[Federal Register Volume 77, Number 92 (Friday, May 11, 2012)]
[Proposed Rules]
[Pages 27671-27691]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11421]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Parts 438, 441, and 447

[CMS-2370-P]
RIN 0938-AQ63


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

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would implement new requirements in 
sections 1902(a)(13), 1902(jj), 1932(f), and 1905(dd) of the Social 
Security Act, as amended by the Patient Protection and Affordable Care 
Act of 2010 (the

[[Page 27672]]

Affordable Care Act). It implements Medicaid payment for primary care 
services furnished by certain physicians in calendar years (CYs) 2013 
and 2014 at rates not less than the Medicare rates in effect in those 
CYs or, if greater, the payment rates that would be applicable in those 
CYs using the CY 2009 Medicare physician fee schedule conversion factor 
(CF). This minimum payment level applies to specified primary care 
services furnished by a physician with a specialty designation of 
family medicine, general internal medicine, or pediatric medicine, and 
also applies to services paid through Medicaid managed care plans. It 
would also provide for a 100 percent Federal matching rate for any 
increase in payment above the amounts that would be due for these 
services under the provisions of the State plan as of July 1, 2009. In 
this proposed rule, we specify which services and types of physicians 
qualify for the minimum payment level in CYs 2013 and 2014, and the 
method for calculating the payment amount and any increase for which 
increased Federal funding is due.
    In addition, this proposed rule would update the interim regional 
maximum fees that providers may charge for the administration of 
pediatric vaccines to federally vaccine-eligible children under the 
Pediatric Immunization Distribution Program, more commonly known as the 
Vaccines for Children (VFC) program.

DATES: To be assured consideration, comments must be received at one of 
the addresses provided below, no later than 5 p.m. on June 11, 2012.

ADDRESSES: In commenting, please refer to file code CMS-2370-P. Because 
of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed):
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov.
    Follow the ``Submit a comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address ONLY: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-2370-P, P.O. Box 8016, 
Baltimore, MD 21244-8016.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address ONLY: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-2370-P, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1850.
    4. By hand or courier. If you prefer, you may deliver (by hand or 
courier) your written comments before the close of the comment period 
to either of the following addresses:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue SW., Washington, DC 
20201.

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

    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
please call telephone number (410) 786-7195 in advance to schedule your 
arrival with one of our staff members.
    Comments mailed to the addresses indicated as appropriate for hand 
or courier delivery may be delayed and received after the comment 
period.
    Submission of comments on paperwork requirements. You may submit 
comments on this document's paperwork requirements by following the 
instructions at the end of the ``Collection of Information 
Requirements'' section in this document.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

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

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

I. Executive Summary and Background

A. Executive Summary

1. Purpose
    This proposed rule implements new requirements in sections 
1902(a)(13), 1902(jj), 1905(dd) and 1932(f) of the Social Security Act 
requiring payment by State Medicaid agencies of at least the Medicare 
rates in effect in CYs 2013 and 2014 or, if higher, the rate using the 
CY 2009 conversion factor (CF) for primary care services furnished by a 
physician with a specialty designation of family medicine, general 
internal medicine, or pediatric medicine. Also, this proposed rule 
implements the statutory payment provisions uniformly across all 
States, defines, for purposes of enhanced Federal match, eligible 
primary care physicians, identifies eligible primary care services, and 
specifies how the increased payment should be calculated. Finally, this 
proposed rule provides general guidelines for implementing the 
increased payment for primary care services delivered by managed care 
plans.
    This proposed rule also proposes updates to vaccine rates that have 
not been updated since the VFC program was established in 1994. We 
propose to update these rates due to inflation and we are proposing to 
use the Medicare Economic Index (MEI).
2. Summary of the Major Provisions
a. Payments to Physicians for Primary Care Services
    This proposed rule would implement Medicaid payment for primary 
care services furnished by certain physicians in calendar years (CYs) 
2013 and 2014 at rates not less than the Medicare rates in effect in 
those CYs or, if greater, the payment rates that would be applicable in 
those CYs using the CY 2009

[[Page 27673]]

conversion factor (CF). It would also provide for a 100 percent Federal 
matching rate for any increase in payment above the amounts that would 
be due for these services under the provisions of the State plan as of 
July 1, 2009. This proposed rule is necessary to promote access to 
primary care services in the Medicaid program before and during the 
expansion of coverage that begins in 2014. These proposals implement 
the Affordable Care Act.
b. Vaccine Administration Under the Vaccines for Children (VFC) Program
    This proposed rule proposes to update the interim regional maximum 
fees that providers may charge for the administration of pediatric 
vaccines to federally vaccine-eligible children under the Pediatric 
Immunization Distribution Program, more commonly known as the Vaccines 
for Children (VFC) program. We are proposing to use the MEI which is a 
price index that is used by CMS to update Medicare physician payments. 
We believe the MEI is the best tool to update these rates because: (1) 
It reflects input price inflation faced by physicians inclusive of the 
time period when the national average was established in 1994, and (2) 
we believe that input prices associated with this specific type of 
physician-provided service are consistent with overall input prices. 
The MEI was most recently updated at the end of 2011.
3. Summary of the Costs and Benefits

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      Provision description                      Total costs                           Total benefits
----------------------------------------------------------------------------------------------------------------
Payments to Physicians for         The overall economic impact of this     The overall benefit of this rule is
 Primary Care Services.             proposed rule is an estimated $5.52     the expected increase in provider
                                    billion in CY 2013 and $5.66 billion    participation by primary care
                                    in CY 2014. In CY 2013, the Federal     physicians resulting in better
                                    cost is approximately $5.74 billion     access to primary and preventive
                                    with $225 million in State savings.     health services by Medicaid
                                    In CY 2014, the Federal cost is         beneficiaries.
                                    approximately $5.96 billion with $300
                                    million in State savings. Of this
                                    amount, the aggregate economic
                                    impact, as a result of this proposed
                                    rule requiring States to reimburse
                                    specified physicians for vaccine
                                    administration at the lesser of the
                                    Medicare rate or the VFC regional
                                    maximum during CYs 2013 and 2014, is
                                    estimated at an additional $970
                                    million in Federal costs. The Federal
                                    costs for funding that increase, in
                                    State payments during CYs 2013 and
                                    2014, are estimated at $490 million
                                    and $480 million, respectively.
Increase in Vaccine for Children   This rule raises the maximum rate that  The overall benefit of this provision
 Program Maximum Ceiling.           States could pay providers for the      is that it gives States the ability
                                    administration of vaccines under the    to increase their VFC vaccine
                                    VFC program in subsequent years after   administration rates.
                                    CY 2014. States are not anticipated
                                    to raise their VFC ceilings in 2013
                                    and 2014 because of the
                                    implementation of the primary care
                                    payment increase.
----------------------------------------------------------------------------------------------------------------

C. Background

1. Payments to Physicians for Primary Care Services: Statutory and 
Regulatory Framework
a. Improving Primary Care
    On March 23, 2010, the Patient Protection and Affordable Care Act 
(Pub. L. 111-148) was enacted and on March 30, 2010, the Health Care 
and Education Reconciliation Act of 2010 (HCERA) (Pub. L. 111-152) was 
enacted; together they are known as the Affordable Care Act. This 
proposed rule would implement the new requirements in sections 
1902(a)(13), 1902(jj), 1932(f), and 1905(dd) of the Act, as amended by 
the Affordable Care Act. Section 1902(a)(13) of the Act requires 
payment by State Medicaid agencies of at least the Medicare rates in 
effect in calendar years (CYs) 2013 and 2014 or, if higher, the rate 
that would be applicable using the CY 2009 Medicare conversion factor 
(CF), for primary care services furnished by a physician with a 
specialty designation of family medicine, general internal medicine, or 
pediatric medicine.
    Primary care for any population is critical to ensuring continuity 
of care, as well as to providing necessary preventive care, which 
improves overall health and can reduce health care costs. The 
availability of primary care is particularly important for Medicaid 
enrollees to establish a regular source of care and to provide care to 
a population that is more prone to chronic health conditions that can 
be appropriately managed by primary care physicians. Primary care 
physicians provide services that are considered to be a core part of 
the Medicaid benefit package. Additionally, these physicians can 
perform the vital function of coordinating care, including specialty 
care.
    As we move towards CY 2014 and the expansion of Medicaid 
eligibility, it is critical that a sufficient number of primary care 
physicians participate in the program. Section 1902(a)(13) of the Act 
will encourage primary care physicians to participate in Medicaid by 
increasing payment rates.
b. Medicaid Payment to Providers
    Section 1902(a)(30)(A) of the Act requires that Medicaid payments 
be consistent with efficiency, economy, and quality of care and be 
sufficient to enlist enough providers so that care and services are 
available under the plan at least to the extent that such care and 
services are available to the general population in the geographic 
area. In meeting these requirements, States have broad discretion in 
establishing and updating Medicaid service payment rates to primary 
care providers. For instance, many States reimburse based on the cost 
of providing the service, a review of the amount paid by commercial 
payers in the private market, or as a percentage of rates paid under 
the Medicare program for equivalent services. States may update

[[Page 27674]]

rates based on specific trending factors such as the MEI or a Medicaid 
specific trend factor that incorporates a State-determined inflation 
adjustment rate. Increasingly, States are providing medical assistance 
through managed care plans under contracts with managed care 
organizations (MCOs) and other organized delivery systems, such as 
prepaid inpatient health plans (PIHPs) and prepaid ambulatory health 
plans (PAHPs). The contract between the State and the managed care plan 
requires the plan to provide access to and make payments to primary 
care physicians using the funds the State pays to the managed care 
plan. Indeed, according to the Medicaid and CHIP Payment and Access 
Commission (MACPAC), 49 million Medicaid beneficiaries receive care 
through some form of Medicaid managed care.
    Section 1902(a)(13)(C) of the Act requires that States pay a 
minimum payment amount for certain primary care services delivered by 
designated primary care physicians. Primary care services are defined 
in new section 1902(jj) of the Act and include certain specified 
procedure codes for evaluation and management (E&M) services and 
certain vaccine administration codes. Under this provision, States must 
reimburse at least as much as the Medicare physician fee schedule 
(MPFS) rate in CYs 2013 and 2014 or, if greater, the payment rate that 
would apply using the CY 2009 Medicare CF. The requirement for payment 
at the Medicare rate extends to primary care services paid on a fee-
for-service (FFS) basis, as well as to those paid by Medicaid managed 
care plans. This proposed regulation would specify which services and 
physicians qualify for the increased payment amount in CYs 2013 and 
2014, and the method for calculating that payment.
    Section 1905(dd) of the Act provides for a higher FMAP for the 
required increase in physician payment. For FFS expenditures, the FMAP 
rate will be 100 percent of the difference between the Medicaid State 
plan rate in effect on July 1, 2009, and the amount required to be paid 
under section 1902(a)(13)(C) of the Act. That means that States will be 
fully reimbursed for these increased payments by the Federal 
government.
    One goal of this proposed rule is to define the payment provisions 
further so that States may uniformly identify the rate differential. 
Specifically, we propose a payment methodology that would take into 
account potential changes in Medicare rates between CYs 2013 and 2014 
and CY 2009 that is independent of the legislatively required payment 
reductions caused by Medicare's sustainable growth rate mechanism. 
Furthermore, this proposed rule would address Medicare's use of 
different fee schedules that take into account the site of service (for 
example, physician's office, or outpatient department of a hospital) 
and geographical location of the provider.
    The Affordable Care Act amended section 1932(f) of the Act to 
clarify that States must incorporate the requirement for increased 
payment to primary care providers into contracts with managed care 
organizations. We propose general guidelines for States to follow when 
identifying the amounts by which MCOs must increase existing payments 
to primary care providers, and any additional capitation costs to the 
State attributable to such required increases in existing payments. We 
are also proposing to extend this same treatment to PIHPs and PAHPs 
through regulations at part 438, to the extent that primary care 
provider payments are made by these entities.
    We seek comments on how best to implement through regulation the 
requirement that managed care plans (whether capitated, partially 
capitated or on a FFS basis) pay primary care providers at the Medicare 
rate for primary care services, consistent with those paid on a FFS 
basis. Additionally, we seek comments from States and others on the 
best way to adequately identify the increase in managed care capitation 
payments made by the State that is attributable to the increased 
provider payment, for the purpose of claiming 100 percent FFP. We are 
particularly interested in ensuring that primary care physicians 
receive the benefit of the increased payment. Section 1932(f) of the 
Act, as amended by the Affordable Care Act, requires that the managed 
care contracts pay providers at the applicable Medicare rate levels. We 
propose to review managed care contracts to ensure that this 
requirement is imposed on managed care plans by the State. We also 
propose to require managed care plans to report to the State the 
payments made to physicians under this provision to justify any 
adjustments to the capitation rates paid by the State under the 
contract. In proposing this approach, we are mindful of balancing the 
need for adequate documentation of the payment with the administrative 
burden it places on States and managed care plans. We are requesting 
comment on these provisions and additional suggestions on how to ensure 
that managed care plans provide the necessary data to the State, as 
well as how to ensure and monitor that managed care plans appropriately 
pass on to physicians the portion of the increased capitation rate that 
is attributable to the primary care rate increase.
    This proposed rule also addresses identification of the rate 
differential eligible for 100 percent Federal matching funds for 
vaccine administration, as set forth in section 1905(dd) of the Act. In 
2011, the vaccine administration billing codes were changed so it is 
not possible to track the Medicaid State plan rate in CY 2009 directly 
to the rates applicable in CYs 2013 and 2014. We are requesting comment 
on our proposal for imputing the CY 2009 rate.
c. Medicare Payment to Primary Care Providers
    Medicare provides health insurance coverage to people who are aged 
65 and over, or who meet other special criteria, under title XVIII of 
the Act. For institutional care, such as hospital and nursing home 
care, Medicare makes payments to providers using prospective payment 
systems. Payment for physicians' services under Medicare is based on 
the MPFS. The MPFS assigns relative value units (RVUs) for each 
procedure, as well as practice cost indices (GPCIs) for geographic 
variations in payments, and a global CF, which converts RVUs into 
dollars. Individual fee schedule amounts for the MPFS are the product 
of the geographic adjustment, RVUs, and CF. Site of service (for 
example, physician office or outpatient hospital) is reflected as an 
adjustment to the RVUs. We generally issue the MPFS final rule for the 
subsequent calendar year on or before November 1st each year. The MPFS 
final rule includes the RVUs and CF for the upcoming calendar year, 
which permits the calculation of rates. Updates may occur throughout 
the year, but normally occur quarterly.
2. Vaccine Administration Under the Vaccines for Children (VFC) Program
    The Omnibus Budget Reconciliation Act of 1993 (OBRA 1993), (Pub. L. 
103-66), created the Vaccines for Children (VFC) Program), which became 
effective October 1, 1994. Section 13631 of OBRA 1993 added section 
1902(a)(62) to the Act to require that States provide for a program for 
the purchase and distribution of pediatric vaccines to program-
registered providers for the immunization of vaccine-eligible children 
in accordance with section 1928 of the Act. Section 1928 of the Act 
requires each State to establish a VFC Program (which may be 
administered by the State Department of Health) under which certain 
specified groups of children are entitled to receive qualified

[[Page 27675]]

pediatric immunizations without charge for the cost of the vaccine.
    Under the VFC Program, a provider, in administering a qualified 
pediatric vaccine to a federally vaccine-eligible child, may not impose 
a charge for the cost of the vaccine. Section 1928(c)(2)(C)(ii) of the 
Act allows a provider to impose a fee for the administration of a 
qualified pediatric vaccine as long as the fee, in the case of a 
federally vaccine-eligible child, does not exceed the costs of such 
administration (as determined by the Secretary based on actual regional 
costs for such administration). However, a provider may not deny 
administration of a qualified pediatric vaccine to a vaccine-eligible 
child due to the inability of the child's parents or legal guardian to 
pay the administration fee.

II. Provisions of the Proposed Regulation

A. Payments to Physicians for Primary Care Services

1. Primary Care Services Furnished by Physicians With Specified 
Specialty and Subspecialty (Sec.  447.400)
a. Specified Specialties and Subspecialties
    Section 1902(a)(13)(C) of the Act specifies that physicians with a 
specialty designation of family medicine, general internal medicine, 
and pediatric medicine qualify as primary care providers for purposes 
of increased payment. This proposed rule provides that services 
provided by subspecialists related to the primary care specialists 
designated in the statute would also qualify for higher payment. These 
subspecialists would be recognized in accordance with the American 
Board of Medical Specialties designations. For example, a pediatric 
cardiologist would qualify for payment if he or she rendered one of the 
specified primary care services by virtue of that physician's 
subspecialty within the qualifying specialty of internal medicine. 
Additionally, this proposed rule would specify a method for States to 
use in identifying practitioners who may receive the increased payment.
    The inclusion of subspecialists is based on three factors. We first 
considered that many primary care subspecialists render the primary 
care services specified in this rule. Stakeholders, including 
physicians, States, and independent policy makers strongly emphasized 
this point in their engagement with CMS on this proposed rule. Many 
stressed the importance of subspecialists, particularly pediatric 
subspecialists, in the provision of primary care and strongly 
recommended that they be eligible for the higher payment. Additionally, 
we see no justification for including only subspecialists in one 
specialty designation and, therefore, we are proposing that all 
subspecialists within the three specialty designations be eligible for 
increased payment for primary care services. Finally, we believe the 
statute provides the latitude to include related subspecialists within 
these specialty designations.
    Therefore, we are proposing that all subspecialists recognized by 
the American Board of Medical Specialties within the three specialty 
designations be eligible for increased payment for primary care 
services. That is, we propose that all subspecialists within the 
specialty designations of family medicine, general internal medicine, 
and pediatric medicine as recognized by the American Board of Medical 
Specialties be eligible for increased payment. In this rule, we propose 
to specify how States would identify the specialists and subspecialists 
eligible for increased payment. Identification of eligible physicians 
is critical to ensure that only specified physicians receive increased 
payment.
    Under our proposal, States would be required to establish a system 
to require physicians to identify to the Medicaid agency their 
specialty or subspecialty before an increased payment is made. For 
program integrity purposes, the State will be required to confirm the 
self-attestation of the physician before paying claims from that 
provider at the higher Medicare rate. We propose that this be done 
either by verifying that the physician is Board certified in an 
eligible specialty or subspecialty or through a review of physician's 
practice characteristics.
    Specifically, for a physician who attests that he or she is an 
eligible primary care specialist or subspecialist but who is not Board 
certified (including those who are Board-eligible, but not certified), 
a review of the physician's billing history must be performed by the 
Medicaid agency. We are proposing that at least 60 percent of the codes 
billed by the physician for all of CY 2012 must be for the E&M codes 
and vaccine administration codes specified in this regulation. For a 
new physician who enrolls during either CY 2013 or CY 2014 and who 
attests that he or she is within one of the eligible specialties or 
subspecialties and who is not Board certified, we propose that 
following the end of the CY in which enrollment occurs, the State would 
review the physician's billing history to confirm that 60 percent of 
codes billed during the CY of enrollment were for primary care services 
eligible for payment under sections 1902(a)(13)(C) and 1902(jj) of the 
Act.
    To summarize, we would not limit specified providers to physicians 
who are Board certified. States would be required to verify the 
eligibility of non-Board certified physicians through a review of the 
physician's practice characteristics.
    We developed this proposal for the use of a supporting history of 
codes billed to qualify physicians for increased payment after 
reviewing the statutory requirements for the Medicare Incentive 
Payments for Primary Care Services payments authorized by section 
5501(a) of the Affordable Care Act, which amended section 1833 of the 
Act. That provision specifically requires that primary care services 
account for at least 60 percent of the allowed charges billed by a 
practitioner for services to be eligible for increased payment. We 
propose that the same standard be applied to the Medicaid payments 
under section 1902(a)(13)(C) of the Act although we propose that 
verification would be based on the number of codes billed for the 
specified primary care services, rather than charges. The use of 
billing codes rather than allowed charges helps to assure that 
physicians providing a certain volume of primary care services are 
uniformly recognized for higher payment across States, regardless of 
variations in service charges.
    We are seeking comment on whether 60 percent or some other 
percentage threshold would be more appropriate to determine whether a 
non Board certified physician qualifies for increased payment.
    In developing the overall requirements for verification of 
physician self-attestation, we considered that there are no pre-
existing Federal Medicaid requirements concerning provider designation 
of a specialty or subspecialty. Because State practices vary on 
recognizing specialty or subspecialty designations for different 
purposes, reliance solely on self-attestation would result in a lack of 
uniformity in the application of minimum payment levels. Self-
attestation alone would not provide an objective and auditable standard 
to document that a provider is one of the types of primary care 
physicians designated in statute. For this reason, we believe imposing 
the requirement for either Board certification in a nationally-
recognized specialty or subspecialty or a supporting history of codes 
billed using the Medicare standard is merited.

[[Page 27676]]

    When making a payment, the State would have the choice of initially 
reimbursing a newly enrolled physician at the Medicare rate or the 
Medicaid State plan rate used for services provided by physicians who 
do not qualify for the increased payment. If the State chooses to 
reimburse a physician initially at the higher Medicare rate and later 
finds through the review of codes billed that the physician did not 
qualify, increased payments to which the provider was not entitled 
under the State plan would be considered as overpayments. Conversely, 
the State could choose to reimburse the newly enrolled physician at the 
Medicaid State plan rate applicable to services provided by physicians 
who do not qualify for increased payment, and then make supplemental 
payments promptly upon determining qualification for the increased 
payments.
    We are soliciting comments on whether the proposed timeframes, or 
something else, for establishing a supporting history of codes billed 
for a physician who is not Board certified is appropriate. We are 
attempting to minimize any implementation burden while also ensuring 
that proper audit controls are in place to prevent inappropriate 
application of this provision.
b. Furnished by a Specified Physician
    Section 1902(a)(13)(c)of the Act requires increased payment for 
``primary care services furnished in CYs 2013 and 2014 by a physician 
with a primary specialty designation of family medicine, general 
internal medicine, or pediatric medicine.'' This regulation would 
specify that the increased payment applies only for services under the 
``physicians' services'' benefit at section 1905(a)(5)(A) of the Act 
and in regulations at Sec.  440.50.
    Increased payment would not be available for services provided by a 
physician delivering services under any other benefit under section 
1905(a) of the Act such as, but not limited to, the FQHC or RHC 
benefits because, in those instances, payment is made on a facility 
basis and is not specific to the physician's services. Section 
1902(a)(13)(c) of the Act requires payment ``for primary care services* 
* * furnished by a physician with a primary specialty designation of 
family medicine, general internal medicine, or pediatric medicine at a 
rate no less than 100 percent of the payment rate that applies to such 
services and physicians under Part B of Title XVIII.'' Therefore, we 
believe that the statute limits payment to physicians who, if Medicare 
providers, would be reimbursed using the MPFS. The MPFS is not used to 
reimburse physicians in settings such as FQHCs or RHCs; therefore, we 
believe physicians delivering primary care services at FQHCs and RHCs 
are not eligible for increased payments under section 1902(a)(13) of 
the Act. Furthermore, we note that the Medicaid statute already 
provides a payment methodology for FQHCs and RHCs that is designed to 
reimburse those providers at cost.
    In specifying that payment is made for qualified primary care 
services under the physicians' services benefit at Sec.  440.50, the 
increased payment for primary care services would be required for 
services furnished ``by or under the personal supervision'' of a 
physician who is one of the primary care specialty or subspecialty 
types designated in the regulation. In Medicaid, many primary care 
physician services are actually furnished under the personal 
supervision of a physician by nonphysician practitioners, such as nurse 
practitioners and physician assistants. Such services are billed under 
the supervising physician's program enrollment number and are treated 
in both Medicare and Medicaid as services of the supervising physician. 
Consistent with that treatment, we propose that primary care services 
would be paid at the higher rates if properly billed under the provider 
number of a physician who is enrolled as one of the specified primary 
care specialists or subspecialists, regardless of whether furnished by 
the physician directly, or under the physician's personal supervision. 
This would align with Medicaid's longstanding practice in providing 
physician services, as well as Medicare's Part B FFS payment 
methodology for professional services. Additionally, this policy would 
recognize the important role that nonphysician practitioners working 
under the supervision of physicians have in the delivery of primary 
care services.
c. Eligible Primary Care Services (Sec.  447.400(b))
    We propose that Healthcare Common Procedure Coding System (HCPCS) 
E&M codes 99201 through 99499 and vaccine administration codes 90460, 
90461, 90471, 90472, 90473 and 90474 or their successors would be 
eligible for higher payment and FFP. These codes are specified by the 
statute and include those primary care E&M codes not reimbursed by 
Medicare.
    We believe that non-Medicare covered primary care services should 
be included because these services represent a core component of 
services commonly delivered in the Medicaid program. We reviewed 
Medicaid payment data from 2007, 2008, and 2009 for these services as a 
percentage of primary care expenditures, and found that they represent 
6 percent of primary care payments (as distinguished from service 
volume). We believe this percentage warrants the inclusion of these 
non-Medicare reimbursed codes to achieve the purpose of encouraging 
primary care providers to serve the Medicaid population.
    Where there are differences in codes reimbursed by Medicaid and 
Medicare we attribute this mostly to the fact that children represent a 
population not typically served by the Medicare program. As a result, 
the scope of primary care services is not equivalent between the two 
programs. We believe that the statute provides the latitude to include 
codes for which the Medicare program sets and publishes RVUs, even if 
Medicare payment is not actually made for the service.
    Specifically, we are proposing to include as primary care services 
the following E&M codes that are not reimbursed by Medicare:
     New Patient/Initial Comprehensive Preventive Medicine--
codes 99381 through 99387;
     Established Patient/Periodic Comprehensive Preventive 
Medicine--codes 99391 through 99397;
     Counseling Risk Factor Reduction and Behavior Change 
Intervention--codes 99401 through 99404, 99408, 99409, 99411, 99412, 
99420 and 99429;
     E&M/Non Face-to-Face physician Service--codes 99441 
through 99444.
2. Amount of Required Minimum Payments (Sec.  447.405)
    Section 1902(a)(13)(C) of the Act requires payment not less than 
the amount that applies under the MPFS in CYs 2013 and 2014 or, if 
greater, the payment rate that would be applicable if the 2009 CF were 
used to calculate the MPFS.
a. Use of Fee Schedule Amount Applicable to the Geographic Location of 
Service
    We are proposing that States be required to use the MPFS rate 
applicable to the site of service and geographic location of the 
service at issue. The Medicare Part B rates vary by geographic location 
and site of service. For example, rates are higher for services 
provided in an office setting as opposed to the outpatient hospital 
setting. We propose that States would be required to use the MPFS 
payment amounts applicable to the site of service and geographic 
location because we

[[Page 27677]]

believe these are integral to the MPFS payment system. Individual fee 
schedule amounts for the MPFS are the product of the geographic 
adjustment, RVUs, and CF that converts adjusted RVUs into dollar 
amounts. Site of service is reflected as an adjustment to the RVUs used 
to set the rate.
    We are proposing that States be required to use the MPFS as 
published by CMS. Medicare primary care incentive payments made 
pursuant to section 5501 of the Affordable Care Act, which amended 
section 1833 of the Act, would not be included. Section 5501(a) 
provides for incentive payments for a subset of the codes covered by 
this regulation. The payments are not made as increases in fee schedule 
amounts and are not reflected in the MPFS.
b. Payment for Services Unique to Medicaid
    For services reimbursed by Medicaid but not Medicare, we propose 
that payment would be made under a fee schedule developed by CMS and 
issued prior to the beginning of CYs 2013 and 2014. We propose that 
rates for non-Medicare reimbursed services would be established using 
the Medicare CF in effect in CYs 2013 and 2014 (or the CY 2009 CF, if 
higher) and the RVUs recommended by the American Medical Association's 
(AMA) Specialty Society Relative Value Update Committee (RUC) and 
published by CMS for CYs 2013 and 2014. We are specifically seeking 
comments from States and others on the most appropriate way to set 
payment rates for services not reimbursed by Medicare.
c. Updates to Medicare Part B Fee Schedule
    We recognize the potential for multiple updates to the MPFS in CYs 
2013 and 2014. Those rates are published by CMS on or before November 
1st of the preceding calendar year, but are subject to periodic 
adjustments or updates throughout the calendar year. In addition, the 
Medicare Part B rates vary by geographic location and site of service.
    We propose to permit States the option of complying with the 
requirements of section 1902(a)(13)(C) of the Act by either adopting 
annual rates or by using a methodology to update rates to reflect 
changes made by Medicare during the year. That is, States could adopt 
the MPFS in effect at the beginning of CYs 2013 and 2014 (or, if the CY 
2009 CF is higher, the CY 2013 or CY 2014 RVUs multiplied by the CY 
2009 MPFS CF), and apply those rates throughout the applicable calendar 
year without adjustments or updates. Using this methodology, mid-year 
updates made to the MPFS during the respective calendar year would not 
be reflected in Medicaid payments. Alternatively, a State could elect 
to adjust Medicaid payments to reflect mid-year updates made to the 
MPFS, but the State's methodology would have to specify the timing for 
such adjustments.
    In consulting with State Medicaid agencies and other stakeholders, 
we were urged not to require multiple rate adjustments based on 
fluctuations in the MPFS, but to identify the MPFS for each year as of 
a single point in time. That annual fee schedule would serve as the 
basis of the rates paid by Medicaid during each of the 2 years that 
section 1902(a)(13)(C) of the Act is in effect. Based on the feedback, 
we propose giving States the choice to apply or not apply mid-year 
updates.
3. State Plan Requirements (Sec.  447.410)
    Under the proposed rule, States would be required to submit a State 
plan amendment (SPA) to reflect the fee schedule rate increases for 
eligible primary care physicians under section 1902(a)(13)(A) of the 
Act. The purpose of this proposed requirement is to assure that when 
States make the increased reimbursement to physicians, they have State 
plan authority to do so and they have notified physicians of the change 
in reimbursement as required by Federal regulations.
4. Availability of Federal Financial Participation (FFP) (Sec.  
447.415)
    Section 1905(dd) of the Act allows States to receive 100 percent 
FFP for expenditures equal to the difference between the Medicaid State 
plan rate for primary care services in effect on July 1, 2009, and the 
Medicare rates in effect in CYs 2013 and 2014 or, if greater, the 
payment rate that would be applicable using the CY 2009 Medicare CF. To 
claim the enhanced Federal match, States must make payments to 
specified physicians at the appropriate MPFS rate and must develop a 
method of identifying both the rate differential and eligible 
physicians for services reimbursed on an FFS for service basis and 
through managed care plans. States must be able to document the 
difference between the July 1, 2009 Medicaid rate and the applicable 
Medicare rate for specified providers that is claimable at the 100 
percent matching rate. This requirement applies also to services 
provided to individuals eligible for both Medicaid and Medicare. This 
means that increased FFP will be available also for higher Medicaid 
payments for Medicare cost sharing for individuals who are eligible for 
both programs.
a. FFP in Payments for Individuals Eligible for Both Medicare and 
Medicaid
    When a service is provided to an individual who is eligible for 
Medicare and Medicaid, Medicare reimburses the physician 80 percent of 
its fee schedule rate while Medicaid pays the remaining cost. 
Currently, States have two options for such payments consistent with 
section 1902(n) of the Act. A State may pay the provider the full 
amount necessary to result in aggregate payment to the provider equal 
to the MPFS rate (the full Medicare cost sharing amount), or only the 
amount (if any) to result in aggregate payment equal to the State's 
Medicaid rate. For example, under the second option, if the Medicare 
allowed amount is $100 and the Medicaid rate is $75, then Medicare pays 
$80 and there is no additional amount paid by Medicaid. Historically, 
most States have chosen to pay providers only up to the lower Medicaid 
rate.
    In CYs 2013 and 2014, the Medicaid rate for primary care services 
by the specified physicians will equal the Medicare rate. As a result, 
these physicians should receive payment up to the full Medicare rate 
for primary care services and 100 percent FFP will be available for the 
full amount of the Medicare cost sharing amount that exceeds the amount 
that would have been payable under the State plan in effect on July 1, 
2009.
b. Identifying the July 1, 2009 Payment Rate
    For the purpose of identifying the differential between the 
Medicaid rate and the Medicare rate, we propose to define the Medicaid 
``rate'' under the approved Medicaid State plan as the final rate paid 
to a provider inclusive of all supplemental or increased payments paid 
to that provider. For example, many States currently pay physicians 
affiliated with academic medical centers the Medicaid State plan rate 
plus a supplemental amount that together equal the average amount paid 
by commercial third party payers. Therefore, in calculating the rate 
differential, these States would determine the CY 2009 rate inclusive 
of any supplemental payment.
c. Federal Funding for Increased Payments for Vaccine Administration
    There are a number of factors affecting the identification of the 
cost of vaccine administration eligible for 100 percent FFP. They 
include the following issues:
     The structure of the billing codes for vaccine 
administration changed in 2011 such that four of the codes used in 2009 
were replaced by two codes.

[[Page 27678]]

     Some States did not use the designated billing codes in 
effect in 2009.
     Prior to CY 2011, billing codes for vaccine administration 
did not permit payment for additional vaccine/toxoid components.
     Vaccines for Children (VFC) program requirements do not 
permit payment for each vaccine/toxoid component administered and limit 
provider charges to the regional VFC ceiling amount.
    Prior to CY 2011 vaccine administration billing codes did not 
permit additional vaccine administration payments for vaccines with 
more than one vaccine/toxoid component. All providers, including those 
participating in the VFC program, received one payment per vaccine 
regardless of the number of vaccine/toxoid components. In this rule, we 
clarify that qualifying physicians, excluding those participating in 
the VFC program, must receive additional payments during CYs 2013 and 
2014 for vaccines with multiple vaccine/toxoid components administered 
to Medicaid beneficiaries.
    The vaccine administration billing codes recognized for 
reimbursement under the statute are: 90465, 90466, 90567, 90568, 90471, 
90472, 90473 and 90474 or their successor codes. In 2011, the coding 
structure for vaccine administration changed such that four pediatric 
billing codes specified in section 1902(jj) of the Act (90465, 90466, 
90767, and 90468) were replaced by just two billing codes (90460 and 
90461). Moreover, the four deleted codes represented vaccine 
administrations by various routes (for example, intranasal vs. 
injectable) to children under age 8. However, new code 90460 represents 
the initial vaccine/toxoid administered through all routes to children 
under 18 while code 90461 represents additional vaccines/toxoids 
administered. As a result, States will not be able to identify the rate 
differential by comparing payments for the codes used in CY 2009 to 
those in use in CYs 2013 and 2014.

                Immunization Codes Before and After 2011
------------------------------------------------------------------------
                      Prior to 2011                       Effective 2011
------------------------------------------------------------------------
90465, 90466, 90467, 90468..............................    90460, 90461
90471...................................................           90471
90472...................................................           90472
90473...................................................           90473
90474...................................................           90474
------------------------------------------------------------------------

    We propose that the State impute the CY 2009 rate for code 90460 
based on the average payment amount for the deleted codes weighted by 
service volume. That is, each of the four CY 2009 rates for vaccine 
administration would be multiplied by their respective percentages of 
service volume and then added to determine one payment amount as 
demonstrated in the following example:
     90465 = $10 x 0.50 service volume = $5.00
     90466 = $10 x 0.10 service volume = $1.00
     90467 = $8 x 0.30 service volume = $2.40
     90468 = $8 x 0.10 service volume = 0.80
     Total cost equals $9.20 for the new, single code, 90460.
    Code 90461 represents payment for the administration of additional 
vaccine/toxoid components in a vaccine. Code 90461 is an add-on code 
that cannot be used without code 90460. Because there were only single 
payments for vaccines prior to 2011, we believe the rate for code 90461 
should be $0. We believe that this is an equitable method of setting 
the 2009 Medicaid base for code 90460, but welcome comments. For VFC 
providers, if the rate paid in July 2009 was lower than the regular 
Medicaid State plan administration fee for non-VFC providers, then the 
rate for VFC providers should be used as the 2009 base for code 90460. 
The majority of vaccines administered to Medicaid-eligible children 
under the age of 18 are administered as part of the Vaccines for 
Children (VFC) program. Section 1928(c)(2)(ii) of the Act provides that 
administration fees for vaccines provided under the VFC program cannot 
exceed the cost of administration as determined by the Secretary for 
that program. An additional concern for VFC vaccines is that, under the 
terms of the VFC program, providers can still only bill a flat fee per 
vaccine given by injection or by intranasal or oral routes, regardless 
of the number of vaccines/toxoid components, and must use only code 
90460. In order to permit providers participating in the VFC program to 
benefit from the provisions of the Affordable Care Act, this rule 
proposes that States be required to reimburse VFC providers at the 
lesser of the 2013 and 2014 Medicare rates or the maximum regional VFC 
amount in those years. States should qualify for 100% FFP for these 
increased reimbursements. This policy is consistent with Medicare which 
limits provider payment to the lesser of the fee schedule amount or 
provider charges, since VFC provider charges are limited to the 
regional maximum administration fee. Since the VFC statute prohibits 
payment for additional vaccines/toxoids, VFC providers would only 
receive payment for administration fees billed using code 90460. We 
invite comment on whether these proposed provisions give sufficient 
effect to the legislative intent to increase provider payments to 
Medicare levels, or whether we should instead adopt policies that we 
describe below as alternatives considered in developing this proposed 
rule.
    In proposing a method to determine the CY 2009 rate for code 90460, 
our goal is to identify a uniform methodology that is not 
administratively burdensome. We are seeking comments on this proposal 
and encourage States and other stakeholders to provide additional 
options for identifying the rate differential.
    An additional issue related to the changes made by the Affordable 
Care Act for vaccine administration is that, in CY 2009, some States 
did not reimburse providers using the designated vaccine administration 
billing codes. Rather, some States paid providers on the basis of non 
standard billing codes developed for the purpose of identifying the 
type of vaccine being administered. In instances where both the vaccine 
and administration fee were billed using the vaccine code, States will 
be required to identify the CY 2009 payment for vaccine administration 
separate from the vaccine itself.
5. Primary Care Service Payments Made by Managed Care Plans, and 
Enhanced Federal Match (Sec.  438.6 and Sec.  438.804)
    As amended by the Affordable Care Act, section 1932(f) of the Act 
requires that the managed care plans pay physicians at the applicable 
Medicare rates. We propose to implement the managed care requirements 
through a State-by-State review of managed care contracts and 
applicable procedures. We will review managed care contracts to ensure 
that they--
     Provide for payment at the minimum Medicare primary care 
payment levels;
     Require that eligible physicians receive direct benefit of 
the payment increase for each of the primary care services specified in 
this rule. This requirement must be met regardless of whether a 
physician is salaried, or receives a fee for service or capitated 
payment. We emphasize that increased payment must correspond directly 
to the volume and payment amounts associated with the primary care 
services specified in this rule;
     Require that all information needed to adequately document 
expenditures eligible for 100 percent FFP is reported

[[Page 27679]]

by MCOs, PIHPs, and PAHPs to the States which, in turn, will report 
these data to CMS; and
     Specify that States must receive from MCOs, PIHPs and 
PHAPs data on primary care services which qualify for payment under 
this rule. The managed care reporting requirements would ensure that 
States have data on increased provider payments necessary to justify 
any adjustments to the capitation rates paid by the State under the 
contract.
    Additionally, we will review each State's proposed methodology for 
identifying the discrete amount paid for each of the eligible primary 
care services that qualifies for 100 percent FFP. Both the managed care 
contracts and the State's methodology for identifying payment amounts 
made for each primary care services must be submitted to CMS for review 
prior to the start of CY 2013.
    We acknowledge the diversity of payment arrangements between 
managed care plans and primary care physicians, and we will not require 
that managed care plans modify the terms of their payments to eligible 
primary care physicians beyond the increase in payments for primary 
care services required by the statute.
    In proposing this approach, we are mindful of balancing the need 
for adequate documentation of the payment with the administrative 
burden it places on States and managed care plans. We are requesting 
comment on these provisions and additional suggestions on how to ensure 
that managed care plans provide the necessary data to the State, as 
well as how to ensure and monitor that managed care plans appropriately 
pass on to physicians the portion of the increased capitation rate that 
is attributable to the primary care rate increase.
    States have expressed concern about their ability to align 
capitated payment made as of July 1, 2009 to payment made for services 
provided in CYs 2013 and 2014 for the purpose of claiming increased 
FFP. We recognize the particular challenges inherent in identifying the 
payment differential eligible for 100 percent FFP for primary care 
services provided by managed care plans because such payments are not 
necessarily linked to individual services and physicians. We believe 
that the most reasonable way to apply this provision for managed care 
rates is to do the following:
    Step I: Identify the proportion of total capitation linked to 
primary care.
    Step II: Identify the fee schedule amount incorporated into the 
actuarial model for primary care services represented by the proportion 
of payment for primary care services. Here, we assume the visit rate 
equals $25.
    Step III: Determine the annualized cost built into the actuarial 
model for primary care. Here we assume 8 visits annually. $25 per visit 
rate x 8 visits annually = $200
    Step IV: Determine the per visit cost discounted for volume. $200/
12 = $16.67
    In this example, $16.67 equals the imputed amount of the payment 
made on a fee for services basis for an individual primary care 
service. The State would compare this amount to the Medicare rate paid 
in CYs 2013 and 2014 to determine the payment differential eligible for 
100 percent Federal matching funds. In proposing this methodology, we 
realize there may be multiple ways to achieve implementation and 
specifically request comments on this portion of the proposed rule.
    To be clear, we are proposing that States would be required to 
submit the methodology they intend to use to identify the increment of 
the capitation payment attributable to increased provider rates to CMS 
for approval prior to the beginning of CY 2013. Further, we propose 
that, absent approval of its methodology from CMS, States would not be 
able to claim the enhanced Federal match for capitation payments to 
managed care plans.
    This proposal was developed with input from States. During a 
January 27, 2011 all-State call specific to the impact of the amended 
section 1932(f) of the Act on managed care, States reported that the 
amount and type of data managed care plans report to them varies 
greatly both across and within States. States expressed the need to be 
able to identify the rate differential for the purpose of claiming 100 
percent FFP and to do so in a manner that is reasonable and documented. 
We are seeking additional comments on how States might best meet these 
requirements.

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

1. General Statement
    At this time, we are proposing to add 42 CFR part 441 subpart K to 
codify the requirements of the Vaccines for Children Program. The 
general requirements of the VFC program will be found at Sec.  441.510, 
and state that federally-purchased vaccines under the VFC Program are 
made available to children who are 18 years of age or younger and who 
are any of the following:
     Eligible for Medicaid.
     Not insured.
     Not insured for the vaccine and who are administered 
pediatric vaccines by a federally-qualified health center (FQHC) or 
rural health clinic (RHC).
     An Indian, as defined in section 4 of the Indian Health 
Care Improvement Act.
    Under the VFC program, vaccines must be administered by program-
registered providers. Section 1928(c) of the Act defines a program-
registered provider as any health care provider that--
     Is licensed or authorized to administer pediatric vaccines 
under the law of the State in which the administration occurs without 
regard to whether or not the provider is a Medicaid-participating 
provider.
     Submits to the State an executed provider agreement in the 
form and manner specified by the Secretary.
     Has not been found, by the Secretary or the State to have 
violated the provider agreement or other applicable requirements 
established by the Secretary or the State.
    Section 1928 of the Act requires each State to establish a VFC 
Program (which may be administered by the State Department of Health) 
and include this program in the State plan (Sec.  441.505) under which 
certain specified groups of children are entitled to receive qualified 
pediatric immunizations without charge for the cost of the vaccine.
    In the October 3, 1994 Federal Register, we published a notice with 
comment period entitled, ``Charges for Vaccine Administration Under the 
Vaccines for Children (VFC) Program'' (59 FR 50235) (hereinafter 
referred to as the ``October 1994 VFC notice'') that set forth, by 
State, the interim regional maximum charges for the VFC program. These 
charges represented the maximum amount that a provider in a State could 
charge for the administration of qualified pediatric vaccines to 
federally vaccine-eligible children under the VFC Program. This 
proposed rule would announce updates to those fees for use on an 
interim basis. This is the first proposed update of the interim 
regional maximum administration fees since 1994. We received comments 
in response to the October 1994 VFC notice and we have reviewed them. 
We expect to address those comments in a separate document. We will 
respond to public comments provided in response to this proposed rule. 
We are interested in receiving comments on this proposed rule and 
suggestions for potential updates that could be made to the 
administration fees to ensure that the VFC regional

[[Page 27680]]

maximum rates are increased to reflect a more current cost of vaccine 
administration. As discussed in the October 1994 VFC notice, the 
interim maximum administration fees apply to all VFC program-registered 
providers that administer pediatric vaccines to federally vaccine-
eligible children. The fees do not apply to children receiving free 
vaccines under State purchase programs or any other arrangement.
    In accordance with section 1928(c)(2)(C)(ii) of the Act, we are 
proposing Sec.  441.500 to state that physicians participating in the 
VFC program can charge federally vaccine-eligible children who are not 
enrolled in Medicaid the maximum administration fee (if that fee 
reflects the provider's cost of administration) regardless of whether 
the State has established a lower administration fee under the Medicaid 
program. Families of children who are enrolled in the VFC program 
because they are either uninsured or do not have insurance that covers 
vaccines would be impacted by this proposed regulation. Providers can 
bill the families of those children at the State's regional maximum 
rate for the administration of a vaccine. Therefore, if the proposed 
updated rates were to become effective, those families could be billed 
at the published rate for that State. However, section 
1928(c)(2)(B)(iii) of the Social Security Act says that ``[t]he 
provider will not deny administration of a qualified pediatric vaccine 
to a vaccine-eligible child due to the inability of the child's parent 
to pay an administration fee.'' A recent survey of providers 
participating in VFC shows that approximately 37 percent of those 
providers actually charge the State's maximum administration fee to 
families of children who are uninsured or who do not have insurance 
that covers vaccines. The remaining 61 percent of providers surveyed 
either write off the charge or charge a lesser amount. We solicit 
comments specifically on the impact of the increased fees on uninsured 
and underinsured VFC-eligible children. However, as discussed in the 
October 1994 VFC notice, and as proposed in new Sec.  441.515(e), there 
would be no Federal Medicaid matching funds available for 
administration since these children are not eligible for Medicaid. 
Although the cost of the vaccines for the VFC program is funded under 
Title XIX of the Act, Medicaid will not pay for the administration of 
vaccines provided to children under the VFC program who are not 
Medicaid-eligible. A provider may only bill Medicaid for the 
administration of a vaccine if the child is eligible under Medicaid.
2. Methodology Used To Establish Administration Charges
    In 1994, to obtain national average rates for the administration of 
vaccines, we contracted with the American Academy of Pediatrics (AAP) 
to purchase data on the normal fee charged by its members for 
administering the vaccines covered by this program. This was because 
there was no reliable data available on physicians' actual cost that 
would provide a valid base for setting these maximum charges on a 
nationwide scale. The final national average administration charge we 
obtained from the AAP was $15.09. The national average was then 
adjusted for regional variations, using indices established for the 
MPFS.
    Before the publication of this proposed rule, we attempted to 
determine the availability of Medicaid cost data; however, just as in 
1994, there is no data readily available on physician's actual costs 
that would provide a valid basis for recalculating these maximum fees. 
Therefore, in Sec.  441.515, we are proposing to update the maximum 
administration fees based on the data and formula established in the 
October 1994 VFC notice. We continue to believe, given the nature of 
the program and the requirements applicable to participating providers, 
that charge data, adjusted for regional variations, is a reasonable 
proxy for calculating these maximum fees. To adjust the administration 
charge of $15.09 for inflation, we are proposing to use the Medicare 
Economic Index (MEI), which is a price index that is used by CMS to 
update Medicare physician payments. We are proposing to use the MEI 
because: (1) It reflects input price inflation faced by physicians 
inclusive of the time period when the national average was established 
in 1994, and (2) we believe that input prices associated with this 
specific type of physician-provided service are consistent with overall 
input prices. The MEI was most recently updated at the end of 2011 (76 
FR 73275 through 73276, November 28, 2011). Therefore, we have 
calculated the proposed update based on the MEI up through and 
including CY 2012. Using that index, we have determined that the 
updated national average administration charge would be $21.80.
    As in the October 1994 VFC notice, we would adjust the national 
average for regional variations, using indices established for the 
MPFS. The national average was weighted by the geographic adjustment 
factors (GAF), which reflects a weighted sum of the three geographic 
practice cost indexes (GPCIs) (work, practice expense, and malpractice 
insurance) for a given Medicare PFS locality.
    The GAF is a proxy for differences in the cost of operating a 
medical practice among various geographic areas, and is used as a 
comparison among Medicare PFS localities (73 FR 69726, 69740 November 
19, 2008). Consistent with the methodology in the October 1994 VFC 
notice, when there was more than one GAF per State, we would select the 
highest GAF within the State and use that GAF to adjust the average 
national vaccination administration charge for the entire State to 
assure that administration charges would fall within our established 
maximum rates.
    The MPFS localities (and corresponding GAFs) are grouped by State 
and sub-State areas. As discussed in the October 1994 VFC notice, we 
developed the regional maximum charges for each ``State'' because the 
geographic area of a State is clearly identifiable by boundary lines 
recognized nationwide, as opposed to a sub-State area. In this proposed 
rule, we see no reason to change that interpretation.
    We are also proposing to revise the national average for each State 
to reflect the fully implemented sixth comprehensive update to the MPFS 
GPCIs and updated GAFs. For more information on the methodology used 
for the most recent GPCI update, we refer readers to the CY 2012 MPFS 
final rule with comment period (76 FR 73026 through 73474). Consistent 
with that rule, the cost share weights for determining the GAF equation 
are 48.266 percent for physician work, 47.439 percent for practice 
expense, and 4.295 percent for malpractice insurance.
    We derived the proposed interim amounts specified in the chart 
under section II of this proposed rule as the maximum allowable charges 
for the administration of qualified pediatric vaccines for each State 
on the basis of the formula: National charge data x updated GAFs = 
maximum VFC fee. (See Table 1.)

[[Page 27681]]



       Table 1--Example of the Application of the Formula for Ohio
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Average national administration charge = $21.80.
Work expense = 0.998; practice expense = 0.927.
Malpractice expense = 1.24.
Using Medicare weights to weigh components of--
    Work expense = 48.266 percent.
    Practice expense = 47.439 percent.
    Malpractice expense = 4.295 percent.
Calculation:
    Work expense: 0.998 x 48.266 percent = 0.482.
    Practice expense: 0.927 x 47.439 percent = 0.439.
    Malpractice expense: 1.24 x 4.295 percent = 0.053.
        Total expense = 0.975.
Ohio's updated maximum fee for administration of the vaccine is: $21.80
 x 0.975 = $21.25.
------------------------------------------------------------------------

    The maximum updated administration fee would be effective with the 
publication of a final notice or regulation. We request comments on the 
methodology used to calculate this administration fee update and will 
consider revisions to the regional maximum fees in response to public 
comments. The proposed updated maximum fees are set forth in Table 2.

          Table 2--Regional Maximum Administration Fee by State
------------------------------------------------------------------------
                                   Current regional    Updated regional
              State                   maximum fee         maximum fee
------------------------------------------------------------------------
Alabama.........................              $14.26              $19.79
Alaska..........................               17.54               27.44
Arizona.........................               15.43               21.33
Arkansas........................               13.30               19.54
California......................               17.55               26.03
Colorado........................               14.74               21.68
Connecticut.....................               16.56               23.41
Delaware........................               16.55               22.07
District of Columbia............               15.13               24.48
Florida.........................               16.06               24.01
Georgia.........................               14.81               21.93
Guam............................  ..................               23.11
Hawaii..........................               15.71               23.11
Idaho...........................               14.34               20.13
Illinois........................               16.79               23.87
Indiana.........................               14.47               20.32
Iowa............................               14.58               19.68
Kansas..........................               14.80               20.26
Kentucky........................               14.17               19.93
Louisiana.......................               15.22               21.30
Maine...........................               14.37               21.58
Maryland........................               15.49               23.28
Massachusetts...................               15.78               23.29
Michigan........................               16.75               23.03
Minnesota.......................               14.69               21.22
Mississippi.....................               13.92               19.79
Missouri........................               15.07               21.53
Montana.........................               14.13               21.32
Nebraska........................               13.58               19.82
Nevada..........................               16.13               22.57
New Hampshire...................               14.51               22.02
New Jersey......................               16.34               24.23
New Mexico......................               14.28               20.80
New York........................               17.85               25.10
North Carolina..................               13.71               20.45
North Dakota....................               13.90               20.99
Ohio............................               14.67               21.25
Oklahoma........................               13.89               19.58
Oregon..........................               15.19               21.96
Pennsylvania....................               15.76               23.14
Puerto Rico.....................               12.24               16.80
Rhode Island....................               14.93               22.69
South Carolina..................               13.62               20.16
South Dakota....................               13.56               20.73
Tennessee.......................               13.70               20.00
Texas...........................               14.85               22.06
Utah............................               14.52               20.72
Vermont.........................               13.86               21.22

[[Page 27682]]

 
Virginia........................               14.71               21.24
Virgin Islands..................               15.09               21.81
Washington......................               15.60               23.44
West Virginia...................               14.49               19.85
Wisconsin.......................               15.02               20.83
Wyoming.........................               14.31               21.72
------------------------------------------------------------------------

    As noted in the October 1994 VFC notice, these fees are intended as 
guidance for Universal Purchase States (that is, where the vaccines are 
purchased by the State for all children in the State). These States may 
use the maximum charges listed or develop their own maximum fees.
    In addition, as stated in the October 1994 VFC notice, State 
Medicaid agencies would not be obligated to set the Medicaid payment 
for vaccine administration at the level of the maximum fees set forth 
in this proposed rule. Therefore, if these proposed maximum fees were 
to go into effect, the amount that a State pays a provider under the 
Medicaid program would not increase unless a State were to submit a SPA 
to CMS that increases the rate. In accordance with sections 1902(a)(30) 
and 1928(c)(2)(C)(ii) of the Act, States have the flexibility to set 
their payment rates at a lower level than the State's regional maximum 
fee. State Medicaid agencies typically take a variety of factors into 
consideration when setting payment rates, including the need to assure 
adequate participation by providers.
III. Collection of Information Requirements
    Under the Paperwork Reduction Act of 1995, we are required to 
provide 60-day notice in the Federal Register and solicit public 
comment before a collection of information requirement is submitted to 
the Office of Management and Budget (OMB) for review and approval. To 
fairly evaluate whether an information collection should be approved by 
OMB, section 3506(c)(2)(A) of the Paperwork Reduction Act of 1995 
requires that we solicit comment on the following issues:
     The need for the information collection and its usefulness 
in carrying out the proper functions of our agency.
     The accuracy of our estimate of the information collection 
burden.
     The quality, utility, and clarity of the information to be 
collected.
     Recommendations to minimize the information collection 
burden on the affected public, including automated collection 
techniques.
    To derive average costs, we used data from the U.S. Bureau of Labor 
Statistics for all salary estimates. The salary estimates include the 
cost of fringe benefits, calculated at approximately 35 percent of 
salary, which is based on the June 2011 Employer Costs for Employee 
Compensation report by the Bureau.
    We are soliciting public comment on each of the section 
3506(c)(2)(A)-required issues for the following information collection 
requirements (ICRs):

A. ICR's Regarding Contract Requirements (Sec.  438.6)

    In Sec.  438.6(c)(3)(v) and (c)(5)(vi), States would be required to 
implement managed care contracts for payment to a MCO, PIPH or PAHP to 
comply with the requirements at section 1202 of the HCERA. There is a 
one-time burden to the State for amending such contracts for the 
following provisions: (1) To assure that the level of payment is 
consistent with part 447, subpart G; (2) to assure that the specified 
physicians (whether directly or through a capitated arrangement) 
receive an amount at least equal to the amount set for and required 
under part 447; and (3) to assure that the State receive documentation 
regarding those payments.
    The burden associated with the requirements under Sec.  
438.6(c)(3)(v) and (c)(5)(vi) is the time and effort it would take each 
of the 35 State Medicaid programs with managed care plan payments and 
the District of Columbia (36 total respondents) to amend an average of 
three managed care contracts. We estimate it will take three hours to 
complete this task per contract at an estimated cost of $441.63 per 
respondent ($49.07/hr x 3 hr x 3 contracts) or $15,898.68 total 
($441.63 per respondent x 36 respondents). In deriving this figure, we 
used a labor rate of $49.07/hr for a State's management, professional 
and related staff to amend each contract.

B. ICR's Regarding Provider Agreements (Sec.  441.505(b))

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

C. ICR's Regarding State Plan Amendments for the Vaccines for Children 
Program (Sec. Sec.  441.510 and 441.515(d))

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

D. ICR's Regarding Eligible Services (Sec.  447.400(a))

    In Sec.  447.400(a), States would be required to ensure that 
physicians identify their specialty to the Medicaid agency before an 
increased payment is made. Initial identification may be made by self-
attestation, but for program integrity purposes the State will be 
required to verify the physician's claimed specialty status by 
reviewing the Board certification status of the physician, or reviewing 
the physician's practice characteristics, before paying for services at 
the Medicare rate.

[[Page 27683]]

    The burden associated with the requirements under Sec.  447.400(a) 
is the time and effort it would take each of the 50 Medicaid Programs 
and the District of Columbia (51 total respondents) to establish that a 
physician is qualified, either through Board certification or a 
supporting history of codes billed, to receive payment under section 
1202 of the HCERA. We estimate that it will take 0.5 hours to determine 
whether a physician may receive payment under section 1202 of the 
HCERA. We used data from the Medicaid Statistical Information System 
(MSIS) to identify the number of physicians claiming for the E&M codes 
specified in this regulation during the fourth quarter of FY 2008 and 
FY 2009 (the most recent data available). Based on that data, there is 
an average of 2,245 physicians per State who currently bill, but whose 
eligibility for increased payment will need to be verified by the 
Medicaid agency. We increased this number by 10 percent to account for 
participation by new physicians for a total of 2,470 physicians.
    We used the following hourly labor rates and estimated the time to 
complete each task: 0.5 hours for a State's Medicaid office and support 
staff working in the medical billing area to retrieve and assess claims 
for an individual physician; or 0.5 hours for administrative staff to 
review the Board certification status of a physician. Costs associated 
with these staff are reported at a cost of $14.12 for each half-hour 
derived from $28.24/hr each and 2,470 physicians for an estimated cost 
of $14.12 per response or $34,876.40 (total).

E. ICR's Regarding State Plan Requirements (Sec.  447.410)

    In Sec.  447.410, States would be required to submit a SPA to 
reflect the fee schedule rate increases for eligible primary care 
physicians under section 1902(a)(13)(C) of the Act. The purpose of this 
proposed requirement is to assure that when States make the increased 
reimbursement to providers, they have State Plan authority to do so and 
they have notified providers of the change in reimbursement as required 
by Federal regulations.
    The burden associated with the one-time requirement under Sec.  
447.410 is the time and effort it would take each of the 50 State 
Medicaid Programs and the District of Columbia (51 total respondents) 
to modify the Medicaid State plan to reflect payment consistent with 
the requirements in section 1902(a)(13)(C) of the Act. This will 
require the preparation and submission of a SPA. We estimate that it 
will take State staff working 4 hours to complete all of the tasks 
associated with the preparation of an SPA. The estimated cost is 
$107.13 ($35.71/hr x 3 hr) per State or $5,463.63 total ($107.13 * 51) 
for tasks completed by non-management staff working on SPA preparation. 
We estimate that this task will also require 1 hour for State-employed 
legal staff at $49.07/hr or $49.07 (per response) for a total of 
$2,502.57 ($49.07 x 51). The combined total for cost associated with 
SPA preparation, including non-legal and legal staff employed by the 
State, is $7,966.20 ($5,463.63 + $2,502.57).

F. ICR's Regarding Additional Requirements (Methodology To Identify 
Rate Differential) for FFP for Managed Care Payments (Sec.  
438.804(a)(2) and (3))

    In Sec.  438.804(a)(3), States would be required to submit the 
methodology they intend to use to identify the rate differential for 
managed care payments to CMS for approval 6 months prior to the 
beginning of CY 2013. Further, we propose that, absent approval from 
CMS, States would not be able to claim the enhanced Federal match for 
managed care payments.
    The burden associated with the requirements under Sec.  
438.804(a)(2) and (3) is the time and effort it would take each of the 
35 State Medicaid Programs with managed care plan payments and the 
District of Columbia (36 total respondents) to develop a methodology 
for the identification of payment made for primary care services 
through managed care contracts eligible for 100 percent Federal 
matching funds. This task will involve a one-time effort on the part of 
financial, legal and information technology staff. We estimate that it 
will take 14 hours per respondent at a cost of $637.42 to develop the 
identification methodology at a total cost of $22,947.12 (36 x 
$637.42). In deriving these figures, we used the following hourly labor 
rates and estimated the time to complete this task: $49.07/hr and 2 
hours for legal staff to review the methodology for compliance with the 
statute ($98.14); $48.09/hr and 8 hours for managerial staff to assess 
the feasibility of implementing the methodology ($384.72); and $38.64/
hr and 4 hours for information technology/public administration staff 
to assess the feasibility of the methodology ($154.56).

                                            Table 3--Proposed Annual Recordkeeping and Reporting Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                              Burden per   Total annual
                   Regulation section(s)                       Respondents      Responses      response       burden       Labor cost of  Total cost ($)
                                                                                               (hours)        (hours)      reporting ($)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Sec.   438.6(c)(3)(v) and (c)(5)(vi).......................              36             108            3             324       15,898.68       15,898.68
Sec.   447.400(a)..........................................              51           2,470          .50           1,235       34,876.40       34,876.40
Sec.   447.410.............................................              51              51            4             204        7,966.20        7,966.20
Sec.   438.804(a)(2) and (3)...............................              36              36           14             504       22,947.12       22,947.12
                                                            --------------------------------------------------------------------------------------------
    Total..................................................  ..............  ..............  ...........           2,267       81,688.40       81,688.40
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note 1: All of the proposed collections are new. Therefore, OMB control numbers have not been assigned and the control number column has been omitted
  from the table.
Note 2: There are no capital or maintenance costs incurred by any of the proposed collections. Therefore, the capitol cost column has been omitted from
  the table.

    We have submitted a copy of this proposed rule to OMB for its 
review of the rule's information collection and recordkeeping 
requirements. These requirements are not effective until they have been 
approved by the OMB.
    To obtain copies of the supporting statement and any related forms 
for the proposed paperwork collections referenced above, access our Web 
site at http://www.cms.hhs.gov/Paperwork@cms.hhs.gov, or call the 
Reports Clearance Office at 410-786-1326.
    We invite public comments on these potential information collection 
requirements. If you comment on these information collection and

[[Page 27684]]

recordkeeping requirements, please do either of the following:
    1. Submit your comments electronically as specified in the 
ADDRESSES section of this proposed rule; or
    2. Submit your comments to the Office of Information and Regulatory 
Affairs, Office of Management and Budget, Attention: CMS Desk Officer, 
(CMS-2370-P) Fax: (202) 395-6974; or Email: OIRA_submission@omb.eop.gov.

IV. Response to Comments

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

V. Regulatory Impact Statement

A. Introduction

    We have examined the impacts of this proposed rule as required by 
Executive Order 12866 (September 30, 1993, Regulatory Planning and 
Review), Executive Order 13563 on Improving Regulation and Regulatory 
Review (January 18, 2011), the Regulatory Flexibility Act (September 
19, 1980; Pub. L. 96-354) (RFA), section 1102(b) of the Social Security 
Act, section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999), and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated an ``economically'' 
significant rule, under section 3(f)(1) of Executive Order 12866. 
Accordingly, we have prepared a Regulatory Impact Analysis (RIA) that, 
to the best of our ability, presents the costs and benefits of the 
rulemaking. We solicit comment on the RIA analysis provided. In 
accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    Section 202 of the Unfunded Mandates Reform Act of 1995 (UMRA) also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2012, that 
threshold is approximately $139 million. This rule does not contain 
mandates that will impose spending costs on State governments in the 
aggregate of $139 million. The cost for increasing payment for primary 
care services in CYs 2013 and 2014 will be borne by the Federal 
government, which will provide 100 percent matching funds equal to the 
difference between the Medicaid State plan rate in effect July 1, 2009 
and the Medicare rate implemented in CY 2013 and 2014, or the rate 
using the CY 2009 CF, if higher. Section 1202 of the HCERA requires 
higher payment to physicians for primary care services but does not 
impose increased costs on States. For the provisions associated with 
the charges for vaccine administration under the VFC program, the 
proposals will have no consequential effect on State, local, or tribal 
governments or on the private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. As indicated, this proposed rule will not have a 
substantial effect on State and local governments.

B. Statement of Need

    This proposed rule implements section 1202 of the HCERA requiring 
payment by State Medicaid agencies of at least the Medicare rates in 
effect in CYs 2013 and 2014 or, if higher, the rate using the CY 2009 
CF for primary care services furnished by a physician with a specialty 
designation of family medicine, general internal medicine, or pediatric 
medicine. Also, this proposed rule implements the statutory payment 
provisions uniformly across all States, defines, for purposes of 
enhanced Federal match, eligible primary care physicians, identifies 
eligible primary care services, and specifies how the increased payment 
should be calculated. Finally, this proposed rule provides general 
guidelines for implementing the increased payment for primary care 
services delivered by managed care plans.

C. Overall Impact

    The aggregate economic impact of this proposed rule is an estimated 
$5.52 billion in CY 2013 and $5.66 billion in CY 2014. In CY 2013, the 
Federal cost is approximately $5.74 billion with $225 million in State 
savings. In CY 2014, the Federal cost is approximately $5.96 billion 
with $300 million in State savings. The State savings are derived from 
the projected increases in reimbursement rates expected to occur prior 
to passage of this legislation between years 2009 and 2013 through 
2014, which will now be paid for by the Federal government. Absent the 
legislation, the projected increases in the reimbursement rates would 
be split between the Federal government and States. This aggregate 
economic impact estimate includes the requirement that States reimburse 
specified physicians for vaccine administration at the lesser of the 
Medicare rate or the VFC regional maximum during CYs 2013 and 2014, 
which is estimated at $970 million in Federal costs. The Federal costs 
for funding that increase, in State payments during CYs 2013 and 2014, 
are estimated at $490 million and $480 million, respectively.
    Overall, the estimated economic impacts are a result of this 
proposed rule providing States the ability to increase payment for 
primary care services without incurring additional costs. We anticipate 
higher payment will result in greater participation by primary care 
physicians, including primary care subspecialists, in Medicaid thereby 
helping to promote overall access to care. At this time it is not known 
whether States will be willing or have the ability to sustain this 
level of payment to providers beyond CY 2014. For managed care plans, 
this proposed rule would require documentation of the primary care 
services that are provided in order for States to claim 100 percent 
FFP. Currently, many States do not receive complete data on individual 
services provided by managed care plans. We believe, as result of this 
proposed rule, there will be improved documentation and reporting of 
primary care services provided by managed care plans. This, in turn, 
may serve to inform future managed care rate setting.

D. Detailed Economic Analysis

1. Anticipated Effects on Medicaid Recipients
    We anticipate this proposed rule will have a positive effect on 
Medicaid recipients by increasing the availability of services through 
financial incentives to primary care physicians. The exact number of 
beneficiaries that will benefit

[[Page 27685]]

is not known, however, we believe it will be substantial because this 
rule directly affects payment for a type of service which is a key 
component of the Medicaid program. Additionally, we believe primary 
care physicians will be encouraged to accept more Medicaid 
beneficiaries into their practices as a result of increased payment.
    We believe that this regulation will positively affect the 
availability of vaccination services as well. Currently, only 5 States 
reimburse the regional maximum for vaccine administration set by the 
VFC program. This proposed rule would require States to reimburse 
specified physicians for vaccine administration at the lesser of the 
Medicare rate or the VFC regional maximum during CYs 2013 and 2014.
    Finally, this rule will positively affect patients who are dually 
eligible for benefits under the Medicare and Medicaid programs by 
increasing payment to physicians who serve this population. 
Specifically, Medicaid will pay higher amounts to providers. We 
anticipate that increased payment will promote greater access to 
primary care services for dually eligible beneficiaries.
2. Anticipated Effects on Other Providers
    We anticipate this proposed rule would increase physician 
participation in Medicaid as most States reimburse physicians at well 
below the Medicare rates. Recently, as States have experienced 
budgetary constraints, they have sought to address this by reducing 
payments to providers, including physicians. This proposed rule would 
ensure that in CYs 2013 and 2014, physicians receive the higher 
Medicare rate for the specified primary care services.
    In addition, this proposed rule would impact States and providers 
who provide immunizations under the Medicaid program because it will 
require that such providers be reimbursed at the lesser of the 2013 or 
2014 Medicare rate or the Regional Maximum VFC Administration Fee in 
CYs 2013 and 2014. This rule also raises the maximum rate that States 
could pay providers for the administration of vaccines under the VFC 
program in subsequent years. The proposed updated Regional Maximum 
Administration Fees included in this proposed rule are the maximum 
amounts that a State could choose to reimburse a provider for the 
administration of a vaccine under the VFC program after the provisions 
of the primary care payment increase expire at the end of CY 2014. 
States have the flexibility to set the rate that they will reimburse 
providers, and can therefore choose to set it at the State's regional 
maximum fee or at any other amount below the regional maximum amount. 
It is not expected that all States will choose to implement the 
increase.
    The impact of this proposed rule on the Federal Government is 
therefore connected to States decisions as to whether to increase the 
amount that they pay providers for the administration of vaccines after 
CY 2014. That is, if no States choose to increase the administration 
fee for providers, there would be no additional costs incurred by the 
Federal Government.
    The same is true for States. There would be no impact of this 
proposed rule on a State unless the State chooses to increase the 
amount that it reimburses providers for the administration of vaccines 
under the VFC program.
    Children enrolled in the VFC program who are Medicaid eligible 
would not incur any additional costs as a result of this proposed rule 
as there are no out-of-pocket expenses related to the VFC program for 
Medicaid eligible children.
    Families of children who are enrolled in the VFC program because 
they are either uninsured or do not have insurance that covers vaccines 
would be impacted by this proposed regulation. The Affordable Care Act 
does not make any changes to the VFC program and therefore uninsured 
and underinsured individuals receiving vaccines through the VFC program 
will continue to pay a single administration fee for any vaccine 
provided. The provider will also receive a single administration fee 
for any vaccine provided, regardless of the number of vaccine/toxoid 
components, and will not receive the Medicare administration rate for 
those services. Providers can bill the families of those children at 
the State's regional maximum rate for the administration of a vaccine. 
As a result, if the proposed updated rates were to become effective, 
those families could be billed at the published rate for that State. 
However, section 1928(c)(2)(B)(iii) of the Social Security Act says 
that ``[t]he provider will not deny administration of a qualified 
pediatric vaccine to a vaccine-eligible child due to the inability of 
the child's parent to pay an administration fee.''
    Therefore, providers could benefit from the proposed regulation as 
they could charge and receive the State's regional maximum rate for 
their patients who are enrolled in the VFC program because they are 
either uninsured or do not have insurance that covers immunizations. A 
provider would not receive an increased administration fee for 
Medicaid-eligible children unless a State chose to increase the amount 
that it pays providers under the Medicaid program.
3. Anticipated Effects on the Medicaid Program Expenditures
    Table 4 provides estimates of the anticipated Medicaid program 
expenditures associated with increasing payment for primary care 
services. CMS' Office of the Actuary (OACT) developed estimates for the 
impact of this section of the Affordable Care Act, which were initially 
published in April 2010, (https://www.cms.gov/ActuarialStudies/downloads/PPACA_2010-04-22.pdf). Initially, projections of Medicaid 
spending on primary care physician services by FFS Medicaid and 
Medicaid managed care plans were created. For this, OACT developed 
assumptions of (1) what share of Medicaid physician spending was for 
primary care and (2) what share of managed care spending was for 
physician services, relying on several studies on physician service 
utilization and expenditures. OACT then projected spending for 2013 and 
2014 based on the projections of Medicaid physician spending in the 
President's Fiscal Year 2010 Budget Mid-Session Review. To determine 
the impact of using Medicare physician payment rates for Medicaid 
payments, OACT compared the ratio of Medicaid rates to Medicare rates, 
based on a study of Medicare and Medicaid physician payment rates 
across all States. Finally, OACT projected growth in Medicaid physician 
payments and the rates prescribed by section 1202 of the HCERA, based 
on Medicare payment rates; these estimates were revised to incorporate 
the actual CY 2011 CF, (75 FR 73169). OACT assumed that physician 
services covered by Medicaid would increase over 2013 and 2014 as a 
result of higher payments and expected increases in physician 
participation in Medicaid. Additionally, these changes were estimated 
to result in a slight decrease to projected State spending as future 
projected Medicaid payment rate increases would be covered by increased 
Federal matching funds in 2013 and 2014. The studies and data sources 
used for developing these estimates included: S. Zuckerman, ``Trends in 
Medicaid Physician Fees, 2003-2008,'' Health Affairs, 28 April 2009; 
the American Medical Association; the Medical Group Management 
Association; and the Bureau of Labor Statistics.

[[Page 27686]]



  Table 4--Federal and State Medicaid Impacts for Payment Increases to
     Primary Care Providers During Calendar Years 2013 Through 2014
                       [Millions of 2012 dollars]
------------------------------------------------------------------------
                                                       CY 2013   CY 2014
------------------------------------------------------------------------
Federal Share *.....................................    $5,740    $5,960
State Share.........................................      -225      -300
                                                     -------------------
    Total...........................................     5,515    5,660
------------------------------------------------------------------------
* Federal cost estimates reflect the additional $490 million and $480
  million in CYs 2013 and 2014, respectively, as a result of States
  reimbursing specified physicians for vaccine administration at the
  lesser of the Medicare rate or the VFC regional maximum.

    The Medicare payment rates used in this estimate were the actual 
2009 MPFS and the current statute projections of the CYs 2013 and 2014 
MPFS.
    In addition, it should be noted that these estimates are based on 
the current statute which includes a significant projected reduction to 
payment rates in the CY 2013 MPFS under the Sustainable Growth Rate 
(SGR) formula. Every year since 2003, the Congress has passed 
legislation overriding projected cuts that otherwise would have 
resulted from the SGR formula. Furthermore, it is possible that the 
Congress may enact legislation that averts the currently projected 
reduction in MPFS rates for 2013 which would affect the CYs 2013, and 
2014 rates that are being used to estimate the payment impacts in this 
rule. Consequently, if the Congress enacts legislation resulting in 
increased payment rates to replace the payment rate reduction called 
for under the SGR formula in CYs 2013, and 2014, and in turn the CYs 
2013 or 2014 rates exceed the rates calculated using the CY 2009 CF, 
then this would result in higher costs for the CYs 2013 and 2014 
Medicaid physician payments presented in this rule. Additionally, other 
changes to the CF in these years may also affect the costs of this 
section. Therefore, currently it is not possible to accurately estimate 
the impact of these potential future changes, since definitive action, 
if any, by the Congress regarding the MPFS CF is unknown.
4. Anticipated Effects on States
    The Federal government would provide 100 percent matching funds for 
the difference between the Medicaid State plan rate in effect July 1, 
2009 and the Medicare rate in CYs 2013 and 2014 or the rate using the 
CY 2009 Medicare CF, if higher. Therefore, we believe this proposed 
rule would result in a positive effect on States, since it reduces 
their expenditures for primary care services. State savings are 
estimated at $225 million and $300 million in CYs 2013 and 2014, 
respectively. However, for Medicaid State plan rates below the 2009 
level, States would be required to reimburse the non-Federal share of 
that portion, so as to return to the 2009 level of payment. We are 
unable to accurately quantify the impact of this effect on States, 
since there is not a precise relationship between any of the Medicaid 
State plan rates and the Medicare rates.
5. Anticipated Effects on Small Entities
    The RFA requires agencies to analyze options for regulatory relief 
of small entities, if a rule has a significant impact on a substantial 
number of small entities. For purposes of the RFA, small entities 
include small businesses, nonprofit organization, and small 
governmental jurisdictions. The great majority of hospitals and most 
other health care providers and suppliers are small entities, either by 
being nonprofit organizations or by meeting the SBA definition of a 
small business and having revenues of less than $7.0 million to $34.5 
million in any 1 year. (For details, see the Small Business 
Administration's Table of Size Standards at http://www.sba.gov/sites/default/files/Size_Standards_Table.pdf.) For purposes of the RFA, 
approximately 95 percent of physicians are considered to be small 
entities. Individuals and States are not included in the definition of 
a small entity.
    We anticipate that this regulation would primarily impact 
individual physicians and State Medicaid agencies. This proposed rule 
requires States to increase payment for primary care services without 
incurring additional State cost. As previously noted, we anticipate 
that this higher payment would impact physicians by encouraging greater 
participation by primary care physicians, including primary care 
subspecialists, in Medicaid, thereby helping to promote overall access 
to care. Therefore, the Secretary has determined that this proposed 
rule would not have a significant impact on a substantial number of 
small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 603 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a metropolitan 
statistical area and has fewer than 100 beds. This rule would not have 
a significant impact on small rural hospitals because it only affects 
physicians. We are not preparing an analysis for section 1102(b) of the 
Act because the Secretary has determined that none of the provisions in 
this proposed rule would have a significant impact on the operations of 
a substantial number of small rural hospitals.

E. Alternatives Considered

    This section provides an overview of the issues addressed in the 
proposed rule and the regulatory alternatives considered. In 
identifying the issues and developing alternatives, we consulted with 
States and other interested stakeholders such as primary care 
specialists and policy makers. We solicit comment on the assumptions 
and analyses presented in the Alternatives Considered section.
1. Eligible Providers
    The statute specifies that increased payment may be made for 
primary care services furnished by a physician with a primary specialty 
designation of family medicine, general internal medicine or pediatric 
medicine. Because States have varying methods of identifying a 
physician's specialty this poses a challenge to the uniform 
implementation of the increased payment. Currently, there are no 
Federal requirements surrounding how States must enroll Medicaid 
providers. In this rule, we propose to use Board certification and a 
supporting history of codes billed in the absence of Board 
certification as a means of identifying eligible primary care 
physicians but seek comment on the time period from which claimed codes 
would be drawn. We considered permitting physicians to qualify for 
payment based solely on self attestation in the absence of Board 
certification but were concerned that without an objective measure, 
such as a supporting history of codes billed, certain physicians could 
be unfairly advantaged or disadvantaged in receiving the increased 
payment. We also believe that an objective measure is more supportive 
of program integrity.
    This proposed rule clarifies that subspecialists related to the 
specialty designations identified in the statute would be eligible for 
payment. We considered extending eligibility for increased payment to 
only those physicians with a primary care specialty designation of 
family medicine, general internal medicine or pediatric medicine and 
not to subspecialists within those categories. However, through our 
engagement with the provider community we learned that pediatric 
subspecialists routinely deliver primary

[[Page 27687]]

care services. Therefore, we propose to make all subspecialists within 
the primary care specialties designated in the statute eligible for the 
enhanced payment. Due to the limited data available, including the lack 
of discrete data on physician specialty or subspecialty, we are unable 
to accurately estimate the impacts representing the exclusion of 
subspecialties relative to this proposed regulation. The analysis is 
further complicated by the observation that some types of 
subspecialists may provide a significant amount of primary care 
services, while other types of subspecialists may provide very little 
primary care services, thereby limiting any sound assumptions presented 
including the entailed impact modeling.
2. Payment Made Under the Physician Benefit as a Physician Service
    This rule clarifies physician services to mean any service 
delivered under the physicians' services benefit at 1905(a)(5)(A) of 
the Act. First, we considered whether the statute limited increased 
payment to services provided only by physicians. In the Medicaid 
program, a significant proportion of primary care services are actually 
rendered by advance practice nurses, and other types of independently 
practicing non-physicians. We recognize the importance of these non-
physician practitioners in the provision of primary care services in 
many States. However, section 1902(a)(13)(c) of the Act limits 
eligibility for higher payment to services provided by physicians. Next 
we considered whether the statute limited increased payment to services 
provided directly by physicians. Medicaid regulations at 42 CFR 440.50 
define ``physician services'' as services provided by or under the 
personal supervision of a physician. Therefore, we concluded that, in 
light of the important role of these practitioners in delivering 
primary care to Medicaid beneficiaries and the regulatory definition of 
a ``physician service,'' those services delivered under the personal 
supervision of a specified primary care physician could qualify for the 
increased payment. This means that specified primary care services 
rendered by non physicians such as advanced practice nurses and other 
mid-level professionals qualify for payment when billed under the 
Medicaid enrollment number of any designated primary care specialist or 
subspecialist.
    Due to the limited data available, we are unable to accurately 
estimate the impacts representing the inclusion of services provided by 
practitioners under the supervision of a physician. All such services 
are billed under the supervising physician's billing number and are 
reported as physician services to CMS making it impossible to determine 
the impact of this proposal.
    We also considered whether services provided by physicians in 
settings such as FQHCs, RHCs, or clinics would be eligible for 
increased payment. In Medicaid ``physician services'' is a distinct 
benefit from other benefits such as the FQHC, RHC or clinic benefits. 
We believe that the statute limits payment to physicians who, if 
Medicare providers, would be reimbursed using the MPFS. The MPFS is not 
used to reimburse physicians in settings such as FQHCs and RHCs and we 
believe that enhanced payment should not be extended to physicians 
under other Medicaid benefit categories. Furthermore, the Medicaid 
statute already requires that FQHCs and RHCs be reimbursed at cost.
    We estimate that the inclusion of services provided by physicians 
in settings such as FQHCs, RHCs, or clinics for increased payment would 
result in an aggregate Federal cost of approximately $820 million for 
CYs 2013 and 2014. The limitations of this impact estimate to more 
accurately reflect clinic participation include, (1) determining 
whether the services provided in the various clinic types are in fact 
performed by a qualifying physician, and (2) determining the direct 
link between Medicaid clinic payment rates, as they vary substantially 
across codes and states, and Medicaid physician rates.
3. Eligible E&M Services
    The statute requires enhanced payment for E&M services/codes. The 
proposed rule specifies the E&M Codes eligible for the increased 
payment. They include all primary care E&M codes, including some codes 
not recognized for payment by Medicare. Because the statute requires 
payment at the Medicare rate, we considered not extending the 
requirement for increased payment to codes not reimbursed by Medicare. 
However, many of those codes represent services provided to children. 
While Medicare covers relatively few children, payments for services 
provided to children constitute a larger proportion of Medicaid 
expenditures. We therefore include these additional codes because they 
represent core primary care services that are important to the Medicaid 
program.
    We estimate that approximately 6 to 7 percent of all expenditures 
on services eligible for the increased payment rates are for services 
not covered by Medicare. Furthermore, we believe that a corresponding 
amount of the Federal costs associated with this proposed regulation 
would be related to these services, reflecting an impact range of $670 
million to $780 million over the two CYs 2013 and 2014.
    The eligible codes are listed in the regulatory text. We propose to 
set rates for codes not covered by Medicare based on a calculation of 
the CF and RVUs that are published by CMS. We establish RVUs based on 
recommendations from the AMA RUC and clinical review by Medicare. We 
considered setting rates for these codes by looking at rates paid by 
Medicare for comparable services. However, each code is designed to 
represent a distinct service and we could not find codes that we were 
comfortable substituting on a one for one basis for purposes of rate 
setting. We seek comment on the proposed rate setting methodology for 
codes not reimbursed by Medicare.
4. Eligible Vaccine Administration Services
    The statute specifies payment at the CY 2013 and 2014 Medicare rate 
for certain vaccine administration billing codes or their successor 
codes. A State may receive 100 percent FMAP for the difference between 
the Medicaid rate as of July 1, 2009 and the Medicare rates in CYs 2013 
and 2014 or the rate using the CY 2009 CF, if higher. In 2011, the 
coding structure for vaccine administration changed such that two codes 
replaced four of the specified codes. Moreover, the four deleted codes 
represented vaccine administrations by various routes (e.g., intranasal 
vs. injectable) to children under 8. However, new code 90460 represents 
the initial vaccine/toxoid administered through all routes to children 
under 18 while code 90461 represents payment for additional vaccines/
toxoids administered. This rule proposes a method for imputing a 
vaccine administration rate in 2009 for code 90460. The proposed 2009 
would equal the average payment amount weighted by volume of the four 
codes used in 2009. The 2009 value for code 90461 would be $0, since 
there was no payment for additional vaccines/toxoids prior to 2011. We 
seek comment from States and other stakeholders on this proposed 
methodology.
    In 2009, approximately 20 States used a bundled rate to reimburse 
vaccines and vaccine administration, complicating the identification of 
the rate differential. This rule clarifies that, for any bundled rate 
payments such as this, States must correctly identify the rate 
differential for the included primary care service only (in this case,

[[Page 27688]]

vaccine administration). We added this provision in the interest of 
promoting program payment integrity but defer to the States to develop 
a methodology.
    In this rule, we propose that providers administering vaccines 
under the VFC program be reimbursed the lesser of the Medicare rates in 
2013 or 2014 or the Regional Maximum Administration Fee per vaccine, 
with no payment for additional vaccine/toxoid components. We considered 
proposing that States be required to pay VFC physicians for vaccine 
administration associated with the VFC program the amounts required by 
sections 1902(a)(13)(c) and 1932(f) of the Act, notwithstanding 
limitations on provider billing for vaccine administration under the 
VFC program. Free vaccine is made available through the VFC program to 
``program registered providers'' who have entered into a VFC provider 
agreement. Under section 1928(c)(2)(C)(ii) of the Act, one of the 
requirements of that agreement is that program registered providers 
limit administration fees to an amount that ``does not exceed the costs 
of such administration (as determined by the Secretary based on actual 
regional costs for such administration).''
    This rule would not have changed the statutory requirement in 
section 1928(c)(2)(C) of the Act that a qualified physician 
administering a vaccine obtained from the VFC program is limited under 
the VFC provider agreement to charging an amount for vaccine 
administration that is no more than the VFC maximum allowable charge. 
However, we considered proposing that States comply with the 
requirements of sections 1902(a)(13)(c) and 1932(f) of the Act and pay 
the designated Medicare amount despite the fact that this amount might 
have been higher than the amount that was billed by the provider. To 
meet this requirement we considered proposing that States re-price 
vaccine administration billing codes, resulting in payment equal to the 
applicable Medicare-based rate.
    We considered this alternative to fully reflect the requirement in 
section 1202 of the HCERA that Medicaid payment for primary care 
services be not less than the MPFS payment rate. While Medicare 
provider payment is limited to the lesser of provider charges or the 
fee schedule amount, we considered that allowing provider payment to 
exceed provider charges in this instance could be allowable in order to 
achieve the objectives of sections 1902(a)(13)(c) and 1932(f) of the 
Act. We also considered proposing that VFC providers account for the 
payment in excess of the billed amount as a Medicaid receipt for 
vaccine administration and that they ensure that it was not considered 
as an increase in the billed amount, or as a credit toward either the 
beneficiary account or toward payment for other services.
    The primary benefit of this alternative is higher reimbursement for 
vaccine administration fees associated with the VFC program. Although 
the VFC ceilings have not been modified since 1994, the majority of 
States have paid for vaccine administrations at rates well below the 
ceilings. For example, California's maximum rate was $17.55, but the 
State paid $9.00. Approximately five States reimbursed vaccine 
administration fees within close proximity to the ceiling. Medicare's 
2011 reimbursement rate for the first vaccine was $23.10 and for 
subsequent vaccines was $11.55. Therefore, we believe that requiring 
VFC administrations be reimbursed at the Medicare rate will help to 
ensure adequate compensation for VFC providers. However, we were 
concerned about the potential Federal budget impact of this proposal, 
with initial estimates indicating a potential cost impact of 
approximately $970 million over CYs 2013 and 2014, and the 
administrative burden it would place on States to reprice claims for 
these services.
    We also considered whether the requirements of the VFC statute 
preclude application of sections 1902(a)(13)(c) and 1932(f) of the Act 
to vaccine administration under the VFC program. However, this would 
mean that participating providers would be limited to the State-
specific VFC rates in the Medicaid State plan as well as to payment per 
vaccine administered.
    Another alternative was to require payment at the DHHS VFC regional 
maximum fee schedule amount but to also require reimbursement for each 
vaccine/toxoid administered. This would comply with VFC requirements 
that providers charge no more than the regional maximum amount, but 
would permit providers to benefit from the coding change that requires 
payment per vaccine/toxoid administered.
    We recognize the complexity of the issues surrounding the interplay 
of the VFC statutory requirements and the requirements of the 
Affordable Care Act and specifically request comment on these 
proposals.
5. Method of Payment
    Section 1902(a)(13)(C) of the Act requires payment in CYs 2013 and 
2014 of the current Medicare rate, unless the rate set using the CY 
2009 CF was higher. Historically, Medicare has issued multiple updates 
to its MPFS within a single year.
    Based on input from States, and to assure the feasibility of 
implementation, we propose to permit States the option to either adopt 
the MPFS in effect at the beginning of CYs 2013 and 2014 or the rate 
using the CY 2009 CF, if higher or a methodology to update rates to 
reflect changes made my Medicare during the year. If the State chooses 
to reflect changes made by Medicare, the methodology for those updates 
must be specified. States would be required to use the MPFS applicable 
to the place of service and geographic location. We considered 
requiring States to make changes throughout the year, as Medicare 
changed its MPFS. However, our proposal to permit States to use a 
single version of the MPFS reflects extensive comment received from 
States concerned about balancing the need for administrative ease with 
meeting the requirements to make this payment.
    We also propose that payment not be made inclusive of Medicare's 
incentive payment as authorized under section 5501(a) of the Affordable 
Care Act. We considered defining the Medicare ``rate'' as being 
inclusive of the incentive payments. However, the Medicare incentive 
payments are supplements made to specific providers based on total 
Medicare allowed charges and do not represent increases to the MPFS 
rates for specific CPT codes. Moreover, even if the same providers 
qualified for both the Medicare incentive payment and this Medicaid 
payment, it would be administratively difficult for State Medicaid 
agencies to determine the Medicare ``rate'' for purposes of the 
increased Medicaid payment since States do not have access to Medicare 
payment data.
    For the purpose of identifying the differential between the 
Medicaid rate and the Medicare rate, this proposed rule would define 
the Medicaid ``rate'' under the approved Medicaid State plan as the 
final rate paid to a provider inclusive of all supplemental or enhanced 
payments made to that provider. For example, many States reimburse 
physicians affiliated with academic medical centers the Medicaid State 
plan rate plus a supplemental amount that together equal the average 
amount paid by commercial third party payers. Therefore, in calculating 
the rate differential, these States would determine the CY 2009 
Medicaid rate inclusive of this type of supplemental payment. We 
considered not defining ``rate'' but, recognizing the wide variety of 
ways in which States characterize their payments, we chose to make this

[[Page 27689]]

clarification to promote uniform and fair implementation of this 
payment.
6. VFC Administration Fee Increase
    We considered a number of options when determining to update the 
average national administration charge portion of the formula used to 
calculate the VFC administration fee. These options included using the 
Medicare Economic Index (MEI), Consumer Price Index (CPI) or the Gross 
Domestic Product Deflator. We have determined the best option is to 
utilize the MEI, which is a price index used by CMS to update Medicare 
physician payments. The MEI reflects input price inflation experienced 
by physicians inclusive of the time period when the national average 
was established in 1994. Therefore, we believe that input prices 
associated with this specific type of physician-provided service are 
consistent with overall input prices.
    The overall economic impact, as a result of this proposed rule 
announcing updates to the regional maximum charges for the VFC program 
for use on an interim basis, is estimated at $75 million per year. The 
Federal cost of this total is approximately $45 million per year. These 
estimates assume that every State would increase its reimbursement rate 
to the new VFC maximum fee.

F. Accounting Statement and Table

    As required by OMB's Circular A-4 (available at http://www.whitehouse.gov/omb//circulars_a004_a-4/), in Table 5 we have 
prepared an accounting statement illustrating the classification of the 
Federal and State expenditures associated with this proposed rule.

  Table 5--Accounting Statement: Classification of Estimated Expenditures for Payment Increases to Primary Care
                                Providers During Calendar Years 2013 Through 2014
                                           [Millions of 2012 dollars]
----------------------------------------------------------------------------------------------------------------
                Category                                                 Transfers
----------------------------------------------------------------------------------------------------------------
                                                      Discount rate
     Annualized monetized transfers      --------------------------------------          Period covered
                                                  7%                 3%
----------------------------------------------------------------------------------------------------------------
Primary Estimate........................             $5,846             $5,848  CYs 2013-2014
                                         -----------------------------------------------------------------------
From/To.................................                 Federal Government to Medicaid Providers.
                                         -----------------------------------------------------------------------
Primary Estimate........................              -$261              -$262  CYs 2013-2014
                                         -----------------------------------------------------------------------
From/To.................................                 State Governments to Medicaid Providers.
----------------------------------------------------------------------------------------------------------------

List of Subjects

42 CFR Part 438

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

42 CFR Part 441

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

42 CFR Part 447

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

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

PART 438--MANAGED CARE

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

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

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


Sec.  438.6  Contract requirements.

* * * * *
    (c) * * *
    (3) * * *
    (v) For rates covering CYs 2013 and 2014, complying with minimum 
payment for physician services under paragraph (c)(5)(vi) of this 
section, and part 447, subpart G, of this chapter.
* * * * *
    (5) * * *
    (vi) For CYs 2013 and 2014, and payments to an MCO, PIHP or PAHP 
for primary care services furnished to enrollees under part 447, 
subpart G, of this chapter, the contract must require that the MCO, 
PIHP or PAHP meet the following requirements:
    (A) Make payments to those specified physicians (whether directly 
or through a capitated arrangement) at least equal to the amounts set 
forth and required under part 447, subpart G, of this chapter.
    (B) Provide sufficient documentation to the State, as determined by 
the State, regarding the amount provider payments increase as a result 
of meeting the requirement of paragraph (c)(5)(vi)(A) of this section.
* * * * *
    3. Section 438.804 is added to read as follows:


Sec.  438.804  Primary care provider payment increases.

    (a) For MCO, PIHP or PAHP contracts that cover calendar years 2013 
and 2014, FFP is available at an enhanced rate of 100 percent for the 
portion of the expenditures for capitation payments made under those 
contracts to comply with the contractual requirement under Sec.  
438.6(c)(5)(vi) only if the following requirements are met:
    (1) The State makes a reasonable estimate of the increased amounts 
paid for specified primary care services provided by eligible primary 
care physicians resulting from the contractual requirement under Sec.  
438.6(c)(5)(vi), based on information received from the managed care 
provider for services furnished as of July 1, 2009.
    (2) The State develops a methodology for identifying the 
differential in payment between the provider payments that would have 
been made by the managed care provider on July 1, 2009 and the amount 
needed to comply with the contractual requirement under Sec.  
438.6(c)(5)(vi).
    (3) The State must submit the methodology in paragraph (a)(2) of 
this section to CMS for approval before the beginning of CY 2013.
    (b) [Reserved]

[[Page 27690]]

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

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

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

    5. Subpart K is added to read as follows:

Subpart K--Vaccines for Children Program

Sec.
441.500 Basis and purpose.
441.505 General requirements.
441.510 State plan requirements.
441.515 Administration fee requirements.

Subpart K--Vaccines for Children Program


Sec.  441.500  Basis and purpose.

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


Sec.  441.505  General requirements.

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


Sec.  441.510  State plan requirements.

    A State plan must provide that the Medicaid agency meets the 
requirements of this subpart.


Sec.  441.515  Administration fee requirements.

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

PART 447--PAYMENTS FOR SERVICES

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

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

    7. Subpart G is added to read as follows:

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

Sec.
447.400 Primary care services furnished by physicians with a 
specified specialty or subspecialty.
447.405 Amount of required minimum payments.
447.410 State plan requirements.
447.415 Availability of Federal financial participation (FFP).

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


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

    (a) States pay for services furnished by a physician as defined in 
Sec.  440.50 of this chapter, or under the personal supervision of a 
physician who self-attests to a specialty designation of family 
medicine, general internal medicine or pediatric medicine or a 
subspecialty recognized by the American Board of Medical Specialties 
and is verified by the Medicaid agency as meeting one of the following 
requirements:
    (1) Is Board certified with such a specialty or subspecialty.
    (2) Has furnished evaluation and management services and vaccine 
administration services under codes described in paragraph (b) of this 
section that equal at least 60 percent of the Medicaid codes billed 
during the most recently completed CY.
    (3) For physicians who do not have 12 months of paid Medicaid 
claims history, data on codes billed must be reviewed from the date of 
enrollment through the end of the enrollment CY.
    (b) Primary care services designated in the Healthcare Common 
Procedure Coding System (HCPCS) are as follows:
    (1) Evaluation and Management (E&M) codes 99201 through 99499.
    (2) Current Procedural Terminology (CPT) vaccine administration 
codes 90460, 90461, 90471, 90472, 90473 and 90474, or their successor 
codes.


Sec.  447.405  Amount of required minimum payments.

    (a) For CYs 2013 and 2014, a State must pay for physician services 
described in Sec.  447.400 based on the lesser of:
    (1) The Medicare Part B fee schedule rate that is applicable to the 
site of service and geographic location of the service of, if there is 
no applicable rate the rate specified in a fee schedule established and 
announced by CMS (that is, the product of multiplying the

[[Page 27691]]

Medicare CF in effect at the beginning of CYs 2013 or 2014 (or the CY 
2009 CF, if higher) and the CY 2013 and 2014 relative value units 
(RVUs).
    (2) The provider's actual billed charge for the service.
    (b) For vaccines provided under the Vaccines for Children Program 
in CYs 2013 and 2014, a State must pay the lesser of:
    (1) The Regional Maximum Administration Fee; or,
    (2) The Medicare fee schedule rate in CY 2013 or 2014 (or, if 
higher, the rate using the 2009 conversion factor and the 2013 and 2014 
RVUs) for code 90460.


Sec.  447.410  State plan requirements.

    The State must amend its plan to reflect the increase in fee 
schedule payments in CYs 2013 and 2014 unless, for each of the billing 
codes eligible for payment, the State currently reimburses at least as 
much as the higher of the CY 2013 and CY 2014 Medicare rate or the rate 
that would be derived using the CY 2009 conversion factor and the CY 
2013 and 2014 Medicare relative value units (RVUs).


Sec.  447.415  Availability of Federal financial participation (FFP)

    (a) For primary care services furnished by physicians specified in 
Sec.  447.400, FFP will be available at the rate of 100 percent for the 
amount by which the payment required to comply with Sec.  447.405 
exceeds the Medicaid payment that would have been made under the 
approved State plan in effect on July 1, 2009.
    (b) For purposes of calculating the payment that would have been 
made under the approved State plan in effect on July 1, 2009, the State 
must consider all supplemental and increased payments made for the 
individually billed codes, including any incentive payments and other 
supplemental payment in effect at that time.
    (c) For vaccine administration, the State must impute the payment 
that would have been made under the approved Medicaid State plan in 
effect on July 1, 2009 by calculating the average payment for codes 
90465, 90466, 90467 and 90468 weighted by volume.
    (d) For any payment made under a bundled rate methodology, 
including bundled rates for vaccines and vaccine administration, the 
amount directly attributable to the applicable primary care service 
must be isolated for purposes of determining the availability of the 
100 percent FFP rate.

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

    Dated: April 17, 2012.
Marilyn Tavenner,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Approved: April 18, 2012.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2012-11421 Filed 5-9-12; 11:15 a.m.]
BILLING CODE 4120-01-P