-
appeal and grievance notices, and de- priate manner that takes into consid-
nial and termination notices, available eration the special needs of enrollees
in the prevalent non-English languages or potential enrollees with disabilities
in its particular service area. Written or limited English proficiency.
materials must also be made available (iv) Include a large print tagline and
in alternative formats upon request of information on how to request auxil-
the potential enrollee or enrollee at no iary aids and services, including the
cost. Auxiliary aids and services must provision of the materials in alter-
also be made available upon request of native formats. Large print means
the potential enrollee or enrollee at no printed in a font size no smaller than
cost. Written materials must include 18 point.
taglines in the prevalent non-English (e) Information for potential enrollees.
languages in the state, as well as large (1) The State or its contracted rep-
print, explaining the availability of resentative must provide the informa-
written translation or oral interpretation specified in paragraph (e)(2) of this
tion to understand the information section to each potential enrollee, ei-
provided and the toll-free and TTY/ ther in paper or electronic form as fol-
TDY telephone number of the MCO’s, lows:
PIHP’s, PAHP’s or PCCM entity’s (i) At the time the potential enrollee
member/customer service unit. Large first becomes eligible to enroll in a vol-
print means printed in a font size no untary managed care program, or is
smaller than 18 point. first required to enroll in a mandatory
(4) Make interpretation services managed care program; and
available to each potential enrollee (ii) Within a timeframe that enables
and require each MCO, PIHP, PAHP, the potential enrollee to use the infor-
and PCCM entity to make those serv- mation in choosing among available
ices available free of charge to each en- MCOs, PIHPs, PAHPs, PCCMs, or
rollee. This includes oral interpreta- PCCM entities.
tion and the use of auxiliary aids such (2) The information for potential en-
as TTY/TDY and American Sign Lan- rollees must include, at a minimum,
guage. Oral interpretation require- all of the following:
ments apply to all non-English lan- (i) Information about the potential
guages, not just those that the State enrollee’s right to disenroll consistent
identifies as prevalent. with the requirements of § 438.56 and
(5) Notify potential enrollees, and re- which explains clearly the process for
quire each MCO, PIHP, PAHP, and exercising this disenrollment right, as
PCCM entity to notify its enrollees— well as the alternatives available to
(i) That oral interpretation is avail- the potential enrollee based on their
able for any language and written specific circumstance;
translation is available in prevalent (ii) The basic features of managed
languages; care;
269
§ 438.10 42 CFR Ch. IV (10–1–17 Edition)
(iii) Which populations are excluded ercising this disenrollment right, as

from enrollment, subject to mandatory well as the alternatives available to
enrollment, or free to enroll volun- the enrollee based on their specific cir-
tarily in the program. For mandatory cumstance. For States that choose to
and voluntary populations, the length restrict disenrollment for periods of 90
of the enrollment period and all days or more, States must send the no-
disenrollment opportunities available tice no less than 60 calendar days be-
to the enrollee must also be specified; fore the start of each enrollment pe-
(iv) The service area covered by each riod.
MCO, PIHP, PAHP, PCCM, or PCCM (3) The MCO, PIHP, PAHP and, when
entity; appropriate, the PCCM entity must
(v) Covered benefits including: make available, upon request, any phy-
(A) Which benefits are provided by sician incentive plans in place as set
the MCO, PIHP, or PAHP; and forth in § 438.3(i).
(B) Which, if any, benefits are pro- (g) Information for enrollees of MCOs,
vided directly by the State. PIHPs, PAHPs and PCCM entities—En-
(C) For a counseling or referral serv- rollee handbook. (1) Each MCO, PIHP,
ice that the MCO, PIHP, or PAHP does PAHP and PCCM entity must provide
not cover because of moral or religious each enrollee an enrollee handbook,
objections, the State must provide in- within a reasonable time after receiv-
formation about where and how to ob- ing notice of the beneficiary’s enroll-
tain the service; ment, which serves a similar function
(vi) The provider directory and for- as the summary of benefits and cov-
mulary information required in para- erage described in 45 CFR 147.200(a).
graphs (h) and (i) of this section; (2) The content of the enrollee hand-
(vii) Any cost-sharing that will be book must include information that
imposed by the MCO, PIHP, PAHP, enables the enrollee to understand how
PCCM, or PCCM entity consistent with to effectively use the managed care
those set forth in the State plan; program. This information must in-
(viii) The requirements for each clude at a minimum:
MCO, PIHP or PAHP to provide ade- (i) Benefits provided by the MCO,
quate access to covered services, in- PIHP, PAHP or PCCM entity.
cluding the network adequacy stand- (ii) How and where to access any ben-
ards established in § 438.68; efits provided by the State, including
(ix) The MCO, PIHP, PAHP, PCCM any cost sharing, and how transpor-
and PCCM entity’s responsibilities for tation is provided.
coordination of enrollee care; and (A) In the case of a counseling or re-
(x) To the extent available, quality ferral service that the MCO, PIHP,
and performance indicators for each PAHP, or PCCM entity does not cover
MCO, PIHP, PAHP and PCCM entity, because of moral or religious objec-
including enrollee satisfaction. tions, the MCO, PIHP, PAHP, or PCCM
(f) Information for all enrollees of entity must inform enrollees that the
MCOs, PIHPs, PAHPs, and PCCM enti- service is not covered by the MCO,
ties: General requirements. (1) The MCO, PIHP, PAHP, or PCCM entity.
PIHP, PAHP and, when appropriate, (B) The MCO, PIHP, PAHP, or PCCM
the PCCM entity, must make a good entity must inform enrollees how they
faith effort to give written notice of can obtain information from the State
termination of a contracted provider, about how to access the services de-
within 15 calendar days after receipt or scribed in paragraph (g)(2)(i)(A) of this
issuance of the termination notice, to section.
each enrollee who received his or her (iii) The amount, duration, and scope
primary care from, or was seen on a of benefits available under the contract
regular basis by, the terminated pro- in sufficient detail to ensure that en-
vider. rollees understand the benefits to
(2) The State must notify all enroll- which they are entitled.
ees of their right to disenroll con- (iv) Procedures for obtaining bene-
sistent with the requirements of § 438.56 fits, including any requirements for
at least annually. Such notification service authorizations and/or referrals
must clearly explain the process for ex- for specialty care and for other benefits
270
not furnished by the enrollee’s primary ices furnished while the appeal or state
care provider. fair hearing is pending if the final deci-
(v) The extent to which, and how, sion is adverse to the enrollee.
after-hours and emergency coverage (xii) How to exercise an advance di-
are provided, including: rective, as set forth in § 438.3(j). For
(A) What constitutes an emergency PAHPs, information must be provided
medical condition and emergency serv- only to the extent that the PAHP in-
ices. cludes any of the providers described in
(B) The fact that prior authorization § 489.102(a) of this chapter.
is not required for emergency services. (xiii) How to access auxiliary aids
(C) The fact that, subject to the pro- and services, including additional in-
visions of this section, the enrollee has formation in alternative formats or
a right to use any hospital or other set- languages.
ting for emergency care. (xiv) The toll-free telephone number
(vi) Any restrictions on the enrollee’s for member services, medical manage-
freedom of choice among network pro- ment, and any other unit providing
viders. services directly to enrollees.
(vii) The extent to which, and how, (xv) Information on how to report
enrollees may obtain benefits, includ- suspected fraud or abuse;
ing family planning services and sup- (xvi) Any other content required by
plies from out-of-network providers. the State.
This includes an explanation that the (3) Information required by this para-
MCO, PIHP, or PAHP cannot require graph to be provided by a MCO, PIHP,
an enrollee to obtain a referral before PAHP or PCCM entity will be consid-
choosing a family planning provider. ered to be provided if the MCO, PIHP,
(viii) Cost sharing, if any is imposed PAHP or PCCM entity:
under the State plan. (i) Mails a printed copy of the infor-
(ix) Enrollee rights and responsibil- mation to the enrollee’s mailing ad-
ities, including the elements specified dress;
in § 438.100. (ii) Provides the information by
(x) The process of selecting and email after obtaining the enrollee’s
changing the enrollee’s primary care agreement to receive the information
provider. by email;
(xi) Grievance, appeal, and fair hear- (iii) Posts the information on the
ing procedures and timeframes, con- Web site of the MCO, PIHP, PAHP or
sistent with subpart F of this part, in a PCCM entity and advises the enrollee
State-developed or State-approved de- in paper or electronic form that the in-
scription. Such information must information is available on the Internet
clude: and includes the applicable Internet
(A) The right to file grievances and address, provided that enrollees with
appeals. disabilities who cannot access this in-
(B) The requirements and timeframes formation online are provided auxil-
for filing a grievance or appeal. iary aids and services upon request at
(C) The availability of assistance in no cost; or
the filing process. (iv) Provides the information by any
(D) The right to request a State fair other method that can reasonably be
hearing after the MCO, PIHP or PAHP expected to result in the enrollee re-
has made a determination on an enroll- ceiving that information.
ee’s appeal which is adverse to the en- (4) The MCO, PIHP, PAHP, or PCCM
rollee. entity must give each enrollee notice
(E) The fact that, when requested by of any change that the State defines as
the enrollee, benefits that the MCO, significant in the information specified
PIHP, or PAHP seeks to reduce or ter- in this paragraph (g), at least 30 days
minate will continue if the enrollee before the intended effective date of
files an appeal or a request for State the change.
fair hearing within the timeframes (h) Information for all enrollees of
specified for filing, and that the en- MCOs, PIHPs, PAHPs, and PCCM enti-
rollee may, consistent with state pol- ties—Provider Directory. (1) Each MCO,
icy, be required to pay the cost of serv- PIHP, PAHP, and when appropriate,
271
§ 438.12 42 CFR Ch. IV (10–1–17 Edition)
the PCCM entity, must make available PAHP’s, or, if applicable, PCCM enti-
in paper form upon request and elec- ty’s Web site in a machine readable file
tronic form, the following information and format as specified by the Sec-
about its network providers: retary.
(i) The provider’s name as well as any (j) Applicability date. This section ap-
group affiliation. plies to the rating period for contracts
(ii) Street address(es). with MCOs, PIHPs, PAHPs, PCCMs,
(iii) Telephone number(s). and PCCM entities beginning on or
(iv) Web site URL, as appropriate. after July 1, 2017. Until that applica-
(v) Specialty, as appropriate. bility date, states are required to con-
(vi) Whether the provider will accept
tinue to comply with § 438.10 contained
new enrollees.
in the 42 CFR parts 430 to 481, edition
(vii) The provider’s cultural and lin-
guistic capabilities, including lan- revised as of October 1, 2015.
guages (including American Sign Lan- [81 FR 27853, May 6, 2016, as amended at 82
guage) offered by the provider or a FR 39, Jan. 3, 2017]
skilled medical interpreter at the pro-
vider’s office, and whether the provider § 438.12 Provider discrimination pro-
has completed cultural competence hibited.
training. (a) General rules. (1) An MCO, PIHP,
(viii) Whether the provider’s office/fa- or PAHP may not discriminate in the
cility has accommodations for people participation, reimbursement, or in-
with physical disabilities, including of- demnification of any provider who is
fices, exam room(s) and equipment. acting within the scope of his or her li-
(2) The provider directory must in-
cense or certification under applicable
clude the information in paragraph
State law, solely on the basis of that li-
(h)(1) of this section for each of the fol-
lowing provider types covered under cense or certification. If an MCO,
the contract: PIHP, or PAHP declines to include in-
(i) Physicians, including specialists; dividual or groups of providers in its
(ii) Hospitals; provider network, it must give the af-
(iii) Pharmacies; fected providers written notice of the
(iv) Behavioral health providers; and reason for its decision.
(v) LTSS providers, as appropriate. (2) In all contracts with network pro-
(3) Information included in a paper viders, an MCO, PIHP, or PAHP must
provider directory must be updated at comply with the requirements specified
least monthly and electronic provider in § 438.214.
directories must be updated no later (b) Construction. Paragraph (a) of this
than 30 calendar days after the MCO, section may not be construed to—
PIHP, PAHP or PCCM entity receives (1) Require the MCO, PIHP, or PAHP
updated provider information. to contract with providers beyond the
(4) Provider directories must be made number necessary to meet the needs of
available on the MCO’s, PIHP’s, its enrollees;
PAHP’s, or, if applicable, PCCM enti-
(2) Preclude the MCO, PIHP, or
ty’s Web site in a machine readable file
PAHP from using different reimburse-
and format as specified by the Sec-
retary. ment amounts for different specialties
(i) Information for all enrollees of or for different practitioners in the
MCOs, PIHPs, PAHPs, and PCCM enti- same specialty; or
ties: Formulary. Each MCO, PIHP, (3) Preclude the MCO, PIHP, or
PAHP, and when appropriate, PCCM PAHP from establishing measures that
entity, must make available in elec- are designed to maintain quality of
tronic or paper form, the following in- services and control costs and are con-
formation about its formulary: sistent with its responsibilities to en-
(1) Which medications are covered rollees.
(both generic and name brand).

(2) What tier each medication is on.
(3) Formulary drug lists must be
made available on the MCO’s, PIHP’s,
272
§ 438.14 Requirements that apply to tion, or a consortium, which may be

MCO, PIHP, PAHP, PCCM, and composed of one or more Tribes, Tribal
PCCM entity contracts involving In- Organizations, or Urban Indian Organi-
dians, Indian health care providers zations, and which also may include
(IHCPs), and Indian managed care the Service.
entities (IMCEs). (b) Network and coverage requirements.
(a) Definitions. As used in this sec- All contracts between a State and a
tion, the following terms have the indi- MCO, PIHP, PAHP, and PCCM entity,
cated meanings: to the extent that the PCCM entity has
Indian means any individual defined a provider network, which enroll Indi-
at 25 U.S.C. 1603(13), 1603(28), or 1679(a), ans must:
or who has been determined eligible as (1) Require the MCO, PIHP, PAHP, or
an Indian, under 42 CFR 136.12. This PCCM entity to demonstrate that
means the individual: there are sufficient IHCPs partici-
(i) Is a member of a Federally recog- pating in the provider network of the
nized Indian tribe; MCO, PIHP, PAHP, or PCCM entity to
(ii) Resides in an urban center and ensure timely access to services avail-
meets one or more of the four criteria: able under the contract from such pro-
(A) Is a member of a tribe, band, or viders for Indian enrollees who are eli-
other organized group of Indians, in- gible to receive services.
cluding those tribes, bands, or groups (2) Require that IHCPs, whether par-
terminated since 1940 and those recog- ticipating or not, be paid for covered
nized now or in the future by the State services provided to Indian enrollees
in which they reside, or who is a de- who are eligible to receive services
scendant, in the first or second degree, from such providers as follows:
of any such member; (i) At a rate negotiated between the
(B) Is an Eskimo or Aleut or other MCO, PIHP, PAHP, or PCCM entity,
Alaska Native; and the IHCP, or
(C) Is considered by the Secretary of (ii) In the absence of a negotiated
the Interior to be an Indian for any rate, at a rate not less than the level
purpose; or and amount of payment that the MCO,
(D) Is determined to be an Indian PIHP, PAHP, or PCCM entity would
under regulations issued by the Sec- make for the services to a partici-
retary; pating provider which is not an IHCP;
(iii) Is considered by the Secretary of and
the Interior to be an Indian for any (iii) Make payment to all IHCPs in
purpose; or its network in a timely manner as re-
(iv) Is considered by the Secretary of quired for payments to practitioners in
Health and Human Services to be an individual or group practices under 42
Indian for purposes of eligibility for In- CFR 447.45 and 447.46.
dian health care services, including as (3) Permit any Indian who is enrolled
a California Indian, Eskimo, Aleut, or in a MCO, PIHP, PAHP, PCCM or
other Alaska Native. PCCM entity that is not an IMCE and
Indian health care provider (IHCP) eligible to receive services from a IHCP
means a health care program operated primary care provider participating as
by the Indian Health Service (IHS) or a network provider, to choose that
by an Indian Tribe, Tribal Organiza- IHCP as his or her primary care pro-
tion, or Urban Indian Organization vider, as long as that provider has ca-
(otherwise known as an I/T/U) as those pacity to provide the services.
terms are defined in section 4 of the In- (4) Permit Indian enrollees to obtain
dian Health Care Improvement Act (25 services covered under the contract be-
U.S.C. 1603). tween the State and the MCO, PIHP,
Indian managed care entity (IMCE) PAHP, or PCCM entity from out-of-
means a MCO, PIHP, PAHP, PCCM, or network IHCPs from whom the enrollee
PCCM entity that is controlled (within is otherwise eligible to receive such
the meaning of the last sentence of sec- services.

tion 1903(m)(1)(C) of the Act) by the In- (5) In a State where timely access to
dian Health Service, a Tribe, Tribal Or- covered services cannot be ensured due
ganization, or Urban Indian Organiza- to few or no IHCPs, an MCO, PIHP,
273
§ 438.50 42 CFR Ch. IV (10–1–17 Edition)
PAHP and PCCM entity will be consid- violation of the requirements in

ered to have met the requirement in § 438.3(d).
paragraph (b)(1) of this section if—
(i) Indian enrollees are permitted by Subpart B—State Responsibilities
the MCO, PIHP, PAHP, or PCCM entity
to access out-of-State IHCPs; or SOURCE: 81 FR 27853, May 6, 2016, unless
(ii) If this circumstance is deemed to otherwise noted.
be good cause for disenrollment from
both the MCO, PIHP, PAHP, or PCCM § 438.50 State Plan requirements.
entity and the State’s managed care (a) General rule. A State plan that re-
program in accordance with § 438.56(c). quires Medicaid beneficiaries to enroll
(6) MCOs, PIHPs, PAHPs, and PCCM in MCOs, PCCMs, or PCCM entities
entities, to the extent the PCCM entity must comply with the provisions of
has a provider network, must permit this section, except when the State im-
an out-of-network IHCP to refer an In- poses the requirement—
dian enrollee to a network provider. (1) As part of a demonstration project
(c) Payment requirements. (1) When an under section 1115(a) of the Act; or
IHCP is enrolled in Medicaid as a FQHC (2) Under a waiver granted under sec-
but not a participating provider of the tion 1915(b) of the Act.
MCO, PIHP, PAHP or PCCM entity, it (b) State plan information. The plan
must be paid an amount equal to the must specify—
amount the MCO, PIHP, PAHP, or (1) The types of entities with which
PCCM entity would pay a FQHC that is the State contracts.
a network provider but is not an IHCP, (2) The payment method it uses (for
including any supplemental payment example, whether FFS or capitation).
from the State to make up the dif- (3) Whether it contracts on a com-
ference between the amount the MCO, prehensive risk basis.
PIHP, PAHP or PCCM entity pays and (4) The process the State uses to in-
what the IHCP FQHC would have re- volve the public in both design and ini-
ceived under FFS. tial implementation of the managed
(2) When an IHCP is not enrolled in care program and the methods it uses
Medicaid as a FQHC, regardless of to ensure ongoing public involvement
whether it participates in the network once the State plan has been imple-
of an MCO, PIHP, PAHP and PCCM en- mented.
tity or not, it has the right to receive (c) State plan assurances. The plan
its applicable encounter rate published must provide assurances that the State
annually in the FEDERAL REGISTER by meets applicable requirements of the
the Indian Health Service, or in the ab- following statute and regulations:
sence of a published encounter rate, (1) Section 1903(m) of the Act, for
the amount it would receive if the serv- MCOs and MCO contracts.
ices were provided under the State (2) Section 1905(t) of the Act, for
plan’s FFS payment methodology. PCCMs and PCCM or PCCM entity con-
(3) When the amount a IHCP receives tracts.
from a MCO, PIHP, PAHP, or PCCM (3) Section 1932(a)(1)(A) of the Act,
entity is less than the amount required for the State’s option to limit freedom
by paragraph (c)(2) of this section, the of choice by requiring beneficiaries to
State must make a supplemental pay- receive their benefits through managed
ment to the IHCP to make up the dif- care entities.
ference between the amount the MCO, (4) This part, for MCOs, PCCMs, and
PIHP, PAHP, or PCCM entity pays and PCCM entities.
the amount the IHCP would have re- (5) Part 434 of this chapter, for all
ceived under FFS or the applicable en- contracts.
counter rate. (6) Section 438.4, for payments under
(d) Enrollment in IMCEs. An IMCE any risk contracts, and § 447.362 of this
may restrict its enrollment to Indians chapter for payments under any
in the same manner as Indian Health nonrisk contracts.

Programs, as defined in 25 U.S.C. (d) Limitations on enrollment. The
1603(12), may restrict the delivery of State must provide assurances that, in
services to Indians, without being in implementing the State plan managed
274
care option, it will not require the fol- (2) To comply with this paragraph
lowing groups to enroll in an MCO, (b), a State, must permit the bene-
PCCM or PCCM entity: ficiary—
(1) Beneficiaries who are also eligible (i) To choose from at least two pri-
for Medicare. mary care providers; and
(2) Indians as defined in § 438.14(a), ex- (ii) To obtain services from any other
cept as permitted under § 438.14(d). provider under any of the following cir-
(3) Children under 19 years of age who cumstances:
are: (A) The service or type of provider (in
(i) Eligible for SSI under Title XVI; terms of training, experience, and spe-
(ii) Eligible under section 1902(e)(3) of cialization) is not available within the
the Act; MCO, PIHP, or PAHP network.
(iii) In foster care or other out-of- (B) The provider is not part of the
home placement; network, but is the main source of a
service to the beneficiary, provided
(iv) Receiving foster care or adoption
that—
assistance; or
(1) The provider is given the oppor-
(v) Receiving services through a fam-
tunity to become a participating pro-
ily-centered, community-based, coordi-
vider under the same requirements for
nated care system that receives grant
participation in the MCO, PIHP, or
funds under section 501(a)(1)(D) of Title
PAHP network as other network pro-
V, and is defined by the State in terms
viders of that type.
of either program participation or spe-
(2) If the provider chooses not to join
cial health care needs.
the network, or does not meet the nec-
§ 438.52 Choice of MCOs, PIHPs, essary qualification requirements to
PAHPs, PCCMs, and PCCM entities. join, the enrollee will be transitioned
to a participating provider within 60
(a) General rule. Except as specified in calendar days (after being given an op-
paragraphs (b) and (c) of this section, a portunity to select a provider who par-
State that requires Medicaid bene- ticipates).
ficiaries to: (C) The only plan or provider avail-
(1) Enroll in an MCO, PIHP, or PAHP, able to the beneficiary does not, be-
must give those beneficiaries a choice cause of moral or religious objections,
of at least two MCOs, PIHPs, or provide the service the enrollee seeks.
PAHPs. (D) The beneficiary’s primary care
(2) Enroll in a primary care case provider or other provider determines
management system, must give those that the beneficiary needs related serv-
beneficiaries a choice from at least two ices that would subject the beneficiary
primary care case managers employed to unnecessary risk if received sepa-
or contracted with the State. rately (for example, a cesarean section
(3) Enroll in a PCCM entity, may and a tubal ligation) and not all of the
limit a beneficiary to a single PCCM related services are available within
entity. Beneficiaries must be permitted the network.
to choose from at least two primary (E) The State determines that other
care case managers employed by or circumstances warrant out-of-network
contracted with the PCCM entity. treatment.
(b) Exception for rural area residents. (3) As used in this paragraph (b),
(1) Under any managed care program ‘‘rural area’’ is any county designated
authorized by any of the following, and as ‘‘micro,’’ ‘‘rural,’’ or ‘‘County with
subject to the requirements of para- Extreme Access Considerations
graph (b)(2) of this section, a State (CEAC)’’ in the Medicare Advantage
may limit a rural area resident to a Health Services Delivery (HSD) Ref-
single MCO, PIHP, or PAHP: erence file for the applicable calendar
(i) A State plan amendment under year.
section 1932(a) of the Act. (c) Exception for certain health insur-
(ii) A waiver under section 1115(a) of ing organizations (HIOs). The State may
the Act. limit beneficiaries to a single HIO if—
(iii) A waiver under section 1915(b) of (1) The HIO is one of those described
the Act. in section 1932(a)(3)(C) of the Act; and
275
§ 438.54 42 CFR Ch. IV (10–1–17 Edition)
(2) The beneficiary who enrolls in the ferent MCO, PIHP, PAHP, PCCM or
HIO has a choice of at least two pri- PCCM entity.
mary care providers within the entity. (2) A State must provide potential
(d) Limitations on changes between pri- enrollees the opportunity to actively
mary care providers. For an enrollee of a elect to receive covered services
single MCO, PIHP, PAHP, or HIO under through the managed care or FFS de-
paragraph (b) or (c) of this section, any livery system. If the potential enrollee
limitation the State imposes on his or elects to receive covered services
her freedom to change between pri- through the managed care delivery sys-
mary care providers may be no more tem, the potential enrollee must then
restrictive than the limitations on also select a MCO, PIHP, PAHP, PCCM,
disenrollment under § 438.56(c). or PCCM entity.
(i) If the State does not use a passive
§ 438.54 Managed care enrollment. enrollment process and the potential
enrollee does not make an active
(a) Applicability. The provisions of
choice during the period allowed by the
this section apply to all Medicaid man-
state, then the potential enrollee will
aged care programs which operate
continue to receive covered services
under any authority in the Act.
through the FFS delivery system.
(b) General rule. The State must have (ii) If the State uses a passive enroll-
an enrollment system for its managed ment process, the potential enrollee
care programs, voluntary and manda- must select either to accept the MCO,
tory, as appropriate. PIHP, PAHP, PCCM, or PCCM entity
(1) Voluntary managed care programs selected for them by the State’s pas-
are those where one or more groups of sive enrollment process, select a dif-
beneficiaries as enumerated in section ferent MCO, PIHP, PAHP, PCCM, or
of 1905(a) of the Act have the option to PCCM entity, or elect to receive cov-
either enroll in a MCO, PIHP, PAHP, ered services through the FFS delivery
PCCM or PCCM entity, or remain en- system. If the potential enrollee does
rolled in FFS to receive Medicaid cov- not make an active choice during the
ered benefits. time allowed by the state, the poten-
(2) Mandatory managed care pro- tial enrollee will remain enrolled with
grams are those where one or more the MCO, PIHP, PAHP, PCCM, or
groups of beneficiaries as enumerated PCCM entity selected by the passive
in section 1905(a) of the Act must en- enrollment process.
roll in a MCO, PIHP, PAHP, PCCM or (3) The State must provide informa-
PCCM entity to receive covered Med- tional notices to each potential en-
icaid benefits. rollee at the time the potential en-
(c) Voluntary managed care programs. rollee first becomes eligible to enroll in
(1) States that have a voluntary man- a managed care program and within a
aged care program must have an en- timeframe that enables the potential
rollment system that: enrollee to use the information in
(i) Provides an enrollment choice pe- choosing among available delivery sys-
riod during which potential enrollees tem and/or managed care plan options.
may make an active choice of delivery The notices must:
system and, if needed, choice of an (i) Clearly explain (as relevant to the
MCO, PIHP, PAHP, PCCM or PCCM en- State’s managed care program) the im-
tity before enrollment is effectuated; plications to the potential enrollee of:
or not making an active choice between
(ii) Employs a passive enrollment managed care and FFS; selecting a dif-
process in which the State enrolls the ferent MCO, PIHP, PAHP, PCCM or
potential enrollee into a MCO, PIHP, PCCM entity; and accepting the MCO,
PAHP, PCCM or PCCM entity and si- PIHP, PAHP, PCCM, or PCCM entity
multaneously provides a period of time selected by the State;
for the enrollee to make an active (ii) Identify the MCOs, PIHPs,
choice of delivery system and, if need- PAHPs, PCCMs or PCCM entities avail-
ed, to maintain enrollment in the MCO, able to the potential enrollee should
PIHP, PAHP, PCCM or PCCM entity they elect the managed care delivery
passively assigned or to select a dif- system;
276
(iii) Provide clear instructions for (i) The State may not arbitrarily ex-
how to make known to the State the clude any MCO, PIHP, PAHP, PCCM,
enrollee’s selection of the FFS delivery or PCCM entity from being considered.
system or a MCO, PIHP, PAHP, PCCM (ii) The State may consider addi-
or PCCM entity; tional criteria to conduct the passive
(iv) Provide a comprehensive expla- enrollment process, including the en-
nation of the length of the enrollment rollment preferences of family mem-
period, the 90 day without cause bers, previous plan assignment of the
disenrollment period, and all other beneficiary, quality assurance and im-
disenrollment options as specified in provement performance, procurement
§ 438.56; evaluation elements, accessibility of
(v) Include the contact information provider offices for people with disabil-
for the beneficiary support system in ities (when appropriate), and other rea-
§ 438.71; and sonable criteria that support the objec-
(vi) Comply with the information re- tives of the managed care program.
quirements in § 438.10. (8) If a passive enrollment process is
(4) The State’s enrollment system used and the enrollee does not elect to
must provide that beneficiaries already be enrolled into the FFS delivery sys-
enrolled in an MCO, PIHP, PAHP, tem, the State must send a notice to
PCCM or PCCM entity are given pri- the enrollee:
ority to continue that enrollment if (i) Confirming that the enrollee’s
the MCO, PIHP, PAHP, PCCM or PCCM time to elect to enroll in the FFS de-
entity does not have the capacity to livery system has ended and that the
accept all those seeking enrollment enrollee will remain enrolled in the
under the program. managed care delivery system for the
remainder of the enrollment period un-
(5) If a State elects to use a passive
less one of the disenrollment reasons
enrollment process, the process must
specified in § 438.56 applies.
assign beneficiaries to a qualified MCO,
(ii) Clearly and fully explaining the
PIHP, PAHP, PCCM or PCCM entity.
enrollee’s right, and process to follow,
To be a qualified MCO, PIHP, PAHP,
to disenroll from the passively assigned
PCCM or PCCM entity, it must:
MCO, PIHP, PAHP, PCCM or PCCM en-
(i) Not be subject to the intermediate
tity and select a different MCO, PIHP,
sanction described in § 438.702(a)(4); and
PAHP, PCCM or PCCM entity within 90
(ii) Have capacity to enroll bene- days from the effective date of the en-
ficiaries. rollment or for any reason specified in
(6) A passive enrollment process must § 438.56(d)(2).
seek to preserve existing provider-ben- (iii) Within 5 calendar days of the end
eficiary relationships and relationships of the time allowed for making the de-
with providers that have traditionally livery system selection.
served Medicaid beneficiaries. (d) Mandatory managed care programs.
(i) An ‘‘existing provider-beneficiary (1) States must have an enrollment
relationship’’ is one in which the pro- system for a mandatory managed care
vider was a main source of Medicaid program that includes the elements
services for the beneficiary during the specified in paragraphs (d)(2) through
previous year. This may be established (8) of this section.
through State records of previous man- (2) The State’s enrollment system
aged care enrollment or FFS experi- must implement enrollment in a MCO,
ence, encounter data, or through con- PIHP, PAHP, PCCM, or PCCM entity
tact with the beneficiary. as follows:
(ii) A provider is considered to have (i) If the State does not use a passive
‘‘traditionally served’’ Medicaid bene- enrollment process and the potential
ficiaries if it has experience in serving enrollee does not make an active
the Medicaid population. choice of a MCO, PIHP, PAHP, PCCM,
(7) If the approach in paragraph (c)(6) or PCCM entity during the period al-
of this section is not possible, the lowed by the State, the potential en-
State must distribute the beneficiaries rollee will be enrolled into a MCO,
equitably among the MCOs, PIHPs, PIHP, PAHP, PCCM, or PCCM entity
PAHPs, PCCMs and PCCM entities. selected by the State’s default process.
277
§ 438.54 42 CFR Ch. IV (10–1–17 Edition)
(ii) If the State uses a passive enroll- tities during the period allowed by the
ment process, the potential enrollee state, the State must have a default
must either accept the MCO, PIHP, enrollment process for assigning those
PAHP, PCCM, or PCCM entity selected beneficiaries to qualified MCOs, PIHPs,
by the State’s passive enrollment proc- PAHPs, PCCMs and PCCM entities. To
ess or select a different MCO, PIHP, be a qualified MCO, PIHP, PAHP,
PAHP, PCCM, or PCCM entity. If the PCCM or PCCM entity, it must:
potential enrollee does not make an ac- (i) Not be subject to the intermediate
tive choice during the time allowed by sanction described in § 438.702(a)(4); and
the State, the MCO, PIHP, PAHP, (ii) Have capacity to enroll bene-
PCCM, or PCCM entity selected by the ficiaries.
passive enrollment process will remain (6) Passive enrollment. For States that
effective. use a passive enrollment process, the
(3) A State must provide informa- process must assign potential enrollees
tional notices to each potential en- to qualified MCOs, PIHPs, PAHPs,
rollee at the time the potential en- PCCMs and PCCM entities. To be a
rollee first becomes eligible to enroll in qualified MCO, PIHP, PAHP, PCCM or
a managed care program and within a PCCM entity, it must:
timeframe that enables the potential (i) Not be subject to the intermediate
enrollee to use the information in sanction described in § 438.702(a)(4); and
choosing among available managed (ii) Have capacity to enroll bene-
care plans. The notices must: ficiaries.
(i) Include the MCOs, PIHPs, PAHPs, (7) The passive and default enroll-
PCCMs, or PCCM entities available to ment processes must seek to preserve
the potential enrollee; existing provider-beneficiary relation-
(ii) Provide clear instructions for ships and relationships with providers
how to make known to the State the that have traditionally served Med-
enrollee’s selection of a MCO, PIHP, icaid beneficiaries.
PAHP, PCCM, or PCCM entity; (i) An ‘‘existing provider-beneficiary
(iii) Clearly explain the implications relationship’’ is one in which the pro-
to the potential enrollee of not making vider was a main source of Medicaid
an active choice of an MCO, PIHP, services for the beneficiary during the
PAHP, PCCM or PCCM entity as well previous year. This may be established
as the implications of making an ac- through State records of previous man-
tive choice of an MCO, PIHP, PAHP, aged care enrollment or FFS experi-
PCCM or PCCM entity; ence, encounter data, or through con-
(iv) Provide a comprehensive expla- tact with the beneficiary.
nation of the length of the enrollment (ii) A provider is considered to have
period, the 90 day without cause ‘‘traditionally served’’ Medicaid bene-
disenrollment period, and all other ficiaries if it has experience in serving
disenrollment options as specified in the Medicaid population.
§ 438.56; (8) If the approach in paragraph (d)(7)
(v) Include the contact information of this section is not possible, the
for the beneficiary support system in State must distribute the beneficiaries
§ 438.71; and equitably among the MCOs, PIHPs,
(vi) Comply with the information re- PAHPs, PCCMs and PCCM entities
quirements in § 438.10. available to enroll them.
(4) Priority for enrollment. The State’s (i) The State may not arbitrarily ex-
enrollment system must provide that clude any MCO, PIHP, PAHP, PCCM or
beneficiaries already enrolled in an PCCM entity from being considered;
MCO, PIHP, PAHP, PCCM or PCCM en- and
tity are given priority to continue that (ii) The State may consider addi-
enrollment if the MCO, PIHP, PAHP, tional criteria to conduct the default
PCCM or PCCM entity does not have enrollment process, including the en-
the capacity to accept all those seek- rollment preferences of family mem-
ing enrollment under the program. bers, previous plan assignment of the
(5) Enrollment by default. For poten- beneficiary, quality assurance and im-
tial enrollees that do not select an provement performance, procurement
MCO, PIHP, PAHP, PCCM or PCCM en- evaluation elements, accessibility of
278
provider offices for people with disabil- (ii) At least once every 12 months
ities (when appropriate), and other rea- thereafter.
sonable criteria related to a bene- (iii) Upon automatic reenrollment
ficiary’s experience with the Medicaid under paragraph (g) of this section, if
program. the temporary loss of Medicaid eligi-
bility has caused the beneficiary to
§ 438.56 Disenrollment: Requirements miss the annual disenrollment oppor-
and limitations. tunity.
(a) Applicability. The provisions of (iv) When the State imposes the in-
this section apply to all managed care termediate sanction specified in
programs whether enrollment is man- § 438.702(a)(4).
datory or voluntary and whether the (d) Procedures for disenrollment—(1)
contract is with an MCO, PIHP, PAHP, Request for disenrollment. The bene-
PCCM, or PCCM entity. ficiary (or his or her representative)
(b) Disenrollment requested by the must submit an oral or written re-
MCO, PIHP, PAHP, PCCM, or PCCM en- quest, as required by the State—
tity. All MCO, PIHP, PAHP, PCCM and (i) To the State (or its agent); or
PCCM entity contracts must: (ii) To the MCO, PIHP, PAHP, PCCM,
or PCCM entity, if the State permits
(1) Specify the reasons for which the
MCOs, PIHP, PAHPs, PCCMs, and
MCO, PIHP, PAHP, PCCM, or PCCM
PCCM entities to process
entity may request disenrollment of an
disenrollment requests.
enrollee.
(2) Cause for disenrollment. The fol-
(2) Provide that the MCO, PIHP, lowing are cause for disenrollment:
PAHP, PCCM, or PCCM entity may not (i) The enrollee moves out of the
request disenrollment because of an ad- MCO’s, PIHP’s, PAHP’s, PCCM’s, or
verse change in the enrollee’s health PCCM entity’s service area.
status, or because of the enrollee’s uti- (ii) The plan does not, because of
lization of medical services, diminished moral or religious objections, cover the
mental capacity, or uncooperative or service the enrollee seeks.
disruptive behavior resulting from his (iii) The enrollee needs related serv-
or her special needs (except when his or ices (for example, a cesarean section
her continued enrollment in the MCO, and a tubal ligation) to be performed at
PIHP, PAHP, PCCM or PCCM entity the same time; not all related services
seriously impairs the entity’s ability are available within the provider net-
to furnish services to either this par- work; and the enrollee’s primary care
ticular enrollee or other enrollees). provider or another provider deter-
(3) Specify the methods by which the mines that receiving the services sepa-
MCO, PIHP, PAHP, PCCM, or PCCM rately would subject the enrollee to un-
entity assures the agency that it does necessary risk.
not request disenrollment for reasons (iv) For enrollees that use MLTSS,
other than those permitted under the the enrollee would have to change their
contract. residential, institutional, or employ-
(c) Disenrollment requested by the en- ment supports provider based on that
rollee. If the State chooses to limit provider’s change in status from an in-
disenrollment, its MCO, PIHP, PAHP, network to an out-of-network provider
PCCM, and PCCM entity contracts with the MCO, PIHP, or PAHP and, as
must provide that a beneficiary may a result, would experience a disruption
request disenrollment as follows: in their residence or employment.
(1) For cause, at any time. (v) Other reasons, including poor
(2) Without cause, at the following quality of care, lack of access to serv-
times: ices covered under the contract, or
(i) During the 90 days following the lack of access to providers experienced
date of the beneficiary’s initial enroll- in dealing with the enrollee’s care
ment into the MCO, PIHP, PAHP, needs.
PCCM, or PCCM entity, or during the (3) MCO, PIHP, PAHP, PCCM, or
90 days following the date the State PCCM entity action on request. (i) When
sends the beneficiary notice of that en- the MCO’s, PIHP’s, PAHP’s, PCCM’s, or
rollment, whichever is later. PCCM entity’s contract with the State
279
§ 438.58 42 CFR Ch. IV (10–1–17 Edition)
permits the MCO, PIHP, PAHP, PCCM, PCCM entity refers the request to the
or PCCM entity to process State.
disenrollment requests, the MCO, (2) If the MCO, PIHP, PAHP, PCCM,
PIHP, PAHP, PCCM, or PCCM entity PCCM entity, or the State agency
may either approve a request for (whichever is responsible) fails to make
disenrollment by or on behalf of an en- the determination within the time-
rollee or the MCO, PIHP, PAHP, frames specified in paragraph (e)(1) of
PCCM, or PCCM entity must refer the this section, the disenrollment is con-
request to the State. sidered approved for the effective date
(ii) If the MCO, PIHP, PAHP, PCCM, that would have been established had
PCCM entity, or State agency (which- the State or MCO, PIHP, PAHP, PCCM,
ever is responsible) fails to make a PCCM entity complied with paragraph
disenrollment determination so that (e)(1) of this section.
the beneficiary can be disenrolled with- (f) Notice and appeals. A State that
in the timeframes specified in para- restricts disenrollment under this sec-
graph (e)(1) of this section, the tion must take the following actions:
disenrollment is considered approved. (1) Provide that enrollees and their
(4) State agency action on request. For representatives are given written no-
a request received directly from the tice of disenrollment rights at least 60
beneficiary, or one referred by the days before the start of each enroll-
MCO, PIHP, PAHP, PCCM, or PCCM ment period. The notice must include
entity, the State agency must take ac- an explanation of all of the enrollee’s
tion to approve or disapprove the re- disenrollment rights as specified in
quest based on the following: this section.
(i) Reasons cited in the request. (2) Ensure timely access to State fair
(ii) Information provided by the hearing for any enrollee dissatisfied
MCO, PIHP, PAHP, PCCM, or PCCM with a State agency determination
entity at the agency’s request. that there is not good cause for
(iii) Any of the reasons specified in disenrollment.
paragraph (d)(2) of this section. (g) Automatic reenrollment: Contract re-
(5) Use of the MCO’s, PIHP’s, PAHP’s, quirement. If the State plan so specifies,
PCCM’s, or PCCMs entity’s grievance the contract must provide for auto-
procedures. (i) The State agency may matic reenrollment of a beneficiary
require that the enrollee seek redress who is disenrolled solely because he or
through the MCO’s, PIHP’s, PAHP’s, she loses Medicaid eligibility for a pe-
PCCM’s, or PCCM entity’s grievance riod of 2 months or less.
system before making a determination
on the enrollee’s request. § 438.58 Conflict of interest safeguards.
(ii) The grievance process, if used, As a condition for contracting with
must be completed in time to permit MCOs, PIHPs, or PAHPs, a State must
the disenrollment (if approved) to be have in effect safeguards against con-
effective in accordance with the time- flict of interest on the part of State
frame specified in paragraph (e)(1) of and local officers and employees and
this section. agents of the State who have respon-
(iii) If, as a result of the grievance sibilities relating to the MCO, PIHP, or
process, the MCO, PIHP, PAHP, PCCM, PAHP contracts or the enrollment
or PCCM entity approves the processes specified in § 438.54(b). These
disenrollment, the State agency is not safeguards must be at least as effective
required to make a determination in as the safeguards specified in section 27
accordance with paragraph (d)(4) of of the Office of Federal Procurement
this section. Policy Act (41 U.S.C. 423).
(e) Timeframe for disenrollment deter-
minations. (1) Regardless of the proce- § 438.60 Prohibition of additional pay-
dures followed, the effective date of an ments for services covered under
approved disenrollment must be no MCO, PIHP or PAHP contracts.
later than the first day of the second The State agency must ensure that
month following the month in which no payment is made to a network pro-
the enrollee requests disenrollment or vider other than by the MCO, PIHP, or
the MCO, PIHP, PAHP, PCCM, or PAHP for services covered under the
280
contract between the State and the (v) Any other necessary procedures
MCO, PIHP, or PAHP, except when as specified by the Secretary to ensure
these payments are specifically re- continued access to services to prevent
quired to be made by the State in Title serious detriment to the enrollee’s
XIX of the Act, in 42 CFR chapter IV, health or reduce the risk of hos-
or when the State agency makes direct pitalization or institutionalization.
payments to network providers for (2) The State must require by con-
graduate medical education costs ap- tract that MCOs, PIHPs, and PAHPs
proved under the State plan. implement a transition of care policy
consistent with the requirements in
§ 438.62 Continued services to enroll- paragraph (b)(1) of this section and at
ees.
least meets the State defined transi-
(a) The State agency must arrange tion of care policy.
for Medicaid services to be provided (3) The State must make its transi-
without delay to any Medicaid enrollee tion of care policy publicly available
of an MCO, PIHP, PAHP, PCCM, or and provide instructions to enrollees
PCCM entity the contract of which is and potential enrollees on how to ac-
terminated and for any Medicaid en- cess continued services upon transi-
rollee who is disenrolled from an MCO, tion. At a minimum, the transition of
PIHP, PAHP, PCCM, or PCCM entity care policy must be described in the
for any reason other than ineligibility quality strategy, under § 438.340, and
for Medicaid. explained to individuals in the mate-
(b) The State must have in effect a rials to enrollees and potential enroll-
transition of care policy to ensure con- ees, in accordance with § 438.10.
tinued access to services during a tran- (c) Applicability date. This section ap-
sition from FFS to a MCO, PIHP, plies to the rating period for contracts
PAHP, PCCM or PCCM entity or tran- with MCOs, PIHPs, PAHPs, PCCMs,
sition from one MCO, PIHP, PAHP, and PCCM entities beginning on or
PCCM or PCCM entity to another when after July 1, 2018. Until that applica-
an enrollee, in the absence of continued bility date, states are required to con-
services, would suffer serious det- tinue to comply with § 438.62 contained
riment to their health or be at risk of in the 42 CFR parts 430 to 481, edition
hospitalization or institutionalization. revised as of October 1, 2015.
(1) The transition of care policy must
include the following: § 438.66 State monitoring require-
(i) The enrollee has access to services ments.
consistent with the access they pre- (a) General requirement. The State
viously had, and is permitted to retain agency must have in effect a moni-
their current provider for a period of toring system for all managed care pro-
time if that provider is not in the MCO, grams.
PIHP or PAHP network.
(b) The State’s system must address
(ii) The enrollee is referred to appro-
all aspects of the managed care pro-
priate providers of services that are in
gram, including the performance of
the network.
each MCO, PIHP, PAHP, and PCCM en-
(iii) The State, in the case of FFS, tity (if applicable) in at least the fol-
PCCM, or PCCM entity, or the MCO, lowing areas:
PIHP or PAHP that was previously
(1) Administration and management.
serving the enrollee, fully and timely
complies with requests for historical (2) Appeal and grievance systems.
utilization data from the new MCO, (3) Claims management.
PIHP, PAHP, PCCM, or PCCM entity (4) Enrollee materials and customer
in compliance with Federal and State services, including the activities of the
law. beneficiary support system.
(iv) Consistent with Federal and (5) Finance, including medical loss
ratio reporting.
State law, the enrollee’s new pro-

vider(s) are able to obtain copies of the (6) Information systems, including
enrollee’s medical records, as appro- encounter data reporting.
priate. (7) Marketing.
281
§ 438.66 42 CFR Ch. IV (10–1–17 Edition)
(8) Medical management, including (i) Prior to the State implementing a

utilization management and case man- managed care program, whether the
agement. program is voluntary or mandatory.
(9) Program integrity. (ii) When the specific MCO, PIHP,
(10) Provider network management, PAHP, or PCCM entity has not pre-
including provider directory standards. viously contracted with the State.
(11) Availability and accessibility of (iii) When any MCO, PIHP, PAHP, or
services, including network adequacy PCCM entity currently contracting
standards. with the State will provide or arrange
(12) Quality improvement. for the provision of covered benefits to
new eligibility groups.
(13) Areas related to the delivery of
(2) The State must conduct a readi-
LTSS not otherwise included in para-
ness review of each MCO, PIHP, PAHP,
graphs (b)(1) through (12) of this sec-
or PCCM entity with which it con-
tion as applicable to the managed care
tracts as follows:
program.
(i) Started at least 3 months prior to
(14) All other provisions of the con- the effective date of the events de-
tract, as appropriate. scribed in paragraph (d)(1) of this sec-
(c) The State must use data collected tion.
from its monitoring activities to im- (ii) Completed in sufficient time to
prove the performance of its managed ensure smooth implementation of an
care program, including at a minimum: event described in paragraph (d)(1) of
(1) Enrollment and disenrollment this section.
trends in each MCO, PIHP, or PAHP. (iii) Submitted to CMS for CMS to
(2) Member grievance and appeal make a determination that the con-
logs. tract or contract amendment associ-
(3) Provider complaint and appeal ated with an event described in para-
logs. graph (d)(1) of this section is approved
(4) Findings from the State’s Exter- under § 438.3(a).
nal Quality Review process. (3) Readiness reviews described in
(5) Results from any enrollee or pro- paragraphs (d)(1)(i) and (ii) of this sec-
vider satisfaction survey conducted by tion must include both a desk review of
the State or MCO, PIHP, or PAHP. documents and on-site reviews of each
(6) Performance on required quality MCO, PIHP, PAHP, or PCCM entity.
measures. Readiness reviews described in para-
graph (d)(1)(iii) of this section must in-
(7) Medical management committee
clude a desk review of documents and
reports and minutes.
may, at the State’s option, include an
(8) The annual quality improvement
on-site review. On-site reviews must in-
plan for each MCO, PIHP, PAHP, or
clude interviews with MCO, PIHP,
PCCM entity.
PAHP, or PCCM entity staff and lead-
(9) Audited financial and encounter ership that manage key operational
data submitted by each MCO, PIHP, or areas.
PAHP. (4) A State’s readiness review must
(10) The medical loss ratio summary assess the ability and capacity of the
reports required by § 438.8. MCO, PIHP, PAHP, and PCCM entity
(11) Customer service performance (if applicable) to perform satisfactorily
data submitted by each MCO, PIHP, or for the following areas:
PAHP and performance data submitted (i) Operations/Administration, in-
by the beneficiary support system. cluding—
(12) Any other data related to the (A) Administrative staffing and re-
provision of LTSS not otherwise in- sources.
cluded in paragraphs (c)(1) through (11) (B) Delegation and oversight of MCO,
of this section as applicable to the PIHP, PAHP or PCCM entity respon-
managed care program. sibilities.
(d)(1) The State must assess the read- (C) Enrollee and provider commu-
iness of each MCO, PIHP, PAHP or nications.
PCCM entity with which it contracts (D) Grievance and appeals.
as follows: (E) Member services and outreach.
282
(F) Provider Network Management. (vi) Availability and accessibility of

(G) Program Integrity/Compliance. covered services within the MCO,
(ii) Service delivery, including— PIHP, or PAHP contracts, including
(A) Case management/care coordina- network adequacy standards.
tion/service planning. (vii) Evaluation of MCO, PIHP, or
(B) Quality improvement. PAHP performance on quality meas-
(C) Utilization review. ures, including as applicable, consumer
(iii) Financial management, includ- report card, surveys, or other reason-
ing— able measures of performance.
(A) Financial reporting and moni- (viii) Results of any sanctions or cor-
toring. rective action plans imposed by the
State or other formal or informal
(B) Financial solvency.
intervention with a contracted MCO,
(iv) Systems management, includ-
PIHP, PAHP, or PCCM entity to im-
ing—
prove performance.
(A) Claims management. (ix) Activities and performance of the
(B) Encounter data and enrollment beneficiary support system.
information management. (x) Any other factors in the delivery
(e)(1) The State must submit to CMS of LTSS not otherwise addressed in
no later than 180 days after each con- (e)(2)(i)–(ix) of this section as applica-
tract year, a report on each managed ble.
care program administered by the (3) The program report required in
State, regardless of the authority this section must be:
under which the program operates. (i) Posted on the Web site required
(i) The initial report will be due after under § 438.10(c)(3).
the contract year following the release (ii) Provided to the Medical Care Ad-
of CMS guidance on the content and visory Committee, required under
form of the report. § 431.12 of this chapter.
(ii) For States that operate their (iii) Provided to the stakeholder con-
managed care program under section sultation group specified in § 438.70, to
1115(a) of the Act authority, submis- the extent that the managed care pro-
sion of an annual report that may be gram includes LTSS.
required by the Special Terms and Con- (f) Applicability. States will not be
ditions of the section 1115(a) dem- held out of compliance with the re-
onstration program will be deemed to quirements of paragraphs (a) through
satisfy the requirement of this para- (d) of this section prior to the rating
graph (e)(1) provided that the report in- period for contracts starting on or
cludes the information specified in after July 1, 2017, so long as they com-
paragraph (e)(2) of this section. ply with the corresponding standard(s)
(2) The program report must provide codified in 42 CFR 438.66 contained in
information on and an assessment of the 42 CFR, parts 430 to 481, edition re-
the operation of the managed care pro- vised as of October 1, 2015.
gram on, at a minimum, the following
areas: § 438.68 Network adequacy standards.
(i) Financial performance of each (a) General rule. A State that con-
MCO, PIHP, and PAHP, including MLR tracts with an MCO, PIHP or PAHP to
experience. deliver Medicaid services must develop
(ii) Encounter data reporting by each and enforce network adequacy stand-
MCO, PIHP, or PAHP. ards consistent with this section.
(iii) Enrollment and service area ex- (b) Provider-specific network adequacy
pansion (if applicable) of each MCO, standards. (1) At a minimum, a State
PIHP, PAHP, and PCCM entity. must develop time and distance stand-
(iv) Modifications to, and implemen- ards for the following provider types, if
tation of, MCO, PIHP, or PAHP bene- covered under the contract:
fits covered under the contract with (i) Primary care, adult and pediatric.
the State. (ii) OB/GYN.

(v) Grievance, appeals, and State fair (iii) Behavioral health (mental
hearings for the managed care pro- health and substance use disorder),
gram. adult and pediatric.
283
§ 438.68 42 CFR Ch. IV (10–1–17 Edition)
(iv) Specialist, adult and pediatric. (vii) The ability of network providers
(v) Hospital. to communicate with limited English
(vi) Pharmacy. proficient enrollees in their preferred
(vii) Pediatric dental. language.
(viii) Additional provider types when (viii) The ability of network pro-
it promotes the objectives of the Med- viders to ensure physical access, rea-
icaid program, as determined by CMS, sonable accommodations, culturally
for the provider type to be subject to competent communications, and acces-
time and distance access standards. sible equipment for Medicaid enrollees
(2) LTSS. States with MCO, PIHP or with physical or mental disabilities.
PAHP contracts which cover LTSS (ix) The availability of triage lines or
must develop: screening systems, as well as the use of
(i) Time and distance standards for telemedicine, e-visits, and/or other
LTSS provider types in which an en- evolving and innovative technological
rollee must travel to the provider to solutions.
receive services; and (2) States developing standards con-
(ii) Network adequacy standards sistent with paragraph (b)(2) of this
other than time and distance standards section must consider the following:
for LTSS provider types that travel to (i) All elements in paragraphs (c)(1)(i)
the enrollee to deliver services. through (ix) of this section.
(3) Scope of network adequacy stand- (ii) Elements that would support an
ards. Network standards established in enrollee’s choice of provider.
accordance with paragraphs (b)(1) and (iii) Strategies that would ensure the
(2) of this section must include all geo- health and welfare of the enrollee and
graphic areas covered by the managed support community integration of the
care program or, if applicable, the con- enrollee.
tract between the State and the MCO,
(iv) Other considerations that are in
PIHP or PAHP. States are permitted to
the best interest of the enrollees that
have varying standards for the same
provider type based on geographic need LTSS.
areas. (d) Exceptions process. (1) To the ex-
(c) Development of network adequacy tent the State permits an exception to
standards. (1) States developing net- any of the provider-specific network
work adequacy standards consistent standards developed under this section,
with paragraph (b)(1) of this section the standard by which the exception
must consider, at a minimum, the fol- will be evaluated and approved must
lowing elements: be:
(i) The anticipated Medicaid enroll- (i) Specified in the MCO, PIHP or
ment. PAHP contract.
(ii) The expected utilization of serv- (ii) Based, at a minimum, on the
ices. number of providers in that specialty
(iii) The characteristics and health practicing in the MCO, PIHP, or PAHP
care needs of specific Medicaid popu- service area.
lations covered in the MCO, PIHP, and (2) States that grant an exception in
PAHP contract. accordance with paragraph (d)(1) of
(iv) The numbers and types (in terms this section to a MCO, PIHP or PAHP
of training, experience, and specializa- must monitor enrollee access to that
tion) of network providers required to provider type on an ongoing basis and
furnish the contracted Medicaid serv- include the findings to CMS in the
ices. managed care program assessment re-
(v) The numbers of network providers port required under § 438.66.
who are not accepting new Medicaid (e) Publication of network adequacy
patients. standards. States must publish the
(vi) The geographic location of net- standards developed in accordance with
work providers and Medicaid enrollees, paragraphs (b)(1) and (2) of this section
considering distance, travel time, the on the Web site required by § 438.10.
means of transportation ordinarily Upon request, network adequacy stand-
used by Medicaid enrollees. ards must also be made available at no
284
cost to enrollees with disabilities in al- (3) An entity that receives non-Med-
ternate formats or through the provi- icaid funding to represent beneficiaries
sion of auxiliary aids and services. at hearings may provide choice coun-
seling on behalf of the State so long as
§ 438.70 Stakeholder engagement when the State requires firewalls to ensure
LTSS is delivered through a man- that the requirements for the provision
aged care program. of choice counseling are met.
The State must ensure the views of (d) Functions specific to LTSS activi-
beneficiaries, individuals representing ties. At a minimum, the beneficiary
beneficiaries, providers, and other support system must provide the fol-
stakeholders are solicited and ad- lowing support to enrollees who use, or
dressed during the design, implementa- express a desire to receive, LTSS:
tion, and oversight of a State’s man- (1) An access point for complaints
aged LTSS program. The composition and concerns about MCO, PIHP, PAHP,
of the stakeholder group and frequency PCCM, and PCCM entity enrollment,
of meetings must be sufficient to en- access to covered services, and other
sure meaningful stakeholder engage- related matters.
ment. (2) Education on enrollees’ grievance
and appeal rights within the MCO,
§ 438.71 Beneficiary support system. PIHP or PAHP; the State fair hearing
(a) General requirement. The State process; enrollee rights and responsibil-
must develop and implement a bene- ities; and additional resources outside
ficiary support system that provides of the MCO, PIHP or PAHP.
support to beneficiaries both prior to (3) Assistance, upon request, in navi-
and after enrollment in a MCO, PIHP, gating the grievance and appeal proc-
PAHP, PCCM or PCCM entity. ess within the MCO, PIHP or PAHP, as
(b) Elements of the support system. (1) well as appealing adverse benefit deter-
A State beneficiary support system minations by the MCO, PIHP, or PAHP
must include at a minimum: to a State fair hearing. The system
(i) Choice counseling for all bene- may not provide representation to the
ficiaries. enrollee at a State fair hearing but
(ii) Assistance for enrollees in under- may refer enrollees to sources of legal
standing managed care. representation.
(iii) Assistance as specified for en- (4) Review and oversight of LTSS
rollees who use, or express a desire to program data to provide guidance to
receive, LTSS in paragraph (d) of this the State Medicaid Agency on identi-
section. fication, remediation and resolution of
(2) The beneficiary support system systemic issues.
must perform outreach to beneficiaries
and/or authorized representatives and § 438.74 State oversight of the min-
be accessible in multiple ways includ- imum MLR requirement.
ing phone, Internet, in-person, and via (a) State reporting requirement. (1) The
auxiliary aids and services when re- State must annually submit to CMS a
quested. summary description of the report(s)
(c) Choice counseling. (1) Choice coun- received from the MCO(s), PIHP(s), and
seling, as defined in § 438.2, must be PAHP(s) under contract with the
provided to all potential enrollees and State, according to § 438.8(k), with the
enrollees who disenroll from a MCO, rate certification required in § 438.7.
PIHP, PAHP, PCCM or PCCM entity (2) The summary description must in-
for reasons specified in § 438.56(b) and clude, at a minimum, the amount of
(c). the numerator, the amount of the de-
(2) If an individual or entity provides nominator, the MLR percentage
choice counseling on the State’s behalf achieved, the number of member
under a memorandum of agreement or months, and any remittances owed by
contract, it is considered an enroll- each MCO, PIHP, or PAHP for that
ment broker as defined in § 438.810(a) MLR reporting year.

and must meet the independence and (b) Repayment of Federal share of re-
freedom from conflict of interest mittances. (1) If a State requires a MCO,
standards in § 438.810(b)(1) and (2). PIHP, or PAHP to pay remittances
285
§ 438.100 42 CFR Ch. IV (10–1–17 Edition)
through the contract for not meeting (v) Be free from any form of restraint
the minimum MLR required by the or seclusion used as a means of coer-
State, the State must reimburse CMS cion, discipline, convenience or retalia-
for an amount equal to the Federal tion, as specified in other Federal regu-
share of the remittance, taking into lations on the use of restraints and se-
account applicable differences in the clusion.
Federal matching rate. (vi) If the privacy rule, as set forth in
(2) If a remittance is owed according 45 CFR parts 160 and 164 subparts A and
to paragraph (b)(1) of this section, the E, applies, request and receive a copy
State must submit a separate report of his or her medical records, and re-
describing the methodology used to de- quest that they be amended or cor-
termine the State and Federal share of rected, as specified in 45 CFR 164.524
the remittance with the report re- and 164.526.
quired in paragraph (a) of this section.
(3) An enrollee of an MCO, PIHP, or
PAHP (consistent with the scope of the
Subpart C—Enrollee Rights and PAHP’s contracted services) has the
Protections right to be furnished health care serv-
ices in accordance with §§ 438.206
SOURCE: 81 FR 27853, May 6, 2016, unless through 438.210.
otherwise noted. (c) Free exercise of rights. The State
must ensure that each enrollee is free
§ 438.100 Enrollee rights.
to exercise his or her rights, and that
(a) General rule. The State must en- the exercise of those rights does not
sure that: adversely affect the way the MCO,
(1) Each MCO, PIHP, PAHP, PCCM PIHP, PAHP, PCCM or PCCM entity
and PCCM entity has written policies and its network providers or the State
regarding the enrollee rights specified agency treat the enrollee.
in this section; and (d) Compliance with other Federal and
(2) Each MCO, PIHP, PAHP, PCCM State laws. The State must ensure that
and PCCM entity complies with any each MCO, PIHP, PAHP, PCCM and
applicable Federal and State laws that
PCCM entity complies with any other
pertain to enrollee rights, and ensures
applicable Federal and State laws (in-
that its employees and contracted pro-
cluding: Title VI of the Civil Rights
viders observe and protect those rights.
Act of 1964 as implemented by regula-
(b) Specific rights—(1) Basic require-
ment. The State must ensure that each tions at 45 CFR part 80; the Age Dis-
managed care enrollee is guaranteed crimination Act of 1975 as implemented
the rights as specified in paragraphs by regulations at 45 CFR part 91; the
(b)(2) and (3) of this section. Rehabilitation Act of 1973; Title IX of
(2) An enrollee of an MCO, PIHP, the Education Amendments of 1972 (re-
PAHP, PCCM, or PCCM entity has the garding education programs and activi-
following rights: The right to— ties); Titles II and III of the Americans
(i) Receive information in accordance with Disabilities Act; and section 1557
with § 438.10. of the Patient Protection and Afford-
(ii) Be treated with respect and with able Care Act.
due consideration for his or her dignity
§ 438.102 Provider-enrollee commu-
and privacy. nications.
(iii) Receive information on available
treatment options and alternatives, (a) General rules. (1) An MCO, PIHP,
presented in a manner appropriate to or PAHP may not prohibit, or other-
the enrollee’s condition and ability to wise restrict, a provider acting within
understand. (The information require- the lawful scope of practice, from ad-
ments for services that are not covered vising or advocating on behalf of an en-
under the contract because of moral or rollee who is his or her patient, for the
religious objections are set forth in following:
§ 438.10(g)(2)(ii)(A) and (B).) (i) The enrollee’s health status, med-

(iv) Participate in decisions regard- ical care, or treatment options, includ-
ing his or her health care, including ing any alternative treatment that
the right to refuse treatment. may be self-administered.
286
(ii) Any information the enrollee where to obtain the service, as speci-
needs to decide among all relevant fied in § 438.10.
treatment options. (d) Sanction. An MCO that violates
(iii) The risks, benefits, and con- the prohibition of paragraph (a)(1) of
sequences of treatment or non-treat- this section is subject to intermediate
ment. sanctions under subpart I of this part.
(iv) The enrollee’s right to partici-
pate in decisions regarding his or her § 438.104 Marketing activities.
health care, including the right to (a) Definitions. As used in this sec-
refuse treatment, and to express pref- tion, the following terms have the indi-
erences about future treatment deci- cated meanings:
sions. Cold-call marketing means any unso-
(2) Subject to the information re- licited personal contact by the MCO,
quirements of paragraph (b) of this sec- PIHP, PAHP, PCCM or PCCM entity
tion, an MCO, PIHP, or PAHP that with a potential enrollee for the pur-
would otherwise be required to provide, pose of marketing as defined in this
reimburse for, or provide coverage of, a paragraph (a).
counseling or referral service because
Marketing means any communica-
of the requirement in paragraph (a)(1)
tion, from an MCO, PIHP, PAHP,
of this section is not required to do so
PCCM or PCCM entity to a Medicaid
if the MCO, PIHP, or PAHP objects to
beneficiary who is not enrolled in that
the service on moral or religious
entity, that can reasonably be inter-
grounds.
preted as intended to influence the ben-
(b) Information requirements: MCO,
eficiary to enroll in that particular
PIHP, and PAHP responsibility. (1)(i) An
MCO’s, PIHP’s, PAHP’s, PCCM’s or
MCO, PIHP, or PAHP that elects the
PCCM entity’s Medicaid product, or ei-
option provided in paragraph (a)(2) of
ther to not enroll in or to disenroll
this section must furnish information
from another MCO’s, PIHP’s, PAHP’s,
about the services it does not cover as
PCCM’s or PCCM entity’s Medicaid
follows:
product. Marketing does not include
(A) To the State—
communication to a Medicaid bene-
(1) With its application for a Med-
ficiary from the issuer of a qualified
icaid contract.
health plan, as defined in 45 CFR 155.20,
(2) Whenever it adopts the policy dur-
about the qualified health plan.
ing the term of the contract.
Marketing materials means materials
(B) Consistent with the provisions of
that—
§ 438.10, to enrollees, within 90 days
after adopting the policy for any par- (i) Are produced in any medium, by
ticular service. or on behalf of an MCO, PIHP, PAHP,
(ii) Although this timeframe would PCCM, or PCCM entity; and
be sufficient to entitle the MCO, PIHP, (ii) Can reasonably be interpreted as
or PAHP to the option provided in intended to market the MCO, PIHP,
paragraph (a)(2) of this section, the PAHP, PCCM, or PCCM entity to po-
overriding rule in § 438.10(g)(4) requires tential enrollees.
the State, its contracted representa- MCO, PIHP, PAHP, PCCM or PCCM
tive, or MCO, PIHP, or PAHP to fur- entity include any of the entity’s em-
nish the information at least 30 days ployees, network providers, agents, or
before the effective date of the policy. contractors.
(2) As specified in § 438.10(g)(2)(ii)(A) Private insurance does not include a
and (B), the MCOs, PIHPs, and PAHPs qualified health plan, as defined in 45
must inform enrollees how they can ob- CFR 155.20.
tain information from the State about (b) Contract requirements. Each con-
how to access the service excluded tract with an MCO, PIHP, PAHP,
under paragraph (a)(2) of this section. PCCM, or PCCM entity must comply
(c) Information requirements: State re- with the following requirements:
sponsibility. For each service excluded (1) Provide that the entity—
by an MCO, PIHP, or PAHP under para- (i) Does not distribute any marketing
graph (a)(2) of this section, the State materials without first obtaining State
must provide information on how and approval.
287
§ 438.106 42 CFR Ch. IV (10–1–17 Edition)
(ii) Distributes the materials to its (c) Payments for covered services
entire service area as indicated in the furnished under a contract, referral, or
contract. other arrangement, to the extent that
(iii) Complies with the information those payments are in excess of the
requirements of § 438.10 to ensure that, amount that the enrollee would owe if
before enrolling, the beneficiary re- the MCO, PIHP, or PAHP covered the
ceives, from the entity or the State, services directly.
the accurate oral and written informa-
tion he or she needs to make an in- § 438.108 Cost sharing.
formed decision on whether to enroll. The contract must provide that any
(iv) Does not seek to influence enroll- cost sharing imposed on Medicaid en-
ment in conjunction with the sale or rollees is in accordance with §§ 447.50
offering of any private insurance. through 447.82 of this chapter.
(v) Does not, directly or indirectly,
engage in door-to-door, telephone, § 438.110 Member advisory committee.
email, texting, or other cold-call mar- (a) General rule. When LTSS are cov-
keting activities. ered under a risk contract between a
(2) Specify the methods by which the State and an MCO, PIHP, or PAHP, the
entity ensures the State agency that contract must provide that each MCO,
marketing, including plans and mate- PIHP or PAHP establish and maintain
rials, is accurate and does not mislead, a member advisory committee.
confuse, or defraud the beneficiaries or (b) Committee composition. The com-
the State agency. Statements that will mittee required in paragraph (a) of this
be considered inaccurate, false, or mis- section must include at least a reason-
leading include, but are not limited to, ably representative sample of the
any assertion or statement (whether LTSS populations, or other individuals
written or oral) that— representing those enrollees, covered
(i) The beneficiary must enroll in the under the contract with the MCO,
MCO, PIHP, PAHP, PCCM or PCCM en- PIHP, or PAHP.
tity to obtain benefits or to not lose
benefits; or § 438.114 Emergency and
(ii) The MCO, PIHP, PAHP, PCCM or poststabilization services.
PCCM entity is endorsed by CMS, the (a) Definitions. As used in this sec-
Federal or State government, or simi- tion—
lar entity. Emergency medical condition means a
(c) State agency review. In reviewing medical condition manifesting itself by
the marketing materials submitted by acute symptoms of sufficient severity
the entity, the State must consult with (including severe pain) that a prudent
the Medical Care Advisory Committee layperson, who possesses an average
established under § 431.12 of this chap- knowledge of health and medicine,
ter or an advisory committee with could reasonably expect the absence of
similar membership. immediate medical attention to result
in the following:
§ 438.106 Liability for payment. (i) Placing the health of the indi-
Each MCO, PIHP, and PAHP must vidual (or, for a pregnant woman, the
provide that its Medicaid enrollees are health of the woman or her unborn
not held liable for any of the following: child) in serious jeopardy.
(a) The MCO’s, PIHP’s, or PAHP’s (ii) Serious impairment to bodily
debts, in the event of the entity’s insol- functions.
vency. (iii) Serious dysfunction of any bod-
(b) Covered services provided to the ily organ or part.
enrollee, for which— Emergency services means covered in-
(1) The State does not pay the MCO, patient and outpatient services that
PIHP, or PAHP; or are as follows:
(2) The State, or the MCO, PIHP, or (i) Furnished by a provider that is
PAHP does not pay the individual or qualified to furnish these services
health care provider that furnished the under this Title.
services under a contractual, referral, (ii) Needed to evaluate or stabilize an
or other arrangement. emergency medical condition.
288
Poststabilization care services means fying the enrollee’s primary care pro-
covered services, related to an emer- vider, MCO, PIHP, PAHP or applicable
gency medical condition that are pro- State entity of the enrollee’s screening
vided after an enrollee is stabilized to and treatment within 10 calendar days
maintain the stabilized condition, or, of presentation for emergency services.
under the circumstances described in (2) An enrollee who has an emergency
paragraph (e) of this section, to im- medical condition may not be held lia-
prove or resolve the enrollee’s condi- ble for payment of subsequent screen-
tion. ing and treatment needed to diagnose
(b) Coverage and payment: General the specific condition or stabilize the
rule. The following entities are respon- patient.
sible for coverage and payment of (3) The attending emergency physi-
emergency services and cian, or the provider actually treating
poststabilization care services. the enrollee, is responsible for deter-
(1) The MCO, PIHP, or PAHP. mining when the enrollee is suffi-
(2) The State, for managed care pro- ciently stabilized for transfer or dis-
grams that contract with PCCMs or charge, and that determination is bind-
PCCM entities ing on the entities identified in para-
(c) Coverage and payment: Emergency graph (b) of this section as responsible
services. (1) The entities identified in for coverage and payment.
paragraph (b) of this section—
(e) Coverage and payment:
(i) Must cover and pay for emergency
Poststabilization care services.
services regardless of whether the pro-
Poststabilization care services are cov-
vider that furnishes the services has a
ered and paid for in accordance with
contract with the MCO, PIHP, PAHP,
provisions set forth at § 422.113(c) of
PCCM or PCCM entity; and
this chapter. In applying those provi-
(ii) May not deny payment for treat-
sions, reference to ‘‘MA organization’’
ment obtained under either of the fol-
and ‘‘financially responsible’’ must be
lowing circumstances:
read as reference to the entities re-
(A) An enrollee had an emergency
sponsible for Medicaid payment, as
medical condition, including cases in
specified in paragraph (b) of this sec-
which the absence of immediate med-
tion, and payment rules governed by
ical attention would not have had the
Title XIX of the Act and the States.
outcomes specified in paragraphs (1),
(2), and (3) of the definition of emer- (f) Applicability to PIHPs and PAHPs.
gency medical condition in paragraph To the extent that services required to
(a) of this section. treat an emergency medical condition
(B) A representative of the MCO, fall within the scope of the services for
PIHP, PAHP, PCCM, or PCCM entity which the PIHP or PAHP is respon-
instructs the enrollee to seek emer- sible, the rules under this section
gency services. apply.
(2) A PCCM or PCCM entity must
§ 438.116 Solvency standards.
allow enrollees to obtain emergency
services outside the primary care case (a) Requirement for assurances. (1)
management system regardless of Each MCO, PIHP, and PAHP that is
whether the case manager referred the not a Federally qualified HMO (as de-
enrollee to the provider that furnishes fined in section 1310 of the Public
the services. Health Service Act) must provide as-
(d) Additional rules for emergency serv- surances satisfactory to the State
ices. (1) The entities specified in para- showing that its provision against the
graph (b) of this section may not— risk of insolvency is adequate to ensure
(i) Limit what constitutes an emer- that its Medicaid enrollees will not be
gency medical condition with reference liable for the MCO’s, PIHP’s, or
to paragraph (a) of this section, on the PAHP’s debts if the entity becomes in-
basis of lists of diagnoses or symptoms; solvent.
and (2) Federally qualified HMOs, as de-

(ii) Refuse to cover emergency serv- fined in section 1310 of the Public
ices based on the emergency room pro- Health Service Act, are exempt from
vider, hospital, or fiscal agent not noti- this requirement.
289
§ 438.206 42 CFR Ch. IV (10–1–17 Edition)
(b) Other requirements—(1) General services. This is in addition to the en-

rule. Except as provided in paragraph rollee’s designated source of primary
(b)(2) of this section, an MCO or PIHP, care if that source is not a women’s
must meet the solvency standards es- health specialist.
tablished by the State for private (3) Provides for a second opinion from
health maintenance organizations, or a network provider, or arranges for the
be licensed or certified by the State as enrollee to obtain one outside the net-
a risk-bearing entity. work, at no cost to the enrollee.
(2) Exception. Paragraph (b)(1) of this (4) If the provider network is unable
section does not apply to an MCO or to provide necessary services, covered
PIHP that meets any of the following under the contract, to a particular en-
conditions: rollee, the MCO, PIHP, or PAHP must
(i) Does not provide both inpatient adequately and timely cover these
hospital services and physician serv- services out of network for the en-
ices. rollee, for as long as the MCO, PIHP, or
(ii) Is a public entity. PAHP’s provider network is unable to
(iii) Is (or is controlled by) one or provide them.
more Federally qualified health cen-
(5) Requires out-of-network providers
ters and meets the solvency standards
to coordinate with the MCO, PIHP, or
established by the State for those cen-
PAHP for payment and ensures the
ters.
cost to the enrollee is no greater than
(iv) Has its solvency guaranteed by
it would be if the services were fur-
the State.
nished within the network.
(6) Demonstrates that its network
Subpart D—MCO, PIHP and PAHP providers are credentialed as required
Standards by § 438.214.
(7) Demonstrates that its network in-
SOURCE: 81 FR 27853, May 6, 2016, unless cludes sufficient family planning pro-
otherwise noted. viders to ensure timely access to cov-
ered services.
§ 438.206 Availability of services.
(c) Furnishing of services. The State
(a) Basic rule. Each State must en- must ensure that each contract with a
sure that all services covered under the MCO, PIHP, and PAHP complies with
State plan are available and accessible the following requirements.
to enrollees of MCOs, PIHPs, and (1) Timely access. Each MCO, PIHP,
PAHPs in a timely manner. The State and PAHP must do the following:
must also ensure that MCO, PIHP and
(i) Meet and require its network pro-
PAHP provider networks for services
viders to meet State standards for
covered under the contract meet the
timely access to care and services, tak-
standards developed by the State in ac-
ing into account the urgency of the
cordance with § 438.68.
(b) Delivery network. The State must need for services.
ensure, through its contracts, that (ii) Ensure that the network pro-
each MCO, PIHP and PAHP, consistent viders offer hours of operation that are
with the scope of its contracted serv- no less than the hours of operation of-
ices, meets the following requirements: fered to commercial enrollees or com-
(1) Maintains and monitors a net- parable to Medicaid FFS, if the pro-
work of appropriate providers that is vider serves only Medicaid enrollees.
supported by written agreements and is (iii) Make services included in the
sufficient to provide adequate access to contract available 24 hours a day, 7
all services covered under the contract days a week, when medically nec-
for all enrollees, including those with essary.
limited English proficiency or physical (iv) Establish mechanisms to ensure
or mental disabilities. compliance by network providers.
(2) Provides female enrollees with di- (v) Monitor network providers regu-
rect access to a women’s health spe- larly to determine compliance.

cialist within the provider network for (vi) Take corrective action if there is
covered care necessary to provide wom- a failure to comply by a network pro-
en’s routine and preventive health care vider.
290
(2) Access and cultural considerations. graph (b) of this section as specified by
Each MCO, PIHP, and PAHP partici- the State, but no less frequently than
pates in the State’s efforts to promote the following:
the delivery of services in a culturally (1) At the time it enters into a con-
competent manner to all enrollees, in- tract with the State.
cluding those with limited English pro- (2) On an annual basis.
ficiency and diverse cultural and eth- (3) At any time there has been a sig-
nic backgrounds, disabilities, and re- nificant change (as defined by the
gardless of gender, sexual orientation State) in the MCO’s, PIHP’s, or PAHP’s
or gender identity. operations that would affect the ade-
(3) Accessibility considerations. Each quacy of capacity and services, includ-
MCO, PIHP, and PAHP must ensure ing—
that network providers provide phys- (i) Changes in MCO, PIHP, or PAHP
ical access, reasonable accommoda- services, benefits, geographic service
tions, and accessible equipment for area, composition of or payments to its
Medicaid enrollees with physical or provider network; or
mental disabilities. (ii) Enrollment of a new population
(d) Applicability date. This section ap- in the MCO, PIHP, or PAHP.
plies to the rating period for contracts (d) State review and certification to
with MCOs, PIHPs, and PAHPs begin- CMS. After the State reviews the docu-
ning on or after July 1, 2018. Until that mentation submitted by the MCO,
applicability date, states are required PIHP, or PAHP, the State must submit
to continue to comply with § 438.206 an assurance of compliance to CMS
contained in the 42 CFR parts 430 to that the MCO, PIHP, or PAHP meets
481, edition revised as of October 1, the State’s requirements for avail-
2015. ability of services, as set forth in
§ 438.68 and § 438.206. The submission to
§ 438.207 Assurances of adequate ca- CMS must include documentation of an
pacity and services. analysis that supports the assurance of
(a) Basic rule. The State must ensure, the adequacy of the network for each
through its contracts, that each MCO, contracted MCO, PIHP or PAHP re-
PIHP, and PAHP gives assurances to lated to its provider network.
the State and provides supporting doc- (e) CMS’ right to inspect documenta-
umentation that demonstrates that it tion. The State must make available to
has the capacity to serve the expected CMS, upon request, all documentation
enrollment in its service area in ac- collected by the State from the MCO,
cordance with the State’s standards for PIHP, or PAHP.
access to care under this part, includ- (f) Applicability date. This section ap-
ing the standards at § 438.68 and plies to the rating period for contracts
§ 438.206(c)(1). with MCOs, PIHPs, and PAHPs begin-
(b) Nature of supporting documenta- ning on or after July 1, 2018. Until that
tion. Each MCO, PIHP, and PAHP must applicability date, states are required
submit documentation to the State, in to continue to comply with § 438.207
a format specified by the State, to contained in the 42 CFR parts 430 to
demonstrate that it complies with the 481, edition revised as of October 1,
following requirements: 2015.
(1) Offers an appropriate range of pre-
ventive, primary care, specialty serv- § 438.208 Coordination and continuity
ices, and LTSS that is adequate for the of care.
anticipated number of enrollees for the (a) Basic requirement—(1) General rule.
service area. Except as specified in paragraphs (a)(2)
(2) Maintains a network of providers and (3) of this section, the State must
that is sufficient in number, mix, and ensure through its contracts, that each
geographic distribution to meet the MCO, PIHP, and PAHP complies with
needs of the anticipated number of en- the requirements of this section.
rollees in the service area. (2) PIHP and PAHP exception. For
(c) Timing of documentation. Each PIHPs and PAHPs, the State deter-
MCO, PIHP, and PAHP must submit mines, based on the scope of the enti-
the documentation described in para- ty’s services, and on the way the State
291
§ 438.208 42 CFR Ch. IV (10–1–17 Edition)
has organized the delivery of managed date of enrollment for all new enroll-
care services, whether a particular ees, including subsequent attempts if
PIHP or PAHP is required to imple- the initial attempt to contact the en-
ment mechanisms for identifying, as- rollee is unsuccessful;
sessing, and producing a treatment (4) Share with the State or other
plan for an individual with special MCOs, PIHPs, and PAHPs serving the
health care needs, as specified in para- enrollee the results of any identifica-
graph (c) of this section. tion and assessment of that enrollee’s
(3) Exception for MCOs that serve du- needs to prevent duplication of those
ally eligible enrollees. (i) For each MCO activities;
that serves enrollees who are also en- (5) Ensure that each provider fur-
rolled in and receive Medicare benefits nishing services to enrollees maintains
from a Medicare Advantage Organiza- and shares, as appropriate, an enrollee
tion (as defined in § 422.2 of this chap- health record in accordance with pro-
ter), the State determines to what ex- fessional standards; and
tent the MCO must meet the identi- (6) Ensure that in the process of co-
fication, assessment, and treatment ordinating care, each enrollee’s privacy
planning provisions of paragraph (c) of is protected in accordance with the pri-
this section for dually eligible individ- vacy requirements in 45 CFR parts 160
uals. and 164 subparts A and E, to the extent
(ii) The State bases its determination that they are applicable.
on the needs of the population it re- (c) Additional services for enrollees with
quires the MCO to serve. special health care needs or who need
(b) Care and coordination of services for LTSS—(1) Identification. The State must
all MCO, PIHP, and PAHP enrollees. implement mechanisms to identify per-
Each MCO, PIHP, and PAHP must im- sons who need LTSS or persons with
plement procedures to deliver care to special health care needs to MCOs,
and coordinate services for all MCO, PIHPs and PAHPs, as those persons are
PIHP, and PAHP enrollees. These pro- defined by the State. These identifica-
cedures must meet State requirements tion mechanisms—
and must do the following: (i) Must be specified in the State’s
(1) Ensure that each enrollee has an quality strategy under § 438.340.
ongoing source of care appropriate to (ii) May use State staff, the State’s
his or her needs and a person or entity enrollment broker, or the State’s
formally designated as primarily re- MCOs, PIHPs and PAHPs.
sponsible for coordinating the services (2) Assessment. Each MCO, PIHP, and
accessed by the enrollee. The enrollee PAHP must implement mechanisms to
must be provided information on how comprehensively assess each Medicaid
to contact their designated person or enrollee identified by the State
entity; (through the mechanism specified in
(2) Coordinate the services the MCO, paragraph (c)(1) of this section) and
PIHP, or PAHP furnishes to the en- identified to the MCO, PIHP, and
rollee: PAHP by the State as needing LTSS or
(i) Between settings of care, includ- having special health care needs to
ing appropriate discharge planning for identify any ongoing special conditions
short term and long-term hospital and of the enrollee that require a course of
institutional stays; treatment or regular care monitoring.
(ii) With the services the enrollee re- The assessment mechanisms must use
ceives from any other MCO, PIHP, or appropriate providers or individuals
PAHP; meeting LTSS service coordination re-
(iii) With the services the enrollee requirements of the State or the MCO,
ceives in FFS Medicaid; and PIHP, or PAHP as appropriate.
(iv) With the services the enrollee re- (3) Treatment/service plans. MCOs,
ceives from community and social sup- PIHPs, or PAHPs must produce a treat-
port providers. ment or service plan meeting the cri-
(3) Provide that the MCO, PIHP or teria in paragraphs (c)(3)(i) through (v)
PAHP makes a best effort to conduct of this section for enrollees who re-
an initial screening of each enrollee’s quire LTSS and, if the State requires,
needs, within 90 days of the effective must produce a treatment or service
292
plan meeting the criteria in paragraphs (1) Identify, define, and specify the
(c)(3)(iii) through (v) of this section for amount, duration, and scope of each
enrollees with special health care service that the MCO, PIHP, or PAHP
needs that are determined through as- is required to offer.
sessment to need a course of treatment (2) Require that the services identi-
or regular care monitoring. The treat- fied in paragraph (a)(1) of this section
ment or service plan must be: be furnished in an amount, duration,
(i) Developed by an individual meet- and scope that is no less than the
ing LTSS service coordination require- amount, duration, and scope for the
ments with enrollee participation, and same services furnished to bene-
in consultation with any providers car- ficiaries under FFS Medicaid, as set
ing for the enrollee; forth in § 440.230 of this chapter, and for
(ii) Developed by a person trained in enrollees under the age of 21, as set
person-centered planning using a per- forth in subpart B of part 441 of this
son-centered process and plan as de- chapter.
fined in § 441.301(c)(1) and (2) of this (3) Provide that the MCO, PIHP, or
chapter for LTSS treatment or service PAHP—
plans; (i) Must ensure that the services are
(iii) Approved by the MCO, PIHP, or sufficient in amount, duration, or
PAHP in a timely manner, if this ap- scope to reasonably achieve the pur-
proval is required by the MCO, PIHP, pose for which the services are fur-
or PAHP; nished.
(iv) In accordance with any applica- (ii) May not arbitrarily deny or re-
ble State quality assurance and utiliza- duce the amount, duration, or scope of
tion review standards; and a required service solely because of di-
(v) Reviewed and revised upon reas- agnosis, type of illness, or condition of
sessment of functional need, at least the beneficiary.
every 12 months, or when the enrollee’s (4) Permit an MCO, PIHP, or PAHP
circumstances or needs change signifi- to place appropriate limits on a serv-
cantly, or at the request of the enrollee ice—
per § 441.301(c)(3) of this chapter. (i) On the basis of criteria applied
(4) Direct access to specialists. For en- under the State plan, such as medical
rollees with special health care needs necessity; or
determined through an assessment (ii) For the purpose of utilization
(consistent with paragraph (c)(2) of this control, provided that—
section) to need a course of treatment (A) The services furnished can rea-
or regular care monitoring, each MCO, sonably achieve their purpose, as re-
PIHP, and PAHP must have a mecha- quired in paragraph (a)(3)(i) of this sec-
nism in place to allow enrollees to dition;
rectly access a specialist (for example, (B) The services supporting individ-
through a standing referral or an ap- uals with ongoing or chronic condi-
proved number of visits) as appropriate tions or who require long-term services
for the enrollee’s condition and identi- and supports are authorized in a man-
fied needs. ner that reflects the enrollee’s ongoing
(d) Applicability date. This section ap- need for such services and supports;
plies to the rating period for contracts and
with MCOs, PIHPs, and PAHPs begin- (C) Family planning services are pro-
ning on or after July 1, 2017. Until that vided in a manner that protects and en-
applicability date, states are required ables the enrollee’s freedom to choose
to continue to comply with § 438.208 the method of family planning to be
contained in the 42 CFR parts 430 to used consistent with § 441.20 of this
481, edition revised as of October 1, chapter.
2015. (5) Specify what constitutes ‘‘medi-
cally necessary services’’ in a manner
§ 438.210 Coverage and authorization that—
of services.
(i) Is no more restrictive than that

(a) Coverage. Each contract between a used in the State Medicaid program,
State and an MCO, PIHP, or PAHP including quantitative and non-quan-
must do the following: titative treatment limits, as indicated
293
§ 438.210 42 CFR Ch. IV (10–1–17 Edition)
in State statutes and regulations, the the enrollee’s notice must meet the re-
State Plan, and other State policy and quirements of § 438.404.
procedures; and (d) Timeframe for decisions. Each MCO,
(ii) Addresses the extent to which the PIHP, or PAHP contract must provide
MCO, PIHP, or PAHP is responsible for for the following decisions and notices:
covering services that address: (1) Standard authorization decisions.
(A) The prevention, diagnosis, and For standard authorization decisions,
treatment of an enrollee’s disease, con- provide notice as expeditiously as the
dition, and/or disorder that results in enrollee’s condition requires and with-
health impairments and/or disability. in State-established timeframes that
(B) The ability for an enrollee to may not exceed 14 calendar days fol-
achieve age-appropriate growth and de- lowing receipt of the request for serv-
velopment. ice, with a possible extension of up to
(C) The ability for an enrollee to at- 14 additional calendar days, if—
tain, maintain, or regain functional ca- (i) The enrollee, or the provider, re-
pacity. quests extension; or
(D) The opportunity for an enrollee
(ii) The MCO, PIHP, or PAHP justi-
receiving long-term services and sup-
fies (to the State agency upon request)
ports to have access to the benefits of
a need for additional information and
community living, to achieve person-
how the extension is in the enrollee’s
centered goals, and live and work in
interest.
the setting of their choice.
(b) Authorization of services. For the (2) Expedited authorization decisions.
processing of requests for initial and (i) For cases in which a provider indi-
continuing authorizations of services, cates, or the MCO, PIHP, or PAHP de-
each contract must require— termines, that following the standard
(1) That the MCO, PIHP, or PAHP timeframe could seriously jeopardize
and its subcontractors have in place, the enrollee’s life or health or ability
and follow, written policies and proce- to attain, maintain, or regain max-
dures. imum function, the MCO, PIHP, or
(2) That the MCO, PIHP, or PAHP— PAHP must make an expedited author-
(i) Have in effect mechanisms to en- ization decision and provide notice as
sure consistent application of review expeditiously as the enrollee’s health
criteria for authorization decisions. condition requires and no later than 72
(ii) Consult with the requesting pro- hours after receipt of the request for
vider for medical services when appro- service.
priate. (ii) The MCO, PIHP, or PAHP may
(iii) Authorize LTSS based on an en- extend the 72 hour time period by up to
rollee’s current needs assessment and 14 calendar days if the enrollee re-
consistent with the person-centered quests an extension, or if the MCO,
service plan. PIHP, or PAHP justifies (to the State
(3) That any decision to deny a serv- agency upon request) a need for addi-
ice authorization request or to author- tional information and how the exten-
ize a service in an amount, duration, or sion is in the enrollee’s interest.
scope that is less than requested, be (3) Covered outpatient drug decisions.
made by an individual who has appro- For all covered outpatient drug author-
priate expertise in addressing the en- ization decisions, provide notice as de-
rollee’s medical, behavioral health, or scribed in section 1927(d)(5)(A) of the
long-term services and supports needs. Act.
(c) Notice of adverse benefit determina- (e) Compensation for utilization man-
tion. Each contract must provide for agement activities. Each contract be-
the MCO, PIHP, or PAHP to notify the tween a State and MCO, PIHP, or
requesting provider, and give the en- PAHP must provide that, consistent
rollee written notice of any decision by with §§ 438.3(i), and 422.208 of this chap-
the MCO, PIHP, or PAHP to deny a ter, compensation to individuals or en-
service authorization request, or to au- tities that conduct utilization manage-

thorize a service in an amount, dura- ment activities is not structured so as
tion, or scope that is less than re- to provide incentives for the individual
quested. For MCOs, PIHPs, and PAHPs, or entity to deny, limit, or discontinue
294
medically necessary services to any en- part F of part 431 of this chapter), for
rollee. medical records and any other health
(f) Applicability date. This section ap- and enrollment information that iden-
plies to the rating period for contracts tifies a particular enrollee, each MCO,
with MCOs, PIHPs, and PAHPs begin- PIHP, and PAHP uses and discloses
ning on or after July 1, 2017. Until that such individually identifiable health
applicability date, states are required information in accordance with the pri-
to continue to comply with § 438.210 vacy requirements in 45 CFR parts 160
contained in the 42 CFR parts 430 to and 164, subparts A and E, to the extent
481, edition revised as of October 1, that these requirements are applicable.
2015.
§ 438.228 Grievance and appeal sys-
[81 FR 27853, May 6, 2016, as amended at 82 tems.
FR 39, Jan. 3, 2017]
(a) The State must ensure, through
§ 438.214 Provider selection. its contracts, that each MCO, PIHP,
(a) General rules. The State must en- and PAHP has in effect a grievance and
sure, through its contracts, that each appeal system that meets the require-
MCO, PIHP, or PAHP implements writ- ments of subpart F of this part.
ten policies and procedures for selec- (b) If the State delegates to the MCO,
tion and retention of network pro- PIHP, or PAHP responsibility for no-
viders and that those policies and pro- tice of action under subpart E of part
cedures, at a minimum, meet the re- 431 of this chapter, the State must con-
quirements of this section. duct random reviews of each delegated
(b) Credentialing and recredentialing MCO, PIHP, or PAHP and its providers
requirements. (1) Each State must estab- and subcontractors to ensure that they
lish a uniform credentialing and are notifying enrollees in a timely
recredentialing policy that addresses manner.
acute, primary, behavioral, substance
use disorders, and LTSS providers, as § 438.230 Subcontractual relationships
appropriate, and requires each MCO, and delegation.
PIHP and PAHP to follow those poli- (a) Applicability. The requirements of
cies. this section apply to any contract or
(2) Each MCO, PIHP, and PAHP must written arrangement that an MCO,
follow a documented process for PIHP, PAHP, or PCCM entity has with
credentialing and recredentialing of any subcontractor.
network providers. (b) General rule. The State must en-
(c) Nondiscrimination. MCO, PIHP, sure, through its contracts with MCOs,
and PAHP network provider selection PIHPs, PAHPs, and PCCM entities
policies and procedures, consistent that—
with § 438.12, must not discriminate (1) Notwithstanding any relation-
against particular providers that serve ship(s) that the MCO, PIHP, PAHP, or
high-risk populations or specialize in PCCM entity may have with any sub-
conditions that require costly treat- contractor, the MCO, PIHP, PAHP, or
ment. PCCM entity maintains ultimate re-
(d) Excluded providers. (1) MCOs, sponsibility for adhering to and other-
PIHPs, and PAHPs may not employ or wise fully complying with all terms
contract with providers excluded from and conditions of its contract with the
participation in Federal health care State; and
programs under either section 1128 or (2) All contracts or written arrange-
section 1128A of the Act. ments between the MCO, PIHP, PAHP,
(c) [Reserved] or PCCM entity and any subcontractor
(e) State requirements. Each MCO, must meet the requirements of para-
PIHP, and PAHP must comply with graph (c) of this section.
any additional requirements estab- (c) Each contract or written arrange-
lished by the State. ment described in paragraph (b)(2) of
this section must specify that:

§ 438.224 Confidentiality. (1) If any of the MCO’s, PIHP’s,
The State must ensure, through its PAHP’s, or PCCM entity’s activities or
contracts, that (consistent with sub- obligations under its contract with the
295
§ 438.236 42 CFR Ch. IV (10–1–17 Edition)
State are delegated to a subcon- (d) Applicability date. This section ap-
tractor— plies to the rating period for contracts
(i) The delegated activities or obliga- with MCOs, PIHPs, PAHPs, and PCCM
tions, and related reporting respon- entities beginning on or after July 1,
sibilities, are specified in the contract 2017. Until that applicability date,
or written agreement. states are required to continue to com-
(ii) The subcontractor agrees to per- ply with § 438.230 contained in the 42
form the delegated activities and re- CFR parts 430 to 481, edition revised as
porting responsibilities specified in of October 1, 2015.
compliance with the MCO’s, PIHP’s,
PAHP’s, or PCCM entity’s contract ob- § 438.236 Practice guidelines.
ligations. (a) Basic rule. The State must ensure,
(iii) The contract or written arrange- through its contracts, that each MCO,
ment must either provide for revoca- PIHP, and PAHP meets the require-
tion of the delegation of activities or ments of this section.
obligations, or specify other remedies (b) Adoption of practice guidelines.
in instances where the State or the Each MCO and, when applicable, each
MCO, PIHP, PAHP, or PCCM entity de- PIHP and PAHP adopts practice guide-
termine that the subcontractor has not lines that meet the following require-
performed satisfactorily. ments:
(2) The subcontractor agrees to com- (1) Are based on valid and reliable
ply with all applicable Medicaid laws, clinical evidence or a consensus of pro-
regulations, including applicable sub- viders in the particular field.
regulatory guidance and contract pro- (2) Consider the needs of the MCO’s,
visions; PIHP’s, or PAHP’s enrollees.
(3) The subcontractor agrees that—
(3) Are adopted in consultation with
(i) The State, CMS, the HHS Inspec-
contracting health care professionals.
tor General, the Comptroller General,
or their designees have the right to (4) Are reviewed and updated periodi-
audit, evaluate, and inspect any books, cally as appropriate.
records, contracts, computer or other (c) Dissemination of guidelines. Each
electronic systems of the subcon- MCO, PIHP, and PAHP disseminates
tractor, or of the subcontractor’s con- the guidelines to all affected providers
tractor, that pertain to any aspect of and, upon request, to enrollees and po-
services and activities performed, or tential enrollees.
determination of amounts payable (d) Application of guidelines. Decisions
under the MCO’s, PIHP’s, or PAHP’s for utilization management, enrollee
contract with the State. education, coverage of services, and
(ii) The subcontractor will make other areas to which the guidelines
available, for purposes of an audit, apply are consistent with the guide-
evaluation, or inspection under para- lines.
graph (c)(3)(i) of this section, its prem-
§ 438.242 Health information systems.
ises, physical facilities, equipment,
books, records, contracts, computer or (a) General rule. The State must en-
other electronic systems relating to its sure, through its contracts that each
Medicaid enrollees. MCO, PIHP, and PAHP maintains a
(iii) The right to audit under para- health information system that col-
graph (c)(3)(i) of this section will exist lects, analyzes, integrates, and reports
through 10 years from the final date of data and can achieve the objectives of
the contract period or from the date of this part. The systems must provide in-
completion of any audit, whichever is formation on areas including, but not
later. limited to, utilization, claims, griev-
(iv) If the State, CMS, or the HHS In- ances and appeals, and disenrollments
spector General determines that there for other than loss of Medicaid eligi-
is a reasonable possibility of fraud or bility.
similar risk, the State, CMS, or the (b) Basic elements of a health informa-
HHS Inspector General may inspect, tion system. The State must require, at
evaluate, and audit the subcontractor a minimum, that each MCO, PIHP, and
at any time. PAHP comply with the following:
296
(1) Section 6504(a) of the Affordable to the State by the MCO, PIHP, or
Care Act, which requires that State PAHP, meets the requirements of this
claims processing and retrieval sys- section. The State must have proce-
tems are able to collect data elements dures and quality assurance protocols
necessary to enable the mechanized to ensure that enrollee encounter data
claims processing and information re- submitted under paragraph (c) of this
trieval systems in operation by the section is a complete and accurate rep-
State to meet the requirements of sec- resentation of the services provided to
tion 1903(r)(1)(F) of the Act. the enrollees under the contract be-
(2) Collect data on enrollee and pro- tween the State and the MCO, PIHP, or
vider characteristics as specified by PAHP.
the State, and on all services furnished (e) Applicability date. This section ap-
to enrollees through an encounter data plies to the rating period for contracts
system or other methods as may be with MCOs, PIHPs, PAHPs, and PCCM
specified by the State. entities beginning on or after July 1,
(3) Ensure that data received from 2017. Until that applicability date,
providers is accurate and complete states are required to continue to com-
by— ply with § 438.242 contained in the 42
(i) Verifying the accuracy and timeli- CFR parts 430 to 481, edition revised as
ness of reported data, including data of October 1, 2015.
from network providers the MCO,
PIHP, or PAHP is compensating on the Subpart E—Quality Measurement
basis of capitation payments. and Improvement; External
(ii) Screening the data for complete- Quality Review
ness, logic, and consistency.
(iii) Collecting data from providers in SOURCE: 81 FR 27853, May 6, 2016, unless
standardized formats to the extent fea- otherwise noted.
sible and appropriate, including secure
information exchanges and tech- § 438.310 Basis, scope, and applica-
nologies utilized for State Medicaid bility.
quality improvement and care coordi- (a) Statutory basis. This subpart is
nation efforts. based on sections 1932(c),
(4) Make all collected data available 1903(a)(3)(C)(ii), 1902(a)(4), and
to the State and upon request to CMS. 1902(a)(19) of the Act.
(c) Enrollee encounter data. Contracts (b) Scope. This subpart sets forth:
between a State and a MCO, PIHP, or (1) Specifications for a quality as-
PAHP must provide for: sessment and performance improve-
(1) Collection and maintenance of ment program that States must re-
sufficient enrollee encounter data to quire each contracting MCO, PIHP, and
identify the provider who delivers any PAHP to implement and maintain.
item(s) or service(s) to enrollees. (2) Requirements for the State review
(2) Submission of enrollee encounter of the accreditation status of all con-
data to the State at a frequency and tracting MCOs, PIHPs, and PAHPs.
level of detail to be specified by CMS (3) Specifications for a Medicaid
and the State, based on program ad- managed care quality rating system for
ministration, oversight, and program all States contracting with MCOs,
integrity needs. PIHPs, and PAHPs.
(3) Submission of all enrollee encoun- (4) Specifications for a Medicaid
ter data that the State is required to managed care quality strategy that
report to CMS under § 438.818. States contracting with MCOs, PIHPs,
(4) Specifications for submitting en- PAHPs, and PCCM entities (described
counter data to the State in standard- in paragraph (c)(2) of this section) must
ized ASC X12N 837 and NCPDP formats, implement to ensure the delivery of
and the ASC X12N 835 format as appro- quality health care.
priate. (5) Requirements for annual external
(d) State review and validation of en- quality reviews of each contracting
counter data. The State must review MCO, PIHP, PAHP and PCCM entity
and validate that the encounter data (described in paragraph (c)(2) of this
collected, maintained, and submitted section) including—
297
§ 438.320 42 CFR Ch. IV (10–1–17 Edition)
(i) Criteria that States must use in aggregated information on quality,

selecting entities to perform the re- timeliness, and access to the health
views. care services that an MCO, PIHP,
(ii) Specifications for the activities PAHP, or PCCM entity (described in
related to external quality review. § 438.310(c)(2)), or their contractors fur-
(iii) Circumstances under which ex- nish to Medicaid beneficiaries.
ternal quality review may use the re- External quality review organization
sults of Medicare quality reviews or means an organization that meets the
private accreditation reviews. competence and independence require-
(iv) Requirements for making the re-
ments set forth in § 438.354, and per-
sults of the reviews publicly available.
forms external quality review, other
(c) Applicability. (1) The provisions of
this subpart apply to States con- EQR-related activities as set forth in
tracting with MCOs, PIHPs, and § 438.358, or both.
PAHPs for the delivery of services cov- Financial relationship means—
ered under Medicaid. (1) A direct or indirect ownership or
(2) The provisions of § 438.330(b)(2), investment interest (including an op-
(b)(3), (c), and (e), § 438.340, and § 438.350 tion or nonvested interest) in any enti-
apply to States contracting with PCCM ty. This direct or indirect interest may
entities whose contracts with the State be in the form of equity, debt, or other
provide for shared savings, incentive means, and includes any indirect own-
payments or other financial reward for ership or investment interest no mat-
the PCCM entity for improved quality ter how many levels removed from a di-
outcomes. rect interest; or
(d) Applicability dates. States will not (2) A compensation arrangement with
be held out of compliance with the fol- an entity.
lowing requirements of this subpart Health care services means all Med-
prior to the dates noted below so long
icaid services provided by an MCO,
as they comply with the corresponding
PIHP, or PAHP under contract with
standard(s) in 42 CFR part 438 con-
the State Medicaid agency in any set-
tained in the 42 CFR parts 430 to 481,
edition revised as of October 1, 2015: ting, including but not limited to med-
(1) States must comply with § 438.330 ical care, behavioral health care, and
and § 438.332 no later than the rating long-term services and supports.
period for contracts beginning on or Outcomes means changes in patient
after July 1, 2017. health, functional status, satisfaction
(2) States must comply with or goal achievement that result from
§§ 438.340, 438.350, 438.354, 438.356, 438.358, health care or supportive services.
438.360, 438.362, and 438.364 no later than Quality, as it pertains to external
July 1, 2018. quality review, means the degree to
which an MCO, PIHP, PAHP, or PCCM
§ 438.320 Definitions. entity (described in § 438.310(c)(2)) in-
As used in this subpart— creases the likelihood of desired out-
Access, as it pertains to external comes of its enrollees through:
quality review, means the timely use of (1) Its structural and operational
services to achieve optimal outcomes, characteristics.
as evidenced by managed care plans (2) The provision of services that are
successfully demonstrating and report- consistent with current professional,
ing on outcome information for the evidenced-based-knowledge.
availability and timeliness elements
(3) Interventions for performance im-
defined under § 438.68 (Network ade-
quacy standards) and § 438.206 (Avail- provement.
ability of services). Validation means the review of infor-
EQR stands for external quality re- mation, data, and procedures to deter-
view. mine the extent to which they are ac-
curate, reliable, free from bias, and in
EQRO stands for external quality re-

view organization. accord with standards for data collec-
External quality review means the tion and analysis.
analysis and evaluation by an EQRO, of
298
§ 438.330 Quality assessment and per- (5) For MCOs, PIHPs, or PAHPs pro-
formance improvement program. viding long-term services and supports:
(a) General rules. (1) The State must (i) Mechanisms to assess the quality
require, through its contracts, that and appropriateness of care furnished
each MCO, PIHP, and PAHP establish to enrollees using long-term services
and implement an ongoing comprehen- and supports, including assessment of
sive quality assessment and perform- care between care settings and a com-
ance improvement program for the parison of services and supports re-
services it furnishes to its enrollees ceived with those set forth in the en-
that includes the elements identified in rollee’s treatment/service plan, if ap-
paragraph (b) of this section. plicable; and
(ii) Participate in efforts by the
(2) After consulting with States and
State to prevent, detect, and remediate
other stakeholders and providing pub-
critical incidents (consistent with as-
lic notice and opportunity to comment,
suring beneficiary health and welfare
CMS may specify performance meas-
per §§ 441.302 and 441.730(a) of this chap-
ures and PIPs, which must be included
ter) that are based, at a minimum, on
in the standard measures identified and
the requirements on the State for
PIPs required by the State in accord-
home and community-based waiver
ance with paragraphs (c) and (d) of this
programs per § 441.302(h) of this chap-
section. A State may request an ex-
ter.
emption from including the perform-
(c) Performance measurement. The
ance measures or PIPs established
State must—
under paragraph (a)(2) of this section,
(1)(i) Identify standard performance
by submitting a written request to
measures, including those performance
CMS explaining the basis for such re-
measures that may be specified by CMS
quest.
under paragraph (a)(2) of this section,
(3) The State must require, through relating to the performance of MCOs,
its contracts, that each PCCM entity PIHPs, and PAHPs; and
described in § 438.310(c)(2) establish and (ii) In addition to the measures speci-
implement an ongoing comprehensive fied in paragraph (c)(1)(i) of this sec-
quality assessment and performance tion, in the case of an MCO, PIHP, or
improvement program for the services PAHP providing long-term services and
it furnishes to its enrollees which in- supports, identify standard perform-
corporates, at a minimum, paragraphs ance measures relating to quality of
(b)(2) and (3) of this section and the life, rebalancing, and community inte-
performance measures identified by the gration activities for individuals re-
State per paragraph (c) of this section. ceiving long-term services and sup-
(b) Basic elements of quality assessment ports.
and performance improvement programs. (2) Require that each MCO, PIHP,
The comprehensive quality assessment and PAHP annually—
and performance improvement pro- (i) Measure and report to the State
gram described in paragraph (a) of this on its performance, using the standard
section must include at least the fol- measures required by the State in
lowing elements: paragraph (c)(1) of this section;
(1) Performance improvement (ii) Submit to the State data, speci-
projects in accordance with paragraph fied by the State, which enables the
(d) of this section. State to calculate the MCO’s, PIHP’s,
(2) Collection and submission of per- or PAHP’s performance using the
formance measurement data in accord- standard measures identified by the
ance with paragraph (c) of this section. State under paragraph (c)(1) of this sec-
(3) Mechanisms to detect both under- tion; or
utilization and overutilization of serv- (iii) Perform a combination of the ac-
ices. tivities described in paragraphs (c)(2)(i)
(4) Mechanisms to assess the quality and (ii) of this section.
and appropriateness of care furnished (d) Performance improvement projects.

to enrollees with special health care (1) The State must require that MCOs,
needs, as defined by the State in the PIHPs, and PAHPs conduct perform-
quality strategy under § 438.340. ance improvement projects, including
299
§ 438.332 42 CFR Ch. IV (10–1–17 Edition)
any performance improvement projects ess to evaluate the impact and effec-
required by CMS in accordance with tiveness of its own quality assessment
paragraph (a)(2) of this section, that and performance improvement pro-
focus on both clinical and nonclinical gram.
areas.
(2) Each performance improvement § 438.332 State review of the accredita-
project must be designed to achieve tion status of MCOs, PIHPs, and
significant improvement, sustained PAHPs.
over time, in health outcomes and en- (a) The State must require, through
rollee satisfaction, and must include its contracts, that each MCO, PIHP,
the following elements: and PAHP inform the State whether it
(i) Measurement of performance has been accredited by a private inde-
using objective quality indicators. pendent accrediting entity.
(ii) Implementation of interventions (b) The State must require, through
to achieve improvement in the access its contracts, that each MCO, PIHP,
to and quality of care. and PAHP that has received accredita-
(iii) Evaluation of the effectiveness tion by a private independent accred-
of the interventions based on the per- iting entity must authorize the private
formance measures in paragraph independent accrediting entity to pro-
(d)(2)(i) of this section. vide the State a copy of its most recent
(iv) Planning and initiation of activi- accreditation review, including:
ties for increasing or sustaining im- (1) Accreditation status, survey type,
provement. and level (as applicable);
(3) The State must require each MCO, (2) Accreditation results, including
PIHP, and PAHP to report the status recommended actions or improve-
and results of each project conducted ments, corrective action plans, and
per paragraph (d)(1) of this section to summaries of findings; and
the State as requested, but not less (3) Expiration date of the accredita-
than once per year. tion.
(4) The State may permit an MCO, (c) The State must—
PIHP, or PAHP exclusively serving (1) Make the accreditation status for
dual eligibles to substitute an MA Or- each contracted MCO, PIHP, and PAHP
ganization quality improvement available on the Web site required
project conducted under § 422.152(d) of under § 438.10(c)(3), including whether
this chapter for one or more of the per- each MCO, PIHP, and PAHP has been
formance improvement projects other- accredited and, if applicable, the name
wise required under this section. of the accrediting entity, accreditation
(e) Program review by the State. (1) The program, and accreditation level; and
State must review, at least annually, (2) Update this information at least
the impact and effectiveness of the annually.
quality assessment and performance
improvement program of each MCO, § 438.334 Medicaid managed care qual-
PIHP, PAHP, and PCCM entity de- ity rating system.
scribed in § 438.310(c)(2). The review (a) General rule. Each State con-
must include— tracting with an MCO, PIHP or PAHP
(i) The MCO’s, PIHP’s, PAHP’s, and to furnish services to Medicaid bene-
PCCM entity’s performance on the ficiaries must—
measures on which it is required to re- (1) Adopt the Medicaid managed care
port. quality rating system developed by
(ii) The outcomes and trended results CMS in accordance with paragraph (b)
of each MCO’s, PIHP’s, and PAHP’s of this section; or
performance improvement projects. (2) Adopt an alternative Medicaid
(iii) The results of any efforts by the managed care quality rating system in
MCO, PIHP, or PAHP to support com- accordance with paragraph (c) of this
munity integration for enrollees using section.
long-term services and supports. (3) Implement such Medicaid man-

(2) The State may require that an aged care quality rating system within
MCO, PIHP, PAHP, or PCCM entity de- 3 years of the date of a final notice
scribed in § 438.310(c)(2) develop a proc- published in the FEDERAL REGISTER.
300
(b) Quality rating system. CMS, in con- based on the data collected, using the
sultation with States and other stake- Medicaid managed care quality rating
holders and after providing public no- system adopted under this section.
tice and opportunity to comment, will (e) Availability of information. The
identify performance measures and a State must prominently display the
methodology for a Medicaid managed quality rating given by the State to
care quality rating system that aligns each MCO, PIHP, or PAHP under para-
with the summary indicators of the graph (d) of this section on the Web
qualified health plan quality rating site required under § 438.10(c)(3) in a
system developed per 45 CFR 156.1120. manner that complies with the stand-
(c) Alternative quality rating system. (1)
ards in § 438.10(d).
A State may submit a request to CMS
for approval to use an alternative Med- § 438.340 Managed care State quality
icaid managed care quality rating sys- strategy.
tem that utilizes different performance
measures or applies a different method- (a) General rule. Each State con-
ology from that described in paragraph tracting with an MCO, PIHP, or PAHP
(b) of this section provided that— as defined in § 438.2 or with a PCCM en-
(i) The ratings generated by the al- tity as described in § 438.310(c)(2) must
ternative Medicaid managed care qual- draft and implement a written quality
ity rating system yield information re- strategy for assessing and improving
garding MCO, PIHP, and PAHP per- the quality of health care and services
formance which is substantially com- furnished by the MCO, PIHP, PAHP or
parable to that yielded by the Medicaid PCCM entity.
managed care quality rating system (b) Elements of the State quality strat-
described in paragraph (b) of this sec- egy. At a minimum, the State’s quality
tion; and, strategy must include the following:
(ii) The state receive CMS approval (1) The State-defined network ade-
prior to implementing an alternative quacy and availability of services
quality rating system or modifications standards for MCOs, PIHPs, and PAHPs
to an approved alternative Medicaid
required by §§ 438.68 and 438.206 and ex-
managed care quality rating system.
amples of evidence-based clinical prac-
(2) Prior to submitting a request for,
or modification of, an alternative Med- tice guidelines the State requires in ac-
icaid managed care quality rating sys- cordance with § 438.236.
tem to CMS, the State must— (2) The State’s goals and objectives
(i) Obtain input from the State’s for continuous quality improvement
Medical Care Advisory Committee es- which must be measurable and take
tablished under § 431.12 of this chapter; into consideration the health status of
and all populations in the State served by
(ii) Provide an opportunity for public the MCO, PIHP, and PAHP.
comment of at least 30 days on the pro- (3) A description of—
posed alternative Medicaid managed (i) The quality metrics and perform-
care quality rating system or modifica- ance targets to be used in measuring
tion. the performance and improvement of
(3) The State must document in the each MCO, PIHP, and PAHP with
request to CMS the public comment which the State contracts, including
process utilized by the State including but not limited to, the performance
discussion of the issues raised by the measures reported in accordance with
Medical Care Advisory Committee and § 438.330(c). The State must identify
the public. The request must document which quality measures and perform-
any policy revisions or modifications
ance outcomes the State will publish
made in response to the comments and
at least annually on the Web site re-
rationale for comments not accepted.
(d) Quality ratings. Each year, the quired under § 438.10(c)(3); and
(ii) The performance improvement
State must collect data from each

MCO, PIHP, and PAHP with which it projects to be implemented in accord-
contracts and issue an annual quality ance with § 438.330(d), including a de-
rating for each MCO, PIHP, and PAHP scription of any interventions the
301
§ 438.350 42 CFR Ch. IV (10–1–17 Edition)
State proposes to improve access, qual- Tribes in accordance with the State’s
ity, or timeliness of care for bene- Tribal consultation policy.
ficiaries enrolled in an MCO, PIHP, or (2) Review and update the quality
PAHP. strategy as needed, but no less than
(4) Arrangements for annual, exter- once every 3 years.
nal independent reviews, in accordance (i) This review must include an eval-
with § 438.350, of the quality outcomes uation of the effectiveness of the qual-
and timeliness of, and access to, the ity strategy conducted within the pre-
services covered under each MCO, vious 3 years.
PIHP, PAHP, and PCCM entity (de- (ii) The State must make the results
scribed in § 438.310(c)(2)) contract. of the review available on the Web site
(5) A description of the State’s tran- required under § 438.10(c)(3).
sition of care policy required under (iii) Updates to the quality strategy
§ 438.62(b)(3). must take into consideration the rec-
(6) The State’s plan to identify, ommendations provided pursuant to
evaluate, and reduce, to the extent § 438.364(a)(4).
practicable, health disparities based on (3) Submit to CMS the following:
age, race, ethnicity, sex, primary lan- (i) A copy of the initial strategy for
guage, and disability status. States CMS comment and feedback prior to
must identify this demographic infor- adopting it in final.
mation for each Medicaid enrollee and (ii) A copy of the revised strategy
provide it to the MCO, PIHP or PAHP whenever significant changes, as de-
at the time of enrollment. For purposes fined in the state’s quality strategy per
of this paragraph (b)(6), ‘‘disability sta- paragraph (b)(11) of this section, are
tus’’ means whether the individual made to the document, or whenever
qualified for Medicaid on the basis of a significant changes occur within the
disability. State’s Medicaid program.
(7) For MCOs, appropriate use of in-
(d) Availability. The State must make
termediate sanctions that, at a min-
the final quality strategy available on
imum, meet the requirements of sub-
the Web site required under
part I of this part.
§ 438.10(c)(3).
(8) A description of how the State
will assess the performance and quality § 438.350 External quality review.
outcomes achieved by each PCCM enti-
ty described in § 438.310(c)(2). Each State that contracts with
(9) The mechanisms implemented by MCOs, PIHPs, or PAHPs, or with PCCM
the State to comply with § 438.208(c)(1) entities (described in § 438.310(c)(2))
(relating to the identification of per- must ensure that—
sons who need long-term services and (a) Except as provided in § 438.362, a
supports or persons with special health qualified EQRO performs an annual
care needs). EQR for each such contracting MCO,
(10) The information required under PIHP, PAHP or PCCM entity (de-
§ 438.360(c) (relating to nonduplication scribed in § 438.310(c)(2)).
of EQR activities); and (b) The EQRO has sufficient informa-
(11) The State’s definition of a ‘‘sig- tion to use in performing the review.
nificant change’’ for the purposes of (c) The information used to carry out
paragraph (c)(3)(ii) of this section. the review must be obtained from the
(c) Development, evaluation, and revi- EQR-related activities described in
sion. In drafting or revising its quality § 438.358 or, if applicable, from a Medi-
strategy, the State must: care or private accreditation review as
(1) Make the strategy available for described in § 438.360.
public comment before submitting the (d) For each EQR-related activity,
strategy to CMS for review, including: the information gathered for use in the
(i) Obtaining input from the Medical EQR must include the elements de-
Care Advisory Committee (established scribed in § 438.364(a)(2)(i) through (iv).
by § 431.12 of this chapter), bene- (e) The information provided to the

ficiaries, and other stakeholders. EQRO in accordance with paragraph (b)
(ii) If the State enrolls Indians in the of this section is obtained through
MCO, PIHP, or PAHP, consulting with methods consistent with the protocols
302
established by the Secretary in accord- (1) If a State agency, department,

ance with § 438.352. university, or other State entity:
(f) The results of the reviews are (i) May not have Medicaid purchasing
made available as specified in § 438.364. or managed care licensing authority;
[81 FR 27853, May 6, 2016, as amended at 82
and
FR 39, Jan. 3, 2017] (ii) Must be governed by a Board or
similar body the majority of whose
§ 438.352 External quality review pro- members are not government employ-
tocols. ees.
The Secretary, in coordination with (2) An EQRO may not:
the National Governor’s Association, (i) Review any MCO, PIHP, PAHP, or
must develop protocols for the external PCCM entity (described in
quality reviews required under this § 438.310(c)(2)), or a competitor oper-
subpart. Each protocol issued by the ating in the State, over which the
Secretary must specify— EQRO exerts control or which exerts
(a) The data to be gathered; control over the EQRO (as used in this
(b) The sources of the data; paragraph, ‘‘control’’ has the meaning
(c) The activities and steps to be fol- given the term in 48 CFR 19.101)
lowed in collecting the data to promote through—
its accuracy, validity, and reliability; (A) Stock ownership;
(d) The proposed method or methods (B) Stock options and convertible de-
for validly analyzing and interpreting bentures;
the data once obtained; and (C) Voting trusts;
(e) Instructions, guidelines, work- (D) Common management, including
sheets, and other documents or tools interlocking management; and
necessary for implementing the pro- (E) Contractual relationships.
tocol. (ii) Deliver any health care services
to Medicaid beneficiaries;
§ 438.354 Qualifications of external (iii) Conduct, on the State’s behalf,
quality review organizations. ongoing Medicaid managed care pro-
(a) General rule. The State must en- gram operations related to oversight of
sure that an EQRO meets the require- the quality of MCO, PIHP, PAHP, or
ments of this section. PCCM entity (described in
(b) Competence. The EQRO must have § 438.310(c)(2)) services, except for the
at a minimum the following: related activities specified in § 438.358;
(1) Staff with demonstrated experi- (iv) Review any MCO, PIHP, PAHP or
ence and knowledge of— PCCM entity (described in
(i) Medicaid beneficiaries, policies, § 438.310(c)(2)) for which it is conducting
data systems, and processes; or has conducted an accreditation re-
(ii) Managed care delivery systems, view within the previous 3 years; or
organizations, and financing; (v) Have a present, or known future,
(iii) Quality assessment and improve- direct or indirect financial relationship
ment methods; and with an MCO, PIHP, PAHP, or PCCM
(iv) Research design and method- entity (described in § 438.310(c)(2)) that
ology, including statistical analysis. it will review as an EQRO.
(2) Sufficient physical, technological,
and financial resources to conduct EQR § 438.356 State contract options for ex-
or EQR-related activities. ternal quality review.
(3) Other clinical and nonclinical (a) The State—
skills necessary to carry out EQR or (1) Must contract with one EQRO to
EQR-related activities and to oversee conduct either EQR alone or EQR and
the work of any subcontractors. other EQR-related activities.
(c) Independence. The EQRO and its (2) May contract with additional
subcontractors must be independent EQROs or other entities to conduct
from the State Medicaid agency and EQR-related activities as set forth in
from the MCOs, PIHPs, PAHPs, or § 438.358.

PCCM entities (described in (b) Each EQRO must meet the com-
§ 438.310(c)(2)) that they review. To petence requirements as specified in
qualify as ‘‘independent’’— § 438.354(b).
303
§ 438.358 42 CFR Ch. IV (10–1–17 Edition)
(c) Each EQRO is permitted to use quirements set forth in § 438.68 and, if
subcontractors. The EQRO is account- the State enrolls Indians in the MCO,
able for, and must oversee, all subcon- PIHP, or PAHP, § 438.14(b)(1).
tractor functions. (2) For each PCCM entity (described
(d) Each EQRO and its subcontrac- in § 438.310(c)(2)), the EQR-related ac-
tors performing EQR or EQR-related tivities in paragraphs (b)(1)(ii) and (iii)
activities must meet the requirements of this section must be performed.
for independence, as specified in (c) Optional activities. For each MCO,
§ 438.354(c). PIHP, PAHP, and PCCM entity (de-
(e) For each contract with an EQRO scribed in § 438.310(c)(2)), the following
described in paragraph (a) of this sec- activities may be performed by using
tion, the State must follow an open, information derived during the pre-
competitive procurement process that ceding 12 months:
is in accordance with State law and (1) Validation of encounter data re-
regulations. In addition, the State ported by an MCO, PIHP, PAHP, or
must comply with 45 CFR part 75 as it PCCM entity (described in
applies to State procurement of Med- § 438.310(c)(2)).
icaid services. (2) Administration or validation of
consumer or provider surveys of qual-
§ 438.358 Activities related to external ity of care.
quality review. (3) Calculation of performance meas-
(a) General rule. (1) The State, its ures in addition to those reported by
agent that is not an MCO, PIHP, an MCO, PIHP, PAHP, or PCCM entity
PAHP, or PCCM entity (described in (described in § 438.310(c)(2)) and vali-
§ 438.310(c)(2)), or an EQRO may per- dated by an EQRO in accordance with
form the mandatory and optional EQR- paragraph (b)(1)(ii) of this section.
related activities in this section. (4) Conduct of performance improve-
(2) The data obtained from the man- ment projects in addition to those con-
datory and optional EQR-related ac- ducted by an MCO, PIHP, PAHP, or
tivities in this section must be used for PCCM entity (described in
the annual EQR in § 438.350 and must § 438.310(c)(2)) and validated by an
include, at a minimum, the elements in EQRO in accordance with paragraph
§ 438.364(a)(2)(i) through (iv). (b)(1)(i) of this section.
(b) Mandatory activities. (1) For each (5) Conduct of studies on quality that
MCO, PIHP, or PAHP the following focus on a particular aspect of clinical
EQR-related activities must be per- or nonclinical services at a point in
formed: time.
(i) Validation of performance im- (6) Assist with the quality rating of
provement projects required in accord- MCOs, PIHPs, and PAHPs consistent
ance with § 438.330(b)(1) that were un- with § 438.334.
derway during the preceding 12 (d) Technical assistance. The EQRO
months. may, at the State’s direction, provide
(ii) Validation of MCO, PIHP, or technical guidance to groups of MCOs,
PAHP performance measures required PIHPs, PAHPs, or PCCM entities (de-
in accordance with § 438.330(b)(2) or scribed in § 438.310(c)(2)) to assist them
MCO, PIHP, or PAHP performance in conducting activities related to the
measures calculated by the State dur- mandatory and optional activities de-
ing the preceding 12 months. scribed in this section that provide in-
(iii) A review, conducted within the formation for the EQR and the result-
previous 3-year period, to determine ing EQR technical report.
the MCO’s, PIHP’s, or PAHP’s compli- [81 FR 27853, May 6, 2016, as amended at 82
ance with the standards set forth in FR 39, Jan. 3, 2017; 82 FR 12510, Mar. 6, 2017]
subpart D of this part and the quality
assessment and performance improve- § 438.360 Nonduplication of mandatory
ment requirements described in activities with Medicare or accredi-
tation review.
§ 438.330.
(iv) Validation of MCO, PIHP, or (a) General rule. Consistent with guid-
PAHP network adequacy during the ance issued by the Secretary under
preceding 12 months to comply with re- § 438.352, to avoid duplication the State
304
may use information from a Medicare (1) The MCO has a current Medicare
or private accreditation review of an contract under part C of Title XVIII or
MCO, PIHP, or PAHP to provide infor- under section 1876 of the Act, and a
mation for the annual EQR (described current Medicaid contract under sec-
in § 438.350) instead of conducting one tion 1903(m) of the Act.
or more of the EQR activities described (2) The two contracts cover all or
in § 438.358(b)(1)(i) through (iii) (relat- part of the same geographic area with-
ing to the validation of performance in the State.
improvement projects, validation of (3) The Medicaid contract has been in
performance measures, and compliance effect for at least 2 consecutive years
review) if the following conditions are before the effective date of the exemp-
met: tion and during those 2 years the MCO
(1) The MCO, PIHP, or PAHP is in has been subject to EQR under this
compliance with the applicable Medi- part, and found to be performing ac-
care Advantage standards established ceptably for the quality, timeliness,
by CMS, as determined by CMS or its and access to health care services it
contractor for Medicare, or has ob- provides to Medicaid beneficiaries.
tained accreditation from a private ac- (b) Information on exempted MCOs.
crediting organization recognized by When the State exercises this option,
CMS as applying standards at least as the State must obtain either of the fol-
stringent as Medicare under the proce- lowing:
dures in § 422.158 of this chapter; (1) Information on Medicare review
(2) The Medicare or private accredi- findings. Each year, the State must ob-
tation review standards are comparable tain from each MCO that it exempts
to standards established through the from EQR the most recent Medicare re-
EQR protocols (§ 438.352) for the EQR view findings reported on the MCO in-
activities described in § 438.358(b)(1)(i) cluding—
(i) All data, correspondence, informa-
through (iii); and
tion, and findings pertaining to the
(3) The MCO, PIHP, or PAHP pro-
MCO’s compliance with Medicare
vides to the State all the reports, find-
standards for access, quality assess-
ings, and other results of the Medicare ment and performance improvement,
or private accreditation review activi- health services, or delegation of these
ties applicable to the standards for the activities.
EQR activities. (ii) All measures of the MCO’s per-
(b) External quality review report. If formance.
the State uses information from a (iii) The findings and results of all
Medicare or private accreditation re- performance improvement projects per-
view in accordance with paragraph (a) taining to Medicare enrollees.
of this section, the State must ensure (2) Medicare information from a private,
that all such information is furnished national accrediting organization that
to the EQRO for analysis and inclusion CMS approves and recognizes for Medi-
in the report described in § 438.364(a). care Advantage Organization deeming. (i)
(c) Quality strategy. The State must If an exempted MCO has been reviewed
identify in its quality strategy under by a private accrediting organization,
§ 438.340 the EQR activities for which it the State must require the MCO to pro-
has exercised the option described in vide the State with a copy of all find-
this section, and explain the rationale ings pertaining to its most recent ac-
for the State’s determination that the creditation review if that review has
Medicare review or private accredita- been used for either of the following
tion activity is comparable to such purposes:
EQR activities, consistent with para- (A) To fulfill certain requirements
graph (a)(2) of this section. for Medicare external review under
subpart D of part 422 of this chapter.
§ 438.362 Exemption from external (B) To deem compliance with Medi-
quality review.
care requirements, as provided in

(a) Basis for exemption. The State may § 422.156 of this chapter.
exempt an MCO from EQR if the fol- (ii) These findings must include, but
lowing conditions are met: need not be limited to, accreditation
305
§ 438.364 42 CFR Ch. IV (10–1–17 Edition)
review results of evaluation of compli- PCCM entity (described in

ance with individual accreditation § 438.310(c)(2)) has addressed effectively
standards, noted deficiencies, correc- the recommendations for quality im-
tive action plans, and summaries of provement made by the EQRO during
unmet accreditation requirements. the previous year’s EQR.
(b) Revision. States may not sub-
§ 438.364 External quality review re-
sults. stantively revise the content of the
final EQR technical report without evi-
(a) Information that must be produced. dence of error or omission.
The State must ensure that the EQR (c) Availability of information. (1) The
results in an annual detailed technical State must contract with a qualified
report that summarizes findings on ac-
EQRO to produce and submit to the
cess and quality of care, including:
State an annual EQR technical report
(1) A description of the manner in
in accordance with paragraph (a) of
which the data from all activities con-
this section. The State must finalize
ducted in accordance with § 438.358 were
aggregated and analyzed, and conclu- the annual technical report by April
sions were drawn as to the quality, 30th of each year.
timeliness, and access to the care fur- (2) The State must—
nished by the MCO, PIHP, PAHP, or (i) Post the most recent copy of the
PCCM entity (described in annual EQR technical report on the
§ 438.310(c)(2)). Web site required under § 438.10(c)(3) by
(2) For each EQR-related activity April 30th of each year.
conducted in accordance with § 438.358: (ii) Provide printed or electronic cop-
(i) Objectives; ies of the information specified in para-
(ii) Technical methods of data collec- graph (a) of this section, upon request,
tion and analysis; to interested parties such as partici-
(iii) Description of data obtained, in- pating health care providers, enrollees
cluding validated performance meas- and potential enrollees of the MCO,
urement data for each activity con- PIHP, PAHP, or PCCM entity (de-
ducted in accordance with scribed in § 438.310(c)(2)), beneficiary
§ 438.358(b)(1)(i) and (ii); and advocacy groups, and members of the
(iv) Conclusions drawn from the data. general public.
(3) An assessment of each MCO’s, (3) The State must make the infor-
PIHP’s, PAHP’s, or PCCM entity’s (de- mation specified in paragraph (a) of
scribed in § 438.310(c)(2)) strengths and this section available in alternative
weaknesses for the quality, timeliness, formats for persons with disabilities,
and access to health care services fur- when requested.
nished to Medicaid beneficiaries. (d) Safeguarding patient identity. The
(4) Recommendations for improving information released under paragraph
the quality of health care services fur- (b) of this section may not disclose the
nished by each MCO, PIHP, PAHP, or
identity or other protected health in-
PCCM entity (described in
formation of any patient.
§ 438.310(c)(2)) including how the State
can target goals and objectives in the § 438.370 Federal financial participa-
quality strategy, under § 438.340, to bet- tion (FFP).
ter support improvement in the qual-
ity, timeliness, and access to health (a) FFP at the 75 percent rate is
care services furnished to Medicaid available in expenditures for EQR (in-
beneficiaries. cluding the production of EQR results)
(5) Methodologically appropriate, and the EQR-related activities set
comparative information about all forth in § 438.358 performed on MCOs
MCOs, PIHPs, PAHPs, and PCCM enti- and conducted by EQROs and their sub-
ties (described in § 438.310(c)(2)), con- contractors.
sistent with guidance included in the (b) FFP at the 50 percent rate is
EQR protocols issued in accordance available in expenditures for EQR-re-

with § 438.352(e). lated activities conducted by any enti-
(6) An assessment of the degree to ty that does not qualify as an EQRO,
which each MCO, PIHP, PAHP, or and for EQR (including the production
306
of EQR results) and EQR-related activi- (5) The failure of an MCO, PIHP, or
ties performed by an EQRO on entities PAHP to act within the timeframes
other than MCOs. provided in § 438.408(b)(1) and (2) regard-
(c) Prior to claiming FFP at the 75 ing the standard resolution of griev-
percent rate in accordance with para- ances and appeals.
graph (a) of this section, the State (6) For a resident of a rural area with
must submit each EQRO contract to only one MCO, the denial of an enroll-
CMS for review and approval. ee’s request to exercise his or her right,
under § 438.52(b)(2)(ii), to obtain serv-
Subpart F—Grievance and ices outside the network.
Appeal System (7) The denial of an enrollee’s request
to dispute a financial liability, includ-
SOURCE: 81 FR 27853, May 6, 2016, unless
ing cost sharing, copayments, pre-
otherwise noted. miums, deductibles, coinsurance, and
other enrollee financial liabilities.
§ 438.400 Statutory basis, definitions, Appeal means a review by an MCO,
and applicability. PIHP, or PAHP of an adverse benefit
(a) Statutory basis. This subpart is determination.
based on the following statutory sec- Grievance means an expression of dis-
tions: satisfaction about any matter other
(1) Section 1902(a)(3) of the Act re- than an adverse benefit determination.
quires that a State plan provide an op- Grievances may include, but are not
portunity for a fair hearing to any per- limited to, the quality of care or serv-
son whose claim for assistance is de- ices provided, and aspects of inter-
nied or not acted upon promptly. personal relationships such as rudeness
(2) Section 1902(a)(4) of the Act re- of a provider or employee, or failure to
quires that the State plan provide for respect the enrollee’s rights regardless
methods of administration that the of whether remedial action is re-
Secretary finds necessary for the prop- quested. Grievance includes an enroll-
er and efficient operation of the plan. ee’s right to dispute an extension of
(3) Section 1932(b)(4) of the Act re- time proposed by the MCO, PIHP or
quires Medicaid managed care organi- PAHP to make an authorization deci-
zations to establish internal grievance sion.
procedures under which Medicaid en- Grievance and appeal system means
rollees, or providers acting on their be- the processes the MCO, PIHP, or PAHP
half, may challenge the denial of cov- implements to handle appeals of an ad-
erage of, or payment for, medical as- verse benefit determination and griev-
sistance. ances, as well as the processes to col-
(b) Definitions. As used in this sub- lect and track information about them.
part, the following terms have the indi- State fair hearing means the process
cated meanings: set forth in subpart E of part 431 of this
Adverse benefit determination means, chapter.
in the case of an MCO, PIHP, or PAHP, (c) Applicability. This subpart applies
any of the following: to the rating period for contracts with
(1) The denial or limited authoriza- MCOs, PIHPs, and PAHPs beginning on
tion of a requested service, including or after July 1, 2017. Until that applica-
determinations based on the type or bility date, states, MCOs, PIHPs, and
level of service, requirements for med- PAHPs are required to continue to
ical necessity, appropriateness, setting, comply with subpart F contained in
or effectiveness of a covered benefit. the 42 CFR parts 430 to 481, edition re-
(2) The reduction, suspension, or ter- vised as of October 1, 2015.
mination of a previously authorized
service. § 438.402 General requirements.
(3) The denial, in whole or in part, of (a) The grievance and appeal system.
payment for a service. Each MCO, PIHP, and PAHP must have
(4) The failure to provide services in a grievance and appeal system in place
a timely manner, as defined by the for enrollees. Non-emergency medical
State. transportation PAHPs, as defined in
307
§ 438.404 42 CFR Ch. IV (10–1–17 Edition)
§ 438.9, are not subject to this subpart mination notice in which to file a re-
F. quest for an appeal to the managed
(b) Level of appeals. Each MCO, PIHP, care plan.
and PAHP may have only one level of (3) Procedures—(i) Grievance. The en-
appeal for enrollees. rollee may file a grievance either oral-
(c) Filing requirements—(1) Authority ly or in writing and, as determined by
to file. (i) An enrollee may file a griev- the State, either with the State or
ance and request an appeal with the with the MCO, PIHP, or PAHP.
MCO, PIHP, or PAHP. An enrollee may (ii) Appeal. The enrollee may request
request a State fair hearing after re- an appeal either orally or in writing.
ceiving notice under § 438.408 that the Further, unless the enrollee requests
adverse benefit determination is an expedited resolution, an oral appeal
upheld. must be followed by a written, signed
(A) Deemed exhaustion of appeals proc- appeal.
esses. In the case of an MCO, PIHP, or
PAHP that fails to adhere to the notice § 438.404 Timely and adequate notice
and timing requirements in § 438.408, of adverse benefit determination.
the enrollee is deemed to have ex- (a) Notice. The MCO, PIHP, or PAHP
hausted the MCO’s, PIHP’s, or PAHP’s must give enrollees timely and ade-
appeals process. The enrollee may ini- quate notice of an adverse benefit de-
tiate a State fair hearing. termination in writing consistent with
(B) External medical review. The State the requirements below and in § 438.10.
may offer and arrange for an external (b) Content of notice. The notice must
medical review if the following condi- explain the following:
tions are met. (1) The adverse benefit determination
(1) The review must be at the enroll- the MCO, PIHP, or PAHP has made or
ee’s option and must not be required intends to make.
before or used as a deterrent to pro- (2) The reasons for the adverse ben-
ceeding to the State fair hearing. efit determination, including the right
(2) The review must be independent of the enrollee to be provided upon re-
of both the State and MCO, PIHP, or quest and free of charge, reasonable ac-
PAHP. cess to and copies of all documents,
(3) The review must be offered with- records, and other information rel-
out any cost to the enrollee. evant to the enrollee’s adverse benefit
(4) The review must not extend any determination. Such information in-
of the timeframes specified in § 438.408 cludes medical necessity criteria, and
and must not disrupt the continuation any processes, strategies, or evi-
of benefits in § 438.420. dentiary standards used in setting cov-
(ii) If State law permits and with the erage limits.
written consent of the enrollee, a pro- (3) The enrollee’s right to request an
vider or an authorized representative appeal of the MCO’s, PIHP’s, or
may request an appeal or file a griev- PAHP’s adverse benefit determination,
ance, or request a State fair hearing, including information on exhausting
on behalf of an enrollee. When the term the MCO’s, PIHP’s, or PAHP’s one level
‘‘enrollee’’ is used throughout subpart of appeal described at § 438.402(b) and
F of this part, it includes providers and the right to request a State fair hear-
authorized representatives consistent ing consistent with § 438.402(c).
with this paragraph, with the excep- (4) The procedures for exercising the
tion that providers cannot request con- rights specified in this paragraph (b).
tinuation of benefits as specified in (5) The circumstances under which an
§ 438.420(b)(5). appeal process can be expedited and
(2) Timing—(i) Grievance. An enrollee how to request it.
may file a grievance with the MCO, (6) The enrollee’s right to have bene-
PIHP, or PAHP at any time. fits continue pending resolution of the
(ii) Appeal. Following receipt of a no- appeal, how to request that benefits be
tification of an adverse benefit deter- continued, and the circumstances, con-

mination by an MCO, PIHP, or PAHP, sistent with state policy, under which
an enrollee has 60 calendar days from the enrollee may be required to pay the
the date on the adverse benefit deter- costs of these services.
308
(c) Timing of notice. The MCO, PIHP, (2) Ensure that the individuals who
or PAHP must mail the notice within make decisions on grievances and ap-
the following timeframes: peals are individuals—
(1) For termination, suspension, or (i) Who were neither involved in any
reduction of previously authorized previous level of review or decision-
Medicaid-covered services, within the making nor a subordinate of any such
timeframes specified in §§ 431.211, individual.
431.213, and 431.214 of this chapter. (ii) Who, if deciding any of the fol-
(2) For denial of payment, at the lowing, are individuals who have the
time of any action affecting the claim. appropriate clinical expertise, as deter-
(3) For standard service authoriza- mined by the State, in treating the en-
tion decisions that deny or limit serv- rollee’s condition or disease.
ices, within the timeframe specified in (A) An appeal of a denial that is
§ 438.210(d)(1). based on lack of medical necessity.
(4) If the MCO, PIHP, or PAHP meets (B) A grievance regarding denial of
the criteria set forth for extending the expedited resolution of an appeal.
timeframe for standard service author- (C) A grievance or appeal that in-
ization decisions consistent with volves clinical issues.
§ 438.210(d)(1)(ii), it must— (iii) Who take into account all com-
ments, documents, records, and other
(i) Give the enrollee written notice of
information submitted by the enrollee
the reason for the decision to extend
or their representative without regard
the timeframe and inform the enrollee
to whether such information was sub-
of the right to file a grievance if he or
mitted or considered in the initial ad-
she disagrees with that decision; and
verse benefit determination.
(ii) Issue and carry out its determina-
(3) Provide that oral inquiries seek-
tion as expeditiously as the enrollee’s
ing to appeal an adverse benefit deter-
health condition requires and no later
mination are treated as appeals (to es-
than the date the extension expires.
tablish the earliest possible filing date
(5) For service authorization deci- for the appeal) and must be confirmed
sions not reached within the time- in writing, unless the enrollee or the
frames specified in § 438.210(d) (which provider requests expedited resolution.
constitutes a denial and is thus an ad- (4) Provide the enrollee a reasonable
verse benefit determination), on the opportunity, in person and in writing,
date that the timeframes expire. to present evidence and testimony and
(6) For expedited service authoriza- make legal and factual arguments. The
tion decisions, within the timeframes MCO, PIHP, or PAHP must inform the
specified in § 438.210(d)(2). enrollee of the limited time available
for this sufficiently in advance of the
§ 438.406 Handling of grievances and
appeals. resolution timeframe for appeals as
specified in § 438.408(b) and (c) in the
(a) General requirements. In handling case of expedited resolution.
grievances and appeals, each MCO, (5) Provide the enrollee and his or her
PIHP, and PAHP must give enrollees representative the enrollee’s case file,
any reasonable assistance in com- including medical records, other docu-
pleting forms and taking other proce- ments and records, and any new or ad-
dural steps related to a grievance or ditional evidence considered, relied
appeal. This includes, but is not lim- upon, or generated by the MCO, PIHP
ited to, auxiliary aids and services or PAHP (or at the direction of the
upon request, such as providing inter- MCO, PIHP or PAHP) in connection
preter services and toll-free numbers with the appeal of the adverse benefit
that have adequate TTY/TTD and in- determination. This information must
terpreter capability. be provided free of charge and suffi-
(b) Special requirements. An MCO’s, ciently in advance of the resolution
PIHP’s or PAHP’s process for handling timeframe for appeals as specified in
enrollee grievances and appeals of ad- § 438.408(b) and (c).

verse benefit determinations must: (6) Include, as parties to the appeal—
(1) Acknowledge receipt of each (i) The enrollee and his or her rep-
grievance and appeal. resentative; or
309
§ 438.408 42 CFR Ch. IV (10–1–17 Edition)
(ii) The legal representative of a de- frame and inform the enrollee of the
ceased enrollee’s estate. right to file a grievance if he or she dis-
agrees with that decision.
§ 438.408 Resolution and notification: (iii) Resolve the appeal as expedi-
Grievances and appeals. tiously as the enrollee’s health condi-
(a) Basic rule. Each MCO, PIHP, or tion requires and no later than the
PAHP must resolve each grievance and date the extension expires.
appeal, and provide notice, as expedi- (3) Deemed exhaustion of appeals proc-
tiously as the enrollee’s health condi- esses. In the case of an MCO, PIHP, or
tion requires, within State-established PAHP that fails to adhere to the notice
timeframes that may not exceed the and timing requirements in this sec-
timeframes specified in this section. tion, the enrollee is deemed to have ex-
(b) Specific timeframes—(1) Standard hausted the MCO’s, PIHP’s, or PAHP’s
resolution of grievances. For standard appeals process. The enrollee may ini-
resolution of a grievance and notice to tiate a State fair hearing.
the affected parties, the timeframe is (d) Format of notice—(1) Grievances.
established by the State but may not The State must establish the method
exceed 90 calendar days from the day that an MCO, PIHP, and PAHP will use
the MCO, PIHP, or PAHP receives the to notify an enrollee of the resolution
grievance. of a grievance and ensure that such
(2) Standard resolution of appeals. For methods meet, at a minimum, the
standard resolution of an appeal and standards described at § 438.10.
notice to the affected parties, the State (2) Appeals. (i) For all appeals, the
must establish a timeframe that is no MCO, PIHP, or PAHP must provide
longer than 30 calendar days from the written notice of resolution in a format
day the MCO, PIHP, or PAHP receives and language that, at a minimum,
the appeal. This timeframe may be ex- meet the standards described at § 438.10.
tended under paragraph (c) of this sec- (ii) For notice of an expedited resolu-
tion. tion, the MCO, PIHP, or PAHP must
(3) Expedited resolution of appeals. For also make reasonable efforts to provide
expedited resolution of an appeal and oral notice.
notice to affected parties, the State (e) Content of notice of appeal resolu-
must establish a timeframe that is no tion. The written notice of the resolu-
longer than 72 hours after the MCO, tion must include the following:
PIHP, or PAHP receives the appeal. (1) The results of the resolution proc-
This timeframe may be extended under ess and the date it was completed.
paragraph (c) of this section. (2) For appeals not resolved wholly in
(c) Extension of timeframes. (1) The favor of the enrollees—
MCO, PIHP, or PAHP may extend the (i) The right to request a State fair
timeframes from paragraph (b) of this hearing, and how to do so.
section by up to 14 calendar days if— (ii) The right to request and receive
(i) The enrollee requests the exten- benefits while the hearing is pending,
sion; or and how to make the request.
(ii) The MCO, PIHP, or PAHP shows (iii) That the enrollee may, con-
(to the satisfaction of the State agen- sistent with state policy, be held liable
cy, upon its request) that there is need for the cost of those benefits if the
for additional information and how the hearing decision upholds the MCO’s,
delay is in the enrollee’s interest. PIHP’s, or PAHP’s adverse benefit de-
(2) Requirements following extension. If termination.
the MCO, PIHP, or PAHP extends the (f) Requirements for State fair hear-
timeframes not at the request of the ings—(1) Availability. An enrollee may
enrollee, it must complete all of the request a State fair hearing only after
following: receiving notice that the MCO, PIHP,
(i) Make reasonable efforts to give or PAHP is upholding the adverse ben-
the enrollee prompt oral notice of the efit determination.
delay. (i) Deemed exhaustion of appeals proc-

(ii) Within 2 calendar days give the esses. In the case of an MCO, PIHP, or
enrollee written notice of the reason PAHP that fails to adhere to the notice
for the decision to extend the time- and timing requirements in § 438.408,
310
the enrollee is deemed to have ex- (1) Transfer the appeal to the time-
hausted the MCO’s, PIHP’s, or PAHP’s frame for standard resolution in ac-
appeals process. The enrollee may ini- cordance with § 438.408(b)(2).
tiate a State fair hearing. (2) Follow the requirements in
(ii) External medical review. The State § 438.408(c)(2).
may offer and arrange for an external
medical review if the following condi- § 438.414 Information about the griev-
tions are met. ance and appeal system to pro-
viders and subcontractors.
(A) The review must be at the enroll-
ee’s option and must not be required The MCO, PIHP, or PAHP must pro-
before or used as a deterrent to provide information specified in
ceeding to the State fair hearing. § 438.10(g)(2)(xi) about the grievance and
(B) The review must be independent appeal system to all providers and sub-
of both the State and MCO, PIHP, or contractors at the time they enter into
PAHP. a contract.
(C) The review must be offered with- § 438.416 Recordkeeping requirements.
out any cost to the enrollee.
(D) The review must not extend any (a) The State must require MCOs,
of the timeframes specified in § 438.408 PIHPs, and PAHPs to maintain records
and must not disrupt the continuation of grievances and appeals and must re-
of benefits in § 438.420. view the information as part of its on-
going monitoring procedures, as well as
(2) State fair hearing. The enrollee
for updates and revisions to the State
must request a State fair hearing no
quality strategy.
later than 120 calendar days from the
(b) The record of each grievance or
date of the MCO’s, PIHP’s, or PAHP’s
appeal must contain, at a minimum,
notice of resolution.
all of the following information:
(3) Parties. The parties to the State
(1) A general description of the rea-
fair hearing include the MCO, PIHP, or
son for the appeal or grievance.
PAHP, as well as the enrollee and his
(2) The date received.
or her representative or the representa-
(3) The date of each review or, if ap-
tive of a deceased enrollee’s estate.
plicable, review meeting.
§ 438.410 Expedited resolution of ap- (4) Resolution at each level of the ap-
peals. peal or grievance, if applicable.
(5) Date of resolution at each level, if
(a) General rule. Each MCO, PIHP, applicable.
and PAHP must establish and maintain (6) Name of the covered person for
an expedited review process for ap- whom the appeal or grievance was
peals, when the MCO, PIHP, or PAHP filed.
determines (for a request from the en- (c) The record must be accurately
rollee) or the provider indicates (in maintained in a manner accessible to
making the request on the enrollee’s the state and available upon request to
behalf or supporting the enrollee’s re- CMS.
quest) that taking the time for a stand-
ard resolution could seriously jeop- § 438.420 Continuation of benefits
ardize the enrollee’s life, physical or while the MCO, PIHP, or PAHP ap-
mental health, or ability to attain, peal and the State fair hearing are
maintain, or regain maximum func- pending.
tion. (a) Definition. As used in this sec-
(b) Punitive action. The MCO, PIHP, tion—
or PAHP must ensure that punitive ac- Timely files means files for continu-
tion is not taken against a provider ation of benefits on or before the later
who requests an expedited resolution of the following:
or supports an enrollee’s appeal. (i) Within 10 calendar days of the
(c) Action following denial of a request MCO, PIHP, or PAHP sending the no-
for expedited resolution. If the MCO, tice of adverse benefit determination.

PIHP, or PAHP denies a request for ex- (ii) The intended effective date of the
pedited resolution of an appeal, it MCO’s, PIHP’s, or PAHP’s proposed ad-
must— verse benefit determination.
311
§ 438.424 42 CFR Ch. IV (10–1–17 Edition)
(b) Continuation of benefits. The MCO, while the appeal was pending, the MCO,
PIHP, or PAHP must continue the en- PIHP, or PAHP must authorize or pro-
rollee’s benefits if all of the following vide the disputed services promptly
occur: and as expeditiously as the enrollee’s
(1) The enrollee files the request for health condition requires but no later
an appeal timely in accordance with than 72 hours from the date it receives
§ 438.402(c)(1)(ii) and (c)(2)(ii); notice reversing the determination.
(2) The appeal involves the termi- (b) Services furnished while the appeal
nation, suspension, or reduction of pre- is pending. If the MCO, PIHP, or PAHP,
viously authorized services; or the State fair hearing officer re-
(3) The services were ordered by an verses a decision to deny authorization
authorized provider; of services, and the enrollee received
(4) The period covered by the original the disputed services while the appeal
authorization has not expired; and was pending, the MCO, PIHP, or PAHP,
(5) The enrollee timely files for con- or the State must pay for those serv-
tinuation of benefits. ices, in accordance with State policy
(c) Duration of continued or reinstated and regulations.
benefits. If, at the enrollee’s request,
the MCO, PIHP, or PAHP continues or Subpart G [Reserved]
reinstates the enrollee’s benefits while
the appeal or state fair hearing is pend- Subpart H—Additional Program
ing, the benefits must be continued Integrity Safeguards
until one of following occurs:
(1) The enrollee withdraws the appeal
or request for state fair hearing. otherwise noted.
(2) The enrollee fails to request a
state fair hearing and continuation of § 438.600 Statutory basis, basic rule,
benefits within 10 calendar days after and applicability.
the MCO, PIHP, or PAHP sends the no- (a) Statutory basis. This subpart is
tice of an adverse resolution to the en- based on the following statutory sec-
rollee’s appeal under § 438.408(d)(2). tions:
(3) A State fair hearing office issues a (1) Section 1128 of the Act provides
hearing decision adverse to the en- for the exclusion of certain individuals
rollee. and entities from participation in the
(d) Enrollee responsibility for services Medicaid program.
furnished while the appeal or state fair (2) Section 1128J(d) of the Act re-
hearing is pending. If the final resolu- quires that persons who have received
tion of the appeal or state fair hearing an overpayment under Medicaid report
is adverse to the enrollee, that is, up- and return the overpayment within 60
holds the MCO’s, PIHP’s, or PAHP’s ad- days after the date on which the over-
verse benefit determination, the MCO, payment was identified.
PIHP, or PAHP may, consistent with (3) Section 1902(a)(4) of the Act re-
the state’s usual policy on recoveries quires that the State plan provide for
under § 431.230(b) of this chapter and as methods of administration that the
specified in the MCO’s, PIHP’s, or Secretary finds necessary for the prop-
PAHP’s contract, recover the cost of er and efficient operation of the plan.
services furnished to the enrollee while (4) Section 1902(a)(19) of the Act re-
the appeal and state fair hearing was quires that the State plan provide the
pending, to the extent that they were safeguards necessary to ensure that eli-
furnished solely because of the require- gibility is determined and services are
ments of this section. provided in a manner consistent with
simplicity of administration and the
§ 438.424 Effectuation of reversed ap- best interests of the beneficiaries.
peal resolutions. (5) Section 1902(a)(27) of the Act re-
(a) Services not furnished while the ap- quires States to enroll persons or insti-
peal is pending. If the MCO, PIHP, or tutions that provide services under the
PAHP, or the State fair hearing officer State plan.
reverses a decision to deny, limit, or (6) Section 1902(a)(68) of the Act re-
delay services that were not furnished quires that any entity that receives or
312
makes annual payments under the the rating period for contracts begin-
State plan of at least $5,000,000 must ning on or after July 1, 2018.
establish certain minimum written
policies relating to the Federal False § 438.602 State responsibilities.
Claims Act. (a) Monitoring contractor compliance.
(7) Section 1902(a)(77) of the Act re- Consistent with § 438.66, the State must
quires that States comply with pro- monitor the MCO’s, PIHP’s, PAHP’s,
vider and supplier screening, oversight, PCCM’s or PCCM entity’s compliance,
and reporting requirements described as applicable, with §§ 438.604, 438.606,
in section 1902(kk)(1) of the Act. 438.608, 438.610, 438.230, and 438.808.
(8) Section 1902(a)(80) of the Act pro- (b) Screening and enrollment and re-
hibits payments for items or services validation of providers. (1) The State
provided under the State plan or under must screen and enroll, and periodi-
a waiver to any financial institution or cally revalidate, all network providers
entity located outside of the United of MCOs, PIHPs, and PAHPs, in accord-
States. ance with the requirements of part 455,
(9) Section 1902(kk)(7) of the Act re- subparts B and E of this chapter. This
quires States to enroll physicians or requirement extends to PCCMs and
other professionals that order or refer PCCM entities to the extent the pri-
services under the State plan. mary care case manager is not other-
(10) Section 1903(i) of the Act pro- wise enrolled with the State to provide
hibits FFP for amounts expended by services to FFS beneficiaries. This pro-
MCOs or PCCMs for providers excluded vision does not require the network
by Medicare, Medicaid, or CHIP, except provider to render services to FFS
for emergency services. beneficiaries.
(11) Section 1903(m) of the Act estab- (2) MCOs, PIHPs, and PAHPs may
lishes conditions for payments to the execute network provider agreements
State for contracts with MCOs. pending the outcome of the process in
(12) Section 1932(d)(1) of the Act pro- paragraph (b)(1) of this section of up to
hibits MCOs and PCCMs from know- 120 days, but must terminate a network
ingly having certain types of relation- provider immediately upon notifica-
ships with individuals and entities tion from the State that the network
debarred under Federal regulations provider cannot be enrolled, or the ex-
from participating in specified activi- piration of one 120 day period without
ties, or with affiliates of those individ- enrollment of the provider, and notify
uals. affected enrollees.
(b) Basic rule. As a condition for re- (c) Ownership and control information.
ceiving payment under a Medicaid The State must review the ownership
managed care program, an MCO, PIHP, and control disclosures submitted by
PAHP, PCCM or PCCM entity must the MCO, PIHP, PAHP, PCCM or PCCM
comply with the requirements in entity, and any subcontractors as re-
§§ 438.604, 438.606, 438.608 and 438.610, as quired in § 438.608(c).
applicable. (d) Federal database checks. Con-
(c) Applicability. States will not be sistent with the requirements at
held out compliance with the following § 455.436 of this chapter, the State must
requirements of this subpart prior to confirm the identity and determine the
the dates noted below so long as they exclusion status of the MCO, PIHP,
comply with the corresponding stand- PAHP, PCCM or PCCM entity, any sub-
ard(s) in 42 CFR part 438 contained in contractor, as well as any person with
the CFR, parts 430 to 481, edition re- an ownership or control interest, or
vised as of October 1, 2015: who is an agent or managing employee
(1) States must comply with of the MCO, PIHP, PAHP, PCCM or
§§ 438.602(a), 438.602(c) through (h), PCCM entity through routine checks of
438.604, 438.606, 438.608(a), and 438.608(c) Federal databases. This includes the
and (d), no later than the rating period Social Security Administration’s
for contracts starting on or after July Death Master File, the National Plan
1, 2017. and Provider Enumeration System
(2) States must comply with (NPPES), the List of Excluded Individ-
§ 438.602(b) and § 438.608(b) no later than uals/Entities (LEIE), the System for
313
§ 438.604 42 CFR Ch. IV (10–1–17 Edition)
Award Management (SAM), and any § 438.604 Data, information, and docu-
other databases as the State or Sec- mentation that must be submitted.
retary may prescribe. These databases (a) Specified data, information, and
must be consulted upon contracting documentation. The State must require
and no less frequently than monthly any MCO, PIHP, PAHP, PCCM or
thereafter. If the State finds a party PCCM entity to submit to the State
that is excluded, it must promptly no- the following data:
tify the MCO, PIHP, PAHP, PCCM, or (1) Encounter data in the form and
PCCM entity and take action con- manner described in § 438.818.
sistent with § 438.610(c). (2) Data on the basis of which the
(e) Periodic audits. The State must pe- State certifies the actuarial soundness
riodically, but no less frequently than of capitation rates to an MCO, PIHP or
once every 3 years, conduct, or con- PAHP under § 438.4, including base data
described in § 438.5(c) that is generated
tract for the conduct of, an inde-
by the MCO, PIHP or PAHP.
pendent audit of the accuracy, truth-
(3) Data on the basis of which the
fulness, and completeness of the en- State determines the compliance of the
counter and financial data submitted MCO, PIHP, or PAHP with the medical
by, or on behalf of, each MCO, PIHP or loss ratio requirement described in
PAHP. § 438.8.
(f) Whistleblowers. The State must re- (4) Data on the basis of which the
ceive and investigate information from State determines that the MCO, PIHP
whistleblowers relating to the integ- or PAHP has made adequate provision
rity of the MCO, PIHP, PAHP, PCCM, against the risk of insolvency as re-
or PCCM entity, subcontractors, or quired under § 438.116.
network providers receiving Federal (5) Documentation described in
funds under this part. § 438.207(b) on which the State bases its
(g) Transparency. The State must certification that the MCO, PIHP or
post on its Web site, as required in PAHP has complied with the State’s
§ 438.10(c)(3), the following documents requirements for availability and ac-
cessibility of services, including the
and reports:
adequacy of the provider network, as
(1) The MCO, PIHP, PAHP, or PCCM set forth in § 438.206.
entity contract. (6) Information on ownership and
(2) The data at § 438.604(a)(5). control described in § 455.104 of this
(3) The name and title of individuals chapter from MCOs, PIHPs, PAHPs,
included in § 438.604(a)(6). PCCMs, PCCM entities, and sub-
(4) The results of any audits under contractors as governed by § 438.230.
paragraph (e) of this section. (7) The annual report of overpayment
(h) Contracting integrity. The State recoveries as required in § 438.608(d)(3).
must have in place conflict of interest (b) Additional data, documentation, or
safeguards described in § 438.58 and information. In addition to the data,
must comply with the requirement de- documentation, or information speci-
scribed in section 1902(a)(4)(C) of the fied in paragraph (a) of this section, an
MCO, PIHP, PAHP, PCCM or PCCM en-
Act applicable to contracting officers,
tity must submit any other data, docu-
employees, or independent contractors.
mentation, or information relating to
(i) Entities located outside of the U.S. the performance of the entity’s obliga-
The State must ensure that the MCO, tions under this part required by the
PIHP, PAHP, PCCM, or PCCM entity State or the Secretary.
with which the State contracts under
this part is not located outside of the [81 FR 27853, May 6, 2016, as amended at 82
FR 39, Jan. 3, 2017]
United States and that no claims paid
by an MCO, PIHP, or PAHP to a net- § 438.606 Source, content, and timing
work provider, out-of-network proof certification.
vider, subcontractor or financial insti-
(a) Source of certification. For the

tution located outside of the U.S. are data, documentation, or information
considered in the development of actu- specified in § 438.604, the State must re-
arially sound capitation rates. quire that the data, documentation or
314
information the MCO, PIHP, PAHP, (ii) The designation of a Compliance

PCCM or PCCM entity submits to the Officer who is responsible for devel-
State be certified by either the MCO’s, oping and implementing policies, pro-
PIHP’s, PAHP’s, PCCM’s, or PCCM en- cedures, and practices designed to en-
tity’s Chief Executive Officer; Chief Fi- sure compliance with the requirements
nancial Officer; or an individual who of the contract and who reports di-
reports directly to the Chief Executive rectly to the Chief Executive Officer
Officer or Chief Financial Officer with and the board of directors.
delegated authority to sign for the (iii) The establishment of a Regu-
Chief Executive Officer or Chief Finan- latory Compliance Committee on the
cial Officer so that the Chief Executive Board of Directors and at the senior
Officer or Chief Financial Officer is ul- management level charged with over-
timately responsible for the certifi- seeing the organization’s compliance
cation. program and its compliance with the
(b) Content of certification. The certifi- requirements under the contract.
cation provided by the individual in (iv) A system for training and edu-
paragraph (a) of this section must at- cation for the Compliance Officer, the
test that, based on best information, organization’s senior management, and
knowledge, and belief, the data, docu- the organization’s employees for the
mentation, and information specified Federal and State standards and re-
in § 438.604 is accurate, complete, and quirements under the contract.
truthful. (v) Effective lines of communication
(c) Timing of certification. The State between the compliance officer and the
must require the MCO, PIHP, PAHP, organization’s employees.
PCCM, or PCCM entity to submit the
(vi) Enforcement of standards
certification concurrently with the
through well-publicized disciplinary
submission of the data, documentation,
guidelines.
or information required in § 438.604(a)
(vii) Establishment and implementa-
and (b).
tion of procedures and a system with
§ 438.608 Program integrity require- dedicated staff for routine internal
ments under the contract. monitoring and auditing of compliance
risks, prompt response to compliance
(a) Administrative and management ar-
issues as they are raised, investigation
rangements or procedures to detect and
of potential compliance problems as
prevent fraud, waste and abuse. The
identified in the course of self-evalua-
State, through its contract with the
tion and audits, correction of such
MCO, PIHP or PAHP, must require
problems promptly and thoroughly (or
that the MCO, PIHP, or PAHP, or sub-
coordination of suspected criminal acts
contractor to the extent that the sub-
with law enforcement agencies) to re-
contractor is delegated responsibility
duce the potential for recurrence, and
by the MCO, PIHP, or PAHP for cov-
ongoing compliance with the require-
erage of services and payment of
ments under the contract.
claims under the contract between the
State and the MCO, PIHP, or PAHP, (2) Provision for prompt reporting of
implement and maintain arrangements all overpayments identified or recov-
or procedures that are designed to de- ered, specifying the overpayments due
tect and prevent fraud, waste, and to potential fraud, to the State.
abuse. The arrangements or procedures (3) Provision for prompt notification
must include the following: to the State when it receives informa-
(1) A compliance program that in- tion about changes in an enrollee’s cir-
cludes, at a minimum, all of the fol- cumstances that may affect the enroll-
lowing elements: ee’s eligibility including all of the fol-
(i) Written policies, procedures, and lowing:
standards of conduct that articulate (i) Changes in the enrollee’s resi-
the organization’s commitment to dence;
comply with all applicable require- (ii) The death of an enrollee.

ments and standards under the con- (4) Provision for notification to the
tract, and all applicable Federal and State when it receives information
State requirements. about a change in a network provider’s
315
§ 438.610 42 CFR Ch. IV (10–1–17 Edition)
circumstances that may affect the net- (3) Reports to the State within 60 cal-
work provider’s eligibility to partici- endar days when it has identified the
pate in the managed care program, in- capitation payments or other pay-
cluding the termination of the provider ments in excess of amounts specified in
agreement with the MCO, PIHP or the contract.
PAHP. (d) Treatment of recoveries made by the
(5) Provision for a method to verify, MCO, PIHP or PAHP of overpayments to
by sampling or other methods, whether providers. (1) Contracts with a MCO,
services that have been represented to PIHP, or PAHP must specify:
have been delivered by network pro- (i) The retention policies for the
viders were received by enrollees and treatment of recoveries of all overpay-
the application of such verification ments from the MCO, PIHP, or PAHP
processes on a regular basis. to a provider, including specifically the
(6) In the case of MCOs, PIHPs, or retention policies for the treatment of
PAHPs that make or receive annual recoveries of overpayments due to
payments under the contract of at fraud, waste, or abuse.
least $5,000,000, provision for written (ii) The process, timeframes, and doc-
policies for all employees of the entity, umentation required for reporting the
and of any contractor or agent, that recovery of all overpayments.
provide detailed information about the (iii) The process, timeframes, and
False Claims Act and other Federal documentation required for payment of
and State laws described in section recoveries of overpayments to the
1902(a)(68) of the Act, including infor- State in situations where the MCO,
mation about rights of employees to be PIHP, or PAHP is not permitted to re-
protected as whistleblowers. tain some or all of the recoveries of
(7) Provision for the prompt referral overpayments.
of any potential fraud, waste, or abuse (iv) This provision does not apply to
that the MCO, PIHP, or PAHP identi- any amount of a recovery to be re-
fies to the State Medicaid program in- tained under False Claims Act cases or
tegrity unit or any potential fraud di- through other investigations.
rectly to the State Medicaid Fraud (2) Each MCO, PIHP, or PAHP re-
Control Unit. quires and has a mechanism for a net-
(8) Provision for the MCO’s, PIHP’s, work provider to report to the MCO,
or PAHP’s suspension of payments to a PIHP or PAHP when it has received an
network provider for which the State overpayment, to return the overpay-
determines there is a credible allega- ment to the MCO, PIHP or PAHP with-
tion of fraud in accordance with § 455.23 in 60 calendar days after the date on
of this chapter. which the overpayment was identified,
(b) Provider screening and enrollment and to notify the MCO, PIHP or PAHP
requirements. The State, through its in writing of the reason for the over-
contracts with a MCO, PIHP, PAHP, payment.
PCCM, or PCCM entity must ensure (3) Each MCO, PIHP, or PAHP must
that all network providers are enrolled report annually to the State on their
with the State as Medicaid providers recoveries of overpayments.
consistent with the provider disclosure, (4) The State must use the results of
screening and enrollment requirements the information and documentation
of part 455, subparts B and E of this collected in paragraph (d)(1) of this sec-
chapter. This provision does not re- tion and the report in paragraph (d)(3)
quire the network provider to render of this section for setting actuarially
services to FFS beneficiaries. sound capitation rates for each MCO,
(c) Disclosures. The State must en- PIHP, or PAHP consistent with the re-
sure, through its contracts, that each quirements in § 438.4.
MCO, PIHP, PAHP, PCCM, PCCM enti-
ty, and any subcontractors: § 438.610 Prohibited affiliations.
(1) Provides written disclosure of any (a) An MCO, PIHP, PAHP, PCCM, or
prohibited affiliation under § 438.610. PCCM entity may not knowingly have
(2) Provides written disclosures of in- a relationship of the type described in
formation on ownership and control re- paragraph (c) of this section with the
quired under § 455.104 of this chapter. following:
316
(1) An individual or entity that is ing compelling reasons that exist for
debarred, suspended, or otherwise ex- renewing or extending the agreement
cluded from participating in procure- despite the prohibited affiliations.
ment activities under the Federal Ac- (4) Nothing in this section must be
quisition Regulation or from partici- construed to limit or otherwise affect
pating in nonprocurement activities any remedies available to the U.S.
under regulations issued under Execu- under sections 1128, 1128A or 1128B of
tive Order No. 12549 or under guidelines the Act.
implementing Executive Order No. (e) Consultation with the Inspector
12549. General. Any action by the Secretary
(2) An individual or entity who is an described in paragraphs (d)(2) or (3) of
affiliate, as defined in the Federal Ac- this section is taken in consultation
quisition Regulation at 48 CFR 2.101, of with the Inspector General.
a person described in paragraph (a)(1)
of this section. Subpart I—Sanctions
(b) An MCO, PIHP, PAHP, PCCM, or
PCCM entity may not have a relation- SOURCE: 81 FR 27853, May 6, 2016, unless
ship with an individual or entity that otherwise noted.
is excluded from participation in any
Federal health care program under sec- § 438.700 Basis for imposition of sanc-
tion 1128 or 1128A of the Act. tions.
(c) The relationships described in (a) Each State that contracts with an
paragraph (a) of this section, are as fol- MCO must, and each State that con-
lows: tracts with a PCCM or PCCM entity
(1) A director, officer, or partner of may, establish intermediate sanctions
the MCO, PIHP, PAHP, PCCM. or (which may include those specified in
PCCM entity. § 438.702) that it may impose if it makes
(2) A subcontractor of the MCO, any of the determinations specified in
PIHP, PAHP, PCCM, or PCCM entity, paragraphs (b) through (d) of this sec-
as governed by § 438.230. tion. The State may base its deter-
(3) A person with beneficial owner- minations on findings from onsite sur-
ship of 5 percent or more of the MCO’s, veys, enrollee or other complaints, fi-
PIHP’s, PAHP’s, PCCM’s, or PCCM en- nancial status, or any other source.
tity’s equity. (b) A State determines that an MCO
(4) A network provider or person with acts or fails to act as follows:
an employment, consulting or other ar- (1) Fails substantially to provide
rangement with the MCO, PIHP, medically necessary services that the
PAHP, PCCM, or PCCM entity for the MCO is required to provide, under law
provision of items and services that are or under its contract with the State, to
significant and material to the MCO’s, an enrollee covered under the contract.
PIHP’s, PAHP’s, PCCM’s, or PCCM en- (2) Imposes on enrollees premiums or
tity’s obligations under its contract charges that are in excess of the pre-
with the State. miums or charges permitted under the
(d) If a State finds that an MCO, Medicaid program.
PIHP, PAHP, PCCM, or PCCM entity is (3) Acts to discriminate among en-
not in compliance with paragraphs (a) rollees on the basis of their health sta-
and (b) of this section, the State: tus or need for health care services.
(1) Must notify the Secretary of the This includes termination of enroll-
noncompliance. ment or refusal to reenroll a bene-
(2) May continue an existing agree- ficiary, except as permitted under the
ment with the MCO, PIHP, PAHP, Medicaid program, or any practice that
PCCM, or PCCM entity unless the Sec- would reasonably be expected to dis-
retary directs otherwise. courage enrollment by beneficiaries
(3) May not renew or otherwise ex- whose medical condition or history in-
tend the duration of an existing agree- dicates probable need for substantial
ment with the MCO, PIHP, PAHP, future medical services.

PCCM, or PCCM entity unless the Sec- (4) Misrepresents or falsifies informa-
retary provides to the State and to tion that it furnishes to CMS or to the
Congress a written statement describ- State.
317
§ 438.702 42 CFR Ch. IV (10–1–17 Edition)
(5) Misrepresents or falsifies informa- (b) State agencies retain authority to

tion that it furnishes to an enrollee, impose additional sanctions under
potential enrollee, or health care pro- State statutes or State regulations
vider. that address areas of noncompliance
(6) Fails to comply with the require- specified in § 438.700, as well as addi-
ments for physician incentive plans, as tional areas of noncompliance. Nothing
set forth (for Medicare) in §§ 422.208 and in this subpart prevents State agencies
422.210 of this chapter. from exercising that authority.
(c) A State determines that an MCO,
PCCM or PCCM entity has distributed § 438.704 Amounts of civil money pen-
directly, or indirectly through any alties.
agent or independent contractor, mar- (a) General rule. If the State imposes
keting materials that have not been civil monetary penalties as provided
approved by the State or that contain under § 438.702(a)(1), the maximum civil
false or materially misleading informa- money penalty the State may impose
tion. varies depending on the nature of the
(d) A State determines that— MCO’s, PCCM or PCCM entity’s action
(1) An MCO has violated any of the or failure to act, as provided in this
other requirements of sections 1903(m) section.
or 1932 of the Act, or any implementing (b) Specific limits. (1) The limit is
regulations. $25,000 for each determination under
(2) A PCCM or PCCM entity has vio- § 438.700(b)(1), (5), (6), and (c).
lated any of the other applicable re-
(2) The limit is $100,000 for each de-
quirements of sections 1932 or 1905(t)(3)
termination under § 438.700(b)(3) or (4).
of the Act, or any implementing regu-
lations. (3) The limit is $15,000 for each bene-
ficiary the State determines was not
(3) For any of the violations under
enrolled because of a discriminatory
paragraphs (d)(1) and (2) of this section,
only the sanctions specified in practice under § 438.700(b)(3). (This is
§ 438.702(a)(3), (4), and (5) may be im- subject to the overall limit of $100,000
posed. under paragraph (b)(2) of this section).
(c) Specific amount. For premiums or
§ 438.702 Types of intermediate sanc- charges in excess of the amounts per-
tions. mitted under the Medicaid program,
(a) The types of intermediate sanc- the maximum amount of the penalty is
tions that a State may impose under $25,000 or double the amount of the ex-
this subpart include the following: cess charges, whichever is greater. The
(1) Civil money penalties in the State must deduct from the penalty
amounts specified in § 438.704. the amount of overcharge and return it
(2) Appointment of temporary man- to the affected enrollees.
agement for an MCO as provided in § 438.706 Special rules for temporary
§ 438.706. management.
(3) Granting enrollees the right to
terminate enrollment without cause (a) Optional imposition of sanction. If
and notifying the affected enrollees of the State imposes temporary manage-
their right to disenroll. ment under § 438.702(a)(2), the State
(4) Suspension of all new enrollment, may do so only if it finds (through on-
including default enrollment, after the site surveys, enrollee or other com-
date the Secretary or the State notifies plaints, financial status, or any other
the MCO of a determination of a viola- source) any of the following:
tion of any requirement under sections (1) There is continued egregious be-
1903(m) or 1932 of the Act. havior by the MCO, including but not
(5) Suspension of payment for bene- limited to behavior that is described in
ficiaries enrolled after the effective § 438.700, or that is contrary to any re-
quirements of sections 1903(m) and 1932
date of the sanction and until CMS or

the State is satisfied that the reason of the Act.
for imposition of the sanction no (2) There is substantial risk to enroll-
longer exists and is not likely to recur. ees’ health.
318
(3) The sanction is necessary to en- (b) Pre-termination hearing—(1) Gen-

sure the health of the MCO’s enroll- eral rule. Before terminating an MCO,
ees— PCCM or PCCM entity contract under
(i) While improvements are made to § 438.708, the State must provide the en-
remedy violations under § 438.700. tity a pre-termination hearing.
(ii) Until there is an orderly termi- (2) Procedures. The State must do all
nation or reorganization of the MCO. of the following:
(b) Required imposition of sanction. (i) Give the MCO, PCCM or PCCM en-
The State must impose temporary tity written notice of its intent to ter-
management (regardless of any other minate, the reason for termination,
sanction that may be imposed) if it and the time and place of the hearing.
finds that an MCO has repeatedly failed (ii) After the hearing, give the entity
to meet substantive requirements in written notice of the decision affirming
sections 1903(m) or 1932 of the Act, or or reversing the proposed termination
this subpart. The State must also grant of the contract and, for an affirming
enrollees the right to terminate enroll- decision, the effective date of termi-
ment without cause, as described in nation.
§ 438.702(a)(3), and must notify the af- (iii) For an affirming decision, give
fected enrollees of their right to termi- enrollees of the MCO, PCCM or PCCM
nate enrollment. entity notice of the termination and
(c) Hearing. The State may not delay information, consistent with § 438.10, on
imposition of temporary management their options for receiving Medicaid
to provide a hearing before imposing services following the effective date of
this sanction. termination.
(d) Duration of sanction. The State
may not terminate temporary manage- § 438.722 Disenrollment during termi-
ment until it determines that the MCO nation hearing process.
can ensure that the sanctioned behav- After a State notifies an MCO, PCCM
ior will not recur. or PCCM entity that it intends to ter-
minate the contract, the State may do
§ 438.708 Termination of an MCO,
PCCM or PCCM entity contract. the following:
(a) Give the entity’s enrollees writ-
A State has the authority to termi- ten notice of the State’s intent to ter-
nate an MCO, PCCM or PCCM entity minate the contract.
contract and enroll that entity’s en- (b) Allow enrollees to disenroll im-
rollees in other MCOs, PCCMs or PCCM mediately without cause.
entities, or provide their Medicaid ben-
efits through other options included in § 438.724 Notice to CMS.
the State plan, if the State determines
that the MCO, PCCM or PCCM entity (a) The State must give CMS written
has failed to do either of the following: notice whenever it imposes or lifts a
(a) Carry out the substantive terms sanction for one of the violations listed
of its contract. in § 438.700.
(b) Meet applicable requirements in (b) The notice must adhere to all of
sections 1932, 1903(m), and 1905(t) of the the following requirements:
Act. (1) Be given no later than 30 days
after the State imposes or lifts a sanc-
§ 438.710 Notice of sanction and pre- tion.
termination hearing. (2) Specify the affected MCO, the
(a) Notice of sanction. Except as pro- kind of sanction, and the reason for the
vided in § 438.706(c), before imposing State’s decision to impose or lift a
any of the intermediate sanctions spec- sanction.
ified in this subpart, the State must
give the affected entity timely written § 438.726 State plan requirement.
notice that explains the following: (a) The State plan must include a
(1) The basis and nature of the sanc- plan to monitor for violations that in-
tion. volve the actions and failures to act
(2) Any other appeal rights that the specified in this part and to implement
State elects to provide. the provisions of this part.
319
§ 438.730 42 CFR Ch. IV (10–1–17 Edition)
(b) A contract with an MCO must dence by a State agency official who
provide that payments provided for did not participate in the original rec-
under the contract will be denied for ommendation.
new enrollees when, and for so long as, (ii) Gives the MCO a concise written
payment for those enrollees is denied decision setting forth the factual and
by CMS under § 438.730(e). legal basis for the decision.
(iii) Forwards the decision to CMS.
§ 438.730 Sanction by CMS: Special (2) The State’s decision under para-
rules for MCOs. graph (d)(1)(ii) of this section becomes
(a) Basis for sanction. A State may CMS’ decision unless CMS reverses or
recommend that CMS impose the de- modifies the decision within 15 days
nial of payment sanction specified in from date of receipt by CMS.
paragraph (e) of this section on an MCO (3) If CMS reverses or modifies the
with a contract under this part if the State decision, the agency sends the
agency determines that the MCO acts MCO a copy of CMS’ decision.
or fails to act as specified in (e) Denial of payment. (1) CMS, based
§ 438.700(b)(1) through (6). upon the recommendation of the agen-
(b) Effect of an agency determination. cy, may deny payment to the State for
(1) The State’s determination becomes new enrollees of the MCO under section
CMS’ determination for purposes of 1903(m)(5)(B)(ii) of the Act in the fol-
section 1903(m)(5)(A) of the Act unless lowing situations:
CMS reverses or modifies it within 15 (i) If a CMS determination that an
days. MCO has acted or failed to act, as de-
(2) When the State decides to rec- scribed in paragraphs (b)(1) through (6)
ommend imposing the sanction de- of § 438.700, is affirmed on review under
scribed in paragraph (e) of this section, paragraph (d) of this section.
this recommendation becomes CMS’ (ii) If the CMS determination is not
decision, for purposes of section timely contested by the MCO under
1903(m)(5)(B)(ii) of the Act, unless CMS paragraph (c) of this section.
rejects this recommendation within 15 (2) Under § 438.726(b), CMS’ denial of
days. payment for new enrollees automati-
(c) Notice of sanction. If the State’s cally results in a denial of agency pay-
determination becomes CMS’ deter- ments to the MCO for the same enroll-
mination under paragraph (b)(2) of this ees. (A new enrollee is an enrollee that
section, the State takes all of the fol- applies for enrollment after the effec-
lowing actions: tive date in paragraph (f)(1) of this sec-
(1) Gives the MCO written notice of tion.)
the nature and basis of the proposed (f) Effective date of sanction. (1) If the
sanction. MCO does not seek reconsideration, a
(2) Allows the MCO 15 days from the sanction is effective 15 days after the
date it receives the notice to provide date the MCO is notified under para-
evidence that it has not acted or failed graph (c) of this section of the decision
to act in the manner that is the basis to impose the sanction.
for the recommended sanction. (2) If the MCO seeks reconsideration,
(3) May extend the initial 15-day pe- the following rules apply:
riod for an additional 15 days if— (i) Except as specified in paragraph
(i) The MCO submits a written re- (d)(2) of this section, the sanction is ef-
quest that includes a credible expla- fective on the date specified in CMS’
nation of why it needs additional time. reconsideration notice.
(ii) The request is received by CMS (ii) If CMS, in consultation with the
before the end of the initial period. State, determines that the MCO’s con-
(iii) CMS has not determined that the duct poses a serious threat to an en-
MCO’s conduct poses a threat to an enrollee’s health or safety, the sanction
rollee’s health or safety. may be made effective earlier than the
(d) Informal reconsideration. (1) If the date of the agency’s reconsideration
MCO submits a timely response to the decision under paragraph (d)(1)(ii) of

notice of sanction, the State— this section.
(i) Conducts an informal reconsider- (g) CMS’ role. (1) CMS retains the
ation that includes review of the evi- right to independently perform the
320
functions assigned to the State under in the consumer price index for all
paragraphs (a) through (d) of this sec- urban consumers.
tion. (c) FFP is not available in an MCO
(2) At the same time that the State contract that does not have prior ap-
sends notice to the MCO under para- proval from CMS under paragraph (b)
graph (c)(1) of this section, CMS for- of this section.
wards a copy of the notice to the OIG.
(3) CMS conveys the determination § 438.808 Exclusion of entities.
described in paragraph (b) of this sec- (a) General rule. FFP is available in
tion to the OIG for consideration of payments under MCO contracts or
possible imposition of civil money pen- PIHP, PAHP, PCCM, or PCCM entity
alties under section 1903(m)(5)(A) of the contracts under a section 1915(b)(1) of
Act and part 1003 of this title. In ac- the Act waiver only if the State ex-
cordance with the provisions of part cludes from the contracts any entities
1003, the OIG may impose civil money described in paragraph (b) of this sec-
penalties on the MCO in addition to, or tion.
in place of, the sanctions that may be (b) Entities that must be excluded. (1)
imposed under this section. An entity that could be excluded under
section 1128(b)(8) of the Act as being
Subpart J—Conditions for Federal controlled by a sanctioned individual.
Financial Participation (FFP) (2) An entity that has a substantial
contractual relationship as defined in
§ 431.55(h)(3) of this chapter, either di-
rectly or indirectly, with an individual
otherwise noted.
convicted of certain crimes as de-
§ 438.802 Basic requirements. scribed in section 1128(b)(8)(B) of the
Act or an individual described in
FFP is available in expenditures for § 438.610(a) and (b).
payments under an MCO contract only (3) An entity that employs or con-
for the periods during which the contracts, directly or indirectly, for the
tract— furnishing of health care, utilization
(a) Meets the requirements of this review, medical social work, or admin-
part; and istrative services, with one of the fol-
(b) Is in effect. lowing:
(i) Any individual or entity described
§ 438.806 Prior approval.
in § 438.610(a) and (b).
(a) Comprehensive risk contracts. FFP (ii) Any individual or entity that
is available under a comprehensive risk would provide those services through
contract only if all of the following an individual or entity described in
apply: § 438.610(a) and (b).
(1) CMS has confirmed that the con-
tractor meets the definition of an MCO § 438.810 Expenditures for enrollment
or is one of the entities described in broker services.
paragraphs (b)(2) through (5) of § 438.3. (a) Definitions. As used in this sec-
(2) The contract meets all the re- tion—
quirements of section 1903(m)(2)(A) of Enrollment activities means activities
the Act, the applicable requirements of such as distributing, collecting, and
section 1932 of the Act, and the provi- processing enrollment materials and
sions of this part. taking enrollments by phone, in per-
(b) MCO contracts. Prior approval by son, or through electronic methods of
CMS is a condition for FFP under any communication.
MCO contract that extends for less Enrollment broker means an individual
than one full year or that has a value or entity that performs choice coun-
equal to, or greater than, the following seling or enrollment activities, or both.
threshold amounts: Enrollment services means choice
(1) For 1998, the threshold is counseling, or enrollment activities, or

$1,000,000. both.
(2) For subsequent years, the amount (b) Conditions that enrollment brokers
is increased by the percentage increase must meet. State expenditures for the
321
§ 438.812 42 CFR Ch. IV (10–1–17 Edition)
use of enrollment brokers are consid- ices to eligible beneficiaries is a med-

ered necessary for the proper and effi- ical assistance cost; and
cient operation of the State plan and (2) The amount the State agency
thus eligible for FFP only if the broker pays for the contractor’s performance
and its subcontractors meet the fol- of other functions is an administrative
lowing conditions: cost.
(1) Independence. The broker and its
subcontractors are independent of any § 438.816 Expenditures for the bene-
MCO, PIHP, PAHP, PCCM, PCCM enti- ficiary support system for enrollees
using LTSS.
ty or other health care provider in the
State in which they provide enrollment State expenditures for the person or
services. A broker or subcontractor is entity providing the services outlined
not considered ‘‘independent’’ if it— in § 438.71(d) are considered necessary
(i) Is an MCO, PIHP, PAHP, PCCM, for the proper and efficient operation
PCCM entity or other health care proof the State plan and thus eligible for
vider in the State; FFP only if all of the following condi-
(ii) Is owned or controlled by an tions are met:
MCO, PIHP, PAHP, PCCM, PCCM enti- (a) Costs must be supported by an al-
ty or other health care provider in the location methodology that appears in
State; or the State’s approved Public Assistance
(iii) Owns or controls an MCO, PIHP, Cost Allocation Plan in § 433.34 of this
PAHP, PCCM, PCCM entity, or other chapter.
health care provider in the State. (b) The costs do not duplicate pay-
ment for activities that are already
(2) Freedom from conflict of interest.
being offered or should be provided by
The broker and its subcontractor are
other entities or paid by other pro-
free from conflict of interest. A broker
grams.
or subcontractor is not considered free
(c) The person or entity providing the
from conflict of interest if any person
services must meet the requirements in
who is the owner, employee, or consult-
§ 438.810(b)(1) and (2).
ant of the broker or subcontractor or
(d) The initial contract or MOA for
has any contract with them—
services performed has been reviewed
(i) Has any direct or indirect finan- and approved by CMS.
cial interest in any entity or health
care provider that furnishes services in § 438.818 Enrollee encounter data.
the State in which the broker or sub-
(a) FFP is available for expenditures
contractor provides enrollment serv-
under an MCO, PIHP, or PAHP con-
ices;
tract only if the State meets the fol-
(ii) Has been excluded from participa-
lowing conditions for providing en-
tion under Title XVIII or XIX of the
rollee encounter data to CMS:
Act;
(1) Enrollee encounter data reports
(iii) Has been debarred by any Fed- must comply with the Health Insur-
eral agency; or ance Portability and Accountability
(iv) Has been, or is now, subject to Act of 1996 (HIPAA) security and pri-
civil money penalties under the Act. vacy standards and be submitted in the
(3) Approval. The initial contract or format required by the Medicaid Sta-
memorandum of agreement (MOA) for tistical Information System or format
services performed by the broker has required by any successor system to
been reviewed and approved by CMS. the Medicaid Statistical Information
System.
§ 438.812 Costs under risk and nonrisk (2) States must ensure that enrollee
contracts.
encounter data is validated for accu-
(a) Under a risk contract, the total racy and completeness as required
amount the State agency pays for car- under § 438.242 before submitting data
rying out the contract provisions is a to CMS. States must also validate that
medical assistance cost.
the data submitted to CMS is a com-

(b) Under a nonrisk contract— plete and accurate representation of
(1) The amount the State agency the information submitted to the State
pays for the furnishing of medical serv- by the MCOs, PIHPs, and PAHPs.
322
(3) States must cooperate with CMS Financial requirements include

to fully comply with all encounter data deductibles, copayments, coinsurance,
reporting requirements of the Medicaid or out-of-pocket maximums. Financial
Statistical Information System or any requirements do not include aggregate
successor system. lifetime or annual dollar limits.
(b) CMS will assess a State’s submis- Medical/surgical benefits means bene-
sion to determine if it complies with fits for items or services for medical
current criteria for accuracy and com- conditions or surgical procedures, as
pleteness. defined by the State and in accordance
(c) If, after being notified of compli-
with applicable Federal and State law,
ance issues under paragraph (b) of this
but do not include mental health or
section the State is unable to make a
data submission compliant, CMS will substance use disorder benefits. Any
take appropriate steps to defer and/or condition defined by the State as being
disallow FFP on all or part of an MCO, or as not being a medical/surgical con-
PIHP, or PAHP contract in a manner dition must be defined to be consistent
based on the enrollee and specific serv- with generally recognized independent
ice type of the noncompliant data. Any standards of current medical practice
deferral and/or disallowance of FFP (for example, the most current version
will be effectuated utilizing the proc- of the International Classification of
esses specified in §§ 430.40 and 430.42 of Diseases (ICD) or State guidelines).
this chapter. Medical/surgical benefits include long
term care services.
Subpart K—Parity in Mental Health Mental health benefits means benefits
and Substance Use Disorder for items or services for mental health
Benefits conditions, as defined by the State and
in accordance with applicable Federal
SOURCE: 81 FR 18436, Mar. 30, 2016, unless and State law. Any condition defined
otherwise noted. by the State as being or as not being a
mental health condition must be de-
§ 438.900 Meaning of terms. fined to be consistent with generally
For purposes of this subpart, except recognized independent standards of
where the context clearly indicates current medical practice (for example,
otherwise, the following terms have the most current version of the Diag-
the meanings indicated: nostic and Statistical Manual of Men-
Aggregate lifetime dollar limit means a tal Disorders (DSM), the most current
dollar limitation on the total amount version of the ICD, or State guide-
of specified benefits that may be paid lines). Mental health benefits include
under a MCO, PIHP, or PAHP. long term care services.
Annual dollar limit means a dollar Substance use disorder benefits means
limitation on the total amount of spec- benefits for items or services for sub-
ified benefits that may be paid in a 12- stance use disorders, as defined by the
month period under a MCO, PIHP, or State and in accordance with applica-
PAHP. ble Federal and State law. Any dis-
Cumulative financial requirements are
order defined by the State as being or
financial requirements that determine
as not being a substance use disorder
whether or to what extent benefits are
provided based on accumulated must be defined to be consistent with
amounts and include deductibles and generally recognized independent
out-of-pocket maximums. (However, standards of current medical practice
cumulative financial requirements do (for example, the most current version
not include aggregate lifetime or an- of the DSM, the most current version
nual dollar limits because these two of the ICD, or State guidelines). Sub-
terms are excluded from the meaning stance use disorder benefits include
of financial requirements.) long term care services.
Early and Periodic Screening, Diag- Treatment limitations include limits on

nostic and Treatment (EPSDT) benefits benefits based on the frequency of
are benefits defined in section 1905(r) of treatment, number of visits, days of
the Act. coverage, days in a waiting period, or
323
§ 438.905 42 CFR Ch. IV (10–1–17 Edition)
other similar limits on the scope or du- mental health or substance use dis-
ration of treatment. Treatment limita- order benefits in a manner that does
tions include both quantitative treat- not distinguish between the medical/
ment limitations, which are expressed surgical benefits and mental health or
numerically (such as 50 outpatient vis- substance use disorder benefits; or
its per year), and nonquantitative (2) Not include an aggregate lifetime
treatment limitations, which otherwise or annual dollar limit on mental health
limit the scope or duration of benefits or substance use disorder benefits that
for treatment under a plan or coverage. is more restrictive than the aggregate
(See § 438.910(d)(2) for an illustrative list lifetime or annual dollar limit, respec-
of nonquantitative treatment limita- tively, on medical/surgical benefits.
tions.) A permanent exclusion of all (d) Determining one-third and two-
benefits for a particular condition or thirds of all medical/surgical benefits. For
disorder, however, is not a treatment purposes of this section, the determina-
limitation for purposes of this definition of whether the portion of medical/
tion. surgical benefits subject to an aggre-
gate lifetime or annual dollar limit
§ 438.905 Parity requirements for ag- represents one-third or two-thirds of
gregate lifetime and annual dollar all medical/surgical benefits is based
limits. on the total dollar amount of all com-
(a) General parity requirement. Each binations of MCO, PIHP, and PAHP
MCO, PIHP, and PAHP providing serv- payments for medical/surgical benefits
ices to MCO enrollees must comply expected to be paid under the MCO,
with paragraphs (b), (c), or (e) of this PIHP, or PAHP for a contract year (or
section for all enrollees of a MCO in for the portion of a contract year after
States that cover both medical/surgical a change in benefits that affects the
benefits and mental health or sub- applicability of the aggregate lifetime
stance use disorder benefits under the or annual dollar limits). Any reason-
State plan. This section details the ap- able method may be used to determine
plication of the parity requirements for whether the dollar amount expected to
aggregate lifetime and annual dollar be paid under the MCOs, PIHPs, and
limits. PAHPs will constitute one-third or
(b) MCOs, PIHPs, or PAHPs with no two-thirds of the dollar amount of all
limit or limits on less than one-third of all payments for medical/surgical benefits.
medical/surgical benefits. If a MCO, (e) MCO, PIHP, or PAHP not described
PIHP, or PAHP does not include an ag- in this section—(1) In general. A MCO,
gregate lifetime or annual dollar limit PIHP, or PAHP that is not described in
on any medical/surgical benefits or in- paragraph (b) or (c) of this section for
cludes an aggregate lifetime or annual aggregate lifetime or annual dollar
dollar limit that applies to less than limits on medical/surgical benefits,
one-third of all medical/surgical bene- must either—
fits provided to enrollees through a (i) Impose no aggregate lifetime or
contract with the State, it may not im- annual dollar limit, on mental health
pose an aggregate lifetime or annual or substance use disorder benefits; or
dollar limit, respectively, on mental (ii) Impose an aggregate lifetime or
health or substance use disorder bene- annual dollar limit on mental health or
fits. substance use disorder benefits that is
(c) MCOs, PIHPs, or PAHPs with a no more restrictive than an average
limit on at least two-thirds of all medical/ limit calculated for medical/surgical
surgical benefits. If a MCO, PIHP, or benefits in the following manner. The
PAHP includes an aggregate lifetime average limit is calculated by taking
or annual dollar limit on at least two- into account the weighted average of
thirds of all medical/surgical benefits the aggregate lifetime or annual dollar
provided to enrollees through a con- limits, as appropriate, that are applica-
tract with the State, it must either— ble to the categories of medical/sur-
(1) Apply the aggregate lifetime or gical benefits. Limits based on delivery
annual dollar limit both to the med- mechanisms, such as inpatient/out-
ical/surgical benefits to which the patient treatment or normal treatment
limit would otherwise apply and to of common, low-cost conditions (such
324
as treatment of normal births), do not fits under the State plan, must not
constitute categories for purposes of apply any financial requirement or
this paragraph (e)(1)(ii). In addition, treatment limitation to mental health
for purposes of determining weighted or substance use disorder benefits in
averages, any benefits that are not any classification that is more restric-
within a category that is subject to a tive than the predominant financial re-
separately-designated dollar limit quirement or treatment limitation of
under the contract are taken into ac- that type applied to substantially all
count as a single separate category by medical/surgical benefits in the same
using an estimate of the upper limit on classification furnished to enrollees
the dollar amount that a MCO, PIHP, (whether or not the benefits are fur-
or PAHP may reasonably be expected nished by the same MCO, PIHP, or
to incur for such benefits, taking into PAHP). Whether a financial require-
account any other applicable restric- ment or treatment limitation is a pre-
tions. dominant financial requirement or
(2) Weighting. For purposes of this treatment limitation that applies to
paragraph (e), the weighting applicable substantially all medical/surgical bene-
to any category of medical/surgical fits in a classification is determined
benefits is determined in the manner separately for each type of financial re-
set forth in paragraph (d) of this sec- quirement or treatment limitation.
tion for determining one-third or two- The application of the rules of this
thirds of all medical/surgical benefits. paragraph (b) to financial requirements
and quantitative treatment limitations
§ 438.910 Parity requirements for fi- is addressed in paragraph (c) of this
nancial requirements and treat- section; the application of the rules of
ment limitations. this paragraph (b) to nonquantitative
(a) Clarification of terms—(1) Classi- treatment limitations is addressed in
fication of benefits. When reference is paragraph (d) of this section.
made in this section to a classification (2) Classifications of benefits used for
of benefits, the term ‘‘classification’’ applying rules. If an MCO enrollee is
means a classification as described in provided mental health or substance
paragraph (b)(2) of this section. use disorder benefits in any classifica-
(2) Type of financial requirement or tion of benefits described in this para-
treatment limitation. When reference is graph (b)(2), mental health or sub-
made in this section to a type of finan- stance use disorder benefits must be
cial requirement or treatment limita- provided to the enrollee in every classi-
tion, the reference to type means its fication in which medical/surgical ben-
nature. Different types of financial re- efits are provided. In determining the
quirements include deductibles, copay- classification in which a particular
ments, coinsurance, and out-of-pocket benefit belongs, a MCO, PIHP, or PAHP
maximums. Different types of quan- must apply the same reasonable stand-
titative treatment limitations include ards to medical/surgical benefits and to
annual, episode, and lifetime day and mental health or substance use dis-
visit limits. See paragraph (d)(2) of this order benefits. To the extent that a
section for an illustrative list of non- MCO, PIHP, or PAHP provides benefits
quantitative treatment limitations. in a classification and imposes any sep-
(3) Level of a type of financial require- arate financial requirement or treat-
ment or treatment limitation. When ref- ment limitation (or separate level of a
erence is made in this section to a level financial requirement or treatment
of a type of financial requirement or limitation) for benefits in the classi-
treatment limitation, level refers to fication, the rules of this section apply
the magnitude of the type of financial separately for that classification for
requirement or treatment limitation. all financial requirements or treat-
(b) General parity requirement—(1) ment limitations. The following classi-
General rule and scope. Each MCO, PIHP fications of benefits are the only classi-
and PAHP providing services to MCO fications used in applying the rules of
enrollees in a State that covers both this section:
medical/surgical benefits and mental (i) Inpatient. Benefits furnished on an
health or substance use disorder bene- inpatient basis.
325
§ 438.910 42 CFR Ch. IV (10–1–17 Edition)
(ii) Outpatient. Benefits furnished on the classification. The least restrictive

an outpatient basis. See special rules level within the combination is consid-
for office visits in paragraph (c)(2) of ered the predominant level of that type
this section. in the classification. (For this purpose,
(iii) Emergency care. Benefits for a MCO, PIHP, or PAHP may combine
emergency care. the most restrictive levels first, with
(iv) Prescription drugs. Benefits for each less restrictive level added to the
prescription drugs. See special rules for combination until the combination ap-
multi-tiered prescription drug benefits plies to more than one-half of the bene-
in paragraph (c)(2) of this section. fits subject to the financial require-
(c) Financial requirements and quan- ment or treatment limitation.)
titative treatment limitations—(1) Deter- (iii) Portion based on MCO, PIHP or
mining ‘‘substantially all’’ and ‘‘predomi- PAHP payments. For purposes of this
nant’’—(i) Substantially all. For pur- section, the determination of the por-
poses of this section, a type of financial tion of medical/surgical benefits in a
requirement or quantitative treatment classification of benefits subject to a
limitation is considered to apply to financial requirement or quantitative
substantially all medical/surgical bene- treatment limitation (or subject to any
fits in a classification of benefits if it level of a financial requirement or
applies to at least two-thirds of all quantitative treatment limitation) is
medical/surgical benefits in that classi- based on the total dollar amount of all
fication. If a type of financial require- combinations of MCO, PIHP, and PAHP
ment or quantitative treatment limita-
payments for medical/surgical benefits
tion does not apply to at least two-
in the classification expected to be
thirds of all medical/surgical benefits
paid under the MCOs, PIHPs, and
in a classification, then that type can-
PAHPs for a contract year (or for the
not be applied to mental health or sub-
portion of a contract year after a
stance use disorder benefits in that
change in benefits that affects the ap-
classification.
plicability of the financial requirement
(ii) Predominant. (A) If a type of fi-
or quantitative treatment limitation).
nancial requirement or quantitative
treatment limitation applies to at (iv) Clarifications for certain threshold
least two-thirds of all medical/surgical requirements. For any deductible, the
benefits in a classification as deter- dollar amount of MCO, PIHP, or PAHP
mined under paragraph (c)(1)(i) of this payments includes all payments for
section, the level of the financial reclaims that would be subject to the de-
quirement or quantitative treatment ductible if it had not been satisfied.
limitation that is considered the pre- For any out-of-pocket maximum, the
dominant level of that type in a classi- dollar amount of MCO, PIHP, or PAHP
fication of benefits is the level that ap- payments includes all payments associ-
plies to more than one-half of medical/ ated with out-of-pocket payments that
surgical benefits in that classification are taken into account towards the
subject to the financial requirement or out-of-pocket maximum as well as all
quantitative treatment limitation. payments associated with out-of-pock-
(B) If, for a type of financial require- et payments that would have been
ment or quantitative treatment limita- made towards the out-of-pocket max-
tion that applies to at least two-thirds imum if it had not been satisfied. Simi-
of all medical/surgical benefits in a lar rules apply for any other thresholds
classification, there is no single level at which the rate of MCO, PIHP, or
that applies to more than one-half of PAHP payment changes.
medical/surgical benefits in the classi- (v) Determining the dollar amount of
fication subject to the financial re- MCO, PIHP, or PAHP payments. Subject
quirement or quantitative treatment to paragraph (c)(1)(iv) of this section,
limitation, the MCO, PIHP, or PAHP any reasonable method may be used to
may combine levels until the combina- determine the dollar amount expected
tion of levels applies to more than one- to be paid under a MCO, PIHP, or
half of medical/surgical benefits sub- PAHP for medical/surgical benefits
ject to the financial requirement or subject to a financial requirement or
quantitative treatment limitation in quantitative treatment limitation (or
326
subject to any level of a financial re- (3) No separate cumulative financial re-
quirement or quantitative treatment quirements. A MCO, PIHP, or PAHP
limitation). may not apply any cumulative finan-
(2) Special rules—(i) Multi-tiered pre- cial requirement for mental health or
scription drug benefits. If a MCO, PIHP, substance use disorder benefits in a
or PAHP applies different levels of fi- classification that accumulates sepa-
nancial requirements to different tiers rately from any established for med-
of prescription drug benefits based on ical/surgical benefits in the same clas-
reasonable factors determined in ac- sification.
cordance with the rules in paragraph (4) Compliance with other cost-sharing
(d)(1) of this section (relating to re- rules. Each MCO, PIHP, and PAHP
quirements for nonquantitative treat- must meet the cost-sharing require-
ment limitations) and without regard ments in § 438.108 when applying Med-
to whether a drug is generally pre- icaid cost-sharing.
scribed for medical/surgical benefits or (d) Nonquantitative treatment limita-
for mental health or substance use dis- tions—(1) General rule. A MCO, PIHP, or
order benefits, the MCO, PIHP, or PAHP may not impose a nonquantita-
PAHP satisfies the parity requirements tive treatment limitation for mental
of this section for prescription drug health or substance use disorder bene-
benefits. Reasonable factors include fits in any classification unless, under
cost, efficacy, generic versus brand the policies and procedures of the MCO,
name, and mail order versus pharmacy PIHP, or PAHP as written and in oper-
pick-up/delivery. ation, any processes, strategies, evi-
(ii) Sub-classifications permitted for of- dentiary standards, or other factors
fice visits, separate from other outpatient used in applying the nonquantitative
services. For purposes of applying the treatment limitation to mental health
financial requirement and treatment or substance use disorder benefits in
limitation rules of this section, a MCO, the classification are comparable to,
PIHP, or PAHP may divide its benefits and are applied no more stringently
furnished on an outpatient basis into than, the processes, strategies, evi-
the two sub-classifications described in dentiary standards, or other factors
this paragraph (c)(2)(ii). After the sub- used in applying the limitation for
classifications are established, the medical/surgical benefits in the classi-
MCO, PIHP or PAHP may not impose fication.
any financial requirement or quan- (2) Illustrative list of nonquantitative
titative treatment limitation on men- treatment limitations. Nonquantitative
tal health or substance use disorder treatment limitations include –
benefits in any sub-classification that (i) Medical management standards
is more restrictive than the predomi- limiting or excluding benefits based on
nant financial requirement or quan- medical necessity or medical appro-
titative treatment limitation that ap- priateness, or based on whether the
plies to substantially all medical/sur- treatment is experimental or inves-
gical benefits in the sub-classification tigative;
using the methodology set forth in (ii) Formulary design for prescription
paragraph (c)(1) of this section. Sub- drugs;
classifications other than these special (iii) For MCOs, PIHPs, or PAHPs
rules, such as separate sub-classifica- with multiple network tiers (such as
tions for generalists and specialists, preferred providers and participating
are not permitted. The two sub-classi- providers), network tier design;
fications permitted under this para- (iv) Standards for provider admission
graph (c)(2)(ii) are: to participate in a network, including
(A) Office visits (such as physician reimbursement rates;
visits); and (v) MCO, PIHP, or PAHP methods for
(B) All other outpatient items and determining usual, customary, and rea-
services (such as outpatient surgery, sonable charges;

facility charges for day treatment cen- (vi) Refusal to pay for higher-cost
ters, laboratory charges, or other med- therapies until it can be shown that a
ical items). lower-cost therapy is not effective
327
§ 438.915 42 CFR Ch. IV (10–1–17 Edition)
(also known as fail-first policies or step § 438.920 Applicability.

therapy protocols); (a) MCOs, PIHPs, and PAHPs. The re-
(vii) Exclusions based on failure to quirements of this subpart apply to
complete a course of treatment; each MCO, PIHP, and PAHP offering
(viii) Restrictions based on geo- services to enrollees of a MCO, in
graphic location, facility type, pro- States covering medical/surgical and
vider specialty, and other criteria that mental health or substance use dis-
limit the scope or duration of benefits order services under the State plan.
for services provided under the MCO, These requirements regarding coverage
PIHP, or PAHP; and for services that must be provided to
(ix) Standards for providing access to enrollees of an MCO apply regardless of
out-of-network providers. the delivery system of the medical/sur-
(3) Application to out-of-network pro- gical, mental health, or substance use
viders. Any MCO, PIHP or PAHP pro- disorder services under the State plan.
viding access to out-of-network pro- (b) State responsibilities. (1) In any in-
stance where the full scope of medical/
viders for medical/surgical benefits
surgical and mental health and sub-
within a classification, must use proc-
stance use disorder services are not
esses, strategies, evidentiary stand- provided through the MCO, the State
ards, or other factors in determining must review the mental health and
access to out-of-network providers for substance use disorder and medical/sur-
mental health or substance use dis- gical benefits provided through the
order benefits that are comparable to, MCO, PIHP, PAHP, and fee-for service
and applied no more stringently than, (FFS) coverage to ensure the full scope
the processes, strategies, evidentiary of services available to all enrollees of
standards, or other factors in deter- the MCO complies with the require-
mining access to out-of-network pro- ments in this subpart. The State must
viders for medical/surgical benefits. provide documentation of compliance
with requirements in this subpart to
§ 438.915 Availability of information. the general public and post this infor-
(a) Criteria for medical necessity deter- mation on the State Medicaid Web site
minations. The criteria for medical ne- by October 2, 2017. Such documentation
cessity determinations, made by a MCO must be updated prior to any change in
or by a PIHP or PAHP providing serv- MCO, PIHP, PAHP or FFS State plan
ices to an MCO enrollee, for mental benefits.
health or substance use disorder bene- (2) The State must ensure that all
fits must be made available by the services are delivered to the enrollees
MCO, PIHP, or PAHP administrator to of the MCO in compliance with this
any enrollee, potential enrollee, or subpart.
contracting provider upon request. (c) Scope. This subpart does not—
(1) Require a MCO, PIHP, or PAHP to
MCOs, PIHPs, and PAHPs operating in
provide any mental health benefits or
compliance with § 438.236(c) will be
substance use disorder benefits beyond
deemed compliant with the require-
what is specified in its contract, and
ments in this paragraph (a).
the provision of benefits by a MCO,
(b) Reason for any denial. The reason PIHP, or PAHP for one or more mental
for any denial by a MCO, PIHP, or health conditions or substance use dis-
PAHP of reimbursement or payment orders does not require the MCO, PIHP
for services for mental health or sub- or PAHP to provide benefits for any
stance use disorder benefits in the case other mental health condition or sub-
of any enrollee must be made available stance use disorder;
by the MCO, PIHP, or PAHP adminis- (2) Require a MCO, PIHP, or PAHP
trator to the enrollee. that provides coverage for mental
(c) Provisions of other law. Compliance health or substance use disorder bene-
with the disclosure requirements in fits only to the extent required under
paragraphs (a) and (b) of this section is 1905(a)(4)(D) of the Act to provide addi-
not determinative of compliance with tional mental health or substance use
any other provision of applicable Fed- disorder benefits in any classification
eral or State law. in accordance with this section; or
328
(3) Affect the terms and conditions 440.168 Primary care case management serv-
relating to the amount, duration, or ices.
scope of mental health or substance 440.169 Case management services.
440.170 Any other medical or remedial care
use disorder benefits under the Med- recognized under State law and specified
icaid MCO, PIHP, or PAHP contract by the Secretary.
except as specifically provided in 440.180 Home and community-based waiver
§§ 438.905 and 438.910. services.
440.181 Home and community-based services
§ 438.930 Compliance dates. for individuals age 65 or older.
In general, contracts with MCOs, 440.182 State plan home and community-
based services.
PIHPs, and PAHPs offering Medicaid 440.185 Respiratory care for ventilator-de-
State plan services to enrollees, and pendent individuals.
those entities, must comply with the
requirements of this subpart no later Subpart B—Requirements and Limits
than October 2, 2017. Applicable to All Services
440.200 Basis, purpose, and scope.
PART 440—SERVICES: GENERAL 440.210 Required services for the categori-
PROVISIONS cally needy.
440.220 Required services for the medically
Subpart A—Definitions needy.
440.225 Optional services.
Sec. 440.230 Sufficiency of amount, duration, and
440.1 Basis and purpose. scope.
440.2 Specific definitions; definitions of 440.240 Comparability of services for groups.
services for FFP purposes. 440.250 Limits on comparability of services.
440.10 Inpatient hospital services, other 440.255 Limited services available to certain
than services in an institution for men- aliens.
tal diseases. 440.260 Methods and standards to assure
440.20 Outpatient hospital services and quality of services.
rural health clinic services. 440.262 Access and cultural considerations.
440.30 Other laboratory and X-ray services. 440.270 Religious objections.
440.40 Nursing facility services for individ-
uals age 21 or older (other than services Subpart C—Benchmark Benefit and
in an institution for mental disease), Benchmark-Equivalent Coverage
EPSDT, and family planning services and
supplies. 440.300 Basis.
440.50 Physicians’ services and medical and 440.305 Scope.
surgical services of a dentist. 440.310 Applicability.
440.60 Medical or other remedial care pro- 440.315 Exempt individuals.
vided by licensed practitioners. 440.320 State plan requirements: Optional
440.70 Home health services. enrollment for exempt individuals.
440.80 Private duty nursing services. 440.325 State plan requirements: Coverage
440.90 Clinic services. and benefits.
440.100 Dental services. 440.330 Benchmark health benefits coverage.
440.110 Physical therapy, occupational ther- 440.335 Benchmark-equivalent health bene-
apy, and services for individuals with fits coverage.
speech, hearing, and language disorders. 440.340 Actuarial report for benchmark-
440.120 Prescribed drugs, dentures, pros- equivalent coverage.
thetic devices, and eyeglasses. 440.345 EPSDT and other required benefits.
440.130 Diagnostic, screening, preventive, 440.347 Essential health benefits.
and rehabilitative services. 440.350 Employer-sponsored insurance
440.140 Inpatient hospital services, nursing health plans.
facility services, and intermediate care 440.355 Payment of premiums.
facility services for individuals age 65 or 440.360 State plan requirements for pro-
older in institutions for mental diseases. viding additional services.
440.150 Intermediate care facility (ICF/IID) 440.365 Coverage of rural health clinic and
services. federally qualified health center (FQHC)
440.155 Nursing facility services, other than services.
in institutions for mental diseases. 440.370 Economy and efficiency.
440.160 Inpatient pyschiatric services for in- 440.375 Comparability.
dividuals under age 21. 440.380 Statewideness.

440.165 Nurse-midwife services. 440.385 Delivery of benchmark and bench-
440.166 Nurse practitioner services. mark-equivalent coverage through man-
440.167 Personal care services. aged care entities.
329
§ 440.1 42 CFR Ch. IV (10–1–17 Edition)
440.386 Public notice. charged or is transferred to another fa-
440.390 Assurance of transportation. cility and does not actually stay in the
440.395 Parity in mental health and sub- institution for 24 hours.
stance use disorder benefits.
Outpatient means a patient of an or-
AUTHORITY: Sec. 1102 of the Social Security ganized medical facility, or distinct
Act (42 U.S.C. 1302). part of that facility who is expected by
SOURCE: 43 FR 45224, Sept. 29, 1978, unless the facility to receive and who does re-
otherwise noted. ceive professional services for less than
a 24-hour period regardless of the hour
Subpart A—Definitions of admission, whether or not a bed is
used, or whether or not the patient re-
§ 440.1 Basis and purpose. mains in the facility past midnight.
This subpart interprets and imple- Patient means an individual who is
ments the following sections of the receiving needed professional services
Act: that are directed by a licensed practi-
tioner of the healing arts toward the
1902(a)(70), State option to establish a non- maintenance, improvement, or protec-
emergency medical transportation program.
1905(a) Services included in the term
tion of health, or lessening of illness,
‘‘medical assistance.’’ disability, or pain. (See also § 435.1010 of
1905 (c), (d), (f) through (i), (l), and (m) this chapter for definitions relating to
Definitions of institutions and services that institutional care.)
are included in the term ‘‘medical assist- (b) Definitions of services for FFP pur-
ance.’’ poses. Except as limited in part 441,
1913 ‘‘Swing-bed’’ services. (See §§ 447.280 FFP is available in expenditures under
and 482.58 of this chapter for related provi-
the State plan for medical or remedial
sions on ‘‘swing-bed’’ services.)
1915(c) Home and community-based serv- care and services as defined in this sub-
ices listed as ‘‘medical assistance’’ and fur- part.
nished under waivers under that section to
individuals who would otherwise require the
FR 47934, Dec. 17, 1987; 71 FR 39229, July 12,
level of care furnished in a hospital, NF, or
2006]
ICF/IID.
1915(d) Home and community-based serv-
ices listed as ‘‘medical assistance’’ and fur-
§ 440.10 Inpatient hospital services,
nished under waivers under that section to
other than services in an institution
individuals age 65 or older who would other-
for mental diseases.
wise require the level of care furnished in a (a) Inpatient hospital services means
NF. services that—
1915(i) Home and community-based serv- (1) Are ordinarily furnished in a hos-
ices furnished under a State plan to elderly
and disabled individuals.
pital for the care and treatment of in-
patients;
[57 FR 29155, June 30, 1992, as amended at 61 (2) Are furnished under the direction
FR 38398, July 24, 1996; 73 FR 77530, Dec. 19,
of a physician or dentist; and
2008; 79 FR 3029, Jan. 16, 2014; 79 FR 27153,
May 12, 2014] (3) Are furnished in an institution
that—
§ 440.2 Specific definitions; definitions (i) Is maintained primarily for the
of services for FFP purposes. care and treatment of patients with
(a) Specific definitions. disorders other than mental diseases;
Inpatient means a patient who has (ii) Is licensed or formally approved
been admitted to a medical institution as a hospital by an officially des-
as an inpatient on recommendation of ignated authority for State standard-
a physician or dentist and who— setting;
(1) Receives room, board and profes- (iii) Meets the requirements for par-
sional services in the institution for a ticipation in Medicare as a hospital;
24 hour period or longer, or and
(2) Is expected by the institution to (iv) Has in effect a utilization review
receive room, board and professional plan, applicable to all Medicaid pa-
services in the institution for a 24 hour tients, that meets the requirements of
period or longer even though it later § 482.30 of this chapter, unless a waiver
develops that the patient dies, is dis- has been granted by the Secretary.
330
(b) Inpatient hospital services do not requirements specified in § 405.2414(a) of

include SNF and ICF services furnished this chapter.
by a hospital with a swing-bed ap- (3) Services and supplies that are fur-
proval. nished as an incident to professional
services furnished by a physician, phy-
FR 31532, July 20, 1982; 51 FR 22041, June 17, sician assistant, nurse practitioner,
1986, 52 FR 47934, Dec. 17, 1987; 60 FR 61486, nurse midwife, or specialized nurse
Nov. 30, 1995] practitioner. (See §§ 405.2413 and 405.2415
of this chapter for the criteria for de-
§ 440.20 Outpatient hospital services termining whether services and sup-
and rural health clinic services. plies are included under this para-
(a) Outpatient hospital services means graph.)
preventive, diagnostic, therapeutic, re- (4) Part-time or intermittent visiting
habilitative, or palliative services nurse care and related medical supplies
that— (other than drugs and biologicals) if:
(1) Are furnished to outpatients; (i) The clinic is located in an area in
(2) Are furnished by or under the di- which the Secretary has determined
rection of a physician or dentist; and that there is a shortage of home health
(3) Are furnished by an institution agencies (see § 405.2417 of this chapter):
that— (ii) The services are furnished by a
(i) Is licensed or formally approved as registered nurse or licensed practical
a hospital by an officially designated nurse or a licensed vocational nurse
authority for State standard-setting; employed by, or otherwise com-
and pensated for the services by, the clinic;
(ii) Meets the requirements for par- (iii) The services are furnished under
ticipation in Medicare as a hospital; a written plan of treatment that is es-
and tablished and reviewed at least every 60
(4) May be limited by a Medicaid days by a supervising physician of the
agency in the following manner: A clinic or that is established by a physi-
Medicaid agency may exclude from the cian, physician assistant, nurse practi-
definition of ‘‘outpatient hospital serv- tioner, nurse midwife, or specialized
ices’’ those types of items and services nurse practitioner and reviewed and
that are not generally furnished by approved at least every 60 days by a su-
most hospitals in the State. pervising physician of the clinic; and
(b) Rural health clinic services. If nurse (iv) The services are furnished to a
practitioners or physician assistants homebound beneficiary. For purposes
(as defined in § 481.1 of this chapter) are of visiting nurse care, a ‘‘homebound’’
not prohibited by State law from fur- beneficiary means one who is perma-
nishing primary health care, ‘‘rural nently or temporarily confined to his
health clinic services’’ means the fol- place of residence because of a medical
lowing services when furnished by a or health condition. He may be consid-
rural health clinic that has been cer- ered homebound if he leaves the place
tified in accordance with part 491 of of residence infrequently. For this pur-
this chapter. pose, ‘‘place of residence’’ does not in-
(1) Services furnished by a physician clude a hospital or a skilled nursing fa-
within the scope of practice of his pro- cility.
fession under State law, if the physi- (c) Other ambulatory services furnished
cian performs the services in the clinic by a rural health clinic. If the State plan
or the services are furnished away from covers rural health clinic services,
the clinic and the physician has an other ambulatory services means am-
agreement with the clinic providing bulatory services other than rural
that he will be paid by it for such serv- health clinic services, as defined in
ices. paragraph (b) of this section, that are
(2) Services furnished by a physician otherwise included in the plan and
assistant, nurse practitioner, nurse meet specific State plan requirements
midwife or other specialized nurse for furnishing those services. Other

practitioner (as defined in §§ 405.2401 ambulatory services furnishd by a
and 491.2 of this chapter) if the services rural health clinic are not subject to
are furnished in accordance with the the physician supervision requirements
331
§ 440.30 42 CFR Ch. IV (10–1–17 Edition)
specified in § 491.8(b) of this chapter, (iii) Ordered by and provided under

unless required by State law or the the direction of a physician.
State plan. (2) Nursing facility services include
services provided by any facility lo-
cated on an Indian reservation and cer-
FR 21050, May 17, 1982; 52 FR 47934, Dec. 17,
1987; 60 FR 61486, Nov. 30, 1995; 73 FR 66198, tified by the Secretary as meeting the
Nov. 7, 2008; 74 FR 31195, June 30, 2009] requirements of subpart B of part 483 of
this chapter.
§ 440.30 Other laboratory and X-ray (b) EPSDT. ‘‘Early and periodic
services. screening and diagnosis and treat-
ment’’ means—
Other laboratory and X-ray services
(1) Screening and diagnostic services
means professional and technical lab-
to determine physical or mental de-
oratory and radiological services—
fects in beneficiaries under age 21; and
(a) Ordered and provided by or under (2) Health care, treatment, and other
the direction of a physician or other li- measures to correct or ameliorate any
censed practioner of the healing arts defects and chronic conditions discov-
within the scope of his practice as de- ered. (See subpart B of part 441 of this
fined by State law or ordered by a phy- chapter.)
sician but provided by referral labora- (c) Family planning services and sup-
tory; plies for individuals of child-bearing age.
(b) Provided in an office or similar [Reserved]
facility other than a hospital out-
patient department or clinic; and [59 FR 56233, Nov. 10, 1994; 60 FR 50117, Sept.
28, 1995, as amended at 61 FR 59198, Nov. 21,
(c) Furnished by a laboratory that 1996; 68 FR 46071, Aug. 4, 2003]
meets the requirements of part 493 of
this chapter. § 440.50 Physicians’ services and med-
ical and surgical services of a den-
[46 FR 42672, Aug. 24, 1981, as amended at 57 tist.
FR 7135, Feb. 28, 1992]
(a) ‘‘Physicians’ services,’’ whether
§ 440.40 Nursing facility services for furnished in the office, the bene-
individuals age 21 or older (other ficiary’s home, a hospital, a skilled
than services in an institution for nursing facility, or elsewhere, means
mental disease), EPSDT, and family services furnished by a physician—
planning services and supplies. (1) Within the scope of practice of
(a) Nursing facility services. (1) ‘‘Nurs- medicine or osteopathy as defined by
ing facility services for individuals age State law; and
21 or older, other than services in an (2) By or under the personal super-
institution for mental diseases’’, means vision of an individual licensed under
services that are— State law to practice medicine or oste-
(i) Needed on a daily basis and re- opathy.
quired to be provided on an inpatient (b) ‘‘Medical and surgical services of
basis under §§ 409.31 through 409.35 of a dentist’’ means medical and surgical
this chapter. services furnished, on or after January
(ii) Provided by— 1, 1988, by a doctor of dental medicine
(A) A facility or distinct part (as de- or dental surgery if the services are
fined in § 483.5(b) of this chapter) that services that—
meets the requirements for participa- (1) If furnished by a physician, would
tion under subpart B of part 483 of this be considered physician’s services.
chapter, as evidenced by a valid agree- (2) Under the law of the State where
ment between the Medicaid agency and they are furnished, may be furnished
the facility for providing nursing facil- either by a physician or by a doctor of
ity services and making payments for dental medicine or dental surgery; and
services under the plan; or (3) Are furnished by a doctor of den-
(B) If specified in the State plan, a tal medicine or dental surgery who is
authorized to furnish those services in
swing-bed hospital that has an ap-

proval from CMS to furnish skilled the State in which he or she furnished
nursing facility services in the Medi- the services.
care program; and [56 FR 8851, Mar. 1, 1991]
332
§ 440.60 Medical or other remedial (iv) Has had orientation to accept-

care provided by licensed practi- able clinical and administrative rec-
tioners. ordkeeping from a health department
(a) ‘‘Medical care or any other type nurse.
remedial care provided by licensed (2) Home health aide service provided
practitioners’’ means any medical or by a home health agency,
remedial care or services, other than (3) Medical supplies, equipment, and
physicians’ services, provided by li- appliances suitable for use in any set-
censed practitioners within the scope ting in which normal life activities
of practice as defined under State law. take place, as defined at § 440.70(c)(1).
(b) Chiropractors’ services include (i) Supplies are health care related
only services that— items that are consumable or dispos-
(1) Are provided by a chiropractor able, or cannot withstand repeated use
who is licensed by the State and meets by more than one individual, that are
standards issued by the Secretary required to address an individual med-
under § 405.232(b) of this chapter; and ical disability, illness or injury.
(ii) Equipment and appliances are
(2) Consists of treatment by means of
items that are primarily and custom-
manual manipulation of the spine that
arily used to serve a medical purpose,
the chiropractor is legally authorized
generally are not useful to an indi-
by the State to perform.
vidual in the absence of a disability,
§ 440.70 Home health services. illness or injury, can withstand re-
peated use, and can be reusable or re-
(a) ‘‘Home health services’’ means movable. State Medicaid coverage of
the services in paragraph (b) of this equipment and appliances is not re-
section that are provided to a bene- stricted to the items covered as dura-
ficiary— ble medical equipment in the Medicare
(1) At his place of residence, as speci- program.
fied in paragraph (c) of this section; (iii) A beneficiary’s need for medical
and supplies, equipment, and appliances
(2) On his or her physician’s orders as must be reviewed by a physician annu-
part of a written plan of care that the ally.
physician reviews every 60 days, except (iv) Frequency of further physician
as specified in paragraph (b)(3) of this review of a beneficiary’s continuing
section. need for the items is determined on a
(b) Home health services include the case-by-case basis, based on the nature
following services and items. Para- of the item prescribed;
graphs (b)(1), (2) and (3) of this section (v) States can have a list of
are required services and items that preapproved medical equipment sup-
must be covered according to the home plies and appliances for administrative
health coverage parameters. Services ease but States are prohibited from
in paragraph (b)(4) of this section are having absolute exclusions of coverage
optional. Coverage of home health on medical equipment, supplies, or ap-
services cannot be contingent upon the pliances. States must have processes
beneficiary needing nursing or therapy and criteria for requesting medical
services. equipment that is made available to in-
(1) Nursing service, as defined in the dividuals to request items not on the
State Nurse Practice Act, that is pro- State’s list. The procedure must use
vided on a part-time or intermittent reasonable and specific criteria to as-
basis by a home health agency as de- sess items for coverage. When denying
fined in paragraph (d) of this section, a request, a State must inform the ben-
or if there is no agency in the area, a eficiary of the right to a fair hearing.
registered nurse who— (4) Physical therapy, occupational
(i) Is currently licensed to practice in therapy, or speech pathology and audi-
the State; ology services, provided by a home
(ii) Receives written orders from the health agency or by a facility licensed
patient’s physician; by the State to provide medical reha-
(iii) Documents the care and services bilitation services. (See § 441.15 of this
provided; and subchapter.)
333
§ 440.70 42 CFR Ch. IV (10–1–17 Edition)
(c) A beneficiary’s place of residence, scribed by or under the direction of in-

for home health services, does not individuals licensed to practice medicine
clude a hospital, nursing facility, or in- or surgery in the State.
termediate care facility for individuals (f) No payment may be made for serv-
with intellectual disabilities, except ices referenced in paragraphs (b)(1)
for home health services in an inter- through (4) of this section, unless the
mediate care facility for Individuals physician referenced in paragraph
with Intellectual Disabilities that are (a)(2) of this section or for medical
not required to be provided by the fa- equipment, the allowed non-physician
cility under subpart I of part 483. For practitioner, as described in paragraph
example, a registered nurse may pro- (f)(3)(ii) through (v), with the exception
vide short-term care for a beneficiary of certified nurse-midwives, as de-
in an intermediate care facility for In- scribed in paragraph (f)(3)(iii) docu-
dividuals with Intellectual Disabilities ments that there was a face-to-face en-
during an acute illness to avoid the counter with the beneficiary that
beneficiary’s transfer to a nursing fa- meets the following requirements:
cility. (1) For the initiation of home health
(1) Nothing in this section should be services, the face-to-face encounter
read to prohibit a beneficiary from re- must be related to the primary reason
ceiving home health services in any the beneficiary requires home health
setting in which normal life activities services and must occur within the 90
take place, other than a hospital, nurs- days before or within the 30 days after
ing facility; intermediate care facility the start of the services.
for individuals with intellectual dis- (2) For the initiation of medical
abilities; or any setting in which pay- equipment, the face-to-face encounter
ment is or could be made under Med- must be related to the primary reason
icaid for inpatient services that in- the beneficiary requires medical equip-
clude room and board. Home health ment and must occur no more than 6
services cannot be limited to services months prior to the start of services.
furnished to beneficiaries who are (3) The face-to-face encounter may be
homebound. conducted by one of the following prac-
(2) Additional services or service titioners:
hours may, at the State’s option, be (i) The physician referenced in para-
authorized to account for medical graph (a)(2) of this section;
needs that arise in the settings home (ii) A nurse practitioner or clinical
health services are provided. nurse specialist, as those terms are de-
(d) ‘‘Home health agency’’ means a fined in section 1861(aa)(5) of the Act,
public or private agency or organiza- working in collaboration with the phy-
tion, or part of an agency or organiza- sician referenced in paragraph (a) of
tion, that meets requirements for par- this section, in accordance with State
ticipation in Medicare, including the law;
capitalization requirements under (iii) A certified nurse midwife, as de-
§ 489.28 of this chapter. fined in section 1861(gg) of the Act, as
(e) A ‘‘facility licensed by the State authorized by State law;
to provide medical rehabilitation serv- (iv) A physician assistant, as defined
ices’’ means a facility that— in section 1861(aa)(5) of the Act, under
(1) Provides therapy services for the the supervision of the physician ref-
primary purpose of assisting in the re- erenced in paragraph (a) of this sec-
habilitation of disabled individuals tion; or
through an integrated program of— (v) For beneficiaries admitted to
(i) Medical evaluation and services; home health immediately after an
and acute or post-acute stay, the attending
(ii) Psychological, social, or voca- acute or post-acute physician.
tional evaluation and services; and (4) The allowed non-physician practi-
(2) Is operated under competent med- tioner, as described in paragraph
ical supervision either— (f)(3)(ii) through (v) of this section, per-

(i) In connection with a hospital; or forming the face-to-face encounter
(ii) As a facility in which all medical must communicate the clinical find-
and related health services are pre- ings of that face-to-face encounter to
334
the ordering physician. Those clinical (a) By a registered nurse or a licensed

findings must be incorporated into a practical nurse;
written or electronic document in- (b) Under the direction of the bene-
cluded in the beneficiary’s medical ficiary’s physician; and
record. (c) To a beneficiary in one or more of
(5) To assure clinical correlation be- the following locations at the option of
tween the face-to-face encounter and the State—
the associated home health services, (1) His or her own home;
the physician responsible for ordering (2) A hospital; or
the services must: (3) A skilled nursing facility.
(i) Document the face-to-face encoun- [52 FR 47934, Dec. 17, 1987]
ter which is related to the primary rea-
son the patient requires home health § 440.90 Clinic services.
services, occurred within the required
Clinic services means preventive, diag-
timeframes prior to the start of home
nostic, therapeutic, rehabilitative, or
health services.
palliative services that are furnished
(ii) Must indicate the practitioner
by a facility that is not part of a hos-
who conducted the encounter, and the
pital but is organized and operated to
date of the encounter.
(6) The face-to-face encounter may provide medical care to outpatients.
occur through telehealth, as imple- The term includes the following serv-
mented by the State. ices furnished to outpatients:
(g)(1) No payment may be made for (a) Services furnished at the clinic by
medical equipment, supplies, or appli- or under the direction of a physician or
ances referenced in paragraph (b)(3) of dentist.
this section to the extent that a face- (b) Services furnished outside the
to-face encounter requirement would clinic, by clinic personnel under the di-
apply as durable medical equipment rection of a physician, to an eligible in-
(DME) under the Medicare program, dividual who does not reside in a per-
unless the physician referenced in manent dwelling or does not have a
paragraph (a)(2) of this section or al- fixed home or mailing address.
lowed non-physician practitioner, as [56 FR 8851, Mar. 1, 1991, as amended at 60 FR
described in paragraph (f)(3)(ii) through 61486, Nov. 30, 1995]
(v) of this section documents a face-to-
face encounter with the beneficiary § 440.100 Dental services.
consistent with the requirements of (a) ‘‘Dental services’’ means diag-
paragraph (f) of this section except as nostic, preventive, or corrective proce-
indicated in paragraph (g)(2) of this dures provided by or under the super-
section. vision of a dentist in the practice of his
(2) The face-to-face encounter may be profession, including treatment of—
performed by any of the practitioners (1) The teeth and associated struc-
described in paragraph (f)(3) of this sec- tures of the oral cavity; and
tion, with the exception of certified (2) Disease, injury, or impairment
nurse-midwives, as described in para- that may affect the oral or general
graph (f)(3)(iii) of this section. health of the beneficiary.
[43 FR 45224, Sept. 29, 1978, as amended at 45 (b) ‘‘Dentist’’ means an individual li-
FR 24888, Apr. 11, 1980; 62 FR 47902, Sept. 11, censed to practice dentistry or dental
1997; 63 FR 310, Jan. 5, 1998; 81 FR 5566, Feb. surgery.
2, 2016]
FR 24888, Apr. 11, 1980]
§ 440.80 Private duty nursing services.
Private duty nursing services means § 440.110 Physical therapy, occupa-
nursing services for beneficiaries who tional therapy, and services for in-
require more individual and continuous dividuals with speech, hearing, and
care than is available from a visiting language disorders.
nurse or routinely provided by the (a) Physical therapy—(1) Physical ther-

nursing staff of the hospital or skilled apy means services prescribed by a
nursing facility. These services are pro- physician or other licensed practi-
vided— tioner of the healing arts within the
335
§ 440.120 42 CFR Ch. IV (10–1–17 Edition)
scope of his or her practice under State censed by the State as an audiologist
law and provided to a beneficiary by or to furnish audiology services.
under the direction of a qualified phys- (ii) In the case of an individual who
ical therapist. It includes any nec- furnishes audiology services in a State
essary supplies and equipment. that does not license audiologists, or
(2) A ‘‘qualified physical therapist’’ is an individual exempted from State li-
an individual who meets personnel censure based on practice in a specific
qualifications for a physical therapist institution or setting, the individual
at § 484.4. must meet one of the following condi-
(b) Occupational therapy—(1) Occupa- tions:
tional therapy means services pre- (A) Have a Certificate of Clinical
scribed by a physician or other licensed Competence in Audiology granted by
practitioner of the healing arts within the American Speech-Language-Hear-
the scope of his or her practice under ing Association.
State law and provided to a beneficiary (B) Have successfully completed a
by or under the direction of a qualified minimum of 350 clock-hours of super-
occupational therapist. It includes any vised clinical practicum (or is in the
necessary supplies and equipment. process of accumulating that super-
(2) A ‘‘qualified occupational thera- vised clinical experience under the su-
pist’’ is an individual who meets per- pervision of a qualified master or doc-
sonnel qualifications for an occupa-
toral-level audiologist); performed at
tional therapist at § 484.4.
least 9 months of full-time audiology
(c) Services for individuals with speech,
services under the supervision of a
hearing, and language disorders—(1)
qualified master or doctoral-level audi-
Services for individuals with speech, hear-
ologist after obtaining a master’s or
ing, and language disorders means diag-
doctoral degree in audiology, or a re-
nostic, screening, preventive, or cor-
lated field; and successfully completed
rective services provided by or under
a national examination in audiology
the direction of a speech pathologist or
approved by the Secretary.
audiologist, for which a patient is re-
ferred by a physician or other licensed [43 FR 45224, Sept. 29, 1978, as amended at 45
practitioner of the healing arts within FR 24888, Apr. 11, 1980; 56 FR 8854, Mar. 1,
the scope of his or her practice under 1991; 60 FR 19861, Apr. 21, 1995; 69 FR 30587,
State law. It includes any necessary May 28, 2004; 77 FR 29031, May 16, 2012]
supplies and equipment. EFFECTIVE DATE NOTE: At 82 FR 4578, Jan.
(2) A ‘‘speech pathologist’’ is an indi- 13, 2017, § 440.110 was amended in paragraphs
vidual who meets one of the following (a)(2) and (b)(2) by removing § 484.4 and add-
conditions: ing in its place § 484.115, effective July 13,
(i) Has a certificate of clinical com- 2017. At 82 FR 31729, July 10, 2017, the effec-
tive date was delayed until Jan. 13, 2018.
petence from the American Speech and
Hearing Association. § 440.120 Prescribed drugs, dentures,
(ii) Has completed the equivalent prosthetic devices, and eyeglasses.
educational requirements and work ex-
perience necessary for the certificate. (a) ‘‘Prescribed drugs’’ means simple
(iii) Has completed the academic pro- or compound substances or mixtures of
gram and is acquiring supervised work substances prescribed for the cure,
experience to qualify for the certifi- mitigation, or prevention of disease, or
cate. for health maintenance that are—
(3) A ‘‘qualified audiologist’’ means (1) Prescribed by a physician or other
an individual with a master’s or doc- licensed practitioner of the healing
toral degree in audiology that main- arts within the scope of this profes-
tains documentation to demonstrate sional practice as defined and limited
that he or she meets one of the fol- by Federal and State law;
lowing conditions: (2) Dispensed by licensed pharmacists
(i) The State in which the individual and licensed authorized practitioners
furnishes audiology services meets or in accordance with the State Medical

exceeds State licensure requirements Practice Act; and
in paragraph (c)(3)(ii)(A) or (c)(3)(ii)(B) (3) Dispensed by the licensed phar-
of this section, and the individual is li- macist or practitioner on a written
336
prescription that is recorded and main- services recommended by a physician

tained in the pharmacist’s or practi- or other licensed practitioner of the
tioner’s records. healing arts, within the scope of his
(b) ‘‘Dentures’’ are artificial struc- practice under State law, for maximum
tures made by or under the direction of reduction of physical or mental dis-
a dentist to replace a full or partial set ability and restoration of a beneficiary
of teeth. to his best possible functional level.
(c) ‘‘Prosthetic devices’’ means re-
placement, corrective, or supportive [43 FR 45224, Sept. 29, 1978, as amended at 78
devices prescribed by a physician or FR 42306, July 15, 2013]
other licensed practitioner of the heal-
ing arts within the scope of his prac- § 440.140 Inpatient hospital services,
nursing facility services, and inter-
tice as defined by State law to—
mediate care facility services for in-
(1) Artificially replace a missing por- dividuals age 65 or older in institu-
tion of the body; tions for mental diseases.
(2) Prevent or correct physical de-
formity or malfunction; or (a) Inpatient hospital services. ‘‘Inpa-
(3) Support a weak or deformed por- tient hospital services for individuals
tion of the body. age 65 or older in institutions for men-
(d) ‘‘Eyeglasses’’ means lenses, in- tal diseases’’ means services provided
cluding frames, and other aids to vision under the direction of a physician for
prescribed by a physician skilled in dis- the care and treatment of beneficiaries
eases of the eye or an optometrist. in an institution for mental diseases
that meets the requirements specified
§ 440.130 Diagnostic, screening, pre- in § 482.60(b), (c), and (e) of this chapter
ventive, and rehabilitative services.
and—
(a) ‘‘Diagnostic services,’’ except as (1) Meets the requirements for utili-
otherwise provided under this subpart, zation review in § 482.30(a), (b), (d), and
includes any medical procedures or (e) of this chapter; or
supplies recommended by a physician (2) Has been granted a waiver of
or other licensed practitioner of the
those utilization review requirements
healing arts, within the scope of his
under section 1903(i)(4) of the Act and
practice under State law, to enable him
to identify the existence, nature, or ex- subpart H of part 456 of this chapter.
tent of illness, injury, or other health (b) Nursing facility services. ‘‘Nursing
deviation in a beneficiary. facility services for individuals age 65
(b) ‘‘Screening services’’ means the or older in institutions for mental dis-
use of standardized tests given under eases’’ means nursing facility services
medical direction in the mass examina- as defined in § 440.40 and in subpart B of
tion of a designated population to depart 483 of this chapter that are pro-
tect the existence of one or more par- vided in institutions for mental dis-
ticular diseases or health deviations or eases, as defined in § 435.1010 of this
to identify for more definitive studies chapter.
individuals suspected of having certain
diseases.
FR 39229, July 12, 2006]
(c) ‘‘Preventive services’’ means serv-
ices recommended by a physician or § 440.150 Intermediate care facility
other licensed practitioner of the heal- (ICF/IID) services.
ing arts acting within the scope of au-
thorized practice under State law to— (a) ‘‘ICF/IID services’’ means those
(1) Prevent disease, disability, and items and services furnished in an in-
other health conditions or their pro- termediate care facility for Individuals
gression; with Intellectual Disabilities if the fol-
(2) Prolong life; and lowing conditions are met:
(3) Promote physical and mental (1) The facility fully meets the re-
health and efficiency. quirements for a State license to pro-

(d) ‘‘Rehabilitative services,’’ except vide services that are above the level of
as otherwise provided under this sub- room and board;
part, includes any medical or remedial
337
§ 440.155 42 CFR Ch. IV (10–1–17 Edition)
(2) The primary purpose of the ICF/ cy and the facility for providing nurs-
IID is to furnish health or rehabilita- ing facility services and making pay-
tive services to persons with Intellec- ments for services under the plan; and
tual Disability or persons with related (b) ‘‘Nursing facility services’’ in-
conditions; clude services—
(3) The ICF/IID meets the standards (1) Considered appropriate by the
specified in subpart I of part 483 of this State and provided by a religious non-
chapter. medical institution as defined in
(4) The beneficiary with Intellectual § 440.170(b); or
Disability for whom payment is re- (2) Provided by a facility located on
quested is receiving active treatment, an Indian reservation that—
as specified in § 483.440 of this chapter. (i) Furnishes, on a regular basis,
(5) The ICF/IID has been certified to health-related services; and
meet the requirements of subpart C of (ii) Is certified by the Secretary to
part 442 of this chapter, as evidenced meet the standards in subpart E of part
by a valid agreement between the Med- 442 of this chapter.
icaid agency and the facility for fur- (c) ‘‘Nursing facility services’’ may
nishing ICF/IID services and making include services provided in a distinct
payments for these services under the part (as defined in § 483.5(b) of this
plan. chapter) of a facility other than a nurs-
(b) ICF/IID services may be furnished ing facility if the distinct part (as de-
in a distinct part of a facility other fined in § 483.5(b) of this chapter)—
than an ICF/IID if the distinct part— (1) Meets all requirements for a nurs-
(1) Meets all requirements for an ICF/ ing facility;
IID, as specified in subpart I of part 483
(2) Is an identifiable unit, such as an
of this chapter;
entire ward or contiguous ward, a
(2) Is clearly an identifiable living
wing, floor, or building;
unit, such as an entire ward, wing,
(3) Consists of all beds and related fa-
floor or building;
(3) Consists of all beds and related cilities in the unit;
services in the unit; (4) Houses all beneficiaries for whom
(4) Houses all beneficiaries for whom payment is being made for nursing fa-
payment is being made for ICF/IID cility services, except as provided in
services; and paragraph (d) of this section;
(5) Is approved in writing by the sur- (5) Is clearly identified; and
vey agency. (6) Is approved in writing by the sur-
vey agency.
[59 FR 56234, Nov. 10, 1994] (d) If a State includes as nursing fa-
§ 440.155 Nursing facility services, cility services those services provided
other than in institutions for men- by a distinct part of a facility other
tal diseases. than a nursing facility, it may not re-
quire transfer of a beneficiary within
(a) ‘‘Nursing facility services, other
or between facilities if, in the opinion
than in an institution for mental dis-
of the attending physician, it might be
eases’’ means services provided in a fa-
harmful to the physical or mental
cility that—
health of the beneficiary.
(1) Fully meets the requirements for
a State license to provide, on a regular (e) Nursing facility services may in-
basis, health-related services to indi- clude services provided in a swing-bed
viduals who do not require hospital hospital that has an approval to fur-
care, but whose mental or physical nish nursing facility services.
condition requires services that— [59 FR 56234, Nov. 10, 1994, as amended at 64
(i) Are above the level of room and FR 67052, Nov. 30, 1999; 68 FR 46071, Aug. 4,
board; and 2003]
(ii) Can be made available only
through institutional facilities; § 440.160 Inpatient psychiatric serv-
ices for individuals under age 21.
(2) Has been certified to meet the re-

quirements of subpart C of part 442 of ‘‘Inpatient psychiatric services for
this chapter as evidenced by a valid individuals under age 21’’ means serv-
agreement between the Medicaid agen- ices that—
338
(a) Are provided under the direction (b) ‘‘Nurse-midwife’’ means a reg-
of a physician; istered professional nurse who meets
(b) Are provided by— the following requirements:
(1) A psychiatric hospital that under- (1) Is currently licensed to practice in
goes a State survey to determine the State as a registered professional
whether the hospital meets the re- nurse.
quirements for participation in Medi- (2) Is legally authorized under State
care as a psychiatric hospital as speci- law or regulations to practice as a
fied in § 482.60 of this chapter, or is ac- nurse-midwife.
(3) Except as provided in paragraph
credited by a national organization
(b)(4) of this section, has completed a
whose psychiatric hospital accrediting
program of study and clinical experi-
program has been approved by CMS; or
ence for nurse-midwives, as specified
a hospital with an inpatient psy- by the State.
chiatric program that undergoes a (4) If the State does not specify a pro-
State survey to determine whether the gram of study and clinical experience
hospital meets the requirements for that nurse-midwives must complete to
participation in Medicare as a hospital, practice in that State, meets one of the
as specified in part 482 of this chapter, following conditions:
or is accredited by a national accred- (i) Is currently certified as a nurse-
iting organization whose hospital ac- midwife by the American College of
crediting program has been approved Nurse-Midwives (ACNM or by the
by CMS. ACNM Certification Council, Inc.
(2) A psychiatric facility which is ac- (ACC).
credited by the Joint Commission on (ii) Has satisfactorily completed a
Accreditation of Healthcare Organiza- formal education program (of at least
tions, the Council on Accreditation of one academic year) that, upon comple-
Services for Families and Children, the tion qualifies the nurse to take the cer-
Commission on Accreditation of Reha- tification examination offered by the
bilitation Facilities, or by any other American College of Nurse-Midwives
accrediting organization, with com- (ACNM) or by the ACNM Certification
parable standards, that is recognized Council, Inc. (ACC).
by the State. (iii) Has successfully completed a for-
(c) Meet the requirements in § 441.151 mal educational program for preparing
of this subchapter. registered nurses to furnish gyneco-
logical and obstetrical care to women
[63 FR 64198, Nov. 19, 1998, as amended at 75 during pregnancy, delivery, and the
FR 50418, Aug. 16, 2010]
postpartum period, and care to normal
newborns, and was practicing as a
§ 440.165 Nurse-midwife service.
nurse-midwife for a total of 12 months
(a) ‘‘Nurse-midwife services’’ means during any 18-month period from Au-
services that— gust 8, 1976 to July 16, 1982.
(1) Are furnished by a nurse-midwife [47 FR 21050, May 17, 1982; 47 FR 23448, May
within the scope of practice authorized 28, 1982, as amended at 55 FR 48611, Nov. 21,
by State law or regulation and, in the 1990; 61 FR 61486, Nov. 30, 1996]
case of inpatient or outpatient hospital
services or clinic services, are fur- § 440.166 Nurse practitioner services.
nished by or under the direction of a (a) Definition of nurse practitioner serv-
nurse-midwife to the extent permitted ices. Nurse practitioner services means
by the facility; and services that are furnished by a reg-
(2) Unless required by State law or istered professional nurse who meets a
regulations or a facility, are reim- State’s advanced educational and clin-
bursed without regard to whether the ical practice requirements, if any, be-
nurse-midwife is under the supervision yond the 2 to 4 years of basic nursing
of, or associated with, a physician or education required of all registered
other health care provider. (See § 441.21 nurses.

of this chapter for provisions on inde- (b) Requirements for certified pediatric
pendent provider agreements for nurse- nurse practitioner. The practitioner
midwives.) must be a registered professional nurse
339
§ 440.167 42 CFR Ch. IV (10–1–17 Edition)
who meets the requirements specified services in accordance with § 441.22(c) of

in either paragraphs (b)(1) or (b)(2) of this subchapter.
this section.
[60 FR 19861, Apr. 21, 1995]
(1) If the State specifies qualifica-
tions for pediatric nurse practitioners, § 440.167 Personal care services.
the practitioner must—
(i) Be currently licensed to practice Unless defined differently by a State
in the State as a registered profes- agency for purposes of a waiver granted
sional nurse; and under part 441, subpart G of this chap-
(ii) Meet the State requirements for ter—
qualification of pediatric nurse practi- (a) Personal care services means serv-
tioners in the State in which he or she ices furnished to an individual who is
furnishes the services. not an inpatient or resident of a hos-
(2) If the State does not specify, by pital, nursing facility, intermediate
specialty, qualifications for pediatric care facility for individuals with intel-
nurse practitioners, but the State does lectual disabilities, or institution for
define qualifications for nurses in ad- mental disease that are—
vanced practice or general nurse prac- (1) Authorized for the individual by a
titioners, the practitioner must—
physician in accordance with a plan of
(i) Meet qualifications for nurses in
treatment or (at the option of the
advanced practice or general nurse
practitioners as defined by the State; State) otherwise authorized for the in-
and dividual in accordance with a service
(ii) Have a pediatric nurse practice plan approved by the State;
limited to providing primary health (2) Provided by an individual who is
care to persons less than 21 years of qualified to provide such services and
age. who is not a member of the individual’s
(c) Requirements for certified family family; and
nurse practitioner. The practitioner (3) Furnished in a home, and at the
must be a registered professional nurse State’s option, in another location.
who meets the requirements specified (b) For purposes of this section, fam-
in either paragraph (c)(1) or (c)(2) of ily member means a legally responsible
this section. relative.
(1) If the State specifies qualifica-
tions for family nurse practitioners, [42 FR 47902, Sept. 11, 1997]
the practitioner must—
(i) Be currently licensed to practice § 440.168 Primary care case manage-
ment services.
in the State as a registered profes-
sional nurse; and (a) Primary care case management
(ii) Meet the State requirements for services means case management re-
qualification of family nurse practi- lated services that—
tioners in the State in which he or she (1) Include location, coordination,
furnishes the services. and monitoring of primary health care
(2) If the State does not specify, by services; and
specialty, qualifications for family (2) Are provided under a contract be-
nurse practitioners, but the State does tween the State and either of the fol-
define qualifications for nurses in ad- lowing:
vanced practice or general nurse prac-
(i) A PCCM who is a physician or
titioners, the practitioner must—
may, at State option, be a physician
(i) Meet qualifications for nurses in
advanced practice or general nurse assistant, nurse practitioner, or cer-
practitioners as defined by the State; tified nurse-midwife.
and (ii) A physician group practice, or an
(ii) Have a family nurse practice lim- entity that employs or arranges with
ited to providing primary health care physicians to furnish the services.
(b) Primary care case management
to individuals and families.

(d) Payment for nurse practitioner serv- services may be offered by the State—
ices. The Medicaid agency must reim- (1) As a voluntary option under the
burse nurse practitioners for their State plan; or
340
(2) On a mandatory basis under sec- individual (or the individual’s author-
tion 1932 (a)(1) of the Act or under sec- ized health care decision maker) and
tion 1915(b) or section 1115 waiver au- others to develop those goals.
thority. (iii) Identifies a course of action to
[67 FR 41115, June 14, 2002] respond to the assessed needs of the eli-
gible individual.
§ 440.169 Case management services. (3) Referral and related activities
(a) Case management services means (such as scheduling appointments for
services furnished to assist individuals, the individual) to help the eligible indi-
eligible under the State plan who re- vidual obtain needed services, includ-
side in a community setting or are ing activities that help link the indi-
transitioning to a community setting, vidual with medical, social, and edu-
in gaining access to needed medical, cational providers or other programs
social, educational, and other services, and services that are capable of pro-
in accordance with § 441.18 of this chap- viding needed services to address iden-
ter. tified needs and achieve goals specified
(b) Targeted case management services
in the care plan.
means case management services fur-
nished without regard to the require- (4) Monitoring and follow-up activi-
ments of § 431.50(b) of this chapter (re- ties, including activities and contacts
lated to statewide provision of serv- that are necessary to ensure that the
ices) and § 440.240 (related to com- care plan is effectively implemented
parability). Targeted case management and adequately addresses the needs of
services may be offered to individuals the eligible individual and which may
in any defined location of the State or be with the individual, family mem-
to individuals within targeted groups bers, service providers, or other enti-
specified in the State plan. ties or individuals and conducted as
(c) [Reserved] frequently as necessary, and including
(d) The assistance that case man- at least one annual monitoring, to help
agers provide in assisting eligible indi- determine whether the following condi-
viduals obtain services includes— tions are met:
(1) Comprehensive assessment and (i) Services are being furnished in ac-
periodic reassessment of individual cordance with the individual’s care
needs, to determine the need for any
plan.
medical, educational, social, or other
services. These assessment activities (ii) Services in the care plan are ade-
include the following: quate.
(i) Taking client history. (iii) There are changes in the needs
(ii) Identifying the needs of the indi- or status of the eligible individual.
vidual, and completing related docu- Monitoring and follow-up activities in-
mentation. clude making necessary adjustments in
(iii) Gathering information from the care plan and service arrangements
other sources, such as family members, with providers.
medical providers, social workers, and (e) Case management may include
educators (if necessary) to form a com- contacts with non-eligible individuals
plete assessment of the eligible indi- that are directly related to the identi-
vidual. fication of the eligible individual’s
(2) Development (and periodic revi- needs and care, for the purposes of
sion) of a specific care plan based on helping the eligible individual access
the information collected through the services, identifying needs and sup-
assessment, that includes the fol- ports to assist the eligible individual in
lowing: obtaining services, providing case man-
(i) Specifies the goals and actions to
agers with useful feedback, and alert-
address the medical, social, edu-
ing case managers to changes in the el-
cational, and other services needed by
igible individual’s needs.
the eligible individual.

(ii) Includes activities such as ensur- [72 FR 68091, Dec. 4, 2007, as amended at 74
ing the active participation of the eli- FR 31196, June 30, 2009]
gible individual and working with the
341
§ 440.170 42 CFR Ch. IV (10–1–17 Edition)
§ 440.170 Any other medical care or re- 45 CFR 75.326 through 75.340 and is
medial care recognized under State based on the State’s evaluation of the
law and specified by the Secretary. broker’s experience, performance, ref-
(a) Transportation. (1) ‘‘Transpor- erences, resources, qualifications, and
tation’’ includes expenses for transpor- costs.
tation and other related travel ex- (B) Has oversight procedures to mon-
penses determined to be necessary by itor beneficiary access and complaints
the agency to secure medical examina- and ensure that transportation is time-
tions and treatment for a beneficiary. ly and that transport personnel are li-
(2) Except as provided in paragraph censed, qualified, competent, and cour-
(a)(4), transportation, as defined in this teous.
section, is furnished only by a provider (C) Is subject to regular auditing and
to whom a direct vendor payment can oversight by the State in order to en-
appropriately be made by the agency. sure the quality and timeliness of the
(3) ‘‘Travel expenses’’ include— transportation services provided and
(i) The cost of transportation for the the adequacy of beneficiary access to
beneficiary by ambulance, taxicab, medical care and services.
common carrier, or other appropriate (D) Is subject to a written contract
means; that imposes the requirements related
(ii) The cost of meals and lodging en to prohibitions on referrals and con-
route to and from medical care, and flicts of interest described at
while receiving medical care; and § 440.170(a)(4)(ii), and provides for the
(iii) The cost of an attendant to ac- broker to be liable for the full cost of
company the beneficiary, if necessary, services resulting from a prohibited re-
and the cost of the attendant’s trans- ferral or subcontract.
portation, meals, lodging, and, if the (ii) Federal financial participation is
attendant is not a member of the bene- available at the medical assistance
ficiary’s family, salary. rate for the cost of a written brokerage
(4) Non-emergency medical transpor- contract that:
tation brokerage program. At the op- (A) Except as provided in paragraph
tion of the State, and notwithstanding (a)(4)(ii)(B) of this section, prohibits
§ 431.50 (statewide operation) and the broker (including contractors, own-
§ 431.51 (freedom of choice of providers) ers, investors, Boards of Directors, cor-
of this chapter and § 440.240 (com- porate officers, and employees) from
parability of services for groups), a providing non-emergency medical
State plan may provide for the estab- transportation services or making a re-
lishment of a non-emergency medical ferral or subcontracting to a transpor-
transportation brokerage program in tation service provider if:
order to more cost-effectively provide (1) The broker has a financial rela-
non-emergency medical transportation tionship with the transportation pro-
services for individuals eligible for vider as defined at § 411.354(a) of this
medical assistance under the State chapter with ‘‘transportation broker’’
plan who need access to medical care substituted for ‘‘physician’’ and ‘‘non-
or services, and have no other means of emergency transportation’’ substituted
transportation. These transportation for ‘‘DHS’’; or
services include wheelchair vans, taxis, (2) The broker has an immediate fam-
stretcher cars, bus passes and tickets, ily member, as defined at § 411.351 of
secured transportation containing an this chapter, that has a direct or indi-
occupant protection system that ad- rect financial relationship with the
dresses safety needs of disabled or spe- transportation provider, with the term
cial needs individuals, and other forms ‘‘transportation broker’’ substituted
of transportation otherwise covered for ‘‘physician.’’
under the state plan. (B) Exceptions: The prohibitions de-
(i) Non-emergency medical transpor- scribed at clause (A) of this paragraph
tation services may be provided under do not apply if there is documentation
contract with individuals or entities to support the following:

that meet the following requirements: (1) Transportation is provided in a
(A) Is selected through a competitive rural area, as defined at § 412.62(f), and
bidding process that is consistent with there is no other available Medicaid
342
participating provider or other pro- (D) In referring or subcontracting for

vider determined by the State to be non-emergency medical transportation
qualified except the non-governmental with transportation providers, a broker
broker. may not withhold necessary non-emer-
(2) Transportation is so specialized gency medical transportation from a
that there is no other available Med- Medicaid beneficiary or provide non-
icaid participating provider or other emergency medical transportation that
provider determined by the State to be is not the most appropriate and a cost-
qualified except the non-governmental effective means of transportation for
broker. that beneficiary for the purpose of fi-
(3) Except for the non-governmental nancial gain, or for any other purpose.
broker, the availability of other Med- (b) Services furnished in a religious
icaid participating providers or other nonmedical health care institution. Serv-
providers determined by the State to ices furnished in a religious nonmed-
be qualified is insufficient to meet the ical health care institution are services
need for transportation. furnished in an institution that:
(4) The broker is a government entity (1) Is an institution that is described
and the individual service is provided in (c)(3) of section 501 of the Internal
by the broker, or is referred to or sub- Revenue Code of 1986 and is exempt
contracted with another government- from taxes under section 501(a) of that
owned or operated transportation pro- section.
vider generally available in the com-
(2) Is lawfully operated under all ap-
munity, if the following conditions are
plicable Federal, State, and local laws
met:
and regulations.
(i) The contract with the broker pro-
vides for payment that does not exceed (3) Furnishes only nonmedical nurs-
the actual costs calculated as though ing items and services to patients who
the broker were a distinct unit, and ex- choose to rely solely upon a religious
cludes from these payments any per- method of healing and for whom the
sonnel or other costs shared with or al- acceptance of medical health services
located from parent or related entities; would be inconsistent with their reli-
and the governmental broker main- gious beliefs.
tains an accounting system such that (4) Furnishes nonmedical items and
all funds allocated to the Medicaid bro- services exclusively through nonmed-
kerage program and all costs charged ical nursing personnel who are experi-
to the brokerage program will be com- enced in caring for the physical needs
pletely separate from any other proof nonmedical patients.
gram; (5) Furnishes these nonmedical items
(ii) The broker documents that, with and services to inpatients on a 24-hour
respect to the individual’s specific basis.
transportation needs, the government (6) Does not furnish, on the basis of
provider is the most appropriate and its religious beliefs, through its per-
lowest cost alternative; and sonnel or otherwise, medical items and
(iii) The broker documents that the services (including any medical screen-
Medicaid program is paying no more ing, examination, diagnosis, prognosis,
for fixed route public transportation treatment, or the administration of
than the rate charged to the general drugs) for its patients.
public and no more for public para- (7) Is not owned by, is not under com-
transit services than the rate charged mon ownership with, or does not have
to other State human services agencies an ownership interest of 5 percent or
for comparable services. more in, a provider of medical treat-
(C) Transportation providers may not ment or services and is not affiliated
offer or make any payment or other with a provider of medical treatment
form of remuneration, including any or services or with an individual who
kickback, rebate, cash, gifts, or service has an ownership interest or 5 percent
in kind to the broker in order to influ- or more in a provider of medical treat-

ence referrals or subcontracting for ment or services. Permissible affili-
non-emergency medical transportation ations are described in paragraph (c) of
provided to a Medicaid beneficiary. this section.
343
§ 440.180 42 CFR Ch. IV (10–1–17 Edition)
(8) Has in effect a utilization review (e) Emergency hospital services.

plan that meets the following criteria: ‘‘Emergency hospital services’’ means
(i) Provides for the review of admis- services that—
sions to the institution, duration of (1) Are necessary to prevent the
stays, cases of continuous extended du- death or serious impairment of the
ration, and items and services fur- health of a beneficiary; and
nished by the institution. (2) Because of the threat to the life or
(ii) Requires that the reviews be health of the beneficiary necessitate
made by a committee of the institution the use of the most accessible hospital
that included the individuals respon- available that is equipped to furnish
sible for overall administration and for the services, even if the hospital does
supervision of nursing personnel at the not currently meet—
institution. (i) The conditions for participation
(iii) Provides that records be main- under Medicare; or
tained of the meetings, decisions, and (ii) The definitions of inpatient or
actions of the utilization review com- outpatient hospital services under
mittee. §§ 440.10 and 440.20.
(iv) Meets other requirements as (f) [Reserved]
CMS finds necessary to establish an ef- (g) Critical access hospital (CAH). (1)
fective utilization review plan. CAH services means services that (i)
(9) Provides information CMS may are furnished by a provider that meet
require to implement section 1821 of the requirements for participation in
the Act, including information relating Medicare as a CAH (see subpart F of
to quality of care and coverage deter- part 485 of this chapter), and (ii) are of
minations. a type that would be paid for by Medi-
(10) Meets other requirements as care when furnished to a Medicare ben-
CMS finds necessary in the interest of eficiary.
the health and safety of patients who (2) Inpatient CAH services do not in-
receive services in the institution. clude nursing facility services fur-
These requirements are the conditions nished by a CAH with a swing-bed ap-
of participation found at part 403, sub- proval.
part G of this chapter. [43 FR 45224, Sept. 29, 1978, as amended at 45
(c) Affiliations. An affiliation is per- FR 24889, Apr. 11, 1980; 46 FR 48540, Oct. 1,
missible for purposes of paragraph 1981; 58 FR 30671, May 26, 1993; 62 FR 46037,
(b)(7) of this section if it is between one Aug. 29, 1997; 64 FR 67051, Nov. 30, 1999; 72 FR
73651, Dec. 28, 2007; 73 FR 77530, Dec. 19, 2008;
of the following: 74 FR 31196, June 30, 2009; 81 FR 3011, Jan. 20,
(1) An individual serving as an un- 2016]
compensated director, trustee, officer,
or other member of the governing body § 440.180 Home and community-based
of an RNHCI and a provider of medical waiver services.
treatment or services. (a) Description and requirements for
(2) An individual who is a director, services. ‘‘Home or community-based
trustee, officer, employee, or staff services’’ means services, not otherwise
member of an RNHCI and an another furnished under the State’s Medicaid
individual, with whom he or she has a plan, that are furnished under a waiver
family relationship, who is affiliated granted under the provisions of part
with (or has an ownership interest in) a 441, subpart G of this chapter.
provider of medical treatment or serv- (1) These services may consist of any
ices. or all of the services listed in para-
(3) The RNHCI and an individual or graph (b) of this section, as those serv-
entity furnishing goods or services as a ices are defined by the agency and ap-
vendor to both providers of medical proved by CMS.
treatment or services and RNHCIs. (2) The services must meet the stand-
(d) Skilled nursing facility services for ards specified in § 441.302(a) of this
individuals under age 21. ‘‘Skilled nurs- chapter concerning health and welfare
ing facility services for individuals assurances.

under 21’’ means those services speci- (3) The services are subject to the
fied in § 440.40 that are provided to limits on FFP described in § 441.310 of
beneficiaries under 21 years of age. this chapter.
344
(b) Included services. Home or commu- (D) The services are reflected in a
nity-based services may include the plan of care directed to habilitative
following services, as they are defined rather than explicit employment objec-
by the agency and approved by CMS: tives.
(1) Case management services. (ii) Educational services, which
(2) Homemaker services. means special education and related
(3) Home health aide services. services (as defined in sections 602(16)
(4) Personal care services. and (17) of the Education of the Handi-
(5) Adult day health services. capped Act) (20 U.S.C. 1401 (16 and 17))
(6) Habilitation services. to the extent they are not prohibited
(7) Respite care services. under paragraph (c)(3)(i) of this sec-
(8) Day treatment or other partial tion.
hospitalization services, psychosocial (iii) Supported employment services,
rehabilitation services and clinic serv- which facilitate paid employment, that
ices (whether or not furnished in a fa- are—
cility) for individuals with chronic (A) Provided to persons for whom
mental illness, subject to the condi- competitive employment at or above
tions specified in paragraph (d) of this the minimum wage is unlikely and
section. who, because of their disabilities, need
(9) Other services requested by the intensive ongoing support to perform
agency and approved by CMS as cost in a work setting;
effective and necessary to avoid insti- (B) Conducted in a variety of set-
tutionalization. tings, particularly worksites in which
(c) Expanded habilitation services, ef- persons without disabilities are em-
fective October 1, 1997—(1) General rule. ployed; and
Expanded habilitation services are (C) Defined as any combination of
those services specified in paragraph special supervisory services, training,
(c)(2) of this section. transportation, and adaptive equip-
(2) Services included. The agency may ment that the State demonstrates are
include as expanded habilitation serv- essential for persons to engage in paid
ices the following services: employment and that are not normally
(i) Prevocational services, which required for nondisabled persons en-
means services that prepare an indi- gaged in competitive employment.
vidual for paid or unpaid employment (3) Services not included. The following
and that are not job-task oriented but services may not be included as habili-
are, instead, aimed at a generalized re- tation services:
sult. These services may include, for (i) Special education and related
example, teaching an individual such services (as defined in sections 602(16)
concepts as compliance, attendance, and (17) of the Education of the Handi-
task completion, problem solving and capped Act) (20 U.S.C. 1401 (16) and (17))
safety. Prevocational services are dis- that are otherwise available to the in-
tinguishable from noncovered voca- dividual through a local educational
tional services by the following cri- agency.
teria: (ii) Vocational rehabilitation serv-
(A) The services are provided to per- ices that are otherwise available to the
sons who are not expected to be able to individual through a program funded
join the general work force or partici- under section 110 of the Rehabilitation
pate in a transitional sheltered work- Act of 1973 (29 U.S.C. 730).
shop within one year (excluding sup- (d) Services for the chronically mentally
ported employment programs). ill—(1) Services included. Services listed
(B) If the beneficiaries are com- in paragraph (b)(8) of this section in-
pensated, they are compensated at less clude those provided to individuals who
than 50 percent of the minimum wage; have been diagnosed as being chron-
(C) The services include activities ically mentally ill, for which the agen-
which are not primarily directed at cy has requested approval as part of ei-
teaching specific job skills but at un- ther a new waiver request or a renewal
derlying habilitative goals (for exam- and which have been approved by CMS
ple, attention span, motor skills); and on or after October 21, 1986.
345
§ 440.181 42 CFR Ch. IV (10–1–17 Edition)
(2) Services not included. Any home § 440.182 State plan home and commu-
and community-based service, includ- nity-based services.
ing those indicated in paragraph (b)(8) (a) Definition. State plan home and
of this section, may not be included in community-based services (HCBS) ben-
home and community-based service efit means the services listed in para-
waivers for the following individuals: graph (c) of this section when provided
(i) For individuals aged 22 through 64 under the State’s plan (rather than
who, absent the waiver, would be insti- through an HCBS waiver program) for
tutionalized in an institution for men- individuals described in paragraph (b)
tal diseases (IMD); and, therefore, sub- of this section.
ject to the limitation on IMDs speci- (b) State plan HCBS coverage. State
fied in § 435.1009(a)(2) of this chapter. plan HCBS can be made available to in-
(ii) For individuals, not meeting the dividuals who—
age requirements described in para- (1) Are eligible under the State plan
graph (d)(2)(i) of this section, who, ab- and have income, calculated using the
sent the waiver, would be placed in an
otherwise applicable rules, including
IMD in those States that have not
any less restrictive income disregards
opted to include the benefits defined in
used by the State for that group under
§ 440.140 or § 440.160.
section 1902(r)(2) of the Act, that does
[59 FR 37716, July 25, 1994, as amended at 65 not exceed 150 percent of the Federal
FR 60107, Oct. 10, 2000; 71 FR 39229, July 12, Poverty Line (FPL); and
2006] (2) In addition to the individuals de-
scribed in paragraph (b)(1) of this sec-
§ 440.181 Home and community-based
services for individuals age 65 or tion, to individuals based on the
older. State’s election of the eligibility
groups described in § 435.219(b) or
(a) Description of services— Home and
§ 436.219(b) of this chapter.
community-based services for individ-
(c) Services. The State plan HCBS
uals age 65 or older means services, not
benefit consists of one or more of the
otherwise furnished under the State’s
following services:
Medicaid plan, or services already fur-
(1) Case management services.
nished under the State’s Medicaid plan
(2) Homemaker services.
but in expanded amount, duration, or (3) Home health aide services.
scope, which are furnished to individ- (4) Personal care services.
uals age 65 or older under a waiver (5) Adult day health services.
granted under the provisions of part (6) Habilitation services, which in-
441, subpart H of this subchapter. Ex- clude expanded habilitation services as
cept as provided in § 441.310, the serv- specified in § 440.180(c).
ices may consist of any of the services (7) Respite care services.
listed in paragraph (b) of this section (8) Subject to the conditions in
that are requested by the State, ap- § 440.180(d)(2), for individuals with
proved by CMS, and furnished to eligi- chronic mental illness:
ble beneficiaries. Service definitions (i) Day treatment or other partial
for each service in paragraph (b) of this hospitalization services;
section must be approved by CMS. (ii) Psychosocial rehabilitation serv-
(b) Included services. (1) Case manage- ices;
ment services. (iii) Clinic services (whether or not
(2) Homemaker services. furnished in a facility).
(3) Home health aide services. (9) Other services requested by the
(4) Personal care services. agency and approved by the Secretary
(5) Adult day health services. as consistent with the purpose of the
(6) Respite care services. benefit.
(7) Other medical and social services (d) Exclusion. FFP is not available for
requested by the Medicaid agency and the cost of room and board in State
approved by CMS, which will con- plan HCBS. The following HCBS costs
tribute to the health and well-being of
are not considered room or board for

individuals and their ability to reside purposes of this exclusion:
in a community-based care setting. (1) The cost of temporary food and
[57 FR 29156, June 30, 1992] shelter provided as an integral part of
346
respite care services in a facility ap- ICF/IID or other institution as defined

proved by the State. in § 435.1010 of this chapter.
(2) Meals provided as an integral [59 FR 37717, July 25, 1994, as amended at 71
component of a program of adult day FR 39229, July 12, 2006]
health services or another service and
consistent with standard procedures in
the State for such a program.
Subpart B—Requirements and
(3) A portion of the rent and food
Limits Applicable to All Services
costs that may be reasonably attrib- § 440.200 Basis, purpose, and scope.
uted to an unrelated caregiver pro-
viding State plan HCBS who is residing (a) This subpart implements the fol-
in the same household with the recipi- lowing statutory requirements—
(1) Section 1902(a)(10), regarding com-
ent, but not if the recipient is living in
parability of services for groups of
the home of the caregiver or in a resi-
beneficiaries, and the amount, dura-
dence that is owned or leased by the
tion, and scope of services described in
caregiver.
section 1905(a) of the Act that the
[79 FR 3029, Jan. 16, 2014] State plan must provide for bene-
ficiaries;
§ 440.185 Respiratory care for venti- (2) Section 1902(a)(22)(D), which pro-
lator-dependent individuals. vides for standards and methods to as-
(a) ‘‘Respiratory care for ventilator- sure quality of services;
dependent individuals’’ means services (3) Section 1903(v)(1), which provides
that are not otherwise available under that no payment may be made to a
the State’s Medicaid plan, provided on State under this section for medical as-
a part-time basis in the beneficiary’s sistance furnished to an alien who is
home by a respiratory therapist or not lawfully admitted for permanent
other health care professional trained residence or otherwise permanently re-
in respiratory therapy (as determined siding in the United States under color
by the State) to an individual who— of law;
(1) Is medically dependent on a venti- (4) Section 1903(v)(2) which provides
lator for life support at least 6 hours that FFP will be available for services
per day; necessary to treat an emergency med-
(2) Has been so dependent for at least ical condition of an alien not described
30 consecutive days (or the maximum in paragraph (a)(3) of this section if
number of days authorized under the that alien otherwise meets the eligi-
State plan, whichever is less) as an in- bility requirements of the State plan;
patient in one or more hospitals, NFs, (5) Section 1907 on observance of reli-
or ICFs/IID; gious beliefs;
(3) Except for the availability of res- (6) Section 1915 on exceptions to sec-
piratory care services, would require tion 1902(a)(10) and waivers of other re-
respiratory care as an inpatient in a quirements of section 1902 of the Act;
hospital, NF, or ICF/IID and would be and
eligible to have payment made for in- (7) Sections 245A(h), 210 and 210A of
patient care under the State plan; the Immigration and Nationality Act
(4) Has adequate social support serv- which provide that certain aliens who
ices to be cared for at home; are legalized may be eligible for Med-
(5) Wishes to be cared for at home; icaid.
and (b) The requirements and limits of
(6) Receives services under the direc- this subpart apply for all services de-
tion of a physician who is familiar with fined in subpart A of this part.
the technical and medical components [55 FR 36822, Sept. 7, 1990]
of home ventilator support, and who
has medically determined that in-home § 440.210 Required services for the cat-
care is safe and feasible for the indi- egorically needy.
vidual. (a) A State plan must specify that, at

(b) For purposes of paragraphs (a)(4) a minimum, categorically needy bene-
and (5) of this section, a beneficiary’s ficiaries are furnished the following
home does not include a hospital, NF, services:
347
§ 440.220 42 CFR Ch. IV (10–1–17 Edition)
(1) The services defined in §§ 440.10 (2) Ambulatory services, as defined in

through 440.50, 440.70, and (to the ex- the State plan, for:
tent nurse-midwives and nurse practi- (i) Individuals under age 18; and
tioners are authorized to practice (ii) Groups of individuals entitled to
under State law or regulation) the institutional services.
services defined in §§ 440.165 and 440.166, (3) Home health services (§ 440.70) to
respectively. any individual entitled to skilled nurs-
(2) Pregnancy-related services and ing facility services.
services for other conditions that (4) If the State plan includes services
might complicate the pregnancy. in an institution for mental diseases
(i) Pregnancy-related services are (§ 440.140 or § 440.160) or in an inter-
those services that are necessary for mediate care facility for Individuals
the health of the pregnant woman and with Intellectual Disabilities
fetus, or that have become necessary as (§ 440.150(c)) for any group of medically
a result of the woman having been needy, either of the following sets of
pregnant. These include, but are not services to each of the medically needy
limited to, prenatal care, delivery, groups:
postpartum care, and family planning (i) The services contained in §§ 440.10
services. through 440.50 and (to the extent nurse-
(ii) Services for other conditions that midwives are authorized to practice
might complicate the pregnancy in- under State law or regulation) § 440.165;
clude those for diagnoses, illnesses, or or
medical conditions which might (ii) The services contained in any
threaten the carrying of the fetus to seven of the sections in §§ 440.10
full term or the safe delivery of the through 440.165.
fetus; and (5) For women who, while pregnant,
(3) For women who, while pregnant, applied for, were eligible as medically
applied for, were eligible for, and re- needy for, and received Medicaid serv-
ceived Medicaid services under the ices under the plan, services under the
plan, all services under the plan that plan that are pregnancy-related (as de-
are pregnancy-related for an extended fined in § 440.210(a)(2)(i) of this subpart)
postpartum period. The postpartum pe- for an extended postpartum period. The
riod begins on the last day of preg- postpartum period begins on the last
nancy and extends through the end of day of pregnancy and extends through
the month in which the 60-day period the end of the month in which the 60-
following termination of pregnancy day period following termination of
ends. pregnancy ends.
(b) A State plan must specify that el- (b) A State plan must specify that el-
igible aliens as defined in §§ 435.406(a) igible aliens as defined in §§ 435.406(a)
and 436.406(a) of this subchapter will re- and 436.406(a) of this subchapter will re-
ceive at least the services provided in ceive at least the services provided in
paragraph (a) of this section. paragraphs (a)(4) (i) and (ii) of this sec-
(c) A State plan must specify that tion.
aliens not defined in §§ 435.406(a) and (c) A State plan must specify that
436.406(a) of this subchapter will only aliens defined in §§ 435.406(b), 435.406(c),
be provided the limited services speci- 436.406(b) and 436.406(c) of this sub-
fied in § 440.255. chapter will only be provided the lim-
ited services specified in § 440.255.
FR 19862, Apr. 21, 1995] [56 FR 24011, May 28, 1991, as amended at 58
FR 4938, Jan. 19, 1993]
§ 440.220 Required services for the
medically needy. § 440.225 Optional services.
(a) A State plan that includes the Any of the services defined in subpart
medically needy must specify that the A of this part that are not required
under §§ 440.210 and 440.220 may be fur-
medically needy are provided, as a

minimum, the following services: nished under the State plan at the
State’s option.
(1) Prenatal care and delivery serv-
ices for pregnant women. [60 FR 19862, Apr. 21, 1995]
348
§ 440.230 Sufficiency of amount, dura- (d) If covered under the plan, services
tion, and scope. to beneficiaries in institutions for
(a) The plan must specify the mental diseases (§ 440.140) must be lim-
amount, duration, and scope of each ited to those age 65 or older.
service that it provides for— (e) If covered under the plan, inpa-
(1) The categorically needy; and tient psychiatric services (§ 440.160)
must be limited to beneficiaries under
(2) Each covered group of medically
age 22 as specified in § 441.151(c) of this
needy.
subchapter.
(b) Each service must be sufficient in
(f) If Medicare benefits under Part B
amount, duration, and scope to reason-
of title XVIII are made available to
ably achieve its purpose.
beneficiaries through a buy-in agree-
(c) The Medicaid agency may not ar- ment or payment of premiums, or part
bitrarily deny or reduce the amount, or all of the deductibles, cost sharing
duration, or scope of a required service or similar charges, they may be limited
under §§ 440.210 and 440.220 to an other- to beneficiaries who are covered by the
wise eligible beneficiary solely because agreement or payment.
of the diagnosis, type of illness, or con- (g) If services in addition to those of-
dition. fered under the plan are made available
(d) The agency may place appropriate under a contract between the agency or
limits on a service based on such cri- political subdivision and an organiza-
teria as medical necessity or on utili- tion providing comprehensive health
zation control procedures. services, those additional services may
[46 FR 47993, Sept. 30, 1981] be limited to beneficiaries who reside
in the geographic area served by the
§ 440.240 Comparability of services for contracting organization and who elect
groups. to receive services from it.
Except as limited in § 440.250— (h) Ambulatory services for the medi-
(a) The plan must provide that the cally needy (§ 440.220(a)(2)) may be lim-
services available to any categorically ited to:
needy beneficiary under the plan are (1) Individuals under age 18; and
not less in amount, duration, and scope (2) Groups of individuals entitled to
than those services available to a institutional services.
medically needy beneficiary; and (i) Services provided under an excep-
(b) The plan must provide that the tion to requirements allowed under
services available to any individual in § 431.54 may be limited as provided
the following groups are equal in under that exception.
amount, duration, and scope for all (j) If CMS has approved a waiver of
beneficiaries within the group: Medicaid requirements under § 431.55,
(1) The categorically needy. services may be limited as provided by
(2) A covered medically needy group. the waiver.
(k) If the agency has been granted a
[46 FR 47993, Sept. 30, 1981] waiver of the requirements of § 440.240
(Comparability of services) in order to
§ 440.250 Limits on comparability of provide for home or community-based
services. services under § 440.180 or § 440.181, the
(a) Skilled nursing facility services services provided under the waiver
(§ 440.40(a)) may be limited to bene- need not be comparable for all individ-
ficiaries age 21 or older. uals within a group.
(b) Early and periodic screening, di- (l) If the agency imposes cost sharing
agnosis, and treatment (§ 440.40(b)) on beneficiaries in accordance with
must be limited to beneficiaries under 447.53, the imposition of cost sharing
age 21. on an individual who is not exempted
(c) Family planning services and sup- by one of the conditions in section
plies must be limited to beneficiaries 447.53(b) shall not require the State to
of childbearing age, including minors impose copayments on an individual

who can be considered sexually active who is eligible for such exemption.
and who desire the services and sup- (m) Eligible legalized aliens who are
plies. not in the exempt groups described in
349
§ 440.255 42 CFR Ch. IV (10–1–17 Edition)
§§ 435.406(a) and 436.406(a), and consid- (2) Targeted groups specified by the
ered categorically needy or medically State.
needy must be furnished only emer- [43 FR 45224, Sept. 29, 1978, as amended at 45
gency services (as defined in § 440.255), FR 24889, Apr. 11, 1980; 46 FR 48541, Oct. 1,
and services for pregnant women as de- 1981; 48 FR 5735, Jan. 8, 1983; 51 FR 22041,
fined in section 1916(a)(2)(B) of the So- June 17, 1986; 55 FR 36822, Sept. 7, 1990; 56 FR
cial Security Act for 5 years from the 24011, May 28, 1991; 57 FR 29156, June 30, 1992;
58 FR 4939, Jan. 19, 1993; 59 FR 37717, July 25,
date the alien is granted lawful tem-
1994; 72 FR 68092, Dec. 4, 2007]
porary resident status.
(n) Aliens who are not lawful perma- § 440.255 Limited services available to
nent residents, permanently residing in certain aliens.
the United States under color of law, (a) FFP for services. FFP is available
or granted lawful status under section for services provided to aliens de-
245A, 210 or 210A of the Immigration scribed in this section which are nec-
and Nationality Act, who, otherwise essary to treat an emergency medical
meet the eligibility requirements of condition as defined in paragraphs
the State plan (except for receipt of (b)(1) and (c) or services for pregnant
AFDC, SSI or a State Supplementary women described in paragraph (b)(2).
payment) must be furnished only those (b) Legalized aliens eligible only for
services necessary to treat an emer- emergency services and services for preg-
gency medical condition of the alien as nant women. Aliens granted lawful tem-
defined in § 440.255(c). porary resident status, or lawful per-
(o) If the agency makes respiratory manent resident status under sections
care services available under § 440.185, 245A, 210 or 210A of the Immigration
the services need not be made available and Nationality Act, who are not in
in equal amount, duration, and scope one of the exempt groups described in
to any individual not eligible for cov- §§ 435.406(a)(3) and 436.406(a)(3) and who
erage under that section. However, the meet all other requirements for Med-
icaid will be eligible for the following
services must be made available in
services—
equal amount, duration, and scope to
(1) Emergency services required after
all individuals eligible for coverage
the sudden onset of a medical condition
under that section. manifesting itself by acute symptoms
(p) A State may provide a greater of sufficient severity (including severe
amount, duration, or scope of services pain) such that the absence of imme-
to pregnant women than it provides diate medical attention could reason-
under its plan to other individuals who ably be expected to result in:
are eligible for Medicaid, under the fol- (i) Placing the patient’s health in se-
lowing conditions: rious jeopardy;
(1) These services must be pregnancy- (ii) Serious impairment to bodily
related or related to any other condi- functions; or
tion which may complicate pregnancy, (iii) Serious dysfunction of any bod-
as defined in § 440.210(a)(2) of this sub- ily organ or part.
part; and (2) Services for pregnant women
(2) These services must be provided in which are included in the approved
equal amount, duration, and scope to State plan. These services include rou-
all pregnant women covered under the tine prenatal care, labor and delivery,
State plan. and routine post-partum care. States,
(q) [Reserved] at their option, may provide additional
plan services for the treatment of con-
(r) If specified in the plan, targeted
ditions which may complicate the
case management services may be lim-
pregnancy or delivery.
ited to the following:
(c) Effective January 1, 1987, aliens
(1) Certain geographic areas within a who are not lawfully admitted for per-
State, without regard to the statewide
manent residence in the United States

requirements in § 431.50 of this chapter. or permanently residing in the United
States under the color of law must re-
ceive the services necessary to treat
350
the condition defined in paragraph (1) icaid unless he undergoes the examina-
of this section if— tion.
(1) The alien has, after sudden onset,
a medical condition (including emer- Subpart C—Benchmark Benefit
gency labor and delivery) manifesting
itself by acute symptoms of sufficient
and Benchmark-Equivalent
severity (including severe pain) such Coverage
that the absence of immediate medical
attention could reasonably be expected SOURCE: 75 FR 23101, Apr. 30, 2010, unless
to result in: otherwise noted.
(i) Placing the patient’s health in se-
rious jeopardy; § 440.300 Basis.
(ii) Serious impairment to bodily This subpart implements section 1937
functions; or of the Act, which authorizes States to
(iii) Serious dysfunction of any bod- provide for medical assistance to one
ily organ or part, and or more groups of Medicaid-eligible in-
(2) The alien otherwise meets the re- dividuals, specified by the State under
quirements in §§ 435.406(c) and 436.406(c) an approved State plan amendment,
of this subpart. through enrollment in coverage that
[55 FR 36823, Sept. 7, 1990; 56 FR 10807, Mar. provides benchmark or benchmark-
14, 1991] equivalent health care benefit cov-
erage.
§ 440.260 Methods and standards to as-
sure quality of services. § 440.305 Scope.
The plan must include a description (a) General. This subpart sets out re-
of methods and standards used to as- quirements for States that elect to pro-
sure that services are of high quality. vide medical assistance to certain Med-
§ 440.262 Access and cultural consider- icaid eligible individuals within one or
ations. more groups of individuals specified by
the State, through enrollment of the
The State must have methods to pro- individuals in coverage, identified as
mote access and delivery of services in
‘‘benchmark’’ or ‘‘benchmark-equiva-
a culturally competent manner to all
lent.’’ Groups must be identified by
beneficiaries, including those with lim-
characteristics of individuals rather
ited English proficiency, diverse cul-
than the amount or level of FMAP.
tural and ethnic backgrounds, disabil-
ities, and regardless of gender, sexual (b) Limitations. A State may only
orientation or gender identity. These apply the option in paragraph (a) of
methods must ensure that beneficiaries this section for an individual whose eli-
have access to covered services that gibility is based on an eligibility cat-
are delivered in a manner that meet egory under section 1905(a) of the Act
their unique needs. that could have been covered under the
State’s plan on or before February 8,
[81 FR 27895, May 6, 2016] 2006, except that individuals who are
§ 440.270 Religious objections. eligible under section
1902(a)(10)(A)(i)(VIII) of the Act must
(a) Except as specified in paragraph enroll in an Alternative Benefit Plan
(b) of this section, the agency may not to receive medical assistance.
require any individual to undergo any (c) A State may not require but may
medical service, diagnosis, or treat- offer enrollment in benchmark or
ment or to accept any other health benchmark-equivalent coverage to the
service provided under the plan if the
Medicaid eligible individuals listed in
individual objects, or in the case of a
§ 440.315. States allowing individuals to
child, a parent or guardian objects, on
voluntarily enroll must be in compli-
religious grounds.
ance with the rules specified at
(b) If a physical examination is nec-

§ 440.320.
essary to establish eligibility based on
disability or blindness, the agency may [75 FR 23101, Apr. 30, 2010, as amended at 78
not find an individual eligible for Med- FR 42306, July 15, 2013]
351
§ 440.310 42 CFR Ch. IV (10–1–17 Edition)
§ 440.310 Applicability. medical needs. For these purposes, the

(a) Enrollment. The State may require State’s definition of individuals who
‘‘full benefit eligible’’ individuals not are medically frail or otherwise have
excluded in § 440.315 to enroll in bench- special medical needs must at least in-
mark or benchmark-equivalent cov- clude those individuals described in
erage. § 438.50(d)(3) of this chapter, individuals
(b) Full benefit eligible. An individual with disabling mental disorders (in-
is a full benefit eligible if determined cluding children with serious emo-
by the State to be eligible to receive tional disturbances and adults with se-
the standard full Medicaid benefit rious mental illness), individuals with
package under the approved State plan chronic substance use disorders, indi-
if not for the application of the option viduals with serious and complex med-
available under this subpart. ical conditions, individuals with a
physical, intellectual or developmental
§ 440.315 Exempt individuals.
disability that significantly impairs
Individuals within one (or more) of their ability to perform 1 or more ac-
the following categories are exempt tivities of daily living, or individuals
from mandatory enrollment in an Al- with a disability determination based
ternative Benefit Plan, unless the indi-
on Social Security criteria or in States
viduals are eligible under section
that apply more restrictive criteria
1902(a)(10)(A)(i)(VIII) of the Act. Indi-
viduals in that eligibility group who than the Supplemental Security In-
meet the conditions for exemption come program, the State plan criteria.
must be given the option of an Alter- (g) The individual qualifies based on
native Benefit Plan that includes all medical condition for medical assist-
benefits available under the approved ance for long-term care services de-
State plan. scribed in section 1917(c)(1)(C) of the
(a) The individual is a pregnant Act.
woman who is required to be covered (h) The individual is eligible and en-
under the State plan under section rolled for Medicaid under § 435.145 of
1902(a)(10)(A)(i) of the Act. this chapter based on current eligi-
(b) The individual qualifies for med- bility for assistance under title IV–E of
ical assistance under the State plan on the Act or under § 435.150 of this chap-
the basis of being blind or disabled (or ter based on current status as a former
being treated as being blind or dis- foster care child.
abled) without regard to whether the
(i) The individual is a parent or care-
individual is eligible for Supplemental
Security Income benefits under title taker relative whom the State is re-
XVI on the basis of being blind or dis- quired to cover under section 1931 of
abled and including an individual who the Act.
is eligible for medical assistance on the (j) The individual is a woman who is
basis of section 1902(e)(3) of the Act. receiving medical assistance by virtue
(c) The individual is entitled to bene- of the application of sections
fits under any part of Medicare. 1902(a)(10)(ii)(XVIII) and 1902(aa) of the
(d) The individual is terminally ill Act.
and is receiving benefits for hospice (k) The individual qualifies for med-
care under title XIX. ical assistance on the basis of section
(e) The individual is an inpatient in a 1902(a)(10)(A)(ii)(XII) of the Act.
hospital, nursing facility, intermediate (l) The individual is only covered by
care facility for individuals with intel- Medicaid for care and services nec-
lectual disabilities, or other medical essary for the treatment of an emer-
institution, and is required, as a condi- gency medical condition in accordance
tion of receiving services in that insti-
with section 1903(v) of the Act.
tution under the State plan, to spend
for costs of medical care all but a mini-
mal amount of the individual’s income

required for personal needs.
(f) The individual is medically frail
or otherwise an individual with special
352
(m) The individual is determined eli- uals while enrolled in benchmark or

gible as medically needy or eligible be- benchmark-equivalent coverage, the
cause of a reduction of countable in- State must comply with the require-
come based on costs incurred for med- ments in paragraphs (a)(1) through
ical or other remedial care under sec- (a)(3) of this section above within 30
tion 1902(f) of the Act or otherwise days after such determination.
based on incurred medical costs. (b) Disenrollment Process. (1) The
[75 FR 23101, Apr. 30, 2010, as amended at 78 State must act upon requests promptly
FR 42306, July 15, 2013] for exempt individuals who choose to
disenroll from benchmark or bench-
§ 440.320 State plan requirements: Op- mark-equivalent coverage.
tional enrollment for exempt indi- (2) The State must have a process in
viduals. place to ensure that exempt individuals
(a) General rule. A State plan that of- have access to all standard State plan
fers exempt individuals as defined in services while disenrollment requests
§ 440.315 the option to enroll in bench- are being processed.
mark or benchmark-equivalent cov- (3) The State must maintain data
erage must identify in its State plan that tracks the total number of bene-
the exempt groups for which this cov- ficiaries that have voluntarily enrolled
erage is available, and must comply in a benchmark plan and the total
with the following provisions: number of individuals that have
(1) In any case in which the State of- disenrolled from the benchmark plan.
fers an exempt individual the option to
obtain coverage in a benchmark or § 440.325 State plan requirements:
benchmark-equivalent benefit package, Coverage and benefits.
the State must effectively inform the Subject to requirements in §§ 440.345
individual prior to enrollment that the and 440.365, States may elect to provide
enrollment is voluntary and that the any of the following types of health
individual may disenroll from the benefits coverage:
benchmark or benchmark-equivalent (a) Benchmark coverage in accord-
coverage at any time and regain imme- ance with § 440.330.
diate access to standard full Medicaid (b) Benchmark-equivalent coverage
coverage under the State plan. in accordance with § 440.335.
(2) Prior to any enrollment in bench-
mark or benchmark-equivalent cov- § 440.330 Benchmark health benefits
erage, the State must inform the ex- coverage.
empt individual of the benefits avail- Benchmark coverage is health bene-
able under the benchmark or bench- fits coverage that is equal to the cov-
mark-equivalent benefit package and erage under one or more of the fol-
the costs under such a package and lowing benefit plans:
provide a comparison of how they differ (a) Federal Employees Health Benefit
from the benefits and costs available Plan Equivalent Coverage (FEHBP—
under the standard full Medicaid pro- Equivalent Health Insurance Coverage).
gram. The State must also inform ex- A benefit plan equivalent to the stand-
empt individuals that they may ard Blue Cross/Blue Shield preferred
disenroll at any time and provide them provider option service benefit plan
with information about the process for that is described in and offered to Fed-
disenrolling. eral employees under 5 U.S.C. 8903(1).
(3) The State must document in the (b) State employee coverage. Health
exempt individual’s eligibility file that benefits coverage that is offered and
the individual was informed in accord- generally available to State employees
ance with this section prior to enroll- in the State.
ment, was given ample time to arrive (c) Health maintenance organization
at an informed choice, and voluntarily (HMO) plan. A health insurance plan
and affirmatively chose to enroll in the that is offered through an HMO, (as de-
benchmark or benchmark-equivalent fined in section 2791(b)(3) of the Public

benefit package. Health Service Act) that has the larg-
(4) For individuals who the State de- est insured commercial, non-Medicaid
termines have become exempt individ- enrollment in the State.
353
§ 440.335 42 CFR Ch. IV (10–1–17 Edition)
(d) Secretary-approved coverage. Any (4) Well-baby and well-child care, in-
other health benefits coverage that the cluding age-appropriate immuniza-
Secretary determines, upon application tions.
by a State, provides appropriate cov- (5) Emergency services.
erage to meet the needs of the popu- (6) Family planning services and sup-
lation provided that coverage. Secre- plies and other appropriate preventive
tarial coverage may include benefits of services, as designated by the Sec-
the type that are available under 1 or retary.
more of the standard benchmark cov- (7) Prescription drugs.
erage packages defined in paragraphs (8) Mental health benefits.
(a) through (c) of this section, State (c) Additional coverage. (1) In addition
plan benefits described in section to the types of benefits of this section,
1905(a), 1915(i), 1915(j), 1915(k) or section benchmark-equivalent coverage may
1945 of the Act, any other Medicaid include coverage for any additional
State plan benefits enacted under title benefits of the type which are covered
XIX, or benefits available under base in 1 or more of the standard benchmark
benchmark plans described in 45 CFR coverage packages described in
156.100. § 440.330(a) through (c) or State plan
(1) States wishing to elect Secretary- benefits, described in section 1905(a),
approved coverage should submit a full 1915(i), 1915(j), 1915(k) and 1945 of the
description of the proposed coverage Act, any other Medicaid State plan
(including a benefit-by-benefit com- benefits enacted under title XIX, or
parison of the proposed plan to one or benefits available under base-bench-
more of the three other benchmark mark plans described in 45 CFR 156.100.
plans specified above or to the State’s (2) If the benchmark coverage pack-
standard full Medicaid coverage package used by the State for purposes of
age), and of the population to which comparison in establishing the aggre-
coverage will be offered. In addition, gate actuarial value of the benchmark-
the State should submit any other in- equivalent package includes any of the
formation that will be relevant to a de- following four categories of services:
termination that the proposed health Prescription drugs; mental health serv-
benefits coverage will be appropriate ices; vision services; and hearing serv-
for the proposed population. ices; then the actuarial value of the
(2) [Reserved] coverage for each of these categories of
service in the benchmark-equivalent
[75 FR 23101, Apr. 30, 2010, as amended at 78 coverage package must be at least 75
FR 42306, July 15, 2013] percent of the actuarial value of the
coverage for that category of service in
§ 440.335 Benchmark-equivalent health the benchmark plan used for compari-
benefits coverage. son by the State.
(a) Aggregate actuarial value. Bench-
mark-equivalent coverage is health FR 42306, July 15, 2013]
benefits coverage that has an aggre-
gate actuarial value, as determined § 440.340 Actuarial report for bench-
under § 440.340, that is at least actuari- mark-equivalent coverage.
ally equivalent to the coverage under (a) A State plan amendment that
one of the benchmark benefit packages would provide for benchmark-equiva-
described in § 440.330 for the identified lent health benefits coverage described
Medicaid population to which it will be in § 440.335, must include an actuarial
offered. report. The actuarial report must con-
(b) Required coverage. Benchmark- tain an actuarial opinion that the
equivalent health benefits coverage benchmark-equivalent health benefits
must include coverage for the fol- coverage meets the actuarial require-
lowing categories of services: ments set forth in § 440.335. The report
(1) Inpatient and outpatient hospital must also specify the benchmark cov-
services.
erage used for comparison.

(2) Physicians’ surgical and medical (b) The actuarial report must state
services. that it was prepared according to the
(3) Laboratory and x-ray services. following requirements:
354
(1) By an individual who is a member (2) State Plan requirement. The

of the American Academy of Actuaries State must include a description of
(AAA). how the additional benefits will be pro-
(2) Using generally accepted actu- vided, how access to additional benefits
arial principles and methodologies of will be coordinated and how bene-
the AAA. ficiaries and providers will be informed
(3) Using a standardized set of utili- of these processes in order to ensure
zation and price factors. that these individuals have access to
(4) Using a standardized population the full EPSDT benefit.
that is representative of the population (b) Family planning. Alternative Ben-
involved. efit Plans must include coverage for
family planning services and supplies.
(5) Applying the same principles and
(c) Mental health parity. Alternative
factors in comparing the value of dif-
Benefit Plans that provide both med-
ferent coverage (or categories of serv-
ical and surgical benefits, and mental
ices).
health or substance use disorder bene-
(6) Without taking into account any fits, must comply with the Mental
differences in coverage based on the Health Parity and Addiction Equity
method of delivery or means of cost Act.
control or utilization used. (d) Essential health benefits. Alter-
(7) Taking into account the ability of native Benefit Plans must include at
the State to reduce benefits by consid- least the essential health benefits de-
ering the increase in actuarial value of scribed in § 440.347, and include all up-
health benefits coverage offered under dates or modifications made thereafter
the State plan that results from the by the Secretary to the definition of
limitations on cost sharing (with the essential health benefits.
exception of premiums) under that cov- (e) Updating of benefits. States are not
erage. required to update Alternative Benefit
(c) The actuary preparing the opinion Plans that have been determined to in-
must select and specify the standard- clude essential health benefits as of
ized set of factors and the standardized January 1, 2014, until December 31,
population to be used in paragraphs 2015. States will adhere to future guid-
(b)(3) and (b)(4) of this section. ance for updating benefits beyond that
(d) The State must provide sufficient date, as described by the Secretary.
detail to explain the basis of the meth- (f) Covered outpatient drugs. To the
odologies used to estimate the actu- extent states pay for covered out-
arial value or, if requested by CMS, to patient drugs under their Alternative
replicate the State’s result. Benefit Plan’s prescription drug cov-
erage, states must comply with the re-
§ 440.345 EPSDT and other required quirements under section 1927 of the
benefits. Act.
(a) The State must assure access to [75 FR 23101, Apr. 30, 2010, as amended at 78
early and periodic screening, diag- FR 42306, July 15, 2013]
nostic and treatment (EPSDT) services
through benchmark or benchmark- § 440.347 Essential health benefits.
equivalent plan benefits or as addi- (a) Alternative Benefit Plans must
tional benefits provided by the State contain essential health benefits cov-
for any child under 21 years of age eli- erage, including benefits in each of the
gible under the State plan in a cat- following ten categories, consistent
egory under section 1902(a)(10)(A) of the with the applicable requirements set
Act. forth in 45 CFR part 156:
(1) Sufficiency. Any additional (1) Ambulatory patient services;
EPSDT benefits not provided by the (2) Emergency services;
benchmark or benchmark-equivalent (3) Hospitalization;
plan must be sufficient so that, in com- (4) Maternity and newborn care;
bination with the benchmark or bench- (5) Mental health and substance use
mark-equivalent benefits plan, these disorders, including behavioral health
individuals have access to the full treatment;
EPSDT benefit. (6) Prescription drugs;
355
§ 440.350 42 CFR Ch. IV (10–1–17 Edition)
(7) Rehabilitative and habilitative mark-equivalent coverage, including

services and devices, except that such the economy and efficiency require-
coverage shall be in accordance with ments at § 440.370.
§ 440.347(d); (c) A State may provide benchmark
(8) Laboratory services; or benchmark-equivalent coverage
(9) Preventive and wellness services through a combination of employer
and chronic disease management; and sponsored health plans and additional
(10) Pediatric services, including oral benefit coverage provided by the State
and vision care, in accordance with sec- that wraps around the employer spon-
tion 1905(r) of the Act. sored health plan which, in the aggre-
(b) Alternative Benefit Plans must gate, results in benchmark or bench-
include essential health benefits in one mark-equivalent level of coverage for
of the state options for establishing es- those individuals.
sential health benefits described in 45
CFR 156.100, subject to supplemen- § 440.355 Payment of premiums.
tation under 45 CFR 156.110(b) and sub- Payment of premiums by the State,
stitution as permitted under 45 CFR net of beneficiary contributions, to ob-
156.115(b). tain benchmark or benchmark-equiva-
(c) States may select more than one lent benefit coverage on behalf of bene-
base benchmark option for establishing ficiaries under this section will be
essential health benefits in keeping treated as medical assistance under
with the flexibility for States to imple- section 1905(a) of the Act.
ment more than one Alternative Ben-
efit Plan for targeted populations. § 440.360 State plan requirements for
(d) To comply with paragraph (a) of providing additional services.
this section, Alternative Benefit Plan In addition to the requirements of
coverage of habilitative services and § 440.345, the State may elect to provide
devices will be based on the additional coverage to individuals en-
habilitative services and devices that rolled in Alternative Benefit Plans, ex-
are in the applicable base benchmark cept that the coverage for individuals
plan. If habilitative services and de- eligible only through section
vices are not in the applicable base 1902(a)(10)(A)(i)(VIII) of the Act is lim-
benchmark plan, the state will define ited to benchmark or benchmark-
habilitative services and devices re- equivalent coverage. The State must
quired as essential health benefits describe the populations covered and
using the methodology set forth in 45 the payment methodology for these
CFR 156.115(a)(5). benefits. Additional benefits must be
(e) Essential health benefits cannot benefits of the type, which are covered
be based on a benefit design or imple- in 1 or more of the standard benchmark
mentation of a benefit design that dis- coverage packages described in
criminates based on an individual’s § 440.330(a) through (c) or State plan
age, expected length of life, present or benefits including those described in
predicted disability, degree of medical sections 1905(a), 1915(i), 1915(j), 1915(k)
dependency, quality of life or other and 1945 of the Act and any other Med-
health conditions. icaid State plan benefits enacted under
[78 FR 42307, July 15, 2013] title XIX, or benefits available under
base benchmark plans described in 45
§ 440.350 Employer-sponsored insur- CFR 156.100.
ance health plans.
[78 FR 42307, July 15, 2013]
(a) A State may provide benchmark
or benchmark-equivalent coverage by § 440.365 Coverage of rural health clin-
obtaining employer sponsored health ic and federally qualified health
plans (either alone or with additional center (FQHC) services.
services covered separately under Med- If a State provides benchmark or
icaid) for individuals with access to benchmark-equivalent coverage to in-
private health insurance. dividuals, it must assure that the indi-

(b) The State must assure that em- vidual has access, through that cov-
ployer sponsored plans meet the re- erage or otherwise, to rural health
quirements of benchmark or bench- clinic services and FQHC services as
356
defined in subparagraphs (B) and (C) of method for complying with the provi-
section 1905(a)(2) of the Act. Payment sions of section 5006(e) of the American
for these services must be made in ac- Recovery and Reinvestment Act of
cordance with the payment provisions 2009.
of section 1902(bb) of the Act.
[78 FR 42307, July 15, 2013]
§ 440.370 Economy and efficiency.
§ 440.390 Assurance of transportation.
Benchmark and benchmark-equiva-
lent coverage and any additional bene- If a benchmark or benchmark-equiv-
fits must be provided in accordance alent plan does not include transpor-
with Federal upper payment limits, tation to and from medically necessary
procurement requirements and other covered Medicaid services, the State
economy and efficiency principles that must nevertheless assure that emer-
would otherwise be applicable to the gency and non-emergency transpor-
services or delivery system through tation is covered for beneficiaries en-
which the coverage and benefits are ob- rolled in the benchmark or benchmark-
tained. equivalent plan, as required under
§ 431.53 of this chapter.
§ 440.375 Comparability.
§ 440.395 Parity in mental health and
States have the option to amend substance use disorder benefits.
their State plan to provide benchmark
or benchmark-equivalent coverage to (a) Meaning of terms. For purposes of
individuals without regard to com- this section, except where the context
parability. clearly indicates otherwise, the fol-
lowing terms have the meanings indi-
§ 440.380 Statewideness. cated:
States have the option to amend Aggregate lifetime dollar limit means a
their State plan to provide benchmark dollar limitation on the total amount
or benchmark-equivalent coverage to of specified benefits that may be paid
individuals without regard to under an ABP.
statewideness. Alternative Benefit Plans (ABPs) mean
benefit packages in one or more of the
§ 440.385 Delivery of benchmark and benchmark coverage packages de-
benchmark-equivalent coverage scribed in §§ 440.330(a) through (c) and
through managed care entities. 440.335. Benefits may be delivered
In implementing benchmark or through managed care and non-man-
benchmark-equivalent benefit packaged care delivery systems. Consistent
ages, States must comply with the with the requirements of § 440.385,
managed care provisions at section 1932 States must comply with the managed
of the Act and part 438 of this chapter, care provisions at section 1932 of the
if benchmark and benchmark-equiva- Act and part 438 of this chapter, if
lent benefits are provided through a benchmark and benchmark-equivalent
managed care entity. benefits are provided through a man-
aged care entity.
§ 440.386 Public notice. Annual dollar limit means a dollar
Prior to submitting to the Centers limitation on the total amount of spec-
for Medicare and Medicaid Services for ified benefits that may be paid in a 12-
approval of a State plan amendment to month period under an ABP.
establish an Alternative Benefit Plan Cumulative financial requirements are
or an amendment to substantially financial requirements that determine
modify an existing Alternative Benefit whether or to what extent benefits are
Plan, a state must have provided the provided based on accumulated
public with advance notice of the amounts and include deductibles and
amendment and reasonable oppor- out-of-pocket maximums. (However,
tunity to comment for such amend- cumulative financial requirements do
ment, and have included in the notice a not include aggregate lifetime or an-
description of the method for assuring nual dollar limits because these two
compliance with § 440.345 related to full terms are excluded from the meaning
access to EPSDT services, and the of financial requirements.)
357
§ 440.395 42 CFR Ch. IV (10–1–17 Edition)
EPSDT means benefits defined in sec- Treatment limitations include limits on

tion 1905(r) of the Act. benefits based on the frequency of
Financial requirements include treatment, number of visits, days of
deductibles, copayments, coinsurance, coverage, days in a waiting period, or
or out-of-pocket maximums. Financial other similar limits on the scope or du-
requirements do not include aggregate ration of treatment. Treatment limita-
lifetime or annual dollar limits. tions include both quantitative treat-
Medical/surgical benefits means bene- ment limitations, which are expressed
fits for items or services for medical numerically (such as 50 outpatient vis-
conditions or surgical procedures, as its per year), and nonquantitative
defined by the State under the terms of treatment limitations, which otherwise
the ABP and in accordance with appli- limit the scope or duration of benefits
cable Federal and State law, but does for treatment under an ABP. (See para-
not include mental health or substance graph (b)(4)(ii) of this section for an il-
use disorder benefits. Any condition de- lustrative list of nonquantitative
fined by the state as being or as not treatment limitations.) A permanent
being a medical/surgical condition exclusion of all benefits for a par-
must be defined to be consistent with ticular condition or disorder, however,
generally recognized independent is not a treatment limitation for pur-
standards of current medical practice poses of this definition.
(for example, the most current version (b) Parity requirements for financial re-
of the International Classification of quirements and treatment limitations—(1)
Clarification of terms—(i) Classification
Diseases (ICD) or State guidelines).
of benefits. When reference is made in
Medical/surgical benefits include long
this paragraph (b) to a classification of
term services.
benefits, the term ‘‘classification’’
Mental health benefits means benefits means a classification as described in
for items or services for mental health paragraph (b)(2)(ii) of this section.
conditions, as defined by the State (ii) Type of financial requirement or
under the terms of the ABP and in ac- treatment limitation. When reference is
cordance with applicable Federal and made in this paragraph (b) to a type of
State law. Any condition defined by financial requirement or treatment
the State as being or as not being a limitation, the reference to type means
mental health condition must be de- its nature. Different types of financial
fined to be consistent with generally requirements include deductibles, co-
recognized independent standards of payments, coinsurance, and out-of-
current medical practice (for example, pocket maximums. Different types of
the most current version of the Diag- quantitative treatment limitations in-
nostic and Statistical Manual of Men- clude annual, episode, and lifetime day
tal Disorders (DSM), the most current and visit limits. See paragraph (b)(4)(ii)
version of the ICD, or State guidelines. of this section for an illustrative list of
Mental health benefits include long nonquantitative treatment limitations.
term care services. (iii) Level of a type of financial require-
Substance use disorder benefits means ment or treatment limitation. When ref-
benefits for items or services for sub- erence is made in this paragraph (b) to
stance use disorder, as defined by the a level of a type of financial require-
State under the terms of the ABP and ment or treatment limitation, level re-
in accordance with applicable Federal fers to the magnitude of the type of fi-
and State law. Any disorder defined by nancial requirement or treatment limi-
the State as being or as not being a tation.
substance use disorder must be defined (2) General parity requirement—(i) Gen-
to be consistent with generally recog- eral rule. A State may not apply within
nized independent standards of current an ABP any financial requirement or
medical practice (for example, the treatment limitation to mental health
most current version of the DSM, the or substance use disorder benefits in
most current version of the ICD, or any classification that is more restric-
State guidelines). Substance use dis- tive than the predominant financial re-
order benefits include long term care quirement or treatment limitation of
services. that type applied to substantially all
358
medical/surgical benefits in the same nant’’—(A) Substantially all. For pur-

classification. Whether a financial re- poses of this paragraph (b), a type of fi-
quirement or treatment limitation is a nancial requirement or quantitative
predominant financial requirement or treatment limitation is considered to
treatment limitation that applies to apply to substantially all medical/sur-
substantially all medical/surgical bene- gical benefits in a classification of ben-
fits in a classification is determined efits if it applies to at least two-thirds
separately for each type of financial re- of all medical/surgical benefits in that
quirement or treatment limitation. classification. If a type of financial re-
The application of the rules of this quirement or quantitative treatment
paragraph (b)(2) to financial require- limitation does not apply to at least
ments and quantitative treatment lim- two-thirds of all medical/surgical bene-
itations is addressed in paragraph (b)(3) fits in a classification, then that type
of this section; the application of the cannot be applied to mental health or
rules of this paragraph (b)(2) to non- substance use disorder benefits in that
quantitative treatment limitations is classification.
addressed in paragraph (b)(4) of this (B) Predominant—(1) If a type of fi-
section. nancial requirement or quantitative
(ii) Classifications of benefits used for treatment limitation applies to at
applying rules. ABPs must include men- least two-thirds of all medical/surgical
tal health or substance use disorder benefits in a classification as deter-
benefits in every classification of bene- mined under paragraph (b)(3)(i)(A) of
fits described in this paragraph this section, the level of the financial
(b)(2)(ii) in which medical/surgical ben- requirement or quantitative treatment
efits are provided. In determining the limitation that is considered the pre-
classification in which a particular dominant level of that type in a classi-
benefit belongs, the State must apply fication of benefits is the level that ap-
the same reasonable standards to med- plies to more than one-half of medical/
ical/surgical benefits and to mental surgical benefits in that classification
health or substance use disorder bene- subject to the financial requirement or
fits. To the extent that a State pro- quantitative treatment limitation.
vides ABP benefits in a classification (2) If, for a type of financial require-
and imposes any separate financial re- ment or quantitative treatment limita-
quirement or treatment limitation (or tion that applies to at least two-thirds
separate level of a financial require- of all medical/surgical benefits in a
ment or treatment limitation) for ben- classification, there is no single level
efits in the classification, the rules of that applies to more than one-half of
this paragraph (b) apply separately for medical/surgical benefits in the classi-
that classification for all financial re- fication subject to the financial re-
quirements or treatment limitations. quirement or quantitative treatment
The following classifications of bene- limitation, the State may combine lev-
fits are the only classifications used in els until the combination of levels ap-
applying the rules of this paragraph plies to more than one-half of medical/
(b): surgical benefits subject to the finan-
(A) Inpatient. Benefits furnished on cial requirement or quantitative treat-
an inpatient basis. ment limitation in the classification.
(B) Outpatient. Benefits furnished on The least restrictive level within the
an outpatient basis. See special rules combination is considered the predomi-
for office visits in paragraph nant level of that type in the classi-
(b)(3)(ii)(B)(1) of this section. fication. (For this purpose, a State
(C) Emergency care. Benefits for emer- may combine the most restrictive lev-
gency care. els first, with each less restrictive level
(D) Prescription drugs. Benefits for added to the combination until the
prescription drugs. See special rules for combination applies to more than one-
multi-tiered prescription drug benefits half of the benefits subject to the fi-
in paragraph (b)(3)(ii) of this section. nancial requirement or treatment limi-

(3) Financial requirements and quan- tation.)
titative treatment limitations—(i) Deter- (C) Portion based on ABP payments.
mining ‘‘substantially all’’ and ‘‘predomi- For purposes of this paragraph (b), the
359
§ 440.395 42 CFR Ch. IV (10–1–17 Edition)
determination of the portion of med- sonable factors include cost, efficacy,

ical/surgical benefits in a classification generic versus brand name, and mail
of benefits subject to a financial re- order versus pharmacy pick-up/deliv-
quirement or quantitative treatment ery.
limitation (or subject to any level of a (B) Sub-classifications permitted for of-
financial requirement or quantitative fice visits, separate from other outpatient
treatment limitation) is based on the services. For purposes of applying the
dollar amount of all ABP payments for financial requirement and treatment
medical/surgical benefits in the classi- limitation rules of this paragraph (b), a
fication expected to be paid under the State may divide its benefits furnished
ABP for the plan year (or for the por- on an outpatient basis into the two
tion of the plan year after a change in sub-classifications described in this
ABP benefits that affects the applica- paragraph (b)(3)(ii)(B). After the sub-
bility of the financial requirement or classifications are established, the
quantitative treatment limitation). State may not impose any financial re-
(D) Clarifications for certain threshold quirement or quantitative treatment
requirements. For any deductible, the limitation on mental health or sub-
dollar amount of ABP payments instance use disorder benefits in any sub-
cludes all payments for claims that classification that is more restrictive
would be subject to the deductible if it than the predominant financial re-
had not been satisfied. For any out-of- quirement or quantitative treatment
pocket maximum, the dollar amount of limitation that applies to substantially
ABP payments includes all payments all medical/surgical benefits in the sub-
associated with out-of-pocket pay- classification using the methodology
ments that are taken into account to- set forth in paragraph (b)(3)(i) of this
wards the out-of-pocket maximum as section. Sub-classifications other than
well as all payments associated with these special rules, such as separate
out-of-pocket payments that would sub-classifications for generalists and
have been made towards the out-of- specialists, are not permitted. The two
pocket maximum if it had not been sat- sub-classifications permitted under
isfied. Similar rules apply for any this paragraph (b)(3)(ii)(B) are:
other thresholds at which the rate of
(1) Office visits (such as physician
payment changes.
visits); and
(E) Determining the dollar amount of
ABP payments. Subject to paragraph (2) All other outpatient items and
(b)(3)(i)(D) of this section, any reason- services (such as outpatient surgery,
able method may be used to determine laboratory services, or other medical
the dollar amount expected to be paid items).
for medical/surgical benefits subject to (iii) No separate cumulative financial
a financial requirement or quantitative requirements. A State may not apply
treatment limitation (or subject to any any cumulative financial requirement
level of a financial requirement or for mental health or substance use dis-
quantitative treatment limitation). order benefits in a classification that
(ii) Special rules—(A) Multi-tiered pre- accumulates separately from any es-
scription drug benefits. If a State or plan tablished for medical/surgical benefits
administrator applies different levels in the same classification.
of financial requirements to different (iv) Compliance with other cost-sharing
tiers of prescription drug benefits rules. States must meet the require-
based on reasonable factors determined ments of §§ 447.50 through 447.57 of this
in accordance with the rules in para- chapter when applying Medicaid cost-
graph (b)(4)(i) of this section (relating sharing.
to requirements for nonquantitative (4) Nonquantitative treatment limita-
treatment limitations) and without re- tions—(i) General rule. A State may not
gard to whether a drug is generally impose a nonquantitative treatment
prescribed for medical/surgical benefits limitation for mental health or sub-
or for mental health or substance use stance use disorder benefits in any
disorder benefits, the ABP satisfies the classification unless, under the terms
parity requirements of this paragraph of the ABP as written and in operation,
(b) for prescription drug benefits. Rea- any processes, strategies, evidentiary
360
standards, or other factors used in ap- services for mental health or substance
plying the nonquantitative treatment use disorder benefits must be made
limitation to mental health or sub- available by the State to the bene-
stance use disorder benefits in the clas- ficiary.
sification are comparable to, and are (3) Provisions of other law. Compliance
applied no more stringently than, the with the disclosure requirements in
processes, strategies, evidentiary paragraphs (d)(1) and (2) of this section
standards, or other factors used in ap- is not determinative of compliance
plying the limitation for medical/sur- with any other provision of applicable
gical benefits in the classification. Federal or State law.
(ii) Illustrative list of nonquantitative (e) Applicability—(1) ABPs. The re-
treatment limitations. Nonquantitative quirements of this section apply to
treatment limitations include— States providing benefits through
(A) Medical management standards ABPs. For those States providing ABPs
limiting or excluding benefits based on through an MCO, PIHP, or PAHP, the
medical necessity or medical appro- rules of 42 CFR part 438, subpart K also
priateness, or based on whether the apply, and approved contracts will be
treatment is experimental or inves- viewed as evidence of compliance with
tigative; the requirements of this section.
(B) Formulary design for prescription (2) Scope. This section does not—
drugs; (i) Require a State to provide any
(C) Standards for provider admission specific mental health benefits or sub-
to participate in a network, including stance use disorder benefits; however,
reimbursement rates; in providing coverage through an ABP,
(D) Methods for determining usual, the State must include EHBs, includ-
customary, and reasonable charges; ing the ten EHBs as required in
(E) Refusal to pay for higher-cost § 440.347, which include mental health
therapies until it can be shown that a and substance use disorder benefits; or
lower-cost therapy is not effective (ii) Affect the terms and conditions
(also known as fail-first policies or step relating to the amount, duration, or
therapy protocols); scope of mental health or substance
(F) Exclusions based on failure to use disorder benefits under the ABP ex-
complete a course of treatment; and cept as specifically provided in para-
(G) Restrictions based on geographic graph (b) of this section.
(3) State plan requirement. If a State
location, facility type, provider spe-
plan provides for an ABP, the State
cialty, and other criteria that limit the
must provide sufficient information in
scope or duration of benefits or serv-
ABP State plan amendment requests to
ices provided under the ABP.
assure compliance with the require-
(c) ABP providing EPSDT benefits. An
ments of this subpart.
ABP that provides EPSDT benefits is
(4) Compliance dates—(i) In general.
deemed to be compliant with the parity
ABP coverage offered by States must
requirements for financial require-
comply with the requirements of this
ments and treatment limitations with section no later than October 2, 2017.
respect to individuals entitled to such (ii) [Reserved]
benefits. Annual or lifetime limits are
not permissible in EPSDT benefits. [81 FR 18439, Mar. 30, 2016]
(d) Availability of information—(1) Cri-
teria for medical necessity determinations. PART 441—SERVICES: REQUIRE-
The criteria for medical necessity de- MENTS AND LIMITS APPLICABLE
terminations made by the State for TO SPECIFIC SERVICES
beneficiaries served through the ABP
for mental health or substance use dis- Sec.
order benefits must be made available 441.1 Purpose.
by the State to any beneficiary or Med-
icaid provider upon request. Subpart A—General Provisions
(2) Reason for any denial. The reason 441.10 Basis.

for any denial made by the State in the 441.11 Continuation of FFP for institutional
case of a beneficiary served through an services.
ABP of reimbursement or payment for 441.12 Inpatient hospital tests.
361
441.13 Prohibitions on FFP: Institutional- 441.201 Definition.
ized individuals. 441.202 General rule.
441.15 Home health services. 441.203 Life of the mother would be endan-
441.16 Home health agency requirements for gered.
surety bonds; Prohibition on FFP. 441.204–441.205 [Reserved]
441.17 Laboratory services. 441.206 Documentation needed by the Med-
441.18 Case management services. icaid agency.
441.20 Family planning services. 441.207 Drugs and devices and termination
441.21 Nurse-midwife services. of ectopic pregnancies.
441.22 Nurse practitioner services. 441.208 Recordkeeping requirements.
441.25 Prohibition on FFP for certain pre-
scribed drugs. Subpart F—Sterilizations
441.30 Optometric services.
441.35 Organ transplants. 441.250 Applicability.
441.40 End-stage renal disease. 441.251 Definitions.
Subpart B—Early and Periodic Screening, 441.253 Sterilization of a mentally com-
Diagnosis, and Treatment (EPSDT) of In- petent individual aged 21 or older.
dividuals Under Age 21 441.254 Mentally incompetent or institu-
tionalized individuals.
441.50 Basis and purpose. 441.255 Sterilization by hysterectomy.
441.55 State plan requirements. 441.256 Additional condition for Federal fi-
441.56 Required activities. nancial participation (FFP).
441.57 Discretionary services. 441.257 Informed consent.
441.58 Periodicity schedule. 441.258 Consent form requirements.
441.59 Treatment of requests for EPSDT 441.259 Review of regulations.
screening services.
APPENDIX TO SUBPART F OF PART 441—RE-
441.60 Continuing care.
QUIRED CONSENT FORM
441.61 Utilization of providers and coordina-
tion with related programs.
441.62 Transportation and scheduling assist-
Subpart G—Home and Community-Based
ance. Services: Waiver Requirements
Subpart C—Medicaid for Individuals Age 441.301 Contents of request for a waiver.
65 or Over in Institutions for Mental Dis- 441.302 State assurances.
eases 441.303 Supporting documentation required.
441.304 Duration, extension, and amendment
of a waiver.
441.305 Replacement of beneficiaries in ap-
441.102 Plan of care for institutionalized
proved waiver programs.
beneficiaries.
441.306 Cooperative arrangements with the
441.103 Alternate plans of care.
Maternal and Child Health program.
441.105 Methods of administration.
441.106 Comprehensive mental health pro- 441.307 Notification of a waiver termi-
gram. nation.
441.308 Hearings procedures for waiver ter-
Subpart D—Inpatient Psychiatric Services minations.
441.310 Limits on Federal financial partici-
for Individuals Under Age 21 in Psy- pation (FFP).
chiatric Facilities or Programs
441.150 Basis and purpose. Subpart H—Home and Community-Based
441.151 General requirements. Services Waivers for Individuals Age 65
441.152 Certification of need for services. or Older: Waiver Requirements
441.153 Team certifying need for services.
441.154 Active treatment. 441.350 Basis and purpose.
441.155 Individual plan of care. 441.351 Contents of a request for a waiver.
441.156 Team developing individual plan of 441.352 State assurances.
care. 441.353 Supporting documentation required.
441.180 Maintenance of effort: General rule. 441.354 Aggregate projected expenditure
441.181 Maintenance of effort: Explanation limit (APEL).
of terms and requirements. 441.355 Duration, extension, and amendment
441.182 Maintenance of effort: Computation. of a waiver.
441.184 Emergency preparedness. 441.356 Waiver termination.
441.357 Hearing procedures for waiver deni-

Subpart E—Abortions als.
441.360 Limits on Federal financial partici-
441.200 Basis and purpose. pation (FFP).
362
441.365 Periodic evaluation, assessment, and 441.615 Administration fee requirements.
review.
Subpart M—State Plan Home and Commu-
Subpart I—Community Supported Living nity-Based Services for the Elderly and
Arrangements Services Individuals with Disabilities
441.400 Basis and purpose. 441.700 Basis and purpose.
441.402 State plan requirements. 441.705 State plan requirements.
441.404 Minimum protection requirements. 441.710 State plan home and community-
based services under section 1915(i)(1) of
Subpart J—Optional Self-Directed Personal the Act.
Assistance Services Program 441.715 Needs-based criteria and evaluation.
441.720 Independent assessment.
441.450 Basis, scope, and definitions. 441.725 Person-centered service plan.
441.452 Self-direction: General. 441.730 Provider qualifications.
441.454 Use of cash. 441.735 Definition of individual’s representa-
441.456 Voluntary disenrollment. tive.
441.458 Involuntary disenrollment. 441.740 Self-directed services.
441.460 Participant living arrangements. 441.745 State plan HCBS administration:
441.462 Statewideness, comparability, and State responsibilities and quality im-
limitations on number served. provement.
441.464 State assurances.
441.466 Assessment of need. AUTHORITY: Secs. 1102, 1902, and 1928 of the
441.468 Service plan elements. Social Security Act (42 U.S.C. 1302).
441.470 Service budget elements. SOURCE: 43 FR 45229, Sept. 29, 1978, unless
441.472 Budget methodology. otherwise noted.
441.474 Quality assurance and improvement
plan. § 441.1 Purpose.
441.476 Risk management.
This part sets forth State plan re-
441.478 Qualifications of providers of per-
sonal assistance. quirements and limits on FFP for spe-
441.480 Use of a representative. cific services defined in part 440 of this
441.482 Permissible purchases. subchapter. Standards for payments for
441.484 Financial management services. services provided in intermediate care
facilities and skilled nursing facilities
Subpart K—Home and Community-Based are set forth in part 442 of this sub-
Attendant Services and Supports State chapter.
Plan Option (Community First Choice)
441.500 Basis and scope. Subpart A—General Provisions
441.510 Eligibility. § 441.10 Basis.
441.515 Statewideness. This subpart is based on the fol-
441.520 Included services. lowing sections of the Act which state
441.525 Excluded services.
441.530 Home and community-based setting.
requirements and limits on the services
441.535 Assessment of functional need. specified or provide Secretarial author-
441.540 Person-centered service plan. ity to prescribe regulations relating to
441.545 Service models. services:
441.550 Service plan requirements for self- (a) Section 1102 for end-stage renal
directed model with service budget. disease (§ 441.40).
441.555 Support system. (b) Section 1138(b) for organ procure-
441.560 Service budget requirements. ment organization services (§ 441.13(c)).
441.565 Provider qualifications.
(c) Sections 1902(a)(10)(A) and
441.570 State assurances.
441.575 Development and Implementation 1905(a)(21) for nurse practitioner serv-
Council. ices (§ 441.22).
441.580 Data collection. (d) Sections 1902(a)(10)(D) and
441.585 Quality assurance system. 1905(a)(7) for home health services
441.590 Increased Federal financial partici- (§ 441.15).
pation. (e) Section 1903(i)(1) for organ trans-
plant procedures (§ 441.35).
Subpart L—Vaccines for Children Program
(f) Section 1903(i)(5) for certain pre-

441.600 Basis and purpose. scribed drugs (§ 441.25).
441.605 General requirements. (g) Section 1903(i)(6) for prohibition
441.610 State plan requirements. (except in emergency situations) of
363
§ 441.11 42 CFR Ch. IV (10–1–17 Edition)
FFP in expenditures for inpatient hos- the agency’s termination or non-

pital tests that are not ordered by the renewal action.
attending physician or other licensed (c) Services for which FFP may be con-
practitioner (§ 441.12). tinued. FFP may be continued for any
(h) Section 1903(i)(18) for the require- of the following services, as defined in
ment that each home health agency subpart A of part 440 of this chapter:
provide the Medicaid agency with a (1) Inpatient hospital services.
surety bond (§ 441.16). (2) Inpatient hospital services for in-
(i) Section 1905(a)(4)(C) for family dividuals age 65 or older in an institu-
planning (§ 441.20). tion for mental diseases.
(j) Sections 1905 (a)(12) and (e) for op-
(3) Nursing facility services for indi-
tometric services (§ 441.30).
(k) Section 1905(a)(17) for nurse-mid- viduals age 21 or older.
wife services (§ 441.21). (4) Nursing facility services for indi-
(l) Section 1905(a) (following (a)(24)) viduals age 65 or older in an institution
for prohibition of FFP in expenditures for mental diseases.
for certain services (§ 441.13). (5) Inpatient psychiatric services for
(m) Section 1905(a)(19) and 1915(g) of individuals under age 21.
the Act for case management services (6) Nursing facility services for indi-
as set forth in § 441.18 and section 8435 viduals under 21.
of the Technical and Miscellaneous (7) Intermediate care facility services
Revenue Act of 1988. for individuals with intellectual dis-
[60 FR 19862, Apr. 21, 1995, as amended at 63 abilities.
FR 310, Jan. 5, 1998; 72 FR 68092, Dec. 4, 2007] [59 FR 56234, Nov. 10, 1994]
§ 441.11 Continuation of FFP for insti- § 441.12 Inpatient hospital tests.
tutional services.
(a) Basic conditions for continuation of Except in an emergency situation
FFP. FFP may be continued for up to (see § 440.170(e)(1) of this chapter for
30 days after the effective date of ter- definition), FFP is not available in ex-
mination or expiration of a provider penditures for inpatient hospital tests
agreement, if the following conditions unless the tests are specifically ordered
are met: by the attending physician or other li-
(1) The Medicaid payments are for censed practitioner, acting within the
beneficiaries admitted to the facility scope of practice as defined under
before the effective date of termination State law, who is responsible for the di-
or expiration. agnosis or treatment of a particular
(2) The State agency is making rea- patient’s condition.
sonable efforts to transfer those bene- [46 FR 48554, Oct. 1, 1981]
ficiaries to other facilities or to alter-
nate care. § 441.13 Prohibitions on FFP: Institu-
(b) When the 30-day period begins. The tionalized individuals.
30-day period begins on one of the fol-
(a) FFP is not available in expendi-
lowing:
(1) The effective date of termination tures for services for—
of the facility’s provider agreement by (1) Any individual who is in a public
CMS; institution, as defined in § 435.1010 of
(2) The effective date of termination this chapter; or
of the facility’s Medicaid provider (2) Any individual who is under age 65
agreement by the Medicaid agency on and is in an institution for mental dis-
its own volition; or eases, except an individual who is
(3) In the case of an ICF/IID, the later under age 22 and receiving inpatient
of— psychiatric services under subpart D of
(i) The effective date of termination this part.
or nonrenewal of the facility’s provider (b) With the exception of active
agreement by the Medicaid agency on treatment services (as defined in

its own volition; or § 483.440(a) of this chapter for residents
(ii) The date of issuance of an admin- of ICFs/IID and in § 441.154 for individ-
istrative hearing decision that upholds uals under age 21 receiving inpatient
364
psychiatric services), payments to in- (c) The eligibility of a beneficiary to

stitutions for Individuals with Intellec- receive home health services does not
tual Disabilities or persons with re- depend on his need for or discharge
lated conditions and to psychiatric fa- from institutional care.
cilities or programs providing inpa- (d) The agency providing home
tient psychiatric services to individ- health services meets the capitaliza-
uals under age 21 may not include re- tion requirements included in § 489.28 of
imbursement for formal educational this chapter.
services or for vocational services. For-
mal educational services relate to
FR 24889, Apr. 11, 1980; 63 FR 310, Jan. 5, 1998]
training in traditional academic sub-
jects. Subject matter rather than set- § 441.16 Home health agency require-
ting, time of day, or class size deter- ments for surety bonds; Prohibition
mines whether a service is educational. on FFP.
Traditional academic subjects include,
(a) Definitions. As used in this sec-
but are not limited to, science, history,
tion, unless the context indicates oth-
literature, foreign languages, and
erwise—
mathematics. Vocational services re-
Assets includes but is not limited to
late to organized programs that are di-
any listing that identifies Medicaid
rectly related to the preparation of in-
beneficiaries to whom home health
dividuals for paid or unpaid employ-
services were furnished by a partici-
ment. An example of vocational serv-
pating or formerly participating HHA.
ices is time-limited vocational training
provided as a part of a regularly sched- Participating home health agency
uled class available to the general pub- means a ‘‘home health agency’’ (HHA)
lic. as that term is defined at § 440.70(d) of
this subchapter.
(c) FFP is not available in expendi-
tures for services furnished by an organ Surety bond means one or more bonds
procurement organization on or after issued by one or more surety compa-
April 1, 1988, that does not meet the re- nies under 31 U.S.C. 9304 to 9308 and 31
quirements of part 486 subpart G of this CFR parts 223, 224, and 225, provided
chapter. the bond otherwise meets the require-
ments of this section.
[43 FR 45229, Sept. 29, 1978, as amended at 51 Uncollected overpayment means an
FR 22041, June 17, 1986; 53 FR 6549, Mar. 1, ‘‘overpayment,’’ as that term is defined
1988; 57 FR 54709, Nov. 20, 1992; 71 FR 31046,
under § 433.304 of this subchapter, plus
May 31, 2006; 71 FR 39229, July 12, 2006]
accrued interest, for which the HHA is
§ 441.15 Home health services. responsible, that has not been recouped
by the Medicaid agency within a time
With respect to the services defined period determined by the Medicaid
in § 440.70 of this subchapter, a State agency.
plan must provide that— (b) Prohibition. FFP is not available
(a) Home health services include, as a in expenditures for home health serv-
minimum— ices under § 440.70 of this subchapter
(1) Nursing services; unless the home health agency fur-
(2) Home health aide services; and nishing these services meets the surety
(3) Medical supplies, equipment, and bond requirements of paragraphs (c)
appliances. through (l) of this section.
(b) The agency provides home health (c) Basic requirement. Except as pro-
services to— vided in paragraph (d) of this section,
(1) Categorically needy beneficiaries each HHA that is a Medicaid partici-
age 21 or over; pating HHA or that seeks to become a
(2) Categorically needy beneficiaries Medicaid participating HHA must—
under age 21, if the plan provides (1) Obtain a surety bond that meets
skilled nursing facility services for the requirements of this section and in-
them; individuals; and structions issued by the Medicaid agen-

(3) Medically needy beneficiaries to cy; and
whom skilled nursing facility services (2) Furnish a copy of the surety bond
are provided under the plan. to the Medicaid agency.
365
§ 441.16 42 CFR Ch. IV (10–1–17 Edition)
(d) Requirement waived for Govern- (3) The Medicaid agency must specify
ment-operated HHAs. An HHA operated the manner by which public notifica-
by a Federal, State, local, or tribal tion of a determination under para-
government agency is deemed to have graph (f)(2) of this section is given and
provided the Medicaid agency with a the effective date of the determination.
comparable surety bond under State (4) A determination by the Medicaid
law, and is therefore exempt from the agency that a surety company is an un-
requirements of this section if, during authorized Surety under paragraph
the preceding 5 years, the HHA has not (f)(2) of this section—
had any uncollected overpayments. (i) Has effect only within the State;
(e) Parties to the bond. The surety and
bond must name the HHA as Principal, (ii) Is not a debarment, suspension,
the Medicaid agency as Obligee, and or exclusion for the purposes of Execu-
the surety company (and its heirs, ex- tive Order No. 12549 (3 CFR 1986 Comp.,
ecutors, administrators, successors and p. 189).
assignees, jointly and severally) as (g) Amount of the bond—(1) Basic rule.
Surety. The amount of the surety bond must be
(f) Authorized Surety and exclusion of $50,000 or 15 percent of the annual Med-
surety companies. An HHA may obtain a icaid payments made to the HHA by
surety bond required under this section the Medicaid agency for home health
only from an authorized Surety. services furnished under this sub-
(1) An authorized Surety is a surety chapter for which FFP is available,
company that— whichever is greater.
(2) Computation of the 15 percent: Par-
(i) Has been issued a Certificate of
ticipating HHA. The 15 percent is com-
Authority by the U.S. Department of
puted by the Medicaid agency on the
the Treasury in accordance with 31
basis of Medicaid payments made to
U.S.C. 9304 to 9308 and 31 CFR parts 223,
the HHA for the most recent annual pe-
224, and 225 as an acceptable surety on
riod for which information is available
Federal bonds and the Certificate has
as specified by the Medicaid agency.
neither expired nor been revoked;
(3) Computation of 15 percent: An HHA
(ii) Has not been determined by the that seeks to become a participating HHA
Medicaid agency to be an unauthorized by obtaining assets or ownership interest.
Surety for the purpose of an HHA ob- For an HHA that seeks to become a
taining a surety bond under this sec- participating HHA by purchasing the
tion; and assets or the ownership interest of a
(iii) Meets other conditions, as speci- participating or formerly participating
fied by the Medicaid agency. HHA, the 15 percent is computed on the
(2) The Medicaid agency may deter- basis of Medicaid payments made by
mine that a surety company is an un- the Medicaid agency to the partici-
authorized Surety under this section— pating or formerly participating HHA
(i) If, upon request by the Medicaid for the most recent annual period as
agency, the surety company fails to specified by the Medicaid agency.
furnish timely confirmation of the (4) Computation of 15 percent: Change
issuance of, and the validity and accu- of ownership. For an HHA that under-
racy of information appearing on, a goes a change of ownership (as ‘‘change
surety bond that an HHA presents to of ownership’’ is defined by the State
the Medicaid agency that shows the Medicaid agency) the 15 percent is
surety company as Surety on the bond; computed on the basis of Medicaid pay-
(ii) If, upon presentation by the Med- ments made by the Medicaid agency to
icaid agency to the surety company of the HHA for the most recent annual pe-
a request for payment on a surety bond riod as specified by the Medicaid agen-
and of sufficient evidence to establish cy.
the surety company’s liability on the (5) An HHA that seeks to become a par-
bond, the surety company fails to time- ticipating HHA without obtaining assets
ly pay the Medicaid agency in full the or ownership interest. For an HHA that
amount requested up to the face seeks to become a participating HHA
amount of the bond; or without purchasing the assets or the
(iii) For other good cause. ownership interest of a participating or
366
formerly participating HHA, the 15 per- cy is not extinguished by any of the

cent computation does not apply. following:
(6) Exception to the basic rule. If an (i) Any action by the HHA or the Sur-
HHA’s overpayment in the most recent ety to terminate or limit the scope or
annual period exceeds 15 percent, the term of the bond. The Surety’s liability
State Medicaid agency may require the may be extinguished, however, when—
HHA to secure a bond in an amount up (A) The Surety furnishes the Med-
to or equal to the amount of the over- icaid agency with notice of such action
payment, provided the amount of the not later than 10 days after receiving
bond is not less than $50,000. notice from the HHA of action by the
(7) Expiration of the 15 percent provi- HHA to terminate or limit the scope of
sion. For an annual surety bond, or for the bond, or not later than 60 days be-
a rider on a continuous surety bond, fore the effective date of such action by
that is required to be submitted on or the Surety; or
after June 1, 2005, notwithstanding any (B) The HHA furnishes the Medicaid
reference in this section to 15 percent agency with a new bond that meets the
as a basis for determining the amount requirements of both this section and
of the bond, the amount of the bond or the Medicaid agency.
rider, as applicable, must be $50,000 or (ii) The Surety’s failure to continue
such amount as the Medicaid agency to meet the requirements of paragraph
specifies in accordance with paragraph (f)(1) of this section or the Medicaid
(g)(6) of this section, whichever amount agency’s determination that the surety
is greater. company is an unauthorized surety
(h) Additional requirements of the sur- under paragraph (f)(2) of this section.
ety bond. The surety bond that an HHA (iii) Termination of the HHA’s pro-
obtains under this section must meet vider agreement described under
the following additional requirements: § 431.107 of this subchapter.
(1) The bond must guarantee that, (iv) Any action by the Medicaid agen-
upon written demand by the Medicaid cy to suspend, offset, or otherwise re-
agency to the Surety for payment cover payments to the HHA.
under the bond and the Medicaid agen- (v) Any action by the HHA to—
cy furnishing to the Surety sufficient (A) Cease operation;
evidence to establish the Surety’s li- (B) Sell or transfer any assets or
ability under the bond, the Surety will ownership interest;
timely pay the Medicaid agency the (C) File for bankruptcy; or
amount so demanded, up to the stated (D) Fail to pay the Surety.
amount of the bond. (vi) Any fraud, misrepresentation, or
(2) The bond must provide that the negligence by the HHA in obtaining the
Surety is liable for uncollected over- surety bond or by the Surety (or by the
payments, as defined in paragraph (a), Surety’s agent, if any) in issuing the
provided such uncollected overpay- surety bond, except that any fraud,
ments are determined during the term misrepresentation, or negligence by
of the bond and regardless of when the the HHA in identifying to the Surety
overpayments took place. Further, the (or to the Surety’s agent) the amount
bond must provide that the Surety re- of Medicaid payments upon which the
mains liable if the HHA fails to furnish amount of the surety bond is deter-
a subsequent annual bond that meets mined shall not cause the Surety’s li-
the requirements of this subpart or ability to the Medicaid agency to ex-
fails to furnish a rider for a year for ceed the amount of the bond.
which a rider is required to be sub- (vii) The HHA’s failure to exercise
mitted, or if the HHA’s provider agree- available appeal rights under Medicaid
ment terminates and that the Surety’s or to assign such rights to the Surety
liability shall be based on the last bond (provided the Medicaid agency permits
or rider in effect for the HHA, which such rights to be assigned).
shall then remain in effect for an addi- (4) The bond must provide that ac-
tional 2-year period. tions under the bond may be brought
(3) The bond must provide that the by the Medicaid agency or by an agent
Surety’s liability to the Medicaid agen- that the Medicaid agency designates.
367
§ 441.16 42 CFR Ch. IV (10–1–17 Edition)
(i) Term and type of bond—(1) Initial that, as of January 1, 1998, meets the
term: Each participating HHA that is criteria for waiver of the requirements
not exempted by paragraph (d) of this of this section but thereafter is deter-
section must submit to the State Med- mined by the Medicaid agency to not
icaid agency a surety bond for a term meet such criteria, must submit a sur-
beginning January 1, 1998. If an annual ety bond to the Medicaid agency within
bond is submitted for the initial term 60 days after it receives notice from the
it must be effective for an annual pe- Medicaid agency that it does not meet
riod specified by the State Medicaid the criteria for waiver.
agency. (6) Change of Surety. An HHA that ob-
(2) Type of bond. The type of bond retains a replacement surety bond from a
quired to be submitted by an HHA, different Surety to cover the remaining
under this section, may be either— term of a previously obtained bond
(i) An annual bond (that is, a bond must submit the new surety bond to
that specifies an effective annual pe- the Medicaid agency within 60 days (or
riod that corresponds to an annual pe- such earlier date as the Medicaid agen-
riod specified by the Medicaid agency); cy may specify) of obtaining the bond
or from the new Surety for a term speci-
(ii) A continuous bond (that is, a fied by the Medicaid agency.
bond that remains in full force and ef- (j) Effect of failure to obtain, maintain,
fect from term to term unless it is ter- and timely file a surety bond. (1) The
minated or canceled as provided for in Medicaid agency must terminate the
the bond or as otherwise provided by HHA’s provider agreement if the HHA
law) that is updated by the Surety for fails to obtain, file timely, and main-
a particular period, via the issuance of tain a surety bond in accordance with
a ‘‘rider,’’ when the bond amount this section and the Medicaid agency’s
changes. For the purposes of this sec- instructions.
tion, ‘‘Rider’’ means a notice issued by
(2) The Medicaid agency must refuse
a Surety that a change to a bond has
to enter into a provider agreement
occurred or will occur. If the HHA has
with an HHA if an HHA seeking to be-
submitted a continuous bond and there
is no increase or decrease in the bond come a participating HHA fails to ob-
amount, no action is necessary by the tain and file timely a surety bond in
HHA to submit a rider as long as the accordance with this section and in-
continuous bond remains in full force structions issued by the State Medicaid
and effect. agency.
(3) HHA that seeks to become a partici- (k) Evidence of compliance. (1) The
pating HHA. (i) An HHA that seeks to Medicaid agency may at any time re-
become a participating HHA must sub- quire an HHA to make a specific show-
mit a surety bond before a provider ing of being in compliance with the re-
agreement described under § 431.107 of quirements of this section and may re-
this subchapter can be entered into. quire the HHA to submit such addi-
(ii) An HHA that seeks to become a tional evidence as the Medicaid agency
participating HHA through the pur- considers sufficient to demonstrate the
chase or transfer of assets or ownership HHA’s compliance.
interest of a participating or formerly (2) The Medicaid agency may termi-
participating HHA must also ensure nate the HHA’s provider agreement or
that the surety bond is effective from refuse to enter into a provider agree-
the date of such purchase or transfer. ment if an HHA fails to timely furnish
(4) Change of ownership. An HHA that sufficient evidence at the Medicaid
undergoes a change of ownership (as agency’s request to demonstrate com-
‘‘change of ownership’’ is defined by pliance with the requirements of this
the State Medicaid agency) must subsection.
mit the surety bond to the State Med- (l) Surety’s standing to appeal Medicaid
icaid agency by such time and for such determinations. The Medicaid agency
term as is specified in the instructions must establish procedures for granting

of the State Medicaid agency. appeal rights to Sureties.
(5) Government-operated HHA that loses (m) Effect of conditions of payment. If
its waiver. A government-operated HHA a Surety has paid the Medicaid agency
368
an amount on the basis of liability in- § 441.18 Case management services.

curred under a bond obtained by an (a) If a State plan provides for case
HHA under this section, and the Med- management services (including tar-
icaid agency subsequently collects geted case management services), as
from the HHA, in whole or in part, on defined in § 440.169 of this chapter, the
such overpayment that was the basis State must meet the following require-
for the Surety’s liability, the Medicaid ments:
agency must reimburse the Surety (1) Allow individuals the free choice
such amount as the Medicaid agency of any qualified Medicaid provider
collected from the HHA, up to the within the specified geographic area
amount paid by the Surety to the Med- identified in the plan when obtaining
icaid agency, provided the Surety has case management services, in accord-
no other liability under the bond. ance with § 431.51 of this chapter, ex-
cept as specified in paragraph (b) of
[63 FR 310, Jan. 5, 1998, as amended at 63 FR this section.
10731, Mar. 4, 1998; 63 FR 29654, June 1, 1998; (2) Not use case management (includ-
63 FR 41170, July 31, 1998] ing targeted case management) serv-
ices to restrict an individual’s access
§ 441.17 Laboratory services.
to other services under the plan.
(a) The plan must provide for pay- (3) Not compel an individual to re-
ment of laboratory services as defined ceive case management services, condi-
in § 440.30 of this subchapter if provided tion receipt of case management (or
by— targeted case management) services on
(1) An independent laboratory that the receipt of other Medicaid services,
meets the requirements for participa- or condition receipt of other Medicaid
tion in the Medicare program found in services on receipt of case management
§ 405.1316 of this chapter; (or targeted case management) serv-
(2) A hospital-based laboratory that ices.
(4) Indicate in the plan that case
meets the requirements for participa-
management services provided in ac-
tion in the Medicare program found in
cordance with section 1915(g) of the Act
§ 482.27 of this chapter; will not duplicate payments made to
(3) A rural health clinic, as defined in public agencies or private entities
§ 491.9 of this chapter; or under the State plan and other pro-
(4) A skilled nursing facility—based gram authorities;
clinical laboratory, as defined in (5) [Reserved]
§ 405.1128(a) of this chapter. (6) Prohibit providers of case man-
(b) Except as provided under para- agement services from exercising the
graph (c), if a laboratory or other enti- agency’s authority to authorize or
ty is requesting payment under Med- deny the provision of other services
icaid for testing for the presence of the under the plan.
human immunodeficiency virus (HIV) (7) Require providers to maintain
antibody or for the isolation and iden- case records that document for all indi-
tification of the HIV causative agent as viduals receiving case management as
described in § 405.1316(f) (2) and (3) of follows:
(i) The name of the individual.
this chapter, the laboratory records
(ii) The dates of the case manage-
must contain the name and other iden-
ment services.
tification of the person from whom the (iii) The name of the provider agency
specimen was taken. (if relevant) and the person providing
(c) An agency may choose to approve the case management service.
the use of alternative identifiers, in (iv) The nature, content, units of the
place of the requirement for patient’s case management services received and
name, in paragraph (b) of this section whether goals specified in the care plan
for HIV antibody or causative agent have been achieved.
testing of Medicaid beneficiaries. (v) Whether the individual has de-

clined services in the care plan.
[54 FR 48647, Dec. 2, 1988. Redesignated at 63
(vi) The need for, and occurrences of,
FR 310, Jan. 5, 1998.]
coordination with other case managers.
369
§ 441.20 42 CFR Ch. IV (10–1–17 Edition)
(vii) A timeline for obtaining needed educational, social, or other services to

services. which an eligible individual has been
(viii) A timeline for reevaluation of referred, including for foster care pro-
the plan. grams, services such as, but not lim-
(8) Include a separate plan amend- ited to, the following:
ment for each group receiving case (1) Research gathering and comple-
management services that includes the tion of documentation required by the
following: foster care program.
(i) Defines the group (and any sub- (2) Assessing adoption placements.
groups within the group) eligible to re- (3) Recruiting or interviewing poten-
ceive the case management services. tial foster care parents.
(ii) Identifies the geographic area to (4) Serving legal papers.
be served. (5) Home investigations.
(iii) Describes the case management (6) Providing transportation.
services furnished, including the types (7) Administering foster care sub-
of monitoring. sidies.
(iv) Specifies the frequency of assess- (8) Making placement arrangements.
ments and monitoring and provides a
(d) After the State assesses whether
justification for those frequencies.
the activities are within the scope of
(v) Specifies provider qualifications
the case management benefit (applying
that are reasonably related to the pop-
the limitations described above), in de-
ulation being served and the case man-
termining the allowable costs for case
agement services furnished.
management (or targeted case manage-
(vi) [Reserved]
ment) services that are also furnished
(vii) Specifies if case management
by another federally-funded program,
services are being provided to Med-
the State must use cost allocation
icaid-eligible individuals who are in in-
methodologies, consistent with OMB
stitutions (except individuals between
Circular A–87, CMS policies, or any
ages 22 and 64 who are served in IMDs
subsequent guidance and reflected in
or individuals who are inmates of pub-
an approved cost allocation plan.
lic institutions).
(9) Include a separate plan amend- [72 FR 68092, Dec. 4, 2007, as amended at 74
ment for each subgroup within a group FR 31196, June 30, 2009]
if any of the following differs among
the subgroups: § 441.20 Family planning services.
(i) The case management services to For beneficiaries eligible under the
be furnished; plan for family planning services, the
(ii) The qualifications of case man- plan must provide that each bene-
agement providers; or ficiary is free from coercion or mental
(iii) The methodology under which pressure and free to choose the method
case management providers will be of family planning to be used.
paid.
(b) If the State limits qualified pro- § 441.21 Nurse-midwife services.
viders of case management services for If a State plan, under § 440.210 or
target groups of individuals with devel- 440.220 of this subchapter, provides for
opmental disability or chronic mental nurse-midwife services, as defined in
illness, in accordance with § 431.51(a)(4) § 440.165, the plan must provide that the
of this chapter, the plan must identify nurse-midwife may enter into an inde-
any limitations to be imposed on the pendent provider agreement, without
providers and specify how these limita- regard to whether the nurse-midwife is
tions enable providers to ensure that under the supervision of, or associated
individuals within the target groups re- with, a physician or other health care
ceive needed services. provider.
(c) Case management does not in-
clude, and FFP is not available in ex- [47 FR 21051, May 17, 1982]
penditures for, services defined in

§ 441.169 of this chapter when the case § 441.22 Nurse practitioner services.
management activities constitute the With respect to nurse practitioner
direct delivery of underlying medical, services that meet the definition of
370
§ 440.166(a) and the requirements of ei- meets the conditions of paragraph (a)
ther § 440.166(b) or § 440.166(c), the State of this section.
plan must meet the following require-
[46 FR 48554, Oct. 1, 1981]
ments:
(a) Provide that nurse practitioner § 441.30 Optometric services.
services are furnished to the categori-
The plan must provide for payment
cally needy.
of optometric services as physician
(b) Specify whether those services are
services, whether furnished by an op-
furnished to the medically needy.
tometrist or a physician, if—
(c) Provide that services furnished by
(a) The plan does not provide for pay-
a nurse practitioner, regardless of ment for services provided by an op-
whether the nurse practitioner is under tometrist, except for eligibility deter-
the supervision of, or associated with, minations under §§ 435.531 and 436.531 of
a physician or other health care pro- this subchapter, but did provide for
vider, may— those services at an earlier period; and
(1) Be reimbursed by the State Med- (b) The plan specifically provides
icaid agency through an independent that physicians’ services include serv-
provider agreement between the State ices an optometrist is legally author-
and the nurse practitioner; or ized to perform.
(2) Be paid through the employing
provider. § 441.35 Organ transplants.
[60 FR 19862, Apr. 21, 1995] (a) FFP is available in expenditures
for services furnished in connection
§ 441.25 Prohibition on FFP for certain with organ transplant procedures only
prescribed drugs. if the State plan includes written
(a) FFP is not available in expendi- standards for the coverage of those pro-
tures for the purchase or administra- cedures, and those standards provide
tion of any drug product that meets all that—
of the following conditions: (1) Similarly situated individuals are
(1) The drug product was approved by treated alike; and
the Food and Drug Administration (2) Any restriction on the practi-
(FDA) before October 10, 1962. tioners or facilities that may provide
(2) The drug product is available only organ transplant procedures is con-
through prescription. sistent with the accessibility of high
quality care to individuals eligible for
(3) The drug product is the subject of
the procedures under the plan.
a notice of opportunity for hearing
(b) Nothing in paragraph (a) permits
issued under section 505(e) of the Fed-
a State to provide, under its plan, serv-
eral Food, Drug, and Cosmetic Act and
ices that are not reasonable in amount,
published in the FEDERAL REGISTER on duration, and scope to achieve their
a proposed order of FDA to withdraw purpose.
its approval for the drug product be-
cause it has determined that the prod- [56 FR 8851, Mar. 1, 1991]
uct is less than effective for all its la-
beled indications. § 441.40 End-stage renal disease.
(4) The drug product is presently not FFP in expenditures for services de-
subject to a determination by FDA, scribed in subpart A of part 440 is avail-
made under its efficacy review program able for facility treatment of end-stage
(see 21 CFR 310.6 for an explanation of renal disease only if the facility has
this program), that there is a compel- been approved by the Secretary to fur-
ling justification of the drug product’s nish those services under Medicare.
medical need. This requirement for approval of the
(b) FFP is not available in expendi- facility does not apply under emer-
gency conditions permitted under
tures for the purchase or administra-

tion of any drug product that is iden- Medicare (see § 482.2 of this chapter).
tical, related, or similar, as defined in [43 FR 45229, Sept. 29, 1978, as amended at 51
21 CFR 310.6, to a drug product that FR 22041, June 17, 1986]
371
§ 441.50 42 CFR Ch. IV (10–1–17 Edition)
Subpart B—Early and Periodic not read or understand the English lan-
Screening, Diagnosis, and guage.
Treatment (EPSDT) of Individ- (4) Provide assurance to CMS that
uals Under Age 21 processes are in place to effectively in-
form individuals as required under this
paragraph, generally, within 60 days of
SOURCE: 49 FR 43666, Oct. 31, 1984, unless the individual’s initial Medicaid eligi-
otherwise noted.
bility determination and in the case of
§ 441.50 Basis and purpose. families which have not utilized
EPSDT services, annually thereafter.
This subpart implements sections (b) Screening. (1) The agency must
1902(a)(43) and 1905(a)(4)(B) of the So- provide to eligible EPSDT beneficiaries
cial Security Act, by prescribing State who request it, screening (periodic
plan requirements for providing early comprehensive child health assess-
and periodic screening and diagnosis of ments); that is, regularly scheduled ex-
eligible Medicaid beneficiaries under aminations and evaluations of the gen-
age 21 to ascertain physical and mental eral physical and mental health,
defects, and providing treatment to growth, development, and nutritional
correct or ameliorate defects and status of infants, children, and youth.
chronic conditions found. (See paragraph (c)(3) of this section for
requirements relating to provision of
§ 441.55 State plan requirements. immunization at the time of screen-
A State plan must provide that the ing.) As a minimum, these screenings
Medicaid agency meets the require- must include, but are not limited to:
ments of §§ 441.56–441.62, with respect to (i) Comprehensive health and devel-
EPSDT services, as defined in § 440.40(b) opmental history.
of this subchapter. (ii) Comprehensive unclothed phys-
ical examination.
§ 441.56 Required activities. (iii) Appropriate vision testing.
(a) Informing. The agency must— (iv) Appropriate hearing testing.
(1) Provide for a combination of writ- (v) Appropriate laboratory tests.
ten and oral methods designed to in- (vi) Dental screening services fur-
form effectively all EPSDT eligible in- nished by direct referral to a dentist
dividuals (or their families) about the for children beginning at 3 years of age.
EPSDT program. An agency may request from CMS an
(2) Using clear and nontechnical lan- exception from this age requirement
guage, provide information about the (within an outer limit of age 5) for a
following— two year period and may request addi-
(i) The benefits of preventive health tional two year exceptions. If an agen-
care; cy requests an exception, it must dem-
(ii) The services available under the onstrate to CMS’s satisfaction that
EPSDT program and where and how to there is a shortage of dentists that pre-
obtain those services; vents the agency from meeting the age
(iii) That the services provided under 3 requirement.
the EPSDT program are without cost (2) Screening services in paragraph
to eligible individuals under 18 years of (b)(1) of this section must be provided
age, and if the agency chooses, to those in accordance with reasonable stand-
18 or older, up to age 21, except for any ards of medical and dental practice de-
enrollment fee, premium, or similar termined by the agency after consulta-
charge that may be imposed on medi- tion with recognized medical and den-
cally needy beneficiaries; and tal organizations involved in child
(iv) That necessary transportation health care.
and scheduling assistance described in (c) Diagnosis and treatment. In addi-
§ 441.62 of this subpart is available to tion to any diagnostic and treatment
the EPSDT eligible individual upon re- services included in the plan, the agen-
quest. cy must provide to eligible EPSDT
(3) Effectively inform those individ- beneficiaries, the following services,
uals who are blind or deaf, or who can- the need for which is indicated by
372
screening, even if the services are not (a) Meets reasonable standards of
included in the plan— medical and dental practice deter-
(1) Diagnosis of and treatment for de- mined by the agency after consultation
fects in vision and hearing, including with recognized medical and dental or-
eyeglasses and hearing aids; ganizations involved in child health
(2) Dental care, at as early an age as care;
necessary, needed for relief of pain and (b) Specifies screening services appli-
infections, restoration of teeth and cable at each stage of the beneficiary’s
maintenance of dental health; and life, beginning with a neonatal exam-
(3) Appropriate immunizations. (If it ination, up to the age at which an indi-
is determined at the time of screening vidual is no longer eligible for EPSDT
that immunization is needed and ap- services; and
propriate to provide at the time of (c) At the agency’s option, provides
screening, then immunization treat- for needed screening services as deter-
ment must be provided at that time.) mined by the agency, in addition to the
(d) Accountability. The agency must otherwise applicable screening services
maintain as required by §§ 431.17 and specified under paragraph (b) of this
431.18— section.
(1) Records and program manuals;
§ 441.59 Treatment of requests for
(2) A description of its screening EPSDT screening services.
package under paragraph (b) of this
section; and (a) The agency must provide the
(3) Copies of rules and policies de- screening services described in
scribing the methods used to assure § 441.56(b) upon the request of an eligi-
that the informing requirement of ble beneficiary.
paragraph (a)(1) of this section is met. (b) To avoid duplicate screening serv-
(e) Timeliness. With the exception of ices, the agency need not provide re-
the informing requirements specified quested screening services to an
in paragraph (a) of this section, the EPSDT eligible if written verification
agency must set standards for the exists that the most recent age-appro-
timely provision of EPSDT services priate screening services, due under the
which meet reasonable standards of agency’s periodicity schedule, have al-
medical and dental practice, as deter- ready been provided to the eligible.
mined by the agency after consultation § 441.60 Continuing care.
with recognized medical and dental or-
ganizations involved in child health (a) Continuing care provider. For pur-
care, and must employ processes to en- poses of this subpart, a continuing care
sure timely initiation of treatment, if provider means a provider who has an
required, generally within an outer agreement with the Medicaid agency to
limit of 6 months after the request for provide reports as required under para-
screening services. graph (b) of this section and to provide
at least the following services to eligi-
[49 FR 43666, Oct. 31, 1984; 49 FR 45431, Nov. ble EPSDT beneficiaries formally en-
16, 1984] rolled with the provider:
§ 441.57 Discretionary services. (1) With the exception of dental serv-
ices required under § 441.56, screening,
Under the EPSDT program, the agen- diagnosis, treatment, and referral for
cy may provide for any other medical follow-up services as required under
or remedial care specified in part 440 of this subpart.
this subchapter, even if the agency (2) Maintenance of the beneficiary’s
does not otherwise provide for these consolidated health history, including
services to other beneficiaries or pro- information received from other pro-
vides for them in a lesser amount, du- viders.
ration, or scope. (3) Physicians’ services as needed by
the beneficiary for acute, episodic or
§ 441.58 Periodicity schedule.
chronic illnesses or conditions.

The agency must implement a perio- (4) At the provider’s option, provision
dicity schedule for screening services of dental services required under
that— § 441.56 or direct referral to a dentist to
373
§ 441.61 42 CFR Ch. IV (10–1–17 Edition)
provide dental services required under § 441.61 Utilization of providers and

§ 441.56(b)(1)(vi). The provider must coordination with related pro-
specify in the agreement whether den- grams.
tal services or referral for dental serv- (a) The agency must provide referral
ices are provided. If the provider does assistance for treatment not covered
not choose to provide either service, by the plan, but found to be needed as
then the provider must refer bene- a result of conditions disclosed during
ficiaries to the agency to obtain those screening and diagnosis. This referral
dental services required under § 441.56. assistance must include giving the
(5) At the provider’s option, provision family or beneficiary the names, ad-
of all or part of the transportation and dresses, and telephone numbers of pro-
scheduling assistance as required under viders who have expressed a willingness
§ 441.62. The provider must specify in to furnish uncovered services at little
the agreement the transportation and or no expense to the family.
scheduling assistance to be furnished. (b) The agency must make available
a variety of individual and group pro-
If the provider does not choose to pro-
viders qualified and willing to provide
vide some or all of the assistance, then
EPSDT services.
the provider must refer beneficiaries to
(c) The agency must make appro-
the agency to obtain the transpor- priate use of State health agencies,
tation and scheduling assistance re- State vocational rehabilitation agen-
quired under § 441.62. cies, and Title V grantees (Maternal
(b) Reports. A continuing care pro- and Child Health/Crippled Children’s
vider must provide to the agency any Services). Further, the agency should
reports that the agency may reason- make use of other public health, men-
ably require. tal health, and education programs and
(c) State monitoring. If the State plan related programs, such as Head Start,
provides for agreements with con- Title XX (Social Services) programs,
tinuing care providers, the agency and the Special Supplemental Food
must employ methods described in the Program for Women, Infants and Chil-
State plan to assure the providers’ dren (WIC), to ensure an effective child
compliance with their agreements. health program.
(d) Effect of agreement with continuing
§ 441.62 Transportation and sched-
care providers. Subject to the require- uling assistance.
ments of paragraphs (a), (b), and (c) of
this section, CMS will deem the agency The agency must offer to the family
or beneficiary, and provide if the bene-
to meet the requirements of this sub-
ficiary requests—
part with respect to all EPSDT eligible
(a) Necessary assistance with trans-
beneficiaries formally enrolled with
portation as required under § 431.53 of
the continuing care provider. To be for- this chapter; and
mally enrolled, a beneficiary or bene- (b) Necessary assistance with sched-
ficiary’s family agrees to use one con- uling appointments for services.
tinuing care provider to be a regular
source of the described set of services
for a stated period of time. Both the
Subpart C—Medicaid for Individ-
beneficiary and the provider must sign
uals Age 65 or Over in Institu-
statements that reflect their obligations for Mental Diseases
tions under the continuing care ar-
rangement. SOURCE: 44 FR 17940, Mar. 23, 1979, unless
otherwise noted.
(e) If the agreement in paragraph (a)
of this section does not provide for all § 441.100 Basis and purpose.
or part of the transportation and
This subpart implements section
scheduling assistance required under
1905(a)(14) of the Act, which authorizes
§ 441.62, or for dental service under
State plans to provide for inpatient

§ 441.56, the agency must provide for hospital services, skilled nursing serv-
those services to the extent they are ices, and intermediate care facility
not provided for in the agreement. services for individuals age 65 or older
374
in an institution for mental diseases, (2) In Guam, Puerto Rico, and the
and sections 1902(a)(20)(B) and (C) and Virgin Islands, make available appro-
1902(a)(21), which prescribe the condi- priate social services authorized under
tions a State must meet to offer these sections 3(a)(4) (i) and (ii) or
services. (See § 431.620 of this sub- 1603(a)(4)(A) (i) and (ii) of the Act.
chapter for regulations implementing
section 1902(a)(20)(A), which prescribe § 441.105 Methods of administration.
interagency requirements related to The agency must have methods of ad-
these services.) ministration to ensure that its respon-
sibilities under this subpart are met.
§ 441.101 State plan requirements.
A State plan that includes Medicaid § 441.106 Comprehensive mental
for individuals age 65 or older in insti- health program.
tutions for mental diseases must pro- (a) If the plan includes services in
vide that the requirements of this sub- public institutions for mental diseases,
part are met. the agency must show that the State is
making satisfactory progress in devel-
§ 441.102 Plan of care for institutional-
ized beneficiaries. oping and implementing a comprehen-
sive mental health program.
(a) The Medicaid agency must pro- (b) The program must—
vide for a recorded individual plan of (1) Cover all ages;
treatment and care to ensure that in-
(2) Use mental health and public wel-
stitutional care maintains the bene-
fare resources; including—
ficiary at, or restores him to, the
(i) Community mental health cen-
greatest possible degree of health and
ters;
independent functioning.
(b) The plan must include— (ii) Nursing homes; and
(1) An initial review of the bene- (iii) Other alternatives to public in-
ficiary’s medical, psychiatric, and so- stitutional care; and
cial needs— (3) Include joint planning with State
(i) Within 90 days after approval of authorities.
the State plan provision for services in (c) The agency must submit annual
institutions for mental disease; and progress reports within 3 months after
(ii) After that period, within 30 days the end of each fiscal year in which
after the date payments are initiated Medicaid is provided under this sub-
for services provided a beneficiary. part.
(2) Periodic review of the bene-
ficiary’s medical, psychiatric, and so- Subpart D—Inpatient Psychiatric
cial needs; Services for Individuals Under
(3) A determination, at least quar- Age 21 in Psychiatric Facilities
terly, of the beneficiary’s need for con- or Programs
tinued institutional care and for alter-
native care arrangements; § 441.150 Basis and purpose.
(4) Appropriate medical treatment in
the institution; and This subpart specifies requirements
(5) Appropriate social services. applicable if a State provides inpatient
psychiatric services to individuals
§ 441.103 Alternate plans of care. under age 21, as defined in § 440.160 of
(a) The agency must develop alter- this subchapter and authorized under
nate plans of care for each beneficiary section 1905 (a)(16) and (h) of the Act.
age 65 or older who would otherwise § 441.151 General requirements.
need care in an institution for mental
diseases. (a) Inpatient psychiatric services for
(b) These alternate plans of care individuals under age 21 must be:
must— (1) Provided under the direction of a
physician;
(1) Make maximum use of available

resources to meet the beneficiary’s (2) Provided by—
medical, social, and financial needs; (i) A psychiatric hospital that under-
and goes a State survey to determine
375
§ 441.152 42 CFR Ch. IV (10–1–17 Edition)
whether the hospital meets the re- (2) Proper treatment of the bene-
quirements for participation in Medi- ficiary’s psychiatric condition requires
care as a psychiatric hospital as speci- services on an inpatient basis under
fied in § 482.60 of this chapter, or is ac- the direction of a physician; and
credited by a national organization (3) The services can reasonably be ex-
whose psychiatric hospital accrediting pected to improve the beneficiary’s
program has been approved by CMS; or condition or prevent further regression
a hospital with an inpatient psy- so that the services will no longer be
chiatric program that undergoes a needed.
State survey to determine whether the (b) The certification specified in this
hospital meets the requirements for section and in § 441.153 satisfies the uti-
participation in Medicare as a hospital, lization control requirement for physi-
as specified in part 482 of this chapter, cian certification in §§ 456.60, 456.160,
or is accredited by a national accred- and 456.360 of this subchapter.
iting organization whose hospital ac-
crediting program has been approved [43 FR 45229, Sept. 29, 1978, as amended at 61
by CMS. FR 38398, July 24, 1996]
(ii) A psychiatric facility that is not § 441.153 Team certifying need for
a hospital and is accredited by the services.
Joint Commission on Accreditation of
Healthcare Organizations, the Commis- Certification under § 441.152 must be
sion on Accreditation of Rehabilitation made by terms specified as follows:
Facilities, the Council on Accredita- (a) For an individual who is a bene-
tion of Services for Families and Chil- ficiary when admitted to a facility or
dren, or by any other accrediting orga- program, certification must be made
nization with comparable standards by an independent team that—
that is recognized by the State. (1) Includes a physician;
(3) Provided before the individual (2) Has competence in diagnosis and
reaches age 21, or, if the individual was treatment of mental illness, preferably
receiving the services immediately be- in child psychiatry; and
fore he or she reached age 21, before the (3) Has knowledge of the individual’s
earlier of the following— situation.
(i) The date the individual no longer (b) For an individual who applies for
requires the services; or Medicaid while in the facility of pro-
(ii) The date the individual reaches gram, the certification must be—
22; and (1) Made by the team responsible for
(4) Certified in writing to be nec- the plan of care as specified in § 441.156;
essary in the setting in which the serv- and
ices will be provided (or are being pro- (2) Cover any period before applica-
vided in emergency circumstances) in tion for which claims are made.
accordance with § 441.152. (c) For emergency admissions, the
(b) Inpatient psychiatric services fur- certification must be made by the
nished in a psychiatric residential team responsible for the plan of care
treatment facility as defined in § 483.352 (§ 441.156) within 14 days after admis-
of this chapter, must satisfy all re- sion.
quirements in subpart G of part 483 of
this chapter governing the use of re- § 441.154 Active treatment.
straint and seclusion. Inpatient psychiatric services must
[66 FR 7160, Jan. 22, 2001, as amended at 75 involve ‘‘active treatment’’, which
FR 50418, Aug. 16, 2010] means implementation of a profes-
sionally developed and supervised indi-
§ 441.152 Certification of need for serv- vidual plan of care, described in
ices. § 441.155 that is—
(a) A team specified in § 441.154 must (a) Developed and implemented no
certify that— later than 14 days after admission; and

(1) Ambulatory care resources avail- (b) Designed to achieve the bene-
able in the community do not meet the ficiary’s discharge from inpatient sta-
treatment needs of the beneficiary; tus at the earliest possible time.
376
§ 441.155 Individual plan of care. other personnel who are employed by,
(a) ‘‘Individual plan of care’’ means a or provide services to patients in, the
written plan developed for each bene- facility.
ficiary in accordance with §§ 456.180 and (b) Based on education and experi-
456.181 of this chapter, to improve his ence, preferably including competence
condition to the extent that inpatient in child psychiatry, the team must be
care is no longer necessary. capable of—
(b) The plan of care must— (1) Assessing the beneficiary’s imme-
(1) Be based on a diagnostic evalua- diate and long-range therapeutic needs,
tion that includes examination of the developmental priorities, and personal
medical, psychological, social, behav- strengths and liabilities;
ioral and developmental aspects of the (2) Assessing the potential resources
beneficiary’s situation and reflects the of the beneficiary’s family;
need for inpatient psychiatric care; (3) Setting treatment objectives; and
(2) Be developed by a team of profes- (4) Prescribing therapeutic modali-
sionals specified under § 441.156 in con- ties to achieve the plan’s objectives.
sultation with the beneficiary; and his (c) The team must include, as a min-
parents, legal guardians, or others in imum, either—
whose care he will be released after dis- (1) A Board-eligible or Board-cer-
charge; tified psychiatrist;
(3) State treatment objectives; (2) A clinical psychologist who has a
(4) Prescribe an integrated program doctoral degree and a physician li-
of therapies, activities, and experiences censed to practice medicine or osteop-
designed to meet the objectives; and athy; or
(5) Include, at an appropriate time, (3) A physician licensed to practice
post-discharge plans and coordination medicine or osteopathy with special-
of inpatient services with partial dis- ized training and experience in the di-
charge plans and related community agnosis and treatment of mental dis-
services to ensure continuity of care eases, and a psychologist who has a
with the beneficiary’s family, school,
master’s degree in clinical psychology
and community upon discharge.
or who has been certified by the State
(c) The plan must be reviewed every
or by the State psychological associa-
30 days by the team specified in
tion.
§ 441.156 to—
(1) Determine that services being pro- (d) The team must also include one of
vided are or were required on an inpa- the following:
tient basis, and (1) A psychiatric social worker.
(2) Recommend changes in the plan (2) A registered nurse with special-
as indicated by the beneficiary’s over- ized training or one year’s experience
all adjustment as an inpatient. in treating mentally ill individuals.
(d) The development and review of (3) An occupational therapist who is
the plan of care as specified in this sec- licensed, if required by the State, and
tion satisfies the utilization control re- who has specialized training or one
quirements for— year of experience in treating mentally
(1) Recertification under §§ 456.60(b), ill individuals.
456.160(b), and 456.360(b) of this sub- (4) A psychologist who has a master’s
chapter; and degree in clinical psychology or who
(2) Establishment and periodic review has been certified by the State or by
of the plan of care under §§ 456.80, the State psychological association.
456.180, and 456.380 of this subchapter.
§ 441.180 Maintenance of effort: Gen-
[43 FR 45229, Sept. 29, 1978, as amended at 46 eral rule.
FR 48560, Oct. 1, 1981; 61 FR 38398, July 24,
1996] FFP is available only if the State
maintains fiscal effort as prescribed
§ 441.156 Team developing individual under this subpart.
plan of care.
(a) The individual plan of care under § 441.181 Maintenance of effort: Expla-
§ 441.155 must be developed by an inter- nation of terms and requirements.
disciplinary team of physicians and (a) For purposes of § 441.182:
377
§ 441.182 42 CFR Ch. IV (10–1–17 Edition)
(1) The base year is the 4-quarter pe- under age 21, in any calendar quarter,
riod ending December 31, 1971. FFP is available only to the extent
(2) Quarterly per capita non-Federal that the total State Medicaid expendi-
expenditures are expenditures for inpa- tures in the current quarter for inpa-
tient psychiatric services determined tient psychiatric services and out-
by reimbursement principles under patient psychiatric treatment for indi-
Medicare. (See part 405, subpart D.) viduals under age 21 exceed the sum of
(3) The number of individuals receiv- the following:
ing inpatient psychiatric services in (1) The total number of individuals
the current quarter means— receiving inpatient psychiatric services
(i) The number of individuals receiv- in the current quarter times the aver-
ing services for the full quarter; plus age quarterly per capita non-Federal
(ii) The full quarter composite num- expenditures for the base year; and
ber of individuals receiving services for (2) The average non-Federal quar-
less than a full quarter. terly expenditures for the base year for
(4) In determining the per capita ex- outpatient psychiatric services for in-
penditures for the base year, the Med- dividuals under age 21.
icaid agency must compute the number (b) FFP is available for 100 percent of
of individuals receiving services in a the increase in expenditures over the
manner similar to that in paragraph base year period, but may not exceed
(a)(3) of this section. the Federal medical assistance per-
(5) Non-Federal expenditures means centage times the expenditures under
the total amount of funds expended by this subpart for inpatient psychiatric
the State and its political subdivisions, services for individuals under age 21.
excluding Federal funds received di-
rectly or indirectly from any source. § 441.184 Emergency preparedness.
(6) Expenditures for the current cal- The Psychiatric Residential Treat-
endar quarter exclude Federal funds re- ment Facility (PRTF) must comply
ceived directly or indirectly from any with all applicable Federal, State, and
source. local emergency preparedness require-
(b) As a basis for determining the ments. The PRTF must establish and
correct amount of Federal payments, maintain an emergency preparedness
each State must submit estimated and program that meets the requirements
actual cost data and other information of this section. The emergency pre-
necessary for this purpose in the form paredness program must include, but
and at the times specified in this sub- not be limited to, the following ele-
chapter and by CMS guidelines. ments:
(c) The agency must have on file ade- (a) Emergency plan. The PRTF must
quate records to substantiate compli- develop and maintain an emergency
ance with the requirements of § 441.182 preparedness plan that must be re-
and to ensure that all necessary adjust- viewed, and updated at least annually.
ments have been made. The plan must do the following:
(d) Facilities that did not meet the (1) Be based on and include a docu-
requirements of §§ 441.151–441.156 in the mented, facility-based and community-
base year, but are providing inpatient based risk assessment, utilizing an all-
psychiatric services under those sec- hazards approach.
tions in the current quarter, must be (2) Include strategies for addressing
included in the maintenance of effort emergency events identified by the
computation if, during the base year, risk assessment.
they were— (3) Address resident population, in-
(1) Providing inpatient psychiatric cluding, but not limited to, persons at-
services for individuals under age 21; risk; the type of services the PRTF has
and the ability to provide in an emergency;
(2) Receiving State aid. and continuity of operations, including
delegations of authority and succession
§ 441.182 Maintenance of effort: Com-
plans.
putation. (4) Include a process for cooperation
(a) For expenditures for inpatient and collaboration with local, tribal, re-
psychiatric services for individuals gional, State, and Federal emergency
378
preparedness officials’ efforts to main- (6) The use of volunteers in an emer-

tain an integrated response during a gency or other emergency staffing
disaster or emergency situation, in- strategies, including the process and
cluding documentation of the PRTF’s role for integration of State and Feder-
efforts to contact such officials and, ally designated health care profes-
when applicable, of its participation in sionals to address surge needs during
collaborative and cooperative planning an emergency.
efforts. (7) The development of arrangements
(b) Policies and procedures. The PRTF with other PRTFs and other providers
must develop and implement emer- to receive residents in the event of lim-
gency preparedness policies and proce- itations or cessation of operations to
dures, based on the emergency plan set maintain the continuity of services to
forth in paragraph (a) of this section, PRTF residents.
risk assessment at paragraph (a)(1) of (8) The role of the PRTF under a
this section, and the communication waiver declared by the Secretary, in
plan at paragraph (c) of this section. accordance with section 1135 of Act, in
The policies and procedures must be re- the provision of care and treatment at
viewed and updated at least annually. an alternate care site identified by
At a minimum, the policies and proce- emergency management officials.
dures must address the following: (c) Communication plan. The PRTF
(1) The provision of subsistence needs must develop and maintain an emer-
for staff and residents, whether they gency preparedness communication
evacuate or shelter in place, include, plan that complies with Federal, State,
but are not limited to the following: and local laws and must be reviewed
(i) Food, water, medical, and pharma- and updated at least annually. The
ceutical supplies. communication plan must include all
(ii) Alternate sources of energy to of the following:
maintain the following: (1) Names and contact information
(A) Temperatures to protect resident for the following:
health and safety and for the safe and (i) Staff.
sanitary storage of provisions. (ii) Entities providing services under
(B) Emergency lighting. arrangement.
(C) Fire detection, extinguishing, and
(iii) Residents’ physicians.
alarm systems.
(iv) Other PRTFs.
(D) Sewage and waste disposal.
(2) A system to track the location of (v) Volunteers.
on-duty staff and sheltered residents in (2) Contact information for the fol-
the PRTF’s care during and after an lowing:
emergency. If on-duty staff and shel- (i) Federal, State, tribal, regional,
tered residents are relocated during the and local emergency preparedness
emergency, the PRTF must document staff.
the specific name and location of the (ii) Other sources of assistance.
receiving facility or other location. (3) Primary and alternate means for
(3) Safe evacuation from the PRTF, communicating with the PRTF’s staff,
which includes consideration of care Federal, State, tribal, regional, and
and treatment needs of evacuees; staff local emergency management agencies.
responsibilities; transportation; identi- (4) A method for sharing information
fication of evacuation location(s); and and medical documentation for resi-
primary and alternate means of com- dents under the PRTF’s care, as nec-
munication with external sources of as- essary, with other health care pro-
sistance. viders to maintain the continuity of
(4) A means to shelter in place for care.
residents, staff, and volunteers who re- (5) A means, in the event of an evacu-
main in the facility. ation, to release resident information
(5) A system of medical documenta- as permitted under 45 CFR
tion that preserves resident informa- 164.510(b)(1)(ii).

tion, protects confidentiality of resi- (6) A means of providing information
dent information, and secures and about the general condition and loca-
maintains the availability of records. tion of residents under the facility’s
379
§ 441.184 42 CFR Ch. IV (10–1–17 Edition)
care as permitted under 45 CFR lem statements, directed messages, or

164.510(b)(4). prepared questions designed to chal-
(7) A means of providing information lenge an emergency plan.
about the PRTF’s occupancy, needs, (iii) Analyze the PRTF’s response to
and its ability to provide assistance, to and maintain documentation of all
the authority having jurisdiction, the drills, tabletop exercises, and emer-
Incident Command Center, or designee. gency events and revise the PRTF’s
(d) Training and testing. The PRTF emergency plan, as needed.
must develop and maintain an emer- (e) Integrated healthcare systems. If a
gency preparedness training program PRTF is part of a healthcare system
that is based on the emergency plan set consisting of multiple separately cer-
forth in paragraph (a) of this section, tified healthcare facilities that elects
risk assessment at paragraph (a)(1) of to have a unified and integrated emer-
this section, policies and procedures at gency preparedness program, the PRTF
paragraph (b) of this section, and the may choose to participate in the
communication plan at paragraph (c) healthcare system’s coordinated emer-
of this section. The training and test- gency preparedness program. If elected,
ing program must be reviewed and up- the unified and integrated emergency
dated at least annually. preparedness program must do the fol-
(1) Training program. The PRTF must lowing:
do all of the following: (1) Demonstrate that each separately
(i) Provide initial training in emer- certified facility within the system ac-
gency preparedness policies and proce- tively participated in the development
dures to all new and existing staff, in- of the unified and integrated emer-
dividuals providing services under ar- gency preparedness program.
rangement, and volunteers, consistent (2) Be developed and maintained in a
with their expected roles. manner that takes into account each
(ii) After initial training, provide separately certified facility’s unique
emergency preparedness training at circumstances, patient populations,
least annually. and services offered.
(iii) Demonstrate staff knowledge of (3) Demonstrate that each separately
emergency procedures. certified facility is capable of actively
(iv) Maintain documentation of all using the unified and integrated emer-
emergency preparedness training. gency preparedness program and is in
(2) Testing. The PRTF must conduct compliance with the program.
exercises to test the emergency plan. (4) Include a unified and integrated
The PRTF must do the following: emergency plan that meets the require-
(i) Participate in a full-scale exercise ments of paragraphs (a)(2), (3), and (4)
that is community-based or when a of this section. The unified and inte-
community-based exercise is not acces- grated emergency plan must also be
sible, an individual, facility-based. If based on and include the following:
the PRTF experiences an actual nat- (i) A documented community-based
ural or man-made emergency that re- risk assessment, utilizing an all-haz-
quires activation of the emergency ards approach.
plan, the PRTF is exempt from engag- (ii) A documented individual facility-
ing in a community-based or indi- based risk assessment for each sepa-
vidual, facility-based full-scale exer- rately certified facility within the
cise for 1 year following the onset of health system, utilizing an all-hazards
the actual event. approach.
(ii) Conduct an additional exercise
(5) Include integrated policies and
that may include, but is not limited to
procedures that meet the requirements
the following:
set forth in paragraph (b) of this sec-
(A) A second full-scale exercise that
tion, a coordinated communication
is community-based or individual, fa-
plan and training and testing programs
cility-based.
that meet the requirements of para-
(B) A tabletop exercise that includes

graphs (c) and (d) of this section, re-
a group discussion led by a facilitator,
spectively.
using a narrated, clinically-relevant
emergency scenario, and a set of prob- [81 FR 64025, Sept. 16, 2016]
380
Subpart E—Abortions tion of the fertilized ovum and for med-

ical procedures necessary for the ter-
§ 441.200 Basis and purpose. mination of an ectopic pregnancy.
This subpart implements section 402
§ 441.208 Recordkeeping requirements.
of Pub. L. 97–12, and subsequent laws
that appropriate funds for the Medicaid Medicaid agencies must maintain
program, including section 204 of Pub. copies of the certifications and docu-
L. 98–619. All of these laws prohibit the mentation specified in § 441.203 for 3
use of Federal funds to pay for abor- years under the recordkeeping require-
tions except when continuation of the ments at 45 CFR 75.361.
pregnancy would endanger the moth-
er’s life. FR 3011, Jan. 20, 2016]
[52 FR 47935, Dec. 17, 1987]
Subpart F—Sterilizations
§ 441.201 Definition.
As used in this subpart, ‘‘physician’’ SOURCE: 43 FR 52171, Nov. 8, 1978, unless
means a doctor of medicine or osteop- otherwise noted.
athy who is licensed to practice in the
State. § 441.250 Applicability.
[52 FR 47935, Dec. 17, 1987] This subpart applies to sterilizations
and hysterectomies reimbursed under
§ 441.202 General rule. Medicaid.
FFP is not available in expenditures
for an abortion unless the conditions § 441.251 Definitions.
specified in §§ 441.203 and 441.206 are As used in this subpart:
met. Hysterectomy means a medical proce-
[52 FR 47935, Dec. 17, 1987] dure or operation for the purpose of re-
moving the uterus.
§ 441.203 Life of the mother would be Institutionalized individual means an
endangered. individual who is (a) involuntarily con-
FFP is available in expenditures for fined or detained, under a civil or
an abortion when a physician has criminal statute, in a correctional or
found, and certified in writing to the rehabilitative facility, including a
Medicaid agency, that on the basis of mental hospital or other facility for
his professional judgment, the life of the care and treatment of mental ill-
the mother would be endangered if the ness; or (b) confined, under a voluntary
fetus were carried to term. The certifi- commitment, in a mental hospital or
cation must contain the name and ad- other facility for the care and treat-
dress of the patient. ment of mental illness.
Mentally incompetent individual means
§§ 441.204–441.205 [Reserved] an individual who has been declared
mentally incompetent by a Federal,
§ 441.206 Documentation needed by State, or local court of competent ju-
risdiction for any purpose, unless the
FFP is not available in any expendi- individual has been declared competent
tures for abortions or other medical for purposes which include the ability
procedures otherwise provided for to consent to sterilization.
under § 441.203 if the Medicaid agency Sterilization means any medical pro-
has paid without first having received cedure, treatment, or operation for the
the certifications and documentation purpose of rendering an individual per-
specified in that section. manently incapable of reproducing.
[52 FR 47935, Dec. 17, 1987]
§ 441.207 Drugs and devices and termi-
A State plan must provide that the

nation of ectopic pregnancies. Medicaid agency will make payment
FFP is available in expenditures for under the plan for sterilization proce-
drugs or devices to prevent implanta- dures and hysterectomies only if all
381
§ 441.253 42 CFR Ch. IV (10–1–17 Edition)
the requirements of this subpart were informed the individual and her rep-
met. resentative, if any, orally and in writ-
ing, that the hysterectomy will make
§ 441.253 Sterilization of a mentally the individual permanently incapable
competent individual aged 21 or of reproducing; and
older. (2) The individual or her representa-
FFP is available in expenditures for tive, if any, has signed a written ac-
the sterilization of an individual only knowledgment of receipt of that infor-
if— mation.
(a) The individual is at least 21 years (d) Effective on March 8, 1979 or any
old at the time consent is obtained; date thereafter through the date of
(b) The individual is not a mentally publication of these regulations at the
incompetent individual; option of the State, FFP is available
(c) The individual has voluntarily if—
given informed consent in accordance (1) The individual—
with all the requirements precribed in (i) Was already sterile before the
§§ 441.257 and 441.258; and hysterectomy; or
(d) At least 30 days, but not more (ii) Requires a hysterectomy because
than 180 days, have passed between the of a life-threatening emergency situa-
date of informed consent and the date tion in which the physician determines
of the sterilization, except in the case that prior acknowledgment is not pos-
of premature delivery or emergency ab- sible; and
dominal surgery. An individual may (2) The physician who performs the
consent to be sterilized at the time of hysterectomy—
a premature delivery or emergency ab- (i) Certifies in writing that the indi-
dominal surgery, if at least 72 hours vidual was already sterile at the time
have passed since he or she gave in- of the hysterectomy, and states the
formed consent for the sterilization. In cause of the sterility; or
the case of premature delivery, the in- (ii) Certifies in writing that the
formed consent must have been given hysterectomy was performed under a
at least 30 days before the expected life-threatening emergency situation
date of delivery. in which he or she determined prior ac-
knowledgment was not possible. He or
§ 441.254 Mentally incompetent or in- she must also include a description of
stitutionalized individuals. the nature of the emergency.
FFP is not available for the steriliza- (e) Effective March 8, 1979, or any
tion of a mentally incompetent or in- date thereafter through the date of
stitutionalized individual. publication of these regulations at the
option of the State, FFP is available
§ 441.255 Sterilization by for hysterectomies performed during a
hysterectomy. period of an individual’s retroactive
(a) FFP is not available in expendi- Medicaid eligibility if the physician
tures for a hysterectomy if— who performed the hysterectomy cer-
(1) It was performed solely for the tifies in writing that—
purpose of rendering an individual per- (1) The individual was informed be-
manently incapable of reproducing; or fore the operation that the
(2) If there was more than one pur- hysterectomy would make her perma-
pose to the procedure, it would not nently incapable of reproducing; or
have been performed but for the pur- (2) One of the conditions in paragraph
pose of rendering the individual perma- (d)(1) of this section was met. The phy-
nently incapable of reproducing. sician must supply the information
(b) FFP is available in expenditures specified in paragraph (d)(2) of this sec-
for a hysterectomy not covered by tion.
paragraph (a) of this section only under [47 FR 33702, Aug. 4, 1982]
the conditions specified in paragraph
§ 441.256 Additional condition for Fed-
(c), (d), or (e) of this section.

(c) FFP is available if— eral financial participation (FFP).
(1) The person who secured authoriza- (a) FFP is not available in expendi-
tion to perform the hysterectomy has tures for any sterilization or
382
hysterectomy unless the Medicaid (vii) Advice that the sterilization

agency, before making payment, ob- will not be performed for at least 30
tained documentation showing that the days, except under the circumstances
requirements of this subpart were met. specified in § 441.253(c).
This documentation must include a (2) Suitable arrangements were made
consent from, an acknowledgement of to insure that the information speci-
receipt of hysterectomy information or fied in paragraph (a)(1) of this section
a physician’s certification under was effectively communicated to any
§ 441.255(d)(2), as applicable. individual who is blind, deaf, or other-
(b) With regard to the requirements wise handicapped;
of § 441.255(d) for hysterectomies per- (3) An interpreter was provided if the
formed from March 8, 1979 through No- individual to be sterilized did not un-
vember 2, 1982, FFP is available in ex- derstand the language used on the con-
penditures for those services if the doc- sent form or the language used by the
umentation showing that the require- person obtaining consent;
ments of that paragraph were met is (4) The individual to be sterilized was
obtained by the Medicaid agency before permitted to have a witness of his or
submitting a claim for FFP for that her choice present when consent was
procedure. obtained;
(5) The consent form requirements of
[47 FR 33702, Aug. 4, 1982]
§ 441.258 were met; and
§ 441.257 Informed consent. (6) Any additional requirement of
State or local law for obtaining con-
(a) Informing the individual. For pur- sent, except a requirement for spousal
poses of this subpart, an individual has consent, was followed.
given informed consent only if— (b) When informed consent may not be
(1) The person who obtained consent obtained. Informed consent may not be
for the sterilization procedure offered obtained while the individual to be
to answer any questions the individual sterilized is—
to be sterilized may have concerning (1) In labor or childbirth;
the procedure, provided a copy of the (2) Seeking to obtain or obtaining an
consent form and provided orally all of abortion; or
the following information or advice to (3) Under the influence of alcohol or
the individual to be sterilized: other substances that affect the indi-
(i) Advice that the individual is free vidual’s state of awareness.
to withhold or withdraw consent to the
procedure at any time before the steri- § 441.258 Consent form requirements.
lization without affecting the right to (a) Content of consent form. The con-
future care or treatment and without sent form must be a copy of the form
loss or withdrawal of any federally appended to this subpart or another
funded program benefits to which the form approved by the Secretary.
individual might be otherwise entitled. (b) Required signatures. The consent
(ii) A description of available alter- form must be signed and dated by—
native methods of family planning and (1) The individual to be sterilized;
birth control. (2) The interpreter, if one was pro-
(iii) Advice that the sterilization provided;
cedure is considered to be irreversible. (3) The person who obtained the con-
(iv) A thorough explanation of the sent; and
specific sterilization procedure to be (4) The physician who performed the
performed. sterilization procedure.
(v) A full description of the discom- (c) Required certifications. (1) The per-
forts and risks that may accompany or son securing the consent must certify,
follow the performing of the procedure, by signing the consent form, that
including an explanation of the type (i) Before the individual to be steri-
and possible effects of any anesthetic lized signed the consent form, he or she
to be used. advised the individual to be sterilized

(vi) A full description of the benefits that no Federal benefits may be with-
or advantages that may be expected as drawn because of the decision not to be
a result of the sterilization. sterilized;
383
§ 441.259 42 CFR Ch. IV (10–1–17 Edition)
(ii) He or she explained orally the re- part not later than 3 years after its ef-
quirements for informed consent as set fective date.
forth on the consent form; and
(iii) To the best of his or her knowl- APPENDIX TO SUBPART F OF PART 441—
edge and belief, the individual to be REQUIRED CONSENT FORM
sterilized appeared mentally com- NOTICE: Your decision at any time not to
petent and knowingly and voluntarily be sterilized will not result in the with-
consented to be sterilized. drawal or withholding of any benefits pro-
(2) The physician performing the vided by programs or projects receiving Fed-
sterilization must certify, by signing eral funds.
the consent form, that:
CONSENT TO STERILIZATION
(i) Shortly before the performance of
sterilization, he or she advised the in- I have asked for and received information
dividual to be sterilized that no Fed- about sterilization from (doctor or clinic).
eral benefits may be withdrawn be- When I first asked for the information, I was
told that the decision to be sterilized is com-
cause of the decision not to be steri-
pletely up to me. I was told that I could de-
lized; cide not to be sterilized. If I decide not to be
(ii) He or she explained orally the re- sterilized, my decision will not affect my
quirements for informed consent as set right to future care or treatment. I will not
forth on the consent form; and lose any help or benefits from programs re-
(iii) To the best of his or her knowl- ceiving Federal funds, such as A.F.D.C. or
edge and belief, the individual appeared Medicaid that I am now getting or for which
mentally competent and knowingly I may become eligible.
and voluntarily consented to be steri- I understand that the sterilization must be
considered permanent and not reversible. I
lized. have decided that I do not want to become
Except in the case of premature deliv- pregnant, bear children or father children.
ery or emergency abdominal surgery, I was told about those temporary methods
the physician must further certify that of birth control that are available and could
at least 30 days have passed between be provided to me which will allow me to
the date of the individual’s signature bear or father a child in the future. I have re-
jected these alternatives and chosen to be
on the consent form and the date upon sterilized.
which the sterilization was performed. I understand that I will be sterilized by an
(3) In the case of premature delivery operation known as a llllll. The dis-
or emergency abdominal surgery per- comforts, risks and benefits associated with
formed within 30 days of consent, the the operation have been explained to me. All
physician must certify that the steri- my questions have been answered to my sat-
lization was performed less than 30 isfaction.
days, but not less than 72 hours after I understand that the operation will not be
done until at least 30 days after I sign this
informed consent was obtained because
form. I understand that I can change my
of premature delivery or emergency ab- mind at any time and that my decision at
dominal surgery and— any time not to be sterilized will not result
(i) In the case of premature delivery, in the withholding of any benefits or medical
must state the expected date of deliv- services provided by Federally funded pro-
ery; or grams.
(ii) In the case of abdominal surgery, I am at least 21 years of age and was born
must describe the emergency. on (Day) (Month) (Year).
(4) If an interpreter is provided, the I, llllll, hereby consent of my own
free will to be sterilized by llllll by a
interpreter must certify that he or she method called llllll. My consent ex-
translated the information and advice pires 180 days from the date of my signature
presented orally and read the consent below.
form and explained its contents to the I also consent to the release of this form
individual to be sterilized and that, to and other medical records about the oper-
the best of the interpreter’s knowledge ation to:
and belief, the individual understood Representatives of the Department of
what the interpreter told him or her. Health and Human Services or
Employees of programs or projects funded
§ 441.259 Review of regulations. by that Department but only for deter-

mining if Federal laws were observed.
The Secretary will request public I have received a copy of this form. (Signa-
comment on the operation of this sub- ture) (Date) (Month) (Day) (Year).
384
You are requested to supply the following To the best of my knowledge and belief the
information, but it is not required: (Race and individual to be sterilized is at least 21 years
ethnicity designation (please check)) Black old and appears mentally competent. He/She
(not of Hispanic origin); Hispanic; Asian or knowingly and voluntarily requested to be
Pacific Islander; American Indian or Alas- sterilized and appeared to understand the na-
kan native; or White (not of Hispanic origin). ture and consequences of the procedure.
(Instructions for use of alternative final para-
INTERPRETER’S STATEMENT graphs: Use the first paragraph below except
If an interpreter is provided to assist the in the case of premature delivery or emer-
individual to be sterilized: gency abdominal surgery where the steriliza-
I have translated the information and ad- tion is performed less than 30 days after the
vice presented orally to the individual to be date of the individual’s signature on the con-
sterilized by the person obtaining this consent form. In those cases, the second para-
sent. I have also read him/her the consent graph below must be used. Cross out the
form in llllll llllll language and paragraph which is not used.)
explained its contents to him/her. To the (1) At least 30 days have passed between
best of my knowledge and belief he/she un- the date of the individual’s signature on this
derstood this explanation. (Interpreter) consent form and the date the sterilization
(Date). was performed.
(2) This sterilization was performed less
STATEMENT OF PERSON OBTAINING CONSENT than 30 days but more than 72 hours after the
Before (name of individual) signed the con- date of the individual’s signature on this
sent form, I explained to him/her the nature consent form because of the following cir-
of the sterilization operation llllll, cumstances (check applicable box and fill in
the fact that it is intended to be a final and information requested): Premature delivery.
Individual’s expected date of delivery:
irreversible procedure and the discomforts,
llllll
risks and benefits associated with it.
b Emergency abdominal surgery: (de-
I counseled the individual to be sterilized
scribe circumstances):llllll (Physi-
that alternative methods of birth control are
cian) (Date).
available which are temporary. I explained
that sterilization is different because it is
permanent. Subpart G—Home and Commu-
I informed the individual to be sterilized nity-Based Services: Waiver
that his/her consent can be withdrawn at any
time and that he/she will not lose any health
Requirements
services or any benefits provided by Federal
funds. SOURCE: 46 FR 48541, Oct. 1, 1981, unless
To the best of my knowledge and belief the otherwise noted.
individual to be sterilized is at least 21 years
old and appears mentally competent. He/She § 441.300 Basis and purpose.
knowingly and voluntarily requested to be
Section 1915(c) of the Act permits
sterilized and appears to understand the na-
ture and consequence of the procedure. (Sig- States to offer, under a waiver of statu-
nature of person obtaining consent) (Date) tory requirements, an array of home
(Facility) (Address). and community-based services that an
individual needs to avoid institutional-
PHYSICIAN’S STATEMENT
ization. Those services are defined in
Shortly before I performed a sterilization § 440.180 of this subchapter. This sub-
operation upon (Name of individual to be part describes what the Medicaid agen-
sterilized) on (Date of sterilization) (oper- cy must do to obtain a waiver.
ation), I explained to him/her the nature of
the sterilization operation (specify type of § 441.301 Contents of request for a
operation), the fact that it is intended to be waiver.
a final and irreversible procedure and the
discomforts, risks and benefits associated (a) A request for a waiver under this
with it. section must consist of the following:
I counseled the individual to be sterilized (1) The assurances required by
that alternative methods of birth control are § 441.302 and the supporting documenta-
available which are temporary. I explained tion required by § 441.303.
that sterilization is different because it is (2) When applicable, requests for
permanent.
waivers of the requirements of section
I informed the individual to be sterilized
that his/her consent can be withdrawn at any 1902(a)(1), section 1902(a)(10)(B), or sec-
time and that he/she will not lose any health tion 1902(a)(10)(C)(i)(III) of the Act,
services or benefits provided by Federal which concern respectively, statewide
funds. application of Medicaid, comparability
385
§ 441.301 42 CFR Ch. IV (10–1–17 Edition)
of services, and income and resource (bundling) when this will permit more
rules applicable to medically needy in- efficient delivery of services and not
dividuals living in the community. compromise either a beneficiary’s ac-
(3) A statement explaining whether cess to or free choice of providers.
the agency will refuse to offer home or (5) Provide that the documentation
community-based services to any bene- requirements regarding individual
ficiary if the agency can reasonably ex- evaluation, specified in § 441.303(c), will
pect that the cost of the services would be met; and
exceed the cost of an equivalent level (6) Be limited to one or more of the
of care provided in— following target groups or any sub-
(i) A hospital (as defined in § 440.10 of group thereof that the State may de-
this chapter); fine:
(ii) A NF (as defined in section 1919(a) (i) Aged or disabled, or both.
of the Act); or (ii) Individuals with Intellectual or
(iii) An ICF/IID (as defined in § 440.150 Developmental Disabilities, or both.
of this chapter), if applicable. (iii) Mentally ill.
(b) If the agency furnishes home and
(c) A waiver request under this sub-
community-based services, as defined
part must include the following—
in § 440.180 of this subchapter, under a
(1) Person-centered planning process.
waiver granted under this subpart, the
The individual will lead the person-
waiver request must—
centered planning process where pos-
(1) Provide that the services are fur-
sible. The individual’s representative
nished—
should have a participatory role, as
(i) Under a written person-centered
needed and as defined by the indi-
service plan (also called plan of care)
vidual, unless State law confers deci-
that is based on a person-centered ap-
sion-making authority to the legal rep-
proach and is subject to approval by
resentative. All references to individ-
uals include the role of the individual’s
(ii) Only to beneficiaries who are not
representative. In addition to being led
inpatients of a hospital, NF, or ICF/
by the individual receiving services
IID; and
and supports, the person-centered plan-
(iii) Only to beneficiaries who the
ning process:
agency determines would, in the ab-
sence of these services, require the (i) Includes people chosen by the in-
Medicaid covered level of care provided dividual.
in— (ii) Provides necessary information
(A) A hospital (as defined in § 440.10 of and support to ensure that the indi-
this chapter); vidual directs the process to the max-
(B) A NF (as defined in section 1919(a) imum extent possible, and is enabled to
of the Act); or make informed choices and decisions.
(C) An ICF/IID (as defined in § 440.150 (iii) Is timely and occurs at times
of this chapter); and locations of convenience to the in-
(2) Describe the qualifications of the dividual.
individual or individuals who will be (iv) Reflects cultural considerations
responsible for developing the indi- of the individual and is conducted by
vidual plan of care; providing information in plain lan-
(3) Describe the group or groups of in- guage and in a manner that is acces-
dividuals to whom the services will be sible to individuals with disabilities
offered; and persons who are limited English
(4) Describe the services to be fur- proficient, consistent with § 435.905(b)
nished so that each service is sepa- of this chapter.
rately defined. Multiple services that (v) Includes strategies for solving
are generally considered to be separate conflict or disagreement within the
services may not be consolidated under process, including clear conflict-of-in-
a single definition. Commonly accepted terest guidelines for all planning par-
terms must be used to describe the ticipants.

service and definitions may not be open (vi) Providers of HCBS for the indi-
ended in scope. CMS will, however, vidual, or those who have an interest
allow combined service definitions in or are employed by a provider of
386
HCBS for the individual must not pro- (iv) Include individually identified
vide case management or develop the goals and desired outcomes.
person-centered service plan, except (v) Reflect the services and supports
when the State demonstrates that the (paid and unpaid) that will assist the
only willing and qualified entity to individual to achieve identified goals,
provide case management and/or de- and the providers of those services and
velop person-centered service plans in supports, including natural supports.
a geographic area also provides HCBS. Natural supports are unpaid supports
In these cases, the State must devise that are provided voluntarily to the in-
conflict of interest protections includ- dividual in lieu of 1915(c) HCBS waiver
ing separation of entity and provider services and supports.
functions within provider entities, (vi) Reflect risk factors and measures
which must be approved by CMS. Indi- in place to minimize them, including
viduals must be provided with a clear individualized back-up plans and strat-
and accessible alternative dispute reso- egies when needed.
lution process. (vii) Be understandable to the indi-
(vii) Offers informed choices to the vidual receiving services and supports,
individual regarding the services and and the individuals important in sup-
supports they receive and from whom. porting him or her. At a minimum, for
(viii) Includes a method for the indi- the written plan to be understandable,
vidual to request updates to the plan as it must be written in plain language
needed. and in a manner that is accessible to
(ix) Records the alternative home individuals with disabilities and per-
and community-based settings that sons who are limited English pro-
were considered by the individual. ficient, consistent with § 435.905(b) of
(2) The Person-Centered Service Plan. this chapter.
The person-centered service plan must (viii) Identify the individual and/or
reflect the services and supports that entity responsible for monitoring the
are important for the individual to plan.
meet the needs identified through an (ix) Be finalized and agreed to, with
assessment of functional need, as well the informed consent of the individual
as what is important to the individual in writing, and signed by all individ-
with regard to preferences for the de- uals and providers responsible for its
livery of such services and supports. implementation.
Commensurate with the level of need
(x) Be distributed to the individual
of the individual, and the scope of serv-
and other people involved in the plan.
ices and supports available under the
State’s 1915(c) HCBS waiver, the writ- (xi) Include those services, the pur-
ten plan must: pose or control of which the individual
elects to self-direct.
(i) Reflect that the setting in which
the individual resides is chosen by the (xii) Prevent the provision of unnec-
individual. The State must ensure that essary or inappropriate services and
the setting chosen by the individual is supports.
integrated in, and supports full access (xiii) Document that any modifica-
of individuals receiving Medicaid HCBS tion of the additional conditions, under
to the greater community, including paragraph (c)(4)(vi)(A) through (D) of
opportunities to seek employment and this section, must be supported by a
work in competitive integrated set- specific assessed need and justified in
tings, engage in community life, con- the person-centered service plan. The
trol personal resources, and receive following requirements must be docu-
services in the community to the same mented in the person-centered service
degree of access as individuals not re- plan:
ceiving Medicaid HCBS. (A) Identify a specific and individual-
(ii) Reflect the individual’s strengths ized assessed need.
and preferences. (B) Document the positive interven-

(iii) Reflect clinical and support tions and supports used prior to any
needs as identified through an assess- modifications to the person-centered
ment of functional need. service plan.
387
§ 441.301 42 CFR Ch. IV (10–1–17 Edition)
(C) Document less intrusive methods (iii) Ensures an individual’s rights of

of meeting the need that have been privacy, dignity and respect, and free-
tried but did not work. dom from coercion and restraint.
(D) Include a clear description of the (iv) Optimizes, but does not regi-
condition that is directly propor- ment, individual initiative, autonomy,
tionate to the specific assessed need. and independence in making life
(E) Include a regular collection and choices, including but not limited to,
review of data to measure the ongoing daily activities, physical environment,
effectiveness of the modification. and with whom to interact.
(v) Facilitates individual choice re-
(F) Include established time limits
garding services and supports, and who
for periodic reviews to determine if the
provides them.
modification is still necessary or can
(vi) In a provider-owned or controlled
be terminated. residential setting, in addition to the
(G) Include informed consent of the qualities at § 441.301(c)(4)(i) through (v),
individual. the following additional conditions
(H) Include an assurance that inter- must be met:
ventions and supports will cause no (A) The unit or dwelling is a specific
harm to the individual. physical place that can be owned,
(3) Review of the Person-Centered Serv- rented, or occupied under a legally en-
ice Plan. The person-centered service forceable agreement by the individual
plan must be reviewed, and revised receiving services, and the individual
upon reassessment of functional need has, at a minimum, the same respon-
as required by § 441.365(e), at least sibilities and protections from eviction
every 12 months, when the individual’s that tenants have under the landlord/
circumstances or needs change signifi- tenant law of the State, county, city,
cantly, or at the request of the indi- or other designated entity. For set-
vidual. tings in which landlord tenant laws do
(4) Home and Community-Based Set- not apply, the State must ensure that
tings. Home and community-based set- a lease, residency agreement or other
tings must have all of the following form of written agreement will be in
qualities, and such other qualities as place for each HCBS participant, and
the Secretary determines to be appro- that the document provides protections
priate, based on the needs of the indi- that address eviction processes and ap-
vidual as indicated in their person-cen- peals comparable to those provided
tered service plan: under the jurisdiction’s landlord ten-
ant law.
(i) The setting is integrated in and
(B) Each individual has privacy in
supports full access of individuals re-
their sleeping or living unit:
ceiving Medicaid HCBS to the greater
(1) Units have entrance doors lock-
community, including opportunities to
able by the individual, with only appro-
seek employment and work in competi- priate staff having keys to doors.
tive integrated settings, engage in (2) Individuals sharing units have a
community life, control personal re- choice of roommates in that setting.
sources, and receive services in the (3) Individuals have the freedom to
community, to the same degree of ac- furnish and decorate their sleeping or
cess as individuals not receiving Med- living units within the lease or other
icaid HCBS. agreement.
(ii) The setting is selected by the in- (C) Individuals have the freedom and
dividual from among setting options support to control their own schedules
including non-disability specific set- and activities, and have access to food
tings and an option for a private unit at any time.
in a residential setting. The setting op- (D) Individuals are able to have visi-
tions are identified and documented in tors of their choosing at any time.
the person-centered service plan and (E) The setting is physically acces-
are based on the individual’s needs, sible to the individual.

preferences, and, for residential set- (F) Any modification of the addi-
tings, resources available for room and tional conditions, under
board. § 441.301(c)(4)(vi)(A) through (D), must
388
be supported by a specific assessed need have the qualities of an institution and

and justified in the person-centered that the setting does have the qualities
service plan. The following require- of home and community-based set-
ments must be documented in the per- tings.
son-centered service plan: (6) Home and Community-Based Set-
(1) Identify a specific and individual- tings: Compliance and Transition:
ized assessed need. (i) States submitting new and initial
(2) Document the positive interven- waiver requests must provide assur-
tions and supports used prior to any ances of compliance with the require-
modifications to the person-centered ments of this section for home and
service plan. community-based settings as of the ef-
(3) Document less intrusive methods fective date of the waiver.
of meeting the need that have been (ii) CMS will require transition plans
tried but did not work. for existing section 1915(c) waivers and
(4) Include a clear description of the approved state plans providing home
condition that is directly propor- and community-based services under
tionate to the specific assessed need. section 1915(i) to achieve compliance
(5) Include regular collection and re- with this section, as follows:
view of data to measure the ongoing ef- (A) For each approved section 1915(c)
fectiveness of the modification. HCBS waiver subject to renewal or sub-
(6) Include established time limits for mitted for amendment within one year
periodic reviews to determine if the after the effective date of this regula-
modification is still necessary or can tion, the State must submit a transi-
be terminated. tion plan at the time of the waiver re-
(7) Include the informed consent of newal or amendment request that sets
the individual. forth the actions the State will take to
(8) Include an assurance that inter- bring the specific waiver into compli-
ventions and supports will cause no ance with this section. The waiver ap-
harm to the individual. proval will be contingent on the inclu-
(5) Settings that are not Home and Com- sion of the transition plan approved by
munity-Based. Home and community- CMS. The transition plan must include
based settings do not include the fol- all elements required by the Secretary;
lowing: and within one hundred and twenty
(i) A nursing facility; days of the submission of the first
(ii) An institution for mental dis- waiver renewal or amendment request
eases; the State must submit a transition
(iii) An intermediate care facility for plan detailing how the State will oper-
individuals with intellectual disabil- ate all section 1915(c) HCBS waivers
ities; and any section 1915(i) State plan ben-
(iv) A hospital; or efit in accordance with this section.
(v) Any other locations that have The transition plan must include all
qualities of an institutional setting, as elements including timelines and
determined by the Secretary. Any set- deliverables as approved by the Sec-
ting that is located in a building that retary.
is also a publicly or privately operated (B) For States that do not have a sec-
facility that provides inpatient institution 1915(c) HCBS waiver or a section
tional treatment, or in a building on 1915(i) State plan benefit due for re-
the grounds of, or immediately adja- newal or proposed for amendments
cent to, a public institution, or any within one year of the effective date of
other setting that has the effect of iso- this regulation, the State must submit
lating individuals receiving Medicaid a transition plan detailing how the
HCBS from the broader community of State will operate all section 1915(c)
individuals not receiving Medicaid HCBS waivers and any section 1915(i)
HCBS will be presumed to be a setting State plan benefit in accordance with
that has the qualities of an institution this section. This plan must be sub-
unless the Secretary determines mitted no later than one year after the
through heightened scrutiny, based on effective date of this regulation. The
information presented by the State or transition plan must include all ele-
other parties, that the setting does not ments including timelines and
389
§ 441.302 42 CFR Ch. IV (10–1–17 Edition)
deliverables as approved by the Sec- quirements are met for services or for
retary. individuals furnishing services that are
(iii) A State must provide at least a provided under the waiver; and
30-day public notice and comment pe- (3) Assurance that all facilities cov-
riod regarding the transition plan(s) ered by section 1616(e) of the Act, in
that the State intends to submit to which home and community-based
CMS for review and consideration, as services will be provided, are in compli-
follows: ance with applicable State standards
(A) The State must at a minimum that meet the requirements of 45 CFR
provide two (2) statements of public no- part 1397 for board and care facilities.
tice and public input procedures. (4) Assurance that the State is able
(B) The State must ensure the full to meet the unique service needs of the
transition plan(s) is available to the individuals when the State elects to
public for public comment. serve more than one target group
(C) The State must consider and under a single waiver, as specified in
modify the transition plan, as the § 441.301(b)(6).
State deems appropriate, to account (i) On an annual basis the State will
for public comment. include in the quality section of the
(iv) A State must submit to CMS, CMS–372 form (or any successor form
with the proposed transition plan: designated by CMS) data that indicates
(A) Evidence of the public notice re- the State continues to serve multiple
quired. target groups in the single waiver and
(B) A summary of the comments re- that a single target group is not being
ceived during the public notice period, prioritized to the detriment of other
reasons why comments were not adopt- groups.
ed, and any modifications to the tran- (ii) [Reserved]
sition plan based upon those com- (5) Assurance that services are pro-
ments. vided in home and community based
(v) Upon approval by CMS, the State settings, as specified in § 441.301(c)(4).
will begin implementation of the tran- (b) Financial accountability— The
sition plans. The State’s failure to sub- agency will assure financial account-
mit an approvable transition plan as ability for funds expended for home and
required by this section and/or to com- community-based services, provide for
ply with the terms of the approved an independent audit of its waiver pro-
transition plan may result in compli- gram (except as CMS may otherwise
ance actions, including but not limited specify for particular waivers), and it
to deferral/disallowance of Federal Fi- will maintain and make available to
nancial Participation. HHS, the Comptroller General, or other
[46 FR 48541, Oct. 1, 1981, as amended at 50 FR designees, appropriate financial
10026, Mar. 13, 1985; 59 FR 37717, July 25, 1994; records documenting the cost of serv-
65 FR 60107, Oct. 10, 2000; 79 FR 3029, Jan. 16, ices provided under the waiver, includ-
2014] ing reports of any independent audits
conducted.
§ 441.302 State assurances. (c) Evaluation of need. Assurance that
Unless the Medicaid agency provides the agency will provide for the fol-
the following satisfactory assurances lowing:
to CMS, CMS will not grant a waiver (1) Initial evaluation. An evaluation of
under this subpart and may terminate the need for the level of care provided
a waiver already granted: in a hospital, a NF, or an ICF/IID when
(a) Health and Welfare—Assurance there is a reasonable indication that a
that necessary safeguards have been beneficiary might need the services in
taken to protect the health and welfare the near future (that is, a month or
of the beneficiaries of the services. less) unless he or she receives home or
Those safeguards must include— community-based services. For pur-
(1) Adequate standards for all types poses of this section, ‘‘evaluation’’
of providers that provide services under means a review of an individual bene-

the waiver; ficiary’s condition to determine—
(2) Assurance that the standards of (i) If the beneficiary requires the
any State licensure or certification re- level of care provided in a hospital as
390
defined in § 440.10 of this subchapter, a (2) A NF; or

NF as defined in section 1919(a) of the (3) An ICF/IID.
Act, or an ICF/IID as defined by (g) Institutionalization absent waiver.
§ 440.150 of this subchapter; and Assurance that, absent the waiver,
(ii) That the beneficiary, but for the beneficiaries in the waiver would re-
provision of waiver services, would oth- ceive the appropriate type of Medicaid-
erwise be institutionalized in such a fa- funded institutional care (hospital, NF,
cility. or ICF/IID) that they require.
(2) Periodic reevaluations. Reevalua-
(h) Reporting. Assurance that annu-
tions, at least annually, of each bene-
ally, the agency will provide CMS with
ficiary receiving home or community-
based services to determine if the bene- information on the waiver’s impact.
ficiary continues to need the level of The information must be consistent
care provided and would, but for the with a data collection plan designed by
provision of waiver services, otherwise CMS and must address the waiver’s im-
be institutionalized in one of the fol- pact on—
lowing institutions: (1) The type, amount, and cost of
(i) A hospital; services provided under the State plan;
(ii) A NF; or and
(iii) An ICF/IID. (2) The health and welfare of bene-
(d) Alternatives—Assurance that when ficiaries.
a beneficiary is determined to be likely (i) Habilitation services. Assurance
to require the level of care provided in that prevocational, educational, or
a hospital, NF, or ICF/IID, the bene- supported employment services, or a
ficiary or his or her legal representa- combination of these services, if pro-
tive will be— vided as habilitation services under the
(1) Informed of any feasible alter- waiver, are—
natives available under the waiver; and
(1) Not otherwise available to the in-
(2) Given the choice of either institu-
dividual through a local educational
tional or home and community-based
services. agency under section 602 (16) and (17) of
(e) Average per capita expenditures. As- the Education of the Handicapped Act
surance that the average per capita fis- (20 U.S.C. 1401 (16 and 17)) or as services
cal year expenditures under the waiver under section 110 of the Rehabilitation
will not exceed 100 percent of the aver- Act of 1973 (29 U.S.C. 730); and
age per capita expenditures that would (2) Furnished as part of expanded ha-
have been made in the fiscal year for bilitation services, if the State has re-
the level of care provided in a hospital, quested and received CMS’s approval
NF, or ICF/IID under the State plan under a waiver or an amendment to a
had the waiver not been granted. waiver.
(1) These expenditures must be rea- (j) Day treatment or partial hospitaliza-
sonably estimated and documented by tion, psychosocial rehabilitation services,
the agency. and clinic services for individuals with
(2) The estimate must be on an an- chronic mental illness. Assurance that
nual basis and must cover each year of FFP will not be claimed in expendi-
the waiver period. tures for waiver services including, but
(f) Actual total expenditures. Assur- not limited to, day treatment or par-
ance that the agency’s actual total ex- tial hospitalization, psychosocial reha-
penditures for home and community- bilitation services, and clinic services
based and other Medicaid services
provided as home and community-
under the waiver and its claim for FFP
based services to individuals with
in expenditures for the services pro-
vided to beneficiaries under the waiver chronic mental illnesses if these indi-
will not, in any year of the waiver pe- viduals, in the absence of a waiver,
riod, exceed 100 percent of the amount would be placed in an IMD and are—
(1) Age 22 to 64;
that would be incurred by the State’s

Medicaid program for these individ- (2) Age 65 and older and the State has
uals, absent the waiver, in— not included the optional Medicaid
(1) A hospital; benefit cited in § 440.140; or
391
§ 441.303 42 CFR Ch. IV (10–1–17 Edition)
(3) Age 21 and under and the State nity-based services who are eligible
has not included the optional Medicaid under a special income level (included
benefit cited in § 440.160. in § 435.217 of this chapter).
[50 FR 10026, Mar. 13, 1985, as amended at 59 (f) An explanation with supporting
FR 37717, July 25, 1994; 65 FR 60107, Oct. 10, documentation satisfactory to CMS of
2000; 79 FR 3031, Jan. 16, 2014] how the agency estimated the average
per capita expenditures for services.
§ 441.303 Supporting documentation (1) The annual average per capita ex-
required. penditure estimate of the cost of home
The agency must furnish CMS with and community-based and other Med-
sufficient information to support the icaid services under the waiver must
assurances required by § 441.302. Except not exceed the estimated annual aver-
as CMS may otherwise specify for par- age per capita expenditures of the cost
ticular waivers, the information must of services in the absence of a waiver.
consist of the following: The estimates are to be based on the
(a) A description of the safeguards following equation:
necessary to protect the health and
welfare of beneficiaries. This informa- D + D′ ≤G + G′.
tion must include a copy of the stand- The symbol ‘‘≤’’ means that the result of the
ards established by the State for facili- left side of the equation must be less
ties that are covered by section 1616(e) than or equal to the result of the right
of the Act. side of the equation.
(b) A description of the records and D = the estimated annual average per capita
information that will be maintained to Medicaid cost for home and community-
support financial accountability. based services for individuals in the
waiver program.
(c) A description of the agency’s plan
D′ = the estimated annual average per capita
for the evaluation and reevaluation of
Medicaid cost for all other services pro-
beneficiaries, including— vided to individuals in the waiver pro-
(1) A description of who will make gram.
these evaluations and how they will be G = the estimated annual average per capita
made; Medicaid cost for hospital, NF, or ICF/
(2) A copy of the evaluation form to IID care that would be incurred for indi-
be used; and if it differs from the form viduals served in the waiver, were the
used in placing beneficiaries in hos- waiver not granted.
pitals, NFs, or ICFs/IID, a description G′ = the estimated annual average per capita
of how and why it differs and an assur- Medicaid costs for all services other than
those included in factor G for individuals
ance that the outcome of the new eval-
served in the waiver, were the waiver not
uation form is reliable, valid, and fully granted.
comparable to the form used for hos-
pital, NF, or ICF/IID placement; (2) For purposes of the equation, the
(3) The agency’s procedure to ensure prime factors include the average per
the maintenance of written docu- capita cost for all State plan services
mentation on all evaluations and re- and expanded EPSDT services provided
evaluations; and that are not accounted for in other for-
(4) The agency’s procedure to ensure mula values.
reevaluations of need at regular inter- (3) In making estimates of average
vals. per capita expenditures for a waiver
(d) A description of the agency’s plan that applies only to individuals with a
for informing eligible beneficiaries of particular illness (for example, ac-
the feasible alternatives available quired immune deficiency syndrome)
under the waiver and allowing bene- or condition (for example, chronic
ficiaries to choose either institutional mental illness) who are inpatients in or
services or home and community-based who would require the level of care pro-
services. vided in hospitals as defined by § 440.10,
(e) An explanation of how the agency NFs as defined in section 1919(a) of the
will apply the applicable provisions re- Act, or ICFs/IID, the agency may deter-
garding the post-eligibility treatment mine the average per capita expendi-
of income and resources of those indi- tures for these individuals absent the
viduals receiving home and commu- waiver without including expenditures
392
for other individuals in the affected under the waiver. The agency must
hospitals, NFs, or ICFs/IID. submit to CMS for review and approval
(4) In making estimates of average the method it uses to apportion the
per capita expenditures for a separate costs of rent and food. The method
waiver program that applies only to in- must be explained fully to CMS. A per-
dividuals identified through the sonal caregiver provides a waiver serv-
preadmission screening annual resident ice to meet the beneficiary’s physical,
review (PASARR) process who are de- social, or emotional needs (as opposed
velopmentally disabled, inpatients of a to services not directly related to the
NF, and require the level of care pro- care of the beneficiary; that is, house-
vided in an ICF/IID as determined by keeping or chore services). FFP for
the State on the basis of an evaluation live-in caregivers is not available if the
under § 441.303(c), the agency may de- beneficiary lives in the caregiver’s
termine the average per capita expend- home or in a residence that is owned or
itures that would have been made in a leased by the caregiver.
fiscal year for those individuals based (9) In submitting estimates for waiv-
on the average per capita expenditures ers that apply to individuals with In-
for inpatients in an ICF/IID. When sub- tellectual Disability or a related condi-
mitting estimates of institutional tion, the agency may adjust its esti-
costs without the waiver, the agency mate of average per capita expendi-
may use the average per capita costs of tures to include increases in expendi-
ICF/IID care even though the deinstitu- tures for ICF/IID care resulting from
tionalized developmentally disabled implementation of a PASARR program
were inpatients of NFs. for making determinations for individ-
(5) For persons diverted rather than uals with Intellectual Disability or re-
deinstitutionalized, the State’s evalua- lated conditions on or after January 1,
tion process required by § 441.303(c) 1989.
must provide for a more detailed de-
(10) For a State that has CMS ap-
scription of their evaluation and
proval to bundle waiver services, the
screening procedures for beneficiaries
State must continue to compute sepa-
to ensure that waiver services will be
rately the costs and utilization of the
limited to persons who would otherwise
component services that make up the
receive the level of care provided in a
hospital, NF, or ICF/IID, as applicable. bundled service to support the final
(6) The State must indicate the num- cost and utilization of the bundled
ber of unduplicated beneficiaries to service that will be used in the cost-
which it intends to provide waiver neutrality formula.
services in each year of its program. (g) The State, at its option, may pro-
This number will constitute a limit on vide for an independent assessment of
the size of the waiver program unless its waiver that evaluates the quality of
the State requests and the Secretary care provided, access to care, and cost-
approves a greater number of waiver neutrality. The results of the assess-
participants in a waiver amendment. ment should be submitted to CMS at
(7) In determining the average per least 90 days prior to the expiration
capita expenditures that would have date of the approved waiver-period and
been made in a waiver year, for waiver cover the first 24 or 48 months of the
estimates that apply to persons with waiver. If a State chooses to provide
Intellectual Disability or related con- for an independent assessment, FFP is
ditions, the agency may include costs available for the costs attributable to
of Medicaid residents in ICFs/IID that the independent assessment.
have been terminated on or after No- (h) For States offering habilitation
vember 5, 1990. services that include prevocational,
(8) In submitting estimates for waiv- educational, or supported employment
ers that include personal caregivers as services, or a combination of these
a waiver service, the agency may in- services, consistent with the provisions
clude a portion of the rent and food at- of § 440.180(c) of this chapter, an expla-
tributed to the unrelated personal nation of why these services are not
caregiver who resides in the home or available as special education and re-
residence of the beneficiary covered lated services under sections 602 (16)
393
§ 441.304 42 CFR Ch. IV (10–1–17 Edition)
and (17) of the Education of the Handi- quests additional information on a new
capped Act (20 U.S.C. 1401 (16 and 17)) or waiver request submitted by a State to
as services under section 110 of the Re- extend its existing waiver or when CMS
habilitation Act of 1973 (29 U.S.C. sec- disapproves a State’s request for exten-
tion 730); sion.
(i) For States offering home and com- (d) The agency may request that
munity-based services for individuals waiver modifications be made effective
diagnosed as chronically mentally ill, retroactive to the first day of a waiver
an explanation of why these individ- year, or another date after the first
uals would not be placed in an institu- day of a waiver year, in which the
tion for mental diseases (IMD) absent amendment is submitted, unless the
the waiver, and the age group of these amendment involves substantive
individuals. changes as determined by CMS.
[46 FR 48532, Oct. 1, 1981, as amended at 50 FR (1) Substantive changes include, but
10027, Mar. 13, 1985; 50 FR 25080, June 17, 1985; are not limited to, revisions to services
59 FR 37718, July 25, 1994] available under the waiver including
elimination or reduction of services, or
§ 441.304 Duration, extension, and
amendment of a waiver. reduction in the scope, amount, and
duration of any service, a change in the
(a) The effective date for a new waiv- qualifications of service providers,
er of Medicaid requirements to provide changes in rate methodology or a con-
home and community-based services striction in the eligible population.
approved under this subpart is estab- (2) A request for an amendment that
lished by CMS prospectively on or after involves a substantive change as deter-
the date of approval and after consulta- mined by CMS, may only take effect on
tion with the State agency. The initial or after the date when the amendment
approved waiver continues for a 3-year is approved by CMS, and must be ac-
period from the effective date. If the companied by information on how the
agency requests it, the waiver may be
State has assured smooth transitions
extended for additional periods un-
and minimal effect on individuals ad-
less—
versely impacted by the change.
(1) CMS’s review of the prior waiver
period shows that the assurances re- (e) The agency must provide public
quired by § 441.302 were not met; and notice of any significant proposed
(2) CMS is not satisfied with the as- change in its methods and standards
surances and documentation provided for setting payment rates for services
by the State in regard to the extension in accordance with § 447.205 of this
period. chapter.
(b) CMS will determine whether a re- (f) The agency must establish and use
quest for extension of an existing waiv- a public input process, for any changes
er is actually an extension request or a in the services or operations of the
request for a new waiver. If a State waiver.
submits an extension request that (1) This process must be described
would add a new group to the existing fully in the State’s waiver application
group of beneficiaries covered under and be sufficient in light of the scope of
the waiver (as defined under the changes proposed, to ensure mean-
§ 441.301(b)(6)), CMS will consider it to ingful opportunities for input for indi-
be two requests: One as an extension viduals served, or eligible to be served,
request for the existing group, and the in the waiver.
other as a new waiver request for the (2) This process must be completed at
new group. Waivers may be extended a minimum of 30 days prior to imple-
for additional 5-year periods. mentation of the proposed change or
(c) CMS may grant a State an exten- submission of the proposed change to
sion of its existing waiver for up to 90 CMS, whichever comes first.
days to permit the State to document (3) This process must be used for both
more fully the satisfaction of statutory existing waivers that have substantive
and regulatory requirements needed to changes proposed, either through the
approve a new waiver request. CMS renewal or the amendment process, and
will consider this option when it renew waivers.
394
(4) This process must include con- gram due to death or loss of eligibility
sultation with Federally-recognized under the State plan without regard to
Tribes, and in accordance with section any federally-imposed limit on utiliza-
5006(e) of the American Recovery and tion, but must maintain a record of
Reinvestment Act of 2009 (Pub. L. 111– beneficiaries replaced on this basis.
5), Indian health programs and Urban (b) Model waivers. (1) The number of
Indian Organizations. individuals who may receive home and
(g)(1) If CMS finds that the Medicaid community-based services under a
agency is not meeting one or more of
model waiver may not exceed 200 bene-
the requirements for a waiver con-
ficiaries at any one time.
tained in this subpart, the agency is
given a notice of CMS’ findings and an (2) The agency may replace any indi-
opportunity for a hearing to rebut the viduals who die or become ineligible
findings. for State plan services to maintain a
(2) If CMS determines that the agen- count up to the number specified by
cy is substantively out of compliance the State and approved by CMS within
with this subpart after the notice and the 200-maximum limit.
any hearing, CMS may employ strate- [59 FR 37719, July 25, 1994]
gies to ensure compliance as described
in paragraph (g)(3) of this section or § 441.306 Cooperative arrangements
terminate the waiver. with the Maternal and Child Health
(3)(i) Strategies to ensure compliance program.
may include the imposition of a mora-
torium on waiver enrollments, other Whenever appropriate, the State
corrective strategies as appropriate to agency administering the plan under
ensure the health and welfare of waiver Medicaid may enter into cooperative
participants, or the withholding of a arrangements with the State agency
portion of Federal payment for waiver responsible for administering a pro-
services until such time that compli- gram for children with special health
ance is achieved, or other actions as care needs under the Maternal and
determined by the Secretary as nec- Child Health program (Title V of the
essary to address non-compliance with Act) in order to ensure improved access
1915(c) of the Act, or termination. to coordinated services to meet the
When a waiver is terminated, the State children’s needs.
must comport with § 441.307.
[59 FR 37720, July 25, 1994]
(ii) CMS will provide states with a
written notice of the impending strate- § 441.307 Notification of a waiver ter-
gies to ensure compliance for a waiver mination.
program. The notice of CMS’ intent to
utilize strategies to ensure compliance (a) If a State chooses to terminate its
would include the nature of the non- waiver before the initial 3-year period
compliance, the strategy to be em- or 5-year renewal period expires, it
ployed, the effective date of the com- must notify CMS in writing 30 days be-
pliance strategy, the criteria for re- fore terminating services to bene-
moving the compliance strategy and ficiaries.
the opportunity for a hearing. (b) If CMS or the State terminates
[50 FR 10028, Mar. 13, 1985; 50 FR 25080, June the waiver, the State must notify bene-
17, 1985, as amended at 59 FR 37719, July 25, ficiaries of services under the waiver in
1994; 79 FR 3032, Jan. 16, 2014] accordance with § 431.210 of this sub-
chapter and notify them 30 days before
§ 441.305 Replacement of beneficiaries terminating services.
in approved waiver programs.
(a) Regular waivers. A State’s esti- [46 FR 48541, Oct. 1, 1981. Redesignated at 59
mate of the number of individuals who FR 37719, July 25, 1994, as amended at 65 FR
60107, Oct. 10, 2000]
may receive home and community-
based services must include those who

will replace beneficiaries who leave the
program for any reason. A State may
replace beneficiaries who leave the pro-
395
§ 441.308 42 CFR Ch. IV (10–1–17 Edition)
§ 441.308 Hearings procedures for tion 602(16) and (17) of the Education of
waiver terminations. the Handicapped Act (20 U.S.C. 1401(16)
The procedures specified in subpart D and (17)) or vocational rehabilitation
of part 430 of this chapter are applica- services available to the individual
ble to State requests for hearings on through a program funded under sec-
terminations. tion 110 of the Rehabilitation Act of
[50 FR 10028, Mar. 13, 1985. Redesignated at 59
1973 (29 U.S.C. 730).
FR 37720, July 25, 1994] (4) For waiver applications and re-
newals approved on or after October 21,
§ 441.310 Limits on Federal financial 1986, home and community-based serv-
participation (FFP). ices provided to individuals aged 22
(a) FFP for home and community- through 64 diagnosed as chronically
based services listed in § 440.180 of this mentally ill who would be placed in an
chapter is not available in expenditures institution for mental diseases. FFP is
for the following: also not available for such services pro-
(1) Services provided in a facility vided to individuals aged 65 and over
subject to the health and welfare re- and 21 and under as an alternative to
quirements described in § 441.302(a) dur- institutionalization in an IMD if the
ing any period in which the facility is State does not include the appropriate
found not to be in compliance with the
optional Medicaid benefits specified at
applicable State standards described in
§§ 440.140 and 440.160 of this chapter in
that section.
(2) The cost of room and board except its State plan.
when provided as— (b) FFP is available for expenditures
(i) Part of respite care services in a for expanded habilitation services, as
facility approved by the State that is described in § 440.180 of this chapter, if
not a private residence; or the services are included under a waiv-
(ii) For waivers that allow personal er or waiver amendment approved by
caregivers as providers of approved CMS.
waiver services, a portion of the rent
and food that may be reasonably at-
FR 60107, Oct. 10, 2000]
tributed to the unrelated caregiver who
resides in the same household with the
waiver beneficiary. FFP for a live-in Subpart H—Home and Commu-
caregiver is not available if the bene- nity-Based Services Waivers
ficiary lives in the caregiver’s home or for Individuals Age 65 or
in a residence that is owned or leased Older: Waiver Requirements
by the provider of Medicaid services
(the caregiver). For purposes of this
provision, ‘‘board’’ means 3 meals a day SOURCE: 57 FR 29156, June 30, 1992, unless
or any other full nutritional regimen otherwise noted.
and does not include meals provided as
§ 441.350 Basis and purpose.
part of a program of adult day health
services as long as the meals provided Section 1915(d) of the Act permits
do not constitute a ‘‘full’’ nutritional States to offer, under a waiver of statu-
regimen. tory requirements, home and commu-
(3) Prevocational, educational, or nity-based services not otherwise avail-
supported employment services, or any able under Medicaid to individuals age
combination of these services, as part 65 or older, in exchange for accepting
of habilitation services that are— an aggregate limit on the amount of
(i) Provided in approved waivers that expenditures for which they claim FFP
include a definition of ‘‘habilitation for certain services furnished to these
services’’ but which have not included
individuals. The home and community-
prevocational, educational, and sup-
based services that may be furnished
ported employment services in that
are listed in § 440.181 of this subchapter.
definition; or
(ii) Otherwise available to the bene- This subpart describes the procedures
ficiary under either special education the Medicaid agency must follow to re-
and related services as defined in sec- quest a waiver.
396
§ 441.351 Contents of a request for a (1) Are age 65 or older;

waiver. (2) Are not inpatients of a hospital,
A request for a waiver under this sec- NF, or ICF/IID; and
tion must meet the following require- (3) The agency determines would be
ments: likely to require the care furnished in
(a) Required signatures. The request a NF under Medicaid.
must be signed by the Governor, the (f) Plan of care. The request must pro-
Director of the Medicaid agency or the vide that the home and community-
Director of the larger State agency of based services described in § 440.181 of
which the Medicaid agency is a compo- this subchapter, are furnished under a
nent or any official of the Medicaid written plan of care based on an assess-
agency to whom this authority has ment of the individual’s health and
been delegated. A request from any welfare needs and developed by quali-
other agency of State government will fied individuals for each beneficiary
not be accepted. under the waiver. The qualifications of
(b) Assurances and supporting docu- the individual or individuals who will
mentation. The request must provide be responsible for developing the indi-
the assurances required by § 441.352 of vidual plan of care must be described.
this part and the supporting docu- Each plan of care must contain, at a
mentation required by § 441.353. minimum, the medical and other serv-
(c) Statement for sections of the Act. ices to be provided, their frequency,
The request must provide a statement and the type of provider to furnish
as to whether waiver of section them. Plans of care must be subject to
1902(a)(1), 1902(a)(10)(B), or the approval of the Medicaid agency.
1902(a)(10)(C)(i)(III) of the Act is re-
(g) Medicaid agency review. The re-
quested. If the State requests a waiver
quest must assure that the State agen-
of section 1902(a)(1) of the Act, the
cy maintain and exercise its authority
waiver must clearly specify the geo-
graphic areas or political subdivisions to review (at a minimum) a valid sta-
in which the services will be offered. tistical sample of each month’s plans
The State must indicate whether it is of care. When the services in a plan do
requesting a waiver of one or all of not comport with the stated disabil-
these sections. The State may request ities and needs of the beneficiary, the
a waiver of any one of the sections agency must implement immediate
cited above. corrective action procedures to ensure
(d) Identification of services. The re- that the needs of the beneficiary are
quest must identify all services avail- adequately addressed.
able under the approved State plan, (h) Groups served. The request must
which are also included in the APEL describe the group or groups of individ-
and which are identified under § 440.181, uals to whom the services will be of-
and any limitations that the State has fered.
imposed on the provision of any serv- (i) Assurances regarding amount ex-
ice. The request must also identify and pended. The request must assure that
describe each service specified in the total amount expended by the
§ 440.181 of this subchapter to be fur- State under the plan for individuals
nished under the waiver, and any addi- age 65 or older during a waiver year for
tional services to be furnished under medical assistance with respect to NF,
the authority of § 440.181(b)(7). Descrip- home health, private duty nursing, per-
tions of additional services must ex- sonal care, and home and community-
plain how each additional service in- based services described in §§ 440.180
cluded under § 440.181(b)(7) will con- and 440.181 of this subchapter and fur-
tribute to the health and well-being of nished as an alternative to NF care
the beneficiaries and to their ability to will not exceed the aggregate projected
reside in a community-based setting. expenditure limit (APEL) defined in
(e) Beneficiaries served. The request § 441.354.
must provide that the home and com- EFFECTIVE DATE NOTE: At 57 FR 29156, June
munity-based services described in 30, 1992, § 441.351 was added. This section con-
§ 440.181 of this subchapter, are fur- tains information collection and record-
nished only to individuals who— keeping requirements and will not become
397
§ 441.352 42 CFR Ch. IV (10–1–17 Edition)
effective until approval has been given by for the level of care furnished in a NF
the Office of Management and Budget. when there is a reasonable indication
that individuals age 65 or older might
§ 441.352 State assurances.
need those services in the near future,
Unless the Medicaid agency provides but for the availability of home and
the following satisfactory assurances community-based services. The proce-
to CMS, CMS will not grant a waiver dures used to assess level of care for a
under this subpart and may terminate potential waiver beneficiary must be at
a waiver already granted. least as stringent as any existing State
(a) Health and welfare. The agency
procedures applicable to individuals
must assure that necessary safeguards
entering a NF. The qualifications of in-
have been taken to protect the health
and welfare of the beneficiaries of serv- dividuals performing the waiver assess-
ices by assuring that the following con- ment must be as high as those of indi-
ditions are met: viduals assessing the need for NF care,
(1) Adequate standards for all types and the assessment instrument itself
of providers that furnish services under must be the same as any assessment
the waiver are met. (These standards instrument used to establish level of
must be reasonably related to the re- care of prospective inpatients in NFs.
quirements of the waiver service to be A periodic reevaluation of the level of
furnished.) care must be performed. The period of
(2) The standards of any State licen- reevaluation of level of care cannot ex-
sure or certification requirements are tend beyond 1 year.
met for services or for individuals fur- (d) Expenditures. The agency must as-
nishing services under the waiver. sure that the total amount expended
(3) All facilities covered by section by the State for medical assistance
1616(e) of the Act, in which home and with respect to NF, home health, pri-
community-based services are fur- vate duty nursing, personal care serv-
nished, are in compliance with applica- ices, home and community-based serv-
ble State standards that meet the re- ices furnished under a section 1915(c)
quirements of 45 CFR part 1397 for waiver granted under Subpart G of this
board and care facilities. part to individuals age 65 or older, and
(4) Physician reviews of prescribed
the home and community-based serv-
psychotropic drugs (when prescribed
ices approved and furnished under a
for purposes of behavior control of
section 1915(d) waiver for individuals
waiver beneficiaries) occur at least
every 30 days. age 65 or older during a waiver year
(b) Financial accountability. The agen- will not exceed the APEL, calculated
cy must assure financial account- in accordance with § 441.354.
ability for funds expended for home and (e) Reporting. The agency must assure
community-based services. The State that it will provide CMS annually with
must provide for an independent audit information on the waiver’s impact.
f its waiver program. The performance The information must be consistent
of a single financial audit, in accord- with a reasonable data collection plan
ance with the Single Audit Act of 1984 designed by CMS and must address the
(Pub. L. 98–502, enacted on October 19, waiver’s impact on—
1984), is deemed to satisfy the require- (1) The type, amount, and cost of
ment for an independent audit. The services furnished under the State
agency must maintain and make avail- plan; and
able to HHS, the Comptroller General, (2) The health and welfare of bene-
or other designees, appropriate finan- ficiaries of the services described in
cial records documenting the cost of § 440.181 of this chapter.
services furnished to individuals age 65
or older under the waiver and the State EFFECTIVE DATE NOTE: At 57 FR 29156, June
plan, including reports of any inde- 30, 1992, § 441.352 was added. This section con-
tains information collection and record-
pendent audits conducted.

(c) Evaluation of need. The agency keeping requirements and will not become
must provide for an initial evaluation effective until approval has been given by
the Office of Management and Budget.
(and periodic reevaluations) of the need
398
§ 441.353 Supporting documentation (4) The agency’s procedure to assure

required. reevaluations of need at regular inter-
The agency must furnish CMS with vals.
sufficient information to support the (5) The intervals at which reevalua-
assurances required under § 441.352, in tions occur, which may be no less fre-
order to meet the requirement that the quent than for institutionalized indi-
assurances are satisfactory. At a min- viduals at comparable levels of care.
imum, this information must consist of (6) The procedures and criteria used
the following: for evaluation and reevaluation of
(a) Safeguards. A description of the waiver beneficiaries must be the same
safeguards necessary to protect the or more stringent than those used for
health and welfare of beneficiaries. individuals served in NFs.
This information must include: (d) Alternatives available. A descrip-
(1) A copy of the standards estab-
tion of the agency’s plan for informing
lished by the State for facilities (in
eligible beneficiaries of the feasible al-
which services will be furnished) that
ternatives available under the waiver
are covered by section 1616(e) of the
and allowing beneficiaries to choose ei-
Act.
(2) The minimum educational or pro- ther institutional or home and commu-
fessional qualifications of the providers nity-based services must be submitted
of the services. to CMS. A copy of the forms or docu-
(3) A description of the administra- mentation used by the agency to verify
tive oversight mechanisms established that this choice has been offered and
by the State to ensure quality of care. that beneficiaries of waiver services, or
(b) Records. A description of the their legal representatives, have been
records and information that are main- given the free choice of the providers of
tained by the agency and by providers both waiver and State plan services
of services to support financial ac- must also be available for CMS review.
countability, information regarding The Medicaid agency must provide an
how the State meets the requirement opportunity for a fair hearing, under 42
for financial accountability, and an ex- CFR part 431, subpart E, to bene-
planation of how the State assures that ficiaries who are not given the choice
there is an audit trail for State and of home or community-based services
Federal funds expended for section as an alternative to institutional care
1915(d) home and community-based in a NF or who are denied the service(s)
waiver services. If the State has an ap- or the providers of their choice.
proved Medicaid Management Informa- (e) Post-eligibility of income. An expla-
tion System (MMIS), this system must nation of how the agency applies the
be used to process individual claims applicable provisions regarding the
data and account for funds expended post-eligibility treatment of income
for services furnished under the waiver. and resources of those individuals re-
(c) Evaluation and reevaluation of ceiving home and community-based
beneficiaries. A description of the agen- services who are eligible under a spe-
cy’s plan for the evaluation and re- cial income level (included in § 435.217
evaluation of beneficiaries’ level of of this subchapter).
care, including the following:
(1) A description of who makes these [57 FR 29156, June 30, 1992, as amended at 81
evaluations and how they are made. FR 3012, Jan. 20, 2016]
(2) A copy of the evaluation instru- EFFECTIVE DATE NOTE: At 57 FR 29156, June
ment. 30, 1992, § 441.353 was added. This section con-
(3) The agency’s procedure to assure tains information collection and record-
the maintenance of written docu- keeping requirements and will not become
mentation on all evaluations and re- effective until approval has been given by
evaluations and copies of the forms. In the Office of Management and Budget.
accordance with regulations at 45 CFR
§ 441.354 Aggregate projected expendi-
part 75, written documentation of all

ture limit (APEL).
evaluations and reevaluations must be
maintained for a minimum period of 3 (a) Definitions. For purposes of this
years. section, the term base year means—
399
§ 441.354 42 CFR Ch. IV (10–1–17 Edition)
(1) Federal fiscal year (FFY) 1987 in the Medicare program, identified as
(that is, October 1, 1986 through Sep- the third quarter data available from
tember 30, 1987); or CMS’s Office of National Cost Estimates
in August preceding the start of the fis-
(2) In the case of a State which did cal year.
not report expenditures on the basis of R = The SNF Input Price Index for the base
age categories during FFY 1987, the year.
base year means FFY 1989 (that is, Oc- S = The number of residents in the State in
tober 1, 1988 through September 30, the waiver year involved who have
1989). reached age 65, defined as the number of
(b) General. (1) The total amount ex- aged Medicare beneficiaries in the State,
equal to the Mid-Period Enrollment in HI
pended by the State for medical assist- or SMI in that State on July 1 preceding
ance with respect to NF, home and the start of the fiscal year.
community-based services under the T = The number of aged Medicare bene-
waiver, home health services, personal ficiaries in the State who are enrolled in
care services, private duty nursing either the HI or SMI programs in the
services, and services furnished under a base year, as defined in S, above.
waiver under subpart G of this part to U = The number of years beginning after the
base year and ending on the last day of
individuals age 65 or older furnished as the waiver year involved.
an alternative to care in an SNF or ICF V = The aggregate amount of the State’s
(NF effective October 1, 1990), may not medical assistance under title XIX in the
exceed the APEL calculated in accord- base year for home and community-based
ance with paragraph (c) of this section. services for individuals who have reached
(2) In applying for a waiver under age 65, defined as the total medical as-
this subpart, the agency must clearly sistance payments (Federal and State)
reported on line 6 of form CMS 64 (as ad-
identify the base year it intends to use.
justed) for home health, personal care,
(3) The State may make a prelimi- and home and community-based services
nary calculation of the expenditure waivers, which provide services as an al-
limit at the time of the waiver ap- ternative to care in a SNF or ICF (NF ef-
proval; however, CMS makes final cal- fective October 1, 1990), increased by an
culations of the aggregate limit after estimate (acceptable to CMS) of expendi-
base data have been verified and ac- tures for private duty nursing services,
cepted. multiplied by the ratio of expenditures
for home health services for the aged to
(4) All base year and waiver year data total expenditures for home health serv-
are subject to final cost settlement ices, as reported on form CMS 2082, for
within 2 years from the end of the base the base year.
or waiver year involved. W = The market basket index for home and
(c) Formula for calculating APEL. Ex- community-based services for the waiver
cept as provided in paragraph (d) of year involved, defined as the Home Agen-
this section, the formula for calcu- cy Input Price Index, used in the Medi-
lating the APEL follows: care program identified as the third
quarter data available from CMS’s Office
APEL = P × (1 + Y) + V × (1 + Z), where of National Cost Estimates in August
preceding the start of the fiscal year.
P = The aggregate amount of the State’s X = The Home Health Agency Input Price
medical assistance under title XIX for Index for the base year.
SNF and ICF (NF effective October 1, Y = The greater of—
1990) services furnished to individuals (U × .07), or (Q/R)-1 + (S/T)-1 + (U × .02).
who have reached age 65, defined as the Z = The greater of—
total medical assistance payments (Fed- (U × .07), or (W/X)-1 + (S/T)-1 + + (U × .02).
eral and State) reported on line 6 of form
CMS 64 (as adjusted) for SNF services, (d) Amendment of the APEL. The State
ICF-other services, and mental health fa- may request amendment of its APEL
cility services for the base year, multi- to reflect an increase in the aggregate
plied by the ratio of expenditures for amount of medical assistance for NF
SNF and ICF-other services for the aged services and for services included in
to total expenditures for these services the calculation of the APEL as re-
as reported on form CMS 2082 for the
base year.
quired by paragraph (c) of this section
Q = The market basket index for SNF and when the increase is directly attrib-
ICF (NF effective October 1, 1990) serv- utable to legislation enacted on or
ices for the waiver year involved, defined after December 22, 1987, which amends
as the total SNF Input Price Index used title XIX of the Act. Costs attributable
400
to laws enacted before December 22, (c) Reconsideration of denial. A deter-

1987 will not be considered. Because the mination of CMS to deny a request for
APEL for each year of the waiver is a waiver (or for extension of a waiver)
computed separately from the APEL under this subpart may be reconsidered
for any other waiver year, a separate in accordance with § 441.357.
amendment must be submitted for each (d) Existing waiver effectiveness after
year in which the State chooses to denial. If CMS denies a request for an
raise its APEL. Documentation specific extension of an existing waiver under
to the waiver year involved must be this subpart:
submitted to CMS. (1) The existing waiver remains in ef-
fect for a period of not less than 90
§ 441.355 Duration, extension, and days after the date on which CMS de-
amendment of a waiver. nies the request, or, if the State seeks
(a) Effective dates and extension peri- reconsideration in accordance with
ods. (1) The effective date for a waiver § 441.357, the date on which a final de-
of Medicaid requirements to furnish termination is made with respect to
home and community-based services to that review.
individuals age 65 or older under this (2) CMS calculates an APEL for the
subpart is established by CMS prospec- period for which the waiver remains in
tively on the first day of the FFY fol- effect, and this calculation is used to
lowing the date on which the waiver is pro-rate the limit according to the
approved. number of days to which it applies.
(2) The initial waiver is approved for
a 3-year period from the effective date. § 441.356 Waiver termination.
Subsequent renewals are approved for (a) Termination by the State. If a State
5-year periods. chooses to terminate its waiver before
(3) If the agency requests it, the an approved program is due to expire,
waiver may be extended for an addi- the following conditions apply:
tional 5-year period if CMS’s review of (1) The State must notify CMS in
the prior period shows that the assur- writing at least 30 days before termi-
ances required by § 441.352 were met. nating services to beneficiaries.
(4) The agency may request that (2) The State must notify bene-
waiver modifications be made effective ficiaries of services under the waiver at
retroactive to the first day of the waiv- least 30 days before terminating serv-
er year in which the amendment is sub- ices in accordance with § 431.210 of this
mitted, unless the amendment involves chapter.
substantive change. Substantive (3) CMS continues to apply the APEL
changes may include, but are not lim- described in § 441.354 through the end of
ited to, addition of services under the the waiver year, but this limit is not
waiver, a change in the qualifications applied in subsequent years.
of service providers, or a change in the (4) The State may not decrease the
eligible population. services available under the approved
(5) A request for an amendment that State plan to individuals age 65 or
involves a substantive change is given older by an amount that violates the
a prospective effective date, but this comparability of service requirements
date need not coincide with the start of set forth in § 440.240 of this chapter.
the next FFY. (b) Termination by CMS. (1) If CMS
(b) Extension or new waiver request. finds, during an approved waiver pe-
CMS determines whether a request for riod, that an agency is not meeting one
extension of an existing waiver is actu- or more of the requirements for a waiv-
ally an extension request, or a request er contained in this subpart, CMS noti-
for a new waiver. Generally, if a fies the agency in writing of its find-
State’s extension request proposes a ings and grants an opportunity for a
substantive change in services fur- hearing in accordance with § 441.357. If
nished, eligible population, service CMS determines that the agency is not
area, statutory sections waived, or in compliance with this subpart after
qualifications of service providers, the notice and any hearing, CMS may
CMS considers it a new waiver request. terminate the waiver.
401
§ 441.357 42 CFR Ch. IV (10–1–17 Edition)
(2) If CMS terminates the waiver, the home or a residence owned or leased by
following conditions apply: the provider of the Medicaid services
(i) The State must notify bene- (the caregiver).
ficiaries of services under the waiver at (d) Services that are not included in
least 30 days before terminating serv- the approved State plan and not ap-
ices in accordance with § 431.210 of this proved as waiver services by CMS.
chapter. (e) Services furnished to beneficiaries
(ii) CMS continues to apply the who are ineligible under the terms of
APEL in § 441.354 of this subpart, but the approved waiver.
the limit is prorated according to the (f) Services furnished by a provider
number of days in the fiscal year dur- when either the services or the pro-
ing which waiver services were offered. vider do not meet the standards that
The limit expires concurrently with are set by the State and included in the
the termination of home and commu- approved waiver.
nity-based services under the waiver. (g) Services furnished to a bene-
EFFECTIVE DATE NOTE: At 57 FR 29156, June ficiary by his or her spouse.
30, 1992, § 441.356 was added. This section con-
tains information collection and record- § 441.365 Periodic evaluation, assess-
keeping requirements and will not become ment, and review.
effective until approval has been given by
the Office of Management and Budget. (a) Purpose. This section prescribes
requirements for periodic evaluation,
§ 441.357 Hearing procedures for waiv- assessment, and review of the care and
er denials. services furnished to individuals re-
The procedures specified in § 430.18 of ceiving home and community-based
this subchapter apply to State requests waiver services under this subpart.
for hearings on denials, renewals, or (b) Evaluation and assessment review
amendments of waivers for home and team. (1) A review team, as described in
community-based services for individ- paragraphs (b)(2) and (c) of this section,
uals age 65 or older. must periodically evaluate and assess
the care and services furnished to bene-
§ 441.360 Limits on Federal financial ficiaries under this subpart. The review
participation (FFP). team must be created by the State
FFP for home and community-based agency directly, or (through inter-
services listed in § 440.181 of this sub- agency agreement) by other depart-
chapter is not available in expenditures ments of State government (such as
for the following: the Department of Health or the Agen-
(a) Services furnished in a facility cy on Aging).
subject to the health and welfare re- (2) Each review team must consist of
quirements described in § 441.352(a) dur- at least one physician or registered
ing any period in which the facility is nurse, and at least one other individual
found not to be in compliance with the with health and social service creden-
applicable State requirements de- tials who the State believes is qualified
scribed in that section. to properly evaluate and assess the
(b) The cost of room and board except care and services provided under the
when furnished as part of respite care waiver. If there is no physician on the
services in a facility, approved by the review team, the Medicaid agency
State, that is not a private residence. must ensure that a physician is avail-
For purposes of this subpart, ‘‘board’’ able to provide consultation to the re-
means three meals a day or any other view team.
full nutritional regimen. ‘‘Board’’ does (3) For waiver services furnished to
not include meals, which do not com- individuals who have been found to be
prise a full nutritional regimen, fur- likely to require the level of care fur-
nished as part of adult day health serv- nished in a NF that is also an IMD,
ices. each review team must have a psychia-
(c) The portion of the cost of room trist or physician and other appro-
and board attributed to unrelated, live- priate mental health or social service
in personal caregivers when the waiver personnel who are knowledgeable about
beneficiary lives in the caregiver’s geriatric mental illness.
402
(c) Financial interests and employment evaluation and assessment must in-
of review team members. (1) No member clude—
of a review team may have a financial (i) A review of each beneficiary’s
interest in or be employed by any enti- medical record, the evaluation and re-
ty that furnishes care and services evaluation required by § 441.353(c), and
under the waiver to a beneficiary the plan of care under which the waiver
whose care is under review. and other services are furnished; and
(2) No physician member of a review (ii) If the records described in para-
team may evaluate or assess the care graph (g)(1)(i) of this section are inad-
of a beneficiary for whom he or she is equate or incomplete, personal contact
the attending physician. and observation of each beneficiary.
(3) No individual who serves as case (2) The review team may personally
manager, caseworker, benefit author- contact and observe any beneficiary
izer, or any similar position, may serve whose care the team evaluates and as-
as member of a review team that evalu- sesses.
ates and assesses care furnished to a (3) The review team may consult
beneficiary with whom he or she has with both formal and informal care-
had a professional relationship. givers when the beneficiary’s records
(d) Number and location of review are inadequate or incomplete and when
teams. A sufficient number of teams any apparent discrepancy exists be-
must be located within the State so tween services required by the bene-
that onsite inspections can be made at ficiary and services furnished under the
appropriate intervals at sites where waiver.
waiver beneficiaries receive care and (h) Determinations by the review team.
services. The review team must determine in its
(e) Frequency of periodic evaluations evaluation and assessment whether—
and assessments. Periodic evaluations (1) The services included in the plan
and assessments must be conducted at of care are adequate to meet the health
least annually for each beneficiary and welfare needs of each beneficiary;
under the waiver. The review team and (2) The services included in the plan
the agency have the option to deter- of care have been furnished to the ben-
mine the frequency of further periodic eficiary as planned;
evaluations and assessments, based on (3) It is necessary and in the interest
the quality of services and access to of the beneficiary to continue receiving
care being furnished under the waiver services through the waiver program;
and the condition of patients receiving and
care and services. (4) It is feasible to meet the bene-
(f) Notification before inspection. No ficiary’s health and welfare needs
provider of care and services under the through the waiver program.
waiver may be notified in advance of a (i) Other information considered by re-
periodic evaluation, assessment, and view team. When making determina-
review. However, when a beneficiary tions, under paragraph (h) of this sec-
receives services in his own home or tion, for each beneficiary, the review
the home of a relative, notification team must consider the following in-
must be provided to the residents of formation and may consider other in-
the household at least 48 hours in ad- formation as it deems necessary:
vance. The beneficiary must have an (1) Whether the medical record, the
opportunity to decline access to the determination of level of care, and the
home. If the beneficiary declines access plan of care are consistent, and wheth-
to his or her own home, or the home of er all ordered services have been fur-
a relative, the review is limited solely nished and properly recorded.
to the review of the provider’s records. (2) Whether physician review of pre-
If the beneficiary is incompetent, the scribed psychotropic medications
head of the household has the author- (when required for behavior control)
ity to decline access to the home. has occurred at least every 30 days.
(g) Personal contact with and observa- (3) Whether tests or observations of
tion of beneficiaries and review of records. each beneficiary indicated by his or her
(1) For beneficiaries of care and serv- medical record are made at appropriate
ices under a waiver, the review team’s times and properly recorded.
403
§ 441.400 42 CFR Ch. IV (10–1–17 Edition)
(4) Whether progress notes entered in Subpart I—Community Supported

the record by formal and informal Living Arrangements Services
caregivers are made as required and ap-
pear to be consistent with the observed
condition of the beneficiary. SOURCE: 56 FR 48114, Sept. 24, 1991, unless
otherwise noted.
(5) Whether reevaluations of the
beneficiary’s level of care have oc- § 441.400 Basis and purpose.
curred at least as frequently as would
be required if that individual were This subpart implements section
served in a NF. 1905(a)(24) of the Act, which adds com-
(6) Whether the beneficiary receives munity supported living arrangements
adequate care and services, based, at a services to the list of services that
minimum, on the following when obser- States may provide as medical assist-
vations are necessary (the require- ance under title XIX (to the extent and
ments for the necessity of observations as defined in section 1930 of the Act),
are set forth in new § 441.365(g)(3)): and section 1930(h)(1)(B) of the Act,
(i) Cleanliness. which specifies minimum protection
(ii) Absence of bedsores. requirements that a State which pro-
(iii) Absence of signs of malnutrition vides community supported living ar-
or dehydration. rangements services as an optional
(7) Whether the beneficiary needs any Medicaid service to developmentally
service that is not included in the plan disabled individuals must meet to en-
of care, or if included, is not being fur- sure the health, safety and welfare of
nished by formal or informal care- those individuals.
givers under the waiver or through ar-
rangements with another public or pri- § 441.402 State plan requirements.
vate source of assistance. If a State that is eligible to provide
(8) Determination as to whether con- community supported living arrange-
tinued home and community-based ments services as an optional Medicaid
services are required by the beneficiary service to developmentally disabled in-
to avoid the likelihood of placement in dividuals provides such services, the
a NF. State plan must specify that it com-
(j) Submission of review team’s results. plies with the minimum protection re-
The review team must submit to the quirements in § 441.404.
Medicaid agency the results of its peri-
odic evaluation, assessment and review § 441.404 Minimum protection require-
of the care of the beneficiary: ments.
(1) Within 1 month of the completion To be eligible to provide community
of the review. supported living arrangements services
(2) Immediately upon its determina- to developmentally disabled individ-
tion that conditions exist that may uals, a State must assure, through
constitute a threat to the life or health methods other than reliance on State
of a beneficiary. licensure processes or the State quality
(k) Agency’s action. The Medicaid assurance programs described under
agency must establish and adhere to section 1930(d) of the Act, that:
procedures for taking appropriate ac-
(a) Individuals receiving community
tion in response to the findings re-
supported living arrangements services
ported by the review team. These pro-
cedures must provide for immediate re- are protected from neglect, physical
sponse to any finding that the life or and sexual abuse, and financial exploi-
health of a beneficiary may be jeopard- tation;
ized. (b) Providers of community sup-
ported living arrangements services—
EFFECTIVE DATE NOTE: At 57 FR 29156, June (1) Do not use individuals who have
30, 1992, § 441.365 was added. This section con-
tains information collection and record-

been convicted of child or client abuse,
keeping requirements and will not become neglect, or mistreatment, or of a felony
effective until approval has been given by involving physical harm to an indi-
the Office of Management and Budget. vidual; and
404
(2) Take all reasonable steps to deter- (11) Scheduling when services are
mine whether applicants for employ- provided.
ment by the provider have histories in- (12) Identifying service workers.
dicating involvement in child or client (13) Reviewing and approving in-
abuse, neglect, or mistreatment, or a voices.
criminal record involving physical (c) Definitions. As used in this part—
harm to an individual; Assessment of need means an evalua-
(c) Providers of community sup-
tion of the needs, strengths, and pref-
ported living arrangements services
erences of participants for services.
are not unjustly enriched as a result of
This includes one or more processes to
abusive financial arrangements (such
as owner lease-backs) with develop- obtain information about an indi-
mentally disabled clients; and vidual, including health condition, per-
(d) Providers of community sup- sonal goals and preferences, functional
ported living arrangements services, or limitation, age, school, employment,
the relatives of such providers, are not household, and other factors that are
named beneficiaries of life insurance relevant to the authorization and pro-
policies purchased by or on behalf of vision of services. Assessment informa-
developmentally disabled clients. tion supports the development of the
service plan and the subsequent service
Subpart J—Optional Self-Directed budget.
Personal Assistance Services Individualized backup plan means a
Program written plan that meets all of the fol-
lowing:
(1) Is sufficiently individualized to
SOURCE: 73 FR 57881, Oct. 3, 2008, unless
otherwise noted. address each participant’s critical con-
tingencies or incidents that would pose
§ 441.450 Basis, scope, and definitions. a risk of harm to the participant’s
(a) Basis. This subpart implements health or welfare;
section 1915(j) of the Act concerning (2) Must demonstrate an interface
the self-directed personal assistance with the risk management provision at
services (PAS) option through a State § 441.476 which requires States to assess
Plan. and identify the potential risks to the
(b) Scope. A self-directed PAS option participant (such as any critical health
is designed to allow individuals, or needs), and ensure that the risks and
their representatives, if applicable, to how they will be managed are the re-
exercise decision-making authority in sult of discussion and negotiation
identifying, accessing, managing and among the persons involved in the
purchasing their PAS. This authority service plan development;
includes, at a minimum, all of the fol- (3) Must not include the 911 emer-
lowing: gency system or other emergency sys-
(1) The purchase of PAS and supports tem as the sole backup feature of the
for PAS. plan; and
(2) Recruiting workers. (4) Must be incorporated into the par-
(3) Hiring and discharging workers. ticipant’s service plan.
(4) Training workers and accessing
Legally liable relatives means persons
training provided by or through the
who have a duty under the provisions
State if additional worker training is
required or desired by the participant, of State law to care for another person.
or participant’s representative, if ap- Legally liable relatives may include
plicable. any of the following:
(5) Specifying worker qualifications. (1) The parent (biological or adop-
(6) Determining worker duties. tive) of a minor child or the guardian
(7) Scheduling workers. of a minor child who must provide care
to the child.
(8) Supervising workers.

(9) Evaluating worker performance. (2) Legally-assigned caretaker rel-
(10) Determining the amount paid for atives.
a service, support or item. (3) A spouse.
405
§ 441.452 42 CFR Ch. IV (10–1–17 Edition)
Self-directed personal assistance serv- and supports and in purchasing their

ices (PAS) means personal care and re- PAS identified in the service plan and
lated services, or home and commu- budget.
nity-based services otherwise available Supports broker or consultant means
under the State plan or a 1915(c) waiver an individual who supports partici-
program that are provided to an indi- pants in directing their PAS and serv-
vidual who has been determined eligi- ice budgets. The supports broker or
ble for the PAS option. Self-directed consultant is an agent of the partici-
PAS also includes, at the State’s op- pants and takes direction from the par-
tion, items that increase the individ- ticipants, or their representatives, if
ual’s independence or substitutes (such applicable, about what information,
as a microwave oven or an accessibility counseling, training or assistance is
ramp) for human assistance, to the ex-
needed or desired. The supports broker
tent the expenditures would otherwise
or consultant is primarily responsible
be made for the human assistance.
for facilitating participants’ develop-
Self-direction means the opportunity
ment of a service budget and effective
for participants or their representa-
management of the participants’ PAS
tives to exercise choice and control
over the budget, planning, and pur- and budgets in a manner that comports
chase of self-directed PAS, including with the participants’ preferences.
the amount, duration, scope, provider, States must develop a protocol to en-
and location of service provision. sure that supports brokers or consult-
Service budget means an amount of ants: are accessible to participants;
funds that is under the control and di- have regularly scheduled phone and in-
rection of a participant, or the partici- person contacts with participants;
pant’s representative, if any, when the monitor whether participants’ health
State has selected the State plan op- status has changed and whether ex-
tion for provision of self-directed PAS. penditure of funds are being made in
It is developed using a person-centered accordance with service budgets.
and directed process and is individually States must also develop the training
tailored in accordance with the partici- requirements and qualifications for
pant’s needs and personal preferences supports brokers or consultants that
as established in the service plan. include, at a minimum, the following:
Service plan means the written docu- (1) An understanding of the philos-
ment that specifies the services and ophy of self-direction and person-cen-
supports (regardless of funding source) tered and directed planning;
that are to be furnished to meet the (2) The ability to facilitate partici-
needs of a participant in the self-di- pants’ independence and participants’
rected PAS option and to assist the preferences in managing PAS and
participant to direct the PAS and to budgets, including any risks assumed
remain in the community. The service by participants;
plan is developed based on the assess- (3) The ability to develop service
ment of need using a person-centered budgets and ensure appropriate docu-
and directed process. The service plan mentation; and
builds upon the participant’s capacity (4) Knowledge of the PAS and re-
to engage in activities that promote sources available in the participant’s
community life and respects the par-
community and how to access them.
ticipant’s preferences, choices, and
The availability of a supports broker
abilities. The participant’s representa-
tive, if any, families, friends and pro- or consultant to each participant is a
fessionals, as desired or required by the requirement of the support system.
participant, will be involved in the
§ 441.452 Self-direction: General.
service-planning process.
Support system means information, (a) States must have in place, before
counseling, training, and assistance electing the self-directed PAS option,
that support the participant (or the personal care services through the
participant’s family or representative, State plan, or home and community-
as appropriate) in identifying, access- based services under a section 1915(c)
ing, managing, and directing their PAS waiver.
406
(b) The State must have both tradi- § 441.458 Involuntary disenrollment.
tional service delivery and the self-di-
(a) States must specify the condi-
rected PAS service delivery option tions under which a participant may be
available in the event that an indi- involuntarily disenrolled from the self-
vidual voluntarily disenrolls or is in- directed PAS option.
voluntarily disenrolled, from the self- (b) CMS must approve the State’s
directed PAS service delivery option. conditions under which a participant
(c) The State’s assessment of an indi- may be involuntarily disenrolled.
vidual’s needs must form the basis of (c) The State must specify in the sec-
the level of services for which the indi- tion 1915(j) State plan amendment the
vidual is eligible. safeguards that are in place to ensure
(d) Nothing in this subpart will be continuity of services during the tran-
construed as affecting an individual’s sition from self-directed PAS.
Medicaid eligibility, including that of
an individual whose Medicaid eligi- § 441.460 Participant living arrange-
bility is attained through receipt of ments.
section 1915(c) waiver services. (a) Self-directed PAS are not avail-
able to an individual who resides in a
§ 441.454 Use of cash. home or property that is owned, oper-
(a) States have the option of dis- ated, or controlled by a PAS provider
bursing cash prospectively to partici- who is not related to the individual by
pants, or their representatives, as ap- blood or marriage.
plicable, self-directing their PAS. (b) States may specify additional re-
(b) States that choose to offer the strictions on a participant’s living ar-
cash option must ensure compliance rangements if they have been approved
with all applicable requirements of the by CMS.
Internal Revenue Service, including,
§ 441.462 Statewideness, comparability
but not limited to, retaining required and limitations on number served.
forms and payment of FICA, FUTA and
State unemployment taxes. A State may do the following:
(c) States must permit participants, (a) Provide self-directed PAS without
or their representatives, as applicable, regard to the requirements of
statewideness.
using the cash option to choose to use
the financial management entity for (b) Limit the population eligible to
receive these services without regard
some or all of the functions described
to comparability of amount, duration,
in § 441.484(c).
and scope of services.
(d) States must make available a fi-
(c) Limit the number of persons
nancial management entity to a partic- served without regard to comparability
ipant, or the participant’s representa- of amount, duration, and scope of serv-
tive, if applicable, who has dem- ices.
onstrated, after additional counseling,
information, training, or assistance, § 441.464 State assurances.
that the participant cannot effectively
A State must assure that the fol-
manage the cash option described in
lowing requirements are met:
paragraph (a) of this section.
(a) Necessary safeguards. Necessary
§ 441.456 Voluntary disenrollment. safeguards have been taken to protect
the health and welfare of individuals
(a) States must permit a participant furnished services under the program
to voluntarily disenroll from the self- and to assure the financial account-
directed PAS option at any time and ability for funds expended for self-di-
return to a traditional service delivery rected services.
system. (1) Safeguards must prevent the pre-
(b) The State must specify in a sec- mature depletion of the participant di-
tion 1915(j) State plan amendment the rected budget as well as identify poten-
safeguards that are in place to ensure tial service delivery problems that
continuity of services during the tran- might be associated with budget under-
sition from self-directed PAS. utilization.
407
§ 441.464 42 CFR Ch. IV (10–1–17 Edition)
(2) These safeguards may include the representative which minimally in-
following: cludes the following:
(i) Requiring a case manager, support (i) Elements of self-direction com-
broker or other person to monitor the pared to non-self-directed PAS.
participant’s expenditures. (ii) Individual responsibilities and po-
(ii) Requiring the financial manage- tential liabilities under the self-direc-
ment entity to flag significant budget tion service delivery model.
variances (over and under expendi- (iii) The choice to receive PAS
tures) and bring them to the attention through a waiver program adminis-
of the participant, the participant’s tered under section 1915(c) of the Act,
representative, if applicable, case man- regardless of delivery system, if appli-
ager, or support broker. cable.
(iii) Allocating the budget on a (iv) The option, if available, to re-
monthly or quarterly basis. ceive and manage the cash amount of
(iv) Other appropriate safeguards as their individual budget allocation.
determined by the State. (2) When and how this information is
provided.
(3) Safeguards must be designed so
(d) Support system. States must pro-
that budget problems are identified on
vide, or arrange for the provision of, a
a timely basis so that corrective action
support system that meets the fol-
may be taken, if necessary.
lowing conditions:
(b) Evaluation of need. The State
(1) Appropriately assesses and coun-
must perform an evaluation of the need
sels an individual, or the individual’s
for personal care under the State Plan
representative, if applicable, before en-
or services under a section 1915(c) waiv-
rollment, including information about
er program for individuals who meet
disenrollment.
the following requirements:
(2) Provides appropriate information,
(1) Are entitled to medical assistance counseling, training, and assistance to
for personal care services under the ensure that a participant is able to
State plan or receiving home and com- manage the services and budgets. Such
munity based services under a section information must be communicated to
1915(c) waiver program. the participant in a manner and lan-
(2) May require self-directed PAS. guage understandable by the partici-
(3) May be eligible for self-directed pant. The support activities must in-
PAS. clude at least the following:
(c) Notification of feasible alternatives. (i) Person-centered planning and how
Individuals who are likely to require it is applied.
personal care under the State plan, or (ii) Information about the services
home and community-based services available for self-direction.
under a section 1915(c) waiver program (iii) Range and scope of individual
are informed of the feasible alter- choices and options.
natives, if available, under the State’s (iv) Process for changing the service
self-directed PAS State plan option, at plan and service budget.
the choice of these individuals, to the (v) Grievance process.
provision of personal care services (vi) Risks and responsibilities of self-
under the State plan, or PAS under a direction.
section 1915(c) home and community- (vii) The ability to freely choose
based services waiver program. Infor- from available PAS providers.
mation on feasible alternatives must (viii) Individual rights.
be communicated to the individual in a (ix) Reassessment and review sched-
manner and language understandable ules.
by the individual. Such information in- (x) Defining goals, needs, and pref-
cludes, but is not limited to, the fol- erences.
lowing: (xi) Identifying and accessing serv-
(1) Information about self-direction ices, supports, and resources.
opportunities that is sufficient to in- (xii) Development of risk manage-

form decision-making about the elec- ment agreements.
tion of self-direction and provided on a (xiii) Development of an individual-
timely basis to an individual or the ized backup plan.
408
(xiv) Recognizing and reporting crit- other factors that are relevant to the
ical events. need for and authorization and provi-
(xv) Information about an advocate sion of services.
or advocacy systems available in the (b) Assessment information supports
State and how a participant, or a par- the determination that an individual
ticipant’s representative, if applicable, requires PAS and also supports the de-
can access the advocate or advocacy velopment of the service plan and
systems. budget.
(3) Offers additional information,
counseling, training, or assistance, in- § 441.468 Service plan elements.
cluding financial management services (a) The service plan must include at
under either of the following condi- least the following:
tions: (1) The scope, amount, frequency, and
(i) At the request of the participant, duration of each service.
or participant’s representative, if ap- (2) The type of provider to furnish
plicable, for any reason. each service.
(ii) When the State has determined (3) Location of the service provision.
the participant, or participant’s rep- (4) The identification of risks that
resentative, if applicable, is not effec- may pose harm to the participant
tively managing the services identified along with a written individualized
in the service plan or budget. backup plan for mitigating those risks.
(4) The State may mandate the use of (b) A State must develop a service
additional assistance, including the use plan for each program participant
of a financial management entity, or using a person-centered and directed
may initiate an involuntary planning process to ensure the fol-
disenrollment in accordance with lowing:
§ 441.458, if, after additional informa- (1) The identification of each pro-
tion, counseling, training or assistance gram participant’s preferences,
is provided to a participant (or partici- choices, and abilities, and strategies to
pant’s representative, if applicable), address those preferences, choices, and
the participant (or participant’s rep- abilities.
resentative, if applicable) has contin- (2) The option for the program partic-
ued to demonstrate an inability to ef- ipant, or participant’s representative,
fectively manage the services and if applicable, to exercise choice and
budget. control over services and supports dis-
(e) Annual report. The State must cussed in the plan.
provide to CMS an annual report on (3) Assessment of, and planning for
the number of individuals served and avoiding, risks that may pose harm to
the total expenditures on their behalf a participant.
in the aggregate. (c) All of the State’s applicable poli-
(f) Three-year evaluation. The State cies and procedures associated with
must provide to CMS an evaluation of service plan development must be car-
the overall impact of the self-directed ried out and include, but are not lim-
PAS option on the health and welfare ited to, the following:
of participating individuals compared (1) Allow the participant, or partici-
to non-participants every 3 years. pant’s representative, if applicable, the
opportunity to engage in, and direct,
§ 441.466 Assessment of need. the process to the extent desired.
States must conduct an assessment (2) Allow the participant, or partici-
of the participant’s needs, strengths, pant’s representative, if applicable, the
and preferences in accordance with the opportunity to involve family, friends,
following: and professionals (as desired or re-
(a) States may use one or more proc- quired) in the development and imple-
esses and techniques to obtain informa- mentation of the service plan.
tion about an individual, including (3) Ensure the planning process is
health condition, personal goals and timely.

preferences for the provision of serv- (4) Ensure the participant’s needs are
ices, functional limitations, age, assessed and that the services meet the
school, employment, household, and participant’s needs.
409
§ 441.470 42 CFR Ch. IV (10–1–17 Edition)
(5) Ensure the responsibilities for (b) How the participant is informed
service plan development are identi- of the amount of the service budget be-
fied. fore the service plan is finalized.
(6) Ensure the qualifications of the (c) The procedures for how the partic-
individuals who are responsible for ipant, or participant’s representative,
service plan development reflect the if applicable, may adjust the budget,
nature of the program’s target popu- including the following:
lation(s). (1) How the participant, or partici-
(7) Ensure the State reviews the serv- pant’s representative, if applicable,
ice plan annually, or whenever nec- may freely make changes to the budg-
essary due to a change in the partici- et.
pant’s needs or health status. (2) The circumstances, if any, that
(8) Ensure that a participant may re- may require prior approval before a
quest revisions to a service plan, based budget adjustment is made.
on a change in needs or health status. (3) The circumstances, if any, that
(d) When an entity that is permitted may require a change in the service
to provide other State plan services is plan.
responsible for service plan develop- (d) The procedure(s) that governs
ment, the State must describe the safe- how a person, at the election of the
guards that are in place to ensure that State, may reserve funds to purchase
the service provider’s role in the plan- items that increase independence or
ning process is fully disclosed to the substitute for human assistance, to the
participant, or participant’s represent- extent that expenditures would other-
ative, if applicable, and controls are in wise be made for the human assistance,
place to avoid any possible conflict of including additional goods, supports,
interest. services or supplies.
(e) An approved self-directed service (e) The procedure(s) that governs how
plan conveys authority to the partici- a person may use a discretionary
pant, or participant’s representative, if amount, if applicable, to purchase
applicable, to perform, at a minimum, items not otherwise delineated in the
the following tasks: budget or reserved for permissible pur-
(1) Recruit and hire workers to pro- chases.
vide self-directed services, including (f) How participants, or their rep-
specifying worker qualifications. resentative, if applicable, are afforded
the opportunity to request a fair hear-
(2) Fire workers.
ing under § 441.300 if a participant’s, or
(3) Supervise workers in the provi-
participant’s representative, if applica-
sion of self-directed services.
ble, request for a budget adjustment is
(4) Manage workers in the provision denied or the amount of the budget is
of self-directed services, which includes reduced.
the following functions:
(i) Determining worker duties. § 441.472 Budget methodology.
(ii) Scheduling workers. (a) The State shall set forth a budget
(iii) Training workers in assigned methodology that ensures service au-
tasks. thorization resides with the State and
(iv) Evaluating workers performance. meets the following criteria:
(5) Determine the amount paid for a (1) The State’s method of deter-
service, support, or item. mining the budget allocation is objec-
(6) Review and approve provider in- tive and evidence based utilizing valid,
voices. reliable cost data.
(2) The State’s method is applied con-
§ 441.470 Service budget elements. sistently to participants.
A service budget must be developed (3) The State’s method is open for
and approved by the State based on the public inspection.
assessment of need and service plan (4) The State’s method includes a cal-
and must include the following: culation of the expected cost of the
(a) The specific dollar amount a par- self-directed PAS and supports, if those
ticipant may utilize for services and services and supports were not self-di-
supports. rected.
410
(5) The State has a process in place (c) The State must ensure that each
that describes the following: service plan includes the risks that an
(i) Any limits it places on self-di- individual is willing and able to as-
rected services and supports, and the sume, and the plan for how identified
basis for the limits. risks will be mitigated.
(ii) Any adjustments that will be al- (d) The State must ensure that the
lowed and the basis for the adjust- risk management plan is the result of
ments. discussion and negotiation among the
(b) The State must have procedures persons designated by the State to de-
to safeguard participants when the
velop the service plan, the participant,
budgeted service amount is insufficient
the participant’s representative, if any,
to meet a participant’s needs.
(c) The State must have a method of and others from whom the participant
notifying participants, or their rep- may seek guidance.
resentative, if applicable, of the
§ 441.478 Qualifications of providers of
amount of any limit that applies to a personal assistance.
participant’s self-directed PAS and
supports. (a) States have the option to permit
(d) The budget may not restrict ac- participants, or their representatives,
cess to other medically necessary care if applicable, to hire any individual ca-
and services furnished under the plan pable of providing the assigned tasks,
and approved by the State but not in- including legally liable relatives, as
cluded in the budget. paid providers of the PAS identified in
(e) The State must have a procedure the service plan and budget.
to adjust a budget when a reassessment (b) Participants, or their representa-
indicates a change in a participant’s tives, if applicable, retain the right to
medical condition, functional status or train their workers in the specific
living situation. areas of personal assistance needed by
§ 441.474 Quality assurance and im- the participant and to perform the
provement plan. needed assistance in a manner that
comports with the participant’s per-
(a) The State must provide a quality
assurance and improvement plan that sonal, cultural, and/or religious pref-
describes the State’s system of how it erences. Participants, or their rep-
will perform activities of discovery, re- resentatives, if applicable, also have
mediation and quality improvement in the right to access other training pro-
order to learn of critical incidents or vided by or through the State so that
events that affect participants, correct their PAS providers can meet any addi-
shortcomings, and pursue opportuni- tional qualifications required or de-
ties for system improvement. sired by participants, or participants’
(b) The quality assurance and im- representatives, if applicable.
provement plan shall also describe the (c) Participants, or their representa-
system performance measures, out- tives, if applicable, retain the right to
come measures, and satisfaction meas- establish additional staff qualifications
ures that the State must use to mon- based on participants’ needs and pref-
itor and evaluate the self-directed erences.
State plan option. Quality of care
measures must be made available to § 441.480 Use of a representative.
CMS upon request and include indica-
(a) States may permit participants to
tors approved or prescribed by the Sec-
appoint a representative to direct the
retary.
provision of self-directed PAS on their
§ 441.476 Risk management. behalf. The following types of rep-
resentatives are permissible:
(a) The State must specify the risk
assessment methods it uses to identify (1) A minor child’s parent or guard-
ian.
potential risks to the participant.

(b) The State must specify any tools (2) An individual recognized under
or instruments it uses to mitigate State law to act on behalf of an inca-
identified risks. pacitated adult.
411
§ 441.482 42 CFR Ch. IV (10–1–17 Edition)
(3) A State-mandated representative, tity, including assuring the integrity

after approval by CMS of the State cri- of financial transactions they perform.
teria, if the participant has dem- (2) Designating a State entity or en-
onstrated, after additional counseling, tities responsible for this monitoring.
information, training or assistance, the (3) Determining how frequently fi-
inability to self-direct PAS. nancial management entity perform-
(b) A person acting as a representa- ance will be assessed.
tive for a participant receiving self-di- (c) A financial management entity
rected PAS is prohibited from acting as must provide functions including, but
a provider of self-directed PAS to the not limited to, the following:
participant. (1) Collect and process timesheets of
the participant’s workers.
§ 441.482 Permissible purchases.
(2) Process payroll, withholding, fil-
(a) Participants, or their representa- ing and payment of applicable Federal,
tives, if applicable, may, at the State’s State and local employment-related
option, use their service budgets to pay taxes and insurance.
for items that increase a participant’s (3) Maintain a separate account for
independence or substitute (such as a each participant’s budget.
microwave oven or an accessibility (4) Track and report disbursements
ramp) for human assistance, to the ex- and balances of participant funds.
tent that expenditures would otherwise
(5) Process and pay invoices for goods
be made for the human assistance.
and services approved in the service
(b) The services, supports and items plan.
that are purchased with a service budg-
(6) Provide to participants periodic
et must be linked to an assessed partic-
reports of expenditures and the status
ipant need or goal established in the
of the approved service budget.
service plan.
(d) States not utilizing a financial
§ 441.484 Financial management serv- management entity must perform the
ices. functions listed in paragraph (c) of this
section on behalf of participants self-
(a) States may choose to provide fi-
directing PAS, with the exception of
nancial management services to par-
those participants utilizing the cash
ticipants, or their representatives, as
option who directly perform those
applicable, self-directing PAS, with the
functions.
exception of those participants uti-
lizing the cash option who directly per- (e) States will be reimbursed for the
form those functions, utilizing a finan- cost of financial management services,
cial management entity, through the either provided directly or through a
following arrangements: financial management entity, at the
administrative rate of 50 percent.
(1) States may use a reporting or
subagent through its fiscal inter- [73 FR 57881, Oct. 3, 2008, as amended at 81 FR
mediary in accordance with section 3012, Jan. 20, 2016]
3504 of the IRS Code and Revenue Pro-
cedure 80–4 and Notice 2003–70; or Subpart K—Home and Commu-
(2) States may use a vendor organiza- nity-Based Attendant Services
tion that has the capabilities to per- and Supports State Plan Op-
form the required tasks in accordance
with Section 3504 of the IRS Code and tion (Community First
Revenue Procedure 70–6. When private Choice)
entities furnish financial management
services, the procurement method must SOURCE: 77 FR 26898, May 7, 2012, unless
meet the requirements set forth in 45 otherwise noted.
CFR 75.326 through 75.340.
(b) States must provide oversight of § 441.500 Basis and scope.
financial management services by per- (a) Basis. This subpart implements

forming the following functions: section 1915(k) of the Act, referred to
(1) Monitoring and assessing the per- as the Community First Choice option
formance of financial management en- (hereafter Community First Choice), to
412
provide home and community-based at- may not also be a paid caregiver of an
tendant services and supports through individual receiving services and sup-
a State plan. ports under this subpart.
(b) Scope. Community First Choice is Instrumental activities of daily living
designed to make available home and (IADLs) means activities related to liv-
community-based attendant services ing independently in the community,
and supports to eligible individuals, as including but not limited to, meal
needed, to assist in accomplishing ac- planning and preparation, managing fi-
tivities of daily living (ADLs), instru- nances, shopping for food, clothing, and
mental activities of daily living other essential items, performing es-
(IADLs), and health-related tasks sential household chores, commu-
through hands-on assistance, super- nicating by phone or other media, and
vision, or cueing. traveling around and participating in
the community.
§ 441.505 Definitions. Other models means methods, other
As used in this subpart: than an agency-provider model or the
Activities of daily living (ADLs) means self-directed model with service budg-
basic personal everyday activities in- et, for the provision of self-directed
cluding, but not limited to, tasks such services and supports, as approved by
as eating, toileting, grooming, dress- CMS.
ing, bathing, and transferring. Self-directed means a consumer con-
Agency-provider model means a meth- trolled method of selecting and pro-
od of providing Community First viding services and supports that al-
Choice services and supports under lows the individual maximum control
which entities contract for or provide of the home and community–based at-
through their own employees, the pro- tendant services and supports, with the
vision of such services and supports, or individual acting as the employer of
act as the employer of record for at- record with necessary supports to per-
tendant care providers selected by the form that function, or the individual
individual enrolled in Community having a significant and meaningful
First Choice. role in the management of a provider
Backup systems and supports means of service when the agency-provider
electronic devices used to ensure con- model is utilized. Individuals exercise
tinuity of services and supports. These as much control as desired to select,
items may include an array of avail- train, supervise, schedule, determine
able technology, personal emergency duties, and dismiss the attendant care
response systems, and other mobile provider.
communication devices. Persons iden- Self-directed model with service budget
tified by an individual can also be in- means methods of providing self-di-
cluded as backup supports. rected services and supports using an
Health-related tasks means specific individualized service budget. These
tasks related to the needs of an indi- methods may include the provision of
vidual, which can be delegated or as- vouchers, direct cash payments, and/or
signed by licensed health-care profes- use of a fiscal agent to assist in obtain-
sionals under State law to be per- ing services.
formed by an attendant.
Individual means the eligible indi- § 441.510 Eligibility.
vidual and, if applicable, the individ- To receive Community First Choice
ual’s representative. services and supports under this sec-
Individual’s representative means a tion, an individual must meet the fol-
parent, family member, guardian, ad- lowing requirements:
vocate, or other person authorized by (a) Be eligible for medical assistance
the individual to serve as a representa- under the State plan;
tive in connection with the provision of (b) As determined annually—
CFC services and supports. This au- (1) Be in an eligibility group under
thorization should be in writing, when the State plan that includes nursing fa-
feasible, or by another method that cility services; or
clearly indicates the individual’s free (2) If in an eligibility group under the
choice. An individual’s representative State plan that does not include such
413
§ 441.515 42 CFR Ch. IV (10–1–17 Edition)
nursing facility services, have an in- § 441.515 Statewideness.

come that is at or below 150 percent of
States must provide Community
the Federal poverty level (FPL). In de-
First Choice to individuals:
termining whether the 150 percent of
(a) On a statewide basis.
the FPL requirement is met, States
(b) In a manner that provides such
must apply the same methodologies as
services and supports in the most inte-
would apply under their Medicaid State
grated setting appropriate to the indi-
plan, including the same income dis- vidual’s needs, and without regard to
regards in accordance with section the individual’s age, type or nature of
1902(r)(2) of the Act; and, disability, severity of disability, or the
(c) Receive a determination, at least form of home and community-based at-
annually, that in the absence of the tendant services and supports that the
home and community-based attendant individual requires to lead an inde-
services and supports provided under pendent life.
this subpart, the individual would oth-
erwise require the level of care fur- § 441.520 Included services.
nished in a hospital, a nursing facility, (a) If a State elects to provide Com-
an intermediate care facility for indi- munity First Choice, the State must
viduals with intellectual disabilities, provide all of the following services:
an institution providing psychiatric (1) Assistance with ADLs, IADLs, and
services for individuals under age 21, or health-related tasks through hands-on
an institution for mental diseases for assistance, supervision, and/or cueing.
individuals age 65 or over, if the cost (2) Acquisition, maintenance, and en-
could be reimbursed under the State hancement of skills necessary for the
plan. The State administering agency individual to accomplish ADLs, IADLs,
may permanently waive the annual re- and health-related tasks.
certification requirement for an indi- (3) Backup systems or mechanisms to
vidual if: ensure continuity of services and sup-
(1) It is determined that there is no ports, as defined in § 441.505 of this sub-
reasonable expectation of improvement part.
or significant change in the individ- (4) Voluntary training on how to se-
ual’s condition because of the severity lect, manage and dismiss attendants.
of a chronic condition or the degree of (b) At the State’s option, the State
impairment of functional capacity; and may provide permissible services and
(2) The State administering agency, supports that are linked to an assessed
or designee, retains documentation of need or goal in the individual’s person-
the reason for waiving the annual re- centered service plan. Permissible serv-
certification requirement. ices and supports may include, but are
(d) For purposes of meeting the cri- not limited to, the following:
terion under paragraph (b) of this sec- (1) Expenditures for transition costs
tion, individuals who qualify for med- such as rent and utility deposits, first
ical assistance under the special home month’s rent and utilities, bedding,
and community-based waiver eligi- basic kitchen supplies, and other neces-
bility group defined at section sities linked to an assessed need for an
1902(a)(10)(A)(ii)(VI) of the Act must individual to transition from a nursing
meet all section 1915(c) requirements facility, institution for mental dis-
and receive at least one home and com- eases, or intermediate care facility for
munity-based waiver service per Individuals with Intellectual Disabil-
month. ities to a home and community-based
setting where the individual resides;
(e) Individuals receiving services
through Community First Choice will (2) Expenditures relating to a need
identified in an individual’s person-
not be precluded from receiving other
centered service plan that increases an
home and community-based long-term
individual’s independence or sub-

care services and supports through stitutes for human assistance, to the
other Medicaid State plan, waiver, extent that expenditures would other-
grant or demonstration authorities. wise be made for the human assistance.
414
§ 441.525 Excluded services. are based on the individual’s needs,

Community First Choice may not in- preferences, and, for residential set-
clude the following: tings, resources available for room and
(a) Room and board costs for the in- board.
dividual, except for allowable transi- (iii) Ensures an individual’s rights of
tion services described in § 441.520(b)(1) privacy, dignity and respect, and free-
of this subpart. dom from coercion and restraint.
(b) Special education and related (iv) Optimizes but does not regiment
services provided under the Individuals individual initiative, autonomy, and
with Disabilities Education Act that independence in making life choices,
are related to education only, and vo- including but not limited to, daily ac-
cational rehabilitation services pro- tivities, physical environment, and
vided under the Rehabilitation Act of with whom to interact.
1973. (v) Facilitates individual choice re-
(c) Assistive devices and assistive garding services and supports, and who
technology services, other than those provides them.
defined in § 441.520(a)(3) of this subpart, (vi) In a provider-owned or controlled
or those that meet the requirements at residential setting, in addition to the
§ 441.520(b)(2) of this subpart. above qualities at paragraphs (a)(1)(i)
(d) Medical supplies and medical through (v) of this section, the fol-
equipment, other than those that meet lowing additional conditions must be
the requirements at § 441.520(b)(2) of met:
this subpart. (A) The unit or dwelling is a specific
(e) Home modifications, other than physical place that can be owned,
those that meet the requirements at rented or occupied under a legally en-
§ 441.520(b) of this subpart. forceable agreement by the individual
receiving services, and the individual
§ 441.530 Home and Community-Based has, at a minimum, the same respon-
Setting. sibilities and protections from eviction
(a) States must make available at- that tenants have under the landlord
tendant services and supports in a tenant law of the State, county, city or
home and community-based setting other designated entity. For settings in
consistent with both paragraphs (a)(1) which landlord tenant laws do not
and (a)(2) of this section. apply, the State must ensure that a
(1) Home and community-based set- lease, residency agreement or other
tings must have all of the following form of written agreement will be in
qualities, and such other qualities as place for each participant and that the
the Secretary determines to be appro- document provides protections that ad-
priate, based on the needs of the indi- dress eviction processes and appeals
vidual as indicated in their person-cen- comparable to those provided under the
tered service plan: jurisdiction’s landlord tenant law.
(i) The setting is integrated in and (B) Each individual has privacy in
supports full access of individuals re- their sleeping or living unit:
ceiving Medicaid HCBS to the greater (1) Units have entrance doors lock-
community, including opportunities to able by the individual, with only appro-
seek employment and work in competi- priate staff having keys to doors as
tive integrated settings, engage in needed.
community life, control personal re- (2) Individuals sharing units have a
sources, and receive services in the choice of roommates in that setting.
community, to the same degree of ac- (3) Individuals have the freedom to
cess as individuals not receiving Med- furnish and decorate their sleeping or
icaid HCBS. living units within the lease or other
(ii) The setting is selected by the in- agreement.
dividual from among setting options, (C) Individuals have the freedom and
including non-disability specific set- support to control their own schedules
tings and an option for a private unit and activities, and have access to food
in a residential setting. The setting op- at any time.
tions are identified and documented in (D) Individuals are able to have visi-
the person-centered service plan and tors of their choosing at any time.
415
§ 441.535 42 CFR Ch. IV (10–1–17 Edition)
(E) The setting is physically acces- unless the Secretary determines

sible to the individual. through heightened scrutiny, based on
(F) Any modification of the addi- information presented by the State or
tional conditions, under paragraphs other parties, that the setting does not
(a)(1)(vi)(A) through (D) of this section, have the qualities of an institution and
must be supported by a specific as- that the setting does have the qualities
sessed need and justified in the person- of home and community-based set-
centered service plan. The following re- tings.
quirements must be documented in the (b) [Reserved]
person-centered service plan:
(1) Identify a specific and individual- [79 FR 3032, Jan. 16, 2014]
ized assessed need.
(2) Document the positive interven- § 441.535 Assessment of functional
tions and supports used prior to any need.
modifications to the person-centered States must conduct a face-to-face
service plan. assessment of the individual’s needs,
(3) Document less intrusive methods strengths, preferences, and goals for
of meeting the need that have been the services and supports provided
tried but did not work. under Community First Choice in ac-
(4) Include a clear description of the cordance with the following:
condition that is directly propor-
(a) States may use one or more proc-
tionate to the specific assessed need.
esses and techniques to obtain informa-
(5) Include regulation collection and
tion, including telemedicine, or other
review of data to measure the ongoing
effectiveness of the modification. information technology medium, in
(6) Include established time limits for lieu of a face-to-face assessment if the
periodic reviews to determine if the following conditions apply:
modification is still necessary or can (1) The health care professional(s)
be terminated. performing the assessment meet the
(7) Include the informed consent of provider qualifications defined by the
the individual. State, including any additional quali-
(8) Include an assurance that inter- fications or training requirements for
ventions and supports will cause no the operation of required information
harm to the individual. technology;
(2) Home and community-based set- (2) The individual receives appro-
tings do not include the following: priate support during the assessment,
(i) A nursing facility; including the use of any necessary on-
(ii) An institution for mental dis- site support-staff; and
eases; (3) The individual is provided the op-
(iii) An intermediate care facility for portunity for an in-person assessment
individuals with intellectual disabil- in lieu of one performed via telemedi-
ities; cine.
(iv) A hospital providing long-term (b) Assessment information supports
care services; or the determination that an individual
(v) Any other locations that have
requires Community First Choice and
qualities of an institutional setting, as
also supports the development of the
determined by the Secretary. Any set-
person-centered service plan and, if ap-
ting that is located in a building that
is also a publicly or privately operated plicable, service budget.
facility that provides inpatient institu- (c) The assessment of functional need
tional treatment, or in a building on must be conducted at least every 12
the grounds of, or immediately adja- months, as needed when the individ-
cent to, a public institution, or any ual’s support needs or circumstances
other setting that has the effect of iso- change significantly necessitating revi-
lating individuals receiving Medicaid sions to the person-centered service
plan, and at the request of the indi-
HCBS from the broader community of

individuals not receiving Medicaid vidual.
HCBS will be presumed to be a setting (d) Other requirements as determined
that has the qualities of an institution by the Secretary.
416
§ 441.540 Person-centered service plan. ed paid services unless the natural sup-
(a) Person-centered planning process. ports are unpaid supports that are pro-
The person-centered planning process vided voluntarily to the individual in
is driven by the individual. The proc- lieu of an attendant.
ess— (6) Reflect risk factors and measures
(1) Includes people chosen by the in- in place to minimize them, including
dividual. individualized backup plans.
(2) Provides necessary information (7) Be understandable to the indi-
and support to ensure that the individual receiving services and supports,
vidual directs the process to the max- and the individuals important in sup-
imum extent possible, and is enabled to porting him or her.
make informed choices and decisions. (8) Identify the individual and/or en-
(3) Is timely and occurs at times and tity responsible for monitoring the
locations of convenience to the indi-
plan.
vidual.
(4) Reflects cultural considerations of (9) Be finalized and agreed to in writ-
the individual. ing by the individual and signed by all
(5) Includes strategies for solving individuals and providers responsible
conflict or disagreement within the for its implementation.
process, including clear conflict-of-in- (10) Be distributed to the individual
terest guidelines for all planning par- and other people involved in the plan.
ticipants. (11) Incorporate the service plan re-
(6) Offers choices to the individual requirements for the self-directed model
garding the services and supports they with service budget at § 441.550, when
receive and from whom. applicable.
(7) Includes a method for the indi- (12) Prevent the provision of unneces-
vidual to request updates to the plan. sary or inappropriate care.
(8) Records the alternative home and (13) Other requirements as deter-
community-based settings that were mined by the Secretary.
considered by the individual.
(c) Reviewing the person-centered serv-
(b) The person-centered service plan.
The person-centered service plan must ice plan. The person-centered service
reflect the services and supports that plan must be reviewed, and revised
are important for the individual to upon reassessment of functional need,
meet the needs identified through an at least every 12 months, when the in-
assessment of functional need, as well dividual’s circumstances or needs
as what is important to the individual change significantly, and at the re-
with regard to preferences for the de- quest of the individual.
livery of such services and supports.
Commensurate with the level of need § 441.545 Service models.
of the individual, and the scope of serv- A State may choose one or more of
ices and supports available under Com- the following as the service delivery
munity First Choice, the plan must: model to provide self-directed home
(1) Reflect that the setting in which and community-based attendant serv-
the individual resides is chosen by the ices and supports:
individual. (a) Agency-provider model. (1) The
(2) Reflect the individual’s strengths
agency-provider model is a delivery
and preferences.
method in which the services and sup-
(3) Reflect clinical and support needs
as identified through an assessment of ports are provided by entities, under a
functional need. contract or provider agreement with
(4) Include individually identified the State Medicaid agency or delegated
goals and desired outcomes. entity to provide services. Under this
(5) Reflect the services and supports model, the entity either provides the
(paid and unpaid) that will assist the services directly through their employ-
individual to achieve identified goals, ees or arranges for the provision of

and the providers of those services and services under the direction of the indi-
supports, including natural supports. vidual receiving services.
Natural supports cannot supplant need-
417
§ 441.550 42 CFR Ch. IV (10–1–17 Edition)
(2) Under the agency-provider model (ii) Permit individuals using the cash
for Community First Choice, individ- option to choose to use the financial
uals maintain the ability to have a sig- management entity for some or all of
nificant role in the selection and dis- the functions described in paragraph
missal of the providers of their choice, (b)(1)(ii) of this section.
for the delivery of their specific care, (iii) Make available a financial man-
and for the services and supports iden- agement entity to an individual who
tified in their person-centered service has demonstrated, after additional
plan. counseling, information, training, or
(b) Self-directed model with service assistance that the individual cannot
budget. A self-directed model with a effectively manage the cash option de-
service budget is one in which the indi- scribed in this section.
vidual has both a person-centered serv- (iv) The State may require an indi-
ice plan and a service budget based on vidual to use a financial management
the assessment of functional need. entity, but must provide the individual
(1) Financial management entity. with the conditions under which this
States must make available financial option would be enforced.
management activities to all individ- (3) Vouchers. States have the option
uals with a service budget. The finan- to issue vouchers to individuals who
cial management entity performs func- self-direct their Community First
tions including, but not limited to, the Choice services and supports as long as
following activities: the requirements in paragraphs (b)(2)(i)
(i) Collect and process timesheets of through (iv) of this paragraph are met.
the individual’s attendant care pro- (c) Other service delivery models.
viders. States have the option of proposing
(ii) Process payroll, withholding, fil- other service delivery models. Such
ing, and payment of applicable Federal, models are defined by the State and ap-
State, and local employment related proved by CMS.
taxes and insurance.
(iii) Separately track budget funds § 441.550 Service plan requirements
and expenditures for each individual. for self-directed model with service
(iv) Track and report disbursements budget.
and balances of each individual’s funds. The person-centered service plan
(v) Process and pay invoices for serv- under the self-directed model with
ices in the person-centered service service budget conveys authority to
plan. the individual to perform, at a min-
(vi) Provide individual periodic re- imum, the following tasks:
ports of expenditures and the status of
(a) Recruit and hire or select attend-
the approved service budget to the in-
ant care providers to provide self-di-
dividual and to the State.
rected Community First Choice serv-
(vii) States may perform the func-
ices and supports, including specifying
tions of a financial management entity
attendant care provider qualifications.
internally or use a vendor organization
that has the capabilities to perform the (b) Dismiss specific attendant care
required tasks in accordance with all providers of Community First Choice
applicable requirements of the Internal services and supports.
Revenue Service. (c) Supervise attendant care pro-
(2) Direct cash. States may disburse viders in the provision of Community
cash prospectively to individuals self- First Choice services and supports.
directing their Community First (d) Manage attendant care providers
Choice services and supports, and must in the provision of Community First
meet the following requirements: Choice services and supports, which in-
(i) Ensure compliance with all appli- cludes the following functions:
cable requirements of the Internal Rev- (1) Determining attendant care pro-
enue Service, and State employment vider duties.
and taxation authorities, including but (2) Scheduling attendant care pro-
not limited to, retaining required viders.
forms and payment of FICA, FUTA and (3) Training attendant care providers
State unemployment taxes. in assigned tasks.
418
(4) Evaluating attendant care pro- (A) The State must specify in the
viders’ performance. State Plan amendment any tools or in-
(e) Determining the amount paid for struments used to mitigate identified
a service, support, or item, in accord- risks.
ance with State and Federal compensa- (B) States utilizing criminal or back-
tion requirements. ground checks as part of their risk
(f) Reviewing and approving provider management agreement will bear the
payment requests. costs of such activities.
§ 441.555 Support system. (xii) Development of a personalized
backup plan.
For each service delivery model
(xiii) Recognizing and reporting crit-
available, States must provide, or ar-
ical events.
range for the provision of, a support
system that meets all of the following (xiv) Information about an advocate
conditions: or advocacy systems available in the
(a) Appropriately assesses and coun- State and how an individual can access
sels an individual before enrollment. the advocate or advocacy systems.
(b) Provides appropriate information, (c) Establishes conflict of interest
counseling, training, and assistance to standards for the assessments of func-
ensure that an individual is able to tional need and the person-centered
manage the services and budgets if ap- service plan development process that
plicable. apply to all individuals and entities,
(1) This information must be commu- public or private. At a minimum, these
nicated to the individual in a manner standards must ensure that the indi-
and language understandable by the in- viduals or entities conducting the as-
dividual. To ensure that the informa- sessment of functional need and per-
tion is communicated in an accessible son-centered service plan development
manner, information should be commu- process are not:
nicated in plain language and needed (1) Related by blood or marriage to
auxiliary aids and services should be
the individual, or to any paid caregiver
provided.
of the individual.
(2) The support activities must in-
clude at least the following: (2) Financially responsible for the in-
(i) Person-centered planning and how dividual.
it is applied. (3) Empowered to make financial or
(ii) Range and scope of individual health-related decisions on behalf of
choices and options. the individual.
(iii) Process for changing the person- (4) Individuals who would benefit fi-
centered service plan and, if applicable, nancially from the provision of as-
service budget. sessed needs and services.
(iv) Grievance process. (5) Providers of State plan HCBS for
(v) Information on the risks and re- the individual, or those who have an
sponsibilities of self-direction. interest in or are employed by a pro-
(vi) The ability to freely choose from vider of State plan HCBS for the indi-
available home and community-based vidual, except when the State dem-
attendant providers, available service onstrates that the only willing and
delivery models and if applicable, fi- qualified entity/entities to perform as-
nancial management entities. sessments of functional need and de-
(vii) Individual rights, including ap-
velop person-centered service plans in
peal rights.
a geographic area also provides HCBS,
(viii) Reassessment and review sched-
ules. and the State devises conflict of inter-
(ix) Defining goals, needs, and pref- est protections including separation of
erences of Community First Choice assessment/planning and HCBS pro-
services and supports. vider functions within provider enti-
ties, which are described in the State
(x) Identifying and accessing serv-

ices, supports, and resources. plan, and individuals are provided with
(xi) Development of risk manage- a clear and accessible alternative dis-
ment agreements. pute resolution process.
419
§ 441.560 42 CFR Ch. IV (10–1–17 Edition)
(d) Ensures the responsibilities for (i) Any limits the State places on
assessment of functional need and per- Community First Choice services and
son-centered service plan development supports, and the basis for the limits.
are identified. (ii) Any adjustments that are allowed
and the basis for the adjustments.
§ 441.560 Service budget requirements. (c) The State must have procedures
(a) For the self-directed model with a in place that will provide safeguards to
service budget, a service budget must individuals when the budgeted service
be developed and approved by the State amount is insufficient to meet the in-
based on the assessment of functional dividual’s needs.
need and person-centered service plan (d) The State must have a method of
and must include all of the following notifying individuals of the amount of
any limit that applies to an individ-
requirements:
ual’s Community First Choice services
(1) The specific dollar amount an in-
and supports. Notice must be commu-
dividual may use for Community First
nicated in an accessible format, com-
Choice services and supports. municated in plain language, and need-
(2) The procedures for informing an ed auxiliary aids and services should be
individual of the amount of the service provided.
budget before the person-centered serv- (e) The budget may not restrict ac-
ice plan is finalized. cess to other medically necessary care
(3) The procedures for how an indi- and services furnished under the State
vidual may adjust the budget including plan and approved by the State but
the following: which are not included in the budget.
(i) The procedures for an individual (f) The State must have a procedure
to freely adjust amounts allocated to to adjust a budget when a reassessment
specific services and supports within indicates a change in an individual’s
the approved service budget. medical condition, functional status,
(ii) The circumstances, if any, that or living situation.
may require prior approval by the
State before a budget adjustment is § 441.565 Provider qualifications.
made. (a) For all service delivery models:
(4) The circumstances, if any, that (1) An individual retains the right to
may require a change in the person- train attendant care providers in the
centered service plan. specific areas of attendant care needed
(5) The procedures that govern the by the individual, and to have the at-
determination of transition costs and tendant care provider perform the
other permissible services and supports needed assistance in a manner that
as defined at § 441.520(b). comports with the individual’s per-
(6) The procedures for an individual sonal, cultural, and/or religious pref-
to request a fair hearing under Subpart erences.
E of this title if an individual’s request (2) An individual retains the right to
for a budget adjustment is denied or establish additional staff qualifications
the amount of the budget is reduced. based on the individual’s needs and
preferences.
(b) The budget methodology set forth
(3) Individuals also have the right to
by the State to determine an individ-
access other training provided by or
ual’s service budget amount must:
through the State so that their attend-
(1) Be objective and evidence-based ant care provider(s) can meet any addi-
utilizing valid, reliable cost data. tional qualifications required or de-
(2) Be applied consistently to individ- sired by individuals.
uals. (b) For the agency-provider model,
(3) Be included in the State plan. the State must define in writing ade-
(4) Include a calculation of the ex- quate qualifications for providers in
pected cost of Community First Choice the agency model of Community First
services and supports, if those services
Choice services and supports.

and supports are not self-directed. (c) For the self-directed model with
(5) Have a process in place that de- service budget, an individual has the
scribes the following: option to permit family members, or
420
any other individuals, to provide Com- (b) States must consult and collabo-
munity First Choice services and sup- rate with the Council when developing
ports identified in the person-centered and implementing a State plan amend-
service plan, provided they meet the ment to provide Community First
qualifications to provide the services Choice services and supports.
and supports established by the indi-
vidual, including additional training. § 441.580 Data collection.
(d) For other models, the applica- A State must provide the following
bility of requirements at paragraphs information regarding the provision of
(b) or (c) of this section will be deter- home and community-based attendant
mined based on the description and ap- services and supports under Commu-
proval of the model. nity First Choice for each Federal fis-
cal year for which the services and sup-
§ 441.570 State assurances.
ports are provided:
A State must assure the following re- (a) The number of individuals who
quirements are met: are estimated to receive Community
(a) Necessary safeguards have been First Choice services and supports
taken to protect the health and welfare under this State plan option during the
of enrollees in Community First Federal fiscal year.
Choice, including adherence to section (b) The number of individuals who re-
1903(i) of the Act that Medicaid pay- ceived the services and supports during
ment shall not be made for items or the preceding Federal fiscal year.
services furnished by individuals or en- (c) The number of individuals served
tities excluded from participating in broken down by type of disability, age,
the Medicaid Program. gender, education level, and employ-
(b) For the first full 12 month period ment status.
in which the State plan amendment is (d) The specific number of individuals
implemented, the State must maintain who have been previously served under
or exceed the level of State expendi- sections 1115, 1915(c) and (i) of the Act,
tures for home and community-based or the personal care State plan option.
attendant services and supports pro- (e) Data regarding how the State pro-
vided under sections 1115, 1905(a), 1915, vides Community First Choice and
or otherwise under the Act, to individ- other home and community-based serv-
uals with disabilities or elderly indi- ices.
viduals attributable to the preceding 12
(f) The cost of providing Community
month period.
First Choice and other home and com-
(c) All applicable provisions of the
munity-based services and supports.
Fair Labor Standards Act of 1938.
(d) All applicable provisions of Fed- (g) Data regarding how the State pro-
eral and State laws regarding the fol- vides individuals with disabilities who
lowing: otherwise qualify for institutional care
(1) Withholding and payment of Fed- under the State plan or under a waiver
eral and State income and payroll the choice to receive home and commu-
taxes. nity-based services in lieu of institu-
(2) The provision of unemployment tional care.
and workers compensation insurance. (h) Data regarding the impact of
(3) Maintenance of general liability Community First Choice services and
insurance. supports on the physical and emotional
(4) Occupational health and safety. health of individuals.
(5) Any other employment or tax re- (i) Other data as determined by the
lated requirements. Secretary.
§ 441.575 Development and Implemen- § 441.585 Quality assurance system.

tation Council. (a) States must establish and main-
(a) States must establish a Develop- tain a comprehensive, continuous qual-
ment and Implementation Council, the ity assurance system, described in the
majority of which is comprised of indi- State plan amendment, which includes
viduals with disabilities, elderly indi- the following:
viduals, and their representatives. (1) A quality improvement strategy.
421
§ 441.590 42 CFR Ch. IV (10–1–17 Edition)
(2) Methods to continuously monitor § 441.600 Basis and purpose.

the health and welfare of each indi-
This subpart implements sections
vidual who receives home and commu-
1902(a)(62) and 1928 of the Act by requir-
nity-based attendant services and sup-
ing states to provide for a program for
ports, including a process for the man-
the purchase and distribution of pedi-
datory reporting, investigation, and
atric vaccines to program-registered
resolution of allegations of neglect,
providers for the immunization of vac-
abuse, or exploitation in connection
cine-eligible children.
with the provision of such services and
supports. § 441.605 General requirements.
(3) Measures individual outcomes as-
(a) Federally-purchased vaccines
sociated with the receipt of home and
under the VFC Program are made
community-based attendant services
available to children who are 18 years
and supports as set forth in the person
of age or younger and who are any of
centered service plan, particularly for
the following:
the health and welfare of individuals
receiving such services and supports. (1) Eligible for Medicaid.
These measures must be reported to (2) Not insured.
CMS upon request. (3) Not insured with respect to the
vaccine and who are administered pedi-
(4) Standards for all service delivery
atric vaccines by a federally qualified
models for training, appeals for denials
health center (FQHC) or rural health
and reconsideration procedures for an
clinic.
individual’s person-centered service
plan. (4) An Indian, as defined in section 4
of the Indian Health Care Improvement
(5) Other requirements as determined
Act.
by the Secretary.
(b) Under the VFC program, vaccines
(b) The State must ensure the qual-
must be administered by program-reg-
ity assurance system will employ
istered providers. Section 1928(c) of the
methods that maximizes individual
Act defines a program-registered pro-
independence and control, and provides
vider as any health care provider that
information about the provisions of
meets the following requirements:
quality improvement and assurance to
(1) Is licensed or authorized to ad-
each individual receiving such services
minister pediatric vaccines under the
and supports.
law of the state in which the adminis-
(c) The State must elicit and incor- tration occurs without regard to
porate feedback from individuals and whether or not the provider is a Med-
their representatives, disability orga- icaid-participating provider.
nizations, providers, families of dis- (2) Submits to the state an executed
abled or elderly individuals, members provider agreement in the form and
of the community and others to im- manner specified by the Secretary.
prove the quality of the community-
(3) Has not been found, by the Sec-
based attendant services and supports
retary or the state to have violated the
benefit.
provider agreement or other applicable
§ 441.590 Increased Federal financial requirements established by the Sec-
participation. retary or the state.
Beginning October 1, 2011, the FMAP § 441.610 State plan requirements.
applicable to the State will be in-
A state plan must provide that the
creased by 6 percentage points, for the
Medicaid agency meets the require-
provision of Community First Choice
ments of this part.
services and supports, under an ap-
proved State plan amendment. § 441.615 Administration fee require-
ments.
Subpart L—Vaccines for Children (a) Under the VFC Program, a pro-
Program
vider who administers a qualified pedi-

atric vaccine to a federally vaccine-eli-
SOURCE: 77 FR 66700, Nov. 6, 2012, unless gible child, may not impose a charge
otherwise noted. for the cost of the vaccine.
422
(1) A provider can impose a fee for § 441.700 Basis and purpose.
the administration of a qualified pedi- Section 1915(i) of the Act permits
atric vaccine as long as the fee does States to offer one or more home and
not exceed the costs of the administra- community-based services (HCBS)
tion (as determined by the Secretary under their State Medicaid plans to
based on actual regional costs for the qualified individuals with disabilities
administration). or individuals who are elderly. Those
(2) A provider may not deny adminis- services are listed in § 440.182 of this
tration of a qualified pediatric vaccine chapter, and are described by the
to a vaccine-eligible child due to the State, including any limitations of the
inability of the child’s parents or legal services. This optional benefit is
guardian to pay the administration fee. known as the State plan HCBS benefit.
(b) The Secretary must publish each This subpart describes what a State
State’s regional maximum charge for Medicaid plan must provide when the
the VFC program, which represents the State elects to include the optional
maximum amount that a provider in a benefit, and defines State responsibil-
state could charge for the administra- ities.
tion of qualified pediatric vaccines to
federally vaccine-eligible children
under the VFC program. A State plan that provides section
(c) An interim formula has been es- 1915(i) of the Act State plan home and
tablished for the calculation of a community-based services must meet
state’s regional maximum administra- the requirements of this subpart.
tion fee. That formula is as follows: § 441.710 State plan home and commu-
National charge data × updated geo- nity-based services under section
graphic adjustment factors (GAFs) = 1915(i)(1) of the Act.
maximum VFC fee. (a) Home and Community-Based Set-
(d) The State Medicaid Agency must ting. States must make State plan
submit a state plan amendment that HCBS available in a home and commu-
identifies the amount that the state nity-based setting consistent with both
will pay providers for the administra- paragraphs (a)(1) and (a)(2) of this sec-
tion of a qualified pediatric vaccine to tion.
a Medicaid-eligible child under the (1) Home and community-based set-
VFC program. The amount identified tings must have all of the following
by the state cannot exceed the state’s qualities, and such other qualities as
regional maximum administration fee. the Secretary determines to be appro-
(e) Physicians participating in the priate, based on the needs of the indi-
VFC program can charge federally vac- vidual as indicated in their person-cen-
cine-eligible children who are not entered service plan:
rolled in Medicaid the maximum ad- (i) The setting is integrated in and
ministration fee (if that fee reflects the supports full access of individuals re-
provider’s cost of administration) receiving Medicaid HCBS to the greater
gardless of whether the state has estab- community, including opportunities to
lished a lower administration fee under seek employment and work in competi-
the Medicaid program. However, there tive integrated settings, engage in
would be no federal Medicaid matching community life, control personal re-
funds available for the administration sources, and receive services in the
since these children are not eligible for community, to the same degree of ac-
Medicaid. cess as individuals not receiving Med-
icaid HCBS.
Subpart M—State Plan Home and (ii) The setting is selected by the in-
dividual from among setting options,
Community-Based Services including non-disability specific set-
for the Elderly and Individuals tings and an option for a private unit
with Disabilities
in a residential setting. The setting op-

tions are identified and documented in
SOURCE: 79 FR 3033, Jan. 16, 2014, unless the person–centered service plan and
otherwise noted. are based on the individual’s needs,
423
§ 441.710 42 CFR Ch. IV (10–1–17 Edition)
preferences, and, for residential set- (E) The setting is physically acces-
tings, resources available for room and sible to the individual; and
board. (F) Any modification of the addi-
(iii) Ensures an individual’s rights of tional conditions, under paragraphs
privacy, dignity and respect, and free- (a)(1)(vi)(A) through (D) of this section,
dom from coercion and restraint. must be supported by a specific as-
(iv) Optimizes, but does not regi- sessed need and justified in the person-
ment, individual initiative, autonomy, centered service plan. The following re-
and independence in making life quirements must be documented in the
choices, including but not limited to, person-centered service plan:
daily activities, physical environment, (1) Identify a specific and individual-
and with whom to interact. ized assessed need.
(v) Facilitates individual choice re- (2) Document the positive interven-
garding services and supports, and who tions and supports used prior to any
provides them. modifications to the person-centered
(vi) In a provider-owned or controlled service plan.
residential setting, in addition to the (3) Document less intrusive methods
above qualities at paragraphs (a)(1)(i) of meeting the need that have been
through (v) of this section, the fol- tried but did not work.
lowing additional conditions must be (4) Include a clear description of the
met: condition that is directly propor-
(A) The unit or dwelling is a specific tionate to the specific assessed need.
physical place that can be owned, (5) Include regular collection and re-
rented, or occupied under a legally en- view of data to measure the ongoing ef-
forceable agreement by the individual fectiveness of the modification.
receiving services, and the individual (6) Include established time limits for
has, at a minimum, the same respon- periodic reviews to determine if the
sibilities and protections from eviction modification is still necessary or can
that tenants have under the landlord/ be terminated.
tenant law of the state, county, city, or (7) Include the informed consent of
other designated entity. For settings in the individual.
which landlord tenant laws do not (8) Include an assurance that inter-
apply, the State must ensure that a ventions and supports will cause no
lease, residency agreement or other harm to the individual.
form of written agreement will be in (2) Home and community-based set-
place for each HCBS participant and tings do not include the following:
that the document provides protections (i) A nursing facility.
that address eviction processes and ap- (ii) An institution for mental dis-
peals comparable to those provided eases.
under the jurisdiction’s landlord ten- (iii) An intermediate care facility for
ant law; individuals with intellectual disabil-
(B) Each individual has privacy in ities.
their sleeping or living unit: (iv) A hospital.
(1) Units have entrance doors lock- (v) Any other locations that have
able by the individual, with only appro- qualities of an institutional setting, as
priate staff having keys to doors; determined by the Secretary. Any set-
(2) Individuals sharing units have a ting that is located in a building that
choice of roommates in that setting; is also a publicly or privately operated
and facility that provides inpatient institu-
(3) Individuals have the freedom to tional treatment, or in a building on
furnish and decorate their sleeping or the grounds of, or immediately adja-
living units within the lease or other cent to, a public institution, or any
agreement. other setting that has the effect of iso-
(C) Individuals have the freedom and lating individuals receiving Medicaid
support to control their own schedules HCBS from the broader community of
and activities, and have access to food individuals not receiving Medicaid
at any time; HCBS will be presumed to be a setting
(D) Individuals are able to have visi- that has the qualities of an institution
tors of their choosing at any time; unless the Secretary determines
424
through heightened scrutiny, based on year after the effective date of this reg-
information presented by the State or ulation. The transition plan must in-
other parties, that the setting does not clude all elements including timelines
have the qualities of an institution and and deliverables as approved by the
that the setting does have the qualities Secretary.
of home and community-based set- (iii) A State must provide at least a
tings. 30-day public notice and comment pe-
(3) Compliance and transition: riod regarding the transition plan(s)
(i) States submitting state plan that the State intends to submit to
amendments for new section 1915(i) of CMS for review and consideration, as
the Act benefits must provide assur- follows:
ances of compliance with the require- (A) The State must at a minimum
ments of this section for home and provide two (2) statements of public no-
community-based settings as of the ef- tice and public input procedures.
fective date of the state plan amend- (B) The State must ensure the full
ment; transition plan(s) is available to the
(ii) CMS will require transition plans public for public comment.
for existing section 1915(c) waivers and (C) The State must consider and
approved state plans providing home modify the transition plan, as the
and community-based services under State deems appropriate, to account
section 1915(i) to achieve compliance for public comment.
with this section, as follows: (iv) A State must submit to CMS,
(A) For each approved section 1915(i) with the proposed transition plan:
of the Act benefit subject to renewal or
(A) Evidence of the public notice re-
submitted for amendment within one
quired.
year after the effective date of this reg-
ulation, the State must submit a tran- (B) A summary of the comments re-
sition plan at the time of the renewal ceived during the public notice period,
or amendment request that sets forth reasons why comments were not adopt-
the actions the State will take to bring ed, and any modifications to the tran-
the specific 1915(i) State plan benefit sition plan based upon those com-
into compliance with this section. The ments.
approval will be contingent on the in- (v) Upon approval by CMS, the State
clusion of the transition plan approved will begin implementation of the tran-
by CMS. The transition plan must in- sition plans. The State’s failure to sub-
clude all elements required by the Sec- mit an approvable transition plan as
retary; and within one hundred and required by this section and/or to com-
twenty days of the submission of the ply with the terms of the approved
first renewal or amendment request transition plan may result in compli-
the State must submit a transition ance actions, including but not limited
plan detailing how the State will oper- to deferral/disallowance of Federal Fi-
ate all section 1915(c) HCBS waivers nancial Participation.
and any section 1915(i) State plan ben- (b) Needs-Based Eligibility Requirement.
efit in accordance with this section. Meet needs-based criteria for eligi-
The transition plan must include all bility for the State plan HCBS benefit,
elements including timelines and as required in § 441.715(a).
deliverables as approved by the Sec- (c) Minimum State plan HCBS Require-
retary. ment. Be assessed to require at least
(B) For States that do not have a sec- one section 1915(i) home and commu-
tion 1915(c) waiver or a section 1915(i) nity-based service at a frequency deter-
State plan benefit due for renewal or mined by the State, as required in
proposed for amendments within one § 441.720(a)(5).
year of the effective date of this regu- (d) Target Population. Meet any appli-
lation, the State must submit a transi- cable targeting criteria defined by the
tion plan detailing how the State will State under the authority of paragraph
operate all section 1915(c) waivers and (e)(2) of this section.

any section 1915(i) State plan benefit in (e) Nonapplication. The State may
accordance with this section. This plan elect in the State plan amendment ap-
must be submitted no later than one proved under this subpart not to apply
425
§ 441.715 42 CFR Ch. IV (10–1–17 Edition)
the following requirements when deter- given person through an individualized

mining eligibility: evaluation of need.
(1) Section 1902(a)(10)(C)(i)(III) of the (b) More stringent institutional and
Act, pertaining to income and resource waiver needs-based criteria. The State
eligibility rules for the medically plan HCBS benefit is available only if
needy living in the community, but the State has in effect needs-based cri-
only for the purposes of providing teria (as defined in paragraph (a) of
State plan HCBS. this section), for receipt of services in
(2) Section 1902(a)(10)(B) of the Act, nursing facilities as defined in section
pertaining to comparability of Med- 1919(a) of the Act, intermediate care fa-
icaid services, but only for the pur- cilities for individuals with intellec-
poses of providing section 1915(i) State tual disabilities as defined in § 440.150 of
plan HCBS. In the event that a State this chapter, and hospitals as defined
elects not to apply comparability rein § 440.10 of this chapter for which the
quirements: State has established long-term level
(i) The State must describe the of care (LOC) criteria, or waivers offer-
group(s) receiving State plan HCBS, ing HCBS, and these needs-based cri-
subject to the Secretary’s approval. teria are more stringent than the
Targeting criteria cannot have the im- needs-based criteria for the State plan
pact of limiting the pool of qualified HCBS benefit. If the State defines
providers from which an individual needs-based criteria for individual
would receive services, or have the im- State plan home and community-based
pact of requiring an individual to re- services, it may not have the effect of
ceive services from the same entity limiting who can benefit from the
from which they purchase their hous- State plan HCBS in an unreasonable
ing. These groups must be defined on way, as determined by the Secretary.
the basis of any combination of the fol- (1) These more stringent criteria
lowing: must meet the following requirements:
(A) Age. (i) Be included in the LOC determina-
(B) Diagnosis. tion process for each institutional serv-
(C) Disability. ice and waiver.
(D) Medicaid Eligibility Group. (ii) Be submitted for inspection by
(ii) The State may elect in the State CMS with the State plan amendment
plan amendment to limit the avail- that establishes the State Plan HCBS
ability of specific services defined benefit.
under the authority of § 440.182(c) of (iii) Be in effect on or before the ef-
this chapter or to vary the amount, du- fective date of the State plan HCBS
ration, or scope of those services, to benefit.
one or more of the group(s) described in (2) In the event that the State modi-
this paragraph. fies institutional LOC criteria to meet
the requirements under paragraph (b)
§ 441.715 Needs-based criteria and or (c)(6) of this section that such cri-
evaluation. teria be more stringent than the State
(a) Needs-based criteria. The State plan HCBS needs-based eligibility cri-
must establish needs-based criteria for teria, States may continue to receive
determining an individual’s eligibility FFP for individuals receiving institu-
under the State plan for the HCBS ben- tional services or waiver HCBS under
efit, and may establish needs-based cri- the LOC criteria previously in effect.
teria for each specific service. Needs- (c) Adjustment authority. The State
based criteria are factors used to deter- may modify the needs-based criteria
mine an individual’s requirements for established under paragraph (a) of this
support, and may include risk factors. section, without prior approval from
The criteria are not characteristics the Secretary, if the number of individ-
that describe the individual or the indi- uals enrolled in the State plan HCBS
vidual’s condition. A diagnosis is not a benefit exceeds the projected number
sufficient factor on which to base a de- submitted annually to CMS. The Sec-
termination of need. A criterion can be retary may approve a retroactive effec-
considered needs-based if it is a factor tive date for the State plan amendment
that can only be ascertained for a modifying the criteria, as early as the
426
day following the notification period (1) Is performed by an agent that is

required under paragraph (c)(1) of this independent and qualified as defined in
section, if all of the following condi- § 441.730.
tions are met: (2) Applies the needs-based eligibility
(1) The State provides at least 60 criteria that the State has established
days notice of the proposed modifica- under paragraph (a) of this section, and
tion to the Secretary, the public, and the general eligibility requirements
each individual enrolled in the State under §§ 435.219 and 436.219 of this chap-
plan HCBS benefit. ter.
(2) The State notice to the Secretary (3) Includes consultation with the in-
is submitted as an amendment to the dividual, and if applicable, the individ-
State plan. ual’s representative as defined under
(3) The adjusted needs-based eligi- § 441.735.
bility criteria for the State plan HCBS (4) Assesses the individual’s support
benefit are less stringent than needs- needs.
based institutional and waiver LOC cri- (5) Uses only current and accurate in-
teria in effect after the adjustment. formation from existing records, and
(4) Individuals who were found eligi- obtains any additional information
ble for the State plan HCBS benefit be- necessary to draw valid conclusions
fore modification of the needs-based about the individual’s support needs.
criteria under this adjustment author- (6) Evaluations finding that an indi-
ity must remain eligible for the HCBS vidual is not eligible for the State plan
benefit until such time as: HCBS benefit are treated as actions de-
(i) The individual no longer meets fined in § 431.201 of this chapter and are
the needs-based criteria used for the subject to the requirements of part 431
initial determination of eligibility; or subpart E of this chapter.
(ii) The individual is no longer eligi- (e) Periodic redetermination. Inde-
ble for or enrolled in Medicaid or the pendent reevaluations of each indi-
HCBS benefit. vidual receiving the State plan HCBS
(5) Any changes in service due to the benefit must be performed at least
modification of needs-based criteria every 12 months, to determine whether
under this adjustment authority are the individual continues to meet eligi-
treated as actions as defined in § 431.201 bility requirements. Redeterminations
of this chapter and are subject to the must meet the requirements of para-
requirements of part 431, subpart E of graph (d) of this section.
this chapter.
§ 441.720 Independent assessment.
(6) In the event that the State also
needs to modify institutional level of (a) Requirements. For each individual
care criteria to meet the requirements determined to be eligible for the State
under paragraph (b) of this section that plan HCBS benefit, the State must pro-
such criteria be more stringent than vide for an independent assessment of
the State plan HCBS needs-based eligi- needs, which may include the results of
bility criteria, the State may adjust a standardized functional needs assess-
the modified institutional LOC criteria ment, in order to establish a service
under this adjustment authority. The plan. In applying the requirements of
adjusted institutional LOC criteria section 1915(i)(1)(F) of the Act, the
must be at least as stringent as those State must:
in effect before they were modified to (1) Perform a face-to-face assessment
meet the requirements in paragraph (b) of the individual by an agent who is
of this section. independent and qualified as defined in
(d) Independent evaluation and deter- § 441.730, and with a person-centered
mination of eligibility. Eligibility for the process that meets the requirements of
State plan HCBS benefit must be deter- § 441.725(a) and is guided by best prac-
mined through an independent evalua- tice and research on effective strate-
tion of each individual according to the gies that result in improved health and
requirements of this subpart. The inde- quality of life outcomes.
pendent evaluation complies with the (i) For the purposes of this section, a
following requirements: face-to-face assessment may include
427
§ 441.725 42 CFR Ch. IV (10–1–17 Edition)
assessments performed by telemedi- (6) Include in the assessment, if the

cine, or other information technology State offers individuals the option to
medium, if the following conditions are self-direct a State plan home and com-
met: munity-based service or services, any
(A) The agent performing the assess- information needed for the self-di-
ment is independent and qualified as rected portion of the service plan, as
defined in § 441.730 and meets the pro- required in § 441.740(b), including the
vider qualifications defined by the ability of the individual (with and
State, including any additional quali- without supports) to exercise budget or
fications or training requirements for employer authority.
the operation of required information (7) Include in the assessment, for in-
technology. dividuals receiving habilitation serv-
(B) The individual receives appro- ices, documentation that no Medicaid
priate support during the assessment, services are provided which would oth-
including the use of any necessary on- erwise be available to the individual,
site support-staff. specifically including but not limited
(C) The individual provides informed to services available to the individual
consent for this type of assessment. through a program funded under sec-
(ii) [Reserved] tion 110 of the Rehabilitation Act of
(2) Conduct the assessment in con- 1973, or the Individuals with Disabil-
sultation with the individual, and if ap- ities Education Improvement Act of
plicable, the individual’s authorized 2004.
representative, and include the oppor- (8) Include in the assessment and sub-
tunity for the individual to identify sequent service plan, for individuals re-
other persons to be consulted, such as, ceiving Secretary approved services
but not limited to, the individual’s under the authority of § 440.182 of this
spouse, family, guardian, and treating chapter, documentation that no State
and consulting health and support pro- plan HCBS are provided which would
fessionals responsible for the individ- otherwise be available to the indi-
ual’s care. vidual through other Medicaid services
(3) Examine the individual’s relevant or other Federally funded programs.
history including the findings from the (9) Include in the assessment and sub-
independent evaluation of eligibility, sequent service plan, for individuals re-
medical records, an objective evalua- ceiving HCBS through a waiver ap-
tion of functional ability, and any proved under § 441.300, documentation
other records or information needed to that HCBS provided through the State
develop the person-centered service plan and waiver are not duplicative.
plan as required in § 441.725.
(10) Coordinate the assessment and
(4) Include in the assessment the in- subsequent service plan with any other
dividual’s physical, cognitive, and be- assessment or service plan required for
havioral health care and support needs, services through a waiver authorized
strengths and preferences, available
under section 1115 or section 1915 of the
service and housing options, and if un-
Social Security Act.
paid caregivers will be relied upon to
implement any elements of the person- (b) Reassessments. The independent
centered service plan, a caregiver as- assessment of need must be conducted
sessment. at least every 12 months and as needed
when the individual’s support needs or
(5) For each service, apply the State’s
additional needs-based criteria (if any) circumstances change significantly, in
that the individual may require. Indi- order to revise the service plan.
viduals are considered enrolled in the
§ 441.725 Person-centered service plan.
State plan HCBS benefit only if they
meet the eligibility and needs-based (a) Person-centered planning process.
criteria for the benefit, and are also as- Based on the independent assessment
sessed to require and receive at least required in § 441.720, the State must de-
one home and community-based serv- velop (or approve, if the plan is devel-
ice offered under the State plan for oped by others) a written service plan
medical assistance. jointly with the individual (including,
428
for purposes of this paragraph, the in- work in competitive integrated set-
dividual and the individual’s author- tings, engage in community life, con-
ized representative if applicable). The trol personal resources, and receive
person-centered planning process is services in the community to the same
driven by the individual. The process: degree of access as individuals not re-
(1) Includes people chosen by the in- ceiving Medicaid HCBS.
dividual. (2) Reflect the individual’s strengths
(2) Provides necessary information and preferences.
and support to ensure that the indi- (3) Reflect clinical and support needs
vidual directs the process to the max- as identified through an assessment of
imum extent possible, and is enabled to functional need.
make informed choices and decisions. (4) Include individually identified
(3) Is timely and occurs at times and goals and desired outcomes.
locations of convenience to the indi- (5) Reflect the services and supports
vidual. (paid and unpaid) that will assist the
(4) Reflects cultural considerations of individual to achieve identified goals,
the individual and is conducted by pro- and the providers of those services and
viding information in plain language supports, including natural supports.
and in a manner that is accessible to Natural supports are unpaid supports
individuals with disabilities and per- that are provided voluntarily to the in-
sons who are limited English pro- dividual in lieu of State plan HCBS.
ficient, consistent with § 435.905(b) of (6) Reflect risk factors and measures
this chapter. in place to minimize them, including
(5) Includes strategies for solving individualized backup plans and strate-
conflict or disagreement within the gies when needed.
process, including clear conflict of in-
(7) Be understandable to the indi-
terest guidelines for all planning par-
vidual receiving services and supports,
ticipants.
and the individuals important in sup-
(6) Offers choices to the individual re-
porting him or her. At a minimum, for
garding the services and supports the
the written plan to be understandable,
individual receives and from whom.
it must be written in plain language
(7) Includes a method for the indi-
and in a manner that is accessible to
vidual to request updates to the plan,
individuals with disabilities and per-
as needed.
sons who are limited English pro-
(8) Records the alternative home and
ficient, consistent with § 435.905(b) of
community-based settings that were
this chapter.
considered by the individual.
(b) The person-centered service plan. (8) Identify the individual and/or en-
The person-centered service plan must tity responsible for monitoring the
reflect the services and supports that plan.
are important for the individual to (9) Be finalized and agreed to, with
meet the needs identified through an the informed consent of the individual
assessment of functional need, as well in writing, and signed by all individ-
as what is important to the individual uals and providers responsible for its
with regard to preferences for the de- implementation.
livery of such services and supports. (10) Be distributed to the individual
Commensurate with the level of need and other people involved in the plan.
of the individual, and the scope of serv- (11) Include those services, the pur-
ices and supports available under the chase or control of which the indi-
State plan HCBS benefit, the written vidual elects to self-direct, meeting the
plan must: requirements of § 441.740.
(1) Reflect that the setting in which (12) Prevent the provision of unneces-
the individual resides is chosen by the sary or inappropriate services and sup-
individual. The State must ensure that ports.
the setting chosen by the individual is (13) Document that any modification
integrated in, and supports full access of the additional conditions, under
of individuals receiving Medicaid HCBS § 441.710(a)(1)(vi)(A) through (D) of this
to the greater community, including chapter, must be supported by a spe-
opportunities to seek employment and cific assessed need and justified in the
429
§ 441.730 42 CFR Ch. IV (10–1–17 Edition)
person-centered service plan. The fol- or who are responsible for the develop-
lowing requirements must be document of the service plan. The conflict
mented in the person-centered service of interest standards apply to all indi-
plan: viduals and entities, public or private.
(i) Identify a specific and individual- At a minimum, these agents must not
ized assessed need. be any of the following:
(ii) Document the positive interven- (1) Related by blood or marriage to
tions and supports used prior to any the individual, or to any paid caregiver
modifications to the person-centered of the individual.
service plan. (2) Financially responsible for the in-
(iii) Document less intrusive methods dividual.
of meeting the need that have been (3) Empowered to make financial or
tried but did not work. health-related decisions on behalf of
(iv) Include a clear description of the the individual.
condition that is directly propor- (4) Holding financial interest, as de-
tionate to the specific assessed need. fined in § 411.354 of this chapter, in any
(v) Include a regular collection and entity that is paid to provide care for
review of data to measure the ongoing the individual.
effectiveness of the modification. (5) Providers of State plan HCBS for
(vi) Include established time limits the individual, or those who have an
for periodic reviews to determine if the interest in or are employed by a pro-
modification is still necessary or can vider of State plan HCBS for the indi-
be terminated. vidual, except when the State dem-
(vii) Include informed consent of the onstrates that the only willing and
individual; and qualified agent to perform independent
(viii) Include an assurance that the assessments and develop person-cen-
interventions and supports will cause tered service plans in a geographic area
no harm to the individual. also provides HCBS, and the State de-
(c) Reviewing the person-centered vises conflict of interest protections
service plan. The person-centered serv- including separation of agent and pro-
ice plan must be reviewed, and revised vider functions within provider enti-
upon reassessment of functional need ties, which are described in the State
as required in § 441.720, at least every 12 plan for medical assistance and ap-
months, when the individual’s cir- proved by the Secretary, and individ-
cumstances or needs change signifi- uals are provided with a clear and ac-
cantly, and at the request of the indi- cessible alternative dispute resolution
vidual. process.
(c) Training. Qualifications for agents
§ 441.730 Provider qualifications. performing independent assessments
(a) Requirements. The State must pro- and plans of care must include training
vide assurances that necessary safe- in assessment of individuals whose
guards have been taken to protect the physical, cognitive, or mental condi-
health and welfare of enrollees in State tions trigger a potential need for home
plan HCBS, and must define in writing and community-based services and sup-
standards for providers (both agencies ports, and current knowledge of avail-
and individuals) of HCBS and for able resources, service options, pro-
agents conducting individualized inde- viders, and best practices to improve
pendent evaluation, independent as- health and quality of life outcomes.
sessment, and service plan develop-
ment. § 441.735 Definition of individual’s rep-
(b) Conflict of interest standards. The resentative.
State must define conflict of interest In this subpart, the term individual’s
standards that ensure the independence representative means, with respect to an
of individual and agency agents who individual being evaluated for, assessed
conduct (whether as a service or an ad- regarding, or receiving State plan
ministrative activity) the independent HCBS, the following:

evaluation of eligibility for State plan (a) The individual’s legal guardian or
HCBS, who are responsible for the inde- other person who is authorized under
pendent assessment of need for HCBS, State law to represent the individual
430
for the purpose of making decisions re- plan jointly with the individual as re-
lated to the person’s care or well-being. quired in § 441.725. If the individual
In instances where state law confers chooses to direct some or all HCBS, the
decision-making authority to the indi- service plan must meet the following
vidual representative, the individual additional requirements:
will lead the service planning process (1) Specify the State plan HCBS that
to the extent possible. the individual will be responsible for
(b) Any other person who is author- directing.
ized under § 435.923 of this chapter, or (2) Identify the methods by which the
under the policy of the State Medicaid individual will plan, direct or control
Agency to represent the individual, in- services, including whether the indi-
cluding but not limited to, a parent, a vidual will exercise authority over the
family member, or an advocate for the employment of service providers and/or
individual. authority over expenditures from the
(c) When the State authorizes rep- individualized budget.
resentatives in accordance with para- (3) Include appropriate risk manage-
graph (b) of this section, the State ment techniques that explicitly recog-
must have policies describing the proc- nize the roles and sharing of respon-
ess for authorization; the extent of de- sibilities in obtaining services in a self-
cision-making authorized; and safe- directed manner and assure the appro-
guards to ensure that the representa- priateness of this plan based upon the
tive uses substituted judgment on be- resources and support needs of the indi-
half of the individual. State policies vidual.
must address exceptions to using sub- (4) Describe the process for facili-
stituted judgment when the individ- tating voluntary and involuntary tran-
ual’s wishes cannot be ascertained or sition from self-direction including any
when the individual’s wishes would re- circumstances under which transition
sult in substantial harm to the indi- out of self-direction is involuntary.
vidual. States may not refuse the au- There must be state procedures to en-
thorized representative that the indi- sure the continuity of services during
vidual chooses, unless in the process of the transition from self-direction to
applying the requirements for author- other service delivery methods.
ization, the State discovers and can (5) Specify the financial management
document evidence that the represent- supports, as required in paragraph (e)
ative is not acting in accordance with of this section, to be provided.
these policies or cannot perform the re- (c) Employer authority. If the person-
quired functions. States must continue centered service plan includes author-
to meet the requirements regarding the ity to select, manage, or dismiss pro-
person-centered planning process at viders of the State plan HCBS, the per-
§ 441.725 of this chapter. son-centered service plan must specify
the authority to be exercised by the in-
§ 441.740 Self-directed services. dividual, any limits to the authority,
(a) State option. The State may and specify parties responsible for
choose to offer an election for self-di- functions outside the authority the in-
recting HCBS. The term ‘‘self-di- dividual exercises.
rected’’ means, with respect to State (d) Budget authority. If the person-
plan HCBS listed in § 440.182 of this centered service plan includes an indi-
chapter, services that are planned and vidualized budget (which identifies the
purchased under the direction and con- dollar value of the services and sup-
trol of the individual, including the ports under the control and direction
amount, duration, scope, provider, and of the individual), the person-centered
location of the HCBS. For purposes of service plan must meet the following
this paragraph, individual means the requirements:
individual and, if applicable, the indi- (1) Describe the method for calcu-
vidual’s representative as defined in lating the dollar values in the budget,
§ 441.735. based on reliable costs and service uti-

(b) Service plan requirement. Based on lization.
the independent assessment required in (2) Define a process for making ad-
§ 441.720, the State develops a service justments in dollar values to reflect
431
§ 441.745 42 CFR Ch. IV (10–1–17 Edition)
changes in an individual’s assessment (A) A State must determine that pro-

and service plan. vided services meet medical necessity
(3) Provide a procedure to evaluate criteria.
expenditures under the budget. (B) A State may limit access to serv-
(4) Not result in payment for medical ices through targeting criteria estab-
assistance to the individual. lished by § 441.710(e)(2).
(e) Functions in support of self-direc- (C) A State may not limit access to
tion. When the State elects to offer services based upon the income of eligi-
self-directed State plan HCBS, it must ble individuals, the cost of services, or
offer the following individualized sup- the individual’s location in the State.
ports to individuals receiving the serv- (iii) Appeals. A State must provide in-
ices and their representatives: dividuals with advance notice of and
(1) Information and assistance con- the right to appeal terminations, sus-
sistent with sound principles and prac- pensions, or reductions of Medicaid eli-
tice of self-direction. gibility or covered services as de-
(2) Financial management supports scribed in part 431, subpart E.
to meet the following requirements: (2) Administration—(i) Option for pre-
(i) Manage Federal, State, and local sumptive payment. (A) The State may
employment tax, labor, worker’s com- provide for a period of presumptive
pensation, insurance, and other repayment, not to exceed 60 days, for
quirements that apply when the indi- Medicaid eligible individuals the State
vidual functions as the employer of has reason to believe may be eligible
service providers. for the State plan HCBS benefit. FFP
(ii) Make financial transactions on is available for both services that meet
the definition of medical assistance
behalf of the individual when the indi-
and necessary administrative expendi-
vidual has personal budget authority.
tures for evaluation of eligibility for
(iii) Maintain separate accounts for
the State plan HCBS benefit under
each individual’s budget and provide
§ 441.715(d) and assessment of need for
periodic reports of expenditures
specific HCBS under § 441.720(a), prior
against budget in a manner under- to an individual’s receipt of State plan
standable to the individual. HCBS or determination of ineligibility
(3) Voluntary training on how to se- for the benefit.
lect, manage, and dismiss providers of (B) If an individual the State has rea-
State plan HCBS. son to believe may be eligible for the
State plan HCBS benefit is evaluated
§ 441.745 State plan HCBS administra-
tion: State responsibilities and and assessed under the presumptive
quality improvement. payment option and found not to be el-
igible for the benefit, FFP is available
(a) State plan HCBS administration—(1) for services that meet the definition of
State responsibilities. The State must medical assistance and necessary ad-
carry out the following responsibilities ministrative expenditures. The indi-
in administration of its State plan vidual so determined will not be con-
HCBS: sidered to have enrolled in the State
(i) Number served. The State will an- plan HCBS benefit for purposes of de-
nually provide CMS with the projected termining the annual number of par-
number of individuals to be enrolled in ticipants in the benefit.
the benefit and the actual number of (ii) Option for phase-in of services and
unduplicated individuals enrolled in eligibility. (A) In the event that a State
State plan HCBS in the previous year. elects to establish targeting criteria
(ii) Access to services. The State must through § 441.710(e)(2), the State may
grant access to all State plan HCBS as- limit the enrollment of individuals or
sessed to be needed in accordance with the provision services to enrolled indi-
a service plan consistent with § 441.725, viduals based upon criteria described in
to individuals who have been deter- a phase-in plan, subject to CMS ap-
mined to be eligible for the State plan proval. A State which elects to target
HCBS benefit, subject to the following the State plan HCBS benefit and to
requirements: phase-in enrollment and/or services
432
must submit a phase-in plan for ap- be made effective retroactive to the
proval by CMS that describes, at a first day of a fiscal year quarter, or an-
minimum: other date after the first day of a fiscal
(1) The criteria used to limit enroll- year quarter, in which the amendment
ment or service delivery. is submitted, unless the amendment in-
(2) The rationale for phasing-in serv- volves substantive change. Substantive
ices and/or eligibility. changes may include, but are not lim-
(3) Timelines and benchmarks to en- ited to, the following:
sure that the benefit is available state- (A) Revisions to services available
wide to all eligible individuals within under the benefit including elimination
the initial 5-year approval. or reduction in services, and changes in
(B) If a State elects to phase-in the the scope, amount and duration of the
enrollment of individuals based on services.
highest need, the phase-in plan must (B) Changes in the qualifications of
use the needs-based criteria described service providers, rate methodology, or
in § 441.715(a) to establish priority for the eligible population.
enrollment. Such criteria must be (1) Request for Amendments. A request
based upon the assessed need of indi- for an amendment that involves a sub-
viduals, with higher-need individuals stantive change as determined by
receiving services prior to individuals CMS—
with lower assessed need.
(i) May only take effect on or after
(C) If a State elects to phase-in the
the date when the amendment is ap-
provision of any services, the phase-in
proved by CMS; and
plan must include a description of the
services that will not be available to (ii) Must be accompanied by informa-
all eligible individuals, the rationale tion on how the State will ensure for
for limiting the provision of services, transitions with minimal adverse im-
and assurance that all individuals with pact on individuals impacted by the
access to a willing and qualified pro- change.
vider may receive services. (2) [Reserved]
(D) The plan may not include a cap (vi) Periods of approval. (A) If a State
on the number of enrollees. elects to establish targeting criteria
(E) The plan must include a timeline through § 441.710(e)(2)(i), the approval of
to assure that all eligible individuals the State Plan Amendment will be in
receive all included services prior to effect for a period of 5 years from the
the end of the first 5-year approval pe- effective date of the amendment. To
riod, described in paragraph (a)(2)(vi) of renew State plan HCBS for an addi-
this section. tional 5-year period, the State must
(iii) Reimbursement methodology. The provide a written request for renewal
State plan amendment to provide State to CMS at least 180 days prior to the
plan HCBS must contain a description end of the approval period. CMS ap-
of the reimbursement methodology for proval of a renewal request is contin-
each covered service, in accordance gent upon State adherence to Federal
with CMS sub-regulatory guidance. To requirements and the state meeting its
the extent that the reimbursement objectives with respect to quality im-
methodologies for any self-directed provement and beneficiary outcomes.
services differ from those descriptions, (B) If a State does not elect to estab-
the method for setting reimbursement lish targeting criteria through
methodology for the self-directed serv- § 441.710(e)(2)(i), the limitations on
ices must also be described. length of approval does not apply.
(iv) Operation. The State plan amend- (b) Quality improvement strategy: Pro-
ment to provide State plan HCBS must gram performance and quality of care.
contain a description of the State Med- States must develop and implement an
icaid agency line of authority for oper- HCBS quality improvement strategy
ating the State plan HCBS benefit, in- that includes a continuous improve-
cluding distribution of functions to ment process and measures of program

other entities. performance and experience of care.
(v) Modifications. The agency may re- The strategy must be proportionate to
quest that modifications to the benefit the scope of services in the State plan
433
HCBS benefit and the number of indi- 442.117 Termination of certification for
viduals to be served. The State will ICFs/IID whose deficiencies pose imme-
make this information available to diate jeopardy.
CMS at a frequency determined by the 442.118 Denial of payments for new admis-
sions to an ICF/IID.
Secretary or upon request.
442.119 Duration of denial of payments and
(1) Quality Improvement Strategy. The subsequent termination of an ICF/IID.
quality improvement strategy must in-
clude all of the following: Subparts D–F [Reserved]
(i) Incorporate a continuous quality
improvement process that includes AUTHORITY: Sec. 1102 of the Social Security
monitoring, remediation, and quality Act (42 U.S.C. 1302), unless otherwise noted.
improvement.
(ii) Be evidence-based, and include SOURCE: 43 FR 45233, Sept. 29, 1978, unless
otherwise noted.
outcome measures for program per-
formance, quality of care, and indi-
vidual experience as determined by the Subpart A—General Provisions
Secretary.
(iii) Provide evidence of the estab- § 442.1 Basis and purpose.
lishment of sufficient infrastructure to (a) This part states requirements for
implement the program effectively. provider agreements for facility certifi-
(iv) Measure individual outcomes as- cation relating to the provision of serv-
sociated with the receipt of HCBS, re- ices furnished by nursing facilities and
lated to the implementation of goals intermediate care facilities for individ-
included in the individual service plan. uals with intellectual disabilities. This
(2) [Reserved] part is based on the following sections
of the Act:
PART 442—STANDARDS FOR PAY- Section 1902(a)(4), administrative methods
MENT TO NURSING FACILITIES for proper and efficient operation of the
AND INTERMEDIATE CARE FA- State plan;
CILITIES FOR INDIVIDUALS WITH Section 1902(a)(27), provider agreements;
INTELLECTUAL DISABILITIES Section 1902(a)(28), nursing facility stand-
ards;
Section 1902(a)(33)(B), State survey agency
Subpart A—General Provisions functions; Section 1902(i), circumstances
Sec. and procedures for denial of payment and
442.1 Basis and purpose. termination of provider agreements in cer-
442.2 Terms. tain cases;
Section 1905(c), definition of nursing facility;
Subpart B—Provider Agreements Section 1905(d), definition of intermediate
care facility for individuals with intellec-
442.10 State plan requirement. tual disabilities;
442.12 Provider agreement: General require- Section 1905 (f), definition of nursing facility
ments. services;
442.13 Effective date of provider agreement. Section 1910, certification and approval of
442.14 Effect of change of ownership. ICFs/IID and of RHCs;
442.15 Duration of agreement for ICF/IIDs.
Section 1913, hospital providers of nursing fa-
442.16 [Reseved]
cility services;
442.30 Agreement as evidence of certifi-
cation. Section 1919 (g) and (h), survey, certification
442.40 Availability of FFP during appeals and enforcement of nursing facilities; and
for ICFs/IID. Section 1922, correction and reduction plans
442.42 FFP under a retroactive provider for intermediate care facilities for individ-
agreement following appeal. uals with intellectual disabilities.
(b) Section 431.610 of this subchapter
Subpart C—Certification of ICFs/IID
contains requirements for designating
442.100 State plan requirements. the State licensing agency to survey
442.101 Obtaining certification. these facilities and for certain survey
442.105 [Reserved] agency responsibilities.
442.109 Certification period for ICF/IIDs:

General provisions. [43 FR 45233, Sept. 29, 1978, as amended at 47
442.110 Certification period for ICF/IID with FR 31533, July 20, 1982; 59 FR 56235, Nov. 10,
standard-level deficiencies. 1994]
434
§ 442.2 Terms. certified the facility under this part to

provide those services. (See § 442.101 for
In this part—
certification by the Secretary or by the
Facility refers to a nursing facility,
State survey agency).
and an intermediate care facility for
Individuals with Intellectual Disabil- (b) Exception. The certification re-
ities or persons with related conditions quirement of paragraph (a) of this sec-
(ICF/IID). tion does not apply with respect to re-
Facility, and any specific type of fa- ligious nonmedical institutions as de-
cility referred to, may include a dis- fined in § 440.170(b) of this chapter.
tinct part of a facility as specified in (c) Conformance with certification con-
§ 440.40 or § 440.150 of this subchapter. dition. An agreement must be in ac-
Immediate jeopardy means a situation cordance with the certification provi-
in which immediate corrective action sions set by the Secretary or the sur-
is necessary because the provider’s vey agency under subpart C of this part
noncompliance with one or more re- for ICFs/IID or subpart E of part 488 of
quirements of participation or condi- this chapter for NFs.
tions of participation has caused, or is (d) Denial for good cause. (1) If the
likely to cause, serious injury, harm, Medicaid agency has adequate docu-
impairment, or death to an individual mentation showing good cause, it may
receiving care in a facility. refuse to execute an agreement, or may
New admission means the admission cancel an agreement, with a certified
of a Medicaid beneficiary who has facility.
never been in the facility or, if pre- (2) A provider agreement is not a
viously admitted, had been discharged valid agreement for purposes of this
or had voluntarily left the facility. The part even though certified by the State
term does not include the following: survey agency, if the facility fails to
(a) Individuals who were in the facil- meet the civil rights requirements set
ity before the effective date of denial of forth in 45 CFR parts 80, 84, and 90.
payment for new admissions, even if [45 FR 22936, Apr. 4, 1980, as amended at 56
they become eligible for Medicaid after FR 48865, Sept. 26, 1991; 59 FR 56235, Nov. 10,
that date. 1994; 64 FR 67052, Nov. 30, 1999]
(b) If the approved State plan in-
cludes payments for reserved beds, in- § 442.13 Effective date of provider
dividuals who, after a temporary ab- agreement.
sence from the facility, are readmitted The effective date of a provider
to beds reserved for them in accordance agreement with an NF or ICF/IID is de-
with § 447.40(a) of this chapter. termined in accordance with the rules
[43 FR 45233, Sept. 29, 1978, as amended at 51 set forth in § 431.108.
FR 24491, July 3, 1986; 53 FR 1993, Jan. 25,
1988; 54 FR 5358, Feb. 2, 1989; 56 FR 48865, [62 FR 43936, Aug. 18, 1997]
Sept. 26, 1991; 59 FR 56235, Nov. 10, 1994]
§ 442.14 Effect of change of ownership.
Subpart B—Provider Agreements (a) Assignment of agreement. When
there is a change of ownership, the
§ 442.10 State plan requirement. Medicaid agency must automatically
A State plan must provide that reassign the agreement to the new
quirements of this subpart are met. owner.
(b) Conditions that apply to assigned
§ 442.12 Provider agreement: General agreements. An assigned agreement is
requirements. subject to all applicable statutes and
(a) Certification and recertification. Ex- regulations and to the terms and condi-
cept as provided in paragraph (b) of tions under which it was originally
this section, a Medicaid agency may issued, including, but not limited to,
not execute a provider agreement with the following:
(1) Any existing plan of correction.
a facility for nursing facility services

nor make Medicaid payments to a fa- (2) Any expiration date for ICFs/IID.
cility for those services unless the Sec- (3) Compliance with applicable health
retary or the State survey agency has and safety requirements.
435
§ 442.15 42 CFR Ch. IV (10–1–17 Edition)
(4) Compliance with the ownership § 431.610(g) of this subchapter relating

and financial interest disclosure re- to evaluating and acting on informa-
quirements of §§ 455.104 and 455.105 of tion about the facility and inspecting
this chapter. the facility;
(5) Compliance with civil rights re- (4) The agency failed to use the Fed-
quirements set forth in 45 CFR parts 80, eral standards, and the forms, methods
84, and 90. and procedures prescribed by CMS as
(6) Compliance with any additional required under § 431.610(f)(1) or
requirements imposed by the Medicaid § 488.318(b) of this chapter, for deter-
agency. mining the qualifications of providers;
[45 FR 22936, Apr. 4, 1980, as amended at 53 or
FR 20495, June 3, 1988; 59 FR 56235, Nov. 10, (5) The survey agency failed to ad-
1994] here to the following principles in de-
termining compliance:
§ 442.15 Duration of agreement for (i) The survey process is the means to
ICF/IIDs.
assess compliance with Federal health,
(a) The agreement for an ICF/IID re- safety and quality standards;
mains in effect until the Secretary de- (ii) The survey process uses resident
termines that the facility no longer outcomes as the primary means to es-
meets the applicable requirements. The tablish the compliance status of facili-
State Survey Agency must conduct a ties. Specifically, surveyors will di-
survey of the facility to determine rectly observe the actual provision of
compliance with the requirements at a care and services to residents, and the
survey interval of no greater than 15 effects of that care, to assess whether
months. the care provided meets the needs of
(b) FFP is available for services fur- individual residents;
nished by a facility for up to 30 days
(iii) Surveyors are professionals who
after its agreement expires or termi-
use their judgment, in concert with
nates under the conditions specified in
Federal forms and procedures, to deter-
§ 441.11 of this subchapter.
mine compliance;
[77 FR 29031, May 16, 2012] (iv) Federal procedures are used by
all surveyors to ensure uniform and
§ 442.16 [Reserved] consistent application and interpreta-
§ 442.30 Agreement as evidence of cer- tion of Federal requirements;
tification. (v) Federal forms are used by all sur-
veyors to ensure proper recording of
(a) Under §§ 440.40(a) and 440.150 of
findings and to document the basis for
this chapter, FFP is available in ex-
the findings.
penditures for NF and ICF/IID services
(6) The survey agency failed to assess
only if the facility has been certified as
in a systematic manner a facility’s ac-
meeting the requirements for Medicaid
tual provision of care and services to
participation, as evidenced by a pro-
residents and effects of that care on
vider agreement executed under this
residents.
part. An agreement is not valid evi-
dence that a facility has met those re- (7) Required elements of the NF sur-
quirements if CMS determines that— vey process fails to include all of the
(1) The survey agency failed to apply following:
the applicable requirements under sub- (i) An entrance conference;
part B of part 483 of this chapter for (ii) A resident-centered tour of facil-
NFs or subpart I of part 483 of this ity;
chapter, which set forth the conditions (iii) An in-depth review of a sample
of participation for ICFs/IID. of residents including observation,
(2) The survey agency failed to follow interview and record review;
the rules and procedures for certifi- (iv) Observation of the preparation
cation set forth in subpart C of this and administration of drugs for a sam-
part, subpart E of part 488, and § 431.610 ple of residents;

of this subchapter; (v) Evaluation of a facility’s meals,
(3) The survey agency failed to per- dining areas and eating assistance pro-
form any of the functions specified in cedures;
436
(vi) Formulation of a deficiency safety, or when it fails to certify that

statement based on the incorporation there is no jeopardy, FFP ends on the
of all appropriate findings onto the sur- effective date of termination or expira-
vey report form; tion.
(vii) An exit conference; and (ii) When the State acts under in-
(viii) Follow-up surveys as appro- structions from CMS, FFP ends on the
priate. date specified by CMS (CMS instructs
(8) The agreement’s terms and condi- the State to terminate the Medicaid
tions do not meet the requirements of provider agreement when CMS in vali-
this subpart. dating a State survey agency certifi-
(b) The Administrator will make the cation, determines that an ICF/IID
determination under paragraph (a) of does not meet the requirements for
this section through onsite surveys, participation.)
other Federal reviews, State certifi- (3) Effective date. This section and
cation records, or reports he may re- § 442.42 apply to terminations or expira-
quire from the Medicaid or survey tions that are effective on or after Sep-
agency. tember 28, 1987. For terminations or
(c) If the Administrator disallows a nonrenewals that were effective before
State’s claim for FFP because of a de- that date, FFP may continue for up to
termination under paragraph (a) of this 120 days from September 28, 1987, or 12
section, the State is entitled upon re- months from the effective date of ter-
quest to reconsideration of the dis- mination or nonrenewal, whichever is
allowance under 45 CFR part 16.
earlier.
[43 FR 45233, Sept. 29, 1978, as amended at 51 (c) Basic rules. (1) Except as provided
FR 21558, June 13, 1986; 53 FR 20495, June 3, in paragraphs (d) and (e) of this sec-
1988; 53 FR 23101, June 17, 1988; 56 FR 48865, tion, FFP in payments to an ICF/IID
Sept. 26, 1991; 59 FR 56235, Nov. 10, 1994]
ends on the effective date of termi-
§ 442.40 Availability of FFP during ap- nation of the facility’s provider agree-
peals for ICFs/IID. ment, or if the agreement is not termi-
nated, on the effective date of expira-
(a) Definitions. As used in this sec-
tion.
tion—
Effective date of expiration means the (2) If State law, or a Federal or State
date of expiration originally specified court order or injunction, requires the
in the provider agreement, or the later agency to extend the provider agree-
date specified if the agreement is ex- ment or continue payments to a facil-
tended under § 442.16; and ity after the dates specified in para-
Effective date of termination means a graph (d) of this section, FFP is not
date earlier than the expiration date, available in those payments.
set by the Medicaid agency when con- (d) Exception: Continuation of FFP
tinuing participation until the expira- after termination or expiration of provider
tion date is not justified, because the agreement—(1) Conditions for continu-
facility no longer meets the require- ation. FFP is available after the effec-
ments for participation. tive date of termination or expiration
(b) Scope, applicability, and effective only if—
date—(1) Scope. This section sets forth (i) The evidentiary hearing required
the extent of FFP in State Medicaid under § 431.153 of this chapter is pro-
payments to an ICF/IID after its provided by the State agency after the ef-
vider agreement has been terminated fective date of termination or expira-
or has expired and not been renewed. tion (or, if begun before termination or
(2) Applicability. (i) This section and expiration, is not completed until after
§ 442.42 apply only when the Medicaid that date); and
agency, of its own volition, terminates (ii) Termination or nonrenewal ac-
or does not a renew a provider agree- tion is based on a survey agency cer-
ment, and only when the survey agency tification that there is no jeopardy to
certifies that there is no jeopardy to beneficiaries’ health and safety.

beneficiary health and safety. When (2) Extent of continuation. FFP is
the survey agency certifies that there available only through the earlier of
is jeopardy to beneficiary health and the following:
437
§ 442.42 42 CFR Ch. IV (10–1–17 Edition)
(i) The date of issuance of an admin- Subpart C—Certification of ICFs/

istrative hearing decision that upholds IID
the agency’s termination or non-
renewal action. § 442.100 State plan requirements.
(ii) The 120th day after the effective A State plan must provide that the
date of termination of the facility’s requirements of this subpart and part
provider agreement or, if the agree- 483 are met.
ment is not terminated, the 120th day
[53 FR 20495, June 3, 1988]
after the effective date of expiration.
(If a hearing decision that upholds the § 442.101 Obtaining certification.
facility is issued after the end of the
(a) This section states the require-
120-day period, when FFP has already
ments for obtaining notice of an ICF/
been discontinued, the rules of § 442.42 IID’s certification before a Medicaid
on retroactive agreements apply). agency executes a provider agreement
(e) Applicability of § 441.11. If FFP is under § 442.12.
continued during appeal under para- (b) The agency must obtain notice of
graph (d) of this section, the 30-day pe- certification from the Secretary for an
riod provided by § 441.11 of this chapter ICF/IID located on an Indian reserva-
would not begin to run until issuance tion.
of a hearing decision that upholds the (c) The agency must obtain notice of
agency’s termination or nonrenewal certification from the survey agency
action. for all other ICFs/IID.
(d) The notice must indicate that one
[52 FR 32551, Aug. 28, 1987, as amended at 56
of the following provisions pertains to
FR 48865, Sept. 26, 1991; 59 FR 56236, Nov. 10,
1994]
the ICF/IID:
(1) An ICF/IID meets the conditions
§ 442.42 FFP under a retroactive proof participation set forth in subpart I
vider agreement following appeal. of part 483 of this chapter.
(2) The ICF/IID has been granted a
(a) Basic rule. Except as specified in waiver or variance by CMS or the sur-
paragraph (b) of this section, if an NF vey agency under subpart I of part 483
or ICF/IID prevails on appeal from ter- of this chapter.
mination or, in the case of an ICF/IID, (3) An ICF/IID has been certified with
nonrenewal of a provider agreement, standard-level deficiencies and
and the State issues a retroactive (i) All conditions of participation are
agreement, FFP is available beginning found met; and
with the retroactive effective date, (ii) The facility submits an accept-
which must be determined in accord- able plan of correction covering the re-
ance with § 442.13. maining deficiencies.
(b) Exception. This rule does not (e) The failure to meet one or more of
apply if CMS determines, under § 442.30, the applicable conditions of participa-
that the agreement is not valid evi- tion is cause for termination or non-re-
dence that the facility meets the renewal of the ICF/IID provider agree-
quirements for participation. This ex- ment.
clusion applies even if the State issues [56 FR 48866, Sept. 26, 1991, as amended at 57
the new agreement as the result of an FR 43924, Sept. 23, 1992; 59 FR 56236, Nov. 10,
administrative hearing decision favor- 1994; 79 FR 27153, May 12, 2014]
able to the facility or under a Federal
or State court order.
[52 FR 32551, Aug. 28, 1987, as amended at 59 § 442.109 Certification period for ICF/
FR 56236, Nov. 10, 1994] IIDs: General provisions.
(a) A survey agency may certify a fa-
cility that fully meets applicable re-
quirements. The State Survey Agency

must conduct a survey of each ICF/IID
not later than 15 months after the last
day of the previous survey.
438
(b) The statewide average interval tions of participation specified under

between surveys must be 12 months or subpart I of part 483 of this chapter.
less, computed in accordance with (b) Agency procedures. Before denying
paragraph (c) of this section. payments for new admissions, the Med-
(c) The statewide average interval is icaid agency must comply with the fol-
computed at the end of each Federal lowing requirements:
fiscal year by comparing the last day (1) Provide the facility up to 60 days
of the most recent survey for each par- to correct the cited deficiencies and
ticipating facility to the last day of comply with conditions of participa-
each facility’s previous survey. tion for ICFs/IID.
[77 FR 29031, May 16, 2012] (2) If at the end of the specified pe-
riod the facility has not achieved com-
§ 442.110 Certification period for ICF/ pliance, give the facility notice of in-
IID with standard-level defi- tent to deny payment for new admis-
ciencies.
sions, and opportunity for an informal
Facilities with standard-level defi- hearing.
ciencies may be certified under § 442.101 (3) If the facility requests a hearing,
with a condition that the certification provide an informal hearing that in-
will continue if either of the following cludes—
applies: (i) The opportunity for the facility to
(a) The survey agency finds that all
present, before a State Medicaid offi-
deficiencies have been satisfactorily
cial who was not involved in making
corrected.
the initial determination, evidence or
(b) The survey agency finds that the
documentation, in writing or in person,
facility has made substantial progress
to refute the decision that the facility
in correcting the deficiencies and has a
new plan of correction that is accept- is out of compliance with the condi-
able. tions of participation for ICFs/IID.
(ii) A written decision setting forth
[79 FR 27153, May 12, 2014] the factual and legal bases pertinent to
a resolution of the dispute.
§ 442.117 Termination of certification
for ICFs/IID whose deficiencies (4) If the decision of the informal
pose immediate jeopardy. hearing is to deny payments for new
admissions, provide the facility and the
(a) A survey agency must terminate
public, at least 15 days before the effec-
a facility’s certification if it deter-
tive date of the sanction, with a notice
mines that—
that includes the effective date and the
(1) The facility no longer meets con-
reasons for the denial of payments.
ditions of participation for ICFs/IID as
specified in subpart I of part 483 of this [51 FR 24491, July 3, 1986, as amended at 59
chapter. FR 56236, Nov. 10, 1994]
(2) The facility’s deficiencies pose im-
mediate jeopardy to residents’ health § 442.119 Duration of denial of pay-
and safety. ments and subsequent termination
(b) Subsequent to a certification of a of an ICF/IID.
facility’s noncompliance, the Medicaid (a) Period of denial. The denial of pay-
agency must, in terminating the pro- ments for new admissions will continue
vider agreement, follow the appeals for 11 months after the month it was
process specified in part 431, subpart D imposed unless, before the end of that
of this chapter. period, the Medicaid agency finds
[51 FR 24491, July 3, 1986, as amended at 59 that—
FR 56236, Nov. 10, 1994] (1) The facility has corrected the de-
ficiencies or is making a good faith ef-
§ 442.118 Denial of payments for new fort to achieve compliance with the
admissions to an ICF/IID. conditions of participation for ICFs/
IID; or
(a) Basis for denial of payments. The

Medicaid agency may deny payment (2) The deficiencies are such that it is
for new admissions to an ICF/IID that necessary to terminate the facility’s
no longer meets the applicable condi- provider agreement.
439
(b) Subsequent termination. The Med- 447.88 Options for claiming FFP payment
icaid agency must terminate a facili- for section 1920A presumptive eligibility
ty’s provider agreement— medical assistance payments.
447.90 FFP: Conditions related to pending
(1) Upon the agency’s finding that investigations of credible allegations of
the facility has been unable to achieve fraud against the Medicaid program.
compliance with the conditions of par-
ticipation for ICFs/IID during the pe- Subpart B—Payment Methods: General
riod that payments for new admissions Provisions
have been denied;
(2) Effective the day following the
last day of the denial of payments pe- 447.202 Audits.
riod; and 447.203 Documentation of access to care and
(3) In accordance with the procedures service payment rates.
for appeal of terminations set forth in 447.204 Medicaid provider participation and
subpart D of part 431 of this chapter. public process to inform access to care.
447.205 Public notice of changes in State-
[51 FR 24491, July 3, 1986, as amended at 59 wide methods and standards for setting
FR 56236, Nov. 10, 1994] payment rates.
Subparts D–F [Reserved] Subpart C—Payment For Inpatient Hospital

and Long-Term Care Facility Services
PART 447—PAYMENTS FOR 447.250 Basis and purpose.
SERVICES PAYMENT RATES
Subpart A—Payments: General Provisions 447.251 Definitions.

Sec. 447.253 Other requirements.
447.1 Purpose. 447.255 Related information.
447.10 Prohibition against reassignment of 447.256 Procedures for CMS action on assur-
provider claims. ances and State plan amendments.
447.15 Acceptance of State payment as pay-
ment in full. FEDERAL FINANCIAL PARTICIPATION
447.20 Provider restrictions: State plan re- 447.257 FFP: Conditions relating to institu-
quirements. tional reimbursement.
447.21 Reduction of payments to providers.
447.25 Direct payments to certain bene- UPPER LIMITS
ficiaries for physicians’ or dentists’ serv- 447.271 Upper limits based on customary
ices. charges.
447.26 Prohibition on payment for provider- 447.272 Inpatient services: Application of
preventable conditions. upper payment limits.
447.30 Withholding the Federal share of pay-
ments to Medicaid providers to recover SWING-BED HOSPITALS
Medicare overpayments.
447.280 Hospital providers of NF services
447.31 Withholding Medicare payments to
(swing-bed hospitals).
recover Medicaid overpayments.
447.40 Payments for reserving beds in insti-
Subpart D [Reserved]
tutions.
447.45 Timely claims payment. Subpart E—Payment Adjustments for Hos-
447.46 Timely claims payment by MCOs.
pitals That Serve a Disproportionate
MEDICAID PREMIUMS AND COST SHARING Number of Low-Income Patients
447.50 Premiums and cost sharing: Basis and 447.294 Medicaid disproportionate share hos-
purpose. pital (DSH) allotment reductions for
447.51 Definitions. Federal fiscal year 2014 and Federal fis-
447.52 Cost sharing. cal year 2015.
447.53 Cost sharing for drugs. 447.295 Hospital-specific disproportionate
447.54 Cost sharing for services furnished in share hospital payment limit: Deter-
a hospital emergency department. mination of individuals without health
447.55 Premiums. insurance or other third party coverage.
447.56 Limitations on premiums and cost 447.296 Limitations on aggregate payments

sharing. for disproportionate share hospitals for
447.57 Beneficiary and public notice require- the period January 1, 1992 through Sep-
ments. tember 30, 1992.
440
447.297 Limitations on aggregate payments 447.516 Upper limits for drugs furnished as
for disproportionate share hospitals be- part of services.
ginning October 1, 1992. 447.518 State plan requirements, findings,
447.298 State disproportionate share hos- and assurances.
pital allotments. 447.520 Federal Financial Participation
447.299 Reporting requirements. (FFP): Conditions relating to physician-
administered drugs.
Subpart F—Payment Methods for Other 447.522 Optional coverage of investigational
Institutional and Noninstitutional Services drugs and other drugs not subject to re-
bate.
AUTHORITY: Sec. 1102 of the Social Security
Act (42 U.S.C. 1302).
447.304 Adherence to upper limits; FFP.
SOURCE: 43 FR 45253, Sept. 29, 1978, unless
OUTPATIENT HOSPITAL AND CLINIC SERVICES otherwise noted.
447.321 Outpatient hospital and clinic serv-
ices: Application of upper payment lim- Subpart A—Payments: General
its.
Provisions
OTHER INPATIENT AND OUTPATIENT FACILITIES
§ 447.1 Purpose.
447.325 Other inpatient and outpatient facil-
ity services: Upper limits of payment. This subpart prescribes State plan re-
447.342 [Reserved] quirements, FFP limitations and pro-
cedures concerning payments made by
PREPAID CAPITATION PLANS State Medicaid agencies for Medicaid
447.362 Upper limits of payment: Nonrisk services.
contract.
§ 447.10 Prohibition against reassign-
RURAL HEALTH CLINIC SERVICES ment of provider claims.
447.371 Services furnished by rural health (a) Basis and purpose. This section
clinics. implements section 1902(a)(32) of the
Act which prohibits State payments
Subpart G—Payments for Primary Care for Medicaid services to anyone other
Services Furnished by Physicians than a provider or beneficiary, except
447.400 Primary care services furnished by in specified circumstances.
physicians with a specified specialty or (b) Definitions. For purposes of this
subspecialty. section:
447.405 Amount of required minimum pay- Facility means an institution that
ments. furnishes health care services to inpa-
447.410 State plan requirements. tients.
447.415 Availability of Federal financial par- Factor means an individual or an or-
ticipation (FFP).
ganization, such as a collection agency
Subpart H [Reserved] or service bureau, that advances money
to a provider for accounts receivable
Subpart I—Payment for Drugs that the provider has assigned, sold or
transferred to the individual organiza-
447.500 Basis and purpose. tion for an added fee or a deduction of
447.502 Definitions. a portion of the accounts receivable.
447.504 Determination of average manufac-
turer price.
Factor does not include a business rep-
447.505 Determination of best price. resentative as described in paragraph
447.506 Authorized generic drugs. (f) of this section.
447.507 Identification of inhalation, infu- Organized health care delivery system
sion, instilled, implanted, or injectable means a public or private organization
drugs (5i drugs). for delivering health services. It in-
447.508 Exclusion from best price of certain cludes, but is not limited to, a clinic, a
sales at a nominal price. group practice prepaid capitation plan,
447.509 Medicaid drug rebates (MDR). and a health maintenance organiza-
447.510 Requirements for manufacturers.
447.511 Requirements for States.
tion.
447.512 Drugs: Aggregate upper limits of (c) State plan requirements. A State
payment. plan must provide that the require-
447.514 Upper limits for multiple source ments of paragraphs (d) through (h) of
drugs. this section are met.
441
§ 447.15 42 CFR Ch. IV (10–1–17 Edition)
(d) Who may receive payment. Pay- § 447.15 Acceptance of State payment
ment may be made only— as payment in full.
(1) To the provider; or A State plan must provide that the
(2) To the beneficiary if he is a Medicaid agency must limit participa-
noncash beneficiary eligible to receive tion in the Medicaid program to pro-
the payment under § 447.25; or viders who accept, as payment in full,
(3) In accordance with paragraphs (e), the amounts paid by the agency plus
(f), and (g) of this section. any deductible, coinsurance or copay-
(e) Reassignments. Payment may be
ment required by the plan to be paid by
made in accordance with a reassign-
the individual. The provider may only
ment from the provider to a govern-
deny services to any eligible individual
ment agency or reassignment by a
on account of the individual’s inability
court order.
to pay the cost sharing amount im-
(f) Business agents. Payment may be
posed by the plan in accordance with
made to a business agent, such as a
§ 447.52(e). The previous sentence does
billing service or an accounting firm,
not apply to an individual who is able
that furnishes statements and receives
to pay. An individual’s inability to pay
payments in the name of the provider,
does not eliminate his or her liability
if the agent’s compensation for this
for the cost sharing charge.
service is—
(1) Related to the cost of processing [78 FR 42307, July 15, 2013]
the billing;
(2) Not related on a percentage or § 447.20 Provider restrictions: State
other basis to the amount that is billed plan requirements.
or collected; and A State plan must provide for the fol-
(3) Not dependent upon the collection lowing:
of the payment. (a) In the case of an individual who is
(g) Individual practitioners. Payment eligible for medical assistance under
may be made to— the plan for service(s) for which a third
(1) The employer of the practitioner, party or parties is liable for payment,
if the practitioner is required as a con- if the total amount of the established
dition of employment to turn over his liability of the third party or parties
fees to the employer; for the service is—
(2) The facility in which the service (1) Equal to or greater than the
is provided, if the practitioner has a amount payable under the State plan
contract under which the facility sub- (which includes, when applicable, cost-
mits the claim; or sharing payments provided for in
(3) A foundation, plan, or similar or- §§ 447.52 through 447.54), the provider
ganization operating an organized furnishing the service to the individual
health care delivery system, if the may not seek to collect from the indi-
practitioner has a contract under vidual (or any financially responsible
which the organization submits the relative or representative of that indi-
claim. vidual) any payment amount for that
(4) In the case of a class of practi- service; or
tioners for which the Medicaid program (2) Less than the amount payable
is the primary source of service rev- under the State plan (including cost
enue, payment may be made to a third sharing payments set forth in §§ 447.52
party on behalf of the individual prac- through 447.54), the provider furnishing
titioner for benefits such as health in- the service to that individual may col-
surance, skills training and other bene- lect from the individual (or any finan-
fits customary for employees. cially responsible relative or represent-
(h) Prohibition of payment to factors. ative of the individual) an amount
Payment for any service furnished to a which is the lesser of—
beneficiary by a provider may not be (i) Any cost-sharing payment amount
made to or through a factor, either di- imposed upon the individual under
rectly or by power of attorney.
§§ 447.52 through 447.54; or

[43 FR 45253, Sept. 29, 1978, as amended at 46 (ii) An amount which represents the
FR 42672, Aug. 24, 1981; 61 FR 38398, July 24, difference between the amount payable
1996; 79 FR 3039, Jan. 16, 2014] under the State plan (which includes,
442
where applicable, cost-sharing pay- (2) To whom supplemental security

ments provided for in §§ 447.52 through benefits are being paid under title XVI
447.54) and the total of the established of the Act; or
third party liability for the services. (3) Who is receiving or eligible for a
(b) A provider may not refuse to fur- State supplementary payment or would
nish services covered under the plan to be eligible if he were not in a medical
an individual who is eligible for med- institution, and who is eligible for
ical assistance under the plan on ac- Medicaid as a categorically needy ben-
count of a third party’s potential li- eficiary.
ability for the service(s). (d) Federal requirements. (1) Direct
payments to beneficiaries under this
FR 42307, July 15, 2013]
section are an alternative to payments
directly to providers and are subject to
§ 447.21 Reduction of payments to pro- the same conditions; for example, the
viders. State’s reasonable charge schedules are
applicable.
If a provider seeks to collect from an
(2) Direct payments must be sup-
individual (or any financially respon-
ported by providers’ bills for services.
sible relative or representative of that
individual) an amount that exceeds an § 447.26 Prohibition on payment for
amount specified under § 447.20(a)— provider-preventable conditions.
(a) The Medicaid agency may provide
for a reduction of any payment amount (a) Basis and purpose. The purpose of
otherwise due to the provider in addi- this section is to protect Medicaid
tion to any other sanction available to beneficiaries and the Medicaid program
the agency; and by prohibiting payments by States for
services related to provider-prevent-
(b) The reduction may be equal to up
able conditions.
to three times the amount that the
provider sought to collect in violation (1) Section 2702 of the Affordable Care
of § 447.20(a). Act requires that the Secretary exer-
cise authority to prohibit Federal pay-
[55 FR 1433, Jan. 16, 1990] ment for certain provider preventable
conditions (PPCs) and health care-ac-
§ 447.25 Direct payments to certain quired conditions (HCACs).
beneficiaries for physicians’ or den- (2) Section 1902(a)(19) of the Act re-
tists’ services.
quires that States provide care and
(a) Basis and purpose. This section services consistent with the best inter-
implements section 1905(a) of the Act ests of the beneficiaries.
by prescribing requirements applicable (3) Section 1902(a)(30) of the Act re-
to States making direct payments to quires that State payment methods
certain beneficiaries for physicians’ or must be consistent with efficiency,
dentists’ services. economy, and quality of care.
(b) State plan requirements. Except for (b) Definitions. As used in this sec-
groups specified in paragraph (c) of this tion—
section, a State may make direct pay- Health care-acquired condition means a
ments to beneficiaries for physicians’ condition occurring in any inpatient
or dentists’ services. If it does so, the hospital setting, identified as a HAC by
State plan must— the Secretary under section
(1) Provide for direct payments; and 1886(d)(4)(D)(iv) of the Act for purposes
(2) Specify the conditions under of the Medicare program identified in
which payments are made. the State plan as described in section
(c) Federal financial participation. No 1886(d)(4)(D)(ii) and (iv) of the Act;
FFP is available in expenditures for di- other than Deep Vein Thrombosis
rect payment for physicians’ or den- (DVT)/Pulmonary Embolism (PE) as re-
tists’ services to any beneficiary— lated to total knee replacement or hip
(1) Who is receiving assistance under replacement surgery in pediatric and

the State’s approved plan under title I, obstetric patients.
IV-A, X, XIV or XVI (AABD) of the Other provider-preventable condition
Act; or means a condition occurring in any
443
§ 447.30 42 CFR Ch. IV (10–1–17 Edition)
health care setting that meets the fol- ated with claims for Medicaid payment
lowing criteria: or with courses of treatment furnished
(i) Is identified in the State plan. to Medicaid patients for which Med-
(ii) Has been found by the State, icaid payment would otherwise be
based upon a review of medical lit- available.
erature by qualified professionals, to be [76 FR 32837, June 6, 2011]
reasonably preventable through the ap-
plication of procedures supported by § 447.30 Withholding the Federal share
evidence-based guidelines. of payments to Medicaid providers
(iii) Has a negative consequence for to recover Medicare overpayments.
the beneficiary. (a) Basis and purpose. This section
(iv) Is auditable. implements section 1914 of the Act,
(v) Includes, at a minimum, wrong which provides for withholding the
surgical or other invasive procedure Federal share of Medicaid payments to
performed on a patient; surgical or a provider if the provider has not ar-
other invasive procedure performed on ranged to repay Medicare overpay-
the wrong body part; surgical or other ments or has failed to provide informa-
invasive procedure performed on the tion to determine the amount of the
wrong patient. overpayments. The intent of the stat-
Provider-preventable condition means a ute and regulations is to facilitate the
condition that meets the definition of a recovery of Medicare overpayments.
‘‘health care-acquired condition’’ or an The provision enables recovery of over-
‘‘other provider-preventable condition’’ payments when institutions have re-
as defined in this section. duced participation in Medicare or
(c) General rules. (1) A State plan when physicians and suppliers have
must provide that no medical assist- submitted few or no claims under Medi-
ance will be paid for ‘‘provider-prevent- care, thus not receiving enough in
able conditions’’ as defined in this sec- Medicare reimbursement to permit off-
tion; and as applicable for individuals set of the overpayment.
dually eligible for both the Medicare (b) When withholding occurs. The Fed-
and Medicaid programs. eral share of Medicaid payments may
(2) No reduction in payment for a be withheld from any provider specified
provider preventable condition will be in paragraph (c) of this section to re-
imposed on a provider when the condi- cover Medicare overpayments that
tion defined as a PPC for a particular CMS has been unable to collect if the
patient existed prior to the initiation provider participates in Medicaid and—
of treatment for that patient by that (1) The provider has not made ar-
provider. rangements satisfactory to CMS to
(3) Reductions in provider payment repay the Medicare overpayment; or
may be limited to the extent that the (2) CMS has been unable to collect in-
following apply: formation from the provider to deter-
(i) The identified provider-prevent- mine the existence or amount of Medi-
able conditions would otherwise result care overpayment.
in an increase in payment. (c) The Federal share of Medicaid
(ii) The State can reasonably isolate payments may be withheld with re-
for nonpayment the portion of the pay- spect to the following providers:
ment directly related to treatment for, (1) An institutional provider that has
and related to, the provider-prevent- or previously had in effect a Medicare
able conditions. provider agreement under section 1866
(4) FFP will not be available for any of the Act; and
State expenditure for provider-prevent- (2) A Medicaid provider who has pre-
able conditions. viously accepted Medicare payment on
(5) A State plan must ensure that the basis of an assignment under sec-
non-payment for provider-preventable tion 1842(b)(3)(B)(ii) of the Act; and
conditions does not prevent access to during the 12 month period preceding
services for Medicaid beneficiaries. the quarter in which the Federal share
(d) Reporting. State plans must re- is to be withheld for a Medicare over-
quire that providers identify provider- payment, submitted no claims under
preventable conditions that are associ- Medicare or submitted claims which
444
total less than the amount of overpay- on which the agency receives notice of
ment. withholding.
(d) Order to reduce State payment. (1) (h) Duration of withholding. No Fed-
CMS may, at its discretion, issue an eral funds are available in expenditures
order to the Medicaid agency of any for services that are furnished by a pro-
State that is using the provider’s serv- vider specified in paragraph (c) of this
ices, to reduce its payment to the pro- section from the date on which the
vider by the amount specified in para- withholding becomes effective until
graph (f) of this section. the termination of withholding under
(2) The order to reduce payment to paragraph (i) of this section.
the provider will remain in effect (i) Termination of withholding. (1) CMS
until— will terminate the order to reduce
(i) The Medicaid agency determines State payment if it determines that
that the overpayment has been com- any of the following has occurred:
pletely recovered; or (i) The Medicare overpayment is
(ii) CMS terminates the order. completely recovered:
(3) CMS may withhold FFP from any (ii) The institution or person makes
State that does not comply with the an agreement satisfactory to CMS to
order specified in paragraph (d)(1) of repay the overpayment; or
this section to reduce payment to the (iii) CMS determines that there is no
provider and claims FFP for the ex- overpayment based on newly acquired
penditure on its quarterly expenditure evidence or a subsequent audit.
report. (2) CMS will notify each State that
(e) Notice of withholding. (1) Before previously received a notice ordering
the Federal share of payments may be the withholding that the withholding
withheld under this section, CMS will has been terminated.
notify the provider and the Medicaid
(j) Procedures for restoring excess with-
agency of each State that CMS believes
holding. If an amount ultimately deter-
may use the overpaid provider’s serv-
mined to be in excess of the Medicare
ices under Medicaid.
overpayment is withheld, CMS will re-
(2) The notice will include the in-
store any excess funds withheld.
struction to reduce State payments, as
provided under paragraph (d) of this (k) Recovery of funds from Medicaid
section. agency. A provider is not entitled to re-
(3) CMS will send the notice referred cover from the Medicaid agency the
to in paragraph (e)(1) by certified mail, amount of payment withheld by the
return receipt requested. agency in accordance with a CMS order
(4) Each Medicaid agency must iden- issued under paragraph (d) of this sec-
tify the amount of payment due the tion.
provider under Medicaid and give that [50 FR 19688, May 10, 1985; 50 FR 23307, June
information to CMS in the next quar- 3, 1985]
terly expenditure report.
(5) The Medicaid agency may appeal § 447.31 Withholding Medicare pay-
any disallowance of FFP resulting ments to recover Medicaid overpay-
from the withholding decision to the ments.
Grant Appeals Board, in accordance (a) Basis and purpose. Section 1885 of
with 45 CFR part 16. the Act provides authority for CMS to
(f) Amount to be withheld. CMS may withhold Medicare payments to a Med-
require the Medicaid agency to reduce icaid provider in order to recover Med-
the Federal share of its payment to the icaid overpayments to the provider.
provider by the lesser of the following Section 405.377 of this chapter sets
amounts. forth the Medicare rules implementing
(1) The Federal matching share of section 1885, and specifies under what
payments to the provider, or circumstances withholding will occur
(2) The total Medicare overpayment and the providers that are subject to
to the provider. withholding. This section establishes

(g) Effective date of withholding. With- the procedures that the Medicaid agen-
holding of payment will become effec- cy must follow when requesting that
tive no less than 60 days after the day CMS withhold Medicare payments.
445
§ 447.40 42 CFR Ch. IV (10–1–17 Edition)
(b) Agency notice to providers. (1) Be- pension of Medicaid payments made
fore the agency requests recovery of a with respect to that overpayment.
Medicaid overpayment through Medi- (7) A copy of the provider’s agree-
care, the agency must send either or ment with the agency under § 431.107 of
both of the following notices, in addi- this chapter.
tion to that required under paragraph (d) Notification to terminate with-
(b)(2) of this section, to the provider. holding. (1) If an agency has requested
(i) Notice that— withholding under this section, it must
(A) There has been an overpayment; notify CMS if any of the following oc-
(B) Repayment is required; and curs:
(C) The overpayment determination (i) The Medicaid provider makes an
is subject to agency appeal procedures, agreement satisfactory to the agency
but we may withhold Medicare pay- to repay the overpayment;
ments while an appeal is in progress. (ii) The Medicaid overpayment is
(ii) Notice that— completely recovered; or
(A) Information is needed to deter- (iii) The agency determines that
mine the amount of overpayment if there is no overpayment, based on
any; and newly acquired evidence or subsequent
(B) The provider has at least 30 days audit.
in which to supply the information to (2) Upon receipt of notification from
the agency. the State agency, CMS will terminate
(2) Notice that, 30 days or later from withholding.
the date of the notice, the agency in- (e) Accounting for returned overpay-
tends to refer the case to CMS for with- ment. The agency must treat as a re-
holding of Medicare payments. covered overpayment the amounts re-
(3) The agency must send all notices ceived from CMS to offset Medicaid
to providers by certified mail, return overpayments.
receipt requested. (f) Procedures for restoring excess with-
(c) Documentation to be submitted to holding. The agency must establish pro-
CMS. The agency must submit the fol- cedures satisfactory to CMS to assure
lowing information or documentation the return to the provider of amounts
to CMS (unless otherwise specified) withheld under this section that are ul-
with the request for withholding of timately determined to be in excess of
overpayments. Those procedures are
Medicare payments.
subject to CMS review.
(1) A statement of the reason that
withholding is requested. [50 FR 19689, May 10, 1985, as amended at 61
(2) The amount of overpayment, type FR 63749, Dec. 2, 1996]
of overpayment, date the overpayment
was determined, and the closing date of § 447.40 Payments for reserving beds
in institutions.
the pertinent cost reporting period (if
applicable). (a) The Medicaid agency may make
(3) The quarter in which the overpay- payments to reserve a bed during a
ment was reported on the quarterly ex- beneficiary’s temporary absence from
penditure report (Form CMS 64). an inpatient facility, if—
(4) As needed, and upon request from (1) The State plan provides for such
CMS, the names and addresses of the payments and specifies any limitations
provider’s officers and owners for each on the policy; and
period that there is an outstanding (2) Absences for purposes other than
overpayment. required hospitalization (which cannot
(5) A statement of assurance that the be anticipated and planned) are in-
State agency has met the notice re- cluded in the patient’s plan of care.
quirements under paragraph (b) of this (b) An agency that pays for reserved
section. beds in an inpatient facility may pay
(6) As needed, and upon request for less for a reserved bed than an occupied
CMS, copies of notices (under para- bed if there is a cost differential be-
tween the two beds. (Section 1102 of the
graph (b) of this section), and reports

of contact or attempted contact with Act.)
the provider concerning the overpay- [43 FR 45253, Sept. 29, 1978, as amended at 51
ment, including any reduction or sus- FR 24491, July 3, 1986]
446
§ 447.45 Timely claims payment. (4) At least one of the practitioners

received payments on a fee-for-service
(a) Basis and purpose. This section
basis under titles V, XVIII, and XIX in
implements section 1902(a)(37) of the
Act by specifying— an amount exceeding $5,000 for any one
month during the preceding 12 months
(1) State plan requirements for—
or in an aggregate amount exceeding
(i) Timely processing of claims for
$40,000 during the preceding 12 months.
payment;
(ii) Prepayment and postpayment The term does not include a provider of
claims reviews; and services (as specified in § 489.2(b) of this
(2) Conditions under which the Ad- chapter), a health maintenance organi-
ministrator may grant waivers of the zation (as defined in section 1301(a) of
time requirements. the Public Health Service Act), a hos-
(b) Definitions. Claim means (1) a bill pital cooperative shared services orga-
for services, (2) a line item of service, nization meeting the requirements of
or (3) all services for one beneficiary section 501(e) of the Internal Revenue
within a bill. Code of 1954, or any public entity.
Clean claim means one that can be Third party is defined in § 433.135 of
processed without obtaining additional this chapter.
information from the provider of the (c) State plan requirements. A State
service or from a third party. It in- plan must (1) provide that the require-
cludes a claim with errors originating ments of paragraphs (d), (e)(2), (f) and
in a State’s claims system. It does not (g) of this section are met; and
include a claim from a provider who is (2) Specify the definition of a claim,
under investigation for fraud or abuse, as provided in paragraph (b) of this sec-
or a claim under review for medical ne- tion, to be used in meeting the require-
cessity. ments for timely claims payment. The
A shared health facility means any ar- definition may vary by type of service
rangement in which— (e.g., physician service, hospital serv-
(1) Two or more health care practi- ice).
tioners practice their professions at a (d) Timely processing of claims. (1) The
common physical location; Medicaid agency must require pro-
(2) The practitioners share common viders to submit all claims no later
waiting areas, examining rooms, treat- than 12 months from the date of serv-
ment rooms, or other space, the service.
ices of supporting staff, or equipment;
(2) The agency must pay 90 percent of
(3) The practitioners have a person
all clean claims from practitioners,
(who may himself be a practitioner)—
who are in individual or group practice
(i) Who is in charge of, controls, man-
or who practice in shared health facili-
ages, or supervises substantial aspects
ties, within 30 days of the date of re-
of the arrangement or operation for the
ceipt.
delivery of health or medical services
at the common physical location other (3) The agency must pay 99 percent of
than the direct furnishing of profes- all clean claims from practitioners,
sional health care services by the prac- who are in individual or group practice
titioners to their patients; or or who practice in shared health facili-
(ii) Who makes available to the prac- ties, within 90 days of the date of re-
titioners the services of supporting ceipt.
staff who are not employees of the (4) The agency must pay all other
practitioners; and claims within 12 months of the date of
(iii) Who is compensated in whole or receipt, except in the following cir-
in part, for the use of the common cumstances:
physical location or related support (i) This time limitation does not
services, on a basis related to amounts apply to retroactive adjustments paid
charged or collected for the services to providers who are reimbursed under
a retrospective payment system, as de-
rendered or ordered at the location or

on any basis clearly unrelated to the fined in § 447.272 of this part.
value of the services provided by the (ii) If a claim for payment under
person; and Medicare has been filed in a timely
447
§ 447.46 42 CFR Ch. IV (10–1–17 Edition)
manner, the agency may pay a Med- type of illness, age, sex, service loca-
icaid claim relating to the same serv- tion;
ices within 6 months after the agency (iii) Verification that the claim does
or the provider receives notice of the not duplicate or conflict with one re-
disposition of the Medicare claim. viewed previously or currently being
(iii) The time limitation does not reviewed;
apply to claims from providers under (iv) Verification that a payment does
investigation for fraud or abuse. not exceed any reimbursement rates or
(iv) The agency may make payments limits in the State plan; and
at any time in accordance with a court
(v) Checks for third party liability
order, to carry out hearing decisions or
agency corrective actions taken to re- within the requirements of § 433.137 of
solve a dispute, or to extend the bene- this chapter.
fits of a hearing decision, corrective (2) The agency must conduct post-
action, or court order to others in the payment claims review that meets the
same situation as those directly af- requirements of parts 455 and 456 of
fected by it. this chapter, dealing with fraud and
(5) The date of receipt is the date the utilization control.
agency receives the claim, as indicated (g) Reports. The agency must provide
by its date stamp on the claim. any reports and documentation on
(6) The date of payment is the date of compliance with this section that the
the check or other form of payment. Administrator may require.
(e) Waivers. (1) The Administrator
may waive the requirements of para- (Secs. 1102 and 1902(a)(37) of the Social Secu-
rity Act (42 U.S.C. 1302, 1396a(a)(37)))
graphs (d) (2) and (3) of this section
upon request by an agency if he finds [44 FR 30344, May 25, 1979, as amended at 55
that the agency has shown good faith FR 1434, Jan. 16, 1990]
in trying to meet them. In deciding
whether the agency has shown good § 447.46 Timely claims payment by
faith, the Administrator will consider MCOs.
whether the agency has received an un- (a) Basis and scope. This section im-
usually high volume of claims which plements section 1932(f) of the Act by
are not clean claims, and whether the specifying the rules and exceptions for
agency is making diligent efforts to prompt payment of claims by MCOs.
implement an automated claims proc- (b) Definitions. ‘‘Claim’’ and ‘‘clean
essing and information retrieval sys- claim’’ have the meaning given those
tem.
terms in § 447.45.
(2) The agency’s request for a waiver
(c) Contract requirements—(1) Basic
must contain a written plan of correc-
tion specifying all steps it will take to rule. A contract with an MCO must pro-
meet the requirements of this section. vide that the organization will meet
(3) The Administrator will review the requirements of § 447.45(d)(2) and
each case and if he approves a waiver, (d)(3), and abide by the specifications
will specify its expiration date, based of § 447.45(d)(5) and (d)(6).
on the State’s capability and efforts to (2) Exception. The MCO and its pro-
meet the requirements of this section. viders may, by mutual agreement, es-
(f) Prepayment and postpayment claims tablish an alternative payment sched-
review. (1) For all claims, the agency ule.
must conduct prepayment claims re- (3) Alternative schedule. Any alter-
view consisting of— native schedule must be stipulated in
(i) Verification that the beneficiary the contract.
was included in the eligibility file and
that the provider was authorized to [67 FR 41115, June 14, 2002]
furnish the service at the time the
service was furnished; MEDICAID PREMIUMS AND COST SHARING
(ii) Checks that the number of visits

and services delivered are logically SOURCE: 78 FR 42307, July 15, 2013, unless
otherwise noted.
consistent with the beneficiary’s char-
acteristics and circumstances, such as
448
§ 447.50 Premiums and cost sharing: (ii) Is an Eskimo or Aleut or other

Basis and purpose. Alaska Native;
Sections 1902(a)(14), 1916 and 1916A of (iii) Is considered by the Secretary of
the Act permit states to require cer- the Interior to be an Indian for any
tain beneficiaries to share in the costs purpose; or
of providing medical assistance (iv) Is determined to be an Indian
through premiums and cost sharing. under regulations promulgated by the
Sections 447.52 through 447.56 specify Secretary;
the standards and conditions under (3) Is considered by the Secretary of
which states may impose such pre- the Interior to be an Indian for any
miums and or cost sharing. purpose; or
(4) Is considered by the Secretary of
§ 447.51 Definitions. Health and Human Services to be an
As used in this part— Indian for purposes of eligibility for In-
Alternative non-emergency services pro- dian health care services, including as
vider means a Medicaid provider, such a California Indian, Eskimo, Aleut, or
as a physician’s office, health care clin- other Alaska Native.
ic, community health center, hospital Indian health care provider means a
outpatient department, or similar pro- health care program operated by the
vider that can provide clinically appro- Indian Health Service (IHS) or by an
priate services in a timely manner. Indian Tribe, Tribal Organization, or
Contract health service means any Urban Indian Organization (otherwise
health service that is: known as an I/T/U) as those terms are
(1) Delivered based on a referral by, defined in section 4 of the Indian
or at the expense of, an Indian health Health Care Improvement Act (25
program; and U.S.C. 1603).
(2) Provided by a public or private Inpatient stay means the services re-
medical provider or hospital that is not ceived during a continuous period of in-
a provider or hospital of the IHS or any patient days in either a single medical
other Indian health program institution or multiple medical institu-
Cost sharing means any copayment, tions, and also includes a return to an
coinsurance, deductible, or other simi- inpatient medical institution after a
lar charge. brief period when the return is for
Emergency services has the same treatment of a condition that was
meaning as in § 438.114 of this chapter. present in the initial period. Inpatient
Federal poverty level (FPL) means the has the same meaning as in § 440.2 of
Federal poverty level updated periodi- this chapter.
cally in the FEDERAL REGISTER by the Non-emergency services means any
Secretary of Health and Human Serv- care or services that are not considered
ices under the authority of 42 U.S.C. emergency services as defined in this
9902(2). section. This does not include any serv-
Indian means any individual defined ices furnished in a hospital emergency
at 25 U.S.C. 1603(13), 1603(28), or 1679(a), department that are required to be pro-
or who has been determined eligible as vided as an appropriate medical screen-
an Indian, under 42 CFR 136.12. This ing examination or stabilizing exam-
means the individual: ination and treatment under section
(1) Is a member of a Federally-recog- 1867 of the Act.
nized Indian tribe; Outpatient services for purposes of im-
(2) Resides in an urban center and posing cost sharing means any service
meets one or more of the following four or supply not meeting the definition of
criteria: an inpatient stay.
(i) Is a member of a tribe, band, or Preferred drugs means drugs that the
other organized group of Indians, in- state has identified on a publicly avail-
cluding those tribes, bands, or groups able schedule as being determined by a
terminated since 1940 and those recog- pharmacy and therapeutics committee
nized now or in the future by the State for clinical efficacy as the most cost ef-
in which they reside, or who is a de- fective drugs within each therapeuti-
scendant, in the first or second degree, cally equivalent or therapeutically
of any such member; similar class of drugs, or all drugs
449
§ 447.52 42 CFR Ch. IV (10–1–17 Edition)
within such a class if the agency does nished in an emergency department, as

not differentiate between preferred and described in §§ 447.53 and 447.54 respec-
non-preferred drugs. tively) may be established at or below
Premium means any enrollment fee, the amounts shown in the following
premium, or other similar charge. table (except that the maximum allow-
able cost sharing for individuals with
§ 447.52 Cost sharing.
family income at or below 100 percent
(a) Applicability. Except as provided of the FPL shall be increased each
in § 447.56(a) (exemptions), the agency year, beginning October 1, 2015, by the
may impose cost sharing for any serv- percentage increase in the medical care
ice under the state plan.
component of the CPI–U for the period
(b) Maximum Allowable Cost Sharing.
of September to September of the pre-
(1) At State option, cost sharing im-
posed for any service (other than for ceding calendar year, rounded to the
drugs and non-emergency services fur- next higher 5-cent increment):
Maximum allowable cost sharing
Services Individuals with Individuals with family income Individuals with family income
family income 101–150% of the FPL >150% of the FPL
≤100% of the FPL
Outpatient Services (physician $4 10% of cost the agency pays ....... 20% of cost the agency pays.
visit, physical therapy, etc.).
Inpatient Stay ................................ 75 10% of total cost the agency pays 20% of total cost the agency pays
for the entire stay. for the entire stay.
(2) States with cost sharing for an in- including a pharmacy or hospital, to
patient stay that exceeds $75, as of require an individual to pay cost shar-
July 15, 2013, must submit a plan to ing as a condition for receiving the
CMS that provides for reducing inpa- item or service if—
tient cost sharing to $75 on or before (i) The individual has family income
July 1, 2017. above 100 percent of the FPL,
(3) In states that do not have fee-for- (ii) The individual is not part of an
service payment rates, any cost shar- exempted group under § 447.56(a), and
ing imposed on individuals at any in- (iii) For cost sharing imposed for
come level may not exceed the max- non-emergency services furnished in an
imum amount established, for individ- emergency department, the conditions
uals with income at or below 100 per- under § 447.54(d) of this part have been
cent of the FPL described in paragraph satisfied.
(b)(1) of this section. (2) Except as provided under para-
(c) Maximum cost sharing. In no case graph (e)(1) of this section, the state
shall the maximum cost sharing estab- plan must specify that no provider may
lished by the agency be equal to or ex- deny services to an eligible individual
ceed the amount the agency pays for on account of the individual’s inability
the service. to pay the cost sharing.
(d) Targeted cost sharing. (1) Except as (3) Nothing in this section shall be
provided in paragraph (d)(2) of this sec- construed as prohibiting a provider
tion, the agency may target cost shar- from choosing to reduce or waive such
ing to specified groups of individuals cost sharing on a case-by-case basis.
with family income above 100 percent (f) Prohibition against multiple charges.
of the FPL. For any service, the agency may not
(2) For cost sharing imposed for non- impose more than one type of cost
preferred drugs under § 447.53 and for sharing.
non-emergency services provided in a (g) Income-related charges. Subject to
hospital emergency department under the maximum allowable charges speci-
§ 447.54, the agency may target cost fied in §§ 447.52(b), 447.53(b) and
sharing to specified groups of individ- 447.54(b), the plan may establish dif-
uals regardless of income. ferent cost sharing charges for individ-
(e) Denial of service for nonpayment. uals at different income levels. If the
(1) The agency may permit a provider, agency imposes such income-related
450
charges, it must ensure that lower in- pital emergency room services are
come individuals are charged less than identified as non-emergency service.
individuals with higher income.
(h) Services furnished by a managed § 447.53 Cost sharing for drugs.
care organization (MCO). Contracts with (a) The agency may establish dif-
MCOs must provide that any cost-shar-
ferential cost sharing for preferred and
ing charges the MCO imposes on Med-
non-preferred drugs. The provisions in
icaid enrollees are in accordance with
the cost sharing specified in the state § 447.56(a) shall apply except as the
plan and the requirements set forth in agency exercises the option under para-
§§ 447.50 through 447.57. graph (d) of this section. All drugs will
(i) State Plan Specifications. For each be considered preferred drugs if so
cost sharing charge imposed under this identified or if the agency does not dif-
part, the state plan must specify— ferentiate between preferred and non-
(1) The service for which the charge preferred drugs.
is made; (b) At state option, cost sharing for
(2) The group or groups of individuals drugs may be established at or below
that may be subject to the charge; the amounts shown in the following
(3) The amount of the charge; table (except that the maximum allow-
(4) The process used by the state to— able cost sharing shall be increased
(i) Ensure individuals exempt from each year, beginning October 1, 2015, by
cost sharing are not charged, the percentage increase in the medical
(ii) Identify for providers whether
care component of the CPI–U for the
cost sharing for a specific item or serv-
period of September to September of
ice may be imposed on an individual
the preceding calendar year, rounded
and whether the provider may require
the individual, as a condition for re- to the next higher 5-cent increment.
ceiving the item or service, to pay the Such increase shall not be applied to
cost sharing charge; and any cost sharing that is based on the
(5) If the agency imposes cost sharing amount the agency pays for the serv-
under § 447.54, the process by which hos- ice):
Services Individuals with

family income Individuals with family income >150% of the FPL
≤150% of the FPL
Preferred Drugs ..................................................... $4 $4.

Non-Preferred Drugs ............................................. 8 20% of the cost the agency pays.
(c) In states that do not have fee-for- process in place so that cost sharing is
service payment rates, cost sharing for limited to the amount imposed for a
prescription drugs imposed on individ- preferred drug if the individual’s pre-
uals at any income level may not ex- scribing provider determines that a
ceed the maximum amount established preferred drug for treatment of the
for individuals with income at or below same condition either will be less effec-
150 percent of the FPL in paragraph (b) tive for the individual, will have ad-
of this section. verse effects for the individual, or both.
(d) For individuals otherwise exempt In such cases the agency must ensure
from cost sharing under § 447.56(a), the that reimbursement to the pharmacy is
agency may impose cost sharing for based on the appropriate cost sharing
non-preferred drugs, not to exceed the amount.
maximum amount established in para-
graph (b) of this section.
(e) In the case of a drug that is iden-
tified by the agency as a non-preferred

drug within a therapeutically equiva-
lent or therapeutically similar class of
drugs, the agency must have a timely
451
§ 447.54 42 CFR Ch. IV (10–1–17 Edition)
§ 447.54 Cost sharing for services fur- lished at or below the amounts shown
nished in a hospital emergency de- in the following table (except that the
partment. maximum allowable cost sharing iden-
(a) The agency may impose cost shar- tified for individuals with family in-
ing for non-emergency services pro- come at or below 150 percent of the
vided in a hospital emergency depart- FPL shall be increased each year, be-
ment. The provisions in § 447.56(a) shall ginning October 1, 2015, by the percent-
apply except as the agency exercises age increase in the medical care com-
the option under paragraph (c) of this ponent of the CPI–U for the period of
section. September to September of the pre-
(b) At state option, cost sharing for ceding calendar year, rounded to the
non-emergency services provided in an next higher 5-cent increment):
emergency department may be estab-
Services Individuals with family Individuals with family

income ≤150% of the income >150% of the
FPL FPL
Non-emergency Use of the Emergency Department ............................................ $8 ............................... No Limit.
(c) For individuals otherwise exempt (iv) Provide a referral to coordinate

from cost sharing under § 447.56(a), the scheduling for treatment by the alter-
agency may impose cost sharing for native provider.
non-emergency use of the emergency (e) Nothing in this section shall be
department, not to exceed the max- construed to:
imum amount established in paragraph (1) Limit a hospital’s obligations for
(b) of this section for individuals with screening and stabilizing treatment of
income at or below 150 percent of the an emergency medical condition under
FPL. section 1867 of the Act; or
(d) For the agency to impose cost (2) Modify any obligations under ei-
sharing under paragraph (a) or (c) of ther state or federal standards relating
this section for non-emergency use of to the application of a prudent-
the emergency department, the hos- layperson standard for payment or cov-
pital providing the care must— erage of emergency medical services by
(1) Conduct an appropriate medical any managed care organization.
screening under § 489.24 subpart G to de- § 447.55 Premiums.
termine that the individual does not
need emergency services. (a) The agency may impose pre-
(2) Before providing non-emergency miums upon individuals whose income
services and imposing cost sharing for exceeds 150 percent of the FPL, subject
such services: to the exemptions set forth in
§ 447.56(a) and the aggregate limitations
(i) Inform the individual of the
set forth in § 447.56(f) of this part, ex-
amount of his or her cost sharing obli- cept that:
gation for non-emergency services pro-
(1) Pregnant women described in de-
vided in the emergency department;
scribed in paragraph (a)(1)(ii) of this
(ii) Provide the individual with the section may be charged premiums that
name and location of an available and do not exceed 10 percent of the amount
accessible alternative non-emergency by which their family income exceeds
services provider; 150 percent of the FPL after deducting
(iii) Determine that the alternative expenses for care of a dependent child.
provider can provide services to the in- (i) The agency may use state or local
dividual in a timely manner with the funds available under other programs
imposition of a lesser cost sharing for payment of a premium for such

amount or no cost sharing if the indi- pregnant women. Such funds shall not
vidual is otherwise exempt from cost be counted as income to the individual
sharing; and for whom such payment is made.
452
(ii) Pregnant women described in this (2) Except for premiums imposed
clause include pregnant women eligible under paragraph (a)(5) of this section,
for Medicaid under § 435.116 of this the agency may terminate an indi-
chapter whose income exceeds the vidual from medical assistance on the
higher of – basis of failure to pay for 60 days or
(A) 150 percent FPL; and more.
(B) If applicable, the percent FPL de- (3) For premiums imposed under
scribed in section 1902(l)(2)(A)(iv) of the paragraph (a)(2) of this section—
Act up to 185 percent FPL. (i) For individuals with annual in-
(2) Individuals provided medical as- come exceeding 250 percent of the FPL,
sistance only under sections the agency may require payment of 100
1902(a)(10)(A)(ii)(XV) or percent of the premiums imposed under
1902(a)(10)(A)(ii)(XVI) of the Act and this paragraph for a year, such that
the Ticket to Work and Work Incen- payment is only required up to 7.5 per-
tives Improvement Act of 1999 cent of annual income for individuals
(TWWIIA), may be charged premiums whose annual income does not exceed
on a sliding scale based on income. 450 percent of the FPL.
(3) Disabled children provided med- (ii) For individuals whose annual ad-
ical assistance under section justed gross income (as defined in sec-
1902(a)(10)(A)(ii)(XIX) of the Act in ac-
tion 62 of the Internal Revenue Code of
cordance with the Family Opportunity
1986) exceeds $75,000, increased by infla-
Act, may be charged premiums on a
tion each calendar year after 2000, the
sliding scale based on income. The ag-
gregate amount of the child’s premium agency must require payment of 100
imposed under this paragraph and any percent of the premiums for a year, ex-
premium that the parent is required to cept that the agency may choose to
pay for family coverage under section subsidize the premiums using state
1902(cc)(2)(A)(i) of the Act, and other funds which may not be federally
cost sharing charges may not exceed: matched by Medicaid.
(i) 5 percent of the family’s income if (4) For any premiums imposed under
the family’s income is no more than 200 this section, the agency may waive
percent of the FPL. payment of a premium in any case
(ii) 7.5 percent of the family’s income where the agency determines that re-
if the family’s income exceeds 200 per- quiring the payment will create an
cent of the FPL but does not exceed 300 undue hardship for the individual or
percent of the FPL. family.
(4) Qualified disabled and working in- (5) The agency may not apply further
dividuals described in section 1905(s) of consequences or penalties for non-pay-
the Act, whose income exceeds 150 per- ment other than those listed in this
cent of the FPL, may be charged pre- section.
miums on a sliding scale based on in- (c) State plan specifications. For each
come, expressed as a percentage of premium, enrollment fee, or similar
Medicare cost sharing described at sec- charge imposed under paragraph (a) of
tion 1905(p)(3)(A)(i) of the Act. this section, subject to the require-
(5) Medically needy individuals, as ments of paragraph (b) of this section,
defined in §§ 435.4 and 436.3 of this chap- the plan must specify—
ter, may be charged on a sliding scale. (1) The group or groups of individuals
The agency must impose an appro- that may be subject to the charge;
priately higher charge for each higher
(2) The amount and frequency of the
level of family income, not to exceed
$20 per month for the highest level of charge;
family income. (3) The process used by the state to
(b) Consequences for non-payment. (1) identify which beneficiaries are subject
For premiums imposed under para- to premiums and to ensure individuals
exempt from premiums are not
graphs (a)(1), (a)(2), (a)(3) and (a)(4) of

this section, the agency may not re- charged; and
quire a group or groups of individuals (4) The consequences for an indi-
to prepay. vidual or family who does not pay.
453
§ 447.56 42 CFR Ch. IV (10–1–17 Edition)
§ 447.56 Limitations on premiums and furnished by an Indian health care pro-

cost sharing. vider or through referral under con-
(a) Exemptions. (1) The agency may tract health services is exempt from
not impose premiums or cost sharing premiums. Indians who are currently
upon the following groups of individ- receiving or have ever received an item
uals: or service furnished by an Indian
(i) Individuals ages 1 and older and health care provider or through refer-
under age 18 eligible under § 435.118 of ral under contract health services are
this chapter. exempt from all cost sharing.
(ii) Infants under age 1 eligible under (xi) Individuals who are receiving
§ 435.118 of this chapter whose income Medicaid because of the state’s elec-
does not exceed the higher of— tion to extend coverage as authorized
(A) 150 percent FPL (for premiums) by § 435.213 of this chapter (Breast and
or 133 percent FPL (for cost sharing); Cervical Cancer).
and (2) The agency may not impose cost
(B) If applicable, the percent FPL de- sharing for the following services:
scribed in section 1902(l)(2)(A)(iv) of the (i) Emergency services as defined at
Act up to 185 percent FPL. section 1932(b)(2) of the Act and
(iii) Individuals under age 18 eligible § 438.114(a) of this chapter;
under §§ 435.120–435.122 or § 435.130 of (ii) Family planning services and
this chapter. supplies described in section
(iv) Children for whom child welfare 1905(a)(4)(C) of the Act, including con-
services are made available under Part traceptives and pharmaceuticals for
B of title IV of the Act on the basis of which the State claims or could claim
being a child in foster care and individ- Federal match at the enhanced rate
uals receiving benefits under Part E of under section 1903(a)(5) of the Act for
that title, without regard to age. family planning services and supplies;
(v) At state option, individuals under (iii) Preventive services, at a min-
age 19, 20 or age 21, eligible under imum the services specified at § 457.520
§ 435.222 of this chapter. of chapter D, provided to children
(vi) Disabled children, except as pro- under 18 years of age regardless of fam-
vided at § 447.55(a)(4) (premiums), who ily income, which reflect the well-baby
are receiving medical assistance by vir- and well child care and immunizations
tue of the application of the Family in the Bright Futures guidelines issued
Opportunity Act in accordance with by the American Academy of Pediat-
sections 1902(a)(10)(A)(ii)(XIX) and rics; and
1902(cc) of the Act. (iv) Pregnancy-related services, in-
(vii) Pregnant women, except for pre- cluding those defined at §§ 440.210(a)(2)
miums allowed under § 447.55(a)(1) and and 440.250(p) of this chapter, and coun-
cost sharing for services specified in seling and drugs for cessation of to-
the state plan as not pregnancy-re- bacco use All services provided to preg-
lated, during the pregnancy and nant women will be considered as preg-
through the postpartum period which nancy-related, except those services
begins on the last day of pregnancy and specifically identified in the state plan
extends through the end of the month as not being related to the pregnancy.
in which the 60-day period following (v) Provider-preventable services as
termination of pregnancy ends. defined in § 447.26(b).
(viii) Any individual whose medical (b) Applicability. Except as permitted
assistance for services furnished in an under § 447.52(d) (targeted cost sharing),
institution, or at state option in a the agency may not exempt additional
home and community-based setting, is individuals from cost sharing obliga-
reduced by amounts reflecting avail- tions that apply generally to the popu-
able income other than required for lation at issue.
personal needs. (c) Payments to providers. (1) Except as
(ix) An individual receiving hospice provided under paragraphs (c)(2) and
care, as defined in section 1905(o) of the (c)(3) of this section, the agency must
Act. reduce the payment it makes to a pro-
(x) An Indian who is eligible to re- vider by the amount of a beneficiary’s
ceive or has received an item or service cost sharing obligation, regardless of
454
whether the provider has collected the family’s incurred premiums and cost
payment or waived the cost sharing. sharing through an effective mecha-
(2) For items and services provided to nism that does not rely on beneficiary
Indians who are exempt from cost shar- documentation.
ing under paragraph (a)(1)(x) of this (3) The agency must inform bene-
section, the agency may not reduce the ficiaries and providers of the bene-
payment it makes to a provider, in- ficiaries aggregate limit and notify
cluding an Indian health care provider, beneficiaries and providers when a ben-
by the amount of cost sharing that will eficiary has incurred out-of-pocket ex-
otherwise be due from the Indian. penses up to the aggregate family limit
(3) For those providers that the agen- and individual family members are no
cy reimburses under Medicare reason- longer subject to cost sharing for the
able cost reimbursement principles, in remainder of the family’s current
accordance with subpart B of this part, monthly or quarterly cap period.
an agency may increase its payment to (4) The agency must have a process in
offset uncollected cost sharing charges place for beneficiaries to request a re-
that are bad debts of providers. assessment of their family aggregate
(d) Payments to managed care organiza- limit if they have a change in cir-
tions. If the agency contracts with a cumstances or if they are being termi-
managed care organization, the agency nated for failure to pay a premium.
must calculate its payments to the or- (5) Nothing in paragraph (f) shall pre-
ganization to include cost sharing es- clude the agency from establishing ad-
tablished under the state plan, for ditional aggregate limits, including
beneficiaries not exempt from cost but not limited to a monthly limit on
sharing under paragraph (a) of this sec- cost sharing charges for a particular
tion, regardless of whether the organi- service.
zation imposes the cost sharing on its
recipient members or the cost sharing § 447.57 Beneficiary and public notice
is collected. requirements.
(e) Payments to states. No FFP in the (a) The agency must make available
state’s expenditures for services is a public schedule describing current
available for— premiums and cost sharing require-
(1) Any premiums or cost sharing ments containing the following infor-
amounts that recipients should have mation:
paid under §§ 447.52 through 447.55 (ex- (1) The group or groups of individuals
cept for amounts that the agency pays who are subject to premiums and/or
as bad debts of providers under para- cost sharing and the current amounts;
graph (c)(3) of this section; and (2) Mechanisms for making payments
(2) Any amounts paid by the agency for required premiums and cost sharing
on behalf of ineligible individuals, charges;
whether or not the individual had paid (3) The consequences for an applicant
any required premium, except for or recipient who does not pay a pre-
amounts for premium assistance to ob- mium or cost sharing charge;
tain coverage for eligible individuals (4) A list of hospitals charging cost
through family coverage that may in- sharing for non-emergency use of the
clude ineligible individuals when au- emergency department; and
thorized in the approved state plan. (5) A list of preferred drugs or a
(f) Aggregate limits. (1) Medicaid pre- mechanism to access such a list, in-
miums and cost sharing incurred by all cluding the agency Web site.
individuals in the Medicaid household (b) The agency must make the public
may not exceed an aggregate limit of 5 schedule available to the following in a
percent of the family’s income applied manner that ensures that affected ap-
on either a quarterly or monthly basis, plicants, beneficiaries, and providers
as specified by the agency. are likely to have access to the notice:
(2) If the state adopts premiums or (1) Beneficiaries, at the time of their
cost sharing rules that could place enrollment and reenrollment after a
beneficiaries at risk of reaching the ag- redetermination of eligibility, and
gregate family limit, the state plan when premiums, cost sharing charges,
must indicate a process to track each or aggregate limits are revised, notice
455
§ 447.88 42 CFR Ch. IV (10–1–17 Edition)
to beneficiaries must be in accordance vidual, if other than presumptively eli-

with § 435.905(b) of this chapter; gible.
(2) Applicants, at the time of applica- (3) A State may elect to delay sub-
tion; mission of claims for payments of sec-
(3) All participating providers; and tion 1920A presumptive eligibility ex-
(4) The general public. penditures until after the actual eligi-
(c) Prior to submitting to the Centers bility determination (if any) is made
for Medicare & Medicaid Services for and, at that time identify such expend-
approval a state plan amendment itures based on the actual eligibility
(SPA) to establish or substantially status of individuals if other than pre-
modify existing premiums or cost shar- sumptively eligible. At that time, the
ing, or change the consequences for State would, as appropriate, recat-
non-payment, the agency must provide egorize the medical assistance expendi-
the public with advance notice of the tures made during the section 1920A
SPA, specifying the amount of pre- presumptive eligibility period based on
miums or cost sharing and who is sub- the results of the actual eligibility de-
ject to the charges. The agency must termination, and claim them appro-
provide a reasonable opportunity to priately.
comment on such SPAs. The agency
must submit documentation with the [65 FR 33622, May 24, 2000]
SPA to demonstrate that these re-
quirements were met. If premiums or § 447.90 FFP: Conditions related to
cost sharing is substantially modified pending investigations of credible
allegations of fraud against the
during the SPA approval process, the Medicaid program.
agency must provide additional public
notice. (a) Basis and purpose. This section
implements section 1903(i)(2)(C) of the
§ 447.88 Options for claiming FFP pay- Act which prohibits payment of FFP
ment for section 1920A presumptive with respect to items or services fur-
eligibility medical assistance pay- nished by an individual or entity with
ments.
respect to which there is pending an in-
(a) The FMAP rate for medical as- vestigation of a credible allegation of
sistance payments made available to a fraud except under specified cir-
child during a presumptive eligibility cumstances.
period under section 1920A of the Act is (b) Denial of FFP. No FFP is available
the regular FMAP under title XIX, with respect to any amount expended
based on the category of medical as- for an item or service furnished by any
sistance; that is, the enhanced FMAP individual or entity to whom a State
is not available for section 1920A pre- has failed to suspend payments in
sumptive eligibility expenditures. whole or part as required by § 455.23 of
(b) States have the following 3 op- this chapter unless—
tions for identifying Medicaid section
(1) The item or service is furnished as
1920A presumptive eligibility expendi-
an emergency item or service, but not
tures and the application of payments
including items or services furnished in
for those expenditures:
an emergency room of a hospital; or
(1) A State may identify Medicaid
(2) The State determines and docu-
section 1920A presumptive eligibility
expenditures in the quarter expended ments that good cause as specified at
with no further adjustment based on § 455.23(e) or (f) of this chapter exists
the results of a subsequent actual eligi- not to suspend such payments, to sus-
bility determination (if any). pend payments only in part, or to dis-
(2) A State may identify Medicaid continue a previously imposed pay-
section 1920A presumptive eligibility ment suspension.
expenditures in the quarter expended [76 FR 5965, Feb. 2, 2011]
but may adjust reported expenditures

based on results of the actual eligi-
bility determination (if any) to reflect
the actual eligibility status of the indi-
456
Subpart B—Payment Methods: such as provider payment rates, as well

General Provisions as the items specified in this section.
The access monitoring review plan
§ 447.200 Basis and purpose. must specify data elements that will
This subpart prescribes State plan re- support the state’s analysis of whether
quirements for setting payment rates beneficiaries have sufficient access to
to implement, in part, section care. The plan and monitoring analysis
1902(a)(30) of the Act, which requires will consider:
that payments for services be con- (i) The extent to which beneficiary
sistent with efficiency, economy, and needs are fully met;
quality of care. (ii) The availability of care through
enrolled providers to beneficiaries in
[46 FR 48560, Oct. 1, 1981]
each geographic area, by provider type
§ 447.201 State plan requirements. and site of service;
(iii) Changes in beneficiary utiliza-
(a) A State plan must provide that
tion of covered services in each geo-
the requirements in this subpart are
graphic area.
met.
(b) The plan must describe the policy (iv) The characteristics of the bene-
and the methods to be used in setting ficiary population (including consider-
payment rates for each type of service ations for care, service and payment
included in the State’s Medicaid pro- variations for pediatric and adult popu-
gram. lations and for individuals with disabil-
ities); and
§ 447.202 Audits. (v) Actual or estimated levels of pro-
The Medicaid agency must assure ap- vider payment available from other
propriate audit of records if payment is payers, including other public and pri-
based on costs of services or on a fee vate payers, by provider type and site
plus cost of materials. of service.
(2) Access monitoring review plan bene-
§ 447.203 Documentation of access to ficiary and provider input. The access
care and service payment rates. monitoring review plan must include
(a) The agency must maintain docu- an analysis of data and the state’s con-
mentation of payment rates and make clusion of the sufficiency of access to
it available to HHS upon request. care that will consider relevant pro-
(b) In consultation with the medical vider and beneficiary information, in-
care advisory committee under § 431.12 cluding information obtained through
of this chapter, the agency must de- public rate-setting processes, the med-
velop a medical assistance access mon- ical care advisory committees estab-
itoring review plan and update it, in lished under § 431.12 of this chapter, the
accordance with the timeline estab- processes described in paragraph (b)(7)
lished in paragraph (b)(5) of this sec- of this section, and other mechanisms
tion. The plan must be published and (such as letters from providers and
made available to the public for review beneficiaries to State or Federal offi-
and comment for a period of no less cials), which describe access to care
than 30 days, prior to being finalized concerns or suggestions for improve-
and submitted to CMS for review. ment in access to care.
(1) Access monitoring review plan data (3) Access monitoring review plan com-
requirements. The access monitoring re- parative payment rate review. For each
view plan must include an access moni- of the services reviewed, by the pro-
toring analysis that includes: Data vider types and sites of service (e.g.,
sources, methodologies, baselines, as- primary care physicians in office set-
sumptions, trends and factors, and tings) described within the access mon-
thresholds that analyze and inform de- itoring analysis, the access monitoring
terminations of the sufficiency of ac- review plan must include an analysis of
cess to care which may vary by geo- the percentage comparison of Medicaid
graphic location within the state and payment rates to other public (includ-
will be used to inform state policies af- ing, as practical, Medicaid managed
fecting access to Medicaid services care rates) and private health insurer
457
§ 447.203 42 CFR Ch. IV (10–1–17 Edition)
payment rates within geographic areas (C) Behavioral health services (in-
of the state. cluding mental health and substance
(4) Access monitoring review plan use disorder).
standards and methodologies. The access (D) Pre- and post-natal obstetric
monitoring review plan and analysis services including labor and delivery.
must, at a minimum, include: The spe- (E) Home health services.
cific measures that the state uses to (F) Any additional types of services
analyze access to care (such as, but not for which a review is required under
limited to: Time and distance stand- paragraph (b)(6) of this section;
ards, providers participating in the (G) Additional types of services for
Medicaid program, providers with open which the state or CMS has received a
panels, providers accepting new Med- significantly higher than usual volume
icaid beneficiaries, service utilization of beneficiary, provider or other stake-
patterns, identified beneficiary needs, holder access complaints for a geo-
data on beneficiary and provider feed- graphic area, including complaints re-
back and suggestions for improvement, ceived through the mechanisms for
the availability of telemedicine and beneficiary input consistent with para-
telehealth, and other similar meas- graph (b)(7) of this section; and
ures), how the measures relate to the (H) Additional types of services se-
access monitoring review plan de- lected by the state.
scribed in paragraph (b)(1) of this sec- (6) Special provisions for proposed pro-
tion, baseline and updated data associ- vider rate reductions or restructuring—(i)
ated with the measures, any issues Compliance with access requirements. The
with access that are discovered as a re- State shall submit with any State plan
sult of the review, and the state agen- amendment that proposes to reduce
cy’s recommendations on the suffi- provider payment rates or restructure
ciency of access to care based on the provider payments in circumstances
review. In addition, the access moni- when the changes could result in di-
toring review plan must include proce- minished access, an access review, in
dures to periodically monitor access accordance with the access monitoring
for at least 3 years after the implemen- review plan, for each service affected
tation of a provider rate reduction or by the State plan amendments as de-
restructuring, as discussed in para- scribed under paragraph (b)(1) of this
graph (b)(6)(ii) of this section. section completed within the prior 12
(5) Access monitoring review plan time- months. That access review must dem-
frame. Beginning October 1, 2016 the onstrate sufficient access for any serv-
State agency must: ice for which the state agency proposes
to reduce payment rates or restructure
(i) Develop its access monitoring re-
provider payments to demonstrate
view plan by October 1 of the first re-
compliance with the access require-
view year, and update this plan by Oc-
ments at section 1902(a)(30)(A) of the
tober 1 of each subsequent review pe-
Act.
riod;
(ii) Monitoring procedures. In addition
(ii) For all of the following, complete
to the analysis conducted through
an analysis of the data collected using paragraphs (b)(1) through (4) of this
the methodology specified in the access section that demonstrates access to
monitoring review plan in paragraphs care is sufficient as of the effective
(b)(1) through (4) of this section, with a date of the State plan amendment, a
separate analysis for each provider state must establish procedures in its
type and site of service furnishing the access monitoring review plan to mon-
type of service at least once every 3 itor continued access to care after im-
years: plementation of state plan service rate
(A) Primary care services (including reduction or payment restructuring.
those provided by a physician, FQHC, The frequency of monitoring should be
clinic, or dental care).
informed by the public review de-

(B) Physician specialist services (for scribed in paragraph (b) of this section
example, cardiology, urology, radi- and should be conducted no less fre-
ology). quently than annually.
458
(A) The procedures must provide for (ii) The resulting improvements in
a periodic review of state determined access must be measured and sustain-
and clearly defined measures, baseline able.
data, and thresholds that will serve to [43 FR 45253, Sept. 29, 1978, as amended at 80
demonstrate continued sustained serv- FR 67611, Nov. 2, 2015; 81 FR 21480, Apr. 12,
ice access, consistent with efficiency, 2016]
economy, and quality of care.
(B) The monitoring procedures must § 447.204 Medicaid provider participa-
be in place for a period of at least 3 tion and public process to inform
years after the effective date of the access to care.
state plan amendment that authorizes (a) The agency’s payments must be
the payment reductions or restruc- consistent with efficiency, economy,
turing. and quality of care and sufficient to en-
(7) Mechanisms for ongoing beneficiary list enough providers so that services
and provider input. (i) States must have under the plan are available to bene-
ongoing mechanisms for beneficiary ficiaries at least to the extent that
and provider input on access to care those services are available to the gen-
(through hotlines, surveys, ombuds- eral population. In reviewing payment
man, review of grievance and appeals sufficiency, states are required to con-
data, or another equivalent mecha- sider, prior to the submission of any
nisms), consistent with the access re- state plan amendment that proposes to
quirements and public process de- reduce or restructure Medicaid service
scribed in § 447.204. payment rates:
(ii) States should promptly respond (1) The data collected, and the anal-
to public input through these mecha- ysis performed, under § 447.203.
nisms citing specific access problems, (2) Input from beneficiaries, pro-
with an appropriate investigation, viders and other affected stakeholders
analysis, and response. on beneficiary access to the affected
(iii) States must maintain a record of services and the impact that the pro-
data on public input and how the state posed rate change will have, if any, on
responded to this input. This record continued service access. The state
should maintain a record of the public
will be made available to CMS upon re-
input and how it responded to such
quest.
input.
(8) Addressing access questions and re-
(b) The state must submit to CMS
mediation of inadequate access to care.
with any such proposed state plan
When access deficiencies are identified,
amendment affecting payment rates:
the state must, within 90 days after
(1) Its most recent access monitoring
discovery, submit a corrective action
review plan performed under
plan with specific steps and timelines
§ 447.203(b)(6) for the services at issue;
to address those issues. While the cor-
(2) An analysis of the effect of the
rective action plan may include longer-
change in payment rates on access; and
term objectives, remediation of the ac-
(3) A specific analysis of the informa-
cess deficiency should take place with-
tion and concerns expressed in input
in 12 months.
from affected stakeholders.
(i) The state’s corrective actions may
(c) CMS may disapprove a proposed
address the access deficiencies through
state plan amendment affecting pay-
a variety of approaches, including, but
ment rates if the state does not include
not limited to: Increasing payment
in its submission the supporting docu-
rates, improving outreach to providers,
mentation described in paragraph (b) of
reducing barriers to provider enroll- this section, for failure to document
ment, proving additional transpor- compliance with statutory access re-
tation to services, providing for tele- quirements. Any such disapproval
medicine delivery and telehealth, or would follow the procedures described
improving care coordination. at part 430 Subpart B of this title.

(d) To remedy an access deficiency,
CMS may take a compliance action
459
§ 447.205 42 CFR Ch. IV (10–1–17 Edition)
using the procedures described at (iii) The newspaper of widest circula-

§ 430.35 of this chapter. tion in the State, if there is no city
with a population of 50,000 or more.
[80 FR 67612, Nov. 2, 2015]
(iv) A Web site developed and main-
§ 447.205 Public notice of changes in tained by the single State agency or
Statewide methods and standards other responsible State agency that is
for setting payment rates. accessible to the general public, pro-
vided that the Web site:
(a) When notice is required. Except as (A) Is clearly titled and can be easily
specified in paragraph (b) of this sec- reached from a hyperlink included on
tion, the agency must provide public Web sites that provide general infor-
notice of any significant proposed mation to beneficiaries and providers,
change in its methods and standards and included on the State-specific page
for setting payment rates for services. on the Federal Medicaid Web site.
(b) When notice is not required. Notice (B) Is updated for bulletins on a reg-
is not required if— ular and known basis (for example, the
(1) The change is being made to con- first day of each month), and the public
form to Medicare methods or levels of notice is issued as part of the regular
reimbursement; update;
(2) The change is required by court (C) Includes the actual date it was re-
order; or leased to the public on the Web site; or
(3) The change is based on changes in (D) Complies with national standards
wholesalers’ or manufacturers’ prices to ensure access to individuals with
of drugs or materials, if the agency’s disabilities; and
reimbursement system is based on ma- (E) Includes protections to ensure
terial cost plus a professional fee. that the content of the issued notice is
(c) Content of notice. The notice not modified after the initial publica-
must— tion and is maintained on the Web site
(1) Describe the proposed change in for no less than a 3-year period.
methods and standards; [46 FR 58680, Dec. 3, 1981; 47 FR 8567, Mar. 1,
(2) Give an estimate of any expected 1982, as amended at 48 FR 56057, Dec. 19, 1983;
increase or decrease in annual aggre- 80 FR 67612, Nov. 2, 2015]
gate expenditures;
(3) Explain why the agency is chang- Subpart C—Payment for Inpatient
ing its methods and standards; Hospital and Long-Term Care
(4) Identify a local agency in each Facility Services
county (such as the social services
agency or health department) where
SOURCE: 46 FR 47971, Sept. 30, 1981, unless
copies of the proposed changes are
otherwise noted.
available for public review;
(5) Give an address where written § 447.250 Basis and purpose.
comments may be sent and reviewed by
(a) This subpart implements section
the public; and
1902(a)(13)(A) of the Act, which requires
(6) If there are public hearings, give that the State plan provide for pay-
the location, date and time for hear- ment for hospital and long-term care
ings or tell how this information may facility services through the use of
be obtained. rates that the State finds, and makes
(d) Publication of notice. The notice assurances satisfactory to the Sec-
must— retary, are reasonable and adequate to
(1) Be published before the proposed meet the costs that must be incurred
effective date of the change; and by efficiently and economically oper-
(2) Appear as a public announcement ated facilities to provide services in
in one of the following publications: conformity with State and Federal
(i) A State register similar to the laws, regulations, and quality and safe-
FEDERAL REGISTER. ty standards.

(ii) The newspaper of widest circula- (b) Section 447.253(a)(2) implements
tion in each city with a population of section 1902(a)(30) of the Act, which re-
50,000 or more. quires that payments be consistent
460
with efficiency, economy, and quality § 447.253 Other requirements.

of care; (a) State assurances. In order to re-
(c) Sections 447.253 (c) and (d) imple- ceive CMS approval of a State plan
ment sections 1902(a)(13)(B) and change in payment methods and stand-
1902(a)(13)(C) of the Act, which require ards, the Medicaid agency must make
a State Medicaid agency to make cer- assurances satisfactory to CMS that
tain assurances to the Secretary re- the requirements set forth in para-
garding increases in payments result- graphs (b) through (i) of this section
ing solely from changes in ownerships are being met, must submit the related
of hospitals, NFs, and ICFs/IID. information required by § 447.255 of this
(d) Section 447.271 implements sec- subpart, and must comply with all
tion 1903(i)(3) of the Act, which re- other requirements of this subpart.
quires that payments for inpatient hos- (b) Findings. Whenever the Medicaid
pital services not exceed the hospital’s agency makes a change in its methods
customary charges. and standards, but not less often than
(e) Section 447.280 implements sec- annually, the agency must make the
tion 1913(b) of the Act, which concerns following findings:
reimbursement for long-term care serv- (1) Payment rates. (i) The Medicaid
ices furnished by swing-bed hospitals. agency pays for inpatient hospital
services and long-term care facility
[48 FR 56057, Dec. 19, 1983, as amended at 57 services through the use of rates that
FR 43921, Sept. 23, 1992] are reasonable and adequate to meet
the costs that must be incurred by effi-
PAYMENT RATES ciently and economically operated pro-
viders to provide services in con-
formity with applicable State and Fed-
For the purposes of this subpart— eral laws, regulations, and quality and
Long-term care facility services means safety standards.
intermediate care facility services for (ii) With respect to inpatient hospital
Individuals with Intellectual Disabil- services—
ities (ICF/IID) and nursing facility (NF) (A) The methods and standards used
services. to determine payment rates take into
Provider means an institution that account the situation of hospitals
furnishes inpatient hospital services or which serve a disproportionate number
an institution that furnishes long-term of low income patients with special
care facility services. needs;
(B) If a State elects in its State plan
[46 FR 47971, Sept. 30, 1981, as amended at 54 to cover inappropriate level of care
FR 5359, Feb. 2, 1989; 56 FR 48867, Sept. 26, services (that is, services furnished to
1991] hospital inpatients who require a lower
covered level of care such as skilled
nursing or intermediate care services)
(a) The plan must provide that the under conditions similar to those de-
requirements of this subpart are met. scribed in section 1861(v)(1)(G) of the
(b) The plan must specify comprehen- Act, the methods and standards used to
sively the methods and standards used determine payment rates must specify
by the agency to set payment rates in that the payments for this type of care
a manner consistent with § 430.10 of this must be made at rates lower than those
chapter. for inpatient hospital level of care
(c) If the agency chooses to apply the services, reflecting the level of care ac-
cost limits established under Medicare tually received, in a manner consistent
(see § 413.30 of this chapter) on an indi- with section 1861(v)(1)(G) of the Act;
vidual provider basis, the plan must and
specify this requirement. (C) The payment rates are adequate
to assure that beneficiaries have rea-
(Approved by the Office of Management and
sonable access, taking into account ge-

Budget under control number 0938–0193) ographic location and reasonable travel
[48 FR 56058, Dec. 19, 1983, as amended at 51 time, to inpatient hospital services of
FR 34833, Sept. 30, 1986] adequate quality.
461
§ 447.253 42 CFR Ch. IV (10–1–17 Edition)
(iii) With respect to nursing facility under §§ 413.130, 413.134, 413.153 and
services— 413.157 of this chapter, insofar as these
(A) Except for preadmission screen- sections affect payment for deprecia-
ing for individuals with mental illness tion, interest on capital indebtedness,
and Intellectual Disability under return on equity capital (if applicable),
§ 483.20(f) of this Chapter, the methods acquisition costs for which payments
and standards used to determine pay- were previously made to prior owners,
ment rates take into account the costs and the recapture of depreciation.
of complying with the requirements of (2) For transfers on or after October
part 483 subpart B of this chapter; 1, 1985, the State’s methods and stand-
(B) The methods and standards used ards must provide that the valuation of
to determine payment rates provide for capital assets for purposes of deter-
an appropriate reduction to take into mining payment rates for NFs and
account the lower costs (if any) of the ICFs/IID is not to increase (as meas-
facility for nursing care under a waiver ured from the date of acquisition by
of the requirement in § 483.35(e) of this the seller to the date of the change of
Chapter to provide licensed nurses on a ownership) solely as a result of a
24-hour basis; change of ownership, by more than the
(C) The State establishes procedures lesser of—
under which the data and methodology (i) One-half of the percentage in-
used in establishing payment rates are crease (as measured from the date of
made available to the public. acquisition by the seller to the date of
(2) Upper payment limits. The agency’s the change of ownership, or, if nec-
proposed payment rate will not exceed essary, as extrapolated retrospectively
the upper payment limits as specified by the Secretary) in the Dodge con-
in § 447.272. struction index applied in the aggre-
(c) Changes in ownership of hospitals. gate with respect to those facilities
In determining payment when there that have undergone a change of own-
has been a sale or transfer of the assets ership during the fiscal year; or
of a hospital, the State’s methods and (ii) One-half of the percentage in-
standards must provide that payment crease (as measured from the date of
rates can reasonably be expected not to acquisition by the seller to the date of
increase in the aggregate solely as a re- the change of ownership) in the Con-
sult of changes of ownership, more sumer Price Index for All Urban Con-
than the payments would increase sumers (CPI-U) (United States city av-
under Medicare under §§ 413.130, 413.134, erage) applied in the aggregate with re-
413.153, and 413.157 of this chapter, inso- spect to those facilities that have un-
far as these sections affect payments dergone a change of ownership during
for depreciation, interest on capital in- the fiscal year.
debtedness, return on equity capital (if (e) Provider appeals. The Medicaid
applicable), acquisition costs for which agency must provide an appeals or ex-
payments were previously made to ception procedure that allows indi-
prior owners, and the recapture of de- vidual providers an opportunity to sub-
preciation. mit additional evidence and receive
(d) Changes in ownership of NFs and prompt administrative review, with re-
ICFs/IID. In determining payment when spect to such issues as the agency de-
there has been a sale or transfer of as- termines appropriate, of payment
sets of an NF or ICF/IID, the State’s rates.
methods and standards must provide (f) Uniform cost reporting. The Med-
the following depending upon the date icaid agency must provide for the filing
of the transfer. of uniform cost reports by each partici-
(1) For transfers on or after July 18, pating provider.
1984 but before October 1, 1985, the (g) Audit requirements. The Medicaid
State’s methods and standards must agency must provide for periodic audits
provide that payment rates can reason- of the financial and statistical records
ably be expected not to increase in the of participating providers.

aggregate, solely as the result of a (h) Public notice. The Medicaid agency
change in ownership, more than pay- must provide that it has complied with
ments would increase under Medicare the public notice requirements in
462
§ 447.205 of this part when it is pro- proval on the acceptability of the Med-
posing significant changes to its meth- icaid agency’s assurances that the re-
ods or standards for setting payment quirements of § 447.253 have been met,
rates for inpatient hospital or LTC fa- and the State’s compliance with the
cility services. other requirements of this subpart.
(i) Rates paid. The Medicaid agency (b) Time limit. CMS will send a notice
must pay for inpatient hospital and to the agency of its determination as
long term care services using rates de- to whether the assurances regarding a
termined in accordance with methods State plan amendment are acceptable
and standards specified in an approved within 90 days of the date CMS receives
State plan. the assurances described in § 447.253,
[48 FR 56057, Dec. 19, 1983, as amended at 52 and the related information described
FR 28147, July 28, 1987; 54 FR 5359, Feb. 2, in § 447.255 of this subpart. If CMS does
1989; 57 FR 43921, Sept. 23, 1992; 81 FR 68847, not send a notice to the agency of its
Oct. 4, 2016]
determination within this time limit
§ 447.255 Related information. and the provisions in paragraph (a) of
this section are met, the assurances
The Medicaid agency must submit,
and/or the State plan amendment will
with the assurances described in
be deemed accepted and approved.
§ 447.253(a), the following information:
(a) The amount of the estimated av- (c) Effective date. A State plan amend-
erage proposed payment rate for each ment that is approved will become ef-
type of provider (hospital, ICF/IID, or fective not earlier than the first day of
nursing facility), and the amount by the calendar quarter in which an ap-
which that estimated average rate in- provable amendment is submitted in
creased or decreased relative to the av- accordance with §§ 430.20 of this chapter
erage payment rate in effect for each and 447.253.
type or provider for the immediately [48 FR 56058, Dec. 19, 1983, as amended at 52
preceding rate period; FR 28147, July 28, 1987]
(b) An estimate of the short-term
and, to the extent feasible, long-term FEDERAL FINANCIAL PARTICIPATION
effect the change in the estimated av-
erage rate will have on— § 447.257 FFP: Conditions relating to
(1) The availability of services on a institutional reimbursement.
Statewide and geographic area basis; FFP is not available for a State’s ex-
(2) The type of care furnished; penditures for hospital inpatient or
(3) The extent of provider participa-
long-term care facility services that
tion; and
are in excess of the amounts allowable
(4) The degree to which costs are cov-
under this subpart.
ered in hospitals that serve a dis-
proportionate number of low income [52 FR 28147, July 28, 1987]
patients with special needs.
UPPER LIMITS
FR 5359, Feb. 2, 1989; 56 FR 48867, Sept. 26,
1991; 57 FR 43924, Sept. 23, 1992; 57 FR 46431,
§ 447.271 Upper limits based on cus-
Oct. 8, 1992]
tomary charges.
(a) Except as provided in paragraph
§ 447.256 Procedures for CMS action (b) of this section, the agency may not
on assurances and State plan pay a provider more for inpatient hos-
amendments.
pital services under Medicaid than the
(a) Criteria for approval. (1) CMS ap- provider’s customary charges to the
proval action on State plans and State general public for the services.
plan amendments, is taken in accord- (b) The agency may pay a public pro-
ance with subpart B of part 430 of this vider that provides services free or at a
chapter and sections 1116, 1902(b) and nominal charge at the same rate that
1915(f) of the Act. would be used if the provider charges

(2) In the case of State plan and plan
were equal to or greater than its costs.
amendment changes in payment meth-
ods and standards, CMS bases its ap- [75 FR 73975, Nov. 30, 2010]
463
§ 447.272 42 CFR Ch. IV (10–1–17 Edition)
§ 447.272 Inpatient services: Applica- (d) Compliance dates. Except as per-

tion of upper payment limits. mitted under paragraph (e) of this sec-
(a) Scope. This section applies to tion, a State must comply with the
rates set by the agency to pay for inpa- upper payment limit described in para-
tient services furnished by hospitals, graph (b) of this section by one of the
NFs, and ICFs/IID within one of the fol- following dates:
lowing categories: (1) For non-State government owned
(1) State government-owned or oper- or operated hospitals,—March 19, 2002.
ated facilities (that is, all facilities (2) For all other facilities—March 13,
that are either owned or operated by 2001.
the State). [66 FR 3175, Jan. 12, 2001, as amended at 66
(2) Non-State government-owned or FR 46399, Sept. 5, 2001; 67 FR 2610, Jan. 18,
operated facilities (that is, all govern- 2002; 72 FR 29834, May 29, 2007; 75 FR 73975,
ment facilities that are neither owned Nov. 30, 2010; 77 FR 31512, May 29, 2012]
nor operated by the State).
(3) Privately-owned and operated fa- SWING-BED HOSPITALS
cilities.
§ 447.280 Hospital providers of NF
(b) General rules. (1) Upper payment services (swing-bed hospitals).
limit refers to a reasonable estimate of
the amount that would be paid for the (a) General rule. If the State plan pro-
services furnished by the group of fa- vides for NF services furnished by a
cilities under Medicare payment prin- swing-bed hospital, as specified in
ciples in subchapter B of this chapter. §§ 440.40(a) and 440.150(f) of this chapter,
(2) Except as provided for in para- the methods and standards used to de-
graph (c) of this section, aggregate termine payment rates for routine NF
Medicaid payments to a group of facili- services must—
ties within one of the categories de- (1) Provide for payment at the aver-
scribed in paragraph (a) of this section age rate per patient day paid to NFs, as
may not exceed the upper payment applicable, for routine services fur-
limit described in paragraph (b)(1) of nished during the previous calendar
this section. year; or
(c) Exceptions—(1) Indian Health Serv- (2) Meet the State plan and payment
ices and tribal facilities. The limitation requirements described in this subpart,
in paragraph (b) of this section does as applicable.
not apply to Indian Health Services fa- (b) Application of the rule. The pay-
cilities and tribal facilities that are ment methodology used by a State to
funded through the Indian Self-Deter- set payment rates for routine NF serv-
mination and Education Assistance ices must apply to all swing-bed hos-
Act (Pub. L. 93–638). pitals in the State.
(2) Disproportionate share hospitals. [59 FR 56237, Nov. 10, 1994]
The limitation in paragraph (b) of this
section does not apply to payment ad-
justments made under section 1923 of
Subpart D [Reserved]
the Act that are made under a State
plan to hospitals found to serve a dis- Subpart E—Payment Adjustments
proportionate number of low-income for Hospitals That Serve a Dis-
patients with special needs as provided proportionate Number of Low-
in section 1902(a)(13)(A)(iv) of the Act. Income Patients
Disproportionate share hospital (DSH)
payments are subject to the following SOURCE: 57 FR 55143, Nov. 24, 1992, unless
limits: otherwise noted.
(i) The aggregate DSH limit using
the Federal share of the DSH limit § 447.294 Medicaid disproportionate
under section 1923(f) of the Act. share hospital (DSH) allotment re-
(ii) The hospital-specific DSH limit ductions for Federal fiscal year
2014 and Federal fiscal year 2015.
in section 1923(g) of the Act.

(iii) The aggregate DSH limit for in- (a) Basis and purpose. This section
stitutions for mental disease (IMDs) sets forth the DSH health reform meth-
under section 1923(h) of the Act. odology (DHRM) for calculating State-
464
specific annual DSH allotment reduc- results in a smaller percentage DSH al-
tions from Federal fiscal year 2014 and lotment reduction on low DSH States.
Federal fiscal year 2015 as required Low DSH State means a State that
under section 1923(f) of the Act. meets the criterion described in sec-
(b) Definitions. For purposes of this tion 1923(f)(5)(B) of the Act.
section— Mean HUF reduction percentage is de-
Aggregate DSH allotment reductions termined by calculating the quotient of
mean the amounts identified in section each state’s HUF reduction amount di-
1923(f)(7)(A)(ii) of the Act. vided by its unreduced DSH allotment,
Budget neutrality factor (BNF) is a fac-
then calculating the mean for each
tor incorporated in the DHRM that
state group, then converting the result
takes into account the extent to which
the DSH allotment for a State was in- to a percentage.
cluded in the budget neutrality cal- Medicaid inpatient utilization rate
culation for a coverage expansion ap- (MIUR) means the rate defined in sec-
proved under section 1115 as of July 31, tion 1923(b)(2) of the Act.
2009. Non-high Medicaid volume hospital
DSH payment means the amount re- means a disproportionate share hos-
ported in accordance with pitals that does not meet the require-
§ 447.299(c)(17). ments of section 1923(b)(1)(A) of the
Effective DSH allotment means the Act.
amount of DSH allotment determined State group means similarly situated
by subtracting the State-specific DSH States that are collectively identified
allotment reduction from a State’s un- by DHRM as defined in § 447.294(e)(1).
reduced DSH allotment. State-specific DSH allotment reduction
High level of uncompensated care factor means the amount of annual DSH al-
(HUF) is a factor incorporated in the lotment reduction for a particular
DHRM that results in larger percent- State as determined by the DHRM.
age DSH allotment reduction for
Total Medicaid cost means the amount
States that do not target DSH pay-
ments on hospitals with high levels of for each hospital reported in accord-
uncompensated care. ance with § 447.299(c)(10).
High Medicaid volume hospital means a Total population means the 1-year es-
disproportionate share hospital that timates data of the total non-institu-
has an MIUR at least one standard de- tionalized population identified by
viation above the mean MIUR for hos- United States Census Bureau’s Amer-
pitals receiving Medicaid payments in ican Community Survey.
the State. Total uninsured cost means the
High uncompensated care hospital amount reported for each DSH in ac-
means a hospital that exceeds the cordance with § 447.299(c)(14).
mean ratio of uncompensated care Uncompensated care cost means the
costs to total Medicaid and uninsured amount reported for each hospital in
inpatient and outpatient hospital serv- accordance with § 447.299(c)(16).
ice costs for all disproportionate share Uncompensated care level means a hos-
hospitals within a state. pital’s uncompensated care cost di-
High volume of Medicaid inpatients fac- vided by the sum of its total Medicaid
tor (HMF) is a factor incorporated in cost and its total uninsured cost.
the DHRM that results in larger per-
Unreduced DSH allotment means the
centage DSH allotment reduction for
States that do not target DSH pay- DSH allotment calculated under sec-
ments on hospitals with high volumes tion 1923(f) of the Act prior to annual
of Medicaid inpatients. reductions under this section.
Hospital with high volumes of Medicaid Uninsured percentage factor (UPF) is a
inpatients means a disproportionate factor incorporated in the DHRM that
share hospital that meets the require- results in larger percentage DSH allot-
ment reductions for States that have
ments of section 1923(b)(1)(A) of the

Act. the lowest percentages of uninsured in-
Low DSH adjustment factor (LDF) is a dividuals.
factor incorporated in the DHRM that
465
§ 447.294 42 CFR Ch. IV (10–1–17 Edition)
Uninsured population means 1-year es- (3) Low DSH adjustment factor (LDF)
timates data of the number of unin- calculation. CMS will calculate the LDF
sured identified by United States Cen- by the following:
sus Bureau’s American Community (i) Dividing each State’s preliminary
Survey. unreduced DSH allotment by their re-
(c) Aggregate DSH allotment reduction spective total Medicaid service expend-
amounts. The aggregate DSH allotment itures.
reduction amounts are as provided in (ii) Calculating for each State group
section 1923(f)(7)(A)(ii) of the Act. the mean of all values determined in
(d) State data submission requirements. paragraph (e)(3)(i) of this section.
States are required to submit the mean (iii) Dividing the value of paragraph
MIUR, determined in accordance with (e)(3)(ii) of this section for the low-DSH
section 1923(b)(1)(A) of the Act, for all State group by the value of paragraph
hospitals receiving Medicaid payments (e)(3)(ii) for the non-low DSH state
in the State and the value of one stand- group.
ard deviation above such mean. States (4) LDF application. CMS will deter-
must provide the data for State Plan mine the final aggregate DSH allot-
Rate Year (SPRY) 2008, SPRY 2009, ment reduction allocation for each
SPRY 2010, and SPRY 2011 by June 30, State group through application of the
2014. States must provide this data for LDF by the following:
each subsequent SPRY to CMS by June (i) Multiplying the LDF by the aggre-
30 of each year. To determine which gate DSH allotment reduction for the
SPRY’s data the state must submit, low DSH State group.
subtract 3 years from the calendar year (ii) Utilizing the value of paragraph
in which the data is due. For example, (e)(4)(i) of this section as the aggregate
SPRY 2012 data must be submitted to DSH allotment reduction allocated to
CMS by June 30, 2015. the low DSH State group.
(e) DHRM methodology. Section (iii) Subtracting the value of para-
1923(f)(7) of the Act requires aggregate graph (e)(4)(ii) of this section from the
annual reduction amounts for FY 2014 value of paragraph (e)(2)(ii) of this sec-
and FY 2015 to be reduced through the tion for the low DSH State group; and
DHRM. The DHRM is calculated on an (iv) Adding the value of paragraph
annual basis based on the most recent (e)(4)(iii) of this section to the value of
data available to CMS at the time of paragraph (e)(2)(ii) of this section for
the calculation. The DHRM is deter- the non-low DSH State group.
mined as follows: (5) Reduction factor allocation. CMS
(1) Establishing State groups. For each will allocate the aggregate DSH allot-
FY, CMS will separate low-DSH States ment reduction amount to three core
and non-low DSH states into distinct factors by multiply the aggregate DSH
State groups. allotment reduction amount for each
(2) Aggregate DSH allotment reduction State group by the following:
allocation. CMS will allocate a portion (i) UPF—33 and 1⁄3 percent.
of the aggregate DSH allotment reduc- (ii) HMF—33 and 1⁄3 percent.
tions to each State group by the fol- (iii) HUF—33 and 1⁄3 percent.
lowing: (6) Uninsured percentage factor (UPF)
(i) Dividing the sum of each State calculation. CMS will calculate the UPF
group’s preliminary unreduced DSH al- by the following:
lotments by the sum of both State (i) Dividing the total State popu-
groups’ preliminary unreduced DSH al- lation by the uninsured in State for
lotment amounts to determine a per- each State.
centage. (ii) Determining the uninsured reduc-
(ii) Multiplying the value of para- tion allocation component for each
graph (e)(2)(i) of this section by the ag- State as a percentage by dividing each
gregate DSH allotment reduction State’s value of paragraph (e)(6)(i) of
amount under paragraph (c) of this sec- this section by the sum of the values of
tion for the applicable fiscal year. paragraph (e)(6)(i) of this section for
(iii) Applying the low DSH adjust- the respective State group (the sum of
ment factor under paragraph (e)(3) of the values of all States in the State
this section. group should total 100 percent).
466
(iii) Determine a weighting factor by graph (e)(5) of this section for the re-
dividing each State’s unreduced DSH spective State group.
allotment by the sum of all prelimi- (12) Section 1115 budget neutrality fac-
nary unreduced DSH allotments for the tor (BNF) calculation. This factor is
respective State group. only calculated for States for which all
(iv) Multiply the weighting factor or a portion of the DSH allotment was
calculated in (e)(6)(iii) of this section included in the calculation of budget
by the value of each State’s uninsured neutrality under a section 1115 dem-
reduction allocation component from onstration for the specific fiscal year
paragraph (e)(6)(ii) of this section. subject to reduction pursuant to an ap-
(v) Determine the UPF as a percent- proval on or before July 31, 2009. CMS
age by dividing the product of para- will calculate the BNF for qualifying
graph (e)(6)(iv) of this section for each states by the following:
State by the sum of the values of para- (i) For States whose DSH allotment
graph (e)(6)(iv) of this section for the was included in the budget neutrality
respective State group (the sum of the calculation for a coverage expansion
values of all States in the State group that was approved under section 1115 as
should total 100 percent). of July 31, 2009, (without regard to ap-
(7) UPF application and reduction proved amendments since that date)
amount. CMS will determine the UPF determining the amount of the State’s
portion of the final aggregate DSH al- DSH allotment included in the budget
lotment reduction allocation for each neutrality calculation for coverage ex-
State by multiplying the State’s UPF pansion for the specific fiscal year sub-
by the aggregate DSH allotment reduc- ject to reduction. This amount is not
tion allocated to the UPF factor under subject to reductions under the HMF
paragraph (e)(5) of this section for the and HUF calculations.
respective State group. (ii) Determining the amount of the
(8) High volume of Medicaid inpatients State’s DSH allotment included in the
factor (HMF) calculation. CMS will cal- budget neutrality calculation for non-
culate the HMF by determining a per- coverage expansion purposes for the
centage for each State by dividing the specific fiscal year subject to reduc-
State’s total DSH payments made to tion.
non-high Medicaid volume hospitals by (iii) Multiplying each qualifying
the total of such payments for the en- State’s value of paragraph (e)(12)(ii) of
tire State group. this section by the mean HMF reduc-
(9) HMF application and reduction tion percentage for the respective
amount. CMS will determine the HMF State group.
portion of the final aggregate DSH al- (iv) Multiplying each qualifying
lotment reduction allocation for each State’s value of paragraph (e)(12)(ii) of
State by multiplying the State’s HMF this section by the mean HUF reduc-
by the aggregate DSH allotment reduction percentage for the respective
tion allocated to the HMF factor under State group.
paragraph (e)(5) of this section for the (v) For each State, calculating the
respective State group. sum of the value of paragraphs
(10) High level of uncompensated care (e)(12)(iii) and of (e)(12)(iv) of this sec-
factor (HUF) calculation. CMS will cal- tion.
culate the HUF by determining a per- (13) Section 1115 budget neutrality fac-
centage for each State by dividing the tor (BNF) application. This factor will
State’s total DSH payments made to be applied in the State-specific DSH al-
non-High Uncompensated Care Level lotment reduction calculation.
hospitals by the total of such payments (14) State-specific DSH allotment reduc-
for the entire State group. tion calculation. CMS will calculate the
(11) HUF application and reduction state-specific DSH reduction by the
amount. CMS will determine the HUF following:
portion of the final aggregate DSH al- (i) Taking the sum of the value of
lotment reduction allocation by multi- paragraphs (e)(7), (e)(9), and (e)(11) of

plying each State’s HUF by the aggre- this section for each State.
gate DSH allotment reduction allo- (ii) For States qualifying under para-
cated to the HUF factor under paragraph (e)(12) of this section, adding the
467
§ 447.295 42 CFR Ch. IV (10–1–17 Edition)
value of paragraph (e)(12)(v) of this sec- group health plan or health insurer,
tion. and for which there is no other legally
(iii) Reducing the amount of para- liable third party. When a health insur-
graph (e)(14)(i) of this section for each ance coverage limit is imposed by a
State that does not qualify under para- third party payer, specific services be-
graph (e)(12)(v) of this section based on yond the limit would not be within the
the proportion of each State’s prelimi- individual’s health benefit package
nary unreduced DSH allotment com- from that third party payer. For Amer-
pared to the national total of prelimi- ican Indians/Alaska Natives, IHS and
nary unreduced DSH allotments so tribal coverage is only considered third
that the sum of paragraph (e)(14)(iii) of party coverage when services are re-
this section equals the sum of para- ceived directly from IHS or tribal
graph (e)(12)(v) of this section. health programs (direct health care
(f) Annual DSH allotment reduction ap- services) or when IHS or a tribal health
plication. For each fiscal year 2014 and program has authorized coverage
fiscal year 2015, CMS will subtract the through the contract health service
State-specific DSH allotment amount program (through a purchase order or
determined in paragraph (e)(14) of this equivalent document). Administrative
section from that State’s final unre- denials of payment, or requirements
duced DSH allotment. This amount is for satisfaction of deductible, copay-
the State’s final DSH allotment for the ment or coinsurance liability, do not
fiscal year. affect the determination that a specific
[78 FR 57311, Sept. 18, 2013]
service is included in the health bene-
fits coverage.
§ 447.295 Hospital-specific dispropor- (c) Determination of an individual’s
tionate share hospital payment third party coverage status. Individuals
limit: Determination of individuals who have no source of third party cov-
without health insurance or other erage for a specific inpatient hospital
third party coverage. or outpatient hospital service must be
(a) Basis and purpose. This section considered, for purposes of that service,
sets forth the methodology for deter- to be uninsured. This determination is
mining the costs for individuals who not dependent on the receipt of pay-
have no health insurance or other ment by the hospital from the third
source of third party coverage for serv- party.
ices furnished during the year for pur- (1) The determination of an individ-
poses of calculating the hospital-spe- ual’s status as having a source of third
cific disproportionate share hospital party coverage must be a service-spe-
payment limit under section 1923(g) of cific coverage determination. The serv-
the Act. ice-specific coverage determination can
(b) Definitions. occur only once per individual per serv-
Health insurance coverage limit means ice provided and applies to the entire
a limit imposed by a third party payer service, including all elements as that
that establishes a maximum dollar service, or similar services, would be
value or maximum number of specific defined in Medicaid.
services, for benefits received by an in- (2) Individuals who are inmates in a
dividual. public institution or are otherwise in-
Individuals who have no health insur- voluntarily in secure custody as a re-
ance (or other source of third party cov- sult of criminal charges are considered
erage) for the services furnished during to have a source of third party cov-
the year means individuals who have no erage.
source of third party coverage for the (d) Hospital-specific DSH limit calcula-
specific inpatient hospital or out- tion. Only costs incurred in providing
patient hospital service furnished by inpatient hospital and outpatient hos-
the hospital. pital services to Medicaid individuals,
No source of third party coverage for a and revenues received with respect to
specific inpatient hospital or outpatient those services, and costs incurred in

hospital service means that the service providing inpatient hospital and out-
is not included in an individual’s patient hospital services, and revenues
health benefits coverage through a received with respect to those services,
468
for which a determination has been that increases aggregate dispropor-

made in accordance with paragraph (c) tionate share hospitals payments in
of this section that the services were order to meet the minimum payment
furnished to individuals who have no adjustments required by section
source of third party coverage for the 1923(c)(1) of the Act. The minimum
specific inpatient hospital or out- payment adjustment is the amount re-
patient hospital service are included quired by the Medicare methodology
when calculating the costs and reve- described in section 1923(c)(1) of the
nues for Medicaid individuals and indi- Act for those hospitals that satisfy the
viduals who have no health insurance minimum Federal definition of a dis-
or other source of third party coverage proportionate share hospital in section
for purposes of section 1923(g)(1) of the 1923(b) of the Act.
Act. (6) A State plan amendment sub-
[79 FR 71694, Dec. 3, 2014] mitted to CMS by September 30, 1992
that provides for a redistribution of
§ 447.296 Limitations on aggregate disproportionate share hospital pay-
payments for disproportionate ments within the State without raising
share hospitals for the period Janu-
ary 1, 1992 through September 30, total payments compared to the pre-
1992. viously approved State plan. CMS will
approve the amendment only if the
(a) The provisions of this section State submits written documentation
apply to the 50 States and the District
that demonstrates to CMS that the ag-
of Columbia, but not to any State
gregate payments that will be made
whose entire Medicaid program is oper-
after the redistribution are no greater
ated under a waiver granted under sec-
than those payments made before the
tion 1115 of the Act.
redistribution.
(b) For the period January 1, 1992
through September 30, 1992, FFP is (7) A State plan amendment sub-
available for aggregate payments to mitted to CMS by September 30, 1992
hospitals that serve a disproprotionate that provides for a reduction in dis-
number of low-income patients with proportionate share hospital payments.
special needs only if the payments are
§ 447.297 Limitations on aggregate
made in accordance with sections payments for disproportionate
1902(a)(13)(A) and 1923 of the Act, and share hospitals beginning October
with one of the following: 1, 1992.
(1) An approved State plan in effect
as of September 30, 1991. (a) Applicability. The provisions of
(2) A State plan amendment sub- this section apply to the 50 States and
mitted to CMS by September 30, 1991. the District of Columbia, but not to
(3) A State plan amendment, or modi- any State whose entire Medicaid pro-
fication thereof, submitted to CMS be- gram is operated under a waiver grant-
tween October 1, 1991 and November 26, ed under section 1115 of the Act.
1991, if the amendment, or modification (b) National payment target. The na-
thereof, was intended to limit the tional payment target for dispropor-
State’s definition of disproportionate tionate share hospital (DSH) payments
share hospitals to those hospitals with for any Federal fiscal year is equal to
Medicaid inpatient utilization rates or 12 percent of the total medical assist-
low-income utilization rates (as de- ance expenditures that will be made
fined in section 1923 (b) of the Act) at during the Federal fiscal year under
or above the statewide arithmetic State plans, excluding administrative
mean. costs. A preliminary national expendi-
(4) A methodology for dispropor- ture target will be published by CMS
tionate share hospital payments that prior to October 1 of each year. This
was established and in effect as of Sep- preliminary national expenditure tar-
tember 30, 1991, or in accordance with a get will be superseded by a final na-
State law enacted or State regulation tional expenditure target published by

adopted as of September 30, 1991. April 1 of each Federal fiscal year, as
(5) A State plan amendment sub- specified in paragraph (d) of this sec-
mitted to CMS by September 30, 1992 tion.
469
§ 447.298 42 CFR Ch. IV (10–1–17 Edition)
(c) State disproportionate share hospital (ii) A preliminary DSH allotment for
allotments. Prior to October 1 of each each State for the Federal fiscal year.
Federal fiscal year, CMS will publish in (2) The final national DSH expendi-
the FEDERAL REGISTER preliminary ture target and State DSH allotments
State DSH allotments for each State. will be published in the FEDERAL REG-
These preliminary State DSH allot- ISTER by April 1 of each Federal fiscal
ments will be determined using the year.
most current applicable actual and es- [57 FR 55143, Nov. 24, 1992, as amended at 58
timated State expenditure information FR 43182, Aug. 13, 1993]
as reported to CMS and adjusted by
CMS as may be necessary using the § 447.298 State disproportionate share
methodology described in § 447.298. CMS hospital allotments.
will publish final State DSH allot- (a) Calculation of State’s base allotment
ments by April 1 of each Federal fiscal for Federal fiscal year 1993. (1) For Fed-
year, as described in paragraph (d) of eral fiscal year 1993, CMS will calculate
this section. for each State a DSH allotment, using
(d) Final national disproportionate the State’s ‘‘base allotment.’’ The
share hospitals expenditure target and State’s base allotment is the greater
State disproportionate share hospitals al- of:
lotments. (1) CMS will revise the pre- (i) The total amount of the State’s
liminary national expenditure target projected DSH payments for Federal
and the preliminary State DSH allot- fiscal year 1992 under the State plan
ments by April 1 of each Federal fiscal applicable to Federal fiscal year 1992,
year. The final national DSH expendi- calculated in accordance with para-
ture target and State DSH allotments graph (a)(2) of this section; or
will be based on the most current ap- (ii) $1,000,000.
plicable actual and estimated expendi- (2) In calculating the State’s DSH
ture information reported to CMS and payments applicable to Federal fiscal
adjusted by CMS as may be necessary year 1992, CMS will derive amounts
immediately prior to the April 1 publi- from payments applicable to the period
cation date. The final national expend- of October 1, 1991, through September
iture target and State DSH allotments 30, 1992, under State plans or plan
will not be recalculated for that Fed- amendments that meet the require-
eral fiscal year based upon any subse- ments specified in § 447.296(b). The cal-
quent actual or estimated expenditure culation will not include—
information reported to CMS. (i) DSH payment adjustments made
by the State applicable to the period
(2) If CMS determines that at any
October 1, 1991 through December 31,
time a State has exceeded its final DSH
1991 under State plans or plan amend-
allotment for a Federal fiscal year,
ments that do not meet the criteria de-
FFP attributable to the excess DSH ex-
scribed in § 447.296; and
penditures will be disallowed. (ii) Retroactive DSH payments made
(3) If a State’s actual DSH expendi- in 1992 that are not applicable to Fed-
tures applicable to a Federal fiscal eral fiscal year 1992.
year are less than its final State DSH (3) CMS will calculate a percentage
allotment for that Federal fiscal year, for each State by dividing the DSH
the State is permitted, to the extent base allotment by the total unadjusted
allowed by its approved State plan, to medical assistance expenditures, ex-
make additional DSH expenditures ap- cluding administrative costs, made
plicable to that Federal fiscal year up during Federal fiscal year 1992. On the
to the amount of its final DSH allot- basis of this percentage, CMS will clas-
ment for that Federal fiscal year. sify each State as a ‘‘high-DSH’’ or
(e) Publication of limits. (1) Before the ‘‘low-DSH’’ State.
beginning of each Federal fiscal year, (i) If the State’s base allotment ex-
CMS will publish in the FEDERAL REG- ceeded 12 percent of its total
ISTER— unadjusted medical assistance expendi-

(i) A preliminary national DSH ex- tures made under the State plan in
penditure target for the Federal fiscal Federal fiscal year 1992, CMS will clas-
year; and sify the State as a ‘‘high-DSH’’ State.
470
(ii) If the State’s base allotment was responding amount in the previous
12 percent or less of its total year; and
unadjusted medical assistance expendi- (ii) The State’s prior year DSH allot-
tures made under the State plan in ment.
Federal fiscal year 1992, CMS will clas- (2) If the growth factor is zero or is
sify the State as a ‘‘low-DSH’’ State. negative, the State growth is zero.
(b) State disproportionate share hos- (3) If a low-DSH State experiences a
pital allotments for Federal fiscal year level of negative growth to the extent
1993. (1) For Federal fiscal year 1993, that its previous Federal fiscal year’s
CMS will calculate a DSH allotment DSH allotment would be more than 12
for each low-DSH State that equals the percent of its current Federal fiscal
State’s base allotment described under year’s total unadjusted medical assist-
paragraph (a) of this section, increased ance expenditures (excluding adminis-
by State growth, as specified in para- trative costs), the low-DSH State’s pre-
graph (d) of this section. vious year’s DSH allotment will be re-
(2) For high-DSH States, the dollar duced to the extent necessary to main-
amount of DSH payments in Federal tain the individual low-DSH State’s 12-
fiscal year 1993 may not exceed the dol- percent limit and that amount will be-
lar amount of DSH payments applica- come the low-DSH State’s DSH allot-
ble to Federal fiscal year 1992 (that is, ment for the current Federal fiscal
the State base allotment). year. In no Federal fiscal year will a
low-DSH State’s DSH allotment be al-
(c) State disproportionate share hospital
lowed to exceed its individual State 12-
allotment for Federal fiscal years 1994 and
percent limit.
after. For Federal fiscal years 1994 and
(e) Supplemental amount available for
after—
low-DSH States. (1) A supplemental
(1) For low-DSH States, CMS will cal- amount is the State’s share of a pool of
culate the DSH allotment for each Fed- money (referred to as a redistribution
eral fiscal year by increasing the prior pool).
year’s State DSHs allotment by— (2) CMS will calculate the redistribu-
(i) State growth, as specified in para- tion pool for the appropriate Federal
graph (d) of this section; and fiscal year by subtracting from the pro-
(ii) A supplemental amount, if appli- jected national DSH expenditure target
cable, as described in paragraph (e) of the following:
this section. (i) The total of the State DSH base
(2) For high-DSH States, the dollar allotments for all high-DSH States;
amount of DSH payments applicable to (ii) The total of the previous year’s
any Federal fiscal year may not exceed State DSH allotments for all low-DSH
the dollar amount of payments applica- States;
ble to Federal fiscal year 1992 (that is, (iii) The State growth amount for all
the State base allotment). This pay- low-DSH States; and
ment limitation will apply until the (iv) The total amount of additional
Federal fiscal year in which the State’s DSH payment adjustments made in
DSH payments applicable to that Fed- order to meet the minimum payment
eral fiscal year, expressed as a percent- adjustments required under section
age of the State’s total unadjusted 1923(c)(l) of the Act, which are made in
medical assistance expenditures in that accordance with § 447.296(b)(5).
Federal fiscal year, equal 12 percent or (3) CMS will determine the percent of
less. When a high-DSH State’s percent- the redistribution pool for each low-
age equals 12 percent or less, the State DSH State on the basis of each State’s
will be reclassified as a low-DSH State. relative share of the total unadjusted
(d) State growth. (1) The State growth medical assistance expenditures for the
for a State in a Federal fiscal year is Federal fiscal year compared to the
equal to the product of— total unadjusted medical assistance ex-
(i) The growth factor that is CMS’s penditures for the Federal fiscal year
projected percentage increase in the projected to be made by all low-DSH

State’s total unadjusted medical as- States. The percent of the redistribu-
sistance expenditures (including ad- tion pool that each State will receive is
ministrative costs) relative to the cor- equal to the State’s total unadjusted
471
§ 447.299 42 CFR Ch. IV (10–1–17 Edition)
medical assistance expenditures di- audit required under § 455.204, the fol-
vided by the total unadjusted medical lowing information for each DSH hos-
assistance expenditures for all low- pital to which the State made a DSH
DSH States. payment in order to permit
(4) CMS will not provide any low- verification of the appropriateness of
DSH State a supplemental amount such payments:
that would result in the State’s total (1) Hospital name. The name of the
DSH allotment exceeding 12 percent of hospital that received a DSH payment
its projected total unadjusted medical from the State, identifying facilities
assistance expenditures. CMS will re- that are institutes for mental disease
allocate any supplemental amounts not (IMDs) and facilities that are located
allocated to States because of this 12- out-of-state.
percent limitation to other low-DSH (2) Estimate of hospital-specific DSH
States in accordance with the percent- limit. The State’s estimate of eligible
age determined in paragraph (e)(3) of uncompensated care for the hospital
this section. receiving a DSH payment for the year
(5) CMS will not reallocate to low- under audit based on the State’s meth-
DSH States the difference between any odology for determining such limit.
State’s actual DSH expenditures appli- (3) Medicaid inpatient utilization rate.
cable to a Federal fiscal year and its The hospital’s Medicaid inpatient utili-
State DSH allotment applicable to that zation rate, as defined in Section
Federal fiscal year. Thus, any unspent 1923(b)(2) of the Act, if the State does
DSH allotment may not be reallocated. not use alternative qualification cri-
(f) Special provision. Any increases in teria described in paragraph (c)(5) of
a State’s aggregate disproportionate this section.
payments, that are made to meet the (4) Low income utilization rate. The
minimum payment requirements speci- hospital’s low income utilization rate,
fied in § 447.296(b)(5), may exceed the as defined in Section 1923(b)(3) of the
State base allotment to the extent Act if the State does not use alter-
such increases are made to satisfy the native qualification criteria described
minimum payment requirement. In in paragraph (c)(5) of this section.
such cases, CMS will adjust the State’s (5) State defined DSH qualification cri-
base allotment in the subsequent Fed- teria. If the State uses an alternate
eral fiscal year to include the increased broader DSH qualification method-
minimum payments. ology as authorized in Section
[57 FR 55143, Nov. 24, 1992, as amended at 58 1923(b)(4) of the Act, the value of the
FR 43182, Aug. 13, 1993] statistic and the methodology used to
determine that statistic.
§ 447.299 Reporting requirements. (6) IP/OP Medicaid fee-for-service (FFS)
(a) Beginning with the first quarter basic rate payments. The total annual
of Federal fiscal year 1993, each State amount paid to the hospital under the
must submit to CMS the quarterly ag- State plan, including Medicaid FFS
gregate amount of its disproportionate rate adjustments, but not including
share hospital payments made to each DSH payments or supplemental/en-
individual public and private provider hanced Medicaid payments, for inpa-
or facility. States’ reports must tient and outpatient services furnished
present a complete, accurate, and full to Medicaid eligible individuals.
disclosure of all of their DSH programs (7) IP/OP Medicaid managed care orga-
and expenditures. nization payments. The total annual
(b) Each State must report the aggre- amount paid to the hospital by Med-
gate information specified under para- icaid managed care organizations for
graph (a) of this section on a quarterly inpatient hospital and outpatient hos-
basis in accordance with procedures es- pital services furnished to Medicaid eli-
tablished by CMS. gible individuals.
(c) Beginning with each State’s Med- (8) Supplemental/enhanced Medicaid IP/
icaid State plan rate year 2005, for each OP payments. Indicate the total annual
Medicaid State plan rate year, the amount of supplemental/enhanced Med-
State must submit to CMS, at the icaid payments made to the hospital
same time as it submits the completed under the State plan. These amounts
472
do not include DSH payments, regular patient hospital services provided to

Medicaid FFS rate payments, and Med- Section 1011 eligible aliens with no
icaid managed care organization pay- source of third party coverage for the
ments. inpatient and outpatient hospital serv-
(9) Total Medicaid IP/OP Payments. ices they receive.
Provide the total sum of items identi- (14) Total cost of IP/OP care for the un-
fied in § 447.299(c)(6), (7) and (8). insured. Indicate the total costs in-
(10) Total Cost of Care for Medicaid IP/ curred for furnishing inpatient hospital
OP Services. The total annual costs in- and outpatient hospital services to in-
curred by each hospital for furnishing dividuals with no source of third party
inpatient hospital and outpatient hos- coverage for the hospital services they
pital services to Medicaid eligible indi- receive.
viduals. The total annual costs are de- (15) Total uninsured IP/OP uncompen-
termined on a hospital-specific basis, sated care costs. Total annual amount of
not a service-specific basis. For pur- uncompensated IP/OP care for fur-
poses of this section, costs— nishing inpatient hospital and out-
(i) Are defined as costs net of third- patient hospital services to individuals
party payments, including, but not with no source of third party coverage
limited to, payments by Medicare and for the hospital services they receive.
private insurance. (i) The amount should be the result
(ii) Must capture the total burden on of subtracting paragraphs (c)(12) and
the hospital of treating Medicaid eligi- (c)(13), from paragraph (c)(14) of this
ble patients prior to payment by Med- section.
icaid. Thus, costs must be determined (ii) The uncompensated care costs of
in the aggregate and not by estimating providing physician services to the un-
the cost of individual patients. For ex- insured cannot be included in this
ample, if a hospital treats two Med- amount.
icaid eligible patients at a cost of $2,000 (iii) The uninsured uncompensated
and receives a $500 payment from a amount also cannot include amounts
third party for each individual, the associated with unpaid co-pays or
total cost to the hospital for purposes deductibles for individuals with third
of this section is $1,000, regardless of party coverage for the inpatient and/or
whether the third party payment re- outpatient hospital services they re-
ceived for one patient exceeds the cost ceive or any other unreimbursed costs
of providing the service to that indi- associated with inpatient and/or out-
vidual. patient hospital services provided to
(11) Total Medicaid Uncompensated individuals with those services in their
Care. The total amount of uncompen- third party coverage benefit package.
sated care attributable to Medicaid in- (iv) The uncompensated care costs do
patient and outpatient services. The not include bad debt or payer discounts
amount should be the result of sub- related to services furnished to individ-
tracting the amount identified in uals who have health insurance or
§ 447.299(c)(9) from the amount identi- other third party payer.
fied in § 447.299(c)(10). The uncompen- (16) Total annual uncompensated care
sated care costs of providing Medicaid costs. The total annual uncompensated
physician services cannot be included care cost equals the total cost of care
in this amount. for furnishing inpatient hospital and
(12) Uninsured IP/OP revenue. Total outpatient hospital services to Med-
annual payments received by the hos- icaid eligible individuals and to indi-
pital by or on behalf of individuals viduals with no source of third party
with no source of third party coverage coverage for the hospital services they
for inpatient and outpatient hospital receive less the sum of regular Med-
services they receive. This amount icaid FFS rate payments, Medicaid
does not include payments made by a managed care organization payments,
State or units of local government, for supplemental/enhanced Medicaid pay-
services furnished to indigent patients. ments, uninsured revenues, and Sec-

(13) Total Applicable Section 1011 Pay- tion 1011 payments for inpatient and
ments. Federal Section 1011 payments outpatient hospital services. This
for uncompensated inpatient and out- should equal the sum of paragraphs
473
§ 447.300 42 CFR Ch. IV (10–1–17 Edition)
(c)(9),(c)(12), and (c)(13) subtracted from Subpart F—Payment Methods for

the sum of paragraphs (c)(10) and (c)(14) Other Institutional and Non-
of this section.
(17) Disproportionate share hospital institutional Services
payments. Indicate total annual pay-
ment adjustments made to the hospital SOURCE: 43 FR 45253, Sept. 29, 1978, unless
under Section 1923 of the Act. otherwise noted. Redesignated at 46 FR 47973,
(18) Medicaid provider number. The Sept. 30, 1981, and further redesignated at 58
provider identification number as- FR 6095, Jan. 26, 1993.
signed by the Medicaid program.
(19) Medicare provider number. The § 447.300 Basis and purpose.
provider identification number as- In this subpart, §§ 447.302 through
signed by the Medicare program. 447.325 and 447.361 implement section
(20) Total hospital cost. The total an- 1902(a)(30) of the Act, which requires
nual costs incurred by each hospital for that payments be consistent with effi-
furnishing inpatient hospital and out- ciency, economy and quality of care.
patient hospital services. Section 447.371 implements section
(21) Reporting. States must report 1902(a)(15) of the Act, which requires
DSH payments made to all hospitals that the State plan provide for pay-
under the authority of the approved ment for rural health clinic services in
Medicaid State plan. This includes accordance with regulations prescribed
both in-State and out-of-State hos-
by the Secretary.
pitals. For out-of-State hospitals,
States must report, at a minimum, the [72 FR 39239, July 17, 2007]
information identified in § 447.299(c)(1)
through (c)(6), (c)(8), (c)(9), (c)(17), § 447.302 State plan requirements.
(c)(18), and (c)(19). A State plan must provide that the
(d) Each State must maintain, in requirements of this subpart are met.
readily reviewable form, supporting
documentation that provides a detailed [46 FR 48560, Oct. 1, 1981]
description of each DSH program, the
legal basis of each DSH program, and § 447.304 Adherence to upper limits;
the amount of DSH payments made to FFP.
each individual public and private pro- (a) The Medicaid agency must not
vider or facility each quarter. This in- pay more than the upper limits de-
formation must be made available to scribed in this subpart.
Federal reviewers upon request. (b) In the case of payments made
(e) If a State fails to comply with the under the plan for deductibles and co-
reporting requirements contained in insurance payable on an assigned Medi-
this section, future grant awards will care claim for noninstitutional serv-
be reduced by the amount of FFP CMS
ices, those payments may be made only
estimates is attributable to the ex-
up to the reasonable charge under
penditures made to the dispropor-
Medicare.
tionate share hospitals as to which the
State has not reported properly, until (c) FFP is not available for a State’s
such time as the State complies with expenditures for services that are in
the reporting requirements. Deferrals excess of the amounts allowable under
and/or disallowances of equivalent this subpart.
amounts may also be imposed with re- NOTE: The Secretary may waive any limi-
spect to quarters for which the State tation on reimbursement imposed by subpart
has failed to report properly. Unless F of this part for experiments conducted
otherwise prohibited by law, FFP for under section 402 of Pub. L. 90–428, Incentives
for Economy Experimentation, as amended
those expenditures will be released
by section 222(b) of Pub. L. 92–603, and under
when the State complies with all re-
section 222(a) of Pub. L. 92–603.
porting requirements.
[46 FR 48560, Oct. 1, 1981; 46 FR 54744, Nov. 4,
[46 FR 47971, Sept. 30, 1981, as amended at 73 1981, as amended at 66 FR 3176, Jan. 12, 2001]
FR 77950, Dec. 19, 2008; 74 FR 18657, Apr. 24,
2009; 77 FR 31512, May 29, 2012; 78 FR 57313,
Sept. 18, 2013; 82 FR 16122, Apr. 3, 2017]
474
OUTPATIENT HOSPITAL AND CLINIC OTHER INPATIENT AND OUTPATIENT

SERVICES FACILITIES
§ 447.321 Outpatient hospital and clin- § 447.325 Other inpatient and out-
ic services: Application of upper patient facility services: Upper lim-
payment limits. its of payment.
(a) Scope. This section applies to The agency may pay the customary
rates set by the agency to pay for out- charges of the provider but must not
patient services furnished by hospitals pay more than the prevailing charges
and clinics within one of the following in the locality for comparable services
under comparable circumstances.
categories:
(1) State government-owned or oper- § 447.342 [Reserved]
ated facilities (that is, all facilities
that are owned or operated by the PREPAID CAPITATION PLANS
State.)
(2) Non-State government owned or § 447.362 Upper limits of payment:
Nonrisk contract.
operated facilities (that is, all govern-
ment operated facilities that are nei- Under a nonrisk contract, Medicaid
ther owned nor operated by the State). payments to the contractor may not
(3) Privately-owned and operated fa- exceed—
(a) What Medicaid would have paid,
cilities.
on a fee-for-service basis, for the serv-
(b) General rules. (1) Upper payment ices actually furnished to beneficiaries:
limit refers to a reasonable estimate of plus
the amount that would be paid for the (b) The net savings of administrative
services furnished by the group of fa- costs the Medicaid agency achieves by
cilities under Medicare payment prin- contracting with the plan instead of
ciples in subchapter B of this chapter. purchasing the services on a fee-for-
(2) Except as provided in paragraph service basis.
(c) of this section, aggregate Medicaid
[48 FR 54025, Nov. 30, 1983]
payments to a group of facilities with-
in one of the categories described in RURAL HEALTH CLINIC SERVICES
paragraph (a) of this section may not
exceed the upper payment limit de- § 447.371 Services furnished by rural
scribed in paragraph (b)(1) of this sec- health clinics.
tion. The agency must pay for rural health
(c) Exceptions. Indian Health Services clinic services, as defined in § 440.20(b)
and tribal facilities. The limitation in of this subchapter, and for other ambu-
paragraph (b) of this section does not latory services furnished by a rural
apply to Indian Health Services facili- health clinic, as defined in § 440.20(c) of
ties and tribal facilities that are fund- this subchapter, as follows:
ed through the Indian Self-Determina- (a) For provider clinics, the agency
tion and Education Assistance Act must pay the reasonable cost of rural
(Pub. L. 93–638). health clinic services and other ambu-
(d) Compliance dates. Except as per- latory services on the basis of the cost
mitted under paragraph (e) of this sec- reimbursement principles in part 413 of
tion, a State must comply with the this chapter. For purposes of this sec-
upper payment limit described in para- tion, a provider clinic is an integral
part of a hospital, skilled nursing facil-
graph (b)(1) of this section by one of
ity, or home health agency that is par-
the following dates:
ticipating in Medicare and is licensed,
(1) For non-State government-owned governed, and supervised with other de-
or operated hospitals—March 19, 2002. partments of the facility.
(2) For all other facilities—March 13, (b) For clinics other than provider
2001. clinics that do not offer any ambula-
[66 FR 3176, Jan. 12, 2001, as amended at 66 tory services other than rural health
FR 46399, Sept. 5, 2001; 67 FR 2611, Jan. 18, clinic services, the agency must pay for
2002; 72 FR 29835, May 29, 2007; 75 FR 73975, rural health clinic services at the rea-
Nov. 30, 2010; 77 FR 31513, May 29, 2012] sonable cost rate per visit determined
475
§ 447.400 42 CFR Ch. IV (10–1–17 Edition)
by a Medicare carrier under §§ 405.2426 § 447.400 Primary care services fur-

through 405.2429 of this chapter. nished by physicians with a speci-
(c) For clinics other than provider fied specialty or subspecialty.
clinics that do offer ambulatory serv- (a) States pay for services furnished
ices other than rural health clinic serv- by a physician as defined in § 440.50 of
ices, the agency must pay for the other this chapter, or under the personal su-
ambulatory services by one of the fol- pervision of a physician who self-at-
lowing methods: tests to a specialty designation of fam-
(1) The agency may pay for other am- ily medicine, general internal medicine
bulatory services and rural health clin- or pediatric medicine or a subspecialty
ic services at a single rate per visit
recognized by the American Board of
that is based on the cost of all services
Medical Specialties (ABMS), the Amer-
furnished by the clinic. The rate must
ican Board of Physician Specialties
be determined by a Medicare carrier
(ABPS) or the American Osteopathic
under §§ 405.2426 through 405.2429 of this
chapter. Association (AOA). Such physician
then attests that he/she:
(2) The agency may pay for other am-
bulatory services at a rate set for each (1) Is Board certified with such a spe-
service by the agency. The rate must cialty or subspecialty and/or
not exceed the upper limits in this sub- (2) Has furnished evaluation and
part. The agency must pay for rural management services and vaccine ad-
health clinic services at the Medicare ministration services under codes de-
reimbursement rate per visit, as speci- scribed in paragraph (b) of this section
fied in § 405.2426 of this chapter. that equal at least 60 percent of the
(3) The agency may pay for dental Medicaid codes he or she has billed dur-
services at a rate per visit that is based ing the most recently completed CY or,
on the cost of dental services furnished for newly eligible physicians, the prior
by the clinic. The rate must be deter- month.
mined by a Medicare carrier under (b) At the end of CY 2013 and 2014 the
§§ 405.2426 through 405.2429 of this chap- Medicaid agency must review a statis-
ter. The agency must pay for ambula- tically valid sample of physicians who
tory services other than dental services received higher payments to verify
under paragraph (c) (1) or (2) of this that they meet the requirements of
section. paragraph (a)(1) or (2) of this section.
(d) For purposes of paragraph (c) (1) (c) Primary care services designated
and (3) of this section, ‘‘visit’’ means a in the Healthcare Common Procedure
face-to-face encounter between a clinic Coding System (HCPCS) are as follows:
patient and any health professional (1) Evaluation and Management
whose services are reimbursed under (E&M) codes 99201 through 99499.
the State plan. Encounters with more (2) Current Procedural Terminology
than one health professional, and mul- (CPT) vaccine administration codes
tiple encounters with the same health
90460, 90461, 90471, 90472, 90473 and 90474,
professional, that take place on the
or their successor codes.
same day and at a single location con-
stitute a single visit, except when the (d)(1) The state must submit to CMS,
patient, after the first encounter, suf- in such form and at such time as CMS
fers illness or injury requiring addi- specifies, information relating to par-
tional diagnosis or treatment. ticipation by physicians described in
paragraph (a) of this section and the
[43 FR 45253, Sept. 29, 1978, as amended at 51 utilization of E&M codes described in
FR 34833, Sept. 30, 1986]
paragraph (c) of this section (whether
furnished by or under the supervision
Subpart G—Payments for Primary of a physician described in paragraph
Care Services Furnished by (a)) of this section for the following
Physicians peri—s—
(i) As of July 1, 2009, and

SOURCE: 77 FR 66700, Nov. 6, 2012, unless (ii) CY 2013
otherwise noted.
476
(2) As soon as practicable after re- (b) Identify all codes that were not
ceipt, CMS will post this information reimbursed under the Medicaid pro-
on www.Medicaid.gov. gram as of July 1, 2009.
[77 FR 66700, Nov. 6, 2012, as amended at 77 (c) Specify either that the state will
FR 74382, Dec. 14, 2012] make all adjustments applicable to the
specific site of service or, at the state’s
§ 447.405 Amount of required min- option, the office setting and will also
imum payments. either adjust for the specific geo-
(a) For CYs 2013 and 2014, a state graphic location of the service or pay
must pay for physician services de- rates that reflect the mean over all
scribed in § 447.400 based on the lower counties of the rate for each E&M code.
of: The state must specify the formula
(1) The Medicare Part B fee schedule that the state will use to determine the
rate that is applicable to the specific mean rate for each E&M code.
site of service or, at the state’s option,
the office setting and is also adjusted § 447.415 Availability of Federal finan-
for either the specific geographic loca- cial participation (FFP).
tion of the service or reflects the mean (a) For primary care services fur-
over all counties of the rate for each
nished by physicians specified in
E&M code. If there is no applicable
§ 447.400, FFP will be available at the
rate, the rate specified in a fee sched-
rate of 100 percent for the amount by
ule established and announced by CMS
(that is, the product of multiplying the which the payment required to comply
Medicare CF in effect at the beginning with § 447.405 exceeds the Medicaid pay-
of CYs 2013 or 2014 (or the CY 2009 CF, ment that would have been made under
if higher) and the CY 2013 and 2014 rel- the approved state plan in effect on
ative value units (RVUs). July 1, 2009.
(2) The provider’s actual billed (b) For purposes of calculating the
charge for the service. payment that would have been made
(b) For vaccines provided under the under the approved State plan in effect
Vaccines for Children Program in CYs on July 1, 2009, the state must exclude
2013 and 2014, a State must pay the incentive, bonus, and performance-
lesser of: based payments but must include sup-
(1) The Regional Maximum Adminis- plemental payments for which the ap-
tration Fee; or, proved methodology is linked to vol-
(2) The Medicare fee schedule rate in ume and payment for specific codes.
CY 2013 or 2014 (or, if higher, the rate (c) For vaccine administration, the
using the 2009 conversion factor and state must impute the payment that
the 2013 and 2014 RVUs) for code 90460. would have been made for code 90460
[77 FR 66700, Nov. 6, 2012, as amended at 77 under the approved Medicaid state
FR 74382, Dec. 14, 2012] plan. The imputed rate for July 1, 2009,
for code 90460 equals the payment rates
§ 447.410 State plan requirements. for codes 90465 and 90471 weighted by
The state must amend its state plan service volume.
to reflect the increase in fee schedule (d) For any payment made under a
payments in CYs 2013 and 2014 unless, bundled rate methodology, including
for each of the billing codes eligible for bundled rates for vaccines and vaccine
payment, the state currently reim- administration, the amount directly
burses at least as much as the higher of attributable to the applicable primary
the CY 2013 and CY 2014 Medicare rate care service must be isolated for pur-
or the rate that would be derived using poses of determining the availability of
the CY 2009 conversion factor and the
the 100 percent FFP rate. Bundled
CY 2013 and 2014 Medicare relative
rates, for purposes of this provision, do
value units (RVUs). The amendment
not include encounter and per diem
must:
(a) Identify all eligible codes that the rates.
state will reimburse at the Medicare
rate in CYs 2013 and 2014. Subpart H [Reserved]
477
§ 447.500 42 CFR Ch. IV (10–1–17 Edition)
Subpart I—Payment for Drugs or packaging (other than repackaging

the listed drug for use in institutions)
SOURCE: 81 FR 5347, Feb. 1, 2016, unless oth-
than the brand name drug.
erwise noted. Bona fide service fee means a fee paid
by a manufacturer to an entity that
§ 447.500 Basis and purpose. represents fair market value for a bona
(a) Basis. This subpart: fide, itemized service actually per-
(1) Interprets those provisions of sec- formed on behalf of the manufacturer
tion 1927 of the Act that set forth re- that the manufacturer would otherwise
quirements for drug manufacturers’ perform (or contract for) in the absence
calculating and reporting average man- of the service arrangement, and that is
ufacturer prices (AMPs) and best prices not passed on in whole or in part to a
and that set upper payment limits for client or customer of an entity, wheth-
covered outpatient drugs. er or not the entity takes title to the
(2) Implements section 1903(i)(10) of drug. The fee includes, but is not lim-
the Act with regard to the denial of ited to, distribution service fees, inven-
Federal financial participation (FFP) tory management fees, product stock-
in expenditures for certain physician- ing allowances, and fees associated
administered drugs. with administrative service agree-
(3) Implements section 1902(a)(54) of ments and patient care programs (such
the Act with regard to a State plan as medication compliance programs
that provides covered outpatient drugs. and patient education programs).
(4) Implements section Brand name drug means a single
1903(m)(2)(A)(xiii) of the Act, in part, source or innovator multiple source
and section 1927(b) of the Act with re- drug.
gard to rebates for covered outpatient Bundled sale means any arrangement
drugs dispensed to individuals eligible regardless of physical packaging under
for medical assistance who are enrolled which the rebate, discount, or other
in Medicaid managed care organiza- price concession is conditioned upon
tions (MCOs). the purchase of the same drug, drugs of
(5) Implements section 1902(a)(30)(A) different types (that is, at the nine-
of the Act with regard to the effi- digit national drug code (NDC) level) or
ciency, economy, and quality of care in another product or some other per-
the context of payments for covered formance requirement (for example,
outpatient drugs. the achievement of market share, in-
(b) Purpose. This subpart specifies clusion or tier placement on a for-
certain requirements in the Social Se- mulary), or where the resulting dis-
curity Act, including changes from the counts or other price concessions are
Affordable Care Act and other require- greater than those which would have
ments pertaining to Medicaid payment been available had the bundled drugs
for drugs. been purchased separately or outside
the bundled arrangement.
§ 447.502 Definitions. (1) The discounts in a bundled sale,
For the purpose of this subpart, the including those discounts resulting
following definitions apply: from a contingent arrangement, are al-
Actual acquisition cost (AAC) means located proportionally to the total dol-
the agency’s determination of the lar value of the units of all drugs or
pharmacy providers’ actual prices paid products sold under the bundled ar-
to acquire drug products marketed or rangement.
sold by specific manufacturers. (2) For bundled sales where multiple
Authorized generic drug means any drugs are discounted, the aggregate
drug sold, licensed, or marketed under value of all the discounts in the bun-
a new drug application (NDA) approved dled arrangement must be proportion-
by the Food and Drug Administration ally allocated across all the drugs or
(FDA) under section 505(c) of the Fed- products in the bundle.
eral Food, Drug and Cosmetic Act Clotting factor means a hemophilia
(FFDCA) that is marketed, sold or dis- clotting factor for which a separate
tributed under a different labeler code, furnishing payment is made under sec-
product code, trade name, trademark, tion 1842(o)(5) of the Act and which is
478
included on a list of such factors speci- (iv) Is a biological product other than
fied and updated regularly by CMS and a vaccine that may only be dispensed
posted on the CMS Web site. upon a prescription and is licensed
Consumer Price Index—Urban (CPI–U) under section 351 of the Public Health
means the index of consumer prices de- Service Act (PHSA) and is produced at
veloped and updated by the U.S. De- an establishment licensed under sec-
partment of Labor. It is the CPI for all tion 351 of the PHSA to produce such
urban consumers (U.S. average) for the product; or
month before the beginning of the cal- (v) Is insulin certified under section
endar quarter for which the rebate is 506 of the FFDCA.
paid. (2) A covered outpatient drug does
Covered outpatient drug means, of not include any drug, biological prod-
those drugs which are treated as a pre- uct, or insulin provided as part of or in-
scribed drug for the purposes of section cident to and in the same setting as
1905(a)(12) of the Act, a drug which may any of the following services (and for
be dispensed only upon a prescription which payment may be made as part of
(except as provided in paragraphs (2) that service instead of as a direct reim-
and (3) of this definition). bursement for the drug):
(1) A drug can only be considered a (i) Inpatient Services;
covered outpatient drug if it: (ii) Hospice Services;
(i) Is approved for safety and effec- (iii) Dental Services, except that
tiveness as a prescription drug by the drugs for which the State plan author-
FDA under section 505 or 507 of the izes direct reimbursement to the dis-
FFDCA or under section 505(j) of the pensing dentist are covered outpatient
FFDCA; drugs;
(ii) Was commercially used or sold in (iv) Physician services;
the United States before the enactment (v) Outpatient hospital services;
of the Drug Amendments of 1962 or (vi) Nursing facility and services pro-
which is identical, similar, or related vided by an intermediate care facility
(within the meaning described in FDA for individuals with intellectual dis-
regulations at 21 CFR 310.6(b)(1)) to abilities;
such a drug, and which has not been (vii) Other laboratory and x-ray serv-
the subject of a final determination by ices; or
the Secretary that it is a ‘‘new drug’’ (viii) Renal dialysis.
(within the meaning of section 201(p) of (3) A covered outpatient drug does
the FFDCA) or an action brought by not include:
the Secretary under sections 301, 302(a), (i) Any drug product, prescription or
or 304(a) of FFDCA to enforce section over-the-counter (OTC), for which an
502(f) or 505(a) of the FFDCA; NDC number is not required by the
(iii) Is described in section 107(c)(3) of FDA;
the Drug Amendments of 1962 and for (ii) Any drug product for which a
which the Secretary has determined manufacturer has not submitted to
there is a compelling justification for CMS evidence to demonstrate that the
its medical need or is identical, simi- drug product satisfies the criteria in
lar, or related (within the meaning de- paragraph (1) of this definition;
scribed in FDA regulations at 21 CFR (iii) Any drug product or biological
310.6(b)(1)) to such a drug or for which used for a medical indication which is
the Secretary has not issued a notice not a medically accepted indication; or
for an opportunity for a hearing under (iv) Over-the-counter products that
section 505(e) of the FFDCA on a pro- are not drugs.
posed order of the Secretary to with- Customary prompt pay discount means
draw approval of an application for any discount off of the purchase price
such drug under section 505(e) of the of a drug routinely offered by the man-
FFDCA because the Secretary has de- ufacturer to a wholesaler for prompt
termined that the drug is less than ef- payment of purchased drugs within a
fective for some or all conditions of use specified timeframe and consistent
prescribed, recommended, or suggested with customary business practices for
in its labeling; payment.
479
§ 447.502 42 CFR Ch. IV (10–1–17 Edition)
Innovator multiple source drug means a (1) Is rated as therapeutically equiva-

multiple source drug that was origi- lent as reported in the FDA’s ‘‘Ap-
nally marketed under an original new proved Drug Products with Thera-
drug application (NDA) approved by peutic Equivalence Evaluations’’ which
FDA, including an authorized generic is available at http://
drug. It also includes a drug product www.accessdata.fda.gov/scripts/cder/ob/.
marketed by any cross-licensed pro- (2) Is pharmaceutically equivalent
ducers, labelers, or distributors oper- and bioequivalent, as determined by
ating under the NDA and a covered the FDA.
outpatient drug approved under a bio- (3) Is sold or marketed in the United
logics license application (BLA), prod- States during the rebate period.
uct license application (PLA), estab- National drug code (NDC) means the
lishment license application (ELA) or numerical code maintained by the FDA
antibiotic drug application (ADA). For that includes the labeler code, product
purposes of this definition and the code, and package code. For purposes
Medicaid drug rebates (MDR) program, of this subpart, the NDC is considered
an original NDA means an NDA, other to be an 11-digit code, unless otherwise
than an Abbreviated New Drug Appli- specified in this subpart as being with-
cation (ANDA), approved by the FDA out regard to package size (that is, the
for marketing, unless CMS determines 9-digit numerical code).
that a narrow exception applies. National rebate agreement means the
Lagged price concession means any rebate agreement developed by CMS
discount or rebate that is realized after and entered into by CMS on behalf of
the sale of the drug, but does not in- the Secretary or his or her designee
clude customary prompt pay discounts. and a manufacturer to implement sec-
Manufacturer means any entity that tion 1927 of the Act.
holds the NDC for a covered outpatient Nominal price means a price that is
drug or biological product and meets less than 10 percent of the average
the following criteria: manufacturer price (AMP) in the same
(1) Is engaged in the production, quarter for which the AMP is com-
preparation, propagation, puted.
compounding, conversion, or proc- Noninnovator multiple source drug
essing of covered outpatient drug prod- means:
ucts, either directly or indirectly by (1) A multiple source drug that is not
extraction from substances of natural an innovator multiple source drug or a
origin, or independently by means of single source drug;
chemical synthesis, or by a combina- (2) A multiple source drug that is
tion of extraction and chemical syn- marketed under an ANDA or an abbre-
thesis; or viated antibiotic drug application;
(2) Is engaged in the packaging, re- (3) A covered outpatient drug that
packaging, labeling, relabeling, or dis- entered the market before 1962 that
tribution of covered outpatient drug was not originally marketed under an
products and is not a wholesale dis- NDA;
tributor of drugs or a retail pharmacy (4) Any drug that has not gone
licensed under State law. through an FDA approval process, but
(3) For authorized generic products, otherwise meets the definition of cov-
the term ‘‘manufacturer’’ will also in- ered outpatient drug; or
clude the original holder of the NDA. (5) If any of the drug products listed
(4) For drugs subject to private label- in this definition of a noninnovator
ing arrangements, the term ‘‘manufac- multiple source drug subsequently re-
turer’’ will also include the entity ceives an NDA or ANDA approval from
under whose own label or trade name FDA, the product’s drug category
the product will be distributed. changes to correlate with the new
Multiple source drug means, for a re- product application type.
bate period, a covered outpatient drug Oral solid dosage form means capsules,
for which there is at least one other tablets, or similar drugs products in-
drug product which meets the fol- tended for oral use as defined in ac-
lowing criteria: cordance with FDA regulation at 21
480
CFR 206.3 that defines solid oral dosage licensed producers or distributors oper-
form. ating under the NDA. It also includes a
Over-the-counter (OTC) drug means a covered outpatient drug approved
drug that is appropriate for use with- under a biologics license application
out the supervision of a health care (BLA), product license application
professional such as a physician, and (PLA), establishment license applica-
which can be purchased by a consumer tion (ELA), or antibiotic drug applica-
without a prescription. tion (ADA). For purposes of this defini-
Pediatric indication means a specifi- tion and the MDR program, an original
cally stated indication for use by the NDA means an NDA, other than an
pediatric age group meaning from birth ANDA, approved by the FDA for mar-
through 16 years of age, or a subset of keting, unless CMS determines that a
this group as specified in the ‘‘Indica- narrow exception applies.
tion and Usage’’ section of the FDA ap- States means the 50 States and the
proved labeling, or in an explanation District of Columbia and, beginning
elsewhere in the labeling that makes it April 1, 2020, also includes the Com-
clear that the drug is for use only in a monwealth of Puerto Rico, the Virgin
pediatric age group, or a subset of this Islands, Guam, the Northern Mariana
group. Islands and American Samoa.
Professional dispensing fee means the United States means the 50 States and
professional fee which: the District of Columbia and, begin-
(1) Is incurred at the point of sale or ning April 1, 2020, also includes the
service and pays for costs in excess of Commonwealth of Puerto Rico, the
the ingredient cost of a covered out- Virgin Islands, Guam, the Northern
patient drug each time a covered out- Mariana Islands and American Samoa.
patient drug is dispensed; Wholesaler means a drug wholesaler
(2) Includes only pharmacy costs as- that is engaged in wholesale distribu-
sociated with ensuring that possession tion of prescription drugs to retail
of the appropriate covered outpatient community pharmacies, including but
drug is transferred to a Medicaid bene- not limited to manufacturers, re-
ficiary. Pharmacy costs include, but packers, distributors, own-label dis-
are not limited to, reasonable costs as- tributors, private-label distributors,
sociated with a pharmacist’s time in jobbers, brokers, warehouses (including
checking the computer for information manufacturer’s and distributor’s ware-
about an individual’s coverage, per- houses, chain drug warehouses, and
forming drug utilization review and wholesale drug warehouses), inde-
preferred drug list review activities, pendent wholesale drug traders, and re-
measurement or mixing of the covered tail community pharmacies that con-
outpatient drug, filling the container, duct wholesale distributions.
beneficiary counseling, physically pro- [81 FR 5347, Feb. 1, 2016, as amended at 81 FR
viding the completed prescription to 80005, Nov. 15, 2016]
the Medicaid beneficiary, delivery, spe-
cial packaging, and overhead associ- § 447.504 Determination of average
ated with maintaining the facility and manufacturer price.
equipment necessary to operate the (a) Definitions. For the purpose of this
pharmacy; and section, the following definitions
(3) Does not include administrative apply:
costs incurred by the State in the oper- Average manufacturer price (AMP)
ation of the covered outpatient drug means, for a covered outpatient drug of
benefit including systems costs for a manufacturer (including those sold
interfacing with pharmacies. under an NDA approved under section
Rebate period means a calendar quar- 505(c) of the Federal Food, Drug, and
ter. Cosmetic Act), the average price paid
Single source drug means a covered to the manufacturer for the drug in the
outpatient drug that is produced or dis- United States by wholesalers for drugs
tributed under an original NDA ap- distributed to retail community phar-

proved by FDA and has an approved macies and retail community phar-
NDA number issued by FDA, including macies that purchase drugs directly
a drug product marketed by any cross- from the manufacturer.
481
§ 447.504 42 CFR Ch. IV (10–1–17 Edition)
Average unit price means a manufac- (3) Sales to retail community phar-
turer’s sales included in AMP less all macies (including those sales, nominal
required adjustments divided by the price sales, and associated discounts,
total units sold and included in AMP rebates (other than rebates under sec-
by the manufacturer in a quarter. tion 1927 of the Act or as specified in
Charitable and not-for profit phar- regulations), payments, or other finan-
macies means organizations exempt cial transactions that are received by,
from taxation as defined by section paid by, or passed through to retail
501(c)(3) of the Internal Revenue Code community pharmacies).
of 1986. (c) Sales, nominal price sales, and asso-
Insurers means entities that are re- ciated discounts, rebates, payments, or
sponsible for payment to pharmacies other financial transactions excluded from
for drugs dispensed to their members, AMP. AMP excludes the following
and do not take actual possession of sales, nominal price sales, and associ-
these drugs or pass on manufacturer ated discounts, rebates, payments, or
discounts or rebates to pharmacies. other financial transactions:
Net sales means quarterly gross sales (1) Any prices on or after October 1,
revenue less cash discounts allowed, 1992, to the Indian Health Service
except customary prompt pay dis- (IHS), the Department of Veterans Af-
counts extended to wholesalers, and all fairs (DVA), a State home receiving
other price reductions (other than refunds under 38 U.S.C. 1741, the Depart-
bates under section 1927 of the Act or ment of Defense (DoD), the Public
price reductions specifically excluded Health Service (PHS), or a covered en-
by statute or regulation) which reduce tity described in section 1927(a)(5)(B) of
the amount received by the manufac- the Act (including inpatient prices
turer. charged to hospitals described in sec-
Retail community pharmacy means an tion 340B(a)(4)(L) of the PHSA).
independent pharmacy, a chain phar- (2) Any prices charged under the Fed-
macy, a supermarket pharmacy, or a eral Supply Schedule (FSS) of the Gen-
mass merchandiser pharmacy that is eral Services Administration (GSA).
licensed as a pharmacy by the State (3) Any depot prices (including
and that dispenses medications to the TRICARE) and single award contract
general public at retail prices. Such prices, as defined by the Secretary, of
term does not include a pharmacy that any agency of the Federal government.
dispenses prescription medications to (4) Sales outside the United States.
patients primarily through the mail, (5) Sales to hospitals.
nursing home pharmacies, long-term (6) Sales to health maintenance orga-
care facility pharmacies, hospital phar- nizations (HMOs) (including managed
macies, clinics, charitable or not-for- care organizations (MCOs)), including
profit pharmacies, government phar- HMO or MCO operated pharmacies.
macies, or pharmacy benefit managers. (7) Sales to long-term care providers,
(b) Sales, nominal price sales, and asso- including nursing facility pharmacies,
ciated discounts, rebates, payments, or nursing home pharmacies, long-term
other financial transactions included in care facilities, contract pharmacies for
AMP. Except for those sales, nominal the nursing facility where these sales
price sales, and associated discounts, can be identified with adequate docu-
rebates, payments or other financial mentation, and other entities where
transactions identified in paragraph (c) the drugs are dispensed through a nurs-
of this section, AMP for covered out- ing facility pharmacy, such as assisted
patient drugs includes the following living facilities.
sales, nominal price sales, and associ- (8) Sales to mail order pharmacies.
ated discounts, rebates, payments, or (9) Sales to clinics and outpatient fa-
other financial transactions: cilities (for example, surgical centers,
(1) Sales to wholesalers for drugs dis- ambulatory care centers, dialysis cen-
tributed to retail community phar- ters, and mental health centers).
macies. (10) Sales to government pharmacies

(2) Sales to other manufacturers who (for example, a Federal, State, county,
act as wholesalers for drugs distributed or municipal-owned pharmacy).
to retail community pharmacies. (11) Sales to charitable pharmacies.
482
(12) Sales to not-for-profit phar- sumer; and the pharmacy, agent, or

macies. other AMP eligible entity does not re-
(13) Sales, associated rebates, dis- ceive any price concession.
counts, or other price concessions paid (27) Manufacturer-sponsored drug dis-
directly to insurers. count card programs, but only to the
(14) Bona fide service fees, as defined extent that the full value of the dis-
in § 447.502, paid by manufacturers to count is passed on to the consumer and
wholesalers or retail community phar- the pharmacy, agent, or other AMP eli-
macies. gible entity does not receive any price
(15) Customary prompt pay discounts concession.
extended to wholesalers. (28) Manufacturer-sponsored patient
(16) Reimbursement by the manufac- refund/rebate programs, to the extent
turer for recalled, damaged, expired, or that the manufacturer provides a full
otherwise unsalable returned goods, in- or partial refund or rebate to the pa-
cluding (but not limited to) reimburse- tient for out-of-pocket costs and the
ment for the cost of the goods and any pharmacy, agent, or other AMP eligi-
reimbursement of costs associated with ble entity does not receive any price
return goods handling and processing, concessions.
reverse logistics, and drug destruction, (29) Manufacturer copayment assist-
but only to the extent that such pay- ance programs, to the extent that the
ment covers only those costs. program benefits are provided entirely
(17) Associated discounts, rebates, or to the patient and the pharmacy,
other price concessions provided under agent, or other AMP eligible entity
the Medicare Coverage Gap Discount does not receive any price concession.
Program under section 1860D–14A of the (30) Any rebates, discounts, or price
Act. concessions provided to a designated
(18) Payments received from and re- State Pharmacy Assistance Program
bates and discounts provided to phar- (SPAP).
macy benefit manufacturers (PBMs). (d) Sales, nominal price sales, and asso-
(19) Rebates under the national re- ciated discounts, rebates, payments, or
bate agreement or a CMS-authorized other financial transactions included in
State supplemental rebate agreement AMP for 5i drugs that are not generally
paid to State Medicaid Agencies under dispensed through retail community phar-
section 1927 of the Act. macies. Except for those sales, nominal
(20) Sales to hospices (inpatient and price sales, and associated discounts,
outpatient). rebates, payments, and other financial
(21) Sales to prisons. transactions identified in paragraph (e)
(22) Sales to physicians. of this section, AMP for inhalation, in-
(23) Direct sales to patients. fusion, instilled, implanted, or
(24) Free goods, not contingent upon injectable drugs (5i) covered outpatient
any purchase requirement. drugs identified in accordance with
(25) Manufacturer coupons to a con- § 447.507 shall include sales, nominal
sumer redeemed by the manufacturer, price sales, and associated discounts,
agent, pharmacy or another entity act- rebates, payments, or other financial
ing on behalf of the manufacturer, but transactions to all entities specified in
only to the extent that the full value of paragraph (b) of this section, as well as
the coupon is passed on to the con- the following sales, nominal price
sumer and the pharmacy, agent, or sales, and associated discounts, re-
other AMP-eligible entity does not rebates, payments, or other financial
ceive any price concession. transactions:
(26) Manufacturer-sponsored pro- (1) Sales to physicians.
grams that provide free goods, includ- (2) Sales to pharmacy benefit man-
ing but not limited to vouchers and pa- agers.
tient assistance programs, but only to (3) Sales to health maintenance orga-
the extent that: The voucher or benefit nizations (HMOs), including managed
of such a program is not contingent on care organizations (MCOs).

any other purchase requirement; the (4) Sales to insurers (except for re-
full value of the voucher or benefit of bates under section 1927 of the Act and
such a program is passed on to the con- this subpart).
483
§ 447.504 42 CFR Ch. IV (10–1–17 Edition)
(5) Sales to hospitals. (7) Reimbursement by the manufac-

(6) Sales to clinics and outpatient fa- turer for recalled, damaged, expired, or
cilities (for example, surgical centers, otherwise unsalable returned goods, in-
ambulatory care centers, dialysis cen- cluding (but not limited to) reimburse-
ters, mental health centers). ment for the cost of the goods and any
(7) Sales to mail order pharmacies. reimbursement of costs associated with
(8) Sales to long-term care providers, return goods handling and processing,
including nursing facility pharmacies, reverse logistics, and drug destruction,
nursing home pharmacies, long-term but only to the extent that such pay-
care facilities, contract pharmacies for ment covers only these costs.
the nursing facility where these sales (8) Any prices charged which are ne-
can be identified with adequate docu- gotiated by a prescription drug plan
mentation, and other entities where under Part D of title XVIII, by any
the drugs are dispensed through a nurs- MA–PD plan under Part C of such title
ing facility pharmacy, such as assisted for covered Part D drugs, or by a Quali-
living facilities. fied Retiree Prescription Drug Plan (as
(9) Sales to hospices (inpatient and defined in section 1860D–22(a)(2) of the
outpatient). Act) for such drugs on behalf of indi-
viduals entitled to benefits under Part
(10) Sales to manufacturers, or any
A or enrolled under Part B of Medicare,
other entity that does not conduct
or any discounts provided by manufac-
business as a wholesaler or retail com-
turers under the Medicare coverage gap
munity pharmacy.
discount program under section 1860D–
(e) Sales, nominal price sales, and asso-
14A of the Act.
ciated discounts, rebates, payments, or
(9) Rebates under the national rebate
other transactions excluded from AMP for
agreement or a CMS-authorized State
5i drugs that are not generally dispensed
supplemental rebate agreement paid to
through retail community pharmacies.
State Medicaid Agencies under section
AMP for 5i covered outpatient drugs
1927 of the Act.
identified in accordance with § 447.507
(10) Any rebates, discounts, or price
excludes the following sales, nominal
concessions provided to a designated
price sales, and associated discounts,
State Pharmacy Assistance Program
rebates, or other financial trans-
(SPAP).
actions:
(11) Sales to patients.
(1) Any prices on or after October 1, (12) Free goods, not contingent upon
1992, to the Indian Health Service any purchase requirement.
(IHS), the Department of Veterans Af- (13) Manufacturer coupons to a con-
fairs (DVA), a State home receiving sumer redeemed by the manufacturer,
funds under 38 U.S.C. 1741, the Depart- agent, pharmacy or another entity act-
ment of Defense (DoD), the Public ing on behalf of the manufacturer, but
Health Service (PHS), or a covered en- only to the extent that the full value of
tity described in section 1927(a)(5)(B) of the coupon is passed on to the con-
the Act (including inpatient prices sumer and the pharmacy, agent, or
charged to hospitals described in sec- other AMP eligible entity does not re-
tion 340B(a)(4)(L) of the PHSA). ceive any price concession.
(2) Any prices charged under the Fed- (14) Manufacturer-sponsored pro-
eral Supply Schedule (FSS) of the Gen- grams that provide free goods, includ-
eral Services Administration (GSA). ing, but not limited to vouchers and
(3) Any depot prices (including patient assistance programs, but only
TRICARE) and single award contract to the extent that the voucher or ben-
prices, as defined by the Secretary, of efit of such a program is not contin-
any agency of the Federal government. gent on any other purchase require-
(4) Sales outside the United States. ment; the full value of the voucher or
(5) Bona fide service fees as defined in benefit of such a program is passed on
§ 447.502 paid by manufacturers to to the consumer; and the pharmacy,
wholesalers or retail community phar- agent, or other AMP eligible entity

macies. does not receive any price concession.
(6) Customary prompt pay discounts (15) Manufacturer-sponsored drug dis-
extended to wholesalers. count card programs, but only to the
484
extent that the full value of the dis- Best price means, for a single source
count is passed on to the consumer and drug or innovator multiple source drug
the pharmacy, agent, or other AMP eli- of a manufacturer (including the low-
gible entity does not receive any price est price available to any entity for an
concession. authorized generic drug), the lowest
(16) Manufacturer-sponsored patient price available from the manufacturer
refund/rebate programs, to the extent during the rebate period to any whole-
that the manufacturer provides a full saler, retailer, provider, health mainte-
or partial refund or rebate to the pa- nance organization, nonprofit entity,
tient for out-of-pocket costs and the or governmental entity in the United
pharmacy, agent, or other AMP eligi- States in any pricing structure (includ-
ble entity does not receive any price ing capitated payments), in the same
concessions. quarter for which the AMP is com-
(17) Manufacturer copayment assist- puted.
ance programs, to the extent that the Provider means a hospital, HMO, in-
program benefits are provided entirely cluding an MCO, or entity that treats
to the patient and the pharmacy, or provides coverage or services to in-
agent, or other AMP eligible entity dividuals for illnesses or injuries or
does not receive any price concession. provides services or items in the provi-
(18) Sales to government pharmacies sion of health care.
(for example, a Federal, State, county, (b) Prices included in best price. Except
or municipal-owned pharmacy). for those prices identified in paragraph
(19) Sales to charitable pharmacies. (c) of this section, best price for cov-
(20) Sales to not-for-profit phar- ered outpatient drugs includes all
macies. prices, including applicable discounts,
(f) Further clarification of AMP cal- rebates, or other transactions that ad-
culation. (1) AMP includes cash dis- just prices either directly or indirectly
counts except customary prompt pay to the best price-eligible entities listed
discounts extended to wholesalers, free in paragraph (a) of this section.
goods that are contingent on any pur- (c) Prices excluded from best price. Best
chase requirement, volume discounts, price excludes the following:
chargebacks that can be identified with (1) Any prices on or after October 1,
adequate documentation, incentives, 1992, charged to the IHS, the DVA, a
administrative fees, service fees, dis- State home receiving funds under 38
tribution fees (other than bona fide U.S.C. 1741, the DoD, or the PHS.
service fees), and any other rebates, (2) Any prices charged to a covered
discounts or other financial trans- entity described in section 1927(a)(5)(B)
actions, other than rebates under sec- of the Act (including inpatient prices
tion 1927 of the Act, which reduce the charged to hospitals described in sec-
price received by the manufacturer for tion 340B(a)(4)(L) of the PHSA).
drugs distributed to retail community (3) Any prices charged under the FSS
pharmacies. of the GSA.
(2) Quarterly AMP is calculated as a (4) Any prices, rebates, or discounts
weighted average of monthly AMPs in provided to a designated State Phar-
that quarter. macy Assistance Program (SPAP).
(3) The manufacturer must adjust the (5) Any depot prices (including
AMP for a rebate period if cumulative TRICARE) and single award contract
discounts, rebates, or other arrange- prices, as defined by the Secretary, of
ments subsequently adjust the prices any agency of the Federal government.
actually realized, to the extent that (6) Any prices charged which are ne-
such cumulative discounts, rebates, or gotiated by a prescription drug plan
other arrangements are not excluded under Part D of title XVIII, by any
from the determination of AMP by MA–PD plan under Part C of such title
statute or regulation. for covered Part D drugs, or by a Quali-
fied Retiree Prescription Drug Plan (as
§ 447.505 Determination of best price.
defined in section 1860D–22(a)(2) of the

(a) Definitions. For the purpose of this Act) for such drugs on behalf of indi-
section, the following definitions viduals entitled to benefits under Part
apply: A or enrolled under Part B of Medicare,
485
§ 447.506 42 CFR Ch. IV (10–1–17 Edition)
or any discounts provided by manufac- but only to the extent that such pay-
turers under the Medicare coverage gap ment covers only these costs.
discount program under section 1860D– (15) Nominal prices to certain enti-
14A of the Act. ties as set forth in § 447.508.
(7) Rebates under the national rebate (16) Bona fide service fees as defined
agreement or a CMS-authorized supple- in § 447.502.
mental rebate agreement paid to State (17) PBM rebates, discounts, or other
Medicaid Agencies under section 1927 of financial transactions except their
the Act. mail order pharmacy’s purchases or
(8) Manufacturer-sponsored drug dis- where such rebates, discounts, or other
count card programs, but only to the financial transactions are designed to
extent that the full value of the dis- adjust prices at the retail or provider
count is passed on to the consumer and level.
the pharmacy, agent, or other entity (18) Sales outside the United States.
does not receive any price concession. (19) Direct sales to patients.
(9) Manufacturer coupons to a con- (d) Further clarification of best price.
sumer redeemed by a consumer, agent, (1) Best price is net of cash discounts,
pharmacy, or another entity acting on free goods that are contingent on any
behalf of the manufacturer; but only to purchase requirement, volume dis-
the extent that the full value of the counts, customary prompt pay dis-
coupon is passed on to the consumer, counts, chargebacks, incentives, pro-
and the pharmacy, agent, or other enti- motional fees, administrative fees,
ty does not receive any price conces- service fees (except bona fide service
sion. fees), distribution fees, and any other
(10) Manufacturer copayment assist- discounts or price reductions and re-
ance programs, to the extent that the bates, other than rebates under section
program benefits are provided entirely 1927 of the Act, which reduce the price
to the patient and the pharmacy, available from the manufacturer.
agent, or other entity does not receive (2) Best price must be determined on
any price concession. a unit basis without regard to package
(11) Manufacturer-sponsored patient size, special packaging, labeling, or
refund or rebate programs, to the ex- identifiers on the dosage form or prod-
tent that the manufacturer provides a uct or package.
full or partial refund or rebate to the (3) The manufacturer must adjust the
patient for out-of-pocket costs and the best price for a rebate period if cumu-
pharmacy, agent, or other entity does lative discounts, rebates, or other ar-
not receive any price concession. rangements subsequently adjust the
(12) Manufacturer-sponsored pro- prices available from the manufac-
grams that provide free goods, includ- turer.
ing but not limited to vouchers and pa-
tient assistance programs, but only to § 447.506 Authorized generic drugs.
the extent that the voucher or benefit (a) Definitions. For the purpose of this
of such a program is not contingent on section, the following definitions
any other purchase requirement; the apply:
full value of the voucher or benefit of Primary manufacturer means a manu-
such a program is passed on to the con- facturer that holds the NDA of the au-
sumer; and the pharmacy, agent, or thorized generic drug.
other entity does not receive any price Secondary manufacturer of an author-
concession. ized generic drug means a manufacturer
(13) Free goods, not contingent upon that is authorized by the primary man-
any purchase requirement. ufacturer to sell the drug but does not
(14) Reimbursement by the manufac- hold the NDA.
turer for recalled, damaged, expired, or (b) Inclusion of authorized generic
otherwise unsalable returned goods, in- drugs in AMP by a primary manufac-
cluding, but not limited to, reimburse- turer. The primary manufacturer must
ment for the cost of the goods and any include in its calculation of AMP its
reimbursement of costs associated with sales of authorized generic drugs that
return goods handling and processing, have been sold or licensed to a sec-
reverse logistics, and drug destruction ondary manufacturer, acting as a
486
wholesaler for drugs distributed to re- § 447.508 Exclusion from best price of
tail community pharmacies, or when certain sales at a nominal price.
the primary manufacturer holding the (a) Exclusion from best price. Sales of
NDA sells directly to a wholesaler. covered outpatient drugs by a manu-
(c) Inclusion of authorized generic facturer at nominal prices are excluded
drugs in best price by a primary manufac- from best price when purchased by the
turer. A primary manufacturer holding following entities:
the NDA must include the best price of (1) A covered entity as described in
an authorized generic drug in its com- section 340B(a)(4) of the PHSA.
putation of best price for a single (2) An ICF/IID providing services as
source or an innovator multiple source set forth in § 440.150 of this chapter.
drug during a rebate period to any (3) A State-owned or operated nurs-
manufacturer, wholesaler, retailer, ing facility providing services as set
provider, HMO, non-profit entity, or forth in § 440.155 of this chapter.
governmental entity in the United (4) A public or non-profit entity, or
States, only when such drugs are being an entity based at an institution of
sold by the manufacturer holding the higher learning whose primary purpose
NDA. is to provide health care services to
(d) Inclusion of authorized generic in students of that institution, that pro-
AMP and best price by a secondary manu- vides family planning services de-
facturer. The secondary manufacturer scribed under section of 1001(a) of
of an authorized generic drug must pro- PHSA, 42 U.S.C. 300.
vide a rebate based on its sales of au- (5) An entity that:
thorized generics, and must calculate (i) Is described in section 501(c)(3) of
AMP and best price, consistent with the Internal Revenue Code of 1986 and
exempt from tax under section 501(a) of
the requirements specified in §§ 447.504
that Act or is State-owned or operated;
and 447.505.
and
§ 447.507 Identification of inhalation, (ii) Is providing the same services to
infusion, instilled, implanted, or the same type of population as a cov-
injectable drugs (5i drugs). ered entity described in section
340B(a)(4) of the PHSA but does not re-
(a) Identification of a 5i drug. A manu- ceive funding under a provision of law
facturer must identify to CMS each referred to in such section.
covered outpatient drug that qualifies (b) Nonapplication. This restriction
as a 5i drug. does not apply to sales by a manufac-
(b) Not generally dispensed through a turer of covered outpatient drugs that
retail community pharmacy. A manufac- are sold under a master agreement
turer must determine if the 5i drug is under 38 U.S.C. 8126.
not generally dispensed through a re- (c) Rule of construction. Nothing in
tail community pharmacy based on the this section is construed to alter any
percentage of sales to entities other existing statutory or regulatory prohi-
than retail community pharmacies. bition on services for an entity de-
(1) A 5i drug is not generally dis- scribed paragraph (a)(5) of this section,
pensed through a retail community including the prohibition set forth in
pharmacy if 70 percent or more of the section 1008 of the PHSA.
sales (based on units at the NDC–9
§ 447.509 Medicaid drug rebates
level) of the 5i drug, were to entities (MDR).
other than retail community phar-
macies or wholesalers for drugs distrib- (a) Determination of rebate amount—(1)
uted to retail community pharmacies. Basic rebate for single source drugs and
(2) A manufacturer is responsible for innovator multiple source drugs. The
amount of basic rebate for each dosage
determining and reporting to CMS
form and strength of a single source
whether a 5i drug is not generally dis-
drug or an innovator multiple source

pensed through a retail community drug is equal to the product of:
pharmacy on a monthly basis. (i) The total number of units of each
dosage form and strength paid for
487
§ 447.509 42 CFR Ch. IV (10–1–17 Edition)
under the State plan in the rebate pe- multiple source drug that is an oral
riod (as reported by the State); and solid dosage form.
(ii) The greater of: (B) The highest additional rebate
(A) The difference between the AMP (calculated as a percentage of AMP)
and the best price for the dosage form under this section for any strength of
and strength of the drug; or the original single source drug or inno-
(B) The AMP for the dosage form and vator multiple source drug.
strength of the drug multiplied by one (C) The total number of units of each
of the following percentages: dosage form and strength of the line
(1) For a clotting factor, 17.1 percent; extension product paid for under the
(2) For a drug approved by FDA ex- State plan in the rebate period (as re-
clusively for pediatric indications, 17.1 ported by the State).
percent; or (ii) The alternative rebate is required
(3) For all other single source drugs to be calculated if the manufacturer of
and innovator multiple source drugs, the line extension drug also manufac-
23.1 percent. tures the initial brand name listed
(2) Additional rebate for single source drug or has a corporate relationship
and innovator multiple source drugs. In with the manufacturer of the initial
addition to the basic rebate described brand name listed drug.
in paragraph (a)(1) of this section, for (5) Limit on rebate. In no case will the
each dosage form and strength of a sin- total rebate amount exceed 100 percent
gle source drug or an innovator mul- of the AMP of the drug.
tiple source drug, the rebate amount (6) Rebate for noninnovator multiple
will be increased by an amount equal source drugs. The amount of the rebate
to the product of the following: for each dosage form and strength of a
(i) The total number of units of such noninnovator multiple source drug will
dosage form and strength paid for be equal to the product of:
under the State plan in the rebate pe- (i) The total number of units of such
riod. dosage form and strength for which
(ii) The amount, if any, by which: payment was made under the State
(A) The AMP for the dosage form and plan for the rebate period; and
strength of the drug for the period ex- (ii) The AMP for the dosage form and
ceeds: strength for the rebate period multi-
(B) The base date AMP for such dos- plied by 13 percent.
age form and strength, increased by (b) Rebates for drugs dispensed through
the percentage by which the consumer Medicaid managed care organizations
price index for all urban consumers (MCOs). (1) Manufacturers partici-
(United States city average) for the pating in the Medicaid drug rebate pro-
month before the month in which the gram will provide a rebate for covered
rebate period begins exceeds such index outpatient drugs dispensed to individ-
associated with the base date AMP of uals enrolled in Medicaid MCOs if the
the drug. MCO is contractually required to pro-
(3) Total rebate. The total rebate vide such drugs.
amount for single source drugs and in- (2) Manufacturers are exempt from
novator multiple source drugs is equal the requirement in paragraph (b)(1) of
to the basic rebate amount plus the ad- this section if such drugs are the fol-
ditional rebate amount, if any. lowing:
(4) Treatment of new formulations. (i) (i) Dispensed by health maintenance
In the case of a drug that is a line ex- organizations including MCOs that
tension of a single source drug or an in- contract under section 1903(m) of the
novator multiple source drug that is an Act; and
oral solid dosage form, the rebate obli- (ii) Discounted under section 340B of
gation is the amount computed under the PHSA.
paragraphs (a)(1) through (3) of this (c) Federal offset of rebates. States
section for such new drug or, if greater, must remit to the Federal government
the product of all of the following: the amount of the savings resulting
(A) The AMP of the line extension of from the following increases in the re-
a single source drug or an innovator bate percentages.
488
(1) For single source or innovator § 447.510 Requirements for manufac-

multiple source drugs other than blood turers.
clotting factors and drugs approved by (a) Quarterly reports. A manufacturer
FDA exclusively for pediatric indica- must report product and pricing infor-
tions: mation for covered outpatient drugs to
(i) If AMP minus best price is less CMS not later than 30 days after the
than or equal to AMP times 15.1 per- end of the rebate period. The quarterly
cent, then the offset amount is the full pricing report must include the fol-
8.0 percent of AMP (the difference be- lowing:
tween 23.1 percent of AMP and 15.1 per- (1) AMP, calculated in accordance
cent of AMP). with § 447.504.
(ii) If AMP minus best price is great- (2) Best price, calculated in accord-
er than AMP times 15.1 percent but less ance with § 447.505.
than AMP times 23.1 percent, then the (3) Customary prompt pay discounts,
offset amount is the difference between which are reported as an aggregate dol-
AMP times 23.1 percent and AMP lar amount for each covered outpatient
minus best price. drug at the nine-digit NDC level, pro-
(iii) If AMP minus best price is equal vided to all wholesalers in the rebate
to or greater than AMP times 23.1 per- period.
cent, then there is no offset amount. (4) Prices that fall within the nomi-
(2) For single source or innovator nal price exclusion, which are reported
multiple source drugs that are clotting as an aggregate dollar amount and in-
factors and drugs approved by FDA exclude all sales of single source and in-
clusively for pediatric indications that novator multiple source drugs to the
are subject to a rebate percentage of entities listed in § 447.508(a) for the re-
17.1 percent of AMP: bate period.
(b) Reporting revised quarterly AMP,
(i) If AMP minus best price is less
best price, customary prompt pay dis-
than or equal to AMP times 15.1 per-
counts, or nominal prices. (1) A manufac-
cent, then the offset amount is the full
turer must report to CMS any revision
2.0 percent of AMP (the difference be-
to AMP, best price, customary prompt
tween 17.1 percent of AMP and 15.1 per-
pay discounts, or nominal prices for a
cent of AMP).
period not to exceed 12 quarters from
(ii) If AMP minus best price is great- the quarter in which the data were due.
er than AMP times 15.1 percent but less Any revision request that exceeds 12
than AMP times 17.1 percent, then the quarters will not be considered, except
offset amount is the difference between for the following reasons:
AMP times 17.1 percent and AMP (i) The change is a result of the drug
minus best price. category change or a market date
(iii) If AMP minus best price is equal change.
to or greater than AMP times 17.1 per- (ii) The change is an initial submis-
cent, then there is no offset amount. sion for a product.
(3) For a drug that is a line extension (iii) The change is due to termination
of a single source or innovator multiple of a manufacturer from the MDR pro-
source drug that is an oral solid dosage gram for failure to submit pricing data
form, the offset amount is the dif- and must submit pricing data to reen-
ference between the unit rebate ter the program.
amount (URA) calculation for the drug (iv) The change is due to a technical
calculated based on the applicable re- correction; that is, not based on any
bate percentage in section 1927 of the changes in sales transactions or pricing
Act prior to the Affordable Care Act adjustments from such transactions.
and the calculation of the URA for the (v) The change is to address specific
line extension drug, if greater, in ac- rebate adjustments to States by manu-
cordance with the Affordable Care Act. facturers, as required by CMS or court
(4) For noninnovator multiple source order, or under an internal investiga-
drugs, the offset amount is equal to 2.0 tion, or an OIG or Department of Jus-
percent of the AMP (the difference be- tice (DOJ) investigation.
tween 13.0 percent of AMP and 11.0 per- (2) A manufacturer must report re-
cent of AMP). vised AMP within the 12-quarter time
489
§ 447.510 42 CFR Ch. IV (10–1–17 Edition)
period, except when the revision would (ii) It is calculated as net sales di-
be solely as a result of data pertaining vided by number of units sold, exclud-
to lagged price concessions. ing goods or any other items specifi-
(c) Base date AMP report—(1) Report- cally excluded in the statute or regula-
ing period. A manufacturer may report tions. Monthly AMP is calculated
a revised Deficit Reduction Act (DRA) based on the best data available to the
base date AMP to CMS within the first manufacturer at the time of submis-
4 full calendar quarters following July sion.
17, 2007. (iii) In calculating monthly AMP, a
(2) Recalculation of the DRA base date manufacturer must estimate the im-
AMP. (i) A manufacturer’s recalcula- pact of its lagged AMP-eligible price
tion of the DRA base date AMP must concessions using a 12-month rolling
only reflect the revisions to AMP as percentage in accordance with the
provided for in § 447.504 in effect from methodology described in this para-
October 1, 2007 to December 14, 2010. graph (d)(2).
(ii) A manufacturer may choose to (A) For each NDC–9 with at least 12
recalculate the DRA base date AMP on months of AMP-eligible sales, after ad-
a product-by-product basis. justing for sales excluded from AMP,
(iii) A manufacturer must use actual the manufacturer calculates a percent-
and verifiable pricing records in recal- age equal to the sum of the price con-
culating the DRA base date AMP. cessions for the most recent 12-month
period (inclusive of the current report-
(3) Reporting a revised Affordable Care
ing period) available associated with
Act base date AMP. A manufacturer
sales subject to the AMP reporting re-
may report a revised Affordable Care
quirement divided by the total in dol-
Act base date AMP to CMS within the
lars for the sales subject to the AMP
first 4 full calendar quarters following
reporting requirement for the same 12-
April 1, 2016.
month period.
(4) Recalculation of the Affordable Care (B) For each NDC–9 with less than 12
Act base date AMP. (i) A manufacturer’s months of AMP-eligible sales, the cal-
recalculation of the Affordable Care culation described in paragraph
Act base date AMP must only reflect (d)(2)(iii)(A) of this section is per-
the revisions to AMP as provided for in formed for the time period equaling the
§ 447.504. total number of months of AMP-eligi-
(ii) A manufacturer may choose to ble sales.
recalculate the Affordable Care Act (iv) The manufacturer multiplies the
base date AMP on a product-by-product applicable percentage described in
basis. paragraph (d)(2)(iii)(A) or (B) of this
(iii) A manufacturer must use actual section by the total in dollars for the
and verifiable pricing records in recal- sales subject to the AMP reporting re-
culating the Affordable Care Act base quirement (after adjusting for sales ex-
date AMP. cluded from AMP) for the month being
(d) Monthly AMP—(1) Definition. submitted. The result of this mul-
Monthly AMP means the AMP that is tiplication is then subtracted from the
calculated on a monthly basis. A man- total in dollars for the sales subject to
ufacturer must submit a monthly AMP the AMP reporting requirement (after
to CMS not later than 30 days after the adjusting for sales excluded from AMP)
last day of each prior month. for the month being submitted.
(2) Calculation of monthly AMP. (v) The manufacturer uses the result
Monthly AMP is calculated based on of the calculation described in para-
§ 447.504, except the period covered is graph (d)(2)(iv) of this section as the
based on monthly, as opposed to quar- numerator and the number of units
terly, sales. sold in the month (after adjusting for
(i) The monthly AMP is calculated sales excluded from AMP) as the de-
based on the weighted average of prices nominator to calculate the manufac-
for all the manufacturer’s package turer’s AMP for the NDC for the month
sizes of each covered outpatient drug being submitted.
sold by the manufacturer during a (vi) Example. After adjusting for sales
month. excluded from AMP, the total lagged
490
price concessions over the most recent scribed in paragraphs (e)(1) through (3)
12-month period available associated of this section.
with sales for NDC 12345–6789 subject to (f) Recordkeeping requirements. (1) A
the AMP reporting requirement equal manufacturer must retain records
$200,000, and the total in dollars for the (written or electronic) for 10 years
sales subject to the AMP reporting re- from the date the manufacturer reports
quirement for the same period equals data to CMS for that rebate period.
$600,000. The lagged price concessions (i) The records must include these
percentage for this period equals data and any other materials from
200,000/600,000 = 0.33333. The total in dol- which the calculations of the AMP, the
lars for the sales subject to the AMP best price, customary prompt pay dis-
reporting requirement for the month counts, and nominal prices are derived,
being reported equals $50,000 for 10,000 including a record of any assumptions
units sold. The manufacturer’s AMP made in the calculations.
calculation for this NDC for this month (ii) The 10-year timeframe applies to
is: $50,000¥(0.33333 × $50,000) = $33,334 a manufacturer’s quarterly and month-
(net total sales amount); $33,334/10,000 = ly submissions of pricing data, as well
$3.33340 (AMP). as any revised pricing data subse-
(3) Timeframe for reporting revised quently submitted to CMS.
monthly AMP. A manufacturer must re- (2) A manufacturer must retain
port to CMS revisions to monthly AMP records beyond the 10-year period if all
for a period not to exceed 36 months of the following circumstances exist:
from the month in which the data were (i) The records are the subject of an
due, except as allowed in paragraph audit, or of a government investigation
(b)(1) of this section. related to pricing data that are used in
(4) Exception. A manufacturer must AMP, best price, customary prompt
report revisions to monthly AMP with- pay discounts, or nominal prices of
in the 36-month time period, except which the manufacturer is aware.
(ii) The audit findings or investiga-
when the revision would be solely as a
tion related to the AMP, best price,
result of data pertaining to lagged
customary prompt pay discounts, or
price concessions.
nominal price have not been resolved.
(5) Terminated products. A manufac-
(g) Data reporting format. All product
turer must not report a monthly AMP
and pricing data, whether submitted on
for a terminated product beginning
a quarterly or monthly basis, must be
with the first month after the expira-
submitted to CMS in an electronic for-
tion date of the last lot sold.
mat designated by CMS.
(6) Monthly AMP units. A manufac-
turer must report the total number of § 447.511 Requirements for States.
units that are used to calculate the
(a) Invoices submitted to participating
monthly AMP in the same unit type as
drug manufacturers. Within 60 days of
used to compute the AMP to CMS not
the end of each quarter, the State must
later than 30 days after the last day of
bill participating drug manufacturers
each month.
an invoice which includes, at a min-
(e) Certification of pricing reports. imum, all of the following data:
Each report submitted under para- (1) The State code.
graphs (a) through (d) of this section (2) National Drug Code.
must be certified by one of the fol- (3) Period covered.
lowing: (4) Product FDA list name.
(1) The manufacturer’s chief execu- (5) Unit rebate amount.
tive officer (CEO). (6) Units reimbursed.
(2) The manufacturer’s chief finan- (7) Rebate amount claimed.
cial officer (CFO). (8) Number of prescriptions.
(3) An individual other than a CEO or (9) Medicaid amount reimbursed.
CFO, who has authority equivalent to a (10) Non-Medicaid amount reim-
CEO or a CFO; or bursed.

(4) An individual with the directly (11) Total amount reimbursed.
delegated authority to perform the cer- (b) Data submitted to CMS. On a quar-
tification on behalf of an individual de- terly basis, the State must submit drug
491
§ 447.512 42 CFR Ch. IV (10–1–17 Edition)
utilization data to CMS, which will be cific brand is medically necessary for a
the same information as submitted to particular beneficiary.
the manufacturers. (2) The agency must decide what cer-
(c) State that has participating Med- tification form and procedure are used.
icaid Managed care organizations (MCO). (3) A check off box on a form is not
A State that has participating Med- acceptable but a notation like ‘‘brand
icaid managed care organizations necessary’’ is allowable.
(MCO) which includes covered out- (4) The agency may allow providers
patient drugs in its contracts with the to keep the certification forms if the
MCOs, must report data described in forms will be available for inspection
paragraph (a) of this section for cov- by the agency or HHS.
ered outpatient drugs dispensed to in-
dividuals eligible for medical assist- § 447.514 Upper limits for multiple
ance who are enrolled with the MCO source drugs.
and for which the MCO is required (a) Establishment and issuance of a list-
under contract for coverage of such ing. (1) CMS will establish and issue
drugs under section 1903 of the Act. listings that identify and set upper
These data must be identified sepa- limits for multiple source drugs avail-
rately from the data pertaining to able for purchase by retail community
drugs that the State reimburses on a pharmacies on a nationwide basis that
fee-for-service basis. FDA has rated at least three drug prod-
ucts as pharmaceutically and thera-
§ 447.512 Drugs: Aggregate upper lim- peutically equivalent in the ‘‘Approved
its of payment. Drug Products with Therapeutic
(a) Multiple source drugs. Except for Equivalence Evaluations’’ which is
brand name drugs that are certified in available at http://
accordance with paragraph (c) of this www.accessdata.fda.gov/scripts/cder/ob/.
section, the agency payment for mul- Only pharmaceutically and therapeuti-
tiple source drugs must not exceed, in cally equivalent formulations will be
the aggregate, the amount that would used to determine such limit, and such
result from the application of the spe- limit will only be applied to those
cific limits established in accordance equivalent drug products.
with § 447.514. If a specific limit has not (2) CMS publishes the list of multiple
been established under § 447.514, then source drugs for which upper limits
the rule for ‘‘other drugs’’ set forth in have been established and any revi-
paragraph (b) of this section applies. sions to the list in Medicaid Program
(b) Other drugs. The agency payments issuances.
for brand name drugs certified in ac- (b) Specific upper limits. (1) The agen-
cordance with paragraph (c) of this sec- cy’s payments for multiple source
tion and drugs other than multiple drugs identified and listed periodically
source drugs for which a specific limit by CMS in Medicaid Program issuances
has been established under § 447.514 must not exceed, in the aggregate,
must not exceed, in the aggregate, pay- prior to the application of any federal
ment levels that the agency has deter- or state drug rebate considerations,
mined by applying the lower of the fol- payment levels determined by applying
lowing: for each pharmaceutically and thera-
(1) AAC plus a professional dis- peutically equivalent multiple source
pensing fee established by the agency; drug product, a professional dispensing
or fee established by the state agency plus
(2) Providers’ usual and customary an amount established by CMS that is
charges to the general public. equal to 175 percent of the weighted av-
(c) Certification of brand name drugs. erage of the most recently reported
(1) The upper limit for payment for monthly AMPs for such multiple
multiple source drugs for which a spe- source drugs, using manufacturer sub-
cific limit has been established under mitted utilization data for each mul-
§ 447.514 does not apply if a physician tiple source drug for which a Federal
certifies in his or her own handwriting upper limit (FUL) is established.
(or by an electronic alternative means (2) Exception. If the amount estab-
approved by the Secretary) that a spe- lished by CMS in paragraph (b)(1) of
492
this section for a pharmaceutically and must be in accordance with the defini-
therapeutically equivalent multiple tion of AAC in § 447.502.
source drug product is lower than the (b) Findings and assurances. Upon pro-
average retail community pharmacies’ posing significant State plan changes
acquisition cost for such drug product, in payments for prescription drugs, and
as determined by the most current na- at least annually for multiple source
tional survey of such costs, CMS will drugs and triennially for all other
use a percent of the weighted average drugs, the agency must make the fol-
of the most recently reported monthly lowing findings and assurances:
AMPs that equals the most current av- (1) Findings. The agency must make
erage acquisition costs paid by retail the following separate and distinct
community pharmacies as determined findings:
by such survey. (i) In the aggregate, its Medicaid ex-
(c) Ensuring a drug is for sale nation- penditures for multiple source drugs,
ally. To assure that a multiple source identified and listed in accordance with
drug is for sale nationally, CMS will § 447.514(a), are in accordance with the
consider the following additional cri- upper limits specified in § 447.514(b).
teria: (ii) In the aggregate, its Medicaid ex-
(1) The AMP of a terminated NDC penditures for all other drugs are in ac-
will not be used to set the Federal cordance with § 447.512.
upper limit (FUL) beginning with the (2) Assurances. The agency must
first day of the month after the termi- make assurances satisfactory to CMS
nation date reported by the manufac-
that the requirements set forth in
turer to CMS.
§§ 447.512 and 447.514 concerning upper
(2) The monthly AMP units data will limits and in paragraph (b)(1) of this
be used to calculate the weighted aver- section concerning agency findings are
age of monthly AMPs for all multiple met.
source drugs to establish the FUL.
(c) Recordkeeping. The agency must
(d) The FUL will be applied as an ag- maintain and make available to CMS,
gregate upper limit. upon request, data, mathematical or
§ 447.516 Upper limits for drugs fur- statistical computations, comparisons,
nished as part of services. and any other pertinent records to sup-
port its findings and assurances.
The upper limits for payment for pre- (d) Data requirements. When proposing
scribed drugs in this subpart also apply changes to either the ingredient cost
to payment for drugs provided as part reimbursement or professional dis-
of skilled nursing facility services and pensing fee reimbursement, States are
intermediate care facility services and required to evaluate their proposed
under prepaid capitation arrange- changes in accordance with the re-
ments.
quirements of this subpart, and States
§ 447.518 State plan requirements, must consider both the ingredient cost
findings, and assurances. reimbursement and the professional
dispensing fee reimbursement when
(a) State plan. (1) The State plan must proposing such changes to ensure that
describe comprehensively the agency’s total reimbursement to the pharmacy
payment methodology for prescription provider is in accordance with require-
drugs, including the agency’s payment ments of section 1902(a)(30)(A) of the
methodology for drugs dispensed by all Act. States must provide adequate data
of the following: such as a State or national survey of
(i) A covered entity described in sec- retail pharmacy providers or other reli-
tion 1927(a)(5)(B) of the Act. able data other than a survey to sup-
(ii) A contract pharmacy under con- port any proposed changes to either or
tract with a covered entity described in both of the components of the reim-
section 1927(a)(5)(B) of the Act. bursement methodology. States must
(iii) An Indian Health Service, tribal submit to CMS the proposed change in
and urban Indian pharmacy. reimbursement and the supporting
(2) The agency’s payment method- data through a State plan amendment
ology in paragraph (a)(1) of this section through the formal review process.
493
§ 447.520 42 CFR Ch. IV (10–1–17 Edition)
§ 447.520 Federal Financial Participa- that they are not eligible to be covered
tion (FFP): Conditions relating to as covered outpatient drugs in the
physician-administered drugs. Medicaid Drug Rebate program.
(a) No FFP is available for physician- (e) Investigational drugs and other
administered drugs for which a State drugs are not subject to the rebate re-
has not required the submission of quirements of section 1927 of the Act
claims using codes that identify the provided they do not meet the defini-
drugs sufficiently for the State to bill tion of a covered outpatient drug as set
a manufacturer for rebates. forth in section 1927(k) of the Act.
(1) As of January 1, 2006, a State
must require providers to submit PART 455—PROGRAM INTEGRITY:
claims for single source, physician-ad- MEDICAID
ministered drugs using Healthcare
Common Procedure Coding System Sec.
codes or NDC numbers to secure re- 455.1 Basis and scope.
bates. 455.2 Definitions.
(2) As of January 1, 2007, a State 455.3 Other applicable regulations.
must require providers to submit
claims for physician-administered sin- Subpart A—Medicaid Agency Fraud
gle source drugs and the 20 multiple Detection and Investigation Program
source drugs identified by the Sec-
455.12 State plan requirement.
retary using NDC numbers.
455.13 Methods for identification, investiga-
(b) As of January 1, 2008, a State tion, and referral.
must require providers to submit 455.14 Preliminary investigation.
claims for the 20 multiple source physi- 455.15 Full investigation.
cian-administered drugs identified by 455.16 Resolution of full investigation.
the Secretary as having the highest 455.17 Reporting requirements.
dollar value under the Medicaid Pro- 455.18 Provider’s statements on claims
gram using NDC numbers to secure re- forms.
bates. 455.19 Provider’s statement on check.
(c) A State that requires additional 455.20 Beneficiary verification procedure.
time to comply with the requirements 455.21 Cooperation with State Medicaid
of this section may apply to the Sec- fraud control units.
455.23 Suspension of payments in cases of
retary for an extension.
fraud.
§ 447.522 Optional coverage of inves-
tigational drugs and other drugs Subpart B—Disclosure of Information by
not subject to rebate. Providers and Fiscal Agents
(a) Medicaid coverage of investiga- 455.100 Purpose.
tional drugs may be provided at State 455.101 Definitions.
option under section 1905(a)(12) of the 455.102 Determination of ownership or con-
Act when such drug is the subject of an trol percentages.
investigational new drug application 455.103 State plan requirement.
(IND) that has been allowed by FDA to 455.104 Disclosure by Medicaid providers
and fiscal agents: Information on owner-
proceed. ship and control.
(b) A State agency electing to pro- 455.105 Disclosure by providers: Information
vide coverage of an investigational related to business transactions.
drug must include in its State plan a 455.106 Disclosure by providers: Information
description of the coverage and pay- on persons convicted of crimes.
ment for such drug.
(c) The State plan must indicate that Subpart C—Medicaid Integrity Program
any reimbursement for investigational
455.200 Basis and scope.
drugs by the State are consistent with 455.202 Limitation on contractor liability.
FDA regulations at 21 CFR part 312 if 455.230 Eligibility requirements.
they are to be eligible to receive FFP 455.232 Medicaid integrity audit program
for these drugs. contractor functions.

(d) Medicaid coverage of other drugs 455.234 Awarding of a contract.
may be provided at State option under 455.236 Renewal of a contract.
section 1905(a)(12) of the Act provided 455.238 Conflict of interest.
494
455.240 Conflict of interest resolution. suspected fraud and abuse cases. In ad-
dition, the subpart requires that the
Subpart D—Independent Certified Audit of State—
State Disproportionate Share Hospital (1) Report fraud and abuse informa-
Payment Adjustments tion to the Department; and
455.300 Purpose. (2) Have a method to verify whether
455.301 Definitions. services reimbursed by Medicaid were
455.304 Condition for Federal financial par- actually furnished to beneficiaries.
ticipation (FFP). (b) Subpart B implements sections
1124, 1126, 1902(a)(36), 1903(i)(2), and
Subpart E—Provider Screening and 1903(n) of the Act. It requires that pro-
Enrollment viders and fiscal agents must agree to
455.400 Purpose. disclose ownership and control infor-
455.405 State plan requirements. mation to the Medicaid State agency.
455.410 Enrollment and screening of pro- (c) Subpart C implements section 1936
viders. of the Act. It establishes the Medicaid
455.412 Verification of provider licenses. Integrity Program under which the
455.414 Revalidation of enrollment. Secretary will promote the integrity of
455.416 Termination or denial of enrollment.
455.420 Reactivation of provider enrollment.
the program by entering into contracts
455.422 Appeal rights. with eligible entities to carry out the
455.432 Site visits. activities of subpart C.
455.434 Criminal background checks.
455.436 Federal database checks.
FR 67655, Nov. 30, 2007]
455.440 National Provider Identifier.
455.450 Screening levels for Medicaid pro-
viders.
455.452 Other State screening methods. As used in this part unless the con-
455.460 Application fee. text indicates otherwise—
455.470 Temporary moratoria. Abuse means provider practices that
are inconsistent with sound fiscal,
Subpart F—Medicaid Recovery Audit
business, or medical practices, and re-
Contractors Program
sult in an unnecessary cost to the Med-
455.500 Purpose. icaid program, or in reimbursement for
455.502 Establishment of program. services that are not medically nec-
455.504 Definitions. essary or that fail to meet profes-
455.506 Activities to be conducted by Med- sionally recognized standards for
icaid RACs and States.
455.508 Eligibility requirements for Med-
health care. It also includes bene-
icaid RACs. ficiary practices that result in unnec-
455.510 Payments to RACs. essary cost to the Medicaid program.
455.512 Medicaid RAC provider appeals. Conviction or Convicted means that a
455.514 Federal share of State expense for judgment of conviction has been en-
the Medicaid RAC program. tered by a Federal, State, or local
455.516 Exceptions from Medicaid RAC pro- court, regardless of whether an appeal
grams.
455.518 Applicability to the territories.
from that judgment is pending.
Credible allegation of fraud. A credible
AUTHORITY: Sec. 1102 of the Social Security allegation of fraud may be an allega-
Act (42 U.S.C. 1302). tion, which has been verified by the
SOURCE: 43 FR 45262, Sept. 29, 1978, unless State, from any source, including but
otherwise noted. not limited to the following:
(1) Fraud hotline complaints.
§ 455.1 Basis and scope. (2) Claims data mining.
This part sets forth requirements for (3) Patterns identified through pro-
a State fraud detection and investiga- vider audits, civil false claims cases,
tion program, and for disclosure of in- and law enforcement investigations.
formation on ownership and control. Allegations are considered to be cred-
(a) Under the authority of sections ible when they have indicia of reli-
1902(a)(4), 1903(i)(2), and 1909 of the So- ability and the State Medicaid agency
cial Security Act, Subpart A provides has reviewed all allegations, facts, and
State plan requirements for the identi- evidence carefully and acts judiciously
fication, investigation, and referral of on a case-by-case basis.
495
§ 455.3 42 CFR Ch. IV (10–1–17 Edition)
Exclusion means that items or serv- Subpart A—Medicaid Agency

ices furnished by a specific provider Fraud Detection and Inves-
who has defrauded or abused the Med- tigation Program
icaid program will not be reimbursed
under Medicaid. § 455.12 State plan requirement.
Fraud means an intentional decep- A State plan must meet the require-
tion or misrepresentation made by a ments of §§ 455.13 through 455.23.
person with the knowledge that the de-
[52 FR 48817, Dec. 28, 1987]
ception could result in some unauthor-
ized benefit to himself or some other § 455.13 Methods for identification, in-
person. It includes any act that con- vestigation, and referral.
stitutes fraud under applicable Federal
The Medicaid agency must have—
or State law. (a) Methods and criteria for identi-
Furnished refers to items and services fying suspected fraud cases;
provided directly by, or under the di- (b) Methods for investigating these
rect supervision of, or ordered by, a cases that—
practitioner or other individual (either (1) Do not infringe on the legal rights
as an employee or in his or her own ca- of persons involved; and
pacity), a provider, or other supplier of (2) Afford due process of law; and
services. (For purposes of denial of re- (c) Procedures, developed in coopera-
imbursement within this part, it does tion with State legal authorities, for
not refer to services ordered by one referring suspected fraud cases to law
party but billed for and provided by or enforcement officials.
under the supervision of another.) [43 FR 45262, Sept. 29, 1978, as amended at 48
Practitioner means a physician or FR 3755, Jan. 27, 1983]
other individual licensed under State
law to practice his or her profession. § 455.14 Preliminary investigation.
Suspension means that items or serv- If the agency receives a complaint of
ices furnished by a specified provider Medicaid fraud or abuse from any
who has been convicted of a program- source or identifies any questionable
related offense in a Federal, State, or practices, it must conduct a prelimi-
local court will not be reimbursed nary investigation to determine wheth-
under Medicaid. er there is sufficient basis to warrant a
full investigation.
FR 37375, Sept. 13, 1985; 51 FR 34788, Sept. 30, [48 FR 3756, Jan. 27, 1983]
1986; 76 FR 5965, Feb. 2, 2011]
§ 455.15 Full investigation.
§ 455.3 Other applicable regulations. If the findings of a preliminary inves-
Part 1002 of this title sets forth the tigation give the agency reason to be-
following: lieve that an incident of fraud or abuse
(a) State plan requirements for ex- has occurred in the Medicaid program,
the agency must take the following ac-
cluding providers for fraud and abuse,
tion, as appropriate:
and suspending practitioners convicted
(a) If a provider is suspected of fraud
of program-related crimes. or abuse, the agency must—
(b) The limitations on FFP for serv- (1) In States with a State Medicaid
ices furnished by excluded providers or fraud control unit certified under sub-
suspended practitioners. part C of part 1002 of this title, refer
(c) The requirements and procedures the case to the unit under the terms of
for reinstatement after exclusion or its agreement with the unit entered
suspension. into under § 1002.309 of this title; or
(d) Requirements for the establish- (2) In States with no certified Med-
ment and operation of State Medicaid icaid fraud control unit, or in cases
fraud control units and the rates of where no referral to the State Medicaid
FFP for their fraud control activities. fraud control unit is required under
paragraph (a)(1) of this section, con-
[51 FR 34788, Sept. 30, 1986] duct a full investigation or refer the
496
case to the appropriate law enforce- (5) The approximate range of dollars
ment agency. involved; and
(b) If there is reason to believe that a (6) The legal and administrative dis-
beneficiary has defrauded the Medicaid position of the case, including actions
program, the agency must refer the taken by law enforcement officials to
case to an appropriate law enforcement whom the case has been referred.
agency. (Approved by the Office of Management and
(c) If there is reason to believe that a Budget under control number 0938–0076)
beneficiary has abused the Medicaid
program, the agency must conduct a FR 3756, Jan. 27, 1983]
full investigation of the abuse.
[48 FR 3756, Jan. 27, 1983, as amended at 51 § 455.18 Provider’s statements on
FR 34788, Sept. 30, 1986] claims forms.
(a) Except as provided in § 455.19, the
§ 455.16 Resolution of full investiga- agency must provide that all provider
tion. claims forms be imprinted in boldface
A full investigation must continue type with the following statements, or
until— with alternate wording that is ap-
(a) Appropriate legal action is initi- proved by the Regional CMS Adminis-
ated; trator:
(b) The case is closed or dropped be- (1) ‘‘This is to certify that the fore-
cause of insufficient evidence to sup- going information is true, accurate,
port the allegations of fraud or abuse; and complete.’’
or (2) ‘‘I understand that payment of
(c) The matter is resolved between this claim will be from Federal and
the agency and the provider or bene- State funds, and that any falsification,
ficiary. This resolution may include or concealment of a material fact, may
but is not limited to— be prosecuted under Federal and State
(1) Sending a warning letter to the laws.’’
provider or beneficiary, giving notice (b) The statements may be printed
that continuation of the activity in above the claimant’s signature or, if
question will result in further action; they are printed on the reverse of the
(2) Suspending or terminating the form, a reference to the statements
provider from participation in the Med- must appear immediately preceding
icaid program; the claimant’s signature.
(3) Seeking recovery of payments § 455.19 Provider’s statement on check.
made to the provider; or
(4) Imposing other sanctions provided As an alternative to the statements
under the State plan. required in § 455.18, the agency may
print the following wording above the
[43 FR 45262, Sept. 29, 1978, as amended at 48 claimant’s endorsement on the reverse
FR 3756, Jan. 27, 1983] of checks or warrants payable to each
provider: ‘‘I understand in endorsing or
§ 455.17 Reporting requirements.
depositing this check that payment
The agency must report the following will be from Federal and State funds
fraud or abuse information to the ap- and that any falsification, or conceal-
propriate Department officials at in- ment of a material fact, may be pros-
tervals prescribed in instructions. ecuted under Federal and State laws.’’
(a) The number of complaints of
fraud and abuse made to the agency § 455.20 Beneficiary verification proce-
that warrant preliminary investiga- dure.
tion. (a) The agency must have a method
(b) For each case of suspected pro- for verifying with beneficiaries wheth-
vider fraud and abuse that warrants a er services billed by providers were re-
full investigation— ceived.
(1) The provider’s name and number; (b) In States receiving Federal
(2) The source of the complaint; matching funds for a mechanized
(3) The type of provider; claims processing and information re-
(4) The nature of the complaint; trieval system under part 433, subpart
497
§ 455.21 42 CFR Ch. IV (10–1–17 Edition)
C, of this subchapter, the agency must (3) A provider may request, and must
provide prompt written notice as re- be granted, administrative review
quired by § 433.116 (e) and (f). where State law so requires.
(b) Notice of suspension. (1) The State
FR 8854, Mar. 1, 1991]
agency must send notice of its suspen-
sion of program payments within the
§ 455.21 Cooperation with State Med- following timeframes:
icaid fraud control units. (i) Five days of taking such action
unless requested in writing by a law
In a State with a Medicaid fraud con-
enforcement agency to temporarily
trol unit established and certified
withhold such notice.
under subpart C of this part,
(ii) Thirty days if requested by law
(a) The agency must— enforcement in writing to delay send-
(1) Refer all cases of suspected pro- ing such notice, which request for
vider fraud to the unit; delay may be renewed in writing up to
(2) If the unit determines that it may twice and in no event may exceed 90
be useful in carrying out the unit’s re- days.
sponsibilities, promptly comply with a (2) The notice must include or ad-
request from the unit for— dress all of the following:
(i) Access to, and free copies of, any (i) State that payments are being
records or information kept by the suspended in accordance with this pro-
agency or its contractors; vision.
(ii) Computerized data stored by the (ii) Set forth the general allegations
agency or its contractors. These data as to the nature of the suspension ac-
must be supplied without charge and in tion, but need not disclose any specific
the form requested by the unit; and information concerning an ongoing in-
(iii) Access to any information kept vestigation.
by providers to which the agency is au- (iii) State that the suspension is for a
thorized access by section 1902(a)(27) of temporary period, as stated in para-
the Act and § 431.107 of this subchapter. graph (c) of this section, and cite the
In using this information, the unit circumstances under which the suspen-
must protect the privacy rights of sion will be terminated.
beneficiaries; and (iv) Specify, when applicable, to
(3) On referral from the unit, initiate which type or types of Medicaid claims
any available administrative or judi- or business units of a provider suspen-
cial action to recover improper pay- sion is effective.
ments to a provider. (v) Inform the provider of the right
(b) The agency need not comply with to submit written evidence

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CFR 2017 Title42a Vol4

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Title 42

Revised as of October 1, 2017

Containing a codification of documents

Published by the Office of the Federal Register

Legal Status and Use of Seals and Logos

Use of ISBN Prefix

U.S. GOVERNMENT PUBLISHING OFFICE

U.S. Superintendent of Documents • Washington, DC 20402–0001

Chapter IV—Centers for Medicare & Medicaid Services, Depart-

Table of CFR Titles and Chapters ....................................................... 705

Alphabetical List of Agencies Appearing in the CFR ......................... 725

List of CFR Sections Affected ............................................................. 735

To cite the regulations in

OMB CONTROL NUMBERS

CHAPTER IV—Centers for Medicare & Medicaid Services, De-

SUBCHAPTER C—MEDICAL ASSISTANCE PROGRAMS

457 Allotments and grants to States ............................. 551

460 Programs of all-inclusive care for the elderly

475 Quality improvement organizations ....................... 662

PART 430—GRANTS TO STATES FOR 430.80 Authority of the presiding officer.

hearing. Act (section 1102 of the Act), or his

onstration projects under sections 1110

§ 430.18 Administrative review of ac- groups eligible for services provided

services to individuals eligible under (through provision of additional serv-

(iv) Limit beneficiaries’ choice of gency room if the conditions of para-

any cost-sharing imposed on bene- community-based services under section

(3) Effect of award. The grant award

appropriated under Federal and State hearing.)

of fact if they are supported by sub- regional office, in readily reviewable

expenditures in question were made or was received by CMS.

quested documents and materials. this section, submit a notice of appeal

procedures are those set forth in 45 by installments if all of the following

of the estimated State share of the cur- payment amount;

moved, the hearing is terminated. (3) Comments on petition. Any party

authority pertains to the issues of

noncompliance, Federal payments will ceeding. Argument is not received in

(a) Evidentiary purpose. The hearing is

cision, to the Administrator. The Ad- 431.10 Single State agency.

431.105 Consultation to medical facilities. 431.250 Federal financial participation.

cational rehabilitation agencies and title

431.834 Access to records: Claims processing or supervise the administration of the

(3) The Medicaid agency— provisions for:

State agencies, the plan must include a tive recommendations; and

(g) Federal financial participation. countability as required by the Sec-

the State, acting through a State agen-

provider that undertakes to provide services.

1902(a)(10)(C)(i)(III) of the Act, with re- lized Medicaid services at a frequency

ficiaries. ographic location: and reasonable trav-

gram and; management system.

(i) Do not apply in emergency situa- when a restriction is imposed unless

(3) Definitions. As used in this sec- furnish consultative services to hos-

furnishing Medicaid services. services under the plan;

public institutions in which Medicaid (2) Make available survey reports,

or continue participation in the Med- aspects of nursing facility services and

§ 431.153 Evidentiary hearing. (1) Basic rule. Except as provided in

(j) Limits on scope of review: Civil (1) Is subject to a proposed transfer

this chapter; and starts over from the beginning.

nursing facility intends to take and the monwealth;

mandatory enrollment in an Alter- (b) The agency may not limit or

§ 431.223 Denial or dismissal of re- PROCEDURES

fair hearing process for individuals to

The hearing must cover—

(1) The transcript or recording of tes- dent review), as expeditiously as pos-